EU SEEKS BANANA RULING TO STAVE OFF U.S. TARIFFS.

Byline: Todd R. Eastham Bloomberg News

The European Union will ask the World Trade Organization to decide whether its banana import rules are unfair in an effort to avoid 100 percent tariffs on EU exports the United States is expected to list as early as today.

Up to $1.5 billion in EU exports ranging from wine, cheeses and specialty foods to home appliances and paper goods would be punished by the end of January unless the EU stops what the United States views as a bias against bananas grown by U.S. companies in Central America. Among the biggest affected firms are Westlake Village-based Dole Food Co. and Chiquita Brands International of Ohio.

The row threatens to harm relations between the world's two largest trading blocs and weaken the WTO's system for defusing trade disputes.

``The attitude shown by the EU contributes to nothing but deterioration of the multilateral trading system,'' Francisco Alvarez De Soto, an adviser to Panama's trade ministry, said at a public hearing on the matter last week.

Earlier this year, the WTO ruled that the EU's favorable treatment for bananas imported from former European colonies broke its rules. The EU amended those rules, though critics said the action fell short of the WTO's demands. Monday's unusual step by the EU of turning again to the WTO amounts to the EU lodging a complaint against itself.

The United States, with the backing of Central American banana-growing countries including Panama, Guatemala, Honduras and Nicaragua, argues that it has the right to impose punitive tariffs at this stage. The EU says the United States must file a new complaint with the WTO, which would postpone any further EU action for as long as a year.

While EU farm ministers in June agreed to increase an import quota on Latin American bananas by 353,000 tons a year to 2.553 million tons, those imports are subject to a duty of about $88 a ton. Former European territories in Africa, the Caribbean and the Pacific are allowed to export 857,700 tons of bananas into the EU duty free.

The EU also changed the system for distributing the right to import Latin bananas, which it said ended favoritism for companies that import African and Caribbean bananas.

Chiquita said its market share in Europe has fallen to 20 percent from 50 percent before the EU's banana import system was introduced in 1992, costing it more than $1 billion in sales. Dole, which has acquired European import companies, says about $1.2 billion of its $4.3 billion in worldwide 1997 sales are in Europe.

The situation has gained urgency since Hurricane Mitch destroyed 80 percent to 90 percent of banana plantations in Honduras, and about half those in Guatemala and Nicaragua in late October, said Steve Warshaw, Chiquita's president and chief operating officer. A level playing field in Europe, he said, ``is essential to assure recovery in these countries.''