THE BANANA WARS.   Term Paper ID:30587 Click to get this paper

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Paper Abstract: Analysis of the international trade dispute of the 1990s. How trade wars progress. The difficulty of achieving international agreements and enforcement. Long-term ramifications of trade policy. Examines the underlying ussues of the Banana Wars. How an agreement was reached, and impediments to implementing it. Effects of agreement on the banana industry. Paper Introduction: Introduction Although the globalization of trade has opened up new markets for many companies, and provided the opportunity for diversification that has provided companies with some insulation during economic downturns, international trade does not always progress smoothly. Single countries can impose trade barriers to protect their own industries or in retaliation for barriers in other markets, and entire countries can join together to create cartels (such as the OPEC) or trading blocs (NAFTA and the EU, for example) that provide specific benefits to members. The World Trade Organization (WTO) evolved from the General Agreement on Tariffs and Trade (GATT) and has recently been tested as an arbiter of international dispute. The so-called banana wars of the 1990s provide an example of how trade wars progress, how internationa Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. However, both the EU andthe United States have long-term faith in the WTO as an arbiter of tradedisputes as evidenced by the fact that both abided by the eventualagreement reached with the encouragement of the WTO, and given that bothparties sought relief from the dispute through the auspices of the WTO. However, the European consumer, as well asLatin American banana-producing countries, suffered far more than did theinternational producers according to some analysts (Dini, 2 1). 18-19. Single countriescan impose trade barriers to protect their own industries or in retaliationfor barriers in other markets, and entire countries can join together tocreate cartels (such as the OPEC) or trading blocs (NAFTA and the EU, forexample) that provide specific benefits to members. Ghana wins banana war. Because of the many different entities involved, andbecause the United States took unilateral retaliatory action, the tradedispute lasted far longer than many observers felt it should. In September 1997, the WTO concluded that elementsof the EU's programs were not compatible with the overall goals andobjectives of the WTO, and the EU was given a deadline of January 1999 toimplement changes. 4 ). Analysis of the WTO Ruling The EU sought to promote trade with its former colonies at the expenseof multinational producers. The EU alsoconsidered taking the United States to the WTO justice system in order toevaluate the appropriateness of the rotating retaliation that Americaproposed. Bounds, A. However, Parliament's consent is needed forthe EU Council (comprised of members from the various EU nations) to passlegislation. In addition, the EU has earmarked US$85 million for aid to ACPcountries; Ghana is expected to receive approximately US$32 million toassist in economic development (Safo, 2 1). As aresult, the cooperative delayed a pay increase for workers, as well asplans to build 4 new houses to replace older company-built residences.In 2 2, the cooperative expects to see a 17 percent decline in the numberof boxes sold; this, coupled with lower prices, is devastating to smallgrowers throughout the region. 14. Background In 1992, the EU imposed a 25 percent tariff on Central Americanbananas and generally favored bananas from former colonies such as Jamaica,the Canary Islands, Madeira and the French West Indies (the group iscollectively known as the African-Caribbean-Pacific countries, or ACP).These African and Caribbean farmers were, according to the EU, unable tocompete with the large plantations found in Latin America that were ownedand operated by large multinational American companies such as Chiquita,Dole and Del Monte. Thus, although Parliament has little direct power overlegislation, the fact that it must approve legislation provides it with astrong tool, nonetheless (Drew, 2 ). 2. The WTO played other roles in the decade-long banana dispute, however. Chiquita, Dole and Del Monte were changing the waythey did business in response to the agreement, and in response to thefinancial losses suffered during the 199 s. The European Court ofJustice dismissed the case by maintaining that any loss suffered by thecompanies would be recoverable through market mechanisms. The so-called banana wars of the 199 s provide an example of how tradewars progress, how international agreements to resolve trade conflicts canbe difficult to achieve and even more difficult to enforce, and how tradepolicy can have long-term ramifications for even large companies affectedby the policy. 2). The WTO ruling also provides that during the 2 1 to 2 6 period overwhich time quotas are to be phased out, companies will receive licenses tofill quotas based on their import activity during the 1994 to 1996 period.This ruling has profound implications for the two largest banana-sellingmultinationals which took very different approaches to handling the EUrestrictions. This issue islargely responsible for the company seeking only a portion of the monies itclaimed to have lost as a result of the banana trade dispute ("Fruit Suit,"2 1). In all, the companyestimates that it lost more than $1.3 billion due to the actions of the EUduring the 199 s (Bounds, 2 1, p. 4 -41. Chiquita Brands, the holding company that does not actually have anybusiness operations of its own, developed a debt restructuring plan for itscreditors in early November 2 1 and is expected to file Chapter 11bankruptcy shortly (Zalla, 2 1). Latin Trade (9), pp. It is this latter subject that is the basis for Chiquita's suitagainst the EU. In 1995, Chiquita (the world's largest banana trader) combined withfour Latin American countries (Ecuador, Guatemala, Honduras and Mexico) toprotest that the EU's trade