18 April 1989

4. Article XIII

4.1 Chile noted that Article XIII only regulated quotas which were not illegal under the General Agreement, which it maintained the restrictions imposed by the EEC were. Nevertheless it presented arguments relating to this Article because it offered a standard for demonstrating the discrimination against Chile and the specific damage which, more than other suppliers, it had suffered.

4.2 The Community's suspension of import licences for Chilean apples in Regulation 962/88 of 12 April 1988 was, Chile maintained, discrimination contrary to Article XIII:1. Chile drew the Panel's attention to the fact that the suspension, effective from 15 to 22 April (later amended by Regulation 984/88 to 18-29 April) applied to Chilean apples only. Given the 5-day period taken to issue licences, Chile argued that, effectively, no licences were issued in respect of applications for Chilean apples lodged later than 8 April 1988. Only on 20 April were import restrictions applied to other supplying countries, and even then Chile was discriminated against as the outright suspension of licences was continued whereas other suppliers were permitted to continue importing under quota. The result was that during most of the export season for southern hemisphere apples, Chilean apples were not allowed to enter the EEC market while others were.

4.3 Chile argued that Article XIII:3(b) had also been infringed. It provided that if a contracting party fixed quotas it should give public notice of the total quantity or value of the product which would be permitted to be imported during a specified future period. However, as Chile had argued concerning Article XI, the Community operated a secret quota against Chile. It suspended imports from Chile exclusively, before public notice of a quota. When a quota was later published it was backdated in the case of Chile. Yet in the absence of any published quota there had been no obligation to observe any restraint or limitation in applying for licences. Only Chilean exporters had no official advance information to guide their planning of apple shipments.

4.4 The EEC maintained that its restrictions had been administered in full accordance with the requirements of Article XIII. Concerning the suspension of licences for Chile, the EEC stated that from 1 to 7 April total licence requests amounted to 41,000 tons, of which 73 per cent were for Chilean apples. Applications for import licences were exceeding the traditional quantity of imports from Chile. These were, the EEC argued, clearly unrealistic and speculative levels designed to establish an irreversible position at the expense of other exporters, who were less well informed or less inclined to engage in speculative operations. Before engaging in the complex and difficult assessment both of the global amount of the quota and of the shares to be allocated to the various supplying countries, the Community had therefore considered it necessary to take precautionary action to protect the rights of other suppliers and hence its obligations towards them under Article XIII as a whole, and in particular paragraph 2(d). Interim protective measures were all the more clearly necessary in the specific case of the application of Article XIII to a seasonal product. The Community's other suppliers who had a later production and shipping season were not in a position to apply for licences which they could not be sure of fulfilling within the prescribed time-periods.

4.5 In the circumstances, the fact that the decision to suspend the issue of licences was taken on 12 April, i.e., 8 days before the publication of the global quota and its distribution in Regulation (EEC) No. 1040 dated 20 April, seemed both reasonable and lawful. At a time of year when there were a limited number of working days, this was in fact a very short delay for carrying out the detailed legal and economic studies required by the 1980 Panel report and in particular for taking into account the relative export capacities of the various suppliers. This precaution had proved to be justified, as the calculations made had shown that Chile had reached the acceptable levels within the meaning of Article XIII:2(d), and that any further rise would have resulted in a reduction in the share of the other suppliers.

4.6 On the other hand, the reason that the issue of licences for apples originating from other third countries was not suspended at this time was that imports from those countries had clearly not yet reached the level of their fair share within a foreseeable quota. It was therefore wrong to maintain that the suspension measures were in themselves a "clear violation" of the principle of non-discrimination. There was nothing in this provision or elsewhere which prevented a contracting party from adopting precautionary interim measures in a situation such as that in 1988, pending the fixing and allocation of global quotas. This interim protective measure was adopted as part of a set of measures whose overall compatibility must be judged in relation to Article XIII as a whole, including paragraph 2(d).

4.7 Chile also held that the EEC had violated the second sentence of Article XIII:3(b), which stated that:

4.8 "Public notice" here referred to public notice of the quotas as provided in the first sentence of Article XIII:3(b). Yet the EEC had excluded from entry Chilean apples which were en route to the Community on or prior to 21 April 1988, the date when quotas were published in Regulation 1040/88, and which were not covered by a licence application made on or before 8 April. Chile provided details concerning these consignments. Chile also referred to the "Standard Practices for the Administration of Import and Export Restrictions and Exchange Controls", adopted by the CONTRACTING PARTIES in 1950 (GATT/CP.5/30/Rev.1), according to which:

"...

