From St Lucia to Scotland, jobs are put at risk in banana war

"HOW DO you tell people that a thousand jobs might be lost over a bunch of bananas?" asked Rony Rathie, production manager of Johnstons, a cashmere knitwear factory in the Scottish borders town of Hawick, as news of the "banana war" emerged yesterday.

It is an extraordinary trade dispute, which has seen the US ambassador carpeted by British government and has apparently brought the Bill Clinton/Tony Blair love-in to the verge of a diplomatic incident.

Fears were obvious yesterday in Hawick "We have 500 cashmere sweaters all packed up ready to go to the States on Monday morning," said Mr Rathie. "Right now, I don't know what to do. We can probably manage for now but if this dispute drags on we will lose customers forever."

The town of Hawick - population 16,000 - boasts major export brands such as Pringle and is dominated by the cashmere woollen industry. Local people find it hard to fathom why their sweaters, selling for up to pounds 200 each in prestige stores, have been targeted for huge hikes in US import taxes.

Washington has warned that the duty, effectively doubling prices, will apply on a host of goods from 15 March unless the European Union ends discrimination against banana sales from Latin America. They say the EU unfairly favours fruit from the Caribbean, Africa and the Pacific.

It sounds like a minor dispute. But long-standing colonial ties explain the trenchant French and British support for bananas from these regions. It is cheaper, and more acceptable to the political left, than expanding overseas aid. European companies such as Fyffes, which dominate exports, also benefit. The Germans would prefer cheaper bananas from Central America, but so far the French and British view has prevailed.

Meanwhile, the Americans back their Central American banana-producing neighbours because of pressure from big business, notably the Big Banana himself, Carl Lindner of the Cincinnati-based Chiquita banana company.

Mr Linder has made large donations to Bill Clinton's campaign coffers and wants better access to EU markets. Additionally, US aggression reflects Washington's general disillusionment with the World Trade Organisation.

The dispute is typical of regular EU-US trade rows such as the long-running pasta, soya beans and chicken wars of recent years, which - after much brinkmanship - are normally resolved at the 11th hour. However, an added dimension is a US threat to ban Concorde from America in retaliation against new European rules requiring aircraft to be quieter. The US claims the rules discriminate against US aircraft.

With neither side budging, the "banana war" engulfs the most unlikely industries blacklisted by the Americans.

Cashmere knitwear is the hardest hit, followed by lead-acid battery production, plastics and biscuits. When other industries such as Italian cheeses, French handbags and German coffee-makers are added in, the EU-wide target list is worth more than $500m.

Mr Rathie said: "The danger is that customers will just switch to Chinese cashmere. There is no limit to how much of that the Americans can import. Once a customer is lost, they are gone for ever."

Anger about the Government's failure to pre-empt the crisis also mounted in the tiny Highlands village of Aberlour on Speyside.

Walkers Shortbread, sold in a famous tartan box in duty-free shops and stores on America's classier malls, has been blacklisted. The company, employing 700 people - virtually the entire local adult population - exports half its production.

The United States is "a very important market indeed," said a spokesman, detailing how the 101-year-old company has diversified into chocolate chip shortbread (pounds 1.55 a pack) to satisfy transatlantic tastes: All its biscuits are kosher.

The Prince of Wales may even be dragged into the row. Walkers makes Duchy Originals, a shortbread sold by the Duchy of Cornwall and exported to the US.

If the war continues, it could damage conservation work at Kew Gardens. Prints of Kew's archives, exported under licence to the United States, are on the hit list.

Profits from the sales, by Cornflower Fine Art Publishers, are ploughed back into projects such as the Millennium Seed Bank, aimed at preserving threatened species. "A 100 per cent duty would stop the market for prints overnight," said a Cornflower spokesman.

Stephen Selby, who publishes and exports Victorian prints of work by Sir John Lavery, John O'Connor and Arthur Elsley, said nearly 50 per cent of his business goes to the US. He said: "We have noticed that since Christmas buyers who are aware of the problem are not bothering to buy British because they think it is too much trouble."

Ironically, 20 new British print-exporting companies were exhibiting yesterday, with government support, at the Art Expo in New York. At the exhibition, Rosie Sumner of the Fine Art Trade Guild said: "This duty could be ruinous. It is grossly unfair that our industry is being affected when it has nothing at all to do with the banana dispute."

IT'S NOT JUST BANANAS AT STAKE: HOW BRITISH INDUSTRIES ARE AFFECTED

SIZE OF MARKET

CASHMERE

The UK exports around pounds 18m of cashmere to the US each year. The major producers are based in the Scottish borders with some towns dominated by cashmere production.

NUMBER OF JOBS AFFECTED

The Scottish Cashmere Association warns of up to 2,000 job losses, half the total employed.

CAN THE INDUSTRY SURVIVE

A prolonged dispute would put many smaller companies out of business. Even larger producers like Dawson International, maker of Pringle sweaters, are already laying-off staff.

SWEET BISCUITS

The UK biscuit market is worth pounds 432m of which pounds 11m is exported to the US. Of that figure around pounds 7m is shortbread.

Not clear but Walkers, the UK's biggest shortbread maker employs 700 at Speyside in the Scottish Highlands.

"Too early to predict," Walkers says. But the US is such an important export market the dispute will have a serious impact, particularly on smaller manufacturers.

BATTERIES

UK exports to the US of lead-acid storage batteries are estimated at pounds 14m a year. Dispute excludes batteries for electric vehicles.

DTI estimates suggest that over 400 jobs could rely on battery exports to the US.

Yes. Companies like BTR, the British manufacturing group, already manufacture most of their batteries in the US. The pounds 14m affected is a small part of the UK market.