Nested and overlapping regimes in the transatlantic banana trade dispute

Abstract

The decade-long transatlantic banana dispute was not a traditional trade conflict stemming from antagonistic producers' interests. Instead, this article argues that the banana dispute is one of the most complex illustrations of the legal and political difficulties created by the nesting and overlapping of international institutions and commitments. The contested Europe-wide banana policy was an artifact of nesting – the fruit of efforts to reconcile the single market with Lomé obligations which then ran afoul of WTO rules. Using counter-factual analysis, this article explores how the nesting of international commitments contributed to creating the dispute, provided forum shopping opportunities which themselves complicated the options of decision-makers, and hindered resolution of what would otherwise be a pretty straightforward trade dispute. We then draw out implications from this case for the EU, an institution increasingly nested within multilateral mechanisms, and for the issue of the nesting of international institutions in general.

Keywords:

• bananas
• European Union
• institutions
• nesting
• trade
• WTO

Acknowledgements

An earlier version of this paper was presented at the Conference of Europeanists, March 11-13, 2004, Chicago, and at the American Political Science Association Conference, September 2-5, 2004, Chicago. We wish to thank Christina Davis, Brian Hanson, Robert Keohane, Andrew Moravcsik, Kenneth Oye, Mark Pollack, Elliot Posner, Mark Rhinard, Alberta Sbragia, Gregory Shaffer, and Daniel Tarullo, as well as two anonymous reviewers, for comments. We also wish to thank Cyrus Friedheim of Chiquita, and Jean-Francois Brakeland, Aldo Longo and Alberto Volpato at the European Union Commission. We deeply appreciate their help in sorting through the politics of the banana dispute, and freely acknowledge that the interpretation of the motives of actors involved is our own.

Notes

1. Bureaucracies tend to replicate policy formulas to create internal consistency and to ease implementation. The EU chose quotas because they boosted the price of bananas, decreasing the need for subsidies to make French and Spanish bananas competitive. The particular system of import licenses replicated existing mechanisms used to distribute quotas across individual importers. Since the quotas were designed to discriminate between ACP and dollar bananas, categories of quotas (A, B, and C) were created, resulting in an incredibly complicated licensing system that caused German importers to raise legal challenges and led the EU policy to be condemned by the WTO. The difficulty of changing this system was in no small part associated with the entrenchment of the policy repertoire which bureaucracies cling to.

2. Signed in 1975 after Great Britain's accession into the EEC (and renewed in 1979, 1984 and 1989), the Lomé Convention is the world's largest financial and political framework for North–South co-operation. This special relationship is characterized by non-reciprocal trade benefits for ACP states including unlimited entry to the EC market for 99 per cent of industrial goods and many other products. Of the sixty-nine ACP countries, at least eight are significant banana producers. Lomé conventions: OJ 1976, L25/1; OJ 1980, L347/1; OJ 1986, L86/1; OJ 1991, L229/I.

3. Latin American bananas are often referred to as ‘dollar bananas’ because they are grown by American multinationals such as Chiquita and Dole on huge, efficient plantations in Latin America.

4. With 14.9 kg/capita compared to an average EU consumption of 9.3 kg/capita (Bessko 1996: 265).

5. In 1992, bananas cost $1.3/kg in Germany, vs. $2.07 in the UK (Sutton 1997).

6. Germany v. Council, ECJ C-280/93 [1994] ECR I-4973; see: par. 78. In a second case, the German government challenged the Commission's system for implementing the disputed regulation, but the ECJ dismissed this case on a technicality. Opinion 3/94 [1995] ECR I-4577.

7. Case 280/93, Germany v. Council [1994] ECR I-4973.

8. The ECJ ruled that it did not need to review the compatibility of the Framework agreement with WTO law because the Framework agreement had come into force with the Uruguay Round, and thus any assessment as to the agreement's legality raised under EEC Article 228 would be legally moot. Opinion 3/94 on the Framework agreement on bananas, decision of 13 December 1995 [1995] ECR I-4577.

9. Firma T. Port v. Hauptzollamt Hamburg-Jonas. (T. Port I, Banana I) BVerfG decisions of 25 January 1995. First Chamber of the Second Senate 2 BvR 2689/94 and 2 BvR 52/95 [1995] EuZW 126. Verwaltungsgerichtshof Hessen decision of 9 February 1995 [1995] EuZW 222.

10. 1996 judgment of the German Federal Fiscal Court Europaische Zeitschrift fur Wirtschaftsrecht (EuZW) 126–128, cited in Gerard G. Sander (1998).

11. Firma T. Port v. Hauptzollamt Hamburg-Jonas. (T. Port II) FG Hamburg order 19 May 1995 [1995] EuZW 413. BFH decision 22 August 1995. T. Port II, Second banana ruling. BVerfG decisions of 26 April 1995. First Chamber of the Second Senate 2 BvR 760/95, [1995] EuZW 412.

12. ‘Yes, we have no profits’ (2001) Fortune 144 (11): 182–96.

13. USTR Charlene Barchefsky, quoted in ‘USTR announces list of European products subject to increased tariffs.’ Document 98–113, Office of the USTR.

14. The EU claimed that aiding the banana industry was preferable to providing direct aid. Caribbean bananas are grown on small, family-run farms, and bananas seem to be the only year-round crop that can recover quickly enough after storm or flood damage. Moreover, according to the defenders of the EU regime, the only alternative crop for these countries in the absence of markets for their banana exports would be drugs. Perhaps. But drug production is also a problem in Latin America, and Europe is also vulnerable to the effects of drug production in Latin America. In addition, a straight-up tariff on dollar bananas might have provided a sufficient benefit for ACP producers.

15. Firma T. Port v. Hauptzollamt Hamburg-Jonas. BVerfG decisions of 25 January 1995. First Chamber of the Second Senate 2 BvR 2689/94 and 2 BvR 52/95 [1995] EuZW 126. Firma T. Port v. Hauptzollamt Hamburg-Jonas Verwaltungsgerichtshof Hessen decision of 9 February 1995, [1995] EuZW 222. Discussed in Alter (2001).

16. ‘Yes, We have no Profits’ (2001) Fortune 144 (11): 182–96; Taylor (2003).

17. Based on interviews with members of the European Commission, Brussels, September 7 and 8, 2004.

18. Hawaii produces bananas for domestic consumption. It was argued that by diminishing consumption for dollar bananas in Europe, the price of Hawaiian bananas could be adversely affected. This may be true, but most commentators explain US actions by focusing on Chiquita bananas' considerable efforts to lobby Congress rather than the Hawaiian banana industry.

19. ‘Ecuadorian banana growers request US base withdrawal due to new import scheme’, in World News Connection, 26 April 2001.

20. Part of the delay was that decision-makers waited for legal and political challenges in the different layers to play themselves out, but European actors were also buying time.