2. Issues related to the GATS

22. Cameroon and Côte d'Ivoire submitted that the new EC regulations were in conformity with the conclusions and recommendations of the panel and the AB with regard to Articles II and XVII of GATS.
23. Cameroon and Côte d'Ivoire considered that the inconsistency of the old import licence allocation system was due to the fact that 30 per cent of the licences, within the tariff quota of 2.2 million tonnes, was reserved for operators marketing EC bananas and traditional ACP bananas, most of which operators were of EC origin. The new regulations no longer made any reference to operator categories nor established any link between trade in the European Communities and traditional ACP bananas and access to import licences under tariff quotas. The new regulations went even further than the findings of the AB, since they provided for a single licensing system applicable to tariff quotas and the quantity of traditional ACP bananas.
24. Cameroon and Côte d'Ivoire submitted that the definition of "traditional importer" adopted by the European Communities was consistent with GATT rules relating to licensing procedures. The acceptance of import licence applications on the basis of the operator's import performance during a recent period was fully consistent with Article 3.5(j) of the Licensing Agreement. Ecuador's claim that the European Communities should have restricted the definition of "traditional importer" to shipments of bananas was incompatible with the above-mentioned provisions. Indeed, Ecuador's statement that "the European Communities should modify its import licensing system to allocate licences to the true importers who (�) are the primary service providers and take the vast majority of the commercial risk in marketing bananas to the European Communities" ¹⁴⁶ referred to operators whose activity function had more to do with exports than imports.
25. Cameroon and Côte d'Ivoire submitted that the new import licence allocation rules were consistent with the principle of non-discrimination. The system was identical for all origins of bananas and, therefore, for all operators, whether EC or third-country operators. Furthermore, the new licence allocation rules had provisions with regard to the reference period, establishment in the European Communities, period of validity, transferability of licences, guarantee, etc., irrespective of the origin of operators.
26. In the view of Cameroon and Côte d'Ivoire, Ecuador's sole claim related to the selection of the reference period 1994-1996 enabling, in Ecuador's view, all operators holding import licences under the old system (Categories A, B and C) and which had actually used those licences to engage in importation, to submit references quantities for the grant of new licences. Cameroon and Côte d'Ivoire submitted that the method selected by the European Communities was in conformity with the rules set out in Article 3.5(j) of the Licensing Agreement. Given the allowance of an additional 353,000 tonnes of imports, the accession of Austria, Sweden and Finland into the European Communities and the non-availability of official data for the year 1997 at the time the new regulations were adopted, any reference period other than 1994-1996 would not have been sufficiently representative of recent banana trading conditions in the European Communities. That this period had enabled certain EC or ACP operators previously holding B licences to participate in the allocation of new rights did not give rise to a situation of discrimination. On the contrary, what would have constituted unacceptable discrimination was a prohibition of those operators from participating in the new licence allocation system.
27. In the view of Cameroon and Côte d'Ivoire it was also incorrect to claim that the new import licence allocation system "perpetuated" the situation criticized by the panel and the AB since, under Article 4.2 of Regulation 2362, the reference period of 1994-1996 applied only to the granting of import licences for the year 1999.
28. Cameroon and Côte d'Ivoire argued further that it was not correct to claim that all holders of B licences were able to present reference quantities for the period 1994�1996, in conformity with the "traditional importer" criterion, and to recover all the imports rights granted in the past to the detriment of third-country operators, such as Ecuador. According to information available to Cameroon and Côte d'Ivoire, operators holding B licences in the former system had to a very large extent lost their reference quantities to operators importing bananas from Latin America. The official statistics on the evolution of reference quantities between 1998 and 1999, following the introduction of the new regime, showed that Spanish and French operators, who accounted for most of the B licence holders on account of their links with European Communities and ACP production, had lost 41.21 per cent and 20.17 per cent, respectively, of their reference quantities. ¹⁴⁷ Operators established in the northern EC countries, which were traditional importers of bananas from Latin America, had increased their reference quantities substantially: Sweden (+114.26 per cent), Finland (+85.14 per cent), Austria (+118.82 per cent) and Benelux (+374.90 per cent).
29. With regard to procedures for the allocation of import licences to "newcomers", Cameroon and Côte d'Ivoire submitted that the European Communities had adopted a broad definition of the term "new operator" which extended to all operators who had engaged in trade in any fruit and vegetables and in products such as coffee or spices. This definition made it possible to expand considerably the category of new operators, which today numbered more than 1,000. Ecuador's claim that this category should have included operators on the basis of their world-wide commercial reference quantities, outside the European Communities, was not only inconsistent with any of the GATT rules, but would have precluded proper implementation of Article 3.5(j) of the Licensing Agreement. It would have led to a proliferation of new operators and made it impossible for them to be issued licences for products in economic quantities.
30. Cameroon and Côte d'Ivoire concluded that Ecuador's claims should be rejected since the European Communities had conformed with the conclusions and recommendations of the panel and the AB as well as the GATT rules. Moreover, from a tariff point of view, the preferences afforded to ACP States by the European Communities under the new regulations were in conformity with the requirements of Article 168(2)(a)(ii)) of the Lomé Convention, both for traditional and non-traditional bananas. From the point of view of guaranteed access, the preference given to the ACP States by the European Communities for the importation of traditional bananas was consistent with the requirements of the Lomé Convention (Protocol 5). Consequently, taking into account the Lomé waiver, Ecuador had no grounds for claiming a violation of Article I of GATT.