restrictions put the company and the countriesat a significant disadvantage in Europe. But by forcing multinationals to work within the quota system(with the absurd result that some countries were forced to buy bananas fromother banana-producing nations before they could sell their own bananas toEurope), the EU hoped to break the multinationals' hold on the market andthus force prices down in the long-term (Boncompagni, 2 1). Instead, the United States imposedimport duties that exceeded 1 percent in some cases, causing upheaval inthe import trade with Europe. Cashmere targeted in next round ofbanana wars. (2 1, February 3). Dole, the second largest banana trader based in the UnitedStates, diversified its banana sources during the 199 s in an effort towork around the limitations imposed by the EU. Thesesanctions involved French and German products, primarily, although othernations were affected, as well. U.S. Chiquita, on the other hand, fought the EU actionsand maintained a much higher level of exports during the mid-199 s than didDole. (2 1, April 21). The dispute wentunresolved for nearly ten years, with both the EU and the United Statesdispleased with the progress (Boncompagni, 2 1). However, the dispute did establish that significantparticipants in the global economy are willing to use the WTO to settledisputes. Banana wars forward going backwards.African Business, p. In the meantime, the WTO encouraged all parties involved in thedispute to reach a solution (Drew, 2 ). Companies around the world have beenaffected as a result of the dispute, as have consumers, who pay higherprices for bananas. Ostroff, J. Zalla, J. However, the European Commissionput forth these proposals without consulting the European Parliament, andit was not immediately clear that the Parliament would accept theCommission's proposals. By mid-2 1, the effect of the WTO agreement was beginning to be feltin the banana industry. The retaliation list for the banana disputewas far-reaching: cashmere, cotton bed linens that were not knitted orcrocheted, purses, bath preparations and selected gourmet foods, includingPecorino cheese. Conclusion The banana wars demonstrate how inefficient the WTO can be atresolving trade disputes, particularly when a nascent organization such asthe EU is involved. (2 1, June). The European Commission carries out EU legislation,although the legal framework of the EU provides the Parliament with littlepower regarding agriculture. In 1997, Dole and an Italian company brought suit against the EU claimingthat the import licenses that the EU took from them in the early 199 swould irreparably harm their market share during the years that theEuropean Commission debated the banana situation. (2 , June 7). Daily News Record, p. The effects were wide-reaching,and included products such as cashmere and car batteries. Other European banana importers have also filed suit, claiming thatthe EU's policies forced them to pay higher prices than they would haveotherwise, and companies in other industries have also filed suit,maintaining that the actions of the EU brought about damaging Americansanctions in those industries. Cincinnati, OH: Chiquita Brands, Inc. From 1999 to 2 1, two WTO panels and the EU Commissionwere involved in developing remedies to the EU's 1993 program that wouldmeet the criteria of the WTO and the United States while not limiting theEU's perceived right to protect its industries. Chiquita reaches agreement on debtrestructuring. Actions of the WTO The WTO was perceived by all sides in the banana trade dispute to bean inefficient body for resolving the conflict. The WTOmaintained that previous American retaliatory measures (estimated to havecost more than US$191.4 million were imposed prematurely. Theagreement also called for the United States to remove all retaliatorysanctions that it had imposed on EU goods; these sanctions were lifted atthe beginning of July 2 1 ("U.S. and EU agree to end banana wars. In mid-2 , the EU Parliament deferred a final vote on legislationuntil a later (unnamed) date. Safo, A. (2 , September). Italy estimatedthat it lost more than US$39 million annually during the years of thebanana wars (Dini, 2 1). However, Chiquita is basing its suit not just on the issue that theEU's policies were damaging to the company, but also on the issue that theEU broke the law by not following its own Council of Ministers' order. Internet address:http://www.chiquita.com/announcements/Restruct_Lang?PR 11112english.asp. It was also at this time that the United Statesproposed levying sanctions on various EU industries through a series oftariffs and other barriers which would be rotated on a six-month basis sothat no one industry would be targeted for an extended period of time.This proposal would also have the effect of bringing pressure from a numberof different European industries to resolve the banana issue so thatAmerican sanctions would be lifted (Drew, 2 ). At the same time, thecompany diversified into other types of fruit which lessened the company'sdependence on bananas. The Economist (US), p. TheCouncil of Ministers ordered the European Commission to implement a newimport program that would be in compliance with the WTO's guidelines by1998 (the WTO had imposed a deadline for implementation of January 1999).Since no such program was put into place by either deadline, the companymaintains that it is entitled to damages as a result. The sanctions came about as a directresult of the perceived inaction of the EU by the Americans, although it isnot clear whether sanctions would have been imposed had the WTO found inthe EU's favor rather than the Americans' favor. The Economist (US), p. (2 1, October). References Boncompagni, T. SomeLatin American countries, including Ecuador, depend on bananas as a keycomponent of their economy, and the restrictions placed on bananas fromthese countries severely hampered their economic development during the199 s. Introduction Although the globalization of trade has opened up new markets for manycompanies, and provided the opportunity for