7.363 Under the activity function rules, primary importers may obtain access to an amount of A and B licences equivalent to 57 per cent of their past import volumes unless they also perform customs clearance or ripening activities. At the same time, customs clearers are allocated 15 per cent, and ripeners are eligible for 28 per cent of the A and B licences required for the importation of third-country or non-traditional ACP bananas at in-quota tariff rates, regardless of whether they have imported bananas in the past. However, we also have to take into account that import licences are tradeable and transferable. Thus, the allocation of fixed percentages of licences through the application of weighting coefficients (to claims for reference quantities) to the performers of particular activity functions does not automatically determine the distribution of import shares between operators performing these different types of economic activity in the supply chain. In fact, both parties agree that large numbers of import licences are being traded on the market place. Consequently, primary importers are, in general, able to purchase the amount of the licences they need in addition to their annual licence entitlement if they wish to maintain their previous market share, e.g. from ripeners who have not imported bananas themselves. Thus we believe that, when licences are being traded, sellers of licences will usually be ripeners and purchasers of licences will usually be primary importers. Accordingly, most of the licence transferees will be primary importers, while most of those initial licence holders who do not carry out the physical importation themselves but sell the licences issued to them will be ripeners. However, while an initial licence holder who carries out the physical importation of bananas or sells the licence will in any case reap tariff quota rents, a licence transferee will have purchased the licence for an amount up to the tariff quota rent from the initial licence holder. Thus a licence transferee does not have the opportunity to benefit from tariff quota rents equivalent to those of an initial licence holder. Given that licence transferees are usually primary importers and that licence sellers are usually ripeners which, as noted above, are overwhelmingly EC owned or controlled, suppliers of EC origin, albeit being subject to formally identical treatment, enjoy more favourable conditions of competition in the meaning of Article XVII:3 of GATS than like wholesale service suppliers of Complainants' origin.

7.364 Primary importers who wish to maintain their previous market share also have the options of entering into contractual arrangements with, or investing in, companies performing customs clearing or ripening activities. However, whatever option primary importers choose in order to obtain licences in addition to their initial entitlement, e.g., ad hoc purchases of licences from, or long-term investment or partnership arrangements with, secondary importers or ripeners, the fact that licence transferees are subject to less favourable conditions of competition than initial licence holders remains the same. Thus, the availability of alternative options to obtain access to additional licences does not detract from our conclusion in the preceding paragraph that the vast majority of ripeners are EC owned or controlled and enjoy more favourable conditions of competition than like wholesale service suppliers of foreign origin.

7.365 Under operator category rules, on the basis of their third-country and non-traditional ACP imports during a preceding three-year period, primary importers classified in operator Category A are eligible for licences for 66.5 per cent of the licences allowing imports of third-country and non-traditional ACP bananas at in-quota tariff rates. Under activity function rules, the entitlements of operators who are primary importers are reduced to 57 per cent of the bananas marketed during a preceding three-year period unless such operators also engage in customs clearance or ripening activities. While primary importers who are Category B operators are subject to the same weighting coefficients as Category A operators, these Category B operators have, on the basis of their marketing of EC and traditional ACP bananas during a preceding three-year period, access to 30 per cent of the licences allowing imports of third-country and non-traditional ACP bananas at in-quota tariff rates regardless of whether they have previously traded in the latter market segment. Therefore, the purchasers of licences will be more often primary importers who are Category A operators than primary importers who are Category B operators. Thus, the allocation of licences according to activity functions is capable of aggravating the adverse impact of the licence allocation to different operator categories for those service suppliers who are of Complainants' origin.

7.366 Therefore, we conclude that the allocation of fixed percentages of licences according to activity functions performed by operators arguably applies on a formally identical basis to all wholesale service suppliers regardless of their origin, nationality, ownership or control. However, the allocation of such licences according to activity functions modifies conditions of competition in favour of service suppliers of EC origin given that the vast majority of ripeners who are actually supplying, or capable of supplying, wholesale services are of EC origin.

