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European Communities - Regime for the Importation,
Sale and Distribution of Bananas

Complaint by Ecuador

Report of the Panel

(Continued)


II.17 The EC responded that the Complaining parties mischaracterized its position on this point. The EC's position was very simple: the request for the establishment did not satisfy the requirements of Article 6.2 of the DSU because of (i) lack of identification of specific measures at issue (i.e. the regime); and (ii) lack of a brief summary of the legal basis of the complaint sufficient to present the problem clearly (i.e. a list of Articles). Therefore, the request for the establishment of the Panel was null and void.

II.18 On 21 January 1996, the EC continued, Ecuador became a Member of the WTO; by 5 February 1996, the other Complaining parties had convinced Ecuador to join them and start new consultations which they requested on that day. Because of problems concerning the modalities of consultations and scheduling problems, these consultations took place only on 14-15 March 1996. Mutual promises were made to reply to long questionnaires, but before the process had run its course a request for a panel was filed. In the view of the EC, undue haste had resulted in the panel request being too brief a summary to present the problem clearly, in particular in a case where a new agreement, i.e. the GATS, was brought up for the first time in a panel procedure. As a separate identification was not made and the list of relevant Articles was so long, it was not even possible for the reader of the request to create his own link between the specific issues and the alleged infringement of a specific provision. This was at least possible in some earlier requests for establishment of panels which were at the border line of what could be deemed acceptable under Article 6.2 of the DSU.

II.19 The EC explained that in not mentioning the issue of the too summarized character of the request at the DSB meeting, the EC followed the by then well-established line that the respect for the basic procedural rules of the dispute settlement system was a task for the panels. Given that this was a well-established practice, raising the matter in the DSB and trying to prevent the DSB from establishing the panel for that reason would have been seen as a stalling tactic and onslaught on the "right to a panel" recently confirmed in the Marrakesh Agreement. Seen in this light, the argument advanced by the Complaining parties that the Panel, by ruling on Article 6.2, would be transgressing its terms of reference, was somewhat disturbing. This amounted to saying that the terms of reference prevailed over the DSU. If the Panel were not bound by what was in effect the constitution of the dispute settlement system and would not be held to apply the rules of the DSU, Members might just as well not have negotiated the DSU in the Uruguay Round. The Complaining parties had finally asserted that Article 6.2 should not be upheld because the EC had suffered no prejudice as a consequence. This position was misconceived in fact and in law. In fact, the EC had suffered a prejudice, i.e. the lack of minimal clarity handicapped the EC in the preparation of its defence, which was not unimportant given that the respondent normally had less time than the complaining Member to make its written submission. In law, procedural rules, and in particular the rule that the respondent must have a clear view of the case held against it, had a certain value in themselves. And that value should be defended by the Panel. As the "healing" measures suggested at the stage of the EC's first submission were no longer feasible at the stage of the rebuttal submissions, there was no alternative for the Panel but to draw the consequences of the serious defects inherent in this important document: nullity of this procedure.

II.20 In response to a question by the Panel, the EC analyzed, in light of Article 6.2 of the DSU, eight panel requests that were brought to the WTO (some of which with multiple Complaining parties). As a preliminary matter, the EC noted that it was puzzled as to how the WTO practice with respect to Article 6.2 could already have changed the interpretation to be given to this Article as it appeared from the (adopted) Salmon Panel report. Time had been too short and practice had been too inconsistent. In the view of the EC, several of the eight analyzed panel reports did not meet or barely met the requirements of Article 6.2 in the sense that there was a clear indication of the specific measure at issue, of the provision of the agreements allegedly infringed, and a link between the two. A considerable number of these requests, however, posed lesser problems in the light of Article 6.2 than the present panel request since they were concerned with one specific measure only or with a limited number of clearly defined measures which made it easier to link the measures to an alleged infringement if the number of provisions cited in the panel request was limited. In the present case, however, there was a total lack of specificity in the description of the measures, on the one hand, and an extremely long and unspecified list of the allegedly infringed WTO provisions, on the other hand. According to the EC, this was clearly contrary to Article 6.2 and did not fulfil the function of properly giving notice to the EC of the case held against it.

