This article discusses a well-
I can hardly believe the banana wars are over. The dispute started back in 1993 when the European Union set quotas favoring banana imports from Ivory Coast, the Windward Islands and other former colonies at the expense of imports from Latin America. American banana companies and the Latin American countries where they grow their bananas sued the E.U., accusing it of rigging an unfair trade deal, first under the GATT and then under the W.T.O.
The suit dragged on for years, and at several points threatened to spark an all-
It finally ended this month when the E.U. said it would continue to grant tariff-
When this started, trade was trumpeted as the single most important tool for development. Europe insisted that its special treatment of its former colonies was central to its post-
Today nobody talks about bananas. Stalled global trade talks (remember Doha?) barely get mentioned. There are a lot of problems out there, including the collapse of world trade in the wake of the global recession and the looming threat of protectionism. Yet there has also been a rethinking about trade’s supposed silver bullet role in economic development.
China’s growth stands as a beacon for the power of trade. But others that have hitched their economic strategy to trade, like Mexico, have found prosperity elusive. Despite growing banana exports, both the Latin American banana exporters and Europe’s impoverished former colonies remain poor.
One thing we have learned over the past 15 years is that trade is necessary but not sufficient for development. Countries also need investment in infrastructure, technology and human capital. They need credit. They need legitimate institutions—
Source: Eduardo Porter, The New York Times, December 29, 2009, p. A30. © 2009 The New York Times. All rights reserved. Used by permission and protected by the Copyright Laws of the United States. The printing, copying, redistribution, or retransmission of this Content without express written permission is prohibited.
Questions to Consider
After reading Banana Wars, consider the question(s) below. Then “submit” your response.
1. Why do you suppose it was the U.S. that filed complaints with GATT and the WTO against the EU of unfair trade practices if the majority of the bananas are grown in Latin American countries?
2. The EU’s banana quota was converted to a tariff in 2005. Based on what you’ve learned from this chapter, how would you expect this change to impact the total welfare of the EU and the banana exporting Latin American countries?
3. How, if at all, would you expect the EU’s reduction of tariffs on Latin American banana imports to impact the welfare of producers in the Ivory Coast?