7.367 The foregoing analysis is sufficient for us to find that the activity function rules are inconsistent with the requirements of Article XVII of GATS. Nevertheless, we consider it useful to note that our conclusions are supported by the fact that according to EC sources, the allocation of 28 per cent of the A and B licences allowing third-country and non-traditional ACP imports at in-quota tariff rates to ripeners regardless of whether they have previously imported bananas is intended to strengthen their bargaining position in the supply chain towards primary importers. ⁸⁹³

(ii) Article II of GATS

7.369-7.372 [Used in the Mexico report.]

(e) Export certificates

7.373 The Complainants claim that the exemption of Category B operators from the requirement imposed on other operators by Regulation 478/95 to match EC import licences with BFA export certificates with respect to imports from Colombia, Costa Rica and Nicaragua accords less favourable treatment to service suppliers of third country origin. As a result, the EC is alleged to be in violation of Article II of GATS with respect to like service suppliers of ACP origin, and Article XVII of GATS with respect to like service suppliers of EC origin.

7.374 The EC responds along the same lines that it has in respect of the other GATS claims. It points out that neither all Category A licence holders are in third-country ownership, nor are all Category B licences holders - that benefit from a BFA export certificate exemption - in EC/ACP control. It also argues that the GATS does not contain any rules governing the allocation or distribution of quota rents which are generated by trade instruments such as tariff quotas whose imposition is legitimate under WTO agreements.

(i) Article XVII of GATS

7.375 In order to establish a breach of the national treatment obligation of Article XVII, three elements need to be demonstrated: (i) the EC has undertaken a commitment in a relevant sector and mode of supply; (ii) the EC has adopted or applied a measure affecting the supply of services in that sector and/or mode of supply; and (iii) the EC's measure accords to service suppliers of any other Member treatment less favourable than that it accords to the EC's own like service suppliers.

7.376 In respect of the first element, we recall that the EC has bound the wholesale trade service subsector as regards service supply across borders and through commercial presence without conditions or qualifications limiting the scope of the commitments.

7.377 As to the second element, i.e., whether the EC measures implementing the export certificate requirement are measures affecting the supply of services, we recall that we have found that the term "affecting" should be interpreted broadly (paragraphs 7.277 et seq.). In this connection, we also note that supply of services through cross-border supply or commercial presence is defined broadly to include the production, distribution, marketing, sale and delivery of such services. ⁸⁹⁴ As a consequence, in our view, the EC measures establishing export certificate requirements are "measures affecting trade in services" in the meaning of the GATS and are measures affecting Complainants' trade in services for the same reasons as are operator category and activity function rules.

7.378 We turn now to the third element of whether the export certificate requirement accords to service suppliers of the Complainants treatment less favourable than that it accords to the EC's own like service suppliers. We note that the parties do not disagree that the requirement to match EC import licences with BFA export certificates serves the purpose, or at least has the effect, of transferring part of the tariff quota rent which would normally accrue to initial EC import licence holders to the suppliers from Colombia, Costa Rica and Nicaragua who are initial holders of BFA export certificates. According to Article 3 of Regulation 478/95, Category A and C operators are subject to the EC's requirement to match import licences with BFA export certificates, whereas Category B operators are not subject to a similar requirement. Therefore, Category B operators who are initial holders of EC import licences do not have to share part of the tariff quota rent with initial holders of BFA export certificates. However, Category A and C operators must obtain export certificates from holders of BFA export certificates issued by the competent authorities of Colombia, Costa Rica or Nicaragua. When Category A and C operators are initial holders of EC import licences they share part of the tariff quota rent with initial holders of BFA export certificates. Consequently, the exemption of Category B operators from the BFA export certificate requirement ensures that tariff quota rent shares that would normally accrue to initial EC import licence holders are transferred exclusively from such holders who are Category A and C operators to initial holders of BFA export certificates.

