The US said that Europe discriminated against bananas from central and South America in favour of its former colonies, and the World Trade Organisation (WTO) agreed.
In response, the European Commission redrew its rules, but no sooner were they on the table than the US and Central America rejected them.
"There are certain elements in this proposal that ... would cause problems and would be difficult to justify under the WTO,'' a US trade official said. "It's difficult to see how this is going to resolve the dispute."
Europe has always maintained that the aim of its banana rules was to help developing nations in the Caribbean which export the fruit, while America was simply defending the large US producers.
But Washington and the WTO said that Brussels was breaking world trade rules, and America imposed a massive package of trade sanctions in response.
The new plan would shift to a tariff-only system by 2006, abandoning quotas, but involves a very complex transitional scheme in the interim.
Francisco de Soto, the vice minister of trade for Panama said: "We reject the basis of the proposals." And Anabel Gonzalez, the vice minister of foreign trade for Costa Rica, the world's second largest banana producer, said: "It appears to maintain high tariffs."Reuse content