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authorized to retaliate over EC banana regime GENEVA: The Dispute Settlement Body of the World Trade Organization on 19 April authorized the United States to undertake cross-retaliation against the EU for up to $191.4 million worth of trade, but without being provided any details of the US retaliation or even deciding when it is to take effect. The DSB granted the authorization sought by the United States on the basis of the ruling of the reconvened banana panel acting as arbitrators under Art. 22.6 of the Dispute Settlement Understanding, but without any multilateral scrutiny of the retaliation details. Even the arbitrators' report was not adopted as such. The panel and arbitrators consisted of Mr. Stuart Harbinson of Hong Kong (chairman) and Messrs. Kym Anderson (Australia) and Christian Haberli (Switzerland). After statements by the US, the EC, Japan, India, Egypt, Brazil, Australia and Mauritius, the chairman of the DSB, Amb. Akao of Japan, said the authorization was effective as of 19 April, and asked that the list of products subject to US retaliation be distributed to the DSB. He also underlined the importance of the ongoing review of the DSU, in particular the relationships between Art. 21.5, 22.6 and 22.7. The US had in effect imposed sanctions on a wider range of products as of 3 March by withholding final customs liquidation, though it apparently did not require from importers either bank guarantees or any bonds. At the DSB, though, the US did not indicate that it would impose the sanctions prospectively. The US said that its measures of retaliation were intended to ensure compliance with the WTO ruling, and that prompt compliance was the WTO requirement. The retaliation was only a temporary solution, and the US invited the EC to hold consultations with the US and the other complainants on a solution. Not contesting The EC for its part said that it was not contesting the value of the trade damage assessed. It said it intended to comply, and was considering the three suggestions for compliance put forward by the reconvened panel in the ruling on Ecuador's reference (which was not before the DSB on 19 April). The EC was initiating contacts with the US and the other parties, but it was a complicated matter and would take some time. But the EC insisted that the retaliation could be effective only as of the date of sanction, and the EC would pursue this question in other fora. The EC complaint against the US over S.301 of the US trade law has already been referred to a panel. The EC has also subsequently, after the US announcement of the sanctions, begun consultations with the US, and the issue of the date of sanctions is expected to be part of them. But the US did not indicate that it would accept the DSB chair's final statement, which was not announced as a ruling. The US offered to provide to interested delegations (bilaterally but not multilaterally via the WTO/DSB) the list of products on which it was withdrawing MFN tariff or other concessions from the EU members. The DSB is still to consider and adopt the reconvened banana panel's separate ruling, on a reference by Ecuador under Art 21.5 of the DSU, on the WTO-compliance of the new EC banana regime and the panel's recommendation or suggestions on how the EC could implement the ruling. Separately, the EC had made its own reference on its banana regime, but the panel has in effect declined to give a ruling on it. Though the three rulings are separate, in fact they are not really separable. If in making the reference this way, the WTO members had hoped that this would end the banana dispute at one stroke and bring some certainty, they could not have been more mistaken. All the three rulings together have raised more questions than given answers, and would increase doubts and concerns in civil society over the WTO system and the panel processes. WTO-inconsistent In the Ecuador ruling, the panel said that the new EC regime's 857,000-tonne limit on traditional African, Caribbean and Pacific (ACP) imports was a tariff quota and thus the provisions of Art. XIII of GATT apply to it. The reservation of this quantity of 857,000 tonnes for traditional ACP imports under the revised regime was inconsistent with paragraphs 1 and 2 of Art. XIII. Also, the country-specific allocations to Ecuador as well as to other substantial suppliers were not consistent with the requirements of Art. XIII:2. As for Article I (MFN clause) of GATT, the panel found that the level of 857,000 tonnes for duty-free traditional imports could be considered to be required by the Lom‚ Convention (between the EU and the ACP countries) because it appeared to be based on the pre-1991 best-ever exports and not on allowances for investments. However, the panel said, it was not reasonable for the EC to conclude that Protocol 5 of the Lom‚ Convention requires a collective allocation for traditional ACP suppliers. Hence, duty-free treatment of imports in excess of an individual ACP state's pre-1991 best-ever export volumes was not required by Protocol 5 of the Lom‚ Convention. And absent any other applicable requirement of the Lom‚ Convention, those excess volumes were not covered by the Lom‚ waiver and the preferential tariff access was therefore inconsistent with Art. I:1 of GATT. Also in respect of Art. I, the panel found that with regard to preferences for non-traditional ACP imports, it was not unreasonable for the EC to conclude that (i) non-traditional ACP imports at zero tariff within the "other" category of the tariff quotas and (ii) the tariff preference of 200 euro per tonne for out-of-quota imports, are required by Art. 168 of the Lom‚ Convention. Therefore, said the panel, the violations of Art.I:1, as alleged by Ecuador in respect of preferences for non- traditional ACP imports, are covered by the Lom‚ waiver. In respect of GATS, the panel defined the range of wholesale trade services (on which the EC has made commitments) and found that (i) under the revised regime Ecuador's suppliers of wholesale services were accorded de facto less favourable treatment in respect of licence allocation than EC/ACP suppliers of those services, in violation of Art. II and XVII of GATS and (ii) the criteria for acquiring "newcomer" status under the revised licensing procedures accord to Ecuador's service suppliers de facto less favourable conditions of competition than those to the like EC service suppliers in violation of Art. XVII of GATS. Suggestions for implementation As sought by Ecuador, the panel has made three suggestions for implementation. But all of them would either require a waiver from the WTO members (which may prove difficult) or involve effectively eliminating any preference enjoyed by the ACP exporters. The suggestions were: *First, the EC could implement a tariff-only system for bananas, without a tariff quota. This could include a tariff preference (at zero or another preferential rate) for ACP bananas. If so, a waiver for the tariff preference may be necessary unless the need for a waiver is obviated, for example, by the creation of a free-trade area consistent with Art. XXIV of GATT. "This option would avoid the need to seek agreement on tariff quota shares." * Second, the EC could choose to implement a tariff-only system for bananas with a tariff quota for ACP bananas covered by a suitable waiver. * Third, the EC could maintain its current bound and autonomous MFN tariff quotas, either without allocating any country-specific shares or allocating such shares by agreement with all substantial suppliers consistent with the requirements of the chapeau to Art. XIII:2. The MFN tariff quota could be combined with the extension of duty-free treatment (or preferential duties) to ACP imports. In respect of such duty-free treatment, the EC could consider with the ACP states whether the Lom‚ Convention can be ready to "require" such treatment within the meaning of the Lom‚ waiver. The panel recalled that some important preferences found by the original panel and Appellate Body reports to be required by the Lom‚ Convention could not be implemented consistently with WTO rules (the most important being the quantitative protections foreseen in Protocol 5). If such a view of the Lom‚ Convention was challenged, a waiver covering such duty-free treatment could be sought, said the panel. The MFN tariff quota could also be combined with a tariff quota for ACP imports, whether traditional or not, provided an appropriate waiver from Art XIII was obtained, the panel said. The panel noted in this connection that waivers for duty- free treatment for developing-country exports have been granted on several occasions by members. In this context, the panel added, some action may be required soon in respect of the Lom‚ waiver since it would expire on 29 February 2000. (SUNS4418) The above article was originally published in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief-Editor.
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