2. Issues related to the GATS

52. The Caribbean States submitted that the re-structuring consequential to the adoption of Regulation 404 had led to a massive transfer of licences from EC origin companies to foreign-owned companies. Mere allegation that the EC's new licensing regime was discriminatory and violated Articles II and XVII of GATS did not relieve Ecuador of its fundamental obligation to prove its case. It was unsupported by any evidence and should be rejected by the Panel.
53. The Caribbean States submitted that Ecuador misunderstood the basis upon which the EC's new regime granted licences to operators. ¹⁵³ The final paragraph of Article 5(3) of Regulation 2362 made clear that where there was a contradiction in the documentation, licences were awarded to the operator that actually paid the customs duty directly or via a customs agent or representative, regardless of whether that operator was the named holder or transferee of the import licence. The European Communities had taken positive steps to remove the benefit of having been a named holder of import licences. This departure from what would otherwise have been an administratively simpler system was designed specifically to benefit foreign owned companies which may have felt disadvantaged as a result of the previous Category B operator system.
54. The Caribbean States argued that Ecuador pointed to the factual situation pertaining to only one company - Leon van Parys (LVP) - which was a relatively small Belgian-registered and Ecuadorian-owned operator. It failed to provide any information on the numerous other companies associated with Ecuador or even owned by Ecuadorian nationals, e.g. Pacific Fruit Europe NV, Bana Trading Gmbh, Noboa Inc.
55. The Caribbean States submitted that Ecuador claimed that LVP's imports in 1994-1996 were "physically imported by LVP and customs cleared in the European Communities by LVP or another company". ¹⁵⁴ If these quantities were customs-cleared by another company which was not acting as the agent of LVP, it must be questioned whether they were LVP imports. Ecuador provided no explanation as to the identity of these "other companies". Since LVP did not pay the customs duty and did not apparently own the bananas as they were "actually imported", it had to be assumed that LVP transported the goods by ship: the presumption must be that LVP was neither the owner of the goods nor responsible for them at the time that they cleared customs within the European Communities. If LVP had "actually imported" those bananas, its licence volumes would be substantially greater.
56. The Caribbean States argued that Ecuador provided no evidence to support the alleged distortion in favour of companies of EC and ACP origin. Licences in respect of at least 350,000 tonnes had been transferred from or sold by what were previously categorized as Category B operators to other operators, principally of non-EC origin. There was ample evidence that most if not all foreign-owned subsidiaries of wholesale banana suppliers had substantially increased their share of licences as a result of the new regime. Dole and Chiquita had increased their licence awards in excess of 100,000 tonnes. On the other hand, those companies which were awarded licences under the old regime were subject to a substantial reduction in their licences. Those tonnages, which they continued to hold, were only on the basis that they carried out the importation activity in the "relevant" period. Whether the licences granted to such EC and ACP origin companies arose directly as a result of them being awarded B licences originally, or whether the B licences were sold and the subsequent licences which they were now awarded arose out of joint venture arrangements with Latin American banana importers independent of their ownership of Category B licences, was not proven.
57. The Caribbean States submitted that recent statistics comparing reference quantities in 1998 and 1999 showed that there had been a significant transfer of reference quantities from operators which were previously awarded Category B licences to operators that imported third-country bananas. Figures compiled by Odeadom demonstrated that operators from Spain and France, which held the majority of Category B licences under the previous regime, had lost approximately 41 and 20 per cent, respectively, of their reference quantities. Operators from the Northern European countries which imported almost exclusively Latin American bananas had made significant gains: Sweden had gained approximately 114 per cent, Finland 85 per cent, Austria 118 per cent and Germany 12 per cent.
58. The Caribbean States argued that Ecuador's claim that its companies had been almost unable to buy licences appeared to be inconsistent with the statement to the effect that "Ecuadorian companies had to invest some $40 million annually � a total of about $200 million � simply to buy back access for their imports". ¹⁵⁵ At an estimated US$5 per box, this amounted to approximately 200,000 tonnes of licences which had been "bought back" by Ecuadorian companies. Given that Ecuador accounted for approximately 20 per cent of EC imports, on a proportionate basis, almost 1 million tonnes of licences were "bought back" each year by foreign owned companies. Thus, according to Ecuador, all Category B and ripener licences would have effectively been bought back by foreign-owned companies. Category B operators in France and Spain alone had sold or transferred approximately 300,000 to 350,000 tonnes of licences per annum.
