Trade Protectionism / Trade Disputes: The Banana Wars

The Banana Wars

Past (1934 – 1935)

The Banana Wars were a series of occupations, police actions, and interventions involving the United States in Central America and the Caribbean. Reasons for these conflicts were largely economical i.e. American interests in these regions were largely made up of banana production.

Present

7% of European bananas come from the Caribbean; nearly 75% come from U.S.A controlled Central American plantations. The term banana war describes a six year trade quarrel between the U.S.A and the EU (roughly 1993-1999). The U.S.A complained that an EU scheme giving banana producers from former colonies in the Caribbean special access to European markets broke free trade rules. The U.S.A filed a complaint against the EU with the World Trade Organization or WTO and in 1997 won the case and the EU was instructed to alter its rules on its banana trade policy.

Since 1975 certain Caribbean countries have been allocated trade quotas by the EU allowing them to sell as many bananas to Europe as possible without facing trade competition from much cheaper, large scaled, mechanized, US run corporations. The EU hoped this would enable the economies of Caribbean countries to grow without depending on overseas aid.

Following the World trade organization ruling the quarrel continued and the U.S.A retaliated by imposing a 100% import duty tax on all EU products inbound for the U.S.A. The British government has been trying to negotiate with the Americans to get them to reverse their import duty and the WTO said it will investigate matters.

The U.S government says it is taking action because it believes in free and fair trade. However, the American trade deficit (i.e. value of imports is more than value of exports) which it wants to reduce and by exporting more bananas it can do that. Also the government had been taking action due to pressure from U.S transnational corporations, for example the American government took the issue to the WTO 24 hours after receiving a $500,000 donation from an American transnational corporation (Chiquita Brands).

The effects on Europe were a decrease in trade profits and potentially a loss of European jobs related to trade, for example Cashmere producers in Scotland. As Bananas provide nearly half of Caribbean jobs if the deal with the EU is instructed to be cancelled then it could cost the Caribbean economy a lot. The Lome convention (a deal which allowed former colonies special free access to European markets) was ruled as unfair by the WTO. Meaning in theory Caribbean colonies weren’t allowed to get any special agreements from the EU.

To this day the situation is not fully resolved and legally the Caribbean is now on a level playing field with American Transnational Companies when it comes to banana exports and competing for markets. However, the market doesn’t remain ‘Free’ as the Americans like to suggest when their incredibly wealthy transnational corporations dominate trade with violent market controlling policies.