7.379 In this context, we recall that operator category rules apply on an arguably formally identical basis to all service suppliers regardless of their nationality, ownership or control (paragraph 7.324). By the same token, we conclude that the exemption of Category B operators from the requirement to match EC import licences with BFA export certificates also arguably applies on a formally identical basis irrespective of the origin of the service suppliers concerned. However, we also recall that most service suppliers of Complainants' origin are classified as Category A operators for most of their previous trade volume and that most of the "like" service suppliers of EC origin are classified as Category B operators for most of the bananas they have marketed during a preceding three-year period. Accordingly, we conclude that the exemption of Category B operators from the requirement to match EC import licences with BFA export certificates constitutes less favourable treatment for suppliers of Complainants' origin because it modifies conditions of competition in the meaning of Article XVII:3 of GATS in favour of "like" service suppliers or EC origin.

(ii) Article II of GATS

7.381 In addressing the claim in respect of export certificates under Article II, we recall that two elements need to be demonstrated in order to establish a violation of the GATS MFN clause: (i) the EC has adopted or applied a measure covered by GATS; (ii) the EC's measure accords to service suppliers of the Complainants' origin treatment less favourable than that it accords to the like services suppliers of any other country.

7.382 As to the first element, i.e., whether the EC measures implementing the export certificate requirement are measures covered by GATS, we recall that we have found that the phrase "affecting trade in services" should be interpreted broadly (paragraphs 7.277 et seq.). In this connection, we also note that supply of services through cross-border supply or commercial presence is defined broadly to include the production, distribution, marketing, sale and delivery of such services. ⁸⁹⁵ As a consequence, in our view, the EC measures are "measures affecting trade in services" in the meaning of the GATS. More specifically, the rules establishing export certificate requirements constitute measures affecting the Complainants' trade in services for the same reasons as do operator category and activity function rules and are therefore covered by GATS.

7.383 We turn now to the second element of whether the export certificate requirement accords to service suppliers of the Complainants treatment less favourable than that it accords to like service suppliers of ACP origin. We note that the parties do not disagree that the requirement to match EC import licences with BFA export certificates serves the purpose, or at least has the effect, of transferring part of the tariff quota rent which would normally accrue to initial EC import licence holders to the suppliers from Colombia, Costa Rica and Nicaragua who are initial holders of BFA export certificates. According to Article 3 of Regulation 478/95, Category A and C operators are subject to the EC's requirement to match import licences with BFA export certificates, whereas Category B operators are not subject to a similar requirement. Therefore, Category B operators who are initial holders of EC import licences do not have to share part of the tariff quota rent with initial holders of BFA export certificates. However, Category A and C operators must obtain export certificates from holders of BFA export certificates issued by the competent authorities of Colombia, Costa Rica or Nicaragua. When Category A and C operators are initial holders of EC import licences they share part of the tariff quota rent with initial holders of BFA export certificates. Consequently, the exemption of Category B operators from the BFA export certificate requirement ensures that tariff quota rent shares that would normally accrue to initial EC import licence holders are transferred exclusively from such holders who are Category A and C operators to initial holders of BFA export certificates.

7.384 In this context, we recall that operator category rules apply on an arguably formally identical basis to all service suppliers regardless of their nationality, ownership or control (paragraph 7.324). By the same token, we conclude that the exemption of Category B operators from the requirement to match EC import licences with BFA export certificates also arguably applies on a formally identical basis irrespective of the origin of the service suppliers concerned. However, we also recall that most service suppliers of Complainants' origin are classified as Category A operators for most of their previous trade volume and that most of the "like" service suppliers of ACP origin are classified as Category B operators for most of the bananas they have marketed during a preceding three-year period. Accordingly, we conclude that the exemption of Category B operators from the requirement to match EC import licences with BFA export certificates constitutes less favourable treatment for suppliers of Complainants' origin because it modifies conditions of competition in favour of "like" service suppliers or ACP origin.

