World Trade
Organization
|
WT/DS27/ARB
9 April 1999
(99-1434)
Original: English |
EUROPEAN COMMUNITIES - REGIME FOR THE
IMPORTATION,
SALE
AND DISTRIBUTION OF BANANAS
- RECOURSE TO
ARBITRATION BY THE
EUROPEAN COMMUNITIES
UNDER ARTICLE 22.6 OF THE DSU -
DECISION BY THE ARBITRATORS
(Continuation) Click here to go to the Table
of Contents
VI. PARAMETERS FOR THE CALCULATION OF THE LEVEL OF NULLIFICATION OR IMPAIRMENT
6.1 In its initial submission, the United States recalls that Article XXIII of GATT 1994 provides for a level of suspension that is "appropriate in the circumstances". It also argues that the evaluation of equivalence should be reasonable and take into account that suspension is an incentive for prompt compliance, that precision in measuring trade damage is not required and that both direct and indirect trade damage should be taken into account.
6.2 In this section we address from a general perspective the parameters and criteria that, in our view, should apply when matching the level of the suspension of concessions to be authorized by the DSB with the level of nullification or impairment resulting from WTO-inconsistent measures.
A. GENERAL CONSIDERATIONS
6.3 In this regard, we first recall the overall objective of compensation or the suspension of concessions or other obligations as described in Article 22.1:
"Compensation and the suspension of concession or other obligations are temporary measures available in the event that the recommendations or rulings are not implemented within a reasonable period of time. However, neither compensation nor the suspension of concessions or other obligations is preferred to full implementation of a recommendation to bring a measure into conformity with the covered agreements. Compensation is voluntary and, if granted, shall be consistent with the covered agreements."
Accordingly, the authorization to suspend concessions or other obligations is a temporary measure pending full implementation by the Member concerned. We agree with the United States that this temporary nature indicates that it is the purpose of countermeasures to
induce compliance. But this purpose does not mean that the DSB should grant authorization to suspend concessions beyond what is
equivalent to the level of nullification or impairment. In our view, there is nothing in Article 22.1 of the DSU, let alone in paragraphs 4 and 7 of Article 22, that could be read as a justification for counter-measures of a
punitive nature.
6.4 We are mindful of the fact that the working party on Netherlands Action under Article XXIII:2 to Suspend Obligations to the United States57 considered whether the proposed action was
"appropriate" and that the Working Party only had "regard" to the equivalence of the impairment suffered:
"2. The Working Party was instructed by the CONTRACTING PARTIES to investigate the appropriateness of the measure which the Netherlands Government proposed to take, having regard to the equivalence to the impairment suffered by the Netherlands as a result of the United States restrictions.
3. The Working Party felt that the appropriateness of the measure envisaged by the Netherlands Government should be considered from two points of view: in the first place, whether in the circumstances, the measure proposed was appropriate in character, and secondly, whether the extent of the quantitative restriction proposed by the Netherlands Government was reasonable, having regard to the impairment suffered." (emphasis added).
In our view, in light of the explicit reference in paragraphs 4 and 7 of Article 22 of the DSU to the need to ensure the
equivalence between the level of proposed suspension and the level of the nullification or impairment suffered, the standard of
appropriateness applied by the 1952 working party has lost its significance as a benchmark for the authorization of the suspension of concessions under the DSU.
6.5 However, we note that the ordinary meaning of "appropriate", connoting "specially suitable, proper, fitting, attached or belonging to"58 , suggests a certain degree of relation between the level of the proposed suspension and the level of nullification or impairment, where as we stated above, the ordinary meaning of "equivalent" implies a higher degree of correspondence, identity or stricter balance between the level of the proposed suspension and the level of nullification or impairment. Therefore, we conclude that the benchmark of equivalence reflects a stricter standard of review for Arbitrators acting pursuant to Article 22.7 of the WTO's DSU than the degree of scrutiny that the standard of
appropriateness, as applied under the GATT of 1947 would have suggested.
