Banana war: Scots exporters hope to escape heavy duty

BRITISH OFFICIALS hope that sanctions against Scottish exports of cashmere sweaters will be dropped after the United States won its argument in the banana trade war.

A panel of experts at the World Trade Organisation has ruled that the European Union was wrong to limit imports for bananas. But it also said that the damage to the US had been less than Washington had claimed, meaning that it must cut its list of sanctions.

The US welcomed warmly the WTO decision, in a case that has dragged on for nearly a decade. Europe gives some preferences to imported bananas from former colonial territories, and US companies that export the fruit from other countries claim they have been penalised as a result. But the experts said the US could impose sanctions of only $191.4m (pounds 120m) in retaliation. The US drew up a list of products totalling $520m (pounds 325m), and has begun asking importers for bonds to cover the punitive tariffs it has applied.

Among the products selected were cashmere sweaters from Scotland, chosen because of the potential impact on theScottish elections. British officials hope the sweaters will not be among the products to be hit with sanctions, which will be announced in the next few days.The issue has been the subject of intense lobbying by ministers.

"This thing should be settled within the relevant sector, which has nothing to do with cashmere, nothing to do with all these other industries, but purely has to do with bananas," the Trade minister Brian Wilson said yesterday. He told the BBC he hoped a trade war could now be avoided. "I certainly am opposed to a tit-for-tat war," he said. "I am opposed to anything which was outside the rules of the WTO or which, indeed, doesn't head for a constructive solution based on the problem, which is about bananas."

The EU reacted with disappointment to the ruling. "We will carefully study both the arbitrator's report and the two panel reports and, of course, meanwhile reserve our right of appeal," said Sir Leon Brittan, the EU's trade commissioner. "It is, however, already clear from the arbitrator's report that the unilateral US retaliation currently in place against EU exports has been, and remains, largely illegal, as it is set at a level well over double that determined by the arbitrator. To comply with the law, the US must ... immediately end sanctions and the threat of sanctions on over half the trade currently subject to them."

The ruling will allow Europe to give some protection to Caribbean banana imports, but it will have to revise the banana import regime. It has already done so once, but the US said it had not done enough and the WTO agreed.