(f) Hurricane licences

7.386 Hurricane licences ⁸⁹⁶ authorize operators who include or represent EC and ACP producers, or producer organizations "to import in compensation third-country bananas and non-traditional ACP bananas for the benefit of the operators who directly suffered damage as a result of the impossibility of supplying the Community market with bananas originating in affected producer regions" because of the impact of tropical storms. In the aftermath of the hurricanes Debbie, Iris, Luis and Marilyn, 281,605 tonnes of third-country or non-traditional ACP imports were authorized between 16 November 1994 and May 1996. ⁸⁹⁷

7.387 The Complainants claim that the award of large amounts of hurricane licences by the EC exclusively to Category B operators and EC producers accords less favourable treatment to third country service suppliers. Therefore, the EC is alleged to be in violation of Article II of GATS because of its treatment of ACP suppliers, and in violation of Article XVII of GATS because of its treatment of EC suppliers.

7.388 The EC responds that the issuance of hurricane licences is required by the Lomé Convention. Further, the EC argues that the allocation of hurricane licences is directly linked to trade in goods. Therefore, inconsistencies with Article II or XVII of GATS cannot occur because the hurricane licences are not covered by the GATS in the EC's view.

(i) Article XVII of GATS

7.389 In order to establish a breach of the national treatment obligation of Article XVII, three elements need to be demonstrated: (i) the EC has undertaken a commitment in a relevant sector and mode of supply; (ii) the EC has adopted or applied a measure affecting the supply of services in that sector and/or mode of supply; and (iii) the EC's measure accords to service suppliers of any other Member treatment less favourable than that it accords to the EC's own like service suppliers.

7.390 In respect of the first element, we recall that the EC has bound the wholesale trade service subsector as regards service supply across borders and through commercial presence without conditions or qualifications limiting the scope of the commitments.

7.391 As to the second element, i.e., whether the EC measures implementing hurricane licences are measures affecting the supply of services, we recall that we have found that the term "affecting" should be interpreted broadly (paragraphs 7.277 et seq.). In this connection, we also note that supply of services through cross-border supply or commercial presence is defined broadly to include the production, distribution, marketing, sale and delivery of such services. As a consequence, in our view, the EC banana regulations are "measures affecting trade in services" in the meaning of the GATS. More specifically, the rules establishing hurricane licences constitute measures affecting Complainants' trade in services.

7.392 We now turn to the third element of whether the issuance of hurricane licences accords to service suppliers of the Complainants treatment less favourable than that it accords to the EC's own like service suppliers. In addressing this issue, we note that while only operators who include or directly represent EC or ACP producers or producer organizations affected by a tropical storm are eligible for the allocation of hurricane licences, ⁸⁹⁸ the EC regulations authorizing the issuance of certain quantities of hurricane licences apply on an arguably formally identical basis to services and service suppliers regardless of their origin, nationality, ownership or control. However, like Category B operators in general, we find that the vast majority of operators who "include or directly represent" EC or ACP producers are service suppliers of EC (or ACP) origin. We further note that hurricane licences allow for the importation of third-country and non-traditional ACP bananas at in-quota tariff rates outside and additional to the tariff quota. Thus service suppliers of EC (or ACP) origin obtain access to an additional entitlement of licences allowing the importation of third-country and non-traditional ACP bananas at in-quota tariff rates beyond the existing allocation to Category B operators of 30 per cent of the licences allowing imports of such bananas within the tariff quota. To put it differently, the allocation of hurricane licences gives service suppliers of EC (and ACP) origin the opportunity to benefit from tariff quota rents in addition to the tariff quota rents generated by the allocation of 30 per cent of the in-quota import licences to them. Thus the fact that only operators who include or directly represent EC (or ACP) producers are eligible for such licences modifies conditions of competition in favour of wholesale services suppliers of EC (and ACP) origin, since like service suppliers of Complainants' origin, if and when affected by a hurricane, do not enjoy a similar rent-making opportunity. We further note that our findings are limited to the present factual situation where hurricane licences are issued to operators who exclusively include or represent EC (or ACP) producers. Our legal analysis would not necessarily apply to a situation where hurricane licences were issued directly and exclusively to EC (or ACP) producers.

