Advertisement

SKIP ADVERTISEMENT

How Trade Wars Begin

Video
bars
0:00/3:13
-0:00

transcript

How Bananas Can Explain Trade Wars

The banana wars were spats that escalated, tariff by tariff, into a decades-long dispute between the United States and the European Union.

Behold, the banana. Who’d have thought it would be one of the most contentious fruits of the 1990s? “It could be a spin doctor’s nightmare on either side of the Atlantic if a row about selling bananas sparks a multibillion-dollar trade war.” “Nobody with any sense wants a tit-for-tat trade war. That is a blind alley if ever I heard of one.” It’s a tale of how trade restrictions can trigger geopolitical feuds when countries use things like tariffs to protect their own industries. What became known as the banana wars started like this. European companies were importing fruit tax free from former colonies in places like the Caribbean, Africa and the Pacific to help support their developing economies. Meanwhile, Europe had tariffs and quotas that restricted the fruit that American companies were shipping to Europe from Latin America. And that limited their access to the world’s biggest market for bananas. The U.S., together with several Latin American countries, repeatedly turned to the World Trade Organization to mediate the dispute. “This case has been lost four times.” But before the W.T.O. ruled that it could strike back, the U.S. announced a plan to put tariffs on European luxury goods. And that got the Europeans mad. “What the Americans have done this last week is clearly unacceptable. It’s illegal and it’s outside the system.” Tensions ran high. Each side accused the others of breaking the rules. “The European Union is the largest member of the W.T.O. And if you allow them to get away with not abiding by the rules, you start to chip away at that system and saying, is the W.T.O. reliable? Can we count on it?” In 2009, Europe agreed to cut back its restrictions on Latin American bananas. But even disputes with a clear-cut resolution can seem to be part of a larger story. For example, what could be called the chicken wars is just one of many disputes between the U.S. and China. “The Obama administration will once again take action to hold China accountable.” Back in 2010, the Chinese accused the U.S. of dumping underpriced chicken onto its market. So China punished the U.S. with antidumping tariffs. The Americans went to the W.T.O. And they won. Years later, just a month after China lifted the chicken tariffs, President Trump started 2018 with a protectionist bang, widely thought to be aimed at China. He put tariffs on washing machines and solar panels, and made other threats too. “It will be 25 percent for steel. It will be 10 percent for aluminum.” Threats of retaliation poured in within days. “We are discussing different U.S. products from which import tariffs can be imposed.” Two weeks later, the president stoked growing fears that a trade war with China could be looming. He announced tariffs on consumer goods to punish China for stealing intellectual property from American companies. “This is the first of many.” The Chinese immediately responded with threats to retaliate against American products. These unilateral moves could test the strength of the global system for resolving trade disputes. Whether the product is technology, cheap chickens or, yes, even bananas.

Video player loading
The banana wars were spats that escalated, tariff by tariff, into a decades-long dispute between the United States and the European Union.CreditCredit...Vincent Tullo for The New York Times

The Trump administration this week raised fears of a trade war after it authorized a series of tariffs explicitly — and implicitly — aimed at China.

Tariffs, and the specter of trade wars, are nothing new.

The United States and the European Union spent much of the 1990s fighting over bananas. Threats and tariffs flew back and forth across the Atlantic. What had started with a call for free trade in bananas by Costa Rica, in 1991, escalated into an all-out battle between two of the world’s economic superpowers.

At the time, the so-called banana wars were seen as a test of the sustainability of the newly formed World Trade Organization, as Europe and the United States fought over whether Europe could give preferential treatment to bananas imported from former colonies in Africa, the Caribbean and Pacific regions.

Advertisement

SKIP ADVERTISEMENT