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Banana Dispute: World Trade Organization vs. European Union Essay (Critical Writing)

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Updated: Aug 30th, 2021

Introduction

The banana dispute between the United States, the European Union and the Latin American countries was as a result of disagreements on importation of bananas into EU1. In 1993, the European Union implemented a trade policy aimed at regulating importation of bananas within the market that it controlled. The policy gave preferential treatment to banana imports from certain regions and those from former EU colonies2. However, bananas imports from Latin American countries and the United States were restricted entry into the EU market.

The main reason why this dispute affected Latin American countries and EU member countries can be explained by the forces of demand and supply. Latin American countries are the biggest producer of bananas. On the other hand, the EU is one of the largest markets for bananas in the world. EU countries only supply 10% of their banana demands. This means that the EU is not able to meet its banana demands.

Prior to establishment of the single market, most members of the European Union had their practice with regard to importation of bananas. For example, France sourced its banana imports from its former colonies such as Cameroon and Cote d’Ivoire while Spain imported from the Canary Islands3.

One of the main factors that led to emergence of the dispute between EU and Latin American countries is the tariffs that were imposed on banana imports by EU. For example, in 1993, UE established a tariff-quota system on banana imports. However, the quota system was biased in that it was implemented depending on the origin of the bananas4. For example, imports from some territories and its members were unrestricted. On the other hand, banana imports from ACP countries were tax exempted. Additionally, a higher import tariff was charged on imports from ACP countries [African, Caribbean and Pacific countries]5. Latin American countries were assigned an import quota of 2.2 million tons. EU was also discriminative in its issuance of licenses to banana distributors from Latin America.

In June 1993, a panel that was established by a number of Latin America countries (Colombia, Guatemala, Venezuela, Nicaragua and Costa Rica) ruled that the import restrictions implemented by EU countries violated Article XI of the GATT provisions. Additionally, these countries also argued that the import quotas and tariffs were unfair and that they were in breach of the free trade regulations that were implemented by WTO. In 1996, a number of Latin American countries (Mexico, Honduras, Ecuador, and Guatemala) in collaboration with the United States challenged EU’s import regime to the World Trade Organization (WTO).

In an effort to resolve the dispute, WTO ruled that the EU import regime was illegal and discriminative. According to WTO, EU was also discriminative in issuing licenses to banana marketing companies located in Latin America. Additionally, WTO also ruled that the new trade system implemented by EU was illegal since it limited the quantity of banana imports from ACP countries. WTO considered this to be discriminative.

In response, EU introduced a new import regime on 1st January 1999 and established a new set of rules. Some of the rules entailed increasing the tariff-rate quota from 2.2 million metric tons to 2.553 million metric tons. However, in April 1999, WTO ruled that the new import regime was not in line with WTO-EU trade obligations6. WTO also implemented a stipulation that required EU to compensate the United States $ 192 million for the loss banana in sales. EU agreed to abide by the rules and regulations laid out by WTO. The EU was also instructed to adhere to WTO’s stipulations regarding establishment of import quotas and issuance of import license7.

WTO granted the United States and a number of Latin American countries such as Ecuador permission to impose sanctions on EU imports up to a certain limit. On its part, the United Stated instituted an import tariff of 100 per cent on all imports into the US originating from the EU member countries to a tune of $192 million. However, the tariff was only applicable to non-agricultural products8. Similarly, Ecuador imposed a tariff on EU imports entering the country to a tune of $201.6 million annually.

On 1st January 2001, the US government made a decision to suspend the imposed sanction on EU imports. However, this would only happen if EU ceased to utilize the tariff-quota system and adopt the tariff-only system. Through the tariff-only system, bananas imported from the United States would not be subjected to the quota system. However, they would only be subjected to one tariff like all other imports. The banana dispute between the EU and WTO was finally resolved in July 2001 after 8 years. The EU agreed to adhere to the trade stipulations laid out by the WTO. For example, the EU agreed to lower the tariffs charged on bananas imported from Latin American countries. The reduction will would result into a reduction in import tariffs to 114 Euros per ton from 176 Euros per ton within a period of 7 years. The EU also agreed to compensate ACP countries 200 million Euros if it failed to comply with WTO’s trade regulations for a period of 4 years.

Positive analysis of the sources used in the introduction

The article ‘Q&A: The banana wars’ used as a reference in the introduction is a credible source of information with regard to the banana dispute between the EU and WTO being analyzed. The article is composed by BBC which is an international news organization. On a global scale, BBC is rated as one of the most credible sources of news. This arises from the fact that the organization is very investigative in its reporting and provides concrete facts as they are on the ground.