59. The Caribbean States submitted that Ecuador effectively purported that import licences should no longer be awarded to importers, but to exporters. Ecuador expressed the desire that import licences should be based not on the "actual importer" but on the basis of a submission by importers of evidence of their activities, in the form of invoices for purchase of bananas in the country of origin, shipping documents (bills of lading) and commercial invoices proving a first sale on EC territory. ¹⁵⁶ The Panel had no authority to accept this suggestion, which must be rejected. It ran contrary to the normal practice throughout the world of awarding import licences to the "actual importer". The person bearing the greatest risk was normally the "actual importer" who undertook to dispose of the fruit in the European market place and in many instances would have entered into long term commercial contracts with the "shipper", which had purchased the bananas from producers in Latin America. The importer would have invested in distribution networks, ripening centres and marketing programmes, all of which were essential to the business of importing. The definition offered by Ecuador, namely purchase of bananas in the country of origin, shipping and an invoice, could be met by an operator that was no more than a pure exporter and arranger of shipping that would have a tenuous link with the country of eventual imports.
60. The Caribbean States argued further that licence allocations based on submissions which may frequently be contradictory or incomplete would pose an unnecessary burden on importers and remove the transparency. Such a system would violate and undermine fundamental principles of the Licensing Agreement, specifically Article 3.2 and 3.3 thereof, as well as Article X:3(a) of GATT.
61. In the view of the Caribbean States there was no evidence that Ecuador's proposal based on invoices and shipping documents would "cure" the perceived wrong. Ecuador provided no evidence to show that under the factual situation as developed between 1993 and 1999 the award of licences on the basis of such "submissions" would be different from the licence procedures being challenged. The only evidence which Ecuador offered related to one company, LVP. Ecuador did not even attempt to demonstrate that LVP would have benefited by an increased award of licences, should the system proposed by the Ecuador, have been adopted. Given that LVP was a member of the Noboa group of companies, it was likely that neither it nor its parent company would have met the requirements of "primary importer". Historically, Noboa did not qualify as a "primary importer" under the old regime for a number of its large contracts as it was deemed to take no commercial risk where a contract to purchase bananas at a fixed price from a European based importer existed and where the contract with Noboa amounted to no more than a c.i.f. contract. In such situations, the importer, based in Europe, would have qualified as the "primary importer" and the "secondary importer" .
62. Referring to Ecuador's statement that "Because � activity function (b) � was itself a source of entitlement to future licences under the prior system, licence holders had a powerful incentive to ensure that they were registered as the official licence users. Customs clearance was therefore done by them or in their names. A rational ripener with a licence, for example, would insist on buying bananas from a primary importer before customs clearance, so that the ripener could claim future reference quantity not only for ripening but also as a 'secondary importer'", ¹⁵⁷ the Caribbean States submitted that this statement was not true. The amount of import licences in the hands of ripeners and/or secondary importers was minimal compared to the quantities of licences held by the primary importers. There were only four or five major primary importers in Europe and the secondary importer and ripener licences were divided between a number of different small operators. Those who were not already owned by or tied to a primary importer had little ability to control access to third county imports. If they did not respond to the demands of the powerful primary importers, the only bananas that would enter their ripening rooms or be handled by them, as secondary importers, would be those bananas they could obtain under their licences. All secondary importers of Category A combined would have licences equivalent to 65.5 per cent (operator category rules) multiplied by 15 per cent (activity function rules), i.e. 9.7 per cent (multiplied by a reduction coefficient). Thus no secondary importer was granted more than 10 per cent of its normal import requirements as a result of the previous banana regime. This quantity was insufficient relative to its need to make any demands on the primary importers.
