Extended Endogenous and Exogenous Protection in the Eu-Us Banana Disputes

Abstract

EXTENDED ENDOGENOUS AND EXOGENOUS PROTECTION IN THE EU–US BANANA DISPUTES Christina Fattore West Virginia University Michael E. Allison The University of Scranton Throughout the 1990s, the US and the European Union (EU) were embroiled in a trade conflict over a product which neither produced natively. In short, due to the creation of the European common market by the Single European Act (SEA), the EU countries extended preferential treatment to their former colonies in Africa, the Caribbean and the Pacific (ACP). This facet of the SEA proved to overstep the agreements made previously in the GATT and in the newly formed WTO, which seemed to irk many non-ACP banana-producing states as well as those that had a great interest in this trade, especially US multinationals that operate in the banana-producing countries of Latin America. Several Latin American states and the US government challenged the EU-ACP trade policy in the GATT and the WTO for nearly two decades before an agreement to resolve the dispute was reached in December 2009 (WTO 2009). Among other reasons, this dispute is important because it was one of the longest running trade disputes in recent history, directly or indirectly involved more than half-the world’s countries, and was the first case in which economic sanctions were applied by a developing state on a developed state(s) (Barfield 2010). Prior research in international political economy has tended to explain this lengthy dispute to be the result of a non-reconciliation between the overlapping trade regimes of the WTO and the EU (Alter and Meunier 2006). During the 1990s, while the member states of the EU were forming a common market that would harmonize their trade policies, they miscalculated how this internal harmonization would be interpreted by other members of the newly formed WTO (Borrell 1997). However, legal and political pressures to change the terms of trade between the EU member states and their former colonies also came from the banana-producing states of Latin America, the EU-based companies that marketed those bananas , United States-based multinational corporation Chiquita, and the United States government. For these parties, European preferential treatment of ACP bananas was discriminatory, violated several binding trade agreements, and was bad for business. The study of endogenous protection focuses on interest groups pressuring governments to adopt policies that will defend domestic products in C 2013 Southeastern Council on Latin American Studies and Wiley Periodicals, Inc. 111 The Latin Americanist, June 2013 a continually liberalizing trade system. However, in light of globalization, we have to consider whether changes in international political economy require us to think beyond endogenous protection in order to understand the formation of trade policy today. For example, what makes a product truly ‘domestic’? Many foodstuffs are produced by one country and distributed by a foreign company. Other goods are assembled with a virtual hodgepodge of foreign made components and then sold in countries around the world. When a good’s production is truly globalized, who is responsible for its trade protection? Endogenous protection appears quite limited under these increasingly common scenarios. In light of this transformation of global production, how do we characterize those situations where one government pressures another to help protect it from the trade policies of a third? For example, there is strong evidence that states with smaller economies are disadvantaged in the World Trade Organization (WTO) and other regional trade organizations as these states have fewer economic and political resources to pursue their interests satisfactorily (Bown 2005; Simmons and Guzman 2005; Busch, Reinhardt, and Shaffer 2009). When these smaller countries lobby larger states in the international system to intervene on their behalf, endogenous protection (which focuses on interest groups lobbying their domestic governments for protection in the international trading regime) does little to help us to understand these trade situations. We argue that we need to move beyond our current understanding of endogenous protection to better explain the adoption of several trade policies in the international system today. Multinational corporations are not only searching for protectionist policies that may promote their good in their domestic market, but, in light of the strengthening of the dispute settlement mechanism in the WTO, they also...