V.67 The ACP third parties refuted the claim that the EC was, de facto, discriminating against US companies by virtue of preferences given to ACP bananas and thereby ACP service companies. The ACP third parties submitted that so-called US companies were substantially involved in the supply of ACP bananas to the EC and their distribution within the EC. US companies and Del Monte had a dominating position in supplying ACP African bananas to the EC market. Both Dole and Del Monte had, at present, substantial interests in banana production in Cameroon. In Côte d'Ivoire, approximately 30,000 to 35,000 tonnes of bananas were marketed by companies associated with Dole, Del Monte and Chiquita. In Jamaica, Dole controlled, at present, 35 per cent of the Jamaican producers' banana market company which held approximately 18 per cent of the UK market. In 1993, Chiquita exported some 25,000 tonnes of bananas from the Dominican Republic to the EC. On the whole, at present, almost 355,000 tonnes of EC and ACP bananas were supplied to the EC market by Chiquita, Dole and Del Monte. Besides Chiquita's ownership of Fyffes (at present, the largest supplier of ACP bananas to the EC) prior to the introduction of the EC banana regime, US companies had considerable control over the major import and distribution companies in France: Chiquita had a 50 per cent shareholding in Compagnie de Banane (which it had since increased to a 100 per cent shareholding) and Dole had a 33 per cent shareholding in Compagnie Fruitière. These two French companies accounted for the major proportion of ACP bananas imported into France from Africa.

V.68 The ACP third parties claimed that the very basis of the allegation that so-called "Latin American banana segment firms" handled less than 10 per cent of the distribution and related marketing of ACP/EC bananas into the EC prior to the institution of the EC banana regime was therefore factually incorrect and misleading.

V.69 However, even assuming that the trade was trade in services (which it was not): (i) the Complaining parties had failed to discuss, much less establish, the required elements; and (ii) a review of the facts demonstrated that Regulation 404/93 did not violate GATS Article II. To establish non-conformity with Article II of GATS, the Complaining parties had to, first, identify an affected service or service supplier. Second, the Complaining parties had to identify the treatment provided by the EC to that discrete service or service provider when it was supplied from, or in the territory of, an ACP country, through commercial presence of an ACP service supplier in the EC, or through the temporary presence of an ACP service supplier in the EC. Third, the Complaining parties had to prove that the EC accorded less favourable treatment to a like service or a supplier of a like service when that discrete service was supplied from, or in the territory of, a non-ACP country, through the commercial presence of a non-ACP service supplier, or through the temporary presence of a non-ACP service supplier in the EC. The Complaining parties had avoided a careful analysis of the requirements of the GATS. They had only used the argument that the word "affecting" in Article I:1 of GATS should be broadly interpreted as, they claimed, two previous panels had done with regard to Article III:4 of GATT. ⁷⁰⁰ The Complaining parties' attempt to base their entire argument on one word failed because a number of elements were needed to establish non-conformity with Article II of GATS and the Complaining parties had failed to prove any of them.

V.70 The ACP third parties argued that they subscribed to what they considered to be the common concept of wholesaling, which was the last stage before retail sale, i.e. the stage at which bulk shipments were stored in inventory and then broken-up into smaller lots for resale to retailers.

V.71 The ACP third parties argued that the United States had acknowledged that the EC regulations were neutral on their face and did not discriminate, de iure, on the basis of nationality of the service provider. The United States had claimed de facto discrimination, but offered no facts in support of this allegation. None of the Complaining parties identified the nature of the wholesaling services involved or the entity that provided them. They had suggested that third-country bananas imported by Category B operators could and would only be wholesaled by ACP providers of wholesale services. The experience of the regime had shown that this was incorrect. Most Latin American bananas, irrespective of whether imported with Category B licences, were "wholesaled" in the north European countries by the same wholesalers which marketed imported bananas with Category A licences. The mere fact that, historically, a certain group of wholesalers might have handled the last pre-retail stage of ACP banana distribution in the EC was irrelevant. The issue was whether the manner in which the EC distributed licences to import third-country bananas served to preclude non-ACP wholesalers from entering or expanding the provision of wholesale services. There were, however, no restrictions on wholesalers which traditionally imported Latin American bananas from offering these services in relation to ACP/EC bananas.

