U.S.-EU TRADE TRUCE BRINGS END TO THREAT OF LUXURY GOODS BAN

Byline: Kristi Ellis

WASHINGTON — The banana-cashmere trade war is over.
The U.S. and European Union called a truce Wednesday over a long-simmering trade dispute over bananas, bringing relief to European handbag makers slapped with killer duties on goods imported into the U.S.
It’s also good news for U.S. retailers and importers who feared an escalation of the war would lead to punitive tariffs on imported EU cashmere sweaters, coats, pullovers and vests, which were threatened during the impasse.
Claus Lahrs, president of Louis Vuitton North America, said: “This [accord] will make it much easier to import our products.” Vuitton’s leather travel bags were on the banana hit list, but the company continued to import them, absorbing the higher tariffs of as much as 100 percent. Lahrs declined to say how much the sanctions cost the company.
“It is great that an end to all of that is in sight,” Lahrs said.
Under the terms of the agreement, the U.S. on July 1 will suspend sanctions imposed on about $191.4 million worth of EU imports since 1999, ranging from French handbags to bath and food products. In turn, the newly announced accord provides for bananas to be imported to the EU through licenses until 2006, when a tariff-only system will take effect.
“Today’s step marks a significant breakthrough,” European Commission and U.S. trade officials said in a joint statement. The European Commission represents the EU in international trade negotiations, among other matters.
The World Trade Organization authorized the sanctions in 1999 after ruling that the EU wrongly favored banana imports from their former colonies in the Caribbean at the expense of Latin America, where U.S. banana companies such as Chiquita and Dole have interests.
At the same time, the Office of the U.S. Trade Representative said that it reserves the right to retaliate again if the increased access for Latin American banana producers to the EU market does not take effect by January 2002.
About $117 million in sanctions on European imports — mainly food products — resulting from the EU’s ban on U.S. hormone-fed beef were not a part of these negotiations. U.S. trade officials said they would treat the beef dispute as a separate matter. Those sanctions don’t involve apparel or other fashion products.
“Sometimes you have to be at the brink on an issue before you find a way to reach a resolution,” said a U.S. trade official during a telephone news conference Wednesday. “I believe that both sides truly wanted to resolve this and we worked hard to do that.”
The two sides — headed by USTR Robert Zoellick and EU Trade Commissioner Pascal Lamy — hinted at a truce over the banana dispute last month, shortly after Zoellick announced at a congressional hearing that he had reached the brink and had “no other recourse” than to change the sanctions list, which could have included a range of cashmere products.
Such a change in sanctions was mandated under legislation passed last year by Congress, commonly referred to as the “carousel amendment.” Lawmakers felt earlier trade sanctions had not moved the EU to change its import policies.
“We are very relieved about the accord because retailers were in the crossfire of this fight,” said Erik Autor, vice president and international trade counsel at the National Retail Federation. “It would have affected $70 million in trade on cashmere sweaters if the carousel sanctions list had gone through and there was a lot of pressure to include cashmere on the retaliation list.”
Frank Kelly, chairman of the U.S. Association of Importers of Textiles and Apparel, who is also vice president of international trade compliance and government affairs at Liz Claiborne, said he “is glad the matter is settled.”
“That takes a lot of pressure off of the current administration [in terms of trade],” said Kelly. “It is good for this administration and Zoellick that they get the credit for settling it.”
He said that the Claiborne company wasn’t affected by the sanctions.
Peter McGrath, J.C. Penney Co.’s vice president of quality and sourcing, said he was “happy the dispute was resolved,” but is still “guarded” about the effects the carousel amendment will have on other trade disputes involving sanctions.
“This is detrimental to U.S. retailers,” said McGrath, noting how in leveling sanctions the USTR gives retailers little or no advance warning.

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