DISPUTE SETTLEMENT: DISPUTE DS27

European Communities — Regime for the Importation, Sale and Distribution of Bananas


This summary has been prepared by the Secretariat under its own responsibility. The summary is for general information only and is not intended to affect the rights and obligations of Members.

  

See also:
One-page summary of key findings of this dispute
The basics: how disputes are settled in WTO
Computer based training on dispute settlement
Text of the Dispute Settlement Understanding


Current status  back to top

 

Key facts  back to top

Short title:
Complainant:
Respondent:
Third Parties:
Agreements cited:
(as cited in request for consultations)
Request for Consultations received:
Panel Report circulated: 22 May 1997
Appellate Body Report circulated: 9 September 1997
Article 21.3(c) Arbitration Report circulated: 7 January 1998
Article 21.5 Panel Report (Ecuador) circulated: 12 April 1999
Article 21.5 Panel Report (European Communities) circulated: 12 April 1999
Recourse to Article 22.6 Arbitration Report circulated: 9 April 1999
Mutually Agreed Solution notified: 2 July 2001
Second Recourse to Article 21.5 Panel Report (Ecuador) circulated: 7 April 2008
Article 21.5 Panel Report (United States) circulated: 19 May 2008
Second Recourse to Article 21.5 Appellate Body Report (Ecuador) circulated: 26 November 2008
Article 21.5 Appellate Body Report (United States) circulated: 26 November 2008

  

Summary of the dispute to date  back to top

The summary below was up-to-date at
See also: One-page summary of key findings of this dispute

Consultations

Complaints by Ecuador, Guatemala, Honduras, Mexico and the United States.

The complainants in this case other than Ecuador had requested consultations with the European Communities on the same issue on 28 September 1995 (DS16). After Ecuador’s accession to the WTO, the current complainants again requested consultations with the European Communities on 5 February 1996. The complainants alleged that the European Communities’ regime for importation, sale and distribution of bananas is inconsistent with Articles I, II, III, X, XI and XIII of the GATT 1994 as well as provisions of the Import Licensing Agreement, the Agreement on Agriculture, the TRIMs Agreement and the GATS.

On 11 April 1996, the five complainants requested the establishment of a panel. At its meeting on 24 April 1996, the DSB deferred the establishment of a panel.

 

Panel and Appellate Body proceedings

Further to a second request by the five complainants, a panel was established at the DSB meeting on 8 May 1996. On 29 May 1996, the five complainants requested the Director-General to determine the composition of the Panel. On 7 June 1996, the panel was composed. The panel report was circulated to Members on 22 May 1997. The panel found that the European Communities’ banana import regime and the licensing procedures for the importation of bananas in this regime are inconsistent with the GATT 1994. The panel further found that the Lomé waiver waives the inconsistency with Article XIII of the GATT 1994, but found no inconsistencies arising from the licensing system.

On 11 June 1997, the European Communities notified its intention to appeal certain issues of law and legal interpretations developed by the Panel. The Appellate Body report was circulated to Members on 9 September 1997. The Appellate Body mostly upheld the panel’s findings, but reversed the panel’s findings that the inconsistency with Article XIII of the GATT 1994 is waived by the Lomé waiver, and that certain aspects of the licensing regime violated Article X of GATT 1994 and the Import Licensing Agreement.

At its meeting on 25 September 1997, the Appellate Body report and the Panel report, as modified by the Appellate Body, were adopted by the DSB.

 

Reasonable period of time

On 17 November 1997, the complainants requested that the reasonable period of time (RPT) for implementation of the recommendations and rulings of the DSB be determined by binding arbitration, pursuant to Article 21.3(c) of the DSU. The Award of the Arbitrator was circulated to Members on 7 January 1998.  The Arbitrator determined that the RPT for implementation to be 15 months and 1 week from the date of the adoption of the reports i.e. it expired on 1 January 1999.

 

Compliance proceedings

On 18 August 1998, further to the European Communities’ revision of their legislation and despite holding that Article 21.5 does not require parties to consult as a prior condition to resort to these proceedings the complainants requested, in the interest of avoiding any further delay, consultations with the European Communities  for the resolution of the disagreement between them over the WTO-consistency of measures introduced by the European Communities in purported compliance with the recommendations and rulings of the Panel and Appellate Body The European Communities then adopted a second Regulation which it said completed the implementation of the recommendations and rulings regarding this dispute insofar as its new system would be fully applicable from 1 January 1999, date of the expiry of the RPT. On 13 November 1998, Ecuador requested the reactivation of consultations initiated by a letter sent jointly with the other co-complainants on 18 August 1998 and held on 17 September 1998. On 18 November 1998, the European Communities confirmed their willingness to reactivate the consultations with a view to concluding the discussion of the subjects that were not discussed during the September consultations. Consultations between Ecuador and the European Communities took place on 23 November 1998 with the presence of Mexico who joined as a co-complainant in the same meeting.

