Brian Wilson: My part in the Banana Wars makes me fear Trump's tariffs
I was UK Trade Minister at the time which largely involved living on aeroplanes and promoting British exports. Trade policy, the World Trade Organisation (WTO) and all that stuff was a much more complex side of the job. Over the next six months, I got to know a lot about trade diplomacy and the politics of bananas.
As the White House’s capricious occupant threatens sanctions against the EU, Canada and Mexico, there are lessons from that episode which are worth recalling. The main ones are not particularly uplifting: in trade wars, might, rather than right, generally wins; “might” tends to mean the United States and “free trade” does not equate to fair trade.
The most urgent memo to all concerned should be about collateral damage. Once tit-for-tat sanctions begin, they immediately move away from the original subject of the dispute. Ostensibly, Trump wants to protect American steel and aluminium producers from foreign imports.
Those from China were the original target. Slapping tariffs on other countries looks like fight-picking rather than a genuine search for economic redress. US industry and construction need the imports and American consumers will pay for their displacement. However, that will take time to filter through and, meanwhile, it’s the political grandstanding that counts.
Twenty years ago, the Banana Wars arose from the efforts of the EU, prompted mainly by the UK, to maintain preferential treatment for bananas from poor Caribbean countries. This was bitterly contested by the big American companies, Chiquita and Dole, who grew their bananas mainly in Colombia and Ecuador.
The leading lobbyist for Chiquita was an awful man named Trent Lott, a Senator from Mississippi who was forced to resign as the Republican leader in the Senate in 2002 because of his racist opinions. Lott had Scottish ancestry and was the main promoter of “Tartan Day” in Congress. However, he did not allow tartan to stand in the way of his Chiquita pay-cheque when the choice arose.
When the US Government’s Trade Department weighed in, they were supported by the WTO which authorised sanctions to the value of losses claimed by the American banana companies to result from pro-Caribbean discrimination. And that is where the “hit list” came in. An eclectic selection of products from EU countries were to have punitive tariffs imposed, effectively blocking them from the US market.
There was nothing random about this list. Every product was chosen with a view to creating political pressure and, in the case of cashmere knitwear, this certainly had the intended effect. In the face of apocalyptic predictions about the implications for jobs, particularly in the Borders, ministerial minds were concentrated wonderfully.
I was quite proud of the solution we found to protect the cashmere industry; all the more so when I learned retrospectively that I was the reason for a high-profile Scottish product appearing on the list. We underwrote the excess tariff for the period of the dispute so that cashmere companies could carry on taking orders as usual.
Eventually, the WTO reduced the value of approved retaliation and cashmere came off the list. By then, the EU had more or less thrown in the towel and the preferential treatment of Caribbean bananas was phased out with disastrous consequences for the tiny Windward Islands economies.
One result was that many small farmers turned to cash crops for the drugs trade and the big boys of that industry moved in. Since most of the end product went to the United States, Chiquita’s gain was paid for on the streets of American cities. It certainly didn’t do the impoverished banana pickers in Colombia and Ecuador any good.
Soon, unless Trump backs off, the EU will produce its own list of tit-for-tat products. That means damage to industries in politically sensitive corners of the US – bourbon, jeans and peanut butter are being mentioned. The greater danger will emerge if Trump then escalates the conflict and bigger fish are dragged in with ripple effects around the world.
Chinese steel is already looking for new markets which will drag down the price, perhaps to unsustainable levels. Once these conflicts start, there is no certainty where they will end up – which is why it makes little sense to start them in the first place. The EU should not be too eager to draw up its list.
The argument for free trade is that consumers benefit but at what cost? I looked at the Fairtrade Foundation website which states that the average price of a banana has dropped from 18p to 11p over the past decade. Shareholders in Chiquita are doubtless delighted, we are all eating more bananas and nobody thinks too much about how this wondrous saving has been paid for in human terms. Or do we? Accoding to Fairtrade, one in three bananas sold in the UK now carry its label, signifying that the people who grow and pick them are receiving a civilised return for their labours. If we can afford these few pennies more, we should pay up and enjoy our bananas with clear conscience.
The United States, long before Trump, has a history of flexing its political muscles through trade. Potentially more damaging to some UK companies than the threatened trade war are actual sanctions now being imposed on Iran. The US government is entitled to tell its own companies who they can trade with, but there is no basis in interntional law for them punishing foreign businesses whose governments take a different political view.
That doesn’t stop them, as people trying to do business with Cuba have found out to their cost in previous decades. No international body has the power to stop them or to protect this aspect of free trade. Trump is following in a long tradition – whatever suits America is how the world should be run, and to hell with victims and consequences.