(ii) Article II of GATS

7.394 In addressing the claim in respect of hurricane licences under Article II, we recall that two elements need to be demonstrated in order to establish a violation of the GATS MFN clause: (i) the EC has adopted or applied a measure covered by GATS; (ii) the EC's measure accords to service suppliers of the Complainants' origin treatment less favourable than that it accords to the like services suppliers of any other country.

7.395 As to the first element, i.e., whether the EC has adopted or applied a measures covered by GATS, we recall that we have found that the phrase "affecting trade in services" should be interpreted broadly (paragraphs 7.277 et seq.). In this connection, we also note that supply of services through cross-border supply or commercial presence is defined broadly to include the production, distribution, marketing, sale and delivery of such services. As a consequence, in our view, the EC banana regulations are "measures affecting trade in services" in the meaning of the GATS. More specifically, the rules establishing hurricane licences constitute measures affecting the Complainants' trade in services and are therefore covered by GATS.

7.396 We now turn to the second element of whether the issuance of hurricane licences accords to service suppliers of the Complainants treatment less favourable than that it accords to like service suppliers of ACP origin. In addressing this issue, we note that while only operators who include or directly represent EC or ACP producers or producer organizations affected by a tropical storm are eligible for the allocation of hurricane licences, ⁸⁹⁹ the EC regulations authorizing the issuance of certain quantities of hurricane licences apply on an arguably formally identical basis to services and service suppliers regardless of their origin, nationality, ownership or control. However, like Category B operators in general, we find that the vast majority of operators who "include or directly represent" EC or ACP producers are service suppliers of ACP (or EC) origin. We further note that hurricane licences allow for the importation of third-country and non-traditional ACP bananas at in-quota tariff rates outside and additional to the tariff quota. Thus service suppliers of ACP (or EC) origin obtain access to an additional entitlement of licences allowing the importation of third-country and non-traditional ACP bananas at in-quota tariff rates beyond the existing allocation to Category B operators of 30 per cent of the licences allowing imports of such bananas within the tariff quota. To put it differently, the allocation of hurricane licences gives service suppliers of ACP (and EC) origin the opportunity to benefit from tariff quota rents in addition to the tariff quota rents generated by the allocation of 30 per cent of the in-quota import licences to them. Thus the fact that only operators who include or directly represent ACP (or EC) producers are eligible for such licences modifies conditions of competition in favour of wholesale services suppliers of EC (and ACP) origin, since like service suppliers of Complainants' origin, if and when affected by a hurricane, do not enjoy a similar rent-making opportunity. We further note that our findings are limited to the present factual situation where hurricane licences are issued to operators who exclusively include or represent ACP (or EC) producers.

5. NULLIFICATION OR IMPAIRMENT

7.398 The measures taken by the EC affecting the importation of bananas from the Complainants, because of the infringement of obligations by the EC under a number of WTO agreements, are a prima facie case of nullification or impairment of benefits in the meaning of Article 3.8 of the DSU, which provides that "there is normally a presumption that a breach of the rules has an adverse impact on other Members parties to that covered agreement". To the extent that this presumption can be rebutted, ⁹⁰⁰ in our view the EC has not succeeded in rebutting the presumption that its breaches of GATT, GATS and Licensing Agreement rules have nullified or impaired benefits of the Complainants.