63. The Caribbean States argued that Ecuador's case appeared to be premised on the belief that companies which were awarded ripener licences might actually have used those to import fruit and may benefit under the new regime. However, no evidence was given as to the extent to which ripeners were successful in subsequently becoming "importers". The Caribbean States submitted that the position of ripeners, which had a minimal amount of import licences, was extremely weak compared to the power of the multi-national companies such as Chiquita, Dole, Del Monte and Noboa, which controlled large quantities of licences and which, in practical terms, from the commencement of the operations refused to provide fruit to ripeners, which would not transfer their licences to them. The ripeners were fully dependent on such large companies because, even if they could use their own licences, the volumes accorded to them with their own licences were insignificant compared to the need they had for volumes to maintain high through-put of bananas in their ripening centres in order to pay the fixed overheads. Thus, even the ripener's quantities migrated to the large foreign owned companies. The major primary importers had the ability to carry out the secondary importation themselves and to use their own ripening centres. They began to do this immediately after Regulation 404 came into force.
64. The Caribbean States referred to the four methods of arrangements concerning importation under Regulation 404 described by Ecuador in paragraph 4.70 above. The Caribbean States submitted that it was incorrect and unsupported by any evidence to claim that licence transfers "were rare". Licence transfers were in fact a most common occurrence. Ecuador's own statement in relation to "purchasing" US$40 million per annum of licences was evidence of this fact. Licence leases, where licences remained in the name of the original licence holder, were rare. Buy-back arrangements were extremely rare in 1994-1996. While it was correct that the person who paid the duty in T1-sales might not be the person who purchased the bananas in the country of origin, this was a normal c.i.f. type transaction. The risk was wholly borne by the importer and there was no reason why the shipper or person who purchased from the producer should be recognized as the appropriate person to hold future licences. This would not be the normal practice in any other substantial trading country, or for other European imports. In the view of the Caribbean States it was incorrect to claim that "in all four cases, the Ecuadorian service supplier was the true importer in a commercial sense". ¹⁵⁸ In particular in relation to T1-sales, Ecuador had provided no evidence that the offshore company selling on a c.i.f. basis had any presence in the European Communities. The Caribbean States submitted that no such evidence existed.
65. The Caribbean States argued that Ecuador sought to dismiss the finding of the panel in relation to secondary importers on the ground that this was one issue in a case involving many other issues. ¹⁵⁹ Ecuador now claimed "that this is the entire basis for future licence allocations". The Caribbean States did not believe that the panel dismissed claims of certain parties solely on the grounds that the issue raised was of relatively lesser importance than other issues. Ecuador, having pointed out that the panel had dismissed the case for lack of evidence, failed to offer any evidence to support the charge that most secondary importers were of EC origin.
66. The Caribbean States submitted that the essence of Ecuador's claims was that the Panel should close its eyes to the existence of almost six years of trading history and view the position as between competing suppliers of wholesale banana services prior to Regulation 404. What Ecuador sought to do was to convert the WTO system into a legal system which would award damages or undo the wrongs that may have arisen as a result of a previous illegal regime. This was not the purpose of the WTO system. Article 1:1 of GATS provided that the GATS "applies to measures by Members affecting trade and services". Measures which were no longer in existence did not constitute "measures" and could not be the subject of a WTO dispute settlement procedure. Were the Panel to seek to address the consequences of a regime, considered previously to be illegal, the WTO dispute settlement system must be prepared to receive a flood of disputes in relation to all regimes which had been found illegal since the commencement of the GATT and which, prior to their being overturned, produced consequences which had in effect been continued as a result of the advantages granted improperly to previous Members or companies from those Members.
67. The Caribbean States requested that the Panel apply the "principle of effectiveness" identified by the AB. It must give practical meaning and effect to the Lomé waiver. This meant that ACP bananas were entitled to "access to and advantages on" the EC market "in the amount of their pre-1991 best-ever export volumes". Only this would promote the economic and social development of the Caribbean States consistently with the objectives of the WTO Agreement and the Lomé Convention. The Caribbean States submitted that the new EC banana import regime achieved these objectives consistently with the GATT and the GATS. The tariff preference was required by the Lomé waiver and was consistent with Articles I and XIII of GATT. The new licensing arrangements were consistent with the GATS. Ecuador had not provided the evidence required to displace its burden in proving its case. The Panel should reject Ecuador's request in its entirety.

