How Do We Fight Normal Trade Wars?

How to fight a normal trade war?

Let’s take a look at cotton and bananas.

Normal Trade Wars

Cotton

The short version of the story is that because federal subsidies give US farmers an unfair advantage in world markets, Brazilian cotton growers protested. In 2009, the World Trade Organization (WTO) agreed and told the US to stop. To make everyone happy, instead of eliminating payments to US farmers, Congress decided to pay the Brazilians subsidies also.

Bananas

During the 1990s, the EU used a system of tariffs and quotas to support the banana growers from 12 of its former colonies in Africa, the Caribbean, and the Pacific (ACP). Consequently, the U.S.-based Chiquita soon saw its EU exports plunge when, In 1993, their bananas were taxed.

The U.S. sought to support Chiquita by filing a WTO complaint with five other countries. From the beginning the WTO agreed with the U.S. and even said it could retaliate if the EU did not eliminate its trade barriers. So, when the EU ignored the WTO decision, the U.S. retaliated with tariffs on EU exports that ranged from French handbags to Italian Pecorino cheese.

In 2001, the U.S lifted its punitive tariffs after the EU said it would phase out the quotas. Then, they continued negotiating and finally nailed an agreement in 2009.

The cotton and banana trade wars did not upset international commerce. Combatants knew the “rules” that perpetuated order and predictability in the global trade system. Those rules came from the World Trade Organization.

Our Bottom Line: The World Trade Organization

Flawed but functional, the World Trade Organization dictated the global rules of trade before it even got its name. Signed in 1948, the General Agreement on Tariffs and Trade (GATT) was the first global multilateral agreement to lower trade barriers. Forty-seven years later, it was replaced by the World Trade Organization.

This is how the WTO describes what it does for its 166 members:

Or, as they’ve expressed it, “the WTO is a place where member governments try to sort out the trade problems they face with each other.”

Concluding, I’ve excerpted one paragraph of an April 9, 2025 statement from Dr. Ngozi Okonjo-Iweala, the Director-General of the WTO. After describing the catastrophic impact of a U.S. China trade conflict, she returned to the beneficial role of the WTO:

My sources and more: Our cotton and banana trade dispute facts come from past econlife posts, here and here. From there, PIIE (Peterson Institute for International Economics) updated us on current WTO relevance. The WTO is most interesting though when you check out the disputes.