Bellerbys Economics - Mr Stephenson

Monday, February 11, 2008

Banana Wars

The 14-years-old banana war between the USA and the EU appears to be coming to an end with the WTO finding in favour of the USA.

What's it all about? Well, back in the 1970s, the EU agreed with 71 small African, Caribbean and Pacific nations a set of rules for tariffs that would give them preferential treatment with regard to products vital to their economies - such as bananas.

Now only 7% of the EU's imported bananas come from these countries so it doesn't seem like a big deal really. The preferential tariff, however, is vital to the nations concerned. Exports to the EU soak up nearly all of their products and without the preferential treatment, the small, rocky farms of the Caribbean islands could not compete with the vast banana growing savannahs of south america. This new ruling will be devastating for their economies.

The South American banana plantations are owned by the big American corporations such as Chiquita and UFS who moved into the area about a century ago and bought up just about everything. They can't really be too worried about the business but it is more a question of principle from their point of view. The US government seems happy to go along with what they are saying, probably because they have no direct interest in the caribbean islands.

The EU may lodge an appeal against the decision which will take another two years but it does look as though the tide is turning against them in this case.

The South American bananas, by the way, are the big tasteless ones - the small tasty ones (about to disappear) are the ones from the Caribbean.

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