(b) The requirement of legal interest

II.21 The EC argued that in any system of law, including international law, 398 a claimant must have a legal right or interest in the claim he was pursuing. The rationale behind this rule was that courts existed to decide cases and not to reply to abstract legal questions; the court system (in the WTO context, the panel system) should not be burdened needlessly by cases without legal or practical consequences. Likewise, the respondent should not be forced to bear the costs and inconvenience of conducting a panel case, when the complaining Member had no legal right, or no legal or material interest in the outcome of the case. The EC submitted that in the present case the United States had no legal right or no legal or material interest in the case that it had brought under the GATT and the other Agreements contained in Annex 1A to the WTO Agreement since none of the remedies it could obtain would be of any avail to it: compensation or retaliation would not be due, since the United States had only a token production of bananas and had not traded in bananas with the EC, not even with those geographical sectors which under the old regime had maintained virtually free access or only a low tariff. Furthermore, the EC considered that a declaratory judgement would be of no interest since there was no serious indication that banana production in the United States could make exports feasible within the foreseeable future. The EC referred to the Working party report on Brazilian Internal Taxes (first report) which had made it clear, in the view of the EC, that a country must at least have potentialities as an exporter in order to be able to file a claim against another Member. 399 Moreover, under the GATT/WTO system the United States could not set itself up as private attorney-general and sue in the public interest and there were no indications that the GATT/WTO system accepted an actio popularis by all Members against any alleged infringement by any other Member. There were no indications so far in the GATT/WTO system that panels were willing to give declaratory rulings at the request of Members which had no legal right or interest in such a ruling, either in the form of a potential trading interest or in the form of a right to compensation or retaliation under Article XXIII of GATT (Article 22 of the DSU). The EC concluded that, on the issues raised under the GATT and other instruments of Annex 1A, the United States had no legal right or interest in obtaining a ruling from the Panel. Therefore, the EC requested that the Panel should decide, in limine litis, that it would not rule on the issues with respect to the United States.

II.22 It was obvious to the EC that the interest of companies, such as Chiquita and Dole Foods, was not the same as a legal interest of the United States in bringing a case under the GATT. The GATT was concerned with the treatment of products, not companies or their subsidiaries. In so far as the United States had a systemic interest in the case, where it professed to be concerned about the general law-abidingness of the EC, it advanced an interest as intervenor with a general interest in the interpretation of the GATT. If the Panel were to take position on the issue of the United States' legal interest in this matter, the United States might perhaps be admitted as intervenor, i.e. third party, in the GATT-related part of the case.

II.23 The United States responded that it had a significant commercial interest in seeing the EC comply with its GATT and other WTO obligations with respect to its banana regime. Two US fruit companies, Chiquita and Dole Foods, had played a major role over many decades in developing the European market for bananas. Although these bananas were mainly grown in Latin America, US companies were seriously affected by the manner in which the EC was distributing market share opportunities on a basis that was unrelated to past imports of third-country bananas or ability to import third-country bananas. The EC's measures had the effect of constraining US companies' import, delivery, and distribution flexibility and required them to expand substantial capital just to try to restore their former business. A regime violating GATT rules could be expected to adversely affect such major participants in the market. Both companies expressed concerns about the discrimination in the EC banana regime and sought an end to it.

II.24 The United States further argued that the EC was well aware of the interests and concerns of the United States since they had been explained to the EC by diplomatic efforts that had begun over five years ago and that had intensified after two GATT panel proceedings had only resulted in additional GATT violations by the EC. The United States had reiterated its concerns during efforts to more formally negotiate a solution to these problems with the EC Commission. The EC's arguments with respect to US banana production had no bearing on this proceeding. However, the United States did produce bananas in both the state of Hawaii and in Puerto Rico, which was within the US customs territory. The Hawaiian producers had expressed their concerns that the EC banana regime was lowering the price of bananas in the free market, adversely affecting their ability to continue to produce and potentially export bananas. The United States considered that it was not for the EC to decide which producers in the world had an interest or potential to export.

II.25 As far as legal rights or interests were concerned, the United States was a Member of the WTO and a founding contracting party of the GATT. Article XXIII of GATT, as amplified in the DSU, permitted the initiation of dispute settlement proceedings when any Member was concerned about the inconsistency of another Member's measures. In fact, dispute settlement proceedings could be instituted to consider measures that were not even alleged to be inconsistent with any WTO agreement. The "interest" that a Member had to have in order to initiate proceedings was self-defined: a Member could initiate procedures whenever (in its judgement) it considered that benefits accruing to it, directly or indirectly, under the GATT were being nullified or impaired or whenever it considered, in its own judgement, that the attainment of any objective of GATT was being impeded or impaired as a result of another Member's failure to carry out its GATT obligations. This was the multilateral procedure under which governments had agreed to address such disputes.

