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US strategy in banana tiff: Divide and conquer.
EU nations friendly to US policy won't be hit with trade tariffs
WASHINGTON -- As the United States prepares a final hit list of European products facing punitive tariffs in the EU-U.S. banana fight, U.S.
trade diplomats are selectively rewarding or punishing individual nations within the European Union based on each country's friendliness to the U.S.
position.
Pending an EU-U.S. summit in Washington on Dec. 18 -- which will feature high-profile rhetoric about EU-U.S. economic cooperation -- the
United States' hardball strategy on bananas is one of divide and conquer.
The administration's trade diplomats are rewarding the "good boys" and punishing the "bad boys" with threats of huge tariff increases, European
ambassadors and industry lobbyists are saying.
"That's a traditional tactic which the United States government applies from time to time. It is a good way to divide our member states. It
has worked before," Hugo Paemon, EU ambassador to the United States, said in a telephone interview Tuesday.
European nations like Germany, for example, that are supportive of U.S. demands for easier access to Europe for Chiquita and Dole brand bananas
are being exempted from the list.
Others, like France and Austria, which are trying to protect the European market in favor of banana producers in former colonies in Africa
and the Caribbean, find their companies are being targeted, European officials say.
By targeting producers from individual countries within the 15-member EU trading block, the United States is attempting to undermine the
EU's common policy by fomenting internal disputes.
Finland, for example, does not have historic colonial ties to
Africa nor the Caribbean and thus has no stake in the EU's development
policies toward banana-producing countries.
But Finland is a big exporter of paper and wood products to the
United States. Thus, by threatening heavy tariffs on Finish commodities, the
United States seeks to convert Finland into an advocate for U.S. trade
policy.
"They start with a long list and then the negotiations begin," Mr.
Paemon said.
The U.S. Trade Representative's Office, a branch of the White House
charged with conducting negotiations with U.S. trading partners, published a
comprehensive "draft" list of European products in November that it said
would face double tariffs if an agreement is not reached.
The USTR's economics unit headed by David Walters has been doing
the actual work on narrowing the list of European products, an agency
spokesman said.
USTR spokesman Jay Ziegler said the U.S. approach has been to pick
European products for punitive tariffs that would generate the least
domestic backlash in the United States, since it is U.S. importers who would
be asked to pay the new fees beginning in January.
"The objective is to secure the greatest amount of leverage in
identifying European products that does the minimum amount of harm in the
domestic arena," Mr. Zeigler said.
The banana row between the United States and Europe has been going
on for 10 years. The current deadlock stems from fallout this year over a
World Trade Organization ruling that Europe's banana import regime was
illegal under global multilateral trading rules because it discriminates
against U.S. brands Chiquita and Dole.
Europe drafted a new import regime, which the United States now
asserts does not comply with the WTO ruling. Under WTO procedures, the two
sides can seek further arbitration, or the United States can impose
unilateral retaliatory sanctions, which in fact is what Congress and the
White House have said will happen.
Last week a testy exchange of letters between U.S. Trade
Representative Charlene Barshefsky and EU Trade Minister Sir Leon Brittan
left both sides toughening their positions and headed toward a
confrontation.
The USTR has said it will issue the final list of retaliatory
tariffs on Dec. 15, a bad sign for the coming summit between EU President
Jacques Santer and U.S President Clinton.
Aides to the two leaders are planning to focus the summit meeting
on the Trans-Atlantic Economic Partnership, a bilateral discussion between
the United States and the EU on reducing non-tariff barriers to trade and
setting up a free-trade zone in services. It is meant to help set the stage
for EU-U.S. cooperation for what will be difficult multilateral trade
liberalization talks beginning in the WTO next year.
Mr. Santer and Mr. Clinton also are expected to consult on a
coordinated approach to the worldwide economic threat posed by crises in
Asia, Russia and Brazil. The United States and the EU are the two stable and
still-growing regions in the world today.
In the midst of this, the tiff over bananas has ballooned to the
point of triggering a serious trade fight if the U.S. invokes retaliatory
tariffs. Further, looming behind bananas is an even more difficult and
similarly contested fight over European barriers to U.S. exports of
hormone-fed beef.
"We think the administration has boxed itself a little bit in the
corner with this," said Mr. Paemon. "There are certainly more important
problems in the world than that for us to focus our attention on."
U.S. Threatens EU With Tariffs As Split Over Bananas Widens
WASHINGTON -- The U.S. said it will slap punitive 100% import duties
on 16 European products -- from pecorino cheese to electric coffee makers --
unless the European Union modifies its banana-import policy.
The items account for nearly $600 million in EU-U.S. trade. That is
a tiny slice of the $400 billion in annual commerce, but perhaps enough to
ignite a trade war if the six-year dispute isn't settled before the tariffs
take effect, as soon as Feb. 1.
See the U.S. Trade Representative's Web site for an Adobe Acrobat
version of the full tariff schedule. * * *
Tensions Increase in Banana War as EU and U.S. Exchange Threats
(Dec. 16)
EU Seeks Judgment From WTO on Disputed Banana Import Rules (Dec. 15)
Will Bananas Peel Apart EU, U.S.? Trade Dispute Risks Wider
Relations (Dec. 14)
EU Condemns U.S. Threat to Impose Trade Sanctions (Nov. 10)
The retaliation "is intended to send a clear and unambiguous message
that the U.S. will insist that other countries meet their trade obligations
just as we meet ours," Peter Scher, a U.S. special trade ambassador, said.
The products, culled from a longer preliminary list issued last
month are from 13 of the 15 EU member states. The U.S. didn't penalize Dutch
and Danish products because those countries have opposed EU banana policies.
The U.S. may add certain pork and olive products to the list during the
coming weeks.
The European Commission said the listed items, which include
cashmere sweaters and candles, represent $591 million in exports to the U.S.
The announcement, though expected, provoked an angry response from
EU Trade Commissioner Sir Leon Brittan. "It is difficult to think of a more
obvious breach of the multilateral trade system than to take the law into
your own hands in defiance of the rules," he said.
EU trade policies favor imports from former European colonies in the
Caribbean and Africa. The U.S., prodded by Cincinnati-based Chiquita Brands
International Inc. and its chief executive officer, Carl Lindner, argues the
policies discriminate against U.S. companies that market Latin American
Now the two sides are arguing about whether the resulting EU revisions bring
its policy into compliance with international trade rules.
While both sides says they still want to resolve the matter through the WTO, each accuses the other of throwing up roadblocks. The chances of a
quick WTO decision received a setback Monday when two requests for dispute-settlement panels on bananas were blocked.
The U.S. says the case is a crucial test of the viability of international trade and dispute-settlement rules, especially as imports of
cheap steel rise. "If it doesn't work, I fear the protectionist sentiment in this country and elsewhere will be that we shouldn't use this system," Mr.
Scher said.
Barring a negotiated solution, the U.S. will impose the tariffs by Feb. 1. The implementation could slip to March 3 if the EU appeals the scale of the retaliation, which is intended to impose costs equal to the damage the banana policy allegedly inflicts on U.S. companies.
MICHAEL M. PHILLIPS, with Julie Wolf contribution.
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