C. The Caribbean States

31. The Governments of Belize, Dominica, Dominican Republic, Grenada, Jamaica, St. Lucia, and St. Vincent and the Grenadines ("Caribbean States") submitted that they supported the arguments of the European Communities in its request that the Panel affirm the conformity of its new regime with the covered agreements and to find that Guatemala, Honduras, Mexico and the United States must be deemed to have accepted that conformity.
32. The Caribbean States submitted that they were heavily dependent upon the production of bananas and relied on the availability of their traditional markets in the European Communities, the protection of which had been assured by various Lomé Conventions, most recently Lomé IV ("the Lomé Convention") as amended. Each State had a significant interest in the outcome of these proceedings. Their economic well-being, social cohesion and political stability were dependent upon proper effect being given to the relevant provisions of the Lomé Convention.
33. The banana industry in the Caribbean States generated a large percentage of gross domestic product and foreign exchange earnings. In the Windward Islands some 34 per cent of the workforce in these islands was engaged in the industry and bananas provided a steady source of income to growers. While the Caribbean States' Windward Islands recognized and accepted the need to diversify their economies, any significant reduction in their traditional sales to the European banana market would be detrimental to the efforts made at national development and economic growth, all aimed at reducing poverty and integrating these economies into the global market. Undermining the new EC banana regime and, in particular, the guaranteed access and advantages of Caribbean States' bananas into the European Communities would destroy their banana industries. This would cause grave economic and social problems. The uncertainty which these proceedings generated were themselves highly destabilizing. It was not possible to invest in and develop the industry in the face of constant attacks on the EC banana import regime, attacks which were scarcely reconcilable with the Lomé waiver granted in 1994 which Ecuador itself had supported when it was extended in 1996.
34. The Caribbean States had difficulty in reconciling Ecuador's interpretation of the Lomé waiver with the broader societal commitments reflected in the Preamble to the WTO Agreement. This binding preambular language emphasized that the WTO system did not call for the mechanical application of rules in such a way as to give absolute precedence to market efficiencies. The legal provisions which this Panel was called upon to interpret and apply must be applied consistently with the "needs and concerns" of all WTO Members, taking account of their economic and social circumstances, the geographical conditions in which they found themselves, and their commitment to sustainable development.
35. The Caribbean States submitted that the EC's new tariff and quota system for bananas did not violate the GATT and that the new import licensing system did not violate the GATS.

1. Issues related to the GATT

(i) Traditional ACP bananas

36. The Caribbean States also submitted that, inter alia, the ACP tariff preferences were required by the Lomé Convention.
37. The Caribbean States argued that Ecuador was wrong in claiming that the 857,700 tonne limit on duty-free traditional ACP banana imports was a quantity which was "in excess of that justified by the requirements of the Lomé Convention". The European Court of Justice in Germany v Council ¹⁴⁸ had referred to the Lomé requirement (Protocol 5) as being a level up to the "best ever exports prior to 1991". This interpretation of the Lomé requirement was confirmed and applied by the panel and AB decisions in relation to Protocol 5 of the Lomé Convention. The only issue for this Panel was, therefore, whether the figure of 857,700 tonnes exceeded "best ever exports prior to 1991". The "best ever" quantities exported by the traditional ACP exporters to Europe in the years prior to 1991 were approximately 940,000 tonnes.
38. The Caribbean States submitted further that the elimination in the revised regime of individual country ceilings on duty-free access did not lead to EC preferences in excess of what was required. The total quantities from traditional ACP sources entitled to special protection under Protocol 5 of the Lomé Convention amounted to 940,000 tonnes. The fact that the European Communities had allocated 857,700 tonnes in the previous regime did not affect the entitlement of the ACP States under Protocol 5 of the Lomé Convention to the higher quantity or the obligation on the European Communities to protect the higher quantities. ¹⁴⁹
39. The Caribbean States argued that the individual quotas had been found to have infringed Article III, a violation which was found by the AB not to be covered by the Lomé waiver. This was the reason why the European Communities had dropped country-specific ACP tariff quota allocations. The panel and the AB had considered that their function was not to prescribe the detailed arrangements that must be implemented by the European Communities in order to comply with its Lomé Convention obligations. Rather, their function was to determine whether the methodology chosen by the European Communities to determine tariff quota allocations could reasonably be considered to have been "required" to meet obligations under the Lomé Convention. The AB had recognised that other methods might also be "required" by the Lomé Convention. The fact that the panel and the AB had accepted that the tariff quota allocation to individual ACP countries was "required" by the Lomé Convention did not preclude the use of a global tariff allocation to ACP countries. The Caribbean States submitted that the general allocation of 857,700 tonnes may equally be considered to be required by the Lomé Convention. However, it did not fall foul of Article XIII because the preferential agreement established by the Lomé Convention did not constitute a quota.