II.26 Mexico considered that the view expressed by the EC that Mexico did not have a substantial interest in participating in this Panel as a Complaining party since its banana exports to the EC were minimal or non-existent was incorrect both from the point of view of Mexico's rights under the GATT and from the point of view of its interest in the international banana trade. It had been clearly established that it was not necessary to prove the existence of adverse effects for a panel to confirm the inconsistency of a particular measure with the provisions of the GATT. Mexico had therefore refrained from providing a more detailed explanation of the impact of the EC's regime on its banana sector. In the view of Mexico, the consistency of a measure with WTO obligations should be examined in legal terms and not in terms of its impact on the economies of other Members. Any other approach would imply, wrongly, that certain Members had more rights than others or that the interpretation of the WTO's provisions varied according to the characteristics of the countries involved in a dispute.

II.27 In order to avoid any misconception as to Mexico's interest in the international banana trade and ultimately in the EC market, Mexico made, however, the following points: (i) Mexico was currently the eighth largest banana producer in the world; (ii) total exports from Mexico exceeded 250,000 tonnes in 1992 and 1993, and fell to just under 200,000 tonnes in 1994; (iii) bananas occupied the fourth place in Mexico's fruit production in terms of area under crop, and the second after oranges in terms of both production volume and value; (iv) bananas now occupied the first place in Mexico's fruit exports; (v) an estimated 50,000 persons were directly employed in banana production in the tropical areas of Mexico, not to mention the persons indirectly employed in transport and marketing of bananas; (vi) the Soconusco region in the state of Chiapas was the most important banana exporting region of Mexico (it was well known that Chiapas was one of the poorest rural states in the country); (vii) bananas provided the only activity of the port Francisco I. Madero, the only port in Chiapas; and (viii) the international banana trade was of vital importance to the recovery of investment in the banana producing regions. With respect to services, Mexico argued that its legal interest in participating in the proceeding did not depend on the market share of its service suppliers, but that in any event, a major banana distribution company, Del Monte, remained in Mexican ownership.

II.28 The EC subsequently clarified its position regarding Mexico's legal interest in this dispute with the statement that, although Mexico had never exported bananas to the EC other than in symbolic quantities, the EC did not contest the legal interest of Mexico in this procedure under the GATT since it clearly was a potential exporter of bananas to the EC with a considerable capacity.

II.29 The Complaining parties considered that the manner in which the EC had continuously and increasingly defied the rules of the international trading system, affecting so many countries, impeded the objectives of the GATT, and of the WTO Agreement, to eliminate discrimination in international commerce.

II.30 With respect to this claim, the United States noted that with each GATT proceeding and each opportunity to reform its regime, the EC had only added new layers of discrimination against imports from third countries. In the view of the United States, this pattern was unprecedented in postwar international commerce.

II.31 The Complaining parties noted that the nature and scope of the Panel's inquiry was set by its terms of reference. All the Complaining parties' claims before the Panel fell within its terms of reference. Those terms did not provide authority to the Panel simply not to consider the Complaining parties claims. Moreover, the DSU had no locus standi limitation. The WTO agreements at issue in this dispute and the DSU set forth comprehensive, detailed rules and procedures governing WTO dispute settlement. Had the DSU drafters intended to institute a limitation of the sort being advanced by the EC, they would have done so. Instead, Article 3.7 of the DSU simply requested that:

"Before bringing a case, a Member shall exercise its judgement as to whether action under these procedures would be fruitful." The DSU in effect already recognized that recourse to dispute settlement under the WTO agreements was self-limiting in that a Member would not initiate and pursue a resource-intensive proceeding unless it considered itself adversely affected; it respected each Member�s determination in that regard.

II.32 The Complaining parties considered that the findings that would result from this proceeding were necessary to bring about a positive solution to the dispute. It was accordingly clear that all five Complaining parties were fully within their legal rights to assert all claims being advanced in this action with respect to both goods and services, and to benefit from the Panel's findings. The Complaining parties were not standing in the place of others, in actio popularis, as the EC suggested. The Complaining parties were raising issues in their capacity as Members of the WTO, and sought EC compliance with specific disciplines which the EC had, in the WTO agreements, agreed to submit to dispute settlement proceedings for interpretation in accordance with the DSU.