D. SUMMARY OF FINDINGS

7.399 The complexity of this case, and the unprecedented number of claims, arguments and Agreements involved, has resulted in a long report with an unprecedented number of findings. To assist the reader, the findings on the various procedural and substantive issues are repeated here. In summary we find that

- the EC's claim that the Complainants' case should be dismissed because the consultations held concerning this dispute did not perform their minimum function of affording a possibility for arriving at a mutually satisfactory solution and a clear setting out of the different claims of which a dispute consists shall be rejected (paragraph 7.21).

- the panel request made by the Complainants was sufficient to meet the requirements of Article 6.2 of the DSU to the extent that it alleged inconsistencies with the requirements of specific provisions of specific WTO agreements (paragraph 7.45).

- under the DSU the United States has a right to advance the claims that it has raised in this case (paragraph 7.52).

- the description of the Panel's proceedings, the factual aspects and the parties' arguments should be identical in the four reports. In the "Findings" section, however, the reports differ to the extent that the Complainants' initial written submissions to the Panel differ in respect of alleging inconsistencies with the requirements of specific provisions of specific agreements (paragraph 7.58).

- bananas are "like" products, for purposes of Article I, III, X and XIII of GATT, irrespective of whether they originate in the EC, in ACP countries, in BFA countries or in other third countries (paragraph 7.63).

- the EC has only one regime for banana imports for purposes of analysing whether its allocation of tariff quota shares is consistent with the requirements of Article XIII (paragraph 7.82).

- it was not unreasonable for the EC to conclude that at the time the BFA was negotiated Colombia and Costa Rica were the only contracting parties that had a substantial interest in supplying the EC banana market in terms of Article XIII:2(d) (paragraph 7.85).

- it is not reasonable to conclude that at the time the BFA was negotiated Nicaragua and Venezuela had a substantial interest in supplying the EC banana market in the terms of Article XIII:2(d) (paragraph 7.85).

- the EC's allocation of tariff quota shares by agreement and by assignment to some Members not having a substantial interest in supplying bananas to the EC (including Nicaragua, Venezuela and certain ACP countries in respect of traditional and non-traditional exports) but not to other Members (such as Guatemala) and the tariff quota reallocation rules of the BFA, are inconsistent with the requirements of Article XIII:1 (paragraph 7.90).

- the failure of Ecuador's Protocol of Accession to address banana-related issues does not mean that Ecuador must accept the validity of the BFA as contained in the EC's Schedule or that it is precluded from invoking Article XIII:2 or XIII:4 (paragraph 7.93).

- it was not unreasonable for the EC to conclude that the Lomé Convention requires the EC to allocate country-specific tariff quota shares to traditional ACP banana supplying countries in an amount of their pre-1991 best-ever exports to the EC (paragraph 7.103).

- the allocation of tariff quota shares to ACP countries in excess of their pre-1991 best-ever exports to the EC is not required by the Lomé Convention (paragraph 7.103).

- to the extent that we have found that the EC has acted inconsistently with the requirements of Article XIII:1 (paragraph 7.90), we find that the Lomé waiver waives that inconsistency with Article XIII:1 to the extent necessary to permit the EC to allocate shares of its banana tariff quota to specific traditional ACP banana supplying countries in an amount not exceeding their pre-1991 best-ever exports to the EC (paragraph 7.110).

- the inclusion of the BFA tariff quota shares in the EC's Schedule does not permit the EC to act inconsistently with the requirements of Article XIII of GATT (paragraph 7.118).

- neither the negotiation of the BFA and its inclusion in the EC's Schedule nor the Agreement on Agriculture permit the EC to act inconsistently with the requirements of Article XIII of GATT (paragraph 7.127).

- to the extent that the EC's preferential tariff treatment of non-traditional ACP bananas is inconsistent with its obligations under Article I:1, those obligations have been waived by the Lomé waiver (paragraph 7.136).

- the Licensing Agreement applies to licensing procedures for tariff quotas (paragraph 7.156).

- the provisions of GATT 1994, the Licensing Agreement and Article 2 of the TRIMS Agreement all apply to the EC's import licensing procedures for bananas (paragraph 7.163).