The second reference is a book by Nicholas Perdikis and Robert Read. Decision to use this book as a reference arose from the fact that the book is very detailed. As a result, it gives a comprehensive background regarding the origin of the dispute between WTO and EU and how it was resolved. Additionally, both authors of the book are lecturers with reputable learning institutions in the UK. For example, Nicholas Perdikis is one of the Senior Lecturers in the School of Management and Business in the University of Wales. On the other hand, Robert Read is also a Senior Lecturer in International Economics in Lancaster University Management School. As a result, he is well versed with the operations of EU and WTO. The credibility of this book is also enhanced by the fact that it is published by Edward Elgar which is one of the most reputable publishing institutions in the world.

The third article by Charles E. Hanrahan is also informative on the issue. Charles E. Hanrahan also writes about the issue in collaboration with other authors who include Raymond J Ahearn, Geoffrey S. Becker and Jeremy V. Lane. The credibility of these two sources arises from the fact that they are developed in collaboration with the Congressional Research Service (CRS) which is an organ of the US Congress. The article can be accessed from The Library of the Congress. The two sources are very comprehensive on the issue since the Congress was a participant in the resolution of the dispute. Additionally, CRS is very rich source of information with regard to multilateral operations on various issues such as trade negotiations.

The fourth source used is by Eliza Patterson who is a registered trade lawyer with the American Law Society. She graduated in 1975 from the Harvard Law School which is one of the most reputable institutions in the world. Currently she works with the New Jersey and New York Ports Authority. As a lawyer registered by the American Law Society and an employee of the US Ports Authority, she is very conversant with international trade laws such as those related to importation.

The other source used in the introduction is a press release by the WTO. The article is very rich in information in that it provides a chronology of the most important dates with regard to the banana dispute between WTO and EU. The credibility of the press release is also enhanced by the fact that one of the contributors is the Director General of WTO, Pascal Lamy.

The sixth source used in the introduction is an academic journal by Robert Read. As outlined above, Robert Read has a wide range of information with regard to international economics. The credibility of the article is further enhanced by the fact that Robert Read partners with Estey Centre Journal for Law and Economics in International Trade which is a renowned institution with regard to issues related to international trade. The institution mainly focuses on conducting research and training on different issues such as international trade, trade facilitation, law and economics. Additionally, the institution also assists WTO on different issues related to international trade.

The seventh source used is a journal by the American Society of International Law Insight. The credibility of this source arises from the fact that the institution that has the copy right to this document is chartered by the US Congress. Therefore, the institution is experienced on international trade issues having been in existence since 1906.

Negative analysis of the sources used in the introduction

As one of the sources used in this paper, the credibility of the article by BBC News is relatively low. In this case, it illustrates how EU is discriminative in its banana trade with Latin American countries. In addition to this, one cannot fully rule out the element of bias in its reporting considering the fact that BBC is a UK owned firm and that UK is a member of EU.

Despite the book by Nicholas Perdikis and Robert Read portraying a rich background with regard to the banana dispute between the EU and WTO, the element of bias cannot be eliminated. This arises from the fact that the authors of the book are both UK nationals which is a member of the EU. Therefore, they may not have portrayed the real image of EU. Additionally, the book is relatively old considering that it was last edited in 2005. Other issues have arisen since then regarding the banana dispute between the two economic blocs that is EU and WTO.

The authors of the book have not followed up on the issue in order to inform its ardent readers on other issues related to banana trade that have arisen since 2005.As a result, it is important for the authors to edit the book in order to account for the changes that have occurred over the recent past regarding the issue. This is also applies to the book by Charles E. Hanrahan, Raymond J Ahearn, Geoffrey S. Becker and Jeremy V. Lane. Similarly, the element of bias cannot be eliminated in the article by Charles E. Hanrahan. The US was one of the countries that pushed for EU to change its banana trade regime. In reporting, the article has portrayed EU as being dictatorial. However, other articles have shown that EU was responsive to the changes that were being advocated by the US and other Latin American countries.

The article ‘The US-EU Banana Dispute’ by Eliza Patterson illustrates America’s effort in resolving the dispute between Latin American countries and the EU. However, its effort is motivated by the fact that the US has vested interest in Latin American countries. Most of the banana businesses in Latin American countries are owned by Americans. As a result, the US would lose if EU continued to impose the import tariff on Latin American countries. Therefore, the article shows that the US main concern as a super power on other countries is based on whether there is any form of connections such as economic or political. Additionally, Patterson is a civil servant working with the Ports Authority. Therefore, there is a high probability that she may have portrayed the EU as a bad trade partners. This is due to the fact that her interest would have been to represent the as a good trade partner on the international scale. This means that there may be other hidden objectives in US efforts to help resolve the dispute between EU and Latin American countries.