II.33 Where the DSU addressed nullification and impairment, it did not address rights to engage in dispute settlement, nor did it limit the panel's consideration of the extent to which the measures at issue violated the agreements. Referring to Article 3.8 of the DSU, the Complaining parties argued that this provision defined nullification and impairment quite broadly, to cover any "adverse impact" on a Member, presupposing a prior finding of an infringement. The kind of economic predictions that the EC would require to determine "trade potentiality" would, in the view of the Complaining parties, involve very difficult and speculative calculations of the type panels had wisely eschewed. From a global perspective, the EC approach would protect only current exporters or investors, at the expense of firms that might later invest in the country, or goods that might later be produced for export in the absence of trade or investment barriers. Such a rule could have a particularly adverse effect on developing countries. It was essential for emerging economies to guard future trade opportunities even before "potentialities" became apparent. Otherwise, opportunities to promote trade and development could be forever limited or foreclosed. Since one of the basic objectives of the GATT was to raise the standard of living and progressively develop the economies of all Members, particularly developing country Members, 400 governments had to have the opportunity to seek dispute settlement proceedings as they saw fit in order to preserve their potential interests.

II.34 The Complaining parties submitted that as recently as 1993, in the panel report on United States -Restrictions on Imports of Tuna (Tuna Panel), 401 the EC had argued that any time a country produced a product, even if the application of another country�s measure to its exports was only hypothetical, the potential effect on price in its market gave rise to a "legal interest". The EC had stated that it was challenging US trade sanctions that were not applicable to the EC on the basis that:

"It is clear that such sanctions can have an enormous impact on third countries, especially when fish and fish products normally exported to the United States have to be sold on other markets. It is primarily for that reason that the EC has an interest in seeking the condemnation [by the panel]." The EC had later affirmed that its principal concern was with potential price depression in its own market resulting from global trade diversion. The EC also had gone so far as to say that even a tariff binding provided benefits to non-suppliers. At the first meeting with the panel in that dispute, the EC had acknowledged that the two measures it was challenging were "presently not applicable to the Community," but had admonished that:

"The GATT does not protect actual trade flows, but trading opportunities created by tariff bindings and other rules. Even though a contracting party is not a principal supplier at all (perhaps even a non-supplier), it profits from the tariff concessions concluded between principal suppliers." The Complaining parties concluded that as a factual matter, by such a standard, the nullification and impairment issue would be conclusively resolved with respect to all the Complaining parties. With respect to goods, the United States produced more bananas than several of the EC�s domestic and ACP supplying sources; with respect to services, all the Complaining parties had banana service suppliers within their own territories that were or would be affected by measures discriminating against foreign service suppliers in the EC. More to the point, however, the DSU and WTO agreements did not permit the EC or a panel to limit recourse to dispute settlement proceedings to only some Members whom the EC might consider to have "potential trade" or whatever other concepts the EC might wish to superimpose on the DSU on the basis of so-called "natural justice". Such an approach would fundamentally undercut the multilateral nature of these agreements.

II.35 The EC responded that it contested the legal (and material) interest of the United States in obtaining a panel ruling under the GATT. In turn, the United States had contested this but did so from the angle of formal requirements of standing or admissibility. This was perhaps understandable since in the common law countries the distinction between absence of the formal requirements for standing and the lack of legal interest to sue was often not sharply made. Both were called "standing". However, in the opinion of the EC, its reference to the maxim "point d'intérêt, point d'action" should have made things clear to the United States. In any case, the EC failed to see how affirmations of the United States fulfilling the formal requirements to appear before the Panel could detract from the EC's demonstration that the United States could not possibly derive any legal or material benefit from its case under the GATT (no compensation, no retaliation, whilst a declaratory judgement was of no interest to the United States either).

II.36 The EC noted that according to official US statistics, the United States for many years has not, and does not now, export bananas. The EC further noted that it did not contest the accuracy of these official US statistics. The EC argued that the United States had claimed that, although the United States had no information that would contradict US export figures (which were nil), import statistics were more reliable and these showed that the United States had exported over 1,000 tonnes of bananas annually to the EC since 1990. In the view of the EC, this was a misrepresentation of the facts. It was well-known and accepted that the United States did not export bananas and that the relevant US statistics were correct. Furthermore, EC import statistics did not show the origin of bananas, but their provenance. This meant that a shipload of bananas from Costa Rica, for example, which first might have headed for a US port and subsequently been bound for the EC would be registered as of US provenance. Or, as another example, intra-EC trade showed significant banana imports into France from the Benelux countries. This clearly proved that import statistics registered the countries of provenance, not of origin (since the Benelux countries did not produce any bananas). The EC noted that the United States had also submitted FAO data on production and exports, according to which the United States had produced between 5,126 and 6,210 tonnes annually between 1990 and 1995, but had exported between 337,365 tonnes and 383,216 tonnes annually in the same period. In the view of the EC, this again demonstrated how misleading statistics relying on aggregate imports from the rest of the world might be. According to the EC, any trade from Puerto Rico was obviously with the US mainland and other US territories, such as the Virgin Islands. Since this was a situation that had existed for many years, the EC was of the view that the United States was not a potential entrant in the banana trade, could not possibly suffer any nullification or impairment, did not even have an interest in a declaratory judgement because it could not take advantage of the possible competitive opportunities and, hence, had no legal interest in a ruling under the GATT.