- the EC licensing procedures for traditional ACP bananas and third-country and non-traditional ACP bananas should be examined as one licensing regime (paragraph 7.167).

- the allocation to Category B operators of 30 per cent of the licences allowing the importation of third-country and non-traditional ACP bananas at in-quota tariff rates is inconsistent with the requirements of Article III:4 of GATT (paragraph 7.182).

- the application in general of operator category rules in respect of the importation of third-country and non-traditional ACP bananas at in-quota tariff rates, in the absence of the application of such rules to traditional ACP imports, and in particular the allocation to Category B operators of 30 per cent of the licences allowing the importation of third-country and non-traditional ACP bananas at in-quota tariff rates, are inconsistent with the requirements of Article I:1 of GATT (paragraph 7.195).

- the Lomé waiver does not waive the EC's obligations under Article I:1 of GATT in respect of licensing procedures applied to third-country and non-traditional ACP imports, including those related to operator category rules (paragraph 7.204).

- the application of activity function rules in respect of the importation of third-country and non-traditional ACP bananas at in-quota tariff rates, in the absence of the application of such rules to traditional ACP imports, is inconsistent with the requirements of Article I:1 of GATT (paragraph 7.223).

- the EC import licensing procedures are subject to the requirements of Article X of GATT (paragraph 7.226).

- the application of activity function rules in respect of the importation of third-country and non-traditional ACP bananas at in-quota tariff rates, in the absence of the application of such rules to traditional ACP imports, is inconsistent with the requirements of Article X:3(a) of GATT (paragraph 7.231).

- the requirement to match EC import licences with BFA export certificates is inconsistent with the requirements of Article I:1 of GATT (paragraph 7.241).

- to the extent that we find that specific aspects of the EC licensing procedures are not in conformity with Articles I, III or X of GATT, we necessarily also find an inconsistency with the requirements of Article 1.2 of the Licensing Agreement (paragraph 7.271).

- we do not make a finding on whether the EC failed to take into account the needs of developing countries in a manner inconsistent with the requirements of Article 1.2 of the Licensing Agreement (paragraph 7.273).

- there is no legal basis for an a priori exclusion of measures within the EC banana import licensing regime from the scope of the GATS (paragraph 7.286).

- the distribution of bananas, regardless of whether they are green or ripened, falls within the scope of category CPC 622 "wholesale trade services" as inscribed in the EC's GATS Schedule of Commitments so long as it involves the sale of bananas to retailers, to industrial, commercial, institutional or other professional business users, or other wholesalers (paragraph 7.293).

- the EC's obligations under Article II of GATS and commitments under Article XVII of GATS cover the treatment of suppliers of wholesale trade services within the jurisdiction of the EC (paragraph 7.297).

- the obligation contained in Article II:1 of GATS to extend "treatment no less favourable" should be interpreted in casu to require providing no less favourable conditions of competition (paragraph 7.304).

- the EC has undertaken a full commitment on national treatment in the sector of "Wholesale Trade Services" with respect to supply through commercial presence (paragraph 7.306).

- the allocation to Category B operators of 30 per cent of the licences allowing the importation of third-country and non-traditional ACP bananas at in-quota tariff rates creates less favourable conditions of competition for like service suppliers of Complainants' origin and is therefore inconsistent with the requirements of Article XVII of GATS (paragraph 7.341).

- the allocation to Category B operators of 30 per cent of the licences allowing the importation of third-country and non-traditional ACP bananas at in-quota tariff rates creates less favourable conditions of competition for like service suppliers of Complainants' origin and is therefore inconsistent with the requirements of Article II of GATS (paragraph 7.353).

- the allocation to ripeners of 28 per cent of the Category A and B licences allowing the importation of third-country and non-traditional ACP bananas at in-quota tariff rates creates less favourable conditions of competition for like service suppliers of Complainants' origin and is therefore inconsistent with the requirements of Article XVII of GATS (paragraph 7.368).