The Community had violated these provisions as well.

4.9 Chile noted that according to the last preambular paragraph of Regulation 962/88 the Commission had felt no need to observe the requirement not to exclude from entry Chilean apples on board and destined for the EEC at the time that Regulation suspending Chilean imports was published, on the following grounds:

This argument was totally unfounded; the statement that "no account should be taken of goods being transported to the Community other than those for which import licences have been issued" meant that no account of such goods was being taken at all, which was manifestly contrary to the clear wording of Article XIII:3(b). Furthermore, the argument started from the assumption that operators should have applied for, and even obtained, licences before the departure of the ships. This assumption was not valid as there was no requirement to do so. Precisely, because of the clear wording of Article XIII:3(b) of the General Agreement and of Article 3(3) of EEC Regulation 2707/72, no importer felt a need to obtain, or even apply for, import licences before the vessel had sailed. The mere fact that they were permitted to do so could not justify the attitude taken by the Commission. As Chile had stated with regard to the operation of the licences, in many cases it was not possible to request licences before the vessel concerned had actually sailed.

4.10 Finally, it was not true that "the period of validity of import licences had been fixed so as to cover amply the dispatch of dessert apples to the Community and to permit the operator to obtain import licences before the ship departs". The crossing from Chile to Western European harbours usually took some three weeks and not all ships sailed directly from the harbour where the apples were loaded to the European harbour where the same apples were unloaded. Therefore, importers would have taken commercially unacceptable risks to apply for licences before the ships holding their cargo had actually sailed.

4.11 Chile maintained that the quantities of apples on sea destined for the EEC and covered by an application for an import licence must be considered "goods en route" in the sense of that Article. Chile drew the Panel's attention to an Interim Judgment of the European Court of Justice of June 1988 ⁴ which ruled against the Commission on this issue in respect of Community law. One such shipment had been allowed to enter the EEC by order of the European Court of Justice; it was not reasonable to request more evidence or further legal actions in respect of the other shipments. The Community gave the impression that Chilean producers put their apples on any ship and then subsequently decided at which ports they should be unloaded. Chile rejected this, detailing the specific selection, quality controls and packaging that its apples destined for the EEC (and other) markets underwent.

4.12 Concerning the requirement in the second sentence of Article XIII:3(b) that goods en route should be allowed entry provided (inter alia) that they could be "counted so far as practicable" against future quota entitlement, Chile argued that it had been the EEC which caused any practical difficulties in this respect, by publishing a backdated quota. Chile noted that during the two rounds of consultations on this matter under Article XXIII:1, the EEC had refused to take corrective action. Chile supplied supporting information to substantiate the commercial losses and market disruption it claimed the Commission's actions had caused.

4.13 The EEC considered that it had correctly applied the provisions of GATT Article XIII:3(b) with regard to products en route at the time of publication of Regulation 962/88 of 12 April 1988. Article XIII:3(b) did not contain an obligation to permit entry into the territory of the contracting party imposing restrictions of any product that had already left the place of production. Nor did it concern all products that were in the process of being transported simply as a result of the fact that they had been purchased by an importer situated in that contracting party. GATT practice confirmed that the notion of "products en route" fundamentally required that the product should be clearly destined for the territory of the contracting party in question without the importer (or more generally whoever had the disposal of them) having any possibility of re-routing them as he wished according to last-minute economic calculations. All the apples found, under the Community's licensing system, to be definitely destined for it were permitted to be imported.

4.14 It was not the case that the system required that a licence be applied for prior to shipment, but it did allow it. Precisely in order to take account of the uncertainties inherent in shipping, the Community, by Regulation 871/88 of 30 March 1988, had extended the validity of import licences from thirty to forty days. Thus, the period of validity provided reasonable protection against any risk of delay due to possible stoppages of ships in ports along the way. The system introduced did, however - and solely - prevent any speculative manoeuvre under which operators could send off products towards a stated destination which was in fact only provisional and destined to be changed during transportation in the light of developments in different markets. The EEC claimed that such was the practice of Chilean exporters.