V.72 With regard to Category A licence allocations, the ACP third parties submitted that the United States had failed to point out that, while 66.5 per cent of these licences were granted to so-called Latin American banana companies, the balance of 30 per cent was given to any company which imported EC or ACP bananas. There was no restriction whatsoever on so-called Latin American companies importing EC and ACP bananas. Dole and Del Monte significantly benefited from this arrangement. On the other hand, access to 66.5 per cent of the licences was restricted to those with an historic involvement in marketing third-country bananas.

V.73 With regard to export certificates, there appeared to be an attempt by the United States to suggest that nationality or categorisation of a company would confer on it benefits of exemptions from the export certificate requirement. This was incorrect. Any company, whether of EC, United States or ACP nationality, which had a Category A licence was subject in the relevant Latin American countries to the possible requirement of export certificates. Equally, any company, regardless of nationality or categorisation, which wished to utilize Category B licences in the relevant Latin American countries was exempt from the export certificate requirement. Chiquita, Dole, and Del Monte possessed substantial quantities of Category B licences and, in each of case, these companies were exempted from the export certificate requirement when importing into the EC using Category B licences.

V.74 With regard to hurricane licences, these licences were effectively replacement licences for the shortfall from ACP or EC origin when production was destroyed by hurricanes. Licences were issued essentially to the producer organizations and not to operators and certainly not to operators on the basis of their nationality.

V.75 In the view of the ACP third parties, Ecuador's argument with regard to the rental of seagoing vessels with crew was fundamentally flawed. Neither the EC nor any other Member had any MFN, national treatment or market access obligations as to any maritime transport service since the legal conditions set out in the GATS "Annex on negotiations on Maritime Transport Services" had not yet been fulfilled. Accordingly, the Panel should dismiss this claim.

Conclusion

V.76 In summary, the ACP third parties requested the Panel to find that:

CANADA

V.77 Canada submitted that it had a substantial interest in several legal issues relating to the interpretation of the GATT and the GATS which had been raised by the parties to the dispute. The first was the relationship between the General Agreement on Tariffs and Trade 1994 and other Multilateral Agreements on Trade in Goods, and the General Agreement on Trade in Services. The second was the effect to be given to a waiver under Article XXV of GATT and the Understanding in Respect of Waivers of Obligations under the General Agreement on Tariffs and Trade 1994.

The relationship between trade in goods and trade in services

V.78 Canada stated that its interest in the case stemmed from the fact that it was the first opportunity for a WTO dispute settlement panel to deal with the interrelationship between treatment of imported products under GATT and the treatment of service suppliers under GATS. The Panel's consideration of the relationship between rights and obligations arising out of WTO agreements relating to trade in goods and rights and obligations arising out of the GATS with respect to measures affecting trade in services was thus of significance for Canada as a party to the WTO agreements. Previous GATT 1947 panels had clearly indicated that GATT applied not only to the importation of goods but also to internal terms and conditions attached to the distribution and sale of products which might have adversely modified the conditions of competition between imported goods and domestic goods within the internal, domestic market. One of the primary reasons for reaching this conclusion was the explicit language of GATT Article III:4, the first sentence of which stated that:

V.79 There was a well-developed line of cases which considered the application of GATT disciplines and the consistency with GATT disciplines of internal laws or practices in terms of whether such measures accorded national treatment to imported products. ⁷⁰¹ Canada considered that it was noteworthy that a number of these cases specifically considered the issue in the context of distribution measures. In their submissions in this case, Ecuador, the United States and Mexico had specifically raised distribution issues as being a contravention of GATS in addition to being a contravention of GATT.

V.80 In Canada's view, any consideration of the GATS implications of such measures had to be assessed in the light of what effect, if any, the result would have for the interpretation of GATT, the relationship between the two agreements and the interpretation of the WTO agreements as a whole.

The Lomé waiver

V.81 Canada also expressed its interest in the dispute as it, in Canada's view, raised a unique opportunity to consider whether measures inconsistent with a waiver granted under GATT were "justiciable" in a WTO dispute settlement and whether measures arising from such a waiver that caused nullification or impairment were "justiciable". Canada noted that the determination of these questions may well have implications beyond the facts of the particular dispute.