II.37 The United States submitted that it had no basis for contradicting FAO figures that showed exports of bananas from Puerto Rico, and that it did not possess the administrative ability to ascertain its export quantities with the same precision that it had with respect to imports.

II.38 The EC argued that the question of legal or material interest in this case was a serious matter and deserved a serious answer. This was best demonstrated by the United States reverting to the Tuna Panel. The EC's approach in the Tuna Panel proceeding was entirely consistent with the EC's present approach. The EC had argued in its second submission in the Tuna Panel case: "... potential entrants into a trade have a legitimate interest in a breach of GATT provisions". In the present case, the EC considered that the United States had demonstrated over many years, by not entering the trade in bananas, that it was not a potential entrant as referred to in the Tuna Panel.

II.39 The United States observed with respect to the Tuna Panel proceeding that the EC had challenged three US measures, the third of which had no potential effect on any EC exports, and that the EC had explained its "legal interest" in that particular measure solely on the basis of collateral price effects on products sold in its own market.

II.40 The EC argued further that the Complaining parties were hiding behind a formalistic approach to nullification and impairment. In the view of the EC, it was logical to apply the rule of lack of legal interest, if one could already see at an early stage that nullification and impairment would not occur. It had demonstrated that there was no such interest, not even in terms of a declaratory judgement. Moreover, it was not necessary to engage in "difficult and speculative calculations" in order to see that the United States had no trade interest in the matter.

II.41 The EC argued that, even if the Panel were not to accept the Community's argument on the lack of a legal right or interest of the United States to pursue the case under the GATT, the United States had not suffered any nullification or impairment under Article XXIII of GATT. If in the present case an infringement of the GATT were to be found, it was, unlike in other cases, not difficult to rebut the presumption of nullification or impairment: the United States had never exported any bananas to the EC and it did not do so, not because it was blocked in any way by the Community's measures, but because it did not have the capacity to export and, through a combination of climatic and economic reasons, was unlikely to have such capacity in the near or medium term. Under these circumstances, the United States could not be considered to suffer nullification or impairment as a result of the Community's measures under the banana regime.

(c) Multiple panel reports

II.42 The EC argued that the present procedure was a procedure with multiple Complaining parties and hence the EC had the right to request that the Panel organize its examination and present its findings to the DSB in such a manner that the rights, which the EC would have enjoyed had separate panels examined the complaints, were in no way impaired. In particular, the EC had a right to a separate report on each complaint, if it so requested (Article 9.2 of the DSU). The EC made such a request at the DSB meeting of 8 May 1996. In the course of this proceeding, the EC had reiterated this request and had asked the Panel to prepare four separate reports, with the reports for Guatemala and Honduras being joined, since they had filed a joint submission.

II.43 Referring to the text of Article 9.2 of the DSU, the Complaining parties conceded that the DSU appeared to require the Panel to accede to the EC's request, if the EC insisted on separate panel reports - in spite of the administrative burden on the Panel and the Secretariat, and the potential waste of resources. If the EC continued to insist on separate reports, the Complaining parties would assume that, in keeping with a general policy favouring uniformity of results, the Panel's four different reports would make the same findings and conclusions with respect to the same claims. Past panels had accomplished this with ease. 402 However, the Complaining parties believed that there were several reasons why the rights which the EC "would have enjoyed" in separate proceedings could be satisfied by a single report. As the Complaining parties' first submissions, their joint oral presentation of 10 September 1996, and the rebuttal submission made clear, with the exception of the tariff rates being challenged by Guatemala and Honduras, all the Complaining parties were challenging the same aspects of the EC banana regime. A single panel report could easily identify the separate claims, 403 if any, made by each country, since the claims all related to the same measures. Ecuador�s separate legal claim under Article 4.2 of the Agreement on Agriculture was based on the same aspects of the EC's regime as the claims made by the other Complaining parties. Such an approach would preserve any rights the EC would have had with separate reports. The different "legal situations" of any of the Complaining parties were, in the opinion of the Complaining parties, irrelevant to the Panel's ability to carry out its task: to examine the measures identified by the Complaining parties in light of the covered agreements.