4.15 The Order of the President of the Court of Justice of the European Communities was only a preliminary order, and the Court's final ruling was yet to come. It recognized as goods actually "en route" only 1,790 tons, which had since been permitted to be imported over and above the quota fixed for Chile. Chilean exporters had not provided proof in the case of other shipments.

4.16 Chile argued that a quota of 142,131 tons was smaller than it was entitled to under Article XIII. The chapeau of Article XIII:2 stated:

Chile argued that the Commission should therefore have used the export forecasts submitted by the southern hemisphere countries to calculate quota shares, as this would have provided the best estimate of what these countries might have been expected to obtain in the absence of quotas. According to such a standard Chile, with its forecast of 200,000 metric tons, should have then received a share of at least 32.6 per cent rather than the 28 per cent the EEC granted it. Chile also noted that South Africa, which had forecast exports of 199,000 metric tons - that is, only 1,000 metric tons less than Chile's forecast - had received a quota of almost 24,000 metric tons more than Chile.

4.17 Chile recalled that Article XIII:2(d) stated in part:

Chile argued that the EEC had not observed this requirement either.

4.18 Normal GATT practice, it said, was to consider the last three years as a previous representative period unless it could be shown for some reason that one or more of those years was not representative. In 1985, EEC imports from Chile were 86,963 metric tons, which was down from 97,820 metric tons in 1984 and also below the generally upward annual trend of shipments. Chilean exports of apples dropped in 1985 because of the severe earthquake of 3 March that year which damaged the export infrastructure. Chile argued that the earthquake should be considered as a "special factor" and therefore 1985 should not be considered as "representative" nor be included in any calculation of a representative period. If EEC imports of the last two years only were taken into account, this would give a Chilean share of 33 per cent; i.e. almost the same as the forecast. Chile also observed that imports from Chile during those years reached 155,000 and 158,000 metric tons, and therefore the Commission's assertion in its regulation suspending imports that applications for import licences exceeded the "traditional quantity" from Chile was not correct. A quota of 142,131 metric tons was well below the quantities of the previous two years.

4.19 Moreover the Community should have considered as a "special factor" the increase in Chilean productive efficiency vis-à-vis its southern hemisphere competitors. This was provided for in the note Ad Article XI:2, last sub-paragraph, and was duly taken into consideration by the previous (1980) Panel on EEC Restrictions on Apples from Chile:

It was clear that a country whose productivity and capacity for exports had increased vis-à-vis other foreign suppliers should be given a relatively bigger quota. Chile provided data on the evolution of its exports in general and apples in particular, to prove that there had been a clear trend in its favour, through higher productivity and improved export capacity.

4.20 Furthermore, the EEC should have taken into consideration, as a demonstration of the increased export capacity of Chile, the commercial contracts for 180,000 metric tons. The previous GATT Panel took account of this factor:

4.21 Analysis of the respective shares of southern hemisphere countries over the last three years showed that there had been discrimination against Chile. Comparing individual 1988 quotas against previous actual performance, the Argentinean quota of 70,000 metric tons represented 141 per cent of its three-year average. In fact the only time the EEC had ever imported anything close to that quota amount from Argentina was seven years before (67,266 metric tons), and there had been a downward trend ever since. Similarly the quotas granted to Australia and New Zealand represented 132 per cent and 117 per cent, respectively, of the average of EEC imports from these countries for the previous three years. Their 1988 quotas, too, were levels at which these countries had never exported to the EEC in the past. For Chile, the quota was only 7 per cent higher than the three-year average of actual EEC imports of Chilean apples, and it was smaller than the actual quantities for 1986 and 1987. Furthermore, Chile stated that the EEC's discrimination in the administration of its quotas was demonstrated by the fact that it allowed the entry of 135,000 tons of dessert apples from New Zealand whereas the quota published for that country was 115,000 tons.

4.22 The EEC rejected Chile's claim that its quota allocation had been smaller than it was entitled to. In allocating quotas, the Community had complied with the obligations under Article XIII as interpreted by the 1980 Panel (in particular paragraphs 4.16 and 4.17 of its report). It had therefore determined the traditional share as the average of the three years preceding the measure, and also taken into account special factors which could affect trade in the product and which could call for adjustment to this average figure. These factors included in particular, but not exclusively, new or improved export capacity of foreign suppliers. The figures obtained by averaging over the reference period were in fact close to those adopted for the shares allocated in the quota.

