Tariffs and Quotas of Product

444 Cases
E ot nearly a decade, the EU and the United
I States were engaged in a heated trade dispute over bananas. The EU had introduced tariffs and quotas that discriminated in favor o[ bananas grown in former European colonies and dependencies located in the Caribbean and Africa. The new rules were favorable to the European-based banana companies, whose production was heavily located in these preferced regions. However, the new rules were disadvantageous to the U.S.-based companies, such as Chiquita and Dole, that owned banana plantations in Latin America.
Dole responded to the crisis by shifting more banana production to West Africa. Over the next few years, Dole's market share in European bananas actually increased. Chiquita, however, asked the
!.S government to bring a complaint against the
EU under GATT. The United Stares wolrwo subseguent suils, but the EU used its veto power under
CATI to avoid compliance. However, these veto rights were rescinded under the WTO.
The WTO then ruled on the case again in favor of the United States, calling Europe's quota system blatandy discriminatory. This time the United States was allowed to employ sanctions against the EU if it failed to comply. The EU proceed{d to make whar most observers believed to be cosmetic, ineffectual changes to its banana importation rules. In retaliation, the United States announced that it would ler,y 100 percent tariffs on 17 categortes of European goods, including printed cards, cashmere clothing, .oril i",re\ ry, and chandeliers.
_ EU officials objected, claiming that the United
States was not authorized to determine whether the EU's actions were insufficient and thus was required to take the case back to the WTO. The U.S. government believed this was a delaying tactic that the EU could employ again and agiin."The WTO supported the U.S. position and approved the retaliatory actions. In Europe, the U.S. sanctions were called ,,silly,' and a "return to the Middle Ages.,' Many EU manufacturers were angry that they -"r" -ud" to suffer over a trade issue that did not concem them. Ior example, thousands of jobs were at risk in the
Belgian biscuit industry, where some companies exported
20 percent of their production !! the Ururte-d
States. The sanctions also threatened Asian investors in Europe such as the British battery subsidiary of the Japanese Yuasa Corporation, which had only recently developed exporr sales to the Unired
States. Now that eFfort would be for nothing.
Only products from Denmark and the Netherlands escaped sanctions because these countries had lobbied the EU for compliance wirh the banana decision. Some questioned why the United States was pursuing the banana case so vehemendy. After all, no jobs were at risk in the United States. Still, Chiquita's lobbying efforts paid otf. The head of Chiquita was a major donor to both the Republican and Democratic parties in the United States. A 1obbyist for Greek feta cheese was less successful in his efforts to keep feta off the sanction list, despite his argument that the pain would be borne'by
Greek Americans, for whom fela was a dietary staple. The United States insisted that the issue at stake in the banana wars was nothing less than the credibility of the WTO. Europe .ouii ,rot flaunt a WTO decision. Ironically, the U.S. trade representarive had ange_red Europeans five years earlier by stating that WTO membership would not obligate America
19 obey.its rules. The United StateJ could defy
WTO rules and accept retaliation from an injured party. After all, few counrries would wish to initiate a trade war with the United States. Despite this rhetoric, the United States had complied with
WTO rulings against it, such as one concerning
U.S. restrictions affecting rhe imporr of oil frori
Brazii and VenezveTa.
The United States was not alone in its attempts to receive redress for losses in the EU banana market.
The WTO arbitrarion panel allowed Ecuador to impose over $200 million in sanctions, an ar-nglmt equivalent to its banana exports shut out of EU markets. However, Ecuador'annually imported products worrh only $62 million from the
EU, and these imports were mainly medicines.
Consequently, the WTO authorized Ecuador to impose_punitive tariffs on service providers and copyrighted material, including compact discs, from the EU. The EU trade- ambaisador announced that the EU would monitor .Ecuador,s