Banana Dispute Update

31 December 2008

On 6 January, the Dispute Settlement Body adopted the latest Appellate Body report in the WTO's longest running dispute. The AB backed a WTO panel's December 2007 determination that Brussels had failed to comply with earlier WTO rulings (Bridges Year 12 No.1 page 10).

Complainants Ecuador and the US had challenged both the -176/mt most-favoured-nation (MFN) tariff  the EU has applied since January 2006, and the 775,000 tonne duty-free import quota it granted to bananas from African, Caribbean and Pacific (ACP) countries in 2006 and 2007. As the ACP quota no longer exists, the Appellate Body made no recommendation on the latter claim.

With regard to the tariff, however, the Appellate Body found the EU in breach of its scheduled tariff bindings under GATT Article II:1(b). Specifically, the AB said that until the EU has negotiated and consolidated a new tariff in its Schedule of Commitments, the application of the MFN -176/mt tariff remains illegal.

In 2006, the EU eliminated an import quota it had granted to MFN suppliers and bound in its Uruguay Round schedule of commitments. The Appellate Body ruled that this quota (for 2.2 million tonnes of bananas at -75/tonne) is in fact still in force. The new -176/mt tariff was set ‘without consideration of this commitment', the AB said, and resulted in less favourable treatment for bananas from non-ACP WTO Members than that provided in the EU's tariff schedule.

Ecuador wants the EU to honour a deal reached during the July 2008 mini-ministerial, under which the EU was to cut its MFN banana tariff to -114/mt by the start of 2016. The EU, however, said that the agreement was part of an overall Doha package that failed to materialise and was therefore off the table (Bridges Year 12 No.4 page 6). The EU still wants settle the matter  ‘once and for all' in the Doha Round negotiations, but with the talks yet again in limbo, there is little hope of a negotiated solution emerging any time soon (see article opposite).

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