V.82 The Lomé waiver explicitly noted that it was not to "... preclude the right of affected contracting parties to have recourse to Articles XXII and XXIII of the General Agreement". Past GATT panels had considered whether a measure was or was not consistent with a waiver granted by the CONTRACTING PARTIES. ⁷⁰² In addition, Canada noted that paragraph 3 of the "Understanding in Respect of Waivers of Obligations under the GATT 1994" provided that a Member considering that a benefit accruing to it under the GATT was being nullified or impaired as a result of (a) the failure of the Member to whom the waiver was granted to observe the terms and conditions of the waiver; or (b) the application of a measure consistent with the waiver, may invoke the dispute settlement provisions of Article XXIII of GATT. Thus, the issue of whether or not a measure was consistent with a waiver was a matter that could be properly submitted to a panel under both GATT practice and now under WTO rules.

V.83 In Canada's view, there may be some question as to whether or not the "Understanding in Respect of Waivers of Obligations under the GATT 1994" was intended to codify the existing practice or to modify it with respect to the ability to assert claims with respect to violations of the GATT. In the United States Sugar Panel the panel concluded that while a waiver did not necessarily indicate a decision by the contracting parties that a measure consistent with the waiver was inconsistent with the General Agreement, both the substantive obligation and the relief provided under Article XXV:5 in the form of a waiver were part of the GATT and thus a measure consistent with the waiver could not constitute a failure by a Member to carry out its obligations under the GATT within the meaning of Article XXIII:1(a). ⁷⁰³ In that case, the claim that the measure in question was a violation of the Agreement was rejected.

V.84 In the case referred to in the previous paragraph, the panel had then considered whether a measure consistent with a waiver could constitute nullification and impairment of benefits accruing to a Member within the meaning of Article XXIII:1(b) of GATT (i.e. "non-violation" nullification and impairment). The panel concluded that the fact that the measures found to be inconsistent with the GATT were consistent with the waiver did not preclude a claim being brought pursuant to Article XXIII:1(b), but that in such a case the complainant bore the burden of demonstrating such nullification or impairment resulting from the application of the measure. ⁷⁰⁴

V.85 The text of the "Understanding in Respect of Waivers of Obligations under the GATT 1994" did not distinguish between violation and non-violation claims pursuant to Article XXIII. Canada questioned, therefore, whether it should be interpreted as only including non-violation claims or whether the drafters had intended to modify existing practice. The drafters would have been familiar with the existing case law and thus it would not be unreasonable to conclude that the lack of language explicitly distinguishing between violation and non-violation cases indicated an intention to modify the law. Before so concluding, however, Canada submitted that the Panel should consider whether such a significant result could be justified through interpretative inference. Canada further asked for reflection on whether in cases where the drafters were aware of the law and practice and intended to modify that law and practice, it was reasonable to expect that such intention be clearly indicated by explicit language in order to avoid an interpretation that the text was not intended to be declaratory of the previous law. Further, where the previous law was embodied in the text of an agreement, relatively minor wording differences may carry significant interpretative weight, but should this also be the case where the law was embodied in such things as decisions of the parties and panel findings? In Canada's view, in the latter case there should, perhaps, be a presumption that if the matter could not be resolved based upon the explicit language of the text, the text should be regarded as codifying the existing law and practice.

Conclusion

V.86 Canada urged the Panel to give serious consideration to the various systemic issues raised by the case and, in particular, the issues relating to the interpretation of the interrelationship of the various WTO agreements, and the appropriate interpretation to be given to the scope of the "Understanding in Respect of Waivers of Obligations under the GATT 1994".

