V.5 The ACP third parties claimed that the Latin American markets were dominated, from production to ripening, by three multinational companies which had a unique level of vertical integration from source to retail level. European legislators' concern about the potential for market abuses or existing market distortions as a result of the strength of such integrated companies in the production and marketing of Latin American bananas was heightened by the fact that the largest of these companies had a lengthy history of abuses of its market power. In contrast to the vertical integration of large multinationals in the EC market for Latin American bananas, the EC market for EC and ACP bananas was, despite the significant presence of both Dole and Del Monte, fragmented and notable for its lack of vertical integration. Moreover, the EC and ACP bananas were dependent on the individual markets into which they had traditionally supplied their bananas.

V.6 These differences in market structure meant, in the view of the ACP States, that importers were likely to abandon ACP suppliers unless the new regime provided sufficient incentives for trade to continue. Because of the vulnerability of the EC market to anti-competitive practices, an open system would have enabled any powerful vertically integrated multinational company to eliminate those of its competitors with less flexibility and resources. The ability of large multinationals to distort the market was demonstrated prior to the introduction of the new regime. 1992 saw the peak of speculative or below cost trading in bananas by major multinationals. Volumes reached unsustainably high levels with correspondingly low prices at all stages in the marketing chain. In 1992, Chiquita lost at least US$52.5 million on its banana sales in Europe and its total declared losses were US$284 million. In the same year, Colombia announced that its producers had suffered losses totalling US$70 million. The EC was faced with a situation in which there were concerted efforts "to weed out" weaker players in the lead up to the new market regime. The depressed market in 1991/92 and the first half of 1993 could not therefore be taken into account for the purposes of establishing the EC third-country tariff quota.

V.7 For the EC to fulfil its commitments to ACP producers (and indeed to consumers who would ultimately bear the cost), it had to ensure that the oligopolistic structure of the market would not undermine the operation of the new regime. The concept of Category B licences was ultimately found to be the only way to achieve this.

V.8 The ACP third parties argued that as demonstrated in paragraph 5.3 above, trading in ACP bananas was more difficult, more risky and much less profitable than trading in Latin American bananas. It was the Category B licence system which provided an incentive for operators to continue importing from ACP countries. In the view of the ACP third parties, it was only by this means that the EC could fulfil its Lomé Convention commitment that traditional ACP suppliers should be no worse off than under the preceding national arrangements.

V.9 Licences to import ACP bananas into the EC were awarded on the basis of a special certificate of origin obtained from the competent authority in the respective ACP country. These special certificates of origin had the potential to operate in the same way as the export certificates issued by the Latin American countries pursuant to the BFA. It was incorrect to state that the exemption of Category B licence-holders from the export certificate requirement for imports from Costa Rica and Colombia favoured EC and ACP traders, since by far the majority of the companies purchasing Colombian and Costa Rican bananas and using Category B licences were the so-called non-EC and non-ACP companies, namely Dole, Del Monte, and Chiquita. The great majority of Category B licences were purchased by these companies and they therefore benefited from the exemption from the export certificate requirement. Moreover, similar certificates were required for importing ACP bananas.

V.10 With regard to hurricane licences, the ACP third parties refuted the claim by the Complaining parties that these licences were given exclusively to Category B operators. Nowhere in the relevant regulations was there any reference to Category B operators. Hurricane licences were awarded to banana producer organizations regardless of whether they were Category B operators. Failure to protect the producers with hurricane licences would have resulted in financial disaster and the loss of their relationship with the traditional wholesalers/shippers and the possible loss of the vital shipping arrangements.

V.11 Furthermore, hurricane licences were necessary to fulfil obligations under Protocol 5 of the Lomé Convention since they maintained benefits accorded to ACP producers prior to the EC banana regime. Both the United Kingdom and France had arrangements pre-existing Regulation 404/93 which "safeguarded the interests of operators who are victims of such exceptional events" (fifth recital to Regulation 2791/94). These arrangements were therefore one of the advantages that ACP producers enjoyed on their traditional markets and were, as such, covered by the Lomé waiver. Contrary to suggestions by the Complaining parties that the hurricane licences favoured Category B licence-holders, a comparison between the pre-1993 arrangements and the new banana regime revealed a clear shift from granting licences to importers to "operators who represent banana producers".

