Banana Wars

By Karl Taro Greenfeld

There's something inherently smirk-inducing about a trade dispute over bananas. You've seen it in the papers in headlines like BANANA SPLIT or GOING BANANAS. But Clark Davis isn't laughing. One day the quality-assurance engineer was contentedly playing in the basement of his Wexford, Pa., home with his N-gauge model railroad--three lines spread over 36 sq. ft. of diorama, styled after turn-of-the-century Europe. The next day, Davis, 66, heard from his supplier of German-made Fleischman engines that not only could the price be doubling but the supplier's hobby shop might even be put out of business. All because the U.S. wants to punish Europe for discriminating against bananas grown by U.S. companies in Latin America.

The dispute, after fermenting in the gut of the world trade bureaucracy for the past seven years, has become at once more serious and more ludicrous. More serious because, unless the Europeans fulfill their obligations under various trade agreements to accept imported bananas, support for trade restrictions will grow among many U.S. commercial interests and their advocates in Congress. A preliminary settlement appeared to have been reached last week allowing the U.S. to impose punitive tariffs on $520 million in European goods, though that figure is subject to review. Whatever the amount, it is not likely to please Europe, and that could spark a trade war that would drive up prices for U.S. consumers and crimp markets for U.S. exports.

The banana battle grows increasingly absurd as it threatens to spread to other food groups, from ham and cheese to wafers and waffles, and to such oddities as candles, cashmere sweaters and model trains. That's because the U.S. targeted for tariffs 17 European exports chosen to "gain the most leverage" over European protectionists. How? Mainly by targeting the British, French and Italians, who have pushed to restrict Latin bananas and to favor those grown in former European colonies, like Martinique and Cameroon.

But why those 17 products? To "minimize impact" on Americans, says the Office of the U.S. Trade Representative. And how does the USTR determine the impact? By throwing the tariff list open to a beagle chorus of special pleading--by U.S. manufacturers eager to get their European competitors barred, by U.S. importers desperate to keep their shipments coming--and to comment by regular folks like Davis, who are caught in the cross fire. There may have once been a time when politics stopped at the water's edge, but today it scarcely taps the brakes.

The first hit list drawn up by the USTR targeted 42 categories of imports, including bath preparations ("other than bath salts") and dolls ("whether or not dressed"). That prompted much yowling from the scores of lobbyists and hobbyists who showed up at a hearing in Washington last month. Importers of feta cheese, a staple of Greek cuisine, implicitly invoked the wrath of the powerful Greek-American lobby and got their product knocked off the list. Pecorino cheese from Italy didn't fare as well; it stayed on.

Model railroaders argued, among other things, that if their trains doubled in price, more kids would turn to lives of drugs and crime. Other train enthusiasts, including Davis, wrote letters: "I fail to see any relationship between model-railroad equipment and bananas." Trains got dropped.

Other interests eagerly crashed the party, seeing the banana dispute as a chance to settle old scores. U.S. pork producers, suffering through a severe price slump, sought to block the import of Italian hams like prosciutto. "The E.U. has closed off much of its market to us," reasoned Nick Giordano, a lawyer at the National Pork Producers Council. "We're looking for reciprocity, and one way to get it is nicking them on bananas." The council got pork added to the hit list. The hog farmers pushed to nail Dutch and Danish ham producers. But because those two countries had opposed the E.U.'s banana restrictions, the USTR said no.

Even alligator farmers got into the act, concerned that proposed restrictions on handbags and wallets might affect them. Though their alligators are raised domestically, most skins are sent to France and Italy for tanning and are reimported as handbags and wallets. "This nation's alligator farmers are hurting bad," moaned Ted Joanen, chairman of the American Alligator Council. He needn't have worried: the USTR went after handbags and wallets with "outer surface of sheeting of plastics." But that outraged high-end department stores such as Bloomingdale's and Neiman Marcus.

Many critics asked, reasonably enough: Why is the U.S., which doesn't grow bananas, embroiled in a banana dispute with Europe, which also doesn't grow bananas? Answer: Before the E.U. imposed the current banana regime in 1993, non-E.U. companies controlled 95% of the European banana market. Since then, American companies like Chiquita and Dole have seen their European market share plummet 50%. Hardest hit has been Chiquita, which has lost money four of the past five years--the result, company officials insist, of being denied access to the European market.

It should come as no surprise that Chiquita's chairman, Carl Lindner, is a man whose calls to Washington are returned, and quickly. In the past few years, he and his family have contributed $3.9 million to the two major political parties, and Lindner has been a guest in the Lincoln Bedroom.

But even folks who buy access sometimes have a strong case. "There is no issue that is less attractive for us to go to a trade dispute on," admits USTR spokesman Jay Ziegler, referring to Lindner's political connections. "But the fact is, the banana dispute has evolved into a crucial test" of the enforceability of rulings by the World Trade Organization, which, to no avail, ordered the E.U. to drop its banana restrictions by Jan. 1. Rising concern about the U.S. trade deficit--up 50% in 1998 and expected to rise as much as 80% in 1999--has critics clamoring. Last month Senate majority leader Trent Lott, in a letter to President Clinton, warned, "If the Administration will not take action to protect trade agreements, Congress will have no choice but to take action on its own."

That would mean increased sanctions and higher prices for imported goods like model trains or--hey, what's your favorite food or hobby?

--With reporting by Adam Zagorin/Washington

With reporting by Adam Zagorin/Washington