II.44 The EC replied that the Complaining parties had deliberately followed a course during this procedure of effacing the differences between them. In their second submission they presented, in a single submission, the claims made by different Complaining parties as if they had been made by all. There was thus a constant threat of confusion about which of the Complaining parties claimed what. It was very important to recall that different Complaining parties had made different claims (especially with regard to services) and that they were in different legal situations (especially with respect to legal interest). The common second submission even seemed to take the position that in situations, where there had been a claim only by one Complaining party, such claim was extended to all. This should be firmly rejected. According to the EC: (i) Ecuador had made claims with respect to both goods and services. These claims were contested by the EC on their merits. Ecuador was the one country making a claim under Article 4.2 of the Agreement on Agriculture; (ii) Guatemala and Honduras had made no claims on services; their claims in the first submission related only to goods. The EC contested the claims with respect to goods on their merits. Guatemala was the only country making a claim under Article II of GATT; (iii) Mexico had made claims on goods and services, but its claims on services in the first submission were extremely limited and totally unsubstantiated. The EC contested the claims in both domains on their merits; (iv) the United States had made claims on trade in goods and on trade in services. The EC contested the claims on trade in goods for reasons of lack of legal interest on the part of the United States. The United States claims on services were contested on their merits.

II.45 The EC further argued that the Complaining parties were in very diverse legal positions as demonstrated in the foregoing paragraph. If there was one situation in which the right to separate reports in the case of multiple complaining parties had a function, it was in the present case, as it was far from clear that the Panel could reach the same findings and conclusions with respect to the same claims for all Complaining parties. It was of great importance for the EC that it be clearly established at the end of this procedure which of the Complaining parties had seen which claims accepted by the Panel and which not. In these circumstances, the EC considered it only logical to invoke what was its perfect right under Article 9.2 of the DSU.

II.46 The Complaining parties considered that the EC had misstated the nature of their claims. All five were making all the claims made in their joint presentations, both with respect to goods and services. While some had made one or two additional claims in the goods area, these were minimal.

III . FACTUAL ASPECTS

III.1 The complaint examined by the Panel relates to the EC's common market organization for bananas introduced on 1 July 1993.

(a) Banana production and trade

III.2 World production of bananas in 1995 is estimated at 54.5 million tonnes (FAO). The largest producer countries were India (9.5 million tonnes) and Brazil (5.7 million tonnes) followed by Ecuador (5.4 million tonnes), China (3.3 million tonnes) and the Philippines (3.2 million tonnes). Banana production of the Complaining parties, other than Ecuador, was as follows: Mexico 2.1 million tonnes, Honduras 0.8 million tonnes, Guatemala 0.5 million tonnes and the United States (including Puerto Rico) 54,500 tonnes. 404 In 1994 (the most recent year for which FAO data are available) the largest exporters were: Ecuador (2.35 million tonnes), Costa Rica (2 million tonnes), Colombia (1.7 million tonnes), the Philippines (1.2 million tonnes) and Panama (0.7 million tonnes). According to the same source, Honduras, Guatemala and the United States 405 each exported 0.4 million tonnes and Mexico 0.2 million tonnes.

III.3 In 1994, the EC was the world's second largest importer of bananas, after the United States (3.7 million tonnes) and followed by Japan (0.9 million tonnes). 406 According to data submitted by the EC, supplies of fresh bananas in the EC - 12 totalled approximately 3.5 million tonnes in 1994, 2.1 million tonnes of which originated in Latin American countries and 727,000 tonnes in African, Caribbean and Pacific (ACP) countries that are parties to the Lomé Convention. 407 The leading suppliers of Latin American bananas to the EC were Costa Rica, Ecuador, Colombia, Panama and Honduras (in descending order). The leading suppliers of ACP bananas to the EC were Cameroon, Côte d'Ivoire, St. Lucia, the Dominican Republic, Jamaica, Belize and Dominica (in descending order). For many ACP countries, banana exports to the EC represent a very high proportion of their total banana exports (see the Attachment to this report). Domestic EC producers supplied, according to the EC, approximately 645,000 tonnes of the bananas consumed in the EC, with the producing areas being the Canary Islands, Martinique, Guadeloupe, Madeira, the Azores and the Algarve, and Crete and Lakonia. The conditions of production differ among all countries and so do the costs of production.