V.12 The ACP third parties recalled that at the beginning of the panel process, they requested that they should be granted enhanced third party status in the proceedings of the Panel with:

V.13 The ACP third parties argued that, as signatories to the Lomé Convention, the ACP States would be directly and severely affected by any decision in this dispute which was favourable to the Complaining parties. The enormity of the threat posed by the United States and Latin American complaint to the livelihoods of these countries and to their survival in the world economy could not be overstated. In fighting to ensure the continued application of the commitment undertaken by the EC in the Lomé Convention, the ACP States were, without exaggeration, fighting for their economic survival. Considerations of this kind had on several occasions been taken into account by the International Court of Justice in similar circumstances. Panels historically had recognized the special status of countries in situations analogous to the one faced by the ACP States. ⁶⁹⁸

V.14 The ACP third parties submitted that Belize, Dominica, the Dominican Republic, Ghana, Grenada, Saint Lucia, Saint Vincent and the Grenadines, Senegal, and Suriname were not afforded the opportunity to attend the organizational meeting on 13 June 1996 and make their own presentations concerning their rights of representation. The proper procedure for the Panel to have followed would have been to hold an organizational meeting to consider the question of which parties had sufficient "substantial interest" to be accorded third party status. Parties should have been accorded the proper opportunity to be heard on such matters. Having decided who "the parties" to a panel request were, the Panel should have held organizational meetings with all "the parties" or "consulted" with them, to decide upon the proper working procedures, taking into account all the circumstances, including the complexity and seriousness of the complaint, and the potential impact for the parties.

V.15 The denial of these rights was a breach of Article 10.1 of the DSU which required that "the interests of the parties to a dispute and those of other Members under a covered agreement at issue in the dispute shall be fully taken into account during the Panel process". The Panel's misinterpretation of the system established by Article 12.1 of the DSU had led to the ACP third parties' interests not being "fully taken into account during the panel process".

V.16 The ACP third parties argued, furthermore, that it was incorrect for the Panel to assume that the consent of the parties was required for it to grant the enhanced status sought by the ACP States. Article 12.1 of the DSU merely empowered the Panel to "consult" the parties in making its decision on the matter; "to consult" did not mean to secure their consent. The Panel, in this regard, transferred powers to the parties which the DSU had expressly reserved for the Panel itself. In the view of the ACP third parties, the Panel's decision on the level of their participation was prejudicial to their interests. The Panel should therefore review its decision of 25 June 1996 and find it null and void. The right to be heard in a manner consistent with one's interests was a fundamental principle of natural justice and this right of the ACP States as third parties, set forth in Articles 10 and 12.1, had been breached.

V.17 The ACP third parties submitted that they were given inadequate time to prepare and present their arguments and submissions. This was in breach of Articles 12.2 and 12.4 of the DSU which required that panel procedures provide sufficient flexibility so as to ensure high quality reports and that the panel shall provide sufficient time for the parties to prepare their submissions. Moreover, it was in breach of Article 12.10 which specifically provided that, when examining a complaint against a developing country, a panel must accord sufficient time for the developing country Member to prepare and present its argumentation.

V.18 The ACP third parties requested the Panel to dismiss the complaint and to terminate the proceedings since, in their view, the Complaining parties' request for establishment of a panel failed to meet the requirements of Article 6.2 of the DSU.

V.19 The ACP third parties argued that the request for the establishment of the panel provided neither "a brief summary of the legal basis of the complaint sufficient to present the problem clearly", as required by Article 6.2 of the DSU, nor "the greatest degree of precision", as required in the report of the panel United States - Imposition of Anti-Dumping Duties on Imports of Fresh and Chilled Atlantic Salmon. Instead of identifying the "specific measures at issue", the Complaining parties merely cited the "regime for the importation, sale and distribution of bananas". They also failed to explain how specific measures allegedly were inconsistent with specific WTO obligations.

V.20 The ACP third parties requested further that, if the panel were not to dismiss the entire proceedings, Mexico and the United States should be dismissed as complainants because they had no trade interest.

V.21 The ACP third parties argued that Mexico's principal alleged justification for appearing as a complainant in this dispute, namely Mexican ownership of Del Monte, had disappeared on 11 June 1996 when Del Monte was sold to the IAT Group, a Jordanian holding company that also controlled United Trading Company of Santiago, Chile. Moreover, Mexico did not export bananas to the EC and was not actively seeking to do so. Mexico had therefore no trade interest in goods and services in this proceeding. Mexico's only available claim was that it might export bananas to the EC in the future. Such hypothetical trade interest fell short of the standards established in Article XXIII:1 of GATT and the DSU. The use of the term "benefit" in Article XXIII:1 of GATT and Article 3.3 of the DSU required that there be actual trade or an active attempt to trade. Further support for requiring all complainants to have a tangible and present trade interest in a dispute was found in the domestic legal regimes of most, if not all, Members, referred to usually as the requirement of "locus standi".