B. THE ISSUE OF "INDIRECT" BENEFITS
6.6 The next question we address is the notion of direct or indirect benefits accruing under the agreements covered by the WTO whose nullification or impairment may give rise to an entitlement to obtain compensation or the authorization to suspend concessions or other obligations. This is of particular relevance in this case as the United States argues,
inter alia, that US exports to Latin America (e.g. fertilizers) used in the production of bananas that would be exported to the European Communities under a WTO-consistent regime should be counted in setting the level of suspension.
6.7 The relevant part of Article XXIII:1 of GATT 1994 reads:
"If a Member should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired �" (emphasis added).
While Article XXIII:1 of GATS does not contain analogous language, Article 3.3 of the DSU provides:
"The prompt settlement of situations in which a Member considers that any benefit accruing to it directly or indirectly under the covered agreements are being impaired by measures taken by another Member is essential to the effective functioning of the WTO and the maintenance of a proper balance between the rights and obligations of Members." (emphasis added).
6.8 We note that, inter alia, from the wording of Article XXIII:1 of GATT and Article 3.3 of the DSU, the United States assumes that any nullification or impairment of any benefit that it considers to directly or indirectly accrue to it under the GATT or the GATS may be taken into account in calculating the level of nullification or impairment for purposes of paragraphs 6 and 7 of Article 22 of the DSU. The European Communities contends that especially with respect to trade in goods the nullification or impairment suffered by the United States can only be negligible
or nil since there is no actual trade and little prospect for potential trade in bananas between the United States and the European Communities. The United States substantiates its reasoning at least in part with our findings in the original dispute concerning the question whether the United States had a "legal interest" to launch a complaint against the EC's previous regime based on the EC's obligations under the GATT. Therefore, we first recall our findings on this issue and then discuss what inferences may be drawn therefrom for the notion of
direct or indirect benefits accruing under the GATT and the GATS.
6.9 In the original panel proceeding we held "that under the DSU the United States has a right to advance the claims that it had raised in this case."59 We recall the EC's argument in the original dispute that if a Member not suffering nullification or impairment of WTO benefits in respect of bananas were allowed to raise a claim under the GATT, that Member would not have an effective remedy under Article 22 of the DSU.60 We also note the complainants' argument61 in the original dispute that Article 3.8 of the DSU presupposes a finding of infringement prior to a consideration of the nullification or impairment issue, suggesting that even if no compensation were due, an infringement finding could be made. We agree. Article XXIII:1 of GATT 1994 and Article 3.3 of the DSU do not establish a procedural requirement. These provisions concern the initiation of a WTO dispute settlement proceeding where a Member considers benefits directly or indirectly accruing to it have been nullified or impaired. Such an initial decision on whether or not to raise a complaint is necessarily the result of a subjective and strategic consideration from the individual perspective of a Member. However, a decision on whether the assertion of nullification or impairment by an individual Member was warranted and justified in light of WTO law is a different decision, taken by a panel or the Appellate Body from the objective benchmark of the agreements covered by the WTO.
6.10 The presumption of nullification or impairment in the case of an infringement of a GATT provision as set forth by Article 3.8 of the DSU cannot in and of itself be taken simultaneously as
evidence proving a particular level of nullification or impairment allegedly suffered by a Member requesting authorization to suspend concessions under Article 22 of the DSU at a much later stage of the WTO dispute settlement system. The review of the level of nullification or impairment by Arbitrators from the objective benchmark foreseen by Article 22 of the DSU, is a separate process that is independent from the finding of infringements of WTO rules by a panel or the Appellate Body. As a result, a Member's potential interests in trade in goods or services and its interest in a determination of rights and obligations under the WTO Agreements are each sufficient to establish a right to pursue a WTO dispute settlement proceeding. However, a Member's legal interest in compliance by other Members does not, in our view, automatically imply that it is entitled to obtain authorization to suspend concessions under Article 22 of the DSU.
6.11 Over the last decades of GATT dispute settlement practice, it has become a truism of GATT law that lack of
actual trade cannot be determinative for a finding that no violation of a provision occurred because it cannot be excluded that the absence of trade is the result of an illegal measure. As discussed by the original panel reports62 , in past dispute settlement practice the non-discrimination provisions have been interpreted to protect "competitive opportunities"63 or the "effective equality of opportunities"64 for foreign products which may be undermined by "any laws or regulations which might adversely modify the conditions of competition between domestic and imported products".65 All these past panel reports concerned the alleged nullification or impairment of potential trade opportunities under the national treatment clause. Also the
US - Superfund case66 , from which the wording of Article 3.8 of the DSU establishing the presumption of nullification or impairment in case of an infringement of GATT is drawn, concerned the alleged violation of Article III of GATT.