(ii) Non-traditional ACP bananas

40. The Caribbean States submitted that the expansion of duty-free access to "non-traditional" ACP bananas (previously limited to 90,000 tonnes) was "required" by the Lomé Convention. In the view of the Caribbean States, the AB had sought to emphasize that the duty-free benefit for non-traditional bananas applied to "all ACP non-traditional bananas" and had not suggested that the duty-free entry for such bananas should be limited to the 90,000 tonnes. The reference to 90,000 tonnes was merely for identification purposes to clarify the quantities to which the AB was referring. The Lomé waiver provided clearly that enhanced access of non-traditional bananas was "required" by the Lomé Convention. The relevant provision was Article 168(2)(a)(ii), which conferred duty-free entry on all ACP bananas. With regard to the argument that the European Court of Justice had ruled that Protocol 5 of the Lomé Convention superseded Article 168(2)(a)(ii), with the result that the European Communities was not "required" to give non-traditional ACP bananas more favourable treatment pursuant to that provision, the Caribbean States referred to paragraph 7.135 of the panel report and paragraph 173 of the AB report. By removing the limitation to 90,000 tonnes of duty-free access, the European Communities had chosen another form of "more favourable treatment", removing a cap on duty-free access that, as recognized by the AB, it had not been required to impose.
41. The Caribbean States concluded that the allocation of 857,700 tonnes in respect of traditional bananas, the duty-free treatment within the tariff quotas and the tariff preference of 200 Euro per tonne outside the tariff quota in respect of non-traditional bananas were, first, "required" by the Lomé Convention, second, provided for by the Lomé waiver, and third, were not incompatible with the GATT.