V.22 Similarly, in the ACP third parties' view, the United States' interest in the dispute was not a trade interest in goods or services; any possible interest was an investment interest. Chiquita Brands exported no bananas from the United States to the EC. Neither Chiquita nor Dole supplied any service in, or from, the United States relating to trade in bananas. The only connection that the United States had to this dispute was that Chiquita and Dole, which produced bananas in, and shipped them from, various Central and Latin American countries, happened to be owned by United States interests. The GATT did not address investment interests. ⁶⁹⁹

V.23 The ACP third parties argued that the United States sought to salvage its status as a Complaining party by alleging an interest under the GATS regarding the marketing of bananas. However, repeated references to firms that were in the business of marketing bananas could not obscure the reality that the United States interest did not fall within the scope of Article I of GATS. Article I provided that, as in the case for trade in goods under the GATT, GATS covered trade in services between one Member and another. The supply of a service could occur in one of four different ways, but in each instance the trade in the service was between the territory of the complainant and the territory of the respondent. The scope of Article I of GATS did not extend to a service provided between a third country and the respondent based on the fact that the service provider happened to be owned by a national of the complainant. This was an investment interest which was not within the scope of the GATS.

V.24 The ACP third parties also requested that the Panel dismiss Ecuador's claim with regard to an alleged breach by the EC of the Agreement on Agriculture. In their view, Ecuador had failed to comply with the requirements of Article 6.2 of the DSU to provide a sufficient explanation of the legal basis in its request for the establishment of a panel. When Ecuador identified its allegation in its first submission, it claimed that the EC licensing regime was inconsistent with footnote 1 to Article 4.2 of the Agreement on Agriculture. Article 4.2 was part of the overall commitment in that Agreement to "tariffy" existing quantitative restrictions. Footnote 1 provided an illustration of the types of measures associated with existing quantitative restrictions. The EC banana regime was "tariffied". It was based on tariff quotas which were expressly permitted under the Agreement on Agriculture. Article XIII of GATT as well as the Licensing Agreement recognized that import licensing regimes were necessary to implement tariff quota schemes. To read footnote 1 to Article 4.2 of the Agreement on Agriculture as vitiating this approved method of tariffication was absurd.

V.25 In the view of the ACP third parties, the Agreement on Agriculture gave specificity to the rights and obligations of Members in respect of agriculture. In the event of a conflict between the Agreement on Agriculture and GATT, the provisions of the former prevailed. This was central to an understanding of the market access bindings, quotas, and other commitments under the Agreement on Agriculture. However, these market access commitments were consolidated concessions within GATT and in this case, there was no conflict. Even if the Panel were to find that Ecuador had properly identified the legal basis of its allegation, the claim that the EC licensing regime was inconsistent with footnote 1 to Article 4.2 of the Agreement on Agriculture should therefore be dismissed by the Panel for lack of substance.

The Lomé Convention and the Lomé waiver

V.26 The ACP third parties submitted that the Fourth Lomé Convention, signed by the European Community, its member States and the ACP States in 1989 and ratified in 1990, had a duration of approximately 10 years, expiring on 29 February 2000. There were 70 ACP signatories to the Convention which represented almost half of the WTO Members.

V.27 The various Lomé Conventions were designed to stimulate the development of the ACP States through, inter alia, the promotion of trade of the ACP countries. They provided a margin of preferences but were not intended to create undue difficulties for the trade of any other Member. The ACP group of countries contained some of the smallest and least developed countries in the world. Article 167 of the Convention provided as follows:

V.28 The ACP third parties claimed that the obligations of the EC to banana producers in ACP States under the Lomé Convention were not limited to Article 1 of Protocol 5. They were much more extensive and included the following:

V.29 Article 168 prohibited the imposition of customs duties, or charges having equivalent effect, on goods being imported from ACP States into the EC. Article 169 prohibited quantitative restrictions. Article 168(2)(a)(ii) specified that the EC was obliged, in relation to products originating in the ACP States, to "take the necessary measures to ensure more favourable treatment than that granted to third countries benefiting from the most-favoured-nation clause for the same products". These provisions applied without distinction to traditional and non-traditional ACP products. The suggestion that the Lomé Convention did not require any preferential treatment for non-traditional ACP bananas was therefore incorrect in the view of the ACP third parties.