4.23 In order to assess the export capacities of the various southern hemisphere suppliers as objectively as possible, the Community took account of the following production figures which indicated that Chile did not have a more favourable production and export potential than the other countries:

Over the three years preceding the measure, Chile's production was relatively stable (about 520,000 tons). Furthermore, 1985, which was close to the three-year average, did not show a significant drop in Chilean output, although Chile claimed that it must have been affected by the earthquake that year. The EEC also stated that it had not been informed, at the time it was calculating the quotas, that Chile considered this a special factor to be taken into account. On the other hand, a supplier such as Argentina appeared to have clearly increased its production, and therefore deserved an improvement over its three-year average.

4.24 The determining factor in apple exports was that since the beginning of the present decade the Community's traditional suppliers had been aware of the need to maintain an orderly Community market and had moderated the quantities exported to the Community, whereas Chile had been taking advantage of that moderation to increase its share at the others' expense. To adjust Chile's market share slightly downwards as compared to the average of actual exports in the past three years could therefore not be considered as discriminatory but only as taking full account of all relevant factors: past performance, export capacity and trade patterns and policies of exporting countries. This was not a question of "punishment", just that the EEC tried to take account of the legitimate interests of other exporters.

4.25 As there appeared to be no objective basis for the assertion that Chilean producers had a higher productivity, the Community did not see fit on these grounds, either, to privilege Chile and harm the interests of other suppliers. On the contrary, it considered that the relative potential of other suppliers, such as Argentina, should lead to an improvement in the shares allocated to those countries in comparison with their three-year export average, and therefore found it necessary to reduce Chile's relative share slightly (by 1 per cent).

4.26 Other elements, such as the forecasts provided by southern hemisphere countries, did not appear to be sufficiently reliable to provide a basis for the distribution of the shares of the Community's various suppliers. Whereas in 1979/80 the forecasts of most of the Community's suppliers were in keeping with their desire to limit exports, since at the time they had agreed to voluntary export restraint, the situation was otherwise in 1987-88. Since in 1986/87 the Community had already envisaged restricting imports from these countries, it argued that these forecasts no longer corresponded to any economic reality but were designed to gain positions in the event that restrictions were introduced.

4.27 Finally, the argument advanced by Chile as to the existence of commercial contracts for an amount of 180,000 tons also seemed unacceptable. Chile had not provided any proof of the existence of such contracts. It also remained to be verified that these were indeed commitments of a contractual nature and not merely estimates subject to modification.

4.28 In the light of the foregoing, the calculation of the quantities allocated to supplying countries was carried out as follows:

4.29 Independently of the decisions the Panel would come to about the specific points above, the EEC suggested that, in view of the complexity and difficulty of the concept of "special factors", it might be wise to adopt a practical solution which would allow the contracting party using quantitative restrictions to rely in principle on the average of the previous three years and for other contracting parties to accept that reliance on this period created a presumption of conformity with the requirements of Article XIII. If there were special factors which were claimed to modify this average, the party which wished to rely on them should then have the burden of proving that one or other such factor should be considered.

4.30 Chile rejected the EEC's statistics concerning southern hemisphere apple production and supplied the following data in support of its argument that Chile's production and export capacity had indeed been increasing:

Chile noted that the Commission had not asked southern hemisphere producers for estimates of production levels when asking them for export forecasts.

4.31 Chile also rejected the EEC's argument that Chile had behaved irresponsibly while other suppliers moderated their exports. In 1979, when the EEC suspended imports of apples from Chile because it did not agree to a voluntary restraint agreement, all the other suppliers exported more than their voluntary quotas to the EEC. Since then, every southern hemisphere country had exported more than its forecast in one year or another, including, in the last four years, those countries whose "moderation" the Commission said it had taken into account. After all, there was no obligation under the GATT whereby exports must not exceed a forecast. The EEC alleged that Chile's behaviour in the past had led other suppliers to inflate their estimates. If that was so, why did the EEC grant Australia, for example, a quota higher than its forecast if the latter was already inflated? Furthermore, the EEC did not request any southern hemisphere supplier to provide evidence of its commercial contracts when setting quota levels, as it suggested Chile should have done to justify a quota of 180,000 tons.