D. Colombia

68. In the view of Colombia, Article 21.5 of the DSU was a procedure applicable to situations where there was disagreement as to the existence or consistency with a covered agreement of measures taken to comply with the recommendations and rulings. The terms of reference of the Panel were limited to examining the consistency of Regulations 1637 and 2362 with the relevant covered agreements. Colombia submitted that at this stage the complainant could not include new claims, nor could the Panel examine issues not raised by the complainant.
69. Colombia's concerns related to a situation where all imports (MFN, traditional and non-traditional ACP supplies) were credited against the existing tariff quota which would result in a 23 per cent reduction of current access to the EC market. Colombia would also be concerned about a situation where all imports would be credited against the existing tariff quota but an additional tariff quota for all suppliers would be opened with a volume equivalent to the ACP imports and at a tariff higher than 75 Euro per tonne but lower than the bound tariff. This situation would also lead to a reduction of current market access opportunities.
70. Colombia argued that the modalities for the Uruguay Round negotiations in agriculture indicated that "current access opportunities shall be maintained as part of the tariffication process". ¹⁶⁰ It did not define "current access opportunities" which could refer to total imports, MFN imports, or imports from GATT Contracting Parties. In the case of the European Communities, the criteria selected to establish "current access opportunities" for bananas were very important since imports under preferential access accounted for more than 20 per cent of total imports and MFN imports from non-GATT contracting parties accounted for nearly 40 per cent of total imports. The reference volume of the "current access opportunities" was based on the average MFN trade for 1989-1991, i.e. at 1.9 million tonnes, while the average total imports exceeded 2.5 million tonnes. As a result of the BFA, the tariff quota volume was set at 2.1 million tonnes for 1994 and 2.2 million tonnes for 1995, of which 90,000 tonnes were allocated to imports from non-traditional ACP suppliers. The negotiation of the tariff quota also involved a commitment to increase the originally agreed volume in order to take account of the EC enlargement.
71. Colombia submitted that the market access commitment of the EC-15 was a tariff quota of 2,553,000 tonnes at 75 Euro per tonne for MFN suppliers and 90,000 tonnes duty-free for non-traditional ACP suppliers.

