A 20-year trade dispute between the European Union and 11 Latin American countries over banana tariffs has ended with a historic trade agreement. The EU agreed to reduce tariffs on imported bananas from Latin America from 176 Euros per tonne to 114 Euros per tonne. Supporters of free trade argue that lowering trade barriers benefits all nations through increased specialization and trade. However, some argue that rising global protectionism during economic downturns undermines recovery by restricting trade flows.

1. Andy Reeve The Grange School, Hartford, Northwich January 2013
Banana Wars are finally over!
A 20 year trade dispute between the Supporters of Free Trade believe that trade flows
European Union and 11 Latin American between nations will benefit all nations. The theory
countries has finally ended, with a historic of Comparative Advantage suggests that nations
trade agreement. The agreement was will specialise in products that they have a low
opportunity cost in and then engage in exchange
signed in front of Pascal Lamy, the Director
with other nations.
General of the World Trade Organisation.
The agreement was originally made in Free Trade will also lead to “Trade Creation” : the
2009, but has taken three years for all reduction in Tariffs (taxation levied in imports) will
nations to ratify. lead to enhanced levels of economic welfare, as
prices fall for consumers.
The Banana Wars relates to the situation which has
Despite the clear benefits of Free Trade, there has
arisen between Europe and some Latin American
been a rise in the level of Protectionism during the
nations. It has been widely commented that the
recent economic downturn. A recent comment made
European Union have unfairly placed tariffs on
by Wan Jifei, a Chinese trade promoter, suggested
Bananas from some Latin American nations, whilst
that rising global protectionism was having a negative
allowing free trade with other former European
impact of the world’s economic recovery. He stated
colonies in Africa and the Caribbean. Under the new
that “Trade protectionism is short-sighted and narrow
deal, the European Union have agreed to reduce
minded, and it cannot fundamentally address the
tariffs on imported bananas from 176 Euros per
problems of unemployment and economic
tonne to 114 Euros per tonne.
growth worldwide” There are many
It is often said that ‘Trade benefits all’ and with this political pressures that lead to the
in mind, the World Trade Organisation has been development of protectionism
established to support nations in promoting trade policies – the need to limit
with each other. As the WTO’s website states its domestic unemployment and
“overriding purpose is to help trade flow as freely as encourage GDP by supporting
possible – so long as there are no undesirable side domestic businesses are key
effects – because this is important for economic pressures.
development and well-being”.