U.S., EU Negotiate Banana Imports as Trade War Brews

The European Union and the United States were holding last-minute talks Sunday aimed at heading off a trade war over bananas that would hit EU exports and the authority of the World Trade Organization.

Diplomats said contacts were underway between officials in Brussels and Washington, and meetings were arranged between the trade ambassadors of the two powers in Geneva to avoid a clash set for today after WTO chief Renato Ruggiero proposed a way out of the dispute.

Details of Ruggiero’s plan, presented to the two sides Friday as they were swapping accusations of bad faith, have not been released.

But a WTO spokesman said Ruggiero, a former EU official who has won wide respect in Washington, had offered “the outlines of a possible compromise.”

If no solution is found, diplomats say, the ability of the 133-member WTO to solve disputes could be seriously impaired.

At the heart of the conflict is the EU’s rules, or regime, for banana imports and marketing across its 15 member nations, which favors fruit from former European colonies--mainly in the Caribbean--over that from big Latin American producers.

In 1997, following a complaint from the U.S.--which exports no bananas but was seeking to protect the interests of U.S.-based fruit companies--a WTO panel found the regime in violation of trading rules and said it should be changed.

But the new version, which went into force Jan. 1, was condemned by Washington and five Latin American countries as hardly different from the old one.

The U.S. argued that it therefore had the right to retaliate by slapping 100% tariffs on EU goods to the value of the trade it says its companies have lost--a sum it has set at around $500 million a year.

Today, Washington is set to ask the WTO’s Dispute Settlement Body for authorization to implement the tariffs on a range of EU goods, from sweaters to pork.