COLOMBIA, COSTA RICA, NICARAGUA AND VENEZUELA

Introduction

V.87 Colombia, Costa Rica, Nicaragua and Venezuela recalled that during the Uruguay Round, the EC established a tariff quota for a quantity of bananas and allocated it among supplying countries. The allocation followed long negotiations between the EC and the principal banana supplying countries. During the negotiations, the EC had offered a tariff quota allocation to all countries interested in the EC banana market in accordance with the principles set out in Article XIII of GATT. The negotiations resulted in a market access commitment in the schedule of concessions of the EC, including an allocation of a tariff quota to all Members. This concession was based on the Banana Framework Agreement ("BFA") negotiated between the EC and countries that figured among the most important suppliers of bananas to the EC, namely Colombia, Costa Rica, Nicaragua and Venezuela. In the complaint on the EC's regime for the importation, sale and distribution of bananas, Ecuador, Guatemala, Honduras, Mexico and the United States challenged, inter alia, the legality of those parts of the EC's banana regime that implemented the BFA. In the view of Colombia, Costa Rica, Nicaragua and Venezuela, their main complaint was not that the EC banana regime was inconsistent with the market access commitment the EC had accepted in respect of bananas, but that the regime was inconsistent with other, more general obligations that all Members had accepted in respect of all products. The complaint therefore raised the fundamental question of whether a specific market access commitment for agricultural products of the type included in the schedules of many Members was lex specialis in relation to the more general obligations assumed under the WTO agreements, or whether such a commitment could be challenged in the light of such general rules.

V.88 Colombia, Costa Rica, Nicaragua and Venezuela noted their interest in the dispute as both signatories of the BFA and exporters of agricultural products interested in the stability and balance of the legal framework governing trade in agriculture. The principal legal argument of Colombia, Costa Rica, Nicaragua and Venezuela was that it was legally incorrect to examine those parts of the EC banana import regime that reflected the EC market access commitment on bananas in the light of the GATT because, under the provisions of the Agreement on Agriculture, market access commitments had to be carried out as specified in the schedule of the Member and these provisions overrode those of the GATT. Subsidiarily, they also argued that the tariff quota allocation and its administration was consistent with the GATT because the provisions of the BFA on the allocation of the banana tariff quota in the EC Schedule constituted an agreement between the EC and all banana supplying countries Members of the WTO within the meaning of Article XIII:2(d) and because the provisions of the BFA on the allocation of export licences did not affect trade levels or shares but concerned the distribution of financial benefits that did not accrue under the GATT.

Principal legal arguments

V.89 Colombia, Costa Rica, Nicaragua and Venezuela recalled that the Uruguay Round produced a fundamental systemic change in the field of agriculture - from a situation of many non-tariff measures to a tariff-only regime. Two principles had governed the negotiations: first, all non-tariff measures had to be transformed into tariffs and, second, the market access opportunities that were already available prior to the conclusion of the Round had to be maintained and certain minimum market access opportunities had to be provided. Many Members made commitments on market access opportunities in the form of tariff quotas allocated to specific countries, and many had included in their schedules commitments on the administration of the tariff quotas. In the view of Colombia, Costa Rica, Nicaragua and Venezuela, the Agreement on Agriculture acknowledged that a market access concession may relate not only to a tariff concession but also to commitments governing the implementation and administration of tariff quotas. This followed from Article 1(g) of the Agreement on Agriculture, which defined the term "market access concessions" as including "... all market access commitments undertaken pursuant to this Agreement" and Article 4.1, which stated that "[m]arket access concessions contained in Schedules relate to bindings and reductions of tariffs, and to other market access commitments as specified therein".

V.90 Colombia, Costa Rica, Nicaragua and Venezuela argued that the negotiators of the Agreement on Agriculture had agreed that any tariff quota, including the applicable tariff rate and any other conditions related to the tariff quota, should be specified in Section I-B of Part I of the schedule of each of the Members concerned. The EC had included in Section I-B of Part I of its Schedule LXXX the following market access commitment: "Initial and final quota quantity and in-quota tariff rate: 2,200,000 tonnes - ECU 75 per tonne subject to the terms and conditions as indicated in the Annex". This Annex set out the BFA. The EC's market access commitments thus comprised the provisions on tariff quota allocation and administration set out in the BFA and were part of the EC's market access commitments under the Agreement on Agriculture.