V.30 The imposition of customs duties or quantitative restrictions was, however, made subject to Article 168(2), which provided that if the EC subjected the products to a common organization of the market, as it did for bananas by way of Regulation 404/93, it reserved the right to adapt the import treatment for products originating in the ACP States. However, Article 168(2)(a)(ii) applied to any adaptation of the import arrangements and obliged the EC to "ensure more favourable treatment than that granted to third countries benefiting from the most-favoured-nation clause for the same products". This covered the preferential tariff treatment and the quantitative allocations accorded to both traditional and non-traditional ACP bananas.

V.31 Article 183 provided that "in order to permit the improvement of the conditions under which bananas originating in the ACP States are produced and marketed, the contracting parties agree to the objectives set out in Protocol 5". Article 183 did not draw a distinction between traditional and non-traditional bananas, although a distinction relating to "traditional suppliers" and "traditional markets" was introduced in certain aspects of Protocol 5, to which the Article referred. The preamble to Protocol 5 provided that the EC agreed to the following objectives:

Article 1 stated that:

V.32 The EC was thus under the obligation to preserve the traditional markets and advantages enjoyed "in the past or at present". The same terms had been used in the banana protocols of the Lomé Conventions since Lomé I in 1975. Given that no limitation on the time period to be taken into account was specified in the banana protocols, the term "in the past or at present" could only be construed as meaning that the traditional markets and advantages enjoyed at any time before 1991 must be matched. The ACP third parties understood that, rather than taking into account all years prior to 1991, the EC used the reference period 1976 to 1991 in establishing the traditional quantities set out in Regulation 404/93. The reason for this restriction on the reference period was not apparent from the wording of the Lomé Convention and was inconsistent with the EC's obligations under Protocol 5. The restriction had the effect of disadvantaging certain ACP countries, such as Jamaica, whose exports to EC member States prior to 1976 were higher than the quantity allocated to them in Regulation 404/93.

V.33 ACP bananas were not only allowed unlimited duty free access to the EC, but in certain of them, namely the "traditional" markets, they were in effect "guaranteed" a market. In the view of the ACP third parties, the protection afforded to ACP producers in terms of "access to, and advantages in" traditional markets prior to Regulation 404/93 included the following:

V.34 The ACP third parties considered that the EC was under a legal obligation to preserve the advantages which ACP banana suppliers enjoyed in the past as regards "markets" and "access". A loss of such access and advantages, even if made up by subsidies, would constitute of breach of the requirements of Protocol 5 since prior to Regulation 404/93 ACP banana producers derived their income from the market. Moreover, a policy of aid instead of trade would be wholly inconsistent with the spirit of the Lomé Convention, given that one of the stated objectives was to promote economic development and increase exports from its ACP signatories to the EC. The provisions of Regulation 404/93 concerning Category B licences were therefore vital to the continued existence of the ACP banana industries. The reasons for the necessity of the Category B licences included the production, shipping and marketing disadvantages which could not simply be remedied by a tariff advantage or subsidy. Moreover, the Category B licence system was necessary due to the concerns relating to the potential for market manipulation and distortion. If these latter concerns were not addressed, the banana industries of the ACP States would not survive.

V.35 The ACP countries submitted further that the EC had obligations in relation to trade co-operation, in particular in relation to island ACP States. Title I of Part Three of the Lomé Convention contained numerous obligations regarding trade cooperation and general trade arrangements. For example, paragraph 1 of Article 167 stated the EC's obligation to "promote trade between the ACP States and the Community". Paragraph 2 stated, more specifically, that the EC shall pay:

These provisions established a general obligation on the part of the EC to improve market access and otherwise contribute to the growth of ACP trade, including trade in bananas from any ACP source.

V.36 Finally, the Lomé Convention established specific obligations with respect to island ACP States. According to Article 335:

The ACP States most heavily dependent on banana exports were small island developing States which were extremely vulnerable to natural hazards and constrained by geographic characteristics.