diversification that hasprovided companies with some insulation during economic downturns,international trade does not always progress smoothly. EU Objectives The European Union sought both to protect growers in its formercolonies and break the hold that the large multinationals had on the bananamarket. The changes that the EU implemented were judged to beinsufficient by the United States and banana exporting countries (includingEcuador), which led to the United States taking retaliatory trade measuresagainst the EU. 41). Life after banana wars. Certainly the welfare of the European consumer was not at issuesince the actions taken by the EU promoted higher prices (through tariffsand limiting the numbers of bananas that entered the EU) rather than lowerprices. While sanctions are generally viewed as ineffective as negotiatingtools, the Americans were able to impose sanctions on a rotating basis, andon key EU exports, so that a catalytic effect was achieved, at least in theopinion of some American policy makers (Boncompagni, 2 1). Fruit suit. Drew, E. Chiquita attributes its financialdownturn directly to the effects of the banana wars and is suing the EUexecutive body for $525 million in damages related to the banana quotas ofthe 199 s. 1 8135u3686. M. 2. Chiquita persuaded the Americangovernment to pursue the matter with the WTO, and the United States tookformal action in 1996. The court leftopen the possibility that damage of some type and amount might occur,however. The World Trade Organization was not silent during this time, but itwas unable to bring the parties to an agreement, either. With the abolition of quotas(Ghana was among the first nations to have quotas abolished by the EU),Ghana expects to see a resurgence in European activity for its bananaindustry. (2 1, May 15). The effect of the WTO's ruling extends beyond the obvious participantsof the EU and American multinationals. 4. The WTO condemned the EU's practices with regard to bananas shortlyafter they were imposed, but had little effect in enforcing its ruling.The United States then took retaliatory action, resulting in numerousEuropean countries suffering as a result as their exports to the UnitedStates became considerably more expensive. The World TradeOrganization (WTO) evolved from the General Agreement on Tariffs and Trade(GATT) and has recently been tested as an arbiter of international dispute. This puts Chiquita at a significant advantage given the WTO's rulingbased on the mid-199 import volume ("A fruity," 2 1). Even after the sanctions were imposed, one year passedbefore an agreement was finally reached (Ostroff, 2 , p. Gourmet Retailer(22), p. 2 . This research examines the underlying issues associatedwith the banana wars, how an agreement was finally reached, impediments toimplementing that agreement, and effects of the agreement on the industry. At the same time, the European Commissionproposed a version of the agreement that was finally adopted in 2 1,whereby quotas are eliminated during the 2 1 to 2 6 period, and wheretariffs are also reduced or eliminated. At the same time, European consumers (including Italians, whoimport a large number of bananas every year), paid higher prices for thebananas they received from "friendly" banana producing countries. The EU stressed that it was merely giving smallerproducers an opportunity to compete in a market where they otherwise wouldbe at a disadvantage, and providing these producers with a ready market inthe 15-member European Union (Bounds, 2 1). If that process can be made more efficient, future disputes areunlikely to last as long. The Americans responded with retaliatory actions against EU memberstates. The company maintains that the ten-year dispute isprimarily responsible for the company's financial downturn, although it issuing for only US$525 million of the more than US$1 billion that thecompany maintains it lost as a result of the trade dispute. Banana wars. Had the WTO been able to enforce the agreement in 1997 (whenan agreement very similar to the one implemented in 2 1 was firstproposed), the United States would not have had the opportunity to takeretaliatory action against the EU. and EU," 2 1). Effect of the WTO's Actions Because the trade dispute lasted for nearly 1 years, there wereconsiderable consequences throughout the complex trade patterns of the EUand the United States (as well as with Latin American and Africancountries). Ghana, for example, which is abanana exporting country, had to buy quotas of bananas from other exporters(such as Cote d'Ivoire) before it was able to export bananas to Europe.This resulted in higher prices for bananas from Ghana and nearly resultedin the collapse of the Ghana banana industry. CorporateCounsel (8), pp. In 1992, Chiquita had a 4 percent market share in Europe; in1993, after quotas and tariffs were imposed, the company's share fell to 2 percent where it remained throughout the decade. Obstacles to Reaching an Agreement The process by which an agreement was reached involved numerousinternational groups, including the newly-formed European Parliament andEuropean Commission. (2 1, June). (2 1, November 12). While there iscertainly no doubt that the company was harmed as a result of the EU'sactions, it is not clear whether the company's claim is justifiable.Traditionally, companies have not been able to sue governments successfullyfor implementing laws that cause damage to the company or its market("Fruit Suit," 2 1). Under the WTO agreement, all tariffs and quotas will be reducedthrough 2 6, at which point quotas will be eliminated entirely. Africa NewsService, p. Chiquita announced that itwould pay $2.86 for a 42-pound box of fruit from a Cooperative in Panama;formerly, the company paid $3.11 per box (Bounds, 2 1, p. By the timethe restrictions are lifted, the market will have felt the effects ofprotectionism for nearly 15 years, and it is unclear whether the bananamarket will be able to recover. A Fruity peace. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.

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