Therefore, the notion underlying the protection of potential trade opportunities is potential trade between the complaining and the respondent party. Likewise, in the case of an alleged violation of the MFN treatment clause, a dispute would involve trade between the complaining party or a third country, on the one hand, and the respondent party, on the other.
6.12 We are of the view that the benchmark for the calculation of nullification or impairment of US trade flows should be losses in US exports of goods to the European Communities and losses by US service suppliers in services supply in or to the European Communities. However, we are of the opinion that losses of US exports in goods or services
between the US and third countries do not constitute nullification or impairment of even
indirect benefits accruing to the United States under the GATT or the GATS for which the European Communities could face suspension of concessions. To the extent the US assessment of nullification or impairment includes
lost US exports defined as US content incorporated in Latin American bananas (e.g. US fertilizer, pesticides and machinery shipped to Latin America and US capital or management services used in banana cultivation), we do not consider such lost US exports for calculating nullification or impairment in the present arbitration proceeding between the European Communities and the United States.
6.13 As for goods used as inputs, this conclusion is also consistent with the rules of origin for goods. The WTO Agreement on Rules of Origin contains some disciplines, but otherwise leaves discretion to WTO Members to devise rules for the determination of the country of origin of goods during a transitional period until the work programme for the harmonization of non-preferential rules of origin is completed. WTO Members typically determine the origin of agricultural products based on the place of production. In principle, every banana has the origin of the country where it was grown. For purposes of WTO rules it is irrelevant whether goods or services (e.g. fertilizer, machinery, pesticides, capital and management services) used as intermediate inputs in the cultivation of bananas and their delivery up to the f.o.b. stage are of US origin even if US content should amount to a significant part of the end-product's value. Also under US rules of origin bananas grown in Puerto Rico or Hawaii are US products regardless of the percentage of foreign input incorporated in them or used for their cultivation. Our conclusion also reflects the fact that the requirements of Articles I and XIII of GATT are tied to the origin of goods.
6.14 It would be wrong to assume that there is no further recourse within the framework of the WTO dispute settlement system to claim compensation or to request authorization to suspend concessions equivalent to the level of the nullification or impairment caused with respect to bananas of Latin American origin, including incorporated inputs of whatever kind or origin. A right to seek redress for that amount of nullification or impairment does exist under the DSU for the WTO Members which are the countries of origin for these bananas, but not for the United States. In fact, a number of these WTO Members have been in the recent past, or are currently, in the process of exercising their rights under the DSU. Moreover, our concern with the protection of rights of other WTO Members is in conformity with public international law principles of sovereign equality of states and the non-interference with the rights of other states. Consequently, there is no right and no need under the DSU for one WTO Member to claim compensation or request authorization to suspend concessions for the nullification or impairment suffered by another WTO Member with respect to goods bearing the latter's origin or service suppliers owned or controlled by it.
6.15 Moreover, if overlapping claims by different WTO Members as to nullification or impairment suffered because of the same lost trade in goods (and goods and service inputs used in their production or incorporated therein) or the same lost trade in services were permissible under the DSU, the problem of
"double-counting" of nullification or impairment would arise. Due to the difference in origin of goods or services used as
inputs in the banana production, on the one hand, and the origin of the bananas as end-products, on the other,
cumulative requests for compensation or suspension of concessions could be made for the same amount of nullification or impairment caused by a Member.