V.37 With regard to the Lomé waiver, the ACP third parties submitted that the second Banana panel had pointed to a waiver under Article XXV:5 of GATT to remedy any possible conflict between the obligations of the EC under the Lomé Convention and those under the GATT:

V.38 On 9 December 1994, Complaining parties and other GATT contracting parties, at the request of the EC, granted the Lomé waiver to allow the EC to meet its commitments to the ACP States embodied in the Lomé Convention (GATT document L/7604, refers). It was abundantly clear to all WTO Members, in particular the United States which supported the waiver, that one of its purposes was specifically to remedy the possible inconsistencies between the GATT and Regulation 404/93. The Complaining parties and, in particular, the United States had ample opportunity to raise, at the time the waiver was being debated, questions as to whether it fully covered Regulation 404/93. They did not do so. It was a standard principle of legislative interpretation that an instrument should be interpreted in light of the circumstances giving rise to its adoption. The ACP third parties considered that the Panel must be cautious in interpreting the waiver in a manner which could undermine its obvious purpose of protecting Regulation 404/93 as it stood prior to the adoption of the waiver.

V.39 In the recitals to the waiver decision, the contracting parties recognized that the Lomé Convention was aimed at improving the standard of living and economic development of the ACP States and that the granting of preferential treatment for ACP products under the Lomé Convention was consistent with the provisions of the GATT.

V.40 The scope of the EC's obligations under the Lomé Convention was extensive. The scope of the Lomé waiver was coterminous and thus was very broad, too. Paragraph 1 provided:

V.41 The ACP third parties considered that Complaining parties attempted to curtail the scope of the waiver by asserting that it applied only to "preferential treatment ... required by" the Lomé Convention. The Complaining parties would limit the waiver only to those preferences "absolutely" required by the Lomé Convention. This reading of the Lomé waiver was incorrect and misleading. The text of the waiver read in relevant part "preferential treatment ... as required by" the Lomé Convention. The word "required" and the phrase "as required by" were not used as terms of restriction, but as terms of definition. They informed the definition of "preferential treatment" by tying it to the provisions of the Lomé Convention. The Lomé waiver empowered the EC to establish preferences in order to meet its obligations to ACP countries under the terms of the Lomé Convention. Absent the waiver, the EC might be caught between its obligations under the WTO and the Lomé Convention. The phrase "as required by" communicated to the reader that the waiver was granted expressly to resolve this dilemma, providing the EC the authority to meet its Lomé Convention obligations, without at the same time violating GATT Article I:1. The same was true of the phrase "to the extent necessary" in the waiver.

V.42 The phrases "to the extent necessary" and "as required", even if interpreted as limitations rather than definitions did not limit the EC to one methodology or regime of preferences. The waiver saved from inconsistency with Article I:1 any means necessary to implement the preferential treatment required by the Lomé Convention. However, the phrases "to the extent necessary" and "as required" did not limit the mechanism(s) used to effect the preferences to only one (i.e. to the "required" or "necessary" one). Rather, the waiver permitted the EC to develop and select any regime to create the preferences, as required or necessary to implement the EC's commitments under the Lomé Convention. Therefore, the possibility of other regimes or ways to achieve the preferential treatment did not render Regulation 404/93 "unnecessary". The EC had created, in Regulation 404/93, a regime with provisions that "provide preferential treatment to products originating in ACP States as required by" the Lomé Convention. Even if the Lomé Convention waiver permitted the EC only to provide the "minimal" preferential treatment as required by the Lomé Convention, the preferences contained in Regulation 404/93 would fall within this "minimal" requirement. Therefore, Regulation 404/93, in its entirety, and each of its provisions were covered by the terms of the Lomé waiver.

V.43 The phrase "without being required to extend the same preferential treatment to like products of any other contracting party" was, in the view of the ACP third parties, significant. Even accepting the Complaining parties' argument that the waiver extended only to "required" and "necessary" measures, the fact that the mechanism chosen to effect the preferential treatment under the Lomé Convention resulted in discriminatory treatment for other contracting parties was irrelevant to the question of whether the mechanism was "required" to implement that treatment. This was so because the waiver itself operated to save the discriminatory treatment from inconsistency with Article I:1 by building in discrimination and making it inherent in the implementing mechanism for the preferential treatment. Therefore, a case could not be made against the mechanism or measure on the grounds that it was restrictive or could be less restrictive in the extent to which it discriminated against other contracting parties, or could be less discriminatory against other contracting parties. The Lomé waiver anticipated that discrimination would occur and expressly saved it from inconsistency with Article I:1 of GATT.