(b) The EC's common organization of the banana market

III.4 The common market organization for bananas, as established by Council Regulation (EEC) 404/93 ("Regulation 404/93"), replaced the various national banana import regimes previously in place in the EC's member States. Subsequent EC legislation, regulations and administrative measures implemented, supplemented and amended that regime.

III.5 Under the previous national import regimes, France, Greece, Italy, Portugal and the United Kingdom restricted imports of banana by means of various quantitative restrictions and licensing requirements. Spain maintained a de facto prohibition on imports of bananas. 408 The French market was supplied principally from the overseas departments of Guadeloupe and Martinique, with additional preferential access granted to the ACP States of Côte d'Ivoire and Cameroon. The United Kingdom granted preferential access to bananas from the ACP States of Jamaica, the Windward Islands (Dominica, Grenada, St. Lucia and St. Vincent and the Grenadines), Belize and Suriname. Bananas from ACP countries were permitted duty-free into all EC member States. The Spanish market was almost exclusively supplied by domestic production from the Canary Islands. A major part of Portuguese supply came from Madeira, the Azores and the Algarve, with additional volumes being imported from Cape Verde and any remaining requirements being imported from third countries. The Greek market was in part supplied by bananas from domestic sources (Crete and Lakonia) and in part by third countries. Italy offered preferential access to bananas from Somalia. Belgium, Denmark, Germany, Luxembourg, Ireland and the Netherlands did not apply quantitative restrictions and, except for Germany, used a 20 per cent tariff as the sole border measure (paragraph 3.31 below refers). These countries almost exclusively imported bananas from Latin America. Germany had a special arrangement, set out in the banana protocol of the Treaty of Rome, permitting duty-free imports of third-country bananas reflecting the level of estimated consumption.

III.6 Regulation 404/93 consists of five separate titles. Titles I to III regulate the internal aspects of the common market organization. Title I provides that common quality and marketing standards for bananas are to be established in subsequent regulations. Title II contains rules concerning producers' organizations and "concentration mechanisms" to promote the establishment of organizations for the purposes of, inter alia, concentrating supply, regulating prices at the production stage, and improving EC production structures and quality. Title III establishes EC assistance for the domestic banana sector. Under this title, members of recognized EC producer organizations (and individual producers under certain circumstances) are eligible for compensation of any income loss resulting from the implementation of the EC banana regime, the maximum quantity for such compensation being fixed at 854,000 tonnes of bananas for the EC as a whole.

(i) Tariff treatment

III.7 Title IV, which regulates trade with third countries, establishes three categories of imports: (i) traditional imports from twelve ACP countries; 409 (ii) non-traditional imports from ACP countries which are defined as both any quantities in excess of traditional quantities supplied by traditional ACP countries and any quantities supplied by ACP countries which are not traditional suppliers of the EC; and (iii) imports from third (non-ACP) countries. The EC applies the following tariffs to these banana imports:

EC tariff treatment of banana imports

Category of banana imports

Source/Definition

Tariffs applied

Traditional ACP bananas

Bananas within country-specific quantitative limits totalling 857,700 tonnes established for each of 12 ACP countries.

Duty-free.

Non-traditional ACP bananas

Either ACP imports above the traditional allocations for traditional ACP countries or any quantities supplied by ACP countries which are non-traditional suppliers.

Duty-free up to 90,000 tonnes, divided into country-specific allocations and an "other ACP countries" category;

ECU 693 per tonne for out-of-quota shipments in 1996/97.

Third-country bananas

Imports from any non-ACP source.

ECU 75 per tonne up to 2.11 million tonnes as provided in the EC Schedule. An additional 353,000 tonnes were made available in 1995 and 1996. Country-specific allocations were made for countries party to the Framework Agreement on Bananas (BFA), plus an "others" category; 410

ECU 793 per tonne for out-of-quota shipments in 1996/97.

(ii) Quantitative aspects, including country allocations

(1) Traditional ACP imports

III.8 Imports of bananas from the twelve traditional ACP countries enter duty-free up to the maximum quantity fixed for each ACP country (see table below which also includes allocations for non-traditional ACP countries). 411 These allocations collectively amount to 857,700 tonnes. These quantities are not bound in the EC Schedule. There is no provision in the EC regulations for an increase in the level of traditional ACP allocations.