6.16 If we were to allow for such "double-counting" of the same nullification or impairment in arbitration proceedings under Article 22.6 of the DSU with different WTO Members, incompatibilities with the standard of
"equivalence" as embodied in paragraphs 4 and 7 of Article 22 of the DSU could arise. Given that the same amount of nullification or impairment inflicted on
one Member cannot simultaneously be inflicted on another, the authorizations to suspend concessions granted by the DSB to different WTO Members could exceed the overall amount of nullification or impairment caused by the Member that has failed to bring a WTO-inconsistent measure into compliance with WTO law. Moreover, such
cumulative compensation or cumulative suspension of concessions by different WTO Members for the
same amount of nullification or impairment would run counter to the general international law principle of proportionality of countermeasures.67
6.17 In view of the fact that initially five WTO Members participated in the original
Bananas III dispute, the problem of "double-counting" nullification or impairment is more than a theoretical possibility. Despite the ambiguity in the wording of Article 22.6 of the DSU, we as Arbitrators in this arbitration proceeding involving only the United States do not exclude the possibility that other original complainants may request authorization from the DSB to suspend concessions towards the European Communities at a later point in time (assuming that the revised regime should prove to be WTO-inconsistent). Therefore, in addition to the need to preserve the rights of other WTO Members under Article 22.6 of the DSU, we also believe that the calculation of the level of nullification or impairment suffered by other original complainants in the
Bananas III dispute is not within our terms of reference in this arbitration proceeding between the European Communities and the United States only.
6.18 We consider that not only goods or service inputs in banana cultivation but also services that add value to bananas after harvesting up to the f.o.b. stage should be excluded from the calculation of nullification or impairment that the United States is entitled to claim in the present arbitration proceeding. We realize that the use of this f.o.b. cut-off point as well as of origin rules is somewhat arbitrary. The globalization of the world economy means that products increasingly "incorporate" as intermediate inputs many goods and services of different origins. While it may be necessary to develop more sophisticated rules in this regard in the future, we believe that the line we have drawn is appropriate in this particular case, which involves the suspension of concessions. We imply no limitations on the extent of WTO obligations for this or other cases by this decision.
6.19 In response to the foregoing section B, which was contained in our Initial Decision, the United States argues that the export of packaging materials should be treated differently because such materials are not an input to banana production
per se. However, in our view, to the extent that the packaging is part of the value of the exported bananas as of the f.o.b. stage, the reasoning set out above clearly applies.
C. SERVICES CALCULATION ISSUES 68
6.20 The European Communities raises one preliminary issue in respect of the scope of service transactions that may be included in the calculation of nullification or impairment in light of the reach of the specific commitments bound in the EC's GATS Schedule. It contends that the revision of the UN Central Product Classification system affects the interpretation of the scope of its market access and national treatment commitments on "wholesale trade services" which the European Communities has bound in its GATS Schedule. The European Communities submits that the Provisional CPC has been replaced in the meantime by the Central Product Classification (CPC) - Version 1.0 ("Revised CPC"), and that the Revised CPC seeks to create a system of service categories that are both exhaustive and mutually exclusive. Therefore, in the EC's view, any services related to wholesale trade transactions which at the same time fall into another CPC category should be assessed on the basis of this new reality, i.e. should not be considered to be covered by the EC's commitments on "wholesale trade services".69 The European Communities adds that the specific commitments bound in its GATS Schedule are still valid.
6.21 The United States contends that the scope of the EC's specific commitments under the GATS, which were bound in the EC GATS Schedule, cannot be affected by the subsequent modification of the Central Product Classification by the UN. Consequently, it is still the Provisional CPC that matters for purposes of interpreting the scope of the EC's commitments on "wholesale trade services".
6.22 We note that the specific commitments bound by the European Communities in its GATS Schedule with respect to the service sectors70 or sub-sectors at issue in the original case were categorized according to the Services Sectoral Classification List which refers to the more detailed Provisional CPC. We also recall that in
Bananas III, the parties disagreed as to whether the panel's terms of reference comprised the narrower sub-sector of "wholesale trade services", or encompass the broader sector of "distributive trade services" as described in a headnote to section 6 of the provisional CPC. The relevant definition of the Provisional CPC for
"wholesale trade services" reads:
"Specialized wholesale services of fresh, dried, frozen or canned fruits and vegetables (Goods classified in CPC 012,013,213, 215)"
The description for "distributive trade services", in turn, provides:
"Distributive trade services consisting in selling merchandise to retailers, to industrial, commercial, institutional or other professional business users, or to other wholesalers, or acting as agent or broker
(wholesaling services) or selling merchandise for personal or household consumption including services incidental to the sale of the goods
(retailing services). The principal services rendered by wholesalers and retailers may be characterized as reselling merchandise, accompanied by a variety of related, subordinated services, such as: maintaining inventories of goods, physically assembling, sorting and grading goods in large lots; breaking bulk and redistribution in smaller lots; delivery services; refrigeration services; sales promotion services rendered by wholesalers �"
6.23 We recall that with respect to both wholesale and distributive trade services, the European Communities had bound specific commitments on liberalization of market access and national treatment without specific conditions or limitations, and without scheduling any MFN exemptions. The original panel limited its findings to the narrower sub-sector of "wholesale trade services".