V.44 The ACP third parties argued that it would be inappropriate for the Panel in its consideration of the Lomé Convention to act as the final arbiter on the interpretation of its provisions. Serious juridical and legal confusion would arise if the Panel were to carry out that role, quite apart from the practical difficulties it would have in undertaking the requisite detailed legal analysis. The role of the Panel should be akin to that of a court judicially reviewing the acts of an administration, i.e. that it should not substitute itself for the administration, but should rather evaluate the reasonableness of the challenged acts.

Article I of GATT

V.45 The ACP third parties noted that Regulation 404/93 established different tariff rates for ACP and third-country bananas. Different tariff rates were also established for in-quota and over-quota imports of bananas from each source. The tariff rates established preferences, first, for traditional ACP bananas, second, for non-traditional ACP bananas, and, third, for third-country bananas.

V.46 The tariff rates were "customs duties and charges of any kind imposed on or in connection with the importation" of bananas and also represented a "method of levying such duties and charges". Therefore, they fell under the ambit of Article I:1 of GATT. As the preferential tariff rates were necessary to achieve the Lomé Convention's "no less favourable situation" commitment, they were therefore within the scope of the Lomé waiver. To the extent that the current in-quota tariff of ECU 75 per tonne was less than the previous 20 per cent, the EC had afforded advantages to the Complaining parties with respect to maintaining historical advantages.

V.47 The ACP third parties submitted that the quota allocations to ACP States were not subject to Article XIII of GATT but fell under GATT Article I:1 and were therefore within the scope of the Lomé waiver.

V.48 Country-specific allocations were inherent in the preferential treatment required by Protocol 5 of the Lomé Convention. Article 1 of Protocol 5 obliged the EC to ensure that "no ACP State" was placed in a less favourable situation. The EC's commitment to provide "no less favourable treatment" was thus, by definition, to each ACP State individually and, to meet these individual obligations, the EC had to set country-specific allocations. The EC, taking account of the trade interest of the non-ACP banana exporting countries, had established a tariff quota for these countries based on their historical performance over a representative period. Thus, the EC had restricted itself in establishing the allocation in a manner which took account of the concerns of non-ACP banana exporters.

V.49 The Complaining parties' allegation that the country-specific allocations for certain traditional ACP suppliers exceeded what was required under the Lomé Convention was incorrect. The commitment contained in the Lomé Convention to guarantee the benefits "past or present" required consideration of the highest export from those countries and was not limited to exports after 1976. In addition, the EC had to give, as a minimum, full consideration to investments made "at present".

V.50 The hitherto unrestricted rights to increase production for the traditional markets had been removed and exports had been capped in some cases, such as Jamaica, at levels well below the historical best. In 1966, Jamaica exported bananas to the United Kingdom in excess of 200,000 tonnes, which compared to an allocation of 105,000 tonnes in Regulation 404/93. In 1961, Cameroon's banana exports totalled approximately 140,000 tonnes. In the years preceding the introduction of the EC banana regime, substantial investments, exceeding US$20 million, took place in the banana industry. These investments were capable of resulting in banana exports considerably in excess of 155,000 tonnes allocated to Cameroon. It was therefore incorrect to suggest that the allocation exceeded the minimum obligations of the EC to Cameroon. The traditional quantity of Côte d'Ivoire contained in Regulation 404/93 was based on the highest quantities of exports to the EC before 1991 as well as specific investments made in banana production in the period preceding Regulation 404/93. The highest previous exports of Côte d'Ivoire took place in 1978 (143,000 tonnes). Accordingly, the quota of 155,000 tonnes allocated to Côte d'Ivoire was wholly consistent with the EC's obligations under the Lomé Convention. In the case of Belize, the traditional quantity contained in Regulation 404/93 was 40,000 tonnes which was less than production in 1994 (59,000 tonnes). The allocation was established on the basis of the "best ever" exports and investments of US$100 million. These investments led to improvements in both quantities and quality of bananas.

V.51 With the adoption of the EC Regulation implementing the BFA, and its incorporation into its Schedule of GATT concessions, non-traditional ACP imports to the EC were capped at 90,000 tonnes. At that time, the exports of non-traditional quantities from Cameroon, Côte d'Ivoire and the Dominican Republic were considerably in excess of 90,000 tonnes. The limitation of non-traditional exports ensured that any further increases in the third-country tariff quota benefited exclusively the Latin American suppliers to the detriment of ACP suppliers, which was not required by the Lomé Convention or GATT rules and was a further concession granted to Latin American suppliers.

