Banana Wars

The banana wars were an eight-year trade dispute between the European Union (EU) and the United States that started in 1993. It escalated to include sanctions on the import of a range of other products. By 2008 it still had not been fully resolved.

The European Economic Community (EEC) introduced the European Union Common Market Organisation for bananas in 1992, and the European banana import regime was put in place in 1993. At this time barriers against bananas imported from Latin America were established. The EEC did this to give former banana-producing colonies from Africa, the Caribbean, and the Pacific (ACP) preferential access to European markets by imposing a quota and 25 percent tariff on bananas from Latin and Central America. This was clearly to the detriment of those producers. The objective of the regime was to help smaller farmers from the former colonies compete with large plantations run by U.S. multinationals in Central and Latin America.

In February 1996 the U.S. government along with Ecuador, Guatemala, Honduras, and Mexico filed [Page 104]a legal complaint to the World Trade Organization (WTO) against the European Union's banana import regime, claiming that it unfairly restricted the entry of their bananas to the EU and favored the former colonies. The action of the U.S. government was partly in response to pressure from one of the big three U.S. banana companies, Cincinnati-based Chiquita Brands International, and its chairman Carl Lindner. (During the period of the banana wars, Chiquita reported that its share of the European market had fallen from 40 percent to 20 percent with estimated revenue losses of $1.5 billion. It said it had been pushed to the brink of bankruptcy.)

The WTO approved U.S. sanctions of up to $191.4 million a year to try to reopen access to outlets like this German fruit market.

In September 1997 the WTO ruled that the EU's banana import regime was inconsistent with WTO rules. Following further consideration in January 1999, the EU introduced a new banana import regime. However, in April 1999 the WTO again ruled that this new regime was still incompatible with the EU's WTO obligations. It was at this stage that the WTO granted the United States authorization to impose sanctions up to US$191.4 million per year on EU products entering the U.S. market. This case is one of only seven out of 315 that have reached the stage where the WTO has authorized retaliatory penalties.

The banana wars then spread beyond the banana market. The U.S. government put in place sanctions on a number of European goods, including cashmere, cheese, French fashions, and Danish ham. In return, the Europeans countered by banning the import of hormone-treated beef from the United States. The situation was intensified still further when in May 2000, the WTO granted Ecuador authorization to impose sanctions up to US$201.6 million per year on EU exports to Ecuador. The so-called carousel legislation, introduced into a 2000 trade bill, also required the United States to implement rotating sanctions against Europe until it lifted its restrictions on imports of bananas and hormone-treated beef.

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