4.32 To counter any impression that there was close co-operation between the EEC and the southern hemisphere countries, and that in its actions the Community took into consideration the interests of southern hemisphere countries, Chile stated that the sole purpose of the system of providing the EEC with export forecasts was to co-operate in the provision of information. This information was provided on a confidential basis. In no case did it prejudge export quantities or constitute a commitment. There was no process of consultation, still less of negotiation, but solely unilateral provision of information, in which Chile had always co-operated. There was thus no reason for the EEC to plead ignorance of special factors or argue that they were so complex that the requirements of Article XIII:2 needed redefining. There had been no such reciprocal co-operation from the EEC. In addition, it was not Chile alone but also other suppliers who had previously refused to enter into a voluntary export restraint agreement, which Chile argued would also have been GATT-illegal.

5. Article I

5.1 Chile argued that the Community's import quotas were discriminatory and thus a breach of general most-favoured-nation treatment and of Article I of the General Agreement.

5.2 The EEC argued that, as this was a question of the administration of quantitative restrictions, it was appropriate that it should be examined not under Article I but solely under Article XIII, which was the "lex specialis" (c.f. para. 4.1 of the 1980 Panel's report).

6. Article X

6.1 Chile argued that the licensing and deposit system on dessert apple imports introduced by the EEC on 6 February (Commission Regulation Nos. 346/88, 871/88 and 1155/88) and administrative arrangements by the member states putting this into effect were not "published promptly in such a manner as to enable governments and traders to become acquainted with them" as required under Article X:1 (first sentence) nor administered in a "uniform, impartial and reasonable manner" as required under Article X:3(a). In particular Chile maintained, concerning Article X:1, that the establishment of a licensing system as late as February 1988, with licences expected to be issued a little over two weeks after publication of the initial regulation, gave member states scant time to organize their administrative machinery for the processing of licences, and traders insufficient, or no, time to become acquainted with the new rules. Chile noted that the regulation introducing the licensing system was published, and entered into force, on 6 February - one week before the first ship loaded with Chilean apples left port destined for the Community and months after commercial contracts had been signed. Chile argued that as the licensing system entered into force before the administrative arrangements giving it effect were established by the EEC's member states or known, the Community had not respected the requirements of Article X:1 (first sentence). According to Chile, these requirements would be met only if publication was carried out sufficiently in advance of the actual trading period for the goods.

6.2 The EEC argued that the regulations introducing and amending the Community's import licensing system were published promptly and properly in the Official Journal. For example, Regulation 346/88 introducing surveillance was published three days after its adoption and provided for entry into force on the eighth day following publication. This delay showed the Community's desire to respect the spirit of Article X:1 even though this Article did not contain any rule concerning entry into force. There was, however, no basis, in Article X or elsewhere, for Chile to argue that the licensing system could not enter into force before administrative arrangements were established by all member states, even had this been the case, which the Community did not admit. Any such requirement would be completely unacceptable for the Community and impossible to meet in all cases.

6.3 Concerning Article X:3, Chile argued that there were differences among the ten member states of the EEC as to the requirement they imposed on applications for licences for imports of dessert apples. It cited examples, such as a French requirement for licence applications to be accompanied by a pro forma invoice, which effectively meant that licences could not be applied for until after ships had been loaded. Other examples cited by Chile included acceptance of telexed licence applications by some member states and not others; differing procedures for bank guarantees; and refusal by one member state to accept a licence issued by another. Therefore the requirements for licence issue were not "uniform" throughout the Community in terms of Article X:3(a). Chile adduced the changes made in the system by the Commission while it was in operation as further evidence that it was not uniform over time, either, since these led to the system being applied in a substantially different manner at different stages of the season. Chile argued that the problem was not whether the licences were administered in an identical manner in all member states, but that in some of them the licences were restrictive and non-automatic in character.

6.4 Chile argued further that the one-month validity period of the import licences was too short, and hence "unreasonable" in terms of Article X:3(a). The later extension of this period to forty days came too late to correct the position with respect to Chile, as its trade was suspended shortly afterwards. As the first of the southern hemisphere suppliers to send apple shipments during the EEC off-season beginning in February, Chile suffered most from this and the other irregularities in the system mentioned above. Hence, it argued, the regulations had not been administered in an "impartial" way, as required by Article X:3(a), among the supplying countries. Nor had their administration been impartial in relation to Community importers, some of whom had been in a more favourable position than others to obtain licences, depending on the member state involved.