(iii) Article XIII issues

42. The Caribbean States submitted that the ACP tariff preferences did not constitute a quota within the meaning of Article XIII of GATT. In the alternative, the new regime had been designed consistently with Article XIII of GATT.
43. The Caribbean States argued that at no time since the adoption of Regulation 404 had the European Communities treated the preferences granted to the traditional ACP countries as part of the bound tariff quota in accordance with its obligations under Article 168(1) of the Lomé Convention which stated that "products originating in the ACP States shall be imported into the Community free of customs duties and charges having equivalent effect." Under Article 169 of the Lomé Convention, the European Communities was bound "not to apply to imports of products originating in ACP States any quantitative restrictions or measures having equivalent effect". If the Panel should rule that ACP preferences fell within the bound tariff quota, and if the European Communities fulfilled its obligations under the Lomé Convention to ensure access and advantages in the market for the appropriate quantity of traditional ACP bananas, third-country access to the European Communities would be reduced from 2.553 million to 1.7 million tonnes.
44. The Caribbean States argued further that whilst the imposition of a tariff constituted a restriction on imports, it did not come within the ambit of Articles XI and XIII of GATT. ¹⁵⁰ The alternative view would have the result that Article XIII:1 applied to every tariff preference and therefore every discrimination within the meaning of Article I would necessarily also offend Article XIII. This could not have been the intention of the drafters of the GATT. Or if it was, the waiver of Article I must be accommodated by some other means within Article XIII. The Panel should, therefore, distinguish between those situations which Article XIII sought to address and those that were more properly covered exclusively by the provisions of Article I. The Caribbean States submitted that the preferential arrangements established by the Lomé Convention were governed by Article I and not Article XIII. Further, the history of the special trade agreements between the Lomé countries and the European Communities showed that the benefits and advantages to which the ACP traditional suppliers were entitled did not constitute a quota within the meaning of Article XIII. No reference was made in the Lomé Convention, including Protocol 5 thereof, to the award of a quota to ACP suppliers.
45. The Caribbean States argued that the above was confirmed, inter alia, by the Lomé waiver, including the context in which it was adopted. Following the finding that the Lomé Convention was not protected by the Article XXIV of GATT exemption for free-trade areas, the European Communities was required to obtain a waiver under Article XXV. The waiver was adopted expressly to accommodate the requirements of the Lomé Convention. It was unambiguously the intention of the Contracting Parties that the European Communities should continue to be able to meet its historic obligations under the Lomé Convention which established a preferential agreement entitling ACP States to sell bananas (up to a limit) on a duty-free basis. It was scarcely credible that the Contracting Parties could have intended to adopt a waiver under Article I which would nevertheless subject ACP bananas to the quota constraints of Article XIII. A finding by this Panel to the effect that the new regime had been established in breach of Article XIII would defeat the express intention of the waiver and the intention of those granting the waiver.
46. The Caribbean States supported their argument that the entitlement of ACP States to duty-free access did not constitute a quota by reference to the Newsprint panel finding that "imports, which are already duty free, due to a preferential agreement, cannot by their very nature participate in an MFN duty free quota". ¹⁵¹ In terms of its purpose and objectives, the Lomé Convention was a preferential agreement and the waiver confirmed that ACP banana imports were duty-free. When subjected to the rigours of Article XIII they were in the words of the Newsprint panel "already duty-free". They could not therefore participate in a duty-free quota, or themselves constitute a quota.
47. In the view of the Caribbean States, the imposition of a quantitative limit on the special tariff preference granted to traditional ACP bananas did not have the effect of transforming their special tariff and other preferential arrangements into a "quota". The ACP States had argued at the time of the adoption of Regulation 404 that there should not be a quantitative limit on the advantages accorded to ACP traditional suppliers. The advantages they had obtained under the individual national regimes were not subject to any quantitative limit and it was argued by the ACP States that there should not be a ceiling limiting the ability of ACP banana industries to develop. Indeed, one of the express purposes of the Lomé Convention was to encourage the increased production and development of industries and exports from the ACP countries to the European Communities. Nevertheless, despite the understanding of the Caribbean States as to the broader meaning and effect of the Lomé Convention, it was recognized that for WTO purposes the AB had ruled that the benefits of Protocol 5 did not apply without limit to bananas from traditional ACP States. For these purposes it was accepted that the limit of 857,700 tonnes was necessary to give practical effect to the conclusion of the AB regarding best ever pre-1991 levels.
48. The Caribbean States submitted that, if the Panel were to find that the preferences for traditional ACP suppliers constituted a tariff quota within the meaning of Article XIII:5 of GATT, the new EC regime had been designed consistently with Article XIII, specifically Article XIII:2(d). This was particularly the case when Article XIII was read in the context of the objectives and specific obligations of the Lomé Convention incorporated into the WTO system by the Lomé waiver.
49. The Caribbean States argued that Article XIII:1 set out the general obligation that restrictions applied to one Member must be "similarly" applied to other Members. The language clearly envisaged that there may be differences in the manner in which restrictions between Members were applied. The restrictions had to be "similar" ¹⁵² but need not be identical. The chapeau to Article XIII:2 sought to illuminate what could be considered to be "similar" prohibitions. The "expectations" of the ACP States were that the new EC banana regime was designed to meet the EC's obligations under the Lomé Convention and its Banana Protocol. Thus, in providing for duty-free imports of 857,700 tonnes of bananas from traditional ACP countries and a margin of tariff preference for any non-traditional ACP banana imports outside the tariff quota, the European Communities was doing no more than aiming "at a distribution of trade in such product approaching as closely as possible the share which the various Members might be expected to obtain in the absence of such restrictions", given its obligations under the Lomé Convention.
50. In the view of the Caribbean States, the sub-paragraphs of Article XIII:2 set out the principles which applied when a Member sought to meet the obligation of applying "similar" restrictions. However, Article XIII:2(d) had no application to traditional ACP bananas since the quantity allocated to the ACP States had not been assigned to the traditional ACP States individually.
51. The Caribbean States argued that the European Communities, by carving out the traditional ACP bananas, before calculating allocations to suppliers with substantial interest, was acting in accordance with the specific provisions of Article XIII:2(d) which required it to take due account of any special factors. In the view of the Caribbean States "any special factors" were not related to those states having a "substantial interest" (in other words the "special factors" could arise outside the interests of those states). Nor did the words "special factor" relate to the determination of a "previous representative period". The "special factors" which determined both the decision of the European Communities and the expectations of the European market were the provisions of the Lomé Convention, including its underlying principles, i.e. the importance of a secure and stable European banana market for the socio-economic fabric and the sustainable development of these countries.

To continue with Issues related to the GATS

¹⁴⁶ Paragraph 141 of Ecuador's first submission.

¹⁴⁷ Annex 2 of the submissions of Cameroon and Côte d'Ivoire.

¹⁴⁸ Case C � 280 192, ECR 1994, pI-4973, Judgment of 5 October 1994.

¹⁴⁹ Paragraph 7.101 of the panel report and paragraphs 174 and 177 of the AB report.

¹⁵⁰ Paragraph 7.154 of the panel report.

¹⁵¹ Newsprint panel, L5680, BISD31, page 114; adopted November 1984.

¹⁵² The Caribbean States submitted that the French word ("semblable") had an even wider meaning.