Reuters
March 7, 2001
By Doug Palmer

WASHINGTON, March 7 (Reuters) -- The top U.S. trade negotiator warned the European Union on Wednesday the Bush administration could target a new batch of EU goods for retaliatory duties in a banana trade dispute.

The EU's restrictions on imports of bananas and hormone-treated beef are among the most contentious trade issues simmering between Brussels and Washington.

In testimony before the House Ways and Means Committee, U.S. Trade Representative Robert Zoellick said he was prepared to defend American interests in the banana case by rotating $191 million in U.S. sanctions to a new set of goods.

Zoellick noted that there was some risk for the United States in that action because the EU has indicated it would then proceed with retaliation on billions of dollars worth of American goods in a dispute over U.S. export tax breaks.

European farm ministers in December approved a new "first-come, first-served" system for distributing banana import licenses that the EU says will bring it into compliance with World Trade Organization rules.

The United States contends the new system still violates WTO rules and wants further negotiations on the issue.

EU Goods Targeted Can Be Changed

Zoellick told the House panel he was disturbed by a provision being considered by "a lower level committee" within the EU that would block further talks with the United States once the first-come, first-served system is implemented.

In conversation with European officials on the issue, "I said quite clearly if they do that I see no recourse other than to start to use the carousel provision," Zoellick said.

Last year Congress passed so-called carousel, or rotating, trade retaliation that requires the administration to revise the list of EU goods hit with 100 percent duties every six months until disputes over beef and bananas are resolved.

The U.S. has about $308 million worth of retaliation in place, of which about $191 million is related to the banana dispute. The 100 percent duties were leveled against a variety of EU products ranging from gourmet foods to handbags.

The WTO has ruled the EU's previous banana import rules unfairly favored growers in EU territories and the Caribbean over Latin American producers. U.S. companies Chiquita Brands International Inc. (NYSE:CQB - news) and Dole Food Co. Inc. (NYSE:DOL - news) are major banana growers in Latin America.

In January, Chiquita filed a lawsuit in the European Court of Justice, seeking $525 million in damages caused by the import restrictions. The company has blamed the trade restrictions for its financial problems.

U.S. Wants To Find Alternative

Zoellick, who emphasized that revising the retaliation is his second choice, urged the EU to delay implementing the new banana regulations to provide more time to resolve the issue.

"I would at least like to have some time to try to negotiate with them to see whether we can resolve that issue working closely with the countries involved," he said.

Zoellick was scheduled to meet this week to discuss several trade issues with Pascal Lamy, the EU Trade Commissioner, who was visiting Washington.

Anthony Gooch, a spokesman for Lamy, had no immediate comments on Zoellick's remarks.

But he said was unaware of any private warning the U.S. trade representative had made to Lamy. The issue was likely to be discussed when they meet on Friday, he said.

The earliest the EU's banana rules could go into effect is April. But "implementation dates are never easy to predict because a lot of preparatory work needs to be carried out," Gooch said. "That could take more time."

Britain and some other members of the EU want continued protection for banana imports from African, Caribbean and Pacific states, many of which are former colonies.

The beef trade dispute involves a 12-year-old battle over EU rules prohibiting U.S. beef from cattle raised with artificial growth hormones. The WTO gave Washington permission to impose duties on $116.8 million worth of EU trade in retaliation for the beef ban.