Banana carousel threatens EU-US trade relations

US Trade Representative Robert Zoellick says US could rotate $191 million banana case sanctions to new EU goods

US Trade Representative Robert Zoellick has indicated that he is considering aggressive action in defence of US trade interests. In an appearance before the US Congress Ways and Means Committee on 7 March, he stated that he was prepared to use the so-called carousel trade retaliation introduced by Congress last year. This requires that the list of EU goods on which 100% duties have been placed is changed every six months until the banana and beef disputes are settled.

The use of carousel, or rotating, trade retaliation to target $191 million of new EU goods could lead to an escalation of the dispute situation. The risk is that the EU will retaliate by imposing sanctions of up to four billion dollars on US goods following a WTO ruling in October 2000 that US foreign sales corporations amount to an illegal export subsidy.

EU Trade Commissioner Pascal Lamy will meet Mr Zoellick in Washington on Friday 9 March for the first time. Prior to Mr Zoellick's statement on carousel retaliation, the top item on the EU's agenda was the concern that the new US administration is going to prioritise regional trade agreements rather than multilateral negotiations under the auspices of the WTO. It remains to be seen whether the banana dispute will now dominate the meeting.

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