6.24 It is not entirely clear to us in which way, in the EC's view, the new categorization of service sectors according to the Revised CPC should affect the classification of service sectors on the basis of which the European Communities bound its specific commitments on market access and national treatment in its GATS Schedule. Therefore, it is not clear how the principle of the mutually exclusive categorization of service sectors could affect the reach of the EC's "wholesale trade services" commitments to those service transactions that do not fall into any other category of the Revised CPC. In any event, we do not see how the revision of the CPC could retroactively change the specific commitments listed and bound in the EC GATS Schedule on the basis of the Provisional CPC. Indeed, at the hearing, the European Communities stated that such a change in the EC's specific commitments bound in its GATS Schedule could only be made consistently with the requirements of Article XXI of GATS on the "Modification of Schedules".
6.25 In our view, what matters for purposes of the calculation of nullification or impairment under the GATS, in light of the EC's commitments on "wholesale trade services", is that, according to the UN CPC descriptions quoted above, the principal services rendered by wholesalers relate to reselling merchandise, accompanied by a variety of related, subordinated services, such as, maintaining inventories of goods; physically assembling, sorting and grading goods in large lots; breaking bulk and redistribution in smaller lots; delivery services; refrigeration services; sales promotion services. We consider that this rather broad variety of principal and subordinated services should constitute the benchmark against which the United States could possibly claim nullification or impairment for losses in its actual or potential trade with the European Communities.
6.26 We would also emphasize that, according to Article XXVIII(b) of the GATS, the "supply of a service" (e.g. wholesaling) includes "the production, distribution, marketing, sale and delivery of a service". We also recall that, pursuant to Articles XXVIII(d,f,g,l,m,n) of the GATS, the origin of a service supplier is defined on the basis of its ownership and control. Therefore, for the calculation of nullification or impairment by reference to losses of actual or potential service supply, it does not matter whether the lost services relate to trade in bananas from the United States, or from third countries, to the European Communities, or to bananas wholesaled within the European Communities, provided that the service suppliers harmed are commercially present in the European Communities and US-owned or US-controlled. These considerations are subject to our conclusion above that it is the right of those WTO Members which are the countries of origin of bananas to claim nullification or impairment for actual or potential losses in the supply of service transactions that add value to bananas up to the f.o.b. stage, and that such claims cannot be made by the United States under Article 22.6 of the DSU.
D. COMPANY-SPECIFIC EFFECTS VS. OVERALL EFFECT ON THE US
6.27 We note that the initial US request for the authorization to suspend concessions or other obligations involved only losses incurred by one US company. In order to calculate the level of nullification and impairment for the United States, it is our view that it is necessary to calculate the aggregate net effects on all US suppliers of wholesale services to bananas wholesaled in the European Communities.
VII. CALCULATIONS OF THE LEVELS
7.1 To estimate the level of nullification or impairment, the same basis needs to be used for measuring the level of suspension of concessions. Since the latter is the gross value of US imports from the European Communities, the comparable basis for estimating nullification and impairment in our view is the impact on the value of relevant EC imports from the United States (rather than US firms' costs and profits, as used in the US submission). More specifically, we compare the value of relevant EC imports from the United States under the present banana import regime (the actual situation) with their value under a WTO-consistent regime (a "counterfactual" situation).