V.91 Colombia, Costa Rica, Nicaragua and Venezuela argued that in accordance with the general interpretative note to Annex 1A of the WTO Agreement ⁷⁰⁵ and Article 21 of the Agreement on Agriculture, the Agreement on Agriculture overrode the GATT. In their view, these provisions made it clear, that the provisions of the GATT applied only to the extent that the Agreement on Agriculture did not provide otherwise. Thus, the drafters of the Agreement on Agriculture had clearly expressed their intention that a commitment on subsidies or market access contained in a Member's schedule was lex specialis in relation to the more general obligations under WTO agreements other than the Agreement on Agriculture.

V.92 Colombia, Costa Rica, Nicaragua and Venezuela noted that from a strictly legal perspective, the market access commitments as well as the export subsidy commitments established in each Member's schedule, were an integral part of the GATT as modified by the Agreement on Agriculture. Articles 1, 3, 4, 6, 7, 8 and 9 thereof permitted the qualification of general obligations through scheduled commitments. In their view, these provisions modified Article II:1(b) of GATT. They argued that it would thus be legally incorrect and contrary to the purpose and objective of the Agreement on Agriculture to examine those parts of the EC banana import regime that reflected the EC market access commitment on bananas in the light of GATT.

V.93 They argued, furthermore, that unlike the GATT and the GATS that established the obligation to accord treatment no less favourable than that provided in the schedule, Article 4.1 of the Agreement on Agriculture specifically required Members to carry out their market access commitments "as specified in their schedules", not as provided for under the GATT. Consequently, Colombia, Costa Rica, Nicaragua and Venezuela argued that the question the Panel needed to examine was whether the EC banana regime was consistent with its market access commitment on bananas, not whether it was consistent with the GATT.

V.94 Colombia, Costa Rica, Nicaragua and Venezuela submitted that unlike the GATT, the Agreement on Agriculture permitted the qualification of general obligations through scheduled commitments. The tariff concessions made under the GATT 1947 resulted in most instances from protocols accepted only by the contracting parties that made the concessions. Since a treaty could not create either obligations or rights for non-signatory States without their consent, ⁷⁰⁶ these GATT 1947 tariff protocols could only be used to assume obligations in addition to those set out under the GATT 1947 - not to diminish the rights of third contracting parties under that Agreement. Moreover, Article II:1(b) merely permitted a Member to make a tariff concession in its schedule "subject to the terms, conditions or qualifications set forth in that schedule", which made clear that it was only the tariff concession and not the obligations under the GATT 1994 that could be qualified through schedule provisions. For these reasons, Colombia, Costa Rica, Nicaragua and Venezuela argued that the 1989 panel report on United States - Restrictions on Imports of Sugar ⁷⁰⁷ correctly rejected the contention of the United States that a note in its Schedule in which it had reserved the right to impose quota limitations on imports of sugar justified import restrictions on sugar inconsistent with Article XI of GATT 1947. The Complaining parties' reference to this panel was not pertinent.

V.95 In contrast, they argued, the market access commitments under the Agreement on Agriculture were part of the WTO agreements which all Members, including the Complaining parties, had accepted - there were no non-signatory, third Members in respect of such market access commitments. Furthermore, the Agreement on Agriculture was based on a legal concept fundamentally different from that of the GATT, i.e. the Agreement on Agriculture regulated the relationship between it and the schedule commitments in a different manner. According to Colombia, Costa Rica, Nicaragua and Venezuela, this was reflected by the fact that the GATT was essentially a framework agreement for the incorporation of the results of tariff negotiations into schedules while the Agreement on Agriculture and the scheduled commitments negotiated under it constituted together the result of a negotiation on the first stage of agricultural reform.

V.96 Colombia, Costa Rica, Nicaragua and Venezuela submitted that the participants in the Uruguay Round were therefore permitted to use the process of scheduling commitments on particular products to both add to and qualify obligations that they would have had under the Agreement on Agriculture in the absence of scheduled commitments for these specific products. Thus, according to Article 8 of the Agreement on Agriculture, the general prohibition of export subsidies did not apply to a Member that accorded a subsidy in accordance "with commitments as specified in that Member's Schedule" -a qualification of general obligations regarding export subsidies. The same applied, in their view, to the market access commitments assumed in addition to a tariff concession. These commitments, too, were, according to Article 4.1 of the Agreement on Agriculture, "as specified" in each Member's schedule irrespective of whether they corresponded to obligations set out in WTO agreements other than the Agreement on Agriculture. The words "as specified" implied that the "other market access commitments" - meant and understood to relate to country-specific tariff quota allocations - had to be carried out exactly as set out in the schedules.

