The corridors of power…

America doesn’t like the fact that the EU allows imports of bananas from former colonies. America’s food companies own vast estates that produce bananas far more cheaply.

But Europe is trying to keep small farmers in third world countries on the land and in work. This may sound a bit worthy but it has its benefits. It reduces immigration pressures and promotes employment, wealth and political stability in unstable parts of the world.

The result has been a long-running trade dispute. Now steel has been added to the list. The problem started when Bush slapped tariffs on imports to protect an uncompetitive US steel industry. Now the European Commission has responded with its own tariffs.

These include steel, of course, but also orange juice. If you think orange juice has little to do with steel I should remind you much of it comes from Florida – you’ll no doubt remember who the governor of the sunshine state is.The dispute could blow up into a full-scale trade war but, of course, it won’t. A compromise deal is likely that will allow a Republican president to save face and protect his constituents’ jobs.

But the real losers won’t be the American – or European – steel giants. The real competition is from the Far East which combines new plants with cheap land and even cheaper labour.

But they don’t have the political or economic clout to stand up to Washington or Brussels and will probably lose out as a result. Protectionism will have won one more victory but it could be a pyrrhic one.

The west ought to be doing all it can to win the war on terrorism. It will not win over critics and enemies in some of the worldås poorest countries by throwing its weight around and fixing the trade system in its favour.

But then steel is a much bigger industry than bananas.

  • Jonty Bloom is a business news reporter at the BBC.

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