Allocations for duty-free banana imports from ACP countries

Country

Traditional quantities
as set out in
EC Regulation 404/93
(tonnes)

Non-traditional quantities
as set out in
EC Regulation 478/95
(tonnes)

Belize

40,000

15,000

Cameroon

155,000

7,500

Cape Verde

4,800

Côte d'Ivoire

155,000

7,500

Dominica

71,000

Dominican Republic

55,000

Grenada

14,000

Jamaica

105,000

Madagascar

5,900

Somalia

60,000

St. Lucia

127,000

St. Vincent and the Grenadines

82,000

Suriname

38,000

"Other" 412

5,000

Total

857,700

90,000

(2) Non-traditional ACP and third-country imports

III.9 Imports of non-traditional ACP bananas and bananas from third countries are subject to a tariff quota (also referred to by the EC as the "basic tariff quota") of, originally, 2 million tonnes (net weight). This tariff quota was increased to 2.1 million tonnes in 1994 and to 2.2 million tonnes as of 1 January 1995. These tariff quota quantities were bound in the EC Uruguay Round Schedule. 413 The tariff quota can be adjusted on the basis of a "supply balance" to be derived from production and consumption forecasts prepared in advance of each year. 414 In 1995 and 1996, a volume of 353,000 tonnes was added to the tariff quota as a result of "consumption and supply needs" resulting from the accession of three new EC member States, Austria, Finland and Sweden. This additional volume is not bound in the EC Schedule. In practice, however, the EC's tariff quota for non-traditional ACP and third-country banana imports was increased to 2.553 million tonnes. 415

III.10 Of the tariff quota referred to above, 90,000 tonnes are reserved for duty-free entries of non-traditional ACP bananas. This volume is bound in the EC Schedule as a result of the BFA. By regulation, the EC allocated this import volume largely among specific supplying countries (see table in paragraph 3.8 above). 416

TO CONTINUE WITH EC - REGIME FOR IMPORTATION OF BANANAS - COMPLAINT BY ECUADOR


398 See the South-West Africa cases, 1966 ICJ Reports, pp.4 et seq.

399 BISD Vol. II/181, para. 16. According to the EC, the panel's interpretation of GATT Article III:2 that it made no difference "whether imports from other contracting parties were substantial, small or non-existent" should be read in this light.

400 GATT, Part IV, Article XXXVI:1(a).

401 DS29/R, circulated 16 June 1994.

402 See "Republic of Korea - Restrictions on Imports of Beef - Complaint by Australia", adopted 7 November 1989, BISD 36S/202; "Republic of Korea - Restrictions on Imports of Beef - Complaint by New Zealand", adopted 7 November 1989, BISD 36S/234; and "Republic of Korea -Restrictions on Imports of Beef - Complaint by the United States", adopted 7 November 1989, BISD 36S/268 (in which the findings were identical except where a unique claim was made by a complaining party). See also "EEC - Restrictions on Imports of Dessert Apples - Complaint by Chile", adopted 22 June 1989, BISD 36S/93 and "EEC - Restrictions on Imports of Apples - Complaint by the United States", adopted 22 June 1989, BISD 36S/135 (in which findings were largely identical except for arguments relating to Part IV and goods en route uniquely made by Chile).

403 See "United States - Taxes on Petroleum and Certain Imported Substances", adopted 17 June 1987, BISD 34S/136.

404 Source: FAO.

405 In the case of the United States, the FAO export data are contested by the EC (see paragraph 2.36 above in section II -procedural issues). It would appear that according to US export figures there are no, or only negligible, quantities of bananas exported.

406 Eurostat and FAO.

407 EC import statistics for 1989-95 are contained in the Attachment to this report, although it should be noted that some of these data, which were submitted by the EC, are contested by the Complaining parties.

408 See "Panel on EEC - Import Regime for Bananas", DS38/R (not adopted), paras. 17 et seq.

409 Belize, Cape Verde, Côte d'Ivoire, Cameroon, Dominica, Grenada, Jamaica, Madagascar, Suriname, Somalia, St. Lucia, and St. Vincent and the Grenadines (Article 15.1 of Council Regulation (EEC) 404/93 (as amended) and the Annex thereto).

410 The EC has opened additional tariff quota access under hurricane licences (para. 3.15 below refers).

411 Article 15.1 of Council Regulation (EEC) 404/93 (as amended) and the Annex thereto.

412 E.g. Ghana and Kenya.

413 Schedule LXXX - European Communities.

414 Article 16 of Council Regulation (EEC) 404/93 (as amended).

415 In addition, the EC issued hurrican licences, see para. 3.15 below.

416 Article 1 of Commission Regulation (EC) 478/95 (as amended) and Annex 1 thereto.