V.97 Colombia, Costa Rica, Nicaragua and Venezuela considered that while one may regret that the drafters of the Agreement on Agriculture decided to permit Members to include in their schedules specific provisions that overrode or qualified provisions in WTO agreements establishing general obligations, the role of the Panel was not to assess the manner by which the drafters of the Agreement on Agriculture expressed their intention. What was important for the Panel was that the drafters of the Agreement on Agriculture had clearly expressed their intention that a commitment on subsidies or market access contained in a Member's schedule was lex specialis in relation to more general obligations under WTO agreements other than the Agreement on Agriculture.

V.98 Colombia, Costa Rica, Nicaragua and Venezuela submitted that the market access commitments made under the Agreement on Agriculture constituted in large part settlements of disputes on: the interpretation and application of the provisions of GATT 1947 that had arisen prior to the Uruguay Round; disagreements in the course of the Uruguay Round about the adherence to the guidelines for negotiations; and potential future disputes about the precise implementation of the market access commitments. The provisions relating to the BFA in the EC's market access commitments had precisely these functions: they were not designed to circumvent GATT provisions. If the Panel were to decide to review the BFA provisions in the light of the provisions of the GATT, it would, in their view, effectively decide that all market access commitments could be subject to such a review and would therefore reopen the "Pandora's Box" of endless disputes that the negotiators of the Agreement on Agriculture had succeeded closing after long and arduous negotiations. Each of the commitments that governed the allocation and administration of the tariff quotas resulted from a negotiation in which not only the Member that assumed the commitment, but also those Members that benefited from them, had made compromises. In many cases, the beneficiary Members had agreed to a proposed tariff quota level on the condition that issues regarding the allocation and administration of the quota were clearly settled. The provisions of Article 4.1 of the Agreement on Agriculture made clear that in such cases both the tariff concession (that is the tariff quota level and in-quota tariff level) and the related market access commitments (that is the allocation of the quota among countries) had the same legal status.

V.99 Furthermore, under the WTO agreements, the legal status of a market access commitment did not depend on its conformity with the criteria and procedures used to negotiate it. The proposal to include in the Agreement on Agriculture a provision with that effect was specifically rejected. The legal status of market access commitments inserted in a schedule was governed by the same rules that governed the legally binding nature of all other provisions of the WTO Agreement: i.e. they were accepted and ratified as a single undertaking ⁷⁰⁸ and with no reservations, except as otherwise provided in the Multilateral Trade Agreements. ⁷⁰⁹ The law did not distinguish between treaty provisions that were inserted at an early stage of the negotiations and those which were inserted in the final stage. It followed from the above that any shortcomings that may have arisen during the negotiating process could have been corrected only during the negotiating process. Neither WTO law nor general international law permitted a State to accept the WTO Agreement and subsequently invoke a failure to follow the procedures for its negotiation as grounds for its invalidity.

V.100 In reference to Guatemala's claims, Colombia, Costa Rica, Nicaragua and Venezuela submitted that whatever rights Guatemala had during the Uruguay Round negotiations such as the right to raise the issue of alleged shortcomings in the verification process in the Trade Negotiations Committee or the right to decide not to join the WTO, were lost as a result of its acceptance of the WTO Agreement because that acceptance could not be made subject to a reservation concerning the EC's Schedule. ⁷¹⁰ Given the fact that Guatemala could not at the same time be a Member and make a valid reservation with respect to the EC market access commitment, its letter to the Director-General could have only one of the following legal consequences: either Guatemala's acceptance of the WTO Agreement was null and void and Guatemala was not a Member of the WTO or Guatemala's reservation was null and void because of Article XVI:5 of the WTO Agreement.