V.52 The ACP third parties submitted that the EC licensing regime as a whole, and each of its constituent parts, fell within the scope of GATT Article I:1 as the regime established "rules and formalities in connection with importation". The fact that the licensing regime was a "formality in connection with importation" within the scope of Article I:1 was made clear by reference to Article VIII of GATT which was entitled "Fees and Formalities Connected with Importation and Exportation". Paragraph 4(c) of Article VIII explicitly listed licensing as a formality imposed in connection with importation.

V.53 The ACP third parties considered that, since the licensing regime fell within the scope of Article I:1 of GATT and was necessary for the EC to meet its Lomé Convention obligations, it was covered by the Lomé waiver. The licensing regime as a whole, and the Category B licences in particular, were the minimum necessary to preserve the historically favourable treatment of the ACP States' banana exports. Without the 30 per cent set aside for Category B operators, there would be insufficient incentives for operators to ship, import, ripen and market ACP bananas.

V.54 The hurricane licence provisions were also crucial to ensure the ACP States' continued access to the EC banana market and for the EC to meet its obligations and commitments which existed prior to the EC banana regime. Without the protection of legislation covering future hurricanes, the operating companies could not maintain their trading links with the ACP States that were vulnerable to hurricanes. To do so in such circumstances would be imprudent and irresponsible to the companies' shareholders. For both reasons, the hurricane licence provisions were required for the EC to meet its "no less favourable situation" obligation and, thus, fell within the scope of the Lomé waiver.

V.55 The ACP third parties noted that Article I:1 of GATT subsumed the national treatment obligation of Article III:4 of GATT by providing that:

Assuming, arguendo, that the licensing regime did not establish "rules and formalities in connection with importation" of bananas under GATT Article I:1, it was a law, regulation or requirement affecting the internal sale, offering for sale, purchase, transportation, distribution, or use of a good (i.e. an internal requirement within the scope of Article III:4 of GATT). Viewed as an internal requirement, all aspects of the licensing regime which were deemed to provide preferences to ACP imports were "advantages" that were not accorded to all Members. Thus, they were within the scope of Article I:1 and hence were within the scope of the Lomé waiver. In other words, the licensing regime was within the scope of Article I of GATT even if, as the second Banana panel ruled, the measures were internal measures rather than rules in connection with their importation.

Article XIII of GATT

V.56 The ACP third parties submitted that country-specific allocations for traditional ACP banana exports did not fall within the scope of Article XIII of GATT. These allocations were an integral part of the preferential treatment that the EC was required to provide by the Lomé Convention, which was saved by the Lomé waiver from inconsistency with Article I:1 of GATT. Article I of Protocol 5 to the Lomé Convention obligated the EC to ensure that:

The EC had chosen a reasonable mechanism to implement this obligation. It coupled preferential tariff treatment for traditional ACP exports with country-specific allocations at levels reflecting historical ACP export volumes. Where the allocated quantity exceeded the previous exports, this reflected investments made. This was confirmed by the higher quantities exported to the EC within a short time of the establishment of the allocations.

V.57 Not only were the country-specific allocations an integral part of the preferential treatment, they also served to limit the extent of the preferential treatment. By virtue of the Lomé waiver, the EC could have established a preferential regime for ACP bananas with virtually no limit. The EC did not do so. Instead, the EC limited the advantages accorded to traditional ACP bananas by capping preferences at certain quantities for each ACP State. By limiting the degree of GATT Article I:1 discrimination, the EC sought to fulfil the terms of the Lomé waiver. In the view of the ACP third parties, the measures introduced by the EC were the very minimum which it could have taken in order to meet its legal obligations.

V.58 Likewise, according to the ACP third parties, quantitative allocations for non-traditional ACP banana exports did not fall within the scope of Article XIII of GATT. They were an integral part of the preferential treatment required to fulfil the EC's obligations under the Lomé Convention, which was saved from possible inconsistency with Article I:1 of GATT by the Lomé waiver. The obligations of the EC under the Lomé Convention extended beyond merely preserving historical access. Article 168 combined with Article 169 obliged the EC to maintain preferences for ACP banana exports. This applied to all ACP bananas, whether traditional or non-traditional. It also applied to preferences in respect of quantitative restrictions. Article 167 of the Lomé Convention established a general obligation on the part of the EC to "secure effective additional advantages for ACP States' trade with the Community", by improving market access for ACP products and otherwise contributing to the growth of ACP trade. Article 335 required specific additional provisions and measures to enhance the economic development of the island ACP States.

