British fury at US over `banana war'

IN AN unprecedented move, the United States ambassador was called to the Department of Trade and Industry last night to hear government protests at trade sanctions imposed by the US in a row over bananas.

Stephen Byers, the Secretary of State for Trade and Industry, told the ambassador, Philip Lader, that the Government "deplored" the US' unilateral action in imposing a 100 per cent tariff on luxury goods from the European Union, including British cashmere.

British taxpayers may now have to pay up to pounds 17m to protect about 500 jobs in the cashmere industry in the Scottish Borders after the Government promised to pay the duty.

Downing Street officials protested directly to the White House, but there was no contact between Tony Blair and President Bill Clinton on the issue.

Mr Blair, who this week advised Europe to follow the US way on economic reform, said on a visit to Scotland: "We must make sure this is resolved... No one should be in any doubt about our determination to make sure... jobs are protected."

The flashpoint for the trade row was America's failure this week to win World Trade Organisation (WTO) backing for its demand that the EU drop tariffs on large-scale Central America producers' exports of bananas - which are mainly owned by US corporations.

The US complained of unfair trade restrictions against its producers compared with the smaller Caribbean banana producers, who can export tariff- free to the EU. Because of historical colonial links to the island communities, many EU countries want to protect them from the economic damage of direct competition.

Rather than wait for a WTO ruling, which it promised "soon" after 15 March, the US imposed a 100 per cent tariff yesterday on selected EU luxury goods, from Italian handbags to pecorino cheese. Brussels reacted with fury, accusing Washington of breaching WTO rules.

"The international trading system only works if all countries fulfil their obligations," said Ambassador Peter Scher, US special trade negotiator, announcing the sanctions.

EU negotiators believe the US has struck such an aggressive position on a relatively insignificant dispute to lay down a marker in looming clashes over US-produced hormone-treated beef and genetically modified crops and foods.

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