The banana dispute that has raged between the US and the European Union for almost a decade is damaging to local industries and unnecessary. It is time to resolve the issue and reconcile the differences that have split not only the US and Europe but also frustrated Latin American producers and exporters.
The first step is to recognise that the EU's banana import regime contains many flaws. The most serious of these is the fact that it gives pride of place to the interests of traders that make unjustified profits from bananas sold in Europe at the expense of producers - mainly in developing countries - for whose economies bananas are the principal source of income.
But that is only part of the problem. The system is based on high prices in Europe compared with the rest of the world, so it seriously penalises consumers - including those of Italy, Europe's second-biggest importer of bananas.
The system of import quotas on which the regime has been based is unviable and has been condemned repeatedly by the General Agreement on Tariffs and Trade and subsequently by the World Trade Organisation. This has led to the US imposing punitive trade sanctions worth about $300 million (€333 million) a year. Italy alone has lost $39 million a year on a list of products.
The EU needs to reform the regime urgently to promote genuine market liberalisation for the benefit of the producing countries rather than the traders and to make the system compliant with international trade rules. Despite the pressing need for reform, however, the EU has failed to reconcile the vested interests involved, which include many of Europe's former colonies as well as banana producers within the EU.
For example, the latest European Commission proposal, based on the "first come, first served" system - whereby import licences would be allotted to those who could ship to Europe first - is likely to favour the traders over the producers.
The deadlock has increased the risk that the US government will apply a range of retaliatory measures as part of the Carousel law, signed last May by the-then President, Mr Bill Clinton. If implemented, the law would extend present sanctions to other industries on a rotating basis. This would only elevate the transatlantic trade dispute: the EU could implement sanctions against the US over US tax rules for export income.
The simplest solution is to move quickly towards a regime based on tariffs. The tariff-based system would include duty-free treatment for African, Caribbean and Pacific (ACP) states. EU leaders have agreed to implement this system by 2006 but that is not soon enough.
For the transitional period, EU countries should adopt a system of allocating import licences based on "auctioning", in which import licences are distributed by means of public bids, underpinned by a transparent procedure. This system would also make it possible for the revenues to go to EU producers and those in the associated ACP countries, to enable them to improve the quality of their products and make them more competitive.
To judge by last month's meetings in Washington between Mr Pascal Lamy, the European trade commissioner, and Mr Robert Zoellick, his US counterpart, constructive discussions on reforming the system have begun. Over the coming weeks, the European Commission has the opportunity to propose an agreed solution to the US administration which, by putting an end to the banana war, would make it possible to meet the expectations of the African and Latin American producers.
It will also avoid the risk of renewed US sanctions using the Carousel mechanism. But there is still a long way to go. Unless Europe comes up with a quick and acceptable reform of its banana regime, the still imminent threat of an escalation in transatlantic sanctions could become a reality. That would be disastrous for world trade.
The writer is Italian minister for foreign affairs
