Posted on: Monday, April 16, 2001

Banana dispute showed effects of globalization

It may not be immediately apparent why it's good news in Hawai'i that the United States has settled its 8-year-old dispute with the European Union over bananas.

So we'll explain. The EU has sought to protect fruit companies in its former colonies and territories in Africa and the Caribbean with banana quotas. That hurt the American producers Chiquita and Dole, which grow bananas in Latin America.

World Trade Organization panels have twice ruled that the EU rules were unfair, and gave the United States the green light to retaliate with 100 percent tariffs on luxury goods from Europe.

The result hurt the Europeans enough to reach a settlement with the United States. Chiquita and Dole will sell more bananas in Europe, and the U.S. luxury tariff will be lifted July 1.

What's completely missing in this synopsis, however, is the effect of these developments in Hawai'i. While Washington was attempting to punish the Europeans for their banana quotas, an unintended target turned out to be the high-end retailers in Waikiki and other resort destinations. They were faced with having to double the price of their Gucci handbags at a time when Japanese visitors, as a result of their own economic malaise, were leaving sooner and spending less.

This case shows how the World Trade Organization can put teeth into fair trade provisions. It also shows how, in the global economy, no action occurs on one side of the globe without an opposite and equal reaction on the other.