V.101 Colombia, Costa Rica, Nicaragua and Venezuela argued that if the Panel were to decide to review the market access commitments in the light of the provisions of the GATT, it would review the legal status of only that part of the negotiated compromise which was beneficial to the exporting Members, not the part that was beneficial to the importing Member. The Panel would then potentially create a legal situation under which Members would be deprived of the security of the market access benefits they had negotiated under the Agreement on Agriculture without having any possibility to change the level of tariff concessions they had accepted to obtain that security. This would, in the view of Colombia, Costa Rica, Nicaragua and Venezuela, produce an enormous imbalance in the rights and obligations under the Agreement on Agriculture. Not only would it be inconsistent with the wording of the provisions of Agreement on Agriculture but also contrary to their purpose and objective.

Subsidiary legal arguments

V.102 Colombia, Costa Rica, Nicaragua and Venezuela argued that, although the principles on non-discrimination set out in Article XIII of GATT were difficult to apply in the case of an allocation of tariff quota shares among supplying countries, the allocation of the banana tariff quota in the EC Schedule was consistent with Article XIII since it reflected an allocation agreed by all Members, including all banana supplying country Members, and met the requirements for a unilateral allocation. Although ideally the allocation of a tariff quota among supplying countries should result in a distribution of trade equivalent to the distribution that would prevail in the absence of the quota, that distribution was never known and the introductory sentence of Article XIII:2 therefore merely obliged Members to aim "as closely as possible" at that distribution. According to Article XIII:2(d), Members may base the allocation on the shares during "a previous representative period ... due account being taken of any special factors which may ... be affecting the trade in the product ...". Since it was difficult to determine which previous period was "representative" and which "special factors" called for a modification of the allotted share, this method was difficult, if not impossible to apply. The example was given of a Member which transformed an import prohibition into a tariff quota allocated among supplying countries. In that case an allocation based on a previous representative period was not possible.

V.103 According to Colombia, Costa Rica, Nicaragua and Venezuela, these inherent difficulties in allocating quotas among supplying countries led the drafters of the GATT to decide that the preferred method of allocating import quota shares would be an agreement with the supplying countries. Article XIII:2(d) therefore provided that:

An allotment in accordance with a previous representative period should be used according to Article XIII:2(d), second sentence, only when an allocation by agreement was "not reasonably practicable".

V.104 Colombia, Costa Rica, Nicaragua and Venezuela argued that in the case at hand, the provisions on the allocation and administration of quotas of the BFA had not only been agreed among the signatories of the BFA but had been formally accepted by all Members. They therefore constituted an agreement on the allocation of tariff quota shares within the meaning of Article XIII:2(d). Colombia, Costa Rica, Nicaragua and Venezuela noted that the allocation of the tariff quota shares, while formally accepted by all Members, did not satisfy all of them. Each banana supplying country buttressed with statistics had claimed to be entitled to a greater share of the tariff quota. Thus, neither the signatories of the BFA nor any of the other countries had come out of the negotiations fully satisfied but the advantage of making the tariff quota allocation part of an agreement accepted by all Members was that legal security and predictability of conditions of trade could be created for all of them. The law did not distinguish between treaty provisions that were accepted willingly and those that were accepted reluctantly.

V.105 Colombia, Costa Rica, Nicaragua and Venezuela considered that, even if the allocation of shares set out in the EC Schedule were not regarded as an agreed allocation within the meaning of Article XIII of GATT 1994, it would nevertheless fall within the range of discretion which this provision accorded to importing Members that allotted quota tariff shares on the basis of a unilateral decision. Article XIII:2(d) stated that, if an allocation by agreement was not reasonably practicable, the Member shall allot to the Members:

Article XIII:4 stated that:

Under these two provisions, it was thus up to the EC to initially select a previous representative period, appraise any special factors affecting trade in bananas, allot shares to the substantially interested Members accordingly and to then stand ready to consult on its decisions with those Members. According to Colombia, Costa Rica, Nicaragua and Venezuela, the EC selected, consistent with recognized GATT 1947 practice, ⁷¹¹ an appropriate previous representative period, i.e. the three previous years with normal trade flows. In their view, the EC had chosen from among several legitimate and reasonable options the period of 1989-1991 because it was the most recent period with reliable data on exports and imports, and because during that period the speculative distortions in trade patterns due to the expectation of a unified EC banana market had not yet taken place. Moreover, that period corresponded to the period the EC had chosen for the establishment of the total tariff quota. It was true that the period of 1989-1991 was not a period free of restrictions and therefore did not give a precise indication of the shares that could reasonably be expected in the absence of restrictions, ⁷¹² but a comparison of the distribution of imports into the whole of the EC during 1989-1991 with the distribution of imports into the six EC member States that did not maintain restrictions during that period (see the following table) showed the differences were only very small. This was a further indication that the reference period chosen was a reasonable one.