The article by Read solely concentrates on EU’s effort in resolving the banana dispute. In doing this, the article only focuses on two main issues which include evaluation of whether the EU banana regime was legal and a conduction of trade policy analysis. The basis of the author’s analysis is the trade rules established by WTO. However, the dispute was very complex since there were other elements involved such as competition. The author has not captured these elements in his analysis of the issue. This shows that the article is not comprehensive.

On the other hand, one cannot also rule out the element of bias in the journal by the American Society of International Law Insight. Despite the organization claim of being independence in its operation, there is a high probability that one of its objectives is to promote the image of the US in the international market. Despite the criticisms, these sources have been very insightful in creating knowledge regarding the resolution of the banana dispute between EU and WTO.

Conclusion

The paper has outlined a number of issues related to the banana dispute between WTO and EU. The definition of banana dispute with regard to this context is illustrated. The dispute arose from existence of differences with regard to import tariffs that were imposed on Latin American countries by EU. The analysis has shown that EU was discriminative with regard to imposition of tariffs on banana imports. For example, bananas originating from form EU colonies were not subject to any import tariff while those that originated from Latin American countries were subject to a high import tariff. Therefore, the paper successfully shows that EU contravened WTO’s trade regulations.

The paper also illustrates the types of solutions that were suggested by EU and WTO in order to resolve the dispute. Some of the suggestions included removal of the import tariffs imposed by EU. Additionally, the US suggested that EU should compensate Latin American countries for the loss of sales caused. In line with these suggestions, WTO ordered EU to compensate the US and Latin American countries. At the end of the dispute, EU replaced the tariff-quota system with a tariff-only trade system. This meant that all countries trading with EU were subjected to only one tariff. The paper also critics the sources used. This is achieved by evaluating both the positive and the negative elements on the basis of credibility and the objective of the various sources. However, the positive points on the sources have a greater weight compared to the negative points. This arises from the fact that the sources have successfully provided the necessary information with regard to the issue.

Reference List

Ahearn, R., Hanrahan, C., Becker, G. & Lane, J., 2002. European Union-US trade conflict and economic relationship. Hauppauge, NY: Novinka Books. Alemanno, A., 2008. The European court rejects damages claim from innocent bystanders in the EU-US ‘banana war’. American Society of International Law Insight. Vol. 12, issue 21, pp. 1-5.

BBC News. 2009. (Online). Web.

Hanrahan, H., 2001. CRS report for congress: the U.S-European Union banana dispute. Web.

Patterson, E., 2001. The US-EU banana dispute. (Online) New York: American Society of International Law. Web.

Perdikis, N. & Read, R., 2005. The WTO and the regulation of international trade: recent trade disputes between the European Union and the United States. Cheltenham: Edward Elgar.

Read, R. 2001. The anatomy of the EU-US WTO banana trade dispute. Estey Centre Journal for Law and Economics in International Trade. Vol. 2, issue 2, pp.257-282. Lancaster: University of Lancaster.

World Trade Organisation. 2009. (Online). Web.

Footnotes

  1. BBC News. 2009. Q&A: The banana wars. (Online). Web.
  2. Perdikis, N. & Read, R., 2005. The WTO and the regulation of international trade: recent trade disputes between the European Union and the United States. Cheltenham: Edward Elgar.
  3. Hanrahan, H., 2001. CRS report for congress: the U.S.- European Union banana dispute. Web.
  4. Patterson, E., 2001. The US-EU banana dispute.(Online) New York: American Society of International Law. Web.
  5. Ahearn, R., Hanrahan, C., Becker, G. & Lane, J., 2002. European Union-US trade conflict and economic relationship. Hauppauge, NY: Novinka Books.
  6. World Trade Organization. 2009. Lamy hails accord ending long running banana dispute. Web.
  7. Read, R. 2001. The anatomy of the EU-US WTO banana trade dispute. Estey Centre Journal for Law and Economics in International Trade. Vol. 2, issue 2, pp.257-282. Lancaster: University of Lancaster.
  8. Alemanno, A., 2008. The European court rejects damages claim from innocent bystanders in the EU-US ‘banana war’. American Society of International Law Insight. Vol. 12, issue 21, pp. 1-5.
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