6.5 The EEC stated that even if certain differences did exist among the ten member states concerning the administrative requirements to obtain licences, as claimed by Chile, these could not in themselves establish a breach of Article X:3(a). Otherwise, this provision would require the generalization of centralized or identical administration within each contracting party. The EEC argued that the Chilean case was based on a misinterpretation of Article X:3(a), whose correct meaning they gave as requiring in substance that the administration of trade measures by the various administrations should not be discriminatory among contracting parties. They quoted in support of their interpretation from the Director-General's Note of 29 November 1968, ⁵ concerning the Agreement on Implementation of Article VI. The EEC denied that the Community surveillance measures were administered in a different manner with regard to imports of Chilean apples and imports of apples originating in other contracting parties. The fact that Chilean exporters were the first to send apples to the Community was not proof of discriminatory, non-uniform, partial or unreasonable administration, but simply an objective fact due to the climatic differences among exporting countries and having nothing to do with the principles of application of the surveillance measures within the Community.

6.6 The EEC noted that the imposition of import quotas and the allocation of licences was the object of Community legislation through a regulation. Under Article 189 of the Treaty of Rome, a regulation had general scope, was binding in its entirety, and was directly applicable in all member States. Consequently, unlike directives, which were addressed to member States and called for precise complementary measures in the form of national regulations, it was the regulation and the regulation alone which established the legal situation for all persons. Of course, member States might adopt the internal administrative provisions necessary for their administrations to enforce the Community regulation, but such provisions could in no way alter or modify the provisions of the regulation and hence the rights of persons as established by the regulation. Hence the internal administrative provisions which certain member States may have found necessary could not validly modify the rights and obligations of persons. Furthermore, these internal administrative provisions did not have to be published and were not usually brought to the attention of the Commission. Nonetheless in the specific case noted by Chile of the French request for a pro forma invoice to support licence applications, the Commission had intervened with the French authorities who had replied that this was not a mandatory requirement.

7. Article XXIV:12

7.1 Chile also raised the question of obligations under Article XXIV:12 of the General Agreement, under which each contracting party shall take "such reasonable measures as may be available to it to ensure the provisions of this Agreement by the regional and local governments and authorities within its territory". Noting the Commission's responsibility for EEC trade policy, and that the establishment of a system of import licensing and surveillance for apples in the member states was decided by the Commission on the basis of Regulations passed by the EEC Council of Ministers, Chile argued that the Commission should therefore be held responsible for seeing that member states administered this system in accordance with Article X.

7.2 The EEC stated that it understood Article XXIV:12 to be essentially an exception clause to the implementation of certain GATT obligations. As the Community had not invoked this exception in the present case, it saw no grounds for the Panel to make an examination of obligations under it. Even were this Article to be relevant, which it was not, the Commission Regulation (3183/80) laying down common detailed rules for the application of the system of import and export licences and advance fixing certificates for agricultural products, enacted such "reasonable measures" as to fully satisfy the requirement.

8. Part IV

8.1 Chile argued that in imposing the measures complained of, the EEC had not respected the commitments by developed contracting parties in favour of developing ones contained in Articles XXXVI and XXXVII of Part IV of the General Agreement.

8.2 Chile was a developing country which had made major, deliberate efforts to diversify its economy away from dependence on the production and export of one commodity, copper. Fresh fruits were the largest export item for Chile after copper, amounting to over US$527 million in 1987. They also accounted for 75 per cent by value of all agricultural exports from Chile. Exports of fruit had increased by 4,186 per cent from their level of fourteen years ago. Chile was now the primary fruit exporter of the southern hemisphere.

8.3 For countries such as Chile, agriculture was a very important factor in socio-economic development. The sector's growth possibilities, which were basically determined by the international market's conditions of access and their transparency, were an urgent priority for development. Furthermore, the critical situation confronted by Chile - as by many other developing countries - due to foreign external debt should have been taken into consideration by the EEC before it closed the principal market for the exports of a product of great importance to Chile.

