A US, EU Split over Bananas Ripens into Bigger Trade Row Calls for Fair Play and Acts of Economic Self-Interest Led Toplanned World Trade Organization Mediation Yesterday

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The link between bananas and cashmere may not seem obvious, but the people of Hawick, a small Scottish town near the border with England, are having no problem making the connection.

They are caught up in a bizarre trade war between the United States and Europe that threatens to wreck their community.

Hawick is famous for producing garments made from the finest fleeces and woven to smooth perfection. In a tit-for-tat move, the US has targeted cashmere products as part of a drive to force Europe to switch policy on where it gets it bananas. Central to the dispute: European Union rules that for decades have favored fruit from the former colonies in the Caribbean rather than from big producers in Latin America, whose economic success is often tied to that of US-based fruit companies. On Jan. 1 the EU amended the rules, but the US and Latin American growers say the changes made little difference. In retaliation, the US says it will slap a 100 percent import tariff on cashmere (the current rate is 5.4 percent). Ninety percent of British cashmere is made in the border area in and around Hawick, and the US is the UK cashmere industry's largest market, with imports worth $28 million to $33 million a year. If the US remains resolute over bananas, some 1,000 jobs in Hawick will be lost, according to Peter Ackroyd, director of the British Wool Exports Corporation. A banana war has been raging across the Atlantic for six years. The Americans say EU insistence that former colonial economies in the Caribbean be given favored treatment for their banana exports breaches world-trade rules. Brussels responds that if Caribbean nations where bananas are the sole crop lose their market in Europe, farmers may resort to producing and trafficking narcotics. The EU is the world's largest importer of the fruit, consuming nearly 40 percent of all traded bananas. But US politics complicates the picture. …