The US had to reduce the list of products to which sanctions would be applied after the World Trade Organisation ruled it was right to retaliate, but had misjudged the level of damages. America says Europe restricts imports of bananas to favour its former colonies, and that this is illegal.
Exports of cashmere sweaters from the Borders region of Scotland and sweet biscuits had both been selected for punitive tariffs by the US, because of the forthcoming Scottish elections.
America hoped to pressure the Government into lobbying for a change in EU rules. The case provoked heavy lobbying from Donald Dewar, the Secretary of State for Scotland, who visited Washington last month, and from the British embassy in Washington, and both were jubilant yesterday. "It is a major boost, not just for the producers but for retailers as well," Mr Dewar said in Glasgow. "We worked long and hard for this result. I visited the States personally and held meetings with President [Bill] Clinton and his most senior ministers." Mr Dewar met the President briefly at a St Patrick's Day event. "I am very pleased that all the patient, behind the scenes work has paid off and that the deal has now been delivered."
The Trade minister Brian Wilson said: "Of course I welcome the fact that the US threat to so many EU businesses has been lifted. This will come as a great relief to all those sectors that have been removed from the retaliation list. It is particularly pleasing that cashmere has now been removed from the list."
Tony Blair confirmed that he had spoken to President Clinton about the issue in one of their daily conversations. "There have been, behind the scenes, intense negotiations obviously between myself and the American government," he said.
The final target list, issued by the US yesterday, still includes French handbags, German coffee makers and batteries, but it left off the British products and also Pecorino cheese from Italy. Articles in US newspapers had revealed that Pecorino was on the list largely by accident.
The new list covers $191.4m of European products, down from the original $520m.
The US is imposing 100 per cent sanctions on the affected products unless the European Union takes immediate action to revise its regime for banana imports. Denmark and the Netherlands are excluded as they have lobbied for the EU to switch tack.
The EU still has to work out which parts, if any, of its banana policy can be salvaged. It aims to help Caribbean island states through preferential imports, and European importers such as the Dublin-based Fyffes also benefit. The US has the world's largest banana companies, which, like EU banana companies, lobby heavily for political influence.