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BRIDGES Weekly Trade News Digest
12 April 1999
Bananas: WTO Rules Against EU
The WTO last week ruled that the EU has not complied with a 1997 WTO
ruling against its banana import regime, and in a parallel ruling found
the U.S. could claim US$191 million in damages from lost banana trade.
The WTO in January agreed to establish a dispute settlement panel to
decide whether the EU had gone far enough in its revised banana import
regime to comply with the spirit of a 1997 WTO Panel ruling. (See
BRIDGES Weekly Trade News Digest Vol. 2, No 44, 16 November, 1998.) The
WTO Dispute Settlement Body (DSB) established the panel in response to
separate requests from Ecuador (one of five complainants - along with
the U.S., Mexico, Honduras and Guatemala - in the case against the EU),
and from the EU itself. (See BRIDGES Weekly Trade News Digest Vol. 3,
No. 1-2, 18 January 1999.)
The EU has said that it reserves the right to appeal last week's ruling.
The requests by the EU and Ecuador were both made under Article 21.5 of
the WTO Dispute Settlement Understanding (DSU). Article 21.5 specifies
that if one country disagrees with another countries' approach to the
implementation of a DSB ruling, the disagreement "shall be decided
through recourse to these dispute settlement procedures, including
wherever possible resort to the original panel."
The panel found that the revised EU banana import regime violates
Articles XIII, Paragraphs 1&2 (import restrictions) of the General
Agreement on Tariffs and Trade (GATT), as well as GATT Article I (most-
favoured-nation treatment), and also with GATT Articles II and XVII
(most-favoured-nation status and national treatment.)
As part of its request to the Dispute Settlement Body, Ecuador asked
the panel to suggest measures the EU could take to bring its banana
import regime into compliance with WTO rules. The panel recommended
three possible choices for implementing its ruling, including a tariff-
only scheme, which could include a preferential tariff for ACP bananas;
a tariff-quota for ACP bananas under a WTO waiver; or country-specific
quotas possibly combined with duty-free treatment for ACP bananas.
In a parallel ruling, the panel determined that the U.S. damages
incurred from lost banana trade is worth US$191 million annually. This
figure is significantly less than the original list of US$520 million
worth of goods the U.S. had targeted. The U.S. said the ruling allows
it to impose punitive sanctions against EU imports immediately,
retroactive to 3 March. It is expected to request authorisation to
impose sanctions when at the next meeting of the DSB.
Caribbean reaction to the ruling continued to criticise the U.S. for
pressing on in the case. Jamaican Prime Minister Percival Patterson
accused the Clinton Administration of reneging on previous promises.
"We were given the most explicit assurance that some solution was going
to be found for this impasse, in a way that would not be to the
detriment of the Caribbean. But to date we have not seen that assurance
implemented in practice," Mr. Patterson said. Edison James, Prime
Minister of Dominica encouraged the EU to appeal the WTO ruling. "The
banana arrangement is a treaty obligation which the EU has under the
Lome Convention, and this is legally binding," Mr. James said. Former
St. Lucia Prime Minister Sir John Compton last week called on Caricom
leaders to convene a high-level Caribbean delegation to hold talks with
the U.S. and EU on the banana issue. Caribbean growers estimate their
banana exports account for account for only 7% of world banana exports
and 20% of EU imports.
Panamanian Minister of Trade and Industry, Raul Hernandez has hailed
the WTO decision as "a triumph for the multilateral system." Hernandez
says his country had lost a US$ 1 billion in the sic years during which
the EU had applied its quota system. Hernandez' tone contrasted with
that of Costa Rican Deputy Minister of Foreign Trade, Anabelle
Gonzalez, who said her country was taking a "wait and see" attitude
with respect to the impact of the WTO decision on exporting countries
in the region.
In its concluding remarks the panel on Article 21.5 noted, "We recall
that the fundamental principles of the WTO and WTO rules are designed
to foster development not impede it. . . The WTO system is flexible
enough to allow, through WTO-consistent trade and non-trade measures,
appropriate policy responses in a wide variety of circumstances across
countries, including countries that are heavily dependent on the
production and commercialisation of bananas."
The report is
available via the WTO website, at http://www.wto.org/wto/dispute/distab.htm
"US exults but
penalties are less than expected," JOURNAL OF COMMERCE,
8 April 1999; "Brittan reacts To WTO arbitrator's report," EU PRESS
RELEASE, 7 April 1999; "Jamaica says Clinton reneged on bananas,"
JOURNAL OF COMMERCE, 6 April 1999; "Jamaican leader assails U.S. 'war'
on bananas," DOW JONES, 21 March 1999; "EU banana damage to U.S. set at
$191 million," IPS, 8 April 1999; "Confidential WTO report rejects EU
banana regime, suggests changes;" "Text: WTO Banana Panel Conclusions;"
INSIDE US TRADE, 9 April 1999; "WTO hits EU over banana import system,"
THE HERALD (St. Vincent-Grenadines), 8 April 1999; "Former Prime
Minister calling for talks with the U.S. and European Union," THE
HERALD (St. Vincent-Grenadines), 12 April 1999; "U.S. to seek WTO
sanctions go-ahead against EU in banana row on April 19," AGENCE FRANCE-
PRESSE, 8 April 1999; "Guerre de la banane: l'OMC donne gain de cause
aux Etats-Unis," LES ECHOS, 8 April 1999; TRADE-LATAM: Banana growers
have mixed feelings over WTO ruling," IPS, 8 April 1999.
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