Theres no clear explanation of the mystery of the banana splits, why the trans-Atlantic trade conflict over bananas should have been so much more intractable and protracted than almost any other (neither international systemic explanations of inter-state conflict, nor the available theoretical literature on public policy nor the empirical literature on EU trade policy or trans-Atlantic trade relations yield a ready explanation of the tenacity of the conflict).
Douglas Webber, INSEAD Professor of Political Science, and Olivier Cadot, Professor of Economics at the University of Lausanne, theorize about the causes. Their explanation emphasizes the importance of domestic politics in the E.U. and the U.S. (Brussels and Washington, D.C.). They call it an institution-driven explanation of the idiosyncratic nature of the conflicts, and, as they explain, the banana splits run deep.
This article describes the economics of the European and world banana industries and markets, looking to overview of the E.U. member states pre-1993 national banana policies. It explores theoretical and empirical literature that tries to make sense of the banana splits and then sets out an explanation backed by empirical evidence that shows what the authors believe provoked the trade conflict.
But how and why did the E.U. adopt such a controversial regulation in the first place? Professors Webber and Cadot say the reasons include the divergent preferences of those involved in the conflicts, which can be attributed to extreme differences in the competitive strength of competing banana industries and the institutional configuration of (agricultural) trade policymaking on either side of the Atlantic.
The authors explain that the division of labor in the E.U. agricultural trade policy-making process favors agricultural interests (over wider trading ones), and this bias is strengthened by sectoral segmentation and sector-specific issue-linkage. The U.S. trade policy process is characterized by the Congress's growing reassertion of its trade policy prerogatives, the institutionalization of firms' access to the trade policy bureaucracy, and the growing volume and role of corporate campaign donations.
When talking bananas, the Agricultural Councils practice of issue-linkage or package dealing led to a virtual winner-take-all outcome on the issue, despite the E.U.s generally consensus-oriented decision-making process. But then it was precisely the winner-take-all character of the initial regulation that provided the opponents of the regulation with a strong incentive to mobilize to overturn it (external as well as internal E.U.). Their apparent ultimate success in doing so was strongly assisted, the authors contend, by traits of the American trade policy process, specifically by the growing role of the Congress in trade policy making, legislation bolstering the capacity of corporate interests to intervene in trade policy issues, and the growing dependence of Congressional (and Presidential) candidates on corporate campaign donations.
Thus, the common effect of the organization and process policy traits on either side of the Atlantic is to facilitate the capture of policy by highly organized, particularistic, predominantly trading interests. This allows them to block the settlement of conflicts on what they might consider to be unfavorable terms.
Although neither the WTO nor the trans-Atlantic trading relationship finally slipped over bananas, the conflict itself doesnt herald a rosy future for trans-Atlantic or international trade relations. The authors fear the traits of the trade policy process in Washington and Brussels, whose effects are observable in the banana splits, will make for an increasingly antagonistic trans-Atlantic trading relationship.
Business and Politics, April 2002