V.106 Furthermore, Colombia, Costa Rica, Nicaragua and Venezuela claimed that the EC had offered tariff quota allocations to all countries having a substantial supplying interest. GATT did not define the term "substantial interest"; it merely stated in the context of the withdrawal or modification of a concession that these terms were meant to cover only those Members which had "a significant share in the market". ⁷¹³ This had been interpreted in practice under GATT 1947 as referring to contracting parties that could "absorb at least 10 per cent of the market". ⁷¹⁴ The only GATT contracting parties that qualified at the time of the allotment of the tariff quota shares as contracting parties with a trade share of more than 10 per cent were Colombia and Costa Rica. Thus, in the view of Colombia, Costa Rica, Nicaragua and Venezuela, the EC would have fulfilled its obligations under Article XIII if it had determined its tariff quota allotments only in consultation with these two countries. Nevertheless, the EC had offered tariff quota allocations not only to Colombia and Costa Rica but to all countries that had expressed an interest in supplying the EC banana market, including all complainants in the GATT 1947 panel proceedings on the EC banana regimes, and several non-contracting parties to GATT 1947. The table below showed that the country quotas offered to the other interested suppliers corresponded, with the exception of Venezuela, approximately to the share they had in the EC market during the reference period chosen.

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

⁷⁰⁰ "Italian Discrimination against Imported Agricultural Machinery", BISD 7S/60, and "United States - Section 337 of the Tariff Act of 1930", BISD 36S/345.

⁷⁰¹ See for example: "Italian Discrimination against Imported Agricultural Machinery", adopted 23 October 1958, BISD 7S/60; "Canada - Administration of Foreign Investment Review Act", adopted 7 February 1984, BISD 30S/140; "Canada - Import, Distribution and Sale of Certain Alcoholic Drinks by Canadian Provincial Marketing Agencies", adopted 22 March 1988, BISD 35S/37; "United States - Section 337 of the Tariff Act of 1930", adopted 7 November 1989, BISD 36S/345; "Thailand - Restrictions on Importation of and Internal Taxes on Cigarettes", adopted 7 November 1990, BISD 37S/200; "Canada - Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies", adopted 18 February 1992, BISD 39S/27; "United States - Measures Affecting Alcoholic Drinks and Malt Beverages", adopted 19 June 1992, BISD 39S/206.

⁷⁰² For example: "United States - Restrictions on the Import of Sugar and Sugar-Containing Products Applied Under the 1955 Waiver and Under the Headnote to the Schedule of Tariff Concessions", adopted on 7 November 1990, BISD 37S/228.

⁷⁰³ Idem, para. 5.18, p.260.

⁷⁰⁴ Idem, para. 5.20, p.261.

⁷⁰⁵ "In the event of a conflict between the provisions of the [GATT 1994] and the provisions of another agreement in Annex 1A to the [WTO Agreement], the provisions of the other agreement shall prevail to the extent of the conflict."

⁷⁰⁶ See Article 34 of the Vienna Convention on the Law of Treaties.

⁷⁰⁷ BISD 36S/342-343.

⁷⁰⁸ WTO Agreement, Article II.

⁷⁰⁹ Idem, Article XVI:5.

⁷¹⁰ Idem.

⁷¹¹ See the panel reports in BISD 27S/116 and 36S/130-131.

⁷¹² Colombia, Costa Rica, Nicaragua and Venezuela noted that six of the twelve member States had restrictive regimes in place during that period, potentially affecting the distribution of imports among supplying countries.

⁷¹³ See para. 7 of the Note Ad Article XXVIII.

⁷¹⁴ See the GATT Secretariat description of this practice in document MTN.GNG/NG7/W/9.