7.2 In its initial submission, the United States based its proposed level of suspension of concessions on a "base" counterfactual that assumed that the European Communities would maintain a quota of 857,700 tonnes for traditional ACP imports and would expand the tariff quota for third-country and non-traditional ACP imports to 3.7 million tonnes, which the United States argues would be required in order to make the 857,700 tonne quota WTO-consistent. The United States also submitted four other counterfactuals, including one based on no increase in the overall tariff quota.
7.3 In response, the European Communities criticized some of the specific assumptions used in the US base counterfactual. It also argued that there were many possible WTO-consistent counterfactuals under which there would be varying effects on US suppliers. Two examples cited were a tariff-only regime and the current tariff quota regime with a first-come, first-served licensing system.
7.4 In our Initial Decision, we requested the United States to provide us with new calculations with respect to the following four "counterfactuals" to the actual EC revised regime:
(1) a tariff-only regime, without tariff quotas, but including an ACP tariff preference (with effects calculated for a range of tariff rates from 75 Euro per tonne to the out-of-quota bound rate);
(2) a tariff-quota system with licence allocations based on the first-come, first-served method;
(3) the complete allocation of a tariff-quota system (with traditional ACP quotas reduced to actual past trade performance) with country-specific allocations to all substantial and non-substantial ACP and non-ACP suppliers; and
(4) the base US counterfactual, which, as noted above, assumed a continuation of a 857,700 tonne quantity for ACP imports and an expansion of the MFN tariff quota to 3.7 million tonnes.
7.5 In its response, the United States did so and came up with a range of levels as follows (excluding packaging):
|
(1) Tariff-only regime at 75 Euro per tonne: |
US$326.9 million; |
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(2) First-come, first-served licensing system: |
US$619.8 million; |
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(3) Fully allocated tariff quota: |
US$558.6 million; and |
|
(4) Base US counterfactual: |
US$362.4 million. |
7.6 In commenting in general on the four counterfactuals, the European Communities notes that in a tariff-only regime, the profits of US suppliers would be lower than at present because of the absence of quota rents. Moreover, according to the European Communities, the market share of those suppliers would not likely change as they would be competing with each other and other non-US suppliers as they do at present. As to a first-come, first-served licence regime, the European Communities notes that prices and volumes would stay the same and only the licence allocations would change. The European Communities asserts that given the large number of traditional importers who would be eligible to apply for licences, the share of licences held by US suppliers would drop and they would obtain less quota rent (and have lower profits) than at present. In the case of the third counterfactual � complete allocation of the tariff quota � the European Communities argues that it is likely that supplies and prices would remain the same, with US suppliers having profits comparable to the present regime. Finally, as to the base US counterfactual, the European Communities argues that the expansion of the tariff quota in the amount suggested by the United States would be sufficiently large so that the result in economic terms would be equivalent to a tariff-only regime (i.e. the first counterfactual). In short, the European Communities believes none of these counterfactuals would involve higher profits for US suppliers than the current revised regime. As already noted above, however, in our view the relevant effect is not on US suppliers' profits but rather on the value of relevant imports from the United States.
7.7 There are various counterfactual regimes that would be WTO-consistent. We have evaluated the various counterfactuals and we have decided to choose, as a reasonable counterfactual, a global tariff quota equal to 2.553 million tonnes (subject to a 75 Euro per tonne tariff) and unlimited access for ACP bananas at a zero tariff (with the ACP tariff preference being covered as now by a waiver). Since the current quota on tariff-free imports of traditional ACP bananas is in practice non-restraining, this counterfactual regime would have a similar impact on prices and quantities as the current EC regime. However, import licenses would be allocated differently in order to remedy the GATS violations.
7.8 We calculated the effect on relevant US imports of the revised EC banana regime, compared with the counterfactual described in the previous paragraph, based on the assumption that the aggregate volume of EC banana imports is the same in the two scenarios ceteris paribus. This implies that EC banana production and consumption, and the f.o.b., c.i.f., wholesale and retail prices of bananas, also are the same in the two scenarios. This in turn implies that the aggregate value of wholesale banana trade services after the f.o.b. point, and the aggregate value of banana import quota rents, are the same in the two scenarios. Both of those values are readily calculated from the price and quantity data made available to us. The only difference between the scenarios is in the shares of those aggregates that are enjoyed by US and other service suppliers. Hence with this particular methodology and counterfactual we do not need to make assumptions about the volume responsiveness of producers, consumers and importers to EC domestic price differences, since there are none. Rather, the task is reduced to working out the differences between the two scenarios in (a) the US share of wholesale trade services in bananas sold in the European Communities and (b) the US share of allocated banana import licences from which quota rents accrue. Using the various data provided on US market shares, and our knowledge of the current quota allocation and what we estimate it would be under the WTO-consistent counterfactual chosen by us, we determine that the level of nullification and impairment is US$191.4 million per year.