V.59 Without the combination of preferential tariffs and a specific allocation for non-traditional ACP banana exports, these bananas would never reach the EC market because they were much more costly to produce and distribute than Latin American bananas. The only way the EC could fulfil its obligations under the Lomé Convention to secure effective additional advantages for the banana trade in ACP countries was to couple preferential tariff treatment with a specific quantitative allocation for non-traditional ACP exports. As with regard to traditional ACP exports, the Lomé waiver saved the preferential treatment provided to non-traditional ACP exports and required to fulfil the EC's obligations under the Lomé Convention, from inconsistency with Article I:1 of GATT.

V.60 According to Article 3.5(j) of the Licensing Agreement:

The EC's allocation for non-traditional ACP banana exports fulfilled the responsibilities established by this exhortation to provide special consideration to developing and least-developed countries which otherwise would be excluded from markets, such as the EC banana market.

V.61 The ACP third parties considered that the EC allocation of licences based on operator categories and activity functions was not inconsistent with Article XIII of GATT. Although the allocation of tariff quota licences was made on the basis of past marketing of bananas by the operator concerned, each licence could be used to purchase bananas from any source. Therefore, Regulation 404/93 did not discriminate among supplying countries.

Article X of GATT and the Licensing Agreement

V.62 The ACP third parties submitted that the Complaining parties' claims under Article X of GATT and the Licensing Agreement were improperly characterized as arguments directed at Regulation 404/93. They were of the view that the Complaining parties chose this approach since they recognized that any possible challenge would be under Article I:1 of GATT. Any inconsistency with Article I:1 of GATT would be covered by the Lomé waiver and they therefore sought to escape this restriction by recasting their allegations independently of Article I:1.

V.63 The ACP third parties argued that some differentiation with regard to the procedural requirements faced by importers of Latin American versus ACP bananas was to be expected given the "dictates" of the Lomé Convention. The Lomé Convention required the EC to distinguish between ACP and non-ACP imports in order to ensure ACP States' continued access to the EC market. It also required the EC to carefully monitor imports of Latin American bananas in order to ensure such continued access. Without monitoring, the producers and importers of the more competitive Latin American bananas would "upset" the EC market for ACP bananas.

V.64 The ACP third parties claimed that the Complaining parties had asserted under Article X:3(a) of GATT that the procedural requirements for importing bananas from their countries exceeded those faced by importers of ACP bananas. The correct measure to assess this claim was the extent of the additional burden faced by importers of bananas from the Complaining parties, which was not significant. This approach was followed by the panel of European Economic Community Restrictions on Imports of Dessert Apples - Complaint by Chile (BISD 36S/93). The panel found that the variations in the EC regulation raised by the complainant "... were minimal and did not in themselves establish a breach of Article X:3".

The GATS

V.65 ACP third parties submitted arguments that Mexico and the United States must be dismissed as Complaining parties because they had no trade interest (either as to goods or services) in this proceeding.

V.66 The ACP third parties claimed further that the United States' complaint had failed to produce any evidence that the provision of services, qua services by United States companies, was restricted, prejudiced, or discriminated against, by virtue of the measures adopted by the EC. The United States had confused the provision or offering of services with trade in goods. The United States could not point to any restrictions or discrimination in respect of the provision of shipping services, wholesaling services, distribution services, or ripening services. EC preferences for goods of a certain origin did not directly or indirectly affect the provision of services relating to those goods. If the Panel were to uphold the United States' complaint on these grounds, every waiver and every tariff quota, which had an impact on the movement of goods, would also constitute a restriction on the provision of services in relation to those goods.

TO CONTINUE WITH EC - REGIME FOR IMPORTATION OF BANANAS - COMPLAINT BY GUATEMALA AND HONDURAS

⁶⁹⁸ See "European Community - Tariff Treatment on Imports of Citrus Products from Certain Countries in the Mediterranean Region" (L/5776, 7 February 1985); "United Kingdom - Dollar Area Quotas", adopted on 30 July 1973 (BISD 20S/230).

⁶⁹⁹ "Report of the panel on Canada - Administration of the Foreign Investment Review Act", adopted 7 February 1984 (BISD 30S/140, para. 5.1).