Question

You are a member of a World Trade Organization task force that is reviewing the nine-year banana conflict between the United States and the European Union (EU). The EU was giving preferential treatment to banana exporters from Africa, the Caribbean, and the Pacific island nations. But the United States challenged what it saw as unfair trading practices and the World Trade Organization agreed. The U.S. action gained support from global fruit companies Dole, Chiquita, and Del Monte, which account for nearly two-thirds of the fruit traded worldwide. The EU argued it was supporting struggling economies for which bananas make up a large portion of their income. Should international trade be left to private enterprise only, or should governments openly manage it to benefit poorer nations? Would you have argued on behalf of the United States or the EU? Explain. What are the pros and cons of each side's arguments?

Answer 1

International trade should not be left to private enterprise because the private companies will monopolize the market. When international trade is left as free trade then the governments can openly manager it to benefit the poorer countries. However, in contrast, “private enterprise means merely that business and the means of production are held in private hands, although the government may make any number of demands on how these individuals go about their business. The fascist governments of Europe in the past century maintained a system of private enterprise, while simultaneously exercising near complete control over business operations. This opens it up for potential corruption and control by the government over the countries which are having the struggling economies.

Here is some background on the matter. The United States (backed by Mexico, Guatemala, Ecuador, and Honduras) complained about the EU policy to the WTO, which awarded victory to the plaintiffs in 1997. The EU made amendments to its banana policy, which the EU said brings the policy in line with WTO specifications. However, the United States and its backers said that the amended policy was no better than the old one. The U.S. government notified U.S. importers that they are liable for hefty tariffs on $520 million worth of European luxury goods in retaliation for European barriers on banana imports. Washington said $520 million is the sum that U.S. companies such as Chiquita and Dole lost because of the EU banana quota system. The tariffs affected a range of EU goods, from Belgian biscuits and Scottish cashmere sweaters to Italian cheese and Spanish leather goods.

The British Trade Minister Brian Wilson called the U.S. action “potentially catastrophic” for the British cashmere industry concentrated in Scotland. The French Foreign Ministry also called on the United States to halt what Paris considered an illegal action by Washington. “We strongly deplore that the U.S. has once again acted unilaterally,” the ministry said in a statement. “We are asking them to show good faith and to reconsider this unacceptable decision.” The World Trade Organization ruled in April 1999 that the European Union’s banana import program violated international trade law and would have to change. Caribbean leaders reacted to the ruling with anger and concern, saying it posed a dire threat to tiny island nations that rely on bananas for their foreign exchange. The Caribbean accounts for 10 percent of the world’s banana trade. Much of the remaining 90 percent is dominated by Latin America’s so-called “dollar banana” producers.