How the EU and the U.S. Fought a Banana Trade War (original) (raw)

“I never in my life thought I would spend so much time on bananas.”

Secretary of State Madeleine Albright, 1999

During the banana wars between the U.S. and the EU, tariffs touched 100%. One side had banana quotas and tariffs and the other taxed Pecorino cheese and cashmere sweaters. Domestic politics influenced a President and countries ignored a WTO decision.

Sound familiar?

This trade war started during the 1990s and lasted for more than two decades. At that time, the United States was supported by the World Trade Organization (WTO).

This is the story…

Starting the Banana War

Ecuador was really good at growing bananas. But the EU didn’t seem to care about its lower production costs. Instead, it wanted to support the banana growers from 12 of its former colonies in Africa, the Caribbean, and the Pacific (ACP). So, through a system of tariffs and quotas, the EU made the bananas from non-ACP countries more expensive.

Their main target was Chiquita. As the U.S.-based company that controlled close to 40% of the EU’s banana market in 1990, Chiquita soon saw its EU exports plunge. The reason? In 1993, the EU divided its banana importers. If you were not an ex-colony, then your bananas were taxed.

For some smiles, do look at one of Chiquita’s original commercials:

To make a long story short, the U.S. and five other countries filed a complaint with the World Trade Organization and (sort of) won after 20 (or so) years. But lots happened during those two decades. From the beginning the WTO supported the U.S. and even said it could retaliate if the EU did not eliminate its trade barriers. So when the EU ignored the WTO decision, the U.S. did retaliate. By 1999, EU exports that ranged from French handbags to Italian Pecorino cheese were slapped with high tariffs.

Ending the Banana War

It all does end. But it took awhile.

In 2001, the U.S lifted its punitive tariffs after the EU said it would phase out the quotas. But they continued negotiating and finally nailed an agreement in 2009. As for the tariffs, they were supposed to have diminished in stages by 2017.

Our Bottom Line: The World Trade Organization

We could say that the WTO deals with the rules of trade among its 164 members.

This is how it describes what it does:

Although the banana wars involving the EU and the U.S. were unusually long, they were not uniquely complex. You can see that solving a trade dispute takes time, patience, rules…

…and the WTO.

My sources and more: The Economist has details about the banana wars as do the NY Times and WSJ. I also found this EU press release interesting and recommend a look at the WTO website. The WTO is most interesting though when you check out the disputes.

Also, please note that my reference at the beginning of the post to political influence related to the reputed connection between Chiquita’s Democratic Party donors and President Clinton.

Elaine Schwartz

I am Elaine Schwartz, an economics writer, teacher, and the founder of econlife®. In so many places and ways, I have tried to make economics interesting and accessible so we could be personally, professionally, and politically knowledgeable.