Banana War Costs U.S., WTO Finds

WASHINGTON —  World trade arbitrators Tuesday paved the way for the United States to impose $191.4 million in punitive tariffs against the European Union in a long-running dispute over banana exports, and U.S. officials said they will begin collecting the fees within days.

The ruling pushed the United States and Europe, which remain comrades in arms in the war against Yugoslavia, to the very edge of a trade war with each other. The U.S. sanctions now seemingly can be stopped only by a quick decision by Europe to back down.

And even if that happens, the two sides are combatants in a growing list of trade disputes that range from aircraft noise to beef treated with growth hormones.

In the banana war, Clinton administration officials interpreted Tuesday’s complex, 180-page ruling issued by the World Trade Organization in Geneva as vindication of their claim that Europe has long maintained illegal barriers to bananas marketed by Chiquita and other U.S. firms. They said the ruling affirmed this country’s right to retaliate against Europe with 100% tariffs against selected products.

However, the arbitrators’ conclusion that U.S. firms suffer an annual cost of $191.4 million diminished the size of the smoldering trade conflict. The administration had claimed $520 million in damages and threatened a long list of European luxury goods--ranging from Scottish cashmere to Italian prosciutto to French handbags--with higher tariffs.

Now, in light of the new WTO finding, U.S. officials will cut the list sharply and announce the remaining items subject to punitive tariffs within the next few days. The taxes will be retroactive to March 3.

“Any way you cut it, $200 million is a lot of money and sends a very clear signal,” special U.S. trade negotiator Peter L. Scher told reporters, adding that “this demonstrates that at the end of the day, there is a price to pay for failure to comply” with trade rulings.

Scher described the WTO ruling as a “major victory” and said it could set an important precedent for disputes with Europe about beef hormones and with Canada about magazines.

While highly unusual, U.S. sanctions against Europe, the world’s other economic superpower, would not be unprecedented. In 1989, the United States imposed about $91 million in punitive tariffs on food imports from Europe, in response to Europe’s prohibition on U.S. hormone-treated beef.

The beef issue flared anew last month, when the United States threatened to impose $900 million in sanctions against an array of mostly agricultural products from Europe. Those sanctions could take effect in May.

During the six-year battle over bananas, the United States repeatedly has complained about European barriers designed to protect bananas from the Caribbean and other former colonies of Europe, as well as Europe-based marketers that compete with Chiquita and other U.S. firms.

Early last month, the United States began requiring importers to post 100% bonds on selected European products, a move that immediately chilled business for such items as Scottish cashmere but which stopped short of formal taxation.