EIIES

Introduction

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The idea of state intervention is highly debatable between realism and liberalism. Realism views that state is needed to counter-act market negative behavior. In other hand, liberalist believes that state is corrupting the market efficiency, the main purpose of current world trade structure. Trade dispute between the European Union (EU) and the United States (US) upon the EU’s banana policy of preferential agreement to Africa, Caribbean and Pacific (hereafter is called ACP countries) can be an interesting case study to discuss the role of state in international trade.

 

The case started when US and other Latin American countries files a protest to World Trade Organization (WTO) regarding EU’s special agreement ACP countries that ACP countries can gain greater access to EU’s banana market. Historically and economically, there is a strong tie between some EU’s member states such as France and the United Kingdom (UK) and ACP countries. US and some Latin American strongly disagree with EU’s banana policy. The fact that US didn’t produce banana posed an interesting question on why US leading the protest. It is also a matter of concern on how WTO becomes a powerful international organization that able to pressure the EU to change its decision.

 

This article will highlight the trade dispute between the US, the EU, and ACP countries in the period of 1992-2001. The aim of the article is to describe the influence of states through its tools in world trade. To answer the question, the writer will use realism as the theoretical background of this article. Realism offers comprehensive approach on identifying the role of state in international politics and economics. Then it will be analyzed on three EU’s decision on banana policy which resulted great discussion among policy maker. In the conclusion, it will summarize the article.

 

Realism 

Realism is a rich theoretical tradition with various thoughts and theories. However, there are three basic assumptions of realism in international politics and economics (IPE): state-centrism, relative gain and zero-sum game. State-centrism refers to the importance of state in IPE. There are a lot of instrument for state to gains its interests in IPE: Multi-national Corporation, international organization, non-governmental organization and individual person. In realist perspectives, Gazprom, Airbus, Boeing, or Statoil are multi-national companies who operates in abroad to gain profits for home-country. IMF and WTO’s decisions are viewed as the reflection of great powers’ interest of economic gain in developing countries. Meanwhile, Amnesty International, US-based human rights international organization, will attempt to promote US and European norm to other parts of globe.

Different with liberalism who emphasize positive-sum game, realists thinks that the main characteristic of IPE is zero-sum game: state will gain certain advantage on the expense of other states. That’s why states must compete each other to gain the maximum advantages from certain international regime. Based on this assumption, international trade will give benefit highly only to countries who offers greater efficiency, technological support, infrastructure, highly skilled worker, political and economic stability. Transfer of technology from developed countries to developing countries will not be happened unless there are greater incentives for developed countries to do so. For example, East Asian tigers (Taiwan, Singapore, Japan and South Korea) enjoy remarkable economic growth and technological development in 1960-1970s because many US- and Europe-based MNCs moves to East Asia seeking greater profits and incentives offered by East Asian markets.

Realism is pessimistic that cooperation will bring benefits to all member states. In contrast, liberalism argue that it’s better for states to cooperate and coordinate in international political economy regime because it will gives each states benefit and advantages.

Council Regulation 404/93

In the beginning of common agricultural policy, EU didn’t have common banana trade policies to ACP countries. France and UK implemented preferential banana access to their former colonies, such as Guadeloupe, Martinique, Cameroon, Ivory Coast, and Madagascar. UK also gave preferential access to Belize, Dominica, Grenada, Jamaica, St. Lucia, St. Vincent, Suriname. In other hand, Belgium, Denmark, Ireland, Luxembourg and the Netherlands imposed 20 percent import tariff to all importers. Even German applies duty-free so that they can get the cheapest banana price in the region.

However, in 1992, EU stipulated Council Regulation 404/93 which regulates a European common banana policy. Bananas from CAP will be eligible to duty free to an annual maximum of 854,000 metric tons (Council Regulation (EEC) No. 404/93). Bananas from third-country (EU’s expressions to groups of states who are not belongs to ACP and EU, which are mostly comes from Latin America) must pay 100 ECU (European Currency Unit) tariff per ton and have maximum export limit to two million tons.

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