On 15 December 1998 the European Communities requested the establishment of a panel under Article 21.5 (the EC compliance panel).  The European Communities' request for a compliance panel was made in response to measures taken by the United States regarding the EC implementing measures, which the United States considered had failed to implement the WTO recommendations.  More specifically, the European Communities requested the compliance panel to determine that the EC implementing measures must be presumed to conform to WTO rules unless challenged in accordance with DSU procedures.  The complainants other than Ecuador objected in writing to the fact that the European Communities' request be considered as constituting recourse to Article 21.5 alleging that there was no procedural basis for treating a forthcoming meeting as the second DSB meeting at which the panel could be established and that the European Communities had not satisfied its own stipulated precondition for the lodging of such request insofar as it had not sought consultations on the matter.

On 18 December 1998, Ecuador requested the re-establishment of the original panel to examine whether the EC measures to implement the recommendations of the DSB were WTO-consistent. (Ecuador compliance panel).

At its meeting on 12 January 1999, the DSB agreed to reconvene the original panel, pursuant to Article 21.5 of the DSU, to examine both Ecuador’s and the European Communities’ compliance panel requests. Jamaica, Nicaragua, Colombia, Costa Rica, Côte d’Ivoire, Dominican Republic, Dominica, St. Lucia, Mauritius, St. Vincent, indicated their interest to join as third parties in both requests, while Ecuador and India indicated their third-party interest only in the European Communities' request. The four original complaining parties other than Ecuador (i.e. Guatemala, Honduras, Mexico and the United States) refrained from requesting a panel or from joining the procedure initiated by Ecuador.

On 14 January 1999, the United States requested pursuant to Article 22.2 of the DSU, the DSB's authorization to suspend concessions or other obligations (see below). On 8 November 1999, and prior to the adoption of the reports of the European Communities and Ecuador compliance panels, Ecuador also requested authorization from the DSB to suspend the application to the European Communities of concessions or other related obligations (see below).  On 18 January 1999, the compliance panels were composed. The two compliance panel reports were circulated on 12 April 1999.

The EC compliance panel found that, because a challenge had actually been made by Ecuador regarding the WTO-consistency of the EC measures taken in implementation of the DSB recommendations, it was unable to agree with the European Communities that the European Communities must be presumed to be in compliance with the recommendations of the DSB. The report of the EC compliance panel was never adopted by the DSB.

The compliance panel requested by Ecuador found that the implementation measures taken by the European Communities in compliance with the recommendations of the DSB were not fully compatible with the European Communities' WTO obligations. The report of the Ecuador compliance panel was adopted by the DSB on 6 May 1999.

 

Proceedings under Article 22 of the DSU (remedies)

On 14 January 1999, the United States requested, pursuant to Article 22.2 of the DSU,  the DSB's authorization to suspend of concessions or other obligations to the European Communities in an amount of USD520 million. The European Communities objected to the level of suspension proposed by the United States on the ground that it was not equivalent to the level of nullification or impairment of benefits suffered by the United States and claimed that the principles and procedures set out in Article 22.3 of the DSU had not been followed. Pursuant to Article 22.6 of the DSU, the European Communities requested that the original panel carry out the arbitration on the level of suspension of concessions requested by the United States. The DSB referred the issue of the level of suspension to the original panel for arbitration on 29 January 1999.  The  decision by the arbitrator was circulated on 9 April 1999.  The Arbitrator found that the level of suspension sought by the United States was not equivalent to the level of nullification and impairment suffered as a result of the EC’s new banana regime not being fully compatible with the WTO. The Arbitrator accordingly determined the level of nullification suffered by the United States to be equal to USD191.4 million per year and 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 USD191.4 million per year would be consistent with Article 22.4 of the DSU.

On 9 April 1999, the United States, pursuant to Article 22.7 of the DSU, requested that the DSB authorize suspension of concessions to the European Communities equivalent to the level of nullification and impairment, i.e. USD191.4 million. On 19 April 1999, the DSB authorized the United States to suspend concessions to the European Communities as requested.On 8 November 1999, and prior to the adoption of the compliance panel report by Ecuador (see above), Ecuador requested authorization from the DSB to suspend the application to the European Communities of concessions or other related obligations under the TRIPS Agreement, GATS and GATT 1994, pursuant to Article 22.2 of the DSU, in an amount of USD450 million. At the DSB meeting on 19 November 1999, the European Communities objected to the proposed level of suspension alleging it exceeded the level of nullification or impairment Ecuador had suffered and to Ecuador's request for cross-