8.4 It was clear that in restricting imports of apples from Chile the Community had paid no regard to the special needs of Chile as a developing country as it was obliged to do under Part IV. It made no conscious and purposeful effort to ensure that Chile secure a share of growth in international trade in apples commensurate with the needs of its economic development. It did not provide in the largest possible measure more favourable and acceptable conditions of access to world markets for these products, as required under Article XXXVI. Nor did the Community refrain to the fullest extent possible from introducing non-tariff import barriers on apples, which were of particular export interest to Chile, a less-developed contracting party, as required under Article XXXVII:1(c). In fact it designed its restrictions to discriminate, through the initial operation of the licensing system, secret quota against Chile, non-entry of Chilean apples en route at the time of the suspension, publication of backdated quota, discrimination vis-à-vis other apple supplying countries as to similarity and transparency of restrictions, and discrimination in quota level. Chile also drew attention to its account of the EEC's consultations with southern hemisphere suppliers (paragraph 4.41 above) which, it argued, supported its claim under Part IV.

8.5 The EEC submitted that it did take these commitments seriously and that it made every effort to avoid having to take restrictive measures against a developing country. It had refrained from imposing import restrictions on apples against Chile in the past, even though Chile had in its view unduly profited from the moderation of other supplying countries. The EEC had also tried to avoid having to take restrictive measures in 1988, but there had been an insufficient comprehension of the situation on the side of its trading partners, in particular Chile, with whom the Community had made every effort to consult. On the other hand, Part IV did not, and could not, mean that the EEC should forego its rights or be obliged to discriminate against other contracting parties.

8.6 The EEC had met with representatives of southern hemisphere apple-supplying countries and had agreed to requests from them insofar as it could without jeopardizing the legitimate interests of the Community and the rights of other contracting parties under the General Agreement. Some amendments to the original regulations had been the result of these requests, e.g. the extension of the validity period of import licences from 30 to 40 days, the sole purpose of which was to allow greater facility for exporting countries and importers.

8.7 Chile recalled the so-called standstill commitment adopted by the CONTRACTING PARTIES under the Punta del Este Declaration, which read in part as follows:

8.8 Chile was acutely aware of the difficulties governments faced in maintaining or adopting liberal trade policies. Of all the contracting parties, only two had bound all of their tariff duties; one of them was Chile. Not only had Chile abided by the standstill commitment, in 1988 it had reduced the tariff level actually applied to less than half of the bound rate: 15 per cent across-the-board. It had not been easy for Chile to do this, given a current external debt of US$19 billion, but it had done so. On the other hand, the European Community, which had far greater resources and a more diversified developed economic base than a small, developing country, had violated its commitment on standstill as well as its obligations under the General Agreement to exclude 100,000 tons of apples (60,000 tons from Chile), a minute percentage of its own production.

8.9 The EEC considered that an examination of the measures in question in relation to the standstill commitment of the Punta del Este Ministerial Declaration did not come within the Panel's terms of reference. Those terms of reference stated that the measures in question should be examined in the light of the relevant provisions of the General Agreement. The Ministerial Declaration was not part of those provisions. The standstill commitment was a political and not a legal commitment. It contained no obligations within the meaning of Article XXIII:1(a). It added nothing to the contractual obligations under the General Agreement. Compliance with that commitment might be raised in the Surveillance Body set up by the Committee on Trade Negotiations (as Chile had done) but not within a dispute settlement procedure under Article XXIII of the GATT.

9. Article XXIII:2 - Prima Facie Nullification or Impairment

9.1 Chile cited established GATT practice to the effect that "in cases where there is a clear infringement of the provisions of the General Agreement, or in other words, where measures are applied in conflict with the provisions of the GATT ..., the action would, prima facie, constitute a case of nullification or impairment" (BISD 11S/99, para. 15). It stated that the Panel should find therefore that as a result of the failure of the European Community to carry out its obligations under the General Agreement with respect to Articles I, X:1 first sentence, X:3(a), XI:1, XIII and Articles XXXVI:9 and XXXVII:1(b) of Part IV, there was a prima facie case of nullification or impairment of benefits accruing to Chile within the meaning of Article XXIII.

9.2 The EEC maintained that its arguments had demonstrated that it had not infringed any provision of the General Agreement by adopting the measures in question. Thus there was no prima facie case of nullification or impairment and consequently no grounds for conclusions or recommendations.

TO CONTINUE WITH RESTRICTIONS ON IMPORTS OF DESSERT APPLES - COMPLAINT BY CHILE

⁴ Order of the President of the Court, No. 296040 of 10 June 1988.

⁵ L/3149. The last paragraph, referred to by the EEC, reads:

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