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U.S. Trade Fight With Europe Escalates
Duties Are Ordered On Variety of Imports

By Paul Blustein
Washington Post Staff Writer
Thursday, March 4, 1999; Page E01

The Clinton administration began firing real economic bullets yesterday in the transatlantic war over bananas, announcing that more than $500 million worth of European imports will immediately be subject to potentially punitive duties that would virtually shut them out of the U.S. market by doubling their price.

The order affects cashmere sweaters from Scotland, pecorino cheese from Italy, handbags from France, coffee makers from Germany and a host of other items. The Customs Service yesterday began requiring importers of those items to post bonds to cover the threatened 100 percent duties.

And although the penalties technically wouldn't be collected unless a World Trade Organization panel approves the amount involved -- a ruling that is expected in a few weeks -- the move inflicts immediate pain on producers, shippers and importers by making it terribly risky to continue transporting the targeted goods into the United States.

It wasn't immediately clear how much the measure would affect the availability of the European products in U.S. stores, because the target list has been public since the dispute began heating up in December, and some importers have reportedly been ordering extra shipments in advance to dodge the threatened duties.

But the announcement sharply raised the confrontation level in the banana case, which -- despite the snickering the product inevitably evokes -- poses a serious threat to the global trading system. Ironically, neither side produces bananas, but the fight could undermine the capacity of the Geneva-based WTO to resolve disputes. Both Washington and the European Union, based in Brussels, accuse each other of endangering the WTO's credibility.

U.S. officials portrayed their action as regrettable but justified because, they contend, the EU has refused to make major changes in its banana-import system even after WTO panels ruled that it illegally discriminates against bananas grown in Latin American countries by Chiquita Brands International Inc., Dole Food Co. and other U.S. fruit companies. The Clinton administration contends the EU system unfairly favors bananas from former European colonies in Africa, the Caribbean and Pacific islands.

"We do not take these steps lightly," said Peter Scher, a deputy U.S. trade representative. "We must conclude that it is time for the EU to bear some of the consequences for its complete disregard for its [WTO] obligations. The international trading system only works if all countries fulfill their obligations."

But Brussels reacted with outrage to what it views as U.S. bullying that violates the spirit of the multilateral trading system. EU officials argue that they have changed their banana-import regime enough to comply with the WTO ruling, so until another panel decides otherwise Washington has no right to impose sanctions.

"The U.S. has today decided to defy the WTO system by introducing a form of sanctions which has no WTO authorization whatsoever," said Leon Brittan, the EU trade commissioner, in a statement. "What the U.S. has done is therefore both unacceptable and unlawful. Just at the time when we should both be working towards a settlement, the United States is fanning the flames of this dispute."

Many trade experts take a "pox on both your houses" view of the spat, and the latest developments reinforced that judgment.

"The Europeans have lost this case three times, and though they're required to perform [by changing their banana-import rules], they've been taking all sorts of delaying tactics," said John Jackson, a Georgetown University professor. "So they're not exactly holding the high ground. Maybe the way to look at this is that they're pulling the U.S. down to their level."

The U.S. move came a day after a WTO panel delivered a setback to Washington by saying it needed more time and information to decide how much money the European banana-import system had cost American banana distributors.

Although that development suggested that the United States would have to wait at least a while longer to impose sanctions, administration officials decided to strike now, in part to show Congress that they are aggressively defending U.S. interests in the WTO.

"There are a lot of doubts in this country about the international trading system," Scher said, "and if the EU is allowed to take the position that they don't have to comply with a WTO decision, how do I explain to Congress that in the three or four cases we've lost, we had to change our rules?"

© Copyright 1999 The Washington Post Company

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