7 April 1999: The WTO rules in favour of the US in the Banana Wars

The World Trade Organisation sides with the US over the EU's preferential treatment of its former colonies in the banana trade, on this day in 1999.

Despite being the quintessential prop of slapstick comedy, bananas are serious business. In 2014, 5,691,782 tonnes of them were eaten in the European Union the largest market in the world for the consumption of bananas. It's not too surprising, then, that American-backed producers wanted access to such a lucrative market.

For much of the 20th century, huge American corporations, in particular the United Fruit Company, had supported corrupt “banana republics” in Latin America. So it's safe to say they were used to getting their way. However, the EU operated a system whereby preferential treatment was given to former colonies in Africa, the Caribbean and the Pacific, many of which depended on the banana trade.

The United States argued that this broke international rules, and it took its case to the World Trade Organisation (WTO). The EU responded by adopting a “first come, first served” system as container ships arrived in port, but Washington held out for more.

A list was drawn up of European goods which would be subject to 100% import tariffs, which included French handbags, German coffee-makers and cheese from Italy. But what hurt the British, or rather the people of Hawick, the most were the sanctions on Scottish cashmere sweaters. Around a thousand jobs depended on the cashmere industry in the small Scottish town in the Borders, which had a population of less than 15,000.

On 7 April 1999, the WTO ruled in favour of the US, and awarded $191m in damages –  somewhat less than the $520m Washington had sought. However, the negotiations went on for years.

In 2001, a deal was reached whereby the sanctions against European imports were suspended. Eight years after that, the Banana Wars – the world's longest-running trade dispute – were declared over.

Europe's former colonies would continue to enjoy tariff-free exports to the EU, while tariffs would be cut on Latin American imports from €176 a tonne to €114 a tonne by 2017. Brussels also pledged €200m to help former colonies modernise and diversify their economies.

Recommended

Whether it’s cryptocurrencies or investment trusts, make sure you know what you’re investing in
Investment strategy

Whether it’s cryptocurrencies or investment trusts, make sure you know what you’re investing in

Many people scoff at cryptocurrency speculators pouring money into an asset they may barely understand. But the same could be said of investors in man…
26 Jan 2022
How to invest in energy and metals as tech stocks crash
Commodities

How to invest in energy and metals as tech stocks crash

It’s been a terrible week for stockmarkets. But not everything is crashing – “real” assets such as metals and energy are holding up well and should ha…
26 Jan 2022
Shareholder capitalism: the world’s most powerful asset manager wants you to have your say
ESG investing

Shareholder capitalism: the world’s most powerful asset manager wants you to have your say

Under shareholder capitalism, the owners of the companies the big fund managers invest in are us – yet our voice is rarely heard. Now one asset manage…
26 Jan 2022
Julian Brigden: markets are at a huge inflexion point
Investment strategy

Julian Brigden: markets are at a huge inflexion point

Merryn talks to Julian Brigden of Macro Intelligence 2 Partners about the unwinding of the US stockmarket's super-bubble, and the risks and opportunit…
25 Jan 2022

Most Popular

Shareholder capitalism: why we must return power to listed companies’ ultimate owners
Investment strategy

Shareholder capitalism: why we must return power to listed companies’ ultimate owners

Under our system of shareholder capitalism it's not fund managers, it‘s the individual investors – the company's ultimate owners – who should be telli…
24 Jan 2022
Three innovative Asian stocks to buy now
Share tips

Three innovative Asian stocks to buy now

Professional investor Fay Ren of the Cerno Pacific Fund highlights three of her favourite Asian stocks to buy now
24 Jan 2022
Temple Bar’s Ian Lance and Nick Purves: the essence of value investing
Investment strategy

Temple Bar’s Ian Lance and Nick Purves: the essence of value investing

Ian Lance and Nick Purves of the Temple Bar investment trust explain the essence of “value investing” – buying something for less than its intrinsic v…
14 Jan 2022