An Assessment of EU-US Relations with Special Reference to the Banana Dispute

Abstract

On the part of the Community, devising a unified banana regime based on a complex import and licensing system was considered the best option to fulfil several conflicting policy objectives simultaneously, namely to achieve internal market liberalisation required under the SEM legislation, while reconciling preferential trade arrangements under the Lome Convention with commitments to multilateral trade liberalisation within the GATT (and the then WTO) framework. However, the new regime was promptly challenged at both internal and external forums and faced legal action. The most important consequence of this new regime was the bitter confrontation between the EU and the US, which developed into a real trade war. Now the trade dispute between the two major traders of the world spilled over into other issues, calling the future of the multilateral trade liberalisation into question. In this context, section one of this paper sketches out the main features of the unified banana regime of the Community, after looking into the import arrangements for bananas of individual member countries preceding the Single European Market. Following the section two, in which the internal and external complaints about the new banana regime and the conclusions of the GATT disputes panel are dealt with, the last section seeks to elaborate the arguments of this paper on the implications of the dispute for the global trading system, after summarising the developments in the trade war between the EU and the US.