Thirty-day "time-out" on bananas at WTO

GENEVA: There was a 30-day "time-out" call (US football-style) over the US-EC banana fight at the World Trade Organization's Dispute Settlement Body (DSB) on the night of 29 January, allowing the two sides to seek a negotiated solution.

The EC is asking for "arbitration" by the original banana panel on the $520 million trade damage claimed by the US in its trade retaliation move, and this ruling has to be given by 1 March, when the US will come back for authorization to retaliate (which the US envisages could be as early as 12 March).

The "arbitration", under Art. 22.6 of the DSU, by the reconvened banana panel on the extent of the US retaliation will be in parallel with its consideration of the reference under Art. 21.5 about the compliance of the new EC measures with the ruling.

No extension

While the panel, in an Art. 21.5 proceeding, can ask for an extension (beyond the 90-day period under the rules), the US made clear there could be no extension of the arbitration deadline of midnight of 1 March.

There is a DSB meeting set for 2 March, and under the rules there is a 10-day notice period required for bringing items on the agenda.

But at a press briefing on 1 February, the US made clear that while the arbitrator's award on the extent of damage would only be circulated on 1 March midnight, the US would be asking (in advance of the arbitrator's award being made known or available to anybody) for the item to be put on the agenda of the DSB meeting of 2 March.

The US has made clear that as far as it is concerned, the only determination that the banana panel can make under Art. 22.6 is to "arbitrate" on the extent of the authorization to be permitted, and not the other legal issues raised, including whether Art. 22.6 can be invoked when Art. 21.5 processes are still underway.

Despite the various interpretations of the outcome by the protagonists and other key delegations, the US has won some points in the fight, and could retaliate against the "damage" suffered by the Chiquita banana TNC, by imposing punitive damages over a range of EC products.

But unless the EC yields in the negotiations and consultations that the US has asked for (with other banana complainants), whatever the trade damage to the EC exports, neither Chiquita nor the Latin American banana exporters will gain or benefit. Retaliation may punish the other side, but may not undo the damage.

The "compromise" purportedly separates the banana dispute from the systemic issues raised by the US seeking WTO authorization under Art. 22.6 (the automatic authorization provision) without going through the Art. 21.5 process.

Some trade diplomats were expressing satisfaction that by separating the banana problem from the systemic issues, a way had been opened to safeguard the multilateral system.

This was on the view that Members, like the Cairns Group members, were inhibited from appearing to side with the EC on an issue related to the EC's implementation of the agriculture accord, but that they could be more forthright in safeguarding multilateral interests when the General Council takes up the systemic issues and in the DSU.

Difficult to see progress

But unless these nations are ready at that stage to speak up more clearly, and the US gets the message that its current course of action would jeopardize the US moves for other negotiations, it is difficult to see any progress.

And trade observers were less sanguine than the trade diplomats and officials, and felt once more there has been a failure. This, they suggest, is partly because capitals do not pay too much attention to details and leave things to their diplomats here, many of whom seem to think on their feet.

But whatever the cause or reasoning, some key trading nations with a stake in the system kept silent.

The ASEAN as such did not seem to have any position. Singapore and Thailand kept quiet, while Malaysia said there should be no vote, but made no comment on the US unilateralism involved.

Indonesia made a statement against US unilateral determination and seeking authorization under Art. 22.6 without going through the Art. 21.5 process.

But the Philippines representative, Mr. Leo Palma, a legal attache at its mission, repeatedly intervened to support the US legal view that it need not go through the Art. 21.5 process. (Third World Economics No. 203, 16-28 February 1999)

The above article was originally published in the South-North Development Monitor (SUNS) of which Chakravarthi Raghavan is the Chief-Editor.