1. Article XIII Issues

72. Colombia submitted that a tariff quota administration through country-specific allocations was both a right and an obligation of the European Communities and that Ecuador had no legal right to request the elimination of country allocations to substantial suppliers. Colombia argued that the right of the European Communities to administer its tariff quota through the allocation of country shares was implicitly recognized by the panel in paragraph 7.85 of its report stating that at the time of the negotiation of the BFA, Colombia and Costa Rica were GATT contracting parties with a substantial interest. This right was distinct from the actual share allocated to each country which, in accordance with Article XIII:4 of GATT, could be adjusted. The right granted by Article XIII to an importing Member became an obligation for the European Communities by virtue of the commitments in its Schedule. One of the terms and conditions included under the market access commitment for bananas was a country allocation for Colombia as adjusted in accordance with Article XIII:4.
73. Colombia submitted that in accordance with Article XIII of GATT an importing Member could legitimately provide for country allocations to substantial suppliers while leaving open the opportunity to any other Member to compete for the remaining part of the quota. Moreover, in this case, the European Communities had bound itself to do so under "terms and conditions" established in its Schedule. Ecuador had no right to request denial of such rights.
74. Colombia submitted further that if the country-specific allocations conformed with the provisions set out in Article XIII:2(d) of GATT, it must be assumed that they complied with the obligation to make an allocation that aimed at a distribution that resembled the shares the parties might obtain in the absence of the restriction. The chapeau of Article XIII:2 reflected an obligation with respect to means, not results. An obligation to attain a result would be impossible to achieve as it referred to a future situation (the distribution that would exist in the market if the restriction was not applied). Hence, the obligation under Article XIII:2 was to allocate country shares in accordance with criteria that were objective, reasonable and non-discriminatory rather than an obligation to allocate shares resulting in the distribution that would exist in the absence of a restriction. Given that a future event could not be foreseen, Article XIII:4 allowed any substantial supplier to request adjustment of the proportion determined or adjustment of the representative period in order to ensure a dynamic allocation of the import market.
75. In Colombia's view, one of the criteria that would result in a distribution that aimed at what the parties could expect in the absence of the restriction was provided for in the second sentence of Article XIII:2(d) which stated that when agreement was not reasonably practicable, the importing Member shall allot shares based upon the proportions supplied during a previous representative period. According to GATT practice, "a previous representative period" was a recent period and one that reflected three years of trade flows. Consequently, when a distribution was made based on a recent representative period, the importing Member fulfilled the requirement of aiming at the distribution that the parties might obtain in the absence of the restriction.
76. Colombia submitted that in the present case the European Communities had consulted with all four substantial suppliers seeking an assignment by agreement. When it became apparent that this was not possible, it had selected 1994 to 1996 as the recent representative period for which definitive data was available and made the corresponding allocations. The allocations corresponded to the distribution of the MFN trade during the selected representative period.
77. Colombia submitted that Ecuador's claim that the 1994-96 period was not representative due to the Article XIII violation found by the panel, was contrary to the principle that parties to a treaty were required to implement it in good faith. When the BFA was negotiated, there was no precedent indicating that it was not in conformity with Article XIII. On the contrary, all principles thereof and past practice were followed. Ecuador had never used its right under Article XIII:4 to request an adjustment of the reference period, country allocations or re-allocation rules until it brought an Article XIII action. Furthermore, Ecuador's suggestion implied that the implementation of the panel recommendations had retroactive effect and, since the re-allocation rules were found to be inconsistent with Article XIII, imports made under such allocation be discounted from Colombia's share. Ecuador's claim was without any legal basis under the dispute settlement mechanism which operated in a way that ensured that remedial action was forward-looking. Colombia argued that Costa Rica and Colombia should not be penalized for rules agreed and implemented in good faith.
78. With regard to Ecuador's argument that it should be granted a quota on the basis of its share of world trade, Colombia submitted that this was not a criterion relevant to Article XIII of GATT. Article XIII:2(d), second sentence referred to "shares based upon the proportions, supplied by such contracting parties during a previous representative period, of the total quantity or value of imports". This referred to supplies to the market of the importing Member applying the restriction. Two examples demonstrated that the criteria suggested by Ecuador were inapplicable: in 1994-1996, the Philippines, a marginal supplier to the European Communities, had over 9 per cent participation in world exports while Panama, a substantial supplier to the European Communities, had only 5 per cent of total world exports. Colombia submitted that the shares provided for in Regulation 2362 were consistent with Article XIII of GATT since they were based on the proportion of imports from each supplier in the period 1994-1996 which was a recent representative period.
79. Colombia submitted that the terms of reference of the Panel were precisely defined by Article 21.5 of the DSU. Consequently the scope of the review could not include new claims and was limited to an analysis of Regulations 1637 and 2362 adopted by the European Communities pursuant to the reports of the panel and AB. Ecuador's suggestions for remedial actions exceeded the scope of review.
80. Colombia had demonstrated that the country-specific allocations made by the European Communities complied with its GATT obligations. First, because the EC's obligation was to make a distribution that aimed at, not one that resulted in, the distribution that would exist in the absence of the restriction. Second, because the distribution corresponded to the proportions supplied by each supplier during a previous representative period. Colombia therefore requested the Panel to find that the country allocations made to the substantial suppliers were in accordance with Article XIII of GATT.

To continue with Costa Rica

¹⁵³ Paragraphs 119-120 of Ecuador's first submission.

¹⁵⁴ Footnote 84 in Ecuador's first submission.

¹⁵⁵ Paragraph 19 of Ecuador's first submission.

¹⁵⁶ Paragraph 141 of Ecuador's first submission.

¹⁵⁷ Paragraph 124 of Ecuador's first submission.

¹⁵⁸ Paragraph 127 of Ecuador's first submission.

¹⁵⁹ Paragraph 136 of Ecuador's first submission.

¹⁶⁰ Modalities for the Establishment of Specific Binding Commitments under the Reform Programme. Doc. MTN.GNG/MA/W/24, 20 December 1993. These modalities where used as non-binding guidelines.