VIII. AWARD AND DECISION OF THE ARBITRATORS
8.1 In light of the foregoing considerations, the Arbitrators determine that the level of nullification or impairment suffered by the United States in the matter European Communities �Regime for the Importation, Sale and Distribution of Bananas is US$191.4 million per year. Accordingly, the Arbitrators decide that the suspension by the United States of the application to the European Communities and its member States of tariff concessions and related obligations under GATT 1994 covering trade in a maximum amount of US$191.4 million per year would be consistent with Article 22.4 of the DSU.
IX. CONCLUDING REMARKS
9.1 As suggested by the Chairman of the DSB as quoted above (paragraph 4.9), we have found a logical way forward to consider the issues raised in this Arbitration, as well as in the Article 21.5 Panel proceedings. Our findings in all three proceedings are consistent. It is not known whether the Appellate Body will accept jurisdiction of an appeal in an Article 21.5 proceeding. If it does so, the above level of suspension of concessions may need to be modified following adoption of the Appellate Body report. In such a case we would be able, if requested, to advise the parties of our view of the effect of that report on the level of suspension of concessions.
9.2 Finally, we emphasize that Article 22.8 of the DSU provides that:
"[t]he suspension of concessions or other obligations shall be temporary and shall only be applied until such time as the measure found to be inconsistent with a covered agreement has been removed, or the Member that must implement recommendations or rulings provides a solution to the nullification or impairment of benefits �".
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57 Report of the working party on Netherlands Action under Article XXIII:2 to Suspend Obligations to the United States, adopted on 8 November 1952, BISD 1S/62.
58 The New Shorter Oxford English Dictionary on Historic Principles (1993), page 103.
59 Panel reports on Bananas III, paragraph 7.52.
60 Panel reports on Bananas III, paragraph 7.47.
61 Panel reports on Bananas III, paragraph 7.48.
62 Panel reports on Bananas III, paragraph 7.50.
63 Report of the working party on Brazilian Internal Taxes, adopted on 30 June 1949, BISD II/181, 185, paragraph 16.
64 Panel report on United States - Section 337 of the Tariff Act of 1930, adopted on 7 November 1989, BISD 36S/345, 386-387, paragraph 5.11.
65 Panel report on Italian Discrimination Against Imported Agricultural Machinery, adopted on 23 October 1958, BISD 7S/60, 64, paragraph 12.
66 Panel report on United States - Taxes on Petroleum and Certain Imported Substances, adopted on 17 June 1987, BISD 34S/136, 158, paragraph 5.1.9.
67 Draft Articles on State Responsibility with Commentaries Thereto Adopted by the International Law Commission on First Reading, January 1997, Article 49 on Proportionality: "Countermeasures taken by an injured State shall not be out of proportion to the degree of gravity of the international wrongful act and the effects thereof on the injured State." See also: I. Brownlie, International Law and the Use of Force by States, Oxford (1983), page 219; H. Kelsen, Principles of International Law, New York (1966), page 21.
68 This is a modified version of the Initial Decision, reaching the same result.
69 The European Communities notes that, according to the "Correspondence Tables between the CPC Version 1.0 and Provisional CPC", item 62221 "Wholesale trade services of fruit and vegetables" corresponds in the CPC Version 1.0 to 61121 "Wholesale trade services, except on a fee and contract basis, fruit and vegetables."
70 Article XXVIII (e) of GATS: "'sector' of a service means,
(i) with reference to a specific commitment, one or more, or all, subsectors of that service, as specified in a Member's Schedule,
(ii) otherwise, the whole of that service sector, including all of its subsectors;".
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