- the exemption of Category B operators of EC origin from the requirement to match EC import licences with BFA export certificates creates less favourable conditions of competition for like service suppliers of Complainants' origin and is therefore inconsistent with the requirements of Article XVII of GATS (paragraph 7.380).

- the exemption of Category B operators of ACP origin from the requirement to match EC import licences with BFA export certificates creates less favourable conditions of competition for like service suppliers of Complainants' origin and is therefore inconsistent with the requirements of Article II of GATS (paragraph 7.385).

- the allocation of hurricane licences exclusively to operators who include or directly represent EC producers creates less favourable conditions of competition for like service suppliers of Complainants' origin and is therefore inconsistent with the requirements of Article XVII of GATS (paragraph 7.393).

- the allocation of hurricane licences exclusively to operators who include or directly represent ACP producers creates less favourable conditions of competition for like service suppliers of Complainants' origin and is therefore inconsistent with the requirements of Article II of GATS (paragraph 7.397).

VIII. FINAL REMARKS

8.1 The procedures under the DSU serve to ensure the settlement of disputes among WTO Members in accordance with WTO obligations, not to add to or diminish these obligations. Accordingly, our terms of reference are to assist the DSB in reaching conclusions with regard to the legal consistency with WTO rules of the EC's common market organization for bananas.

8.2 Throughout our proceedings we were aware of the economic and social effects of the EC measures at issue in this case, particularly for the ACP and the Latin American banana exporting countries. In recognizing this, we decided to grant third parties participatory rights in our proceedings which were substantially broader than those normally afforded to them under the DSU.

8.3 From a substantive perspective, the fundamental principles of the WTO and WTO rules are designed to foster the development of countries, not impede it. Having heard the arguments of a large number of Members interested in this case and having worked through a complex set of claims under several WTO agreements, we conclude that the system is flexible enough to allow, through WTO-consistent trade and non-trade measures, appropriate policy responses in the wide variety of circumstances across countries, including countries that are currently heavily dependent on the production and commercialization of bananas.

IX. CONCLUSIONS

9.1 The Panel concludes that for the reasons outlined in this Report aspects of the European Communities' import regime for bananas are inconsistent with its obligations under Articles I:1, III:4, X:3 and XIII:1 of GATT, Article 1.2 of the Licensing Agreement and Articles II and XVII of the GATS. These conclusions are also described briefly in the summary of findings.

9.2 The Panel recommends that the Dispute Settlement Body request the European Communities to bring its import regime for bananas into conformity with its obligations under GATT, the Licensing Agreement and the GATS.

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

⁸⁹³ "At the ripener level, holders of Category B licences will use their licences to aid in their negotiations with their suppliers of bananas, be they dollar, ACP or EC". European Commission, Report on the EC Banana Regime, VI/5671/94, p.10f.

⁸⁹⁴ GATS, Article XXVIII:(b).

⁸⁹⁵ GATS, Article XXVIII:(b).

⁸⁹⁶ See EC regulations cited in note 449 supra.

⁸⁹⁷ See note 451 supra.

⁸⁹⁸ "1.The quantities referred to in Article 1(2) shall be allocated to the operators who:

2. The competent authorities in the Member States concerned shall determine the beneficiary operators who meet the requirements of paragraph 1 and shall make an allocation to each of them pursuant to this Regulation on the basis of:

3. The competent authorities shall assess the damage sustained on the basis of all supporting documents and information collected from the operators concerned." Article 2 of Commission Regulation (EC) No. 2791/94 of 16 November 1994 on the exceptional allocation of a quantity additional to the tariff quota for imports of bananas in 1994 as a result of tropical storm Debbie." Id., Art. 4.

⁸⁹⁹ Idem.

⁹⁰⁰ See Panel Report on "United States - Taxes on Petroleum and Certain Imported Substances", adopted on 17 June 1987, BISD 34S/136, 158, para. 5.1.9.