AYF Homework 11 December

Read about the WTO and the incident with banana trade. Answer the questions below. 

The WTO

The World Trade Organization, known as the WTO, was established in 1995. It is a Geneva-based organization that aims to ensure that global trade flows as smoothly and freely as possible. One of its functions is to settle trade disputes. Member countries agree to reduce the trade barriers between them in a series of trade negotiations, known as 'rounds'. These rounds (for example, the Uruguay Round) have made trade freer. 

Here you can see a map of the member countries: 

The Banana War

It is perhaps strange that a fruit should be at the centre of what was almost a trade war between the USA and the European Union. France and Britain wanted to protect the interests of banana producers in their ex-colonies, especially  in the West Indies, against US companies operating out of Central America. The USA claimed that this was against the rules of international competition and free trade. The WTO decided in favour of the USA, but the Europeans refused to recognize the decision. It was following a second WTO judgement against the EU, and the USA's imposition of huge tariffs on unrelated goods, that they finally agreed to obey the decision. It remains to be seen how well banana growers in the West Indies can survive as Central American countries have a comparative advantage in climate, land and labour costs. 

Answer using your own words:

1. What was the cause of the disagreement between the USA and the EU?

2. How did the USA punish the EU for refusing to accept the decision of the WTO?

3. What is the future likely to be for West Indian producers? Why?