Europe accuses US of starting war over trade

THE EUROPEAN Union yesterday accused the United States of "declaring war" on countries it judged were trading unfairly.

With the rhetoric in the "banana war" becoming tougher on both sides of the Atlantic, Europe's ambassador to the World Trade Organisation, Roderick Abbott, said the US acted illegally in effectively imposing sanctions on $520m (pounds 325m) of EU goods. America was "declaring war on any or all WTO members whose compliance [with WTO decisions] it decides is inadequate", he said.

But Washington showed no sign of concession. Its special ambassador, Rita Hayes, insisted responsibility for resolving the dispute lay with Europe.

Although yesterday's meeting was not expected to resolve the conflict, some diplomats fear the gathering of the General Council, the WTO's supreme body, may have made both sides more entrenched.

Behind the tough talking there were signs of tension on the European side. Tony Blair's attempt to mediate directly with the US President, Bill Clinton, caused controversy as some European nations, including France, made clear they opposed striking a quick deal.

Many member states believe concessions to the US before 12 April, when the WTO is set to rule on the dispute, may simply vindicate America's tough stance.

"Blair can try to talk but I'm not sure it would be a good deal; in fact I believe it would be a bad deal," one European diplomat said.

The WTO is to rule both on the legitimacy of the EU's banana import regime, which the US says discriminates in favour of producers in former European colonies, and on the extent of any compensation to be awarded against the EU. Washington is claiming $520m.

European diplomats are confident that if the trade organisation does award compensation, it will be less than Washington demanded - perhaps $150m to $200m. Any concessions should be left until after this, they say.

The EU called yesterday's meeting in Geneva in the hope of winning support from other members of the 134-strong WTO. Its chief, Renato Ruggiero, appeared to criticise the US decision to go ahead with sanctions when he said: "We seek a solution to a problem firstly by mutual agreement and not by imposing rulings on either side."

Many envoys voiced anger at both sides in the dispute, which now threatens to undermine WTO rules. "They are playing with fire, and we could all be burnt," said one.

The dispute is already hitting Hawick, a Scottish Borders town dependent on the export of cashmere sweaters. Johnstons, one of a dozen textile factories in the town, was due to send 500 sweaters to America yesterday but has put the order on hold until the uncertainty over duty is resolved. The US has said it will ask for bonds of 100 per cent.

Rony Rathie, production manager, said unless Johnstons could guarantee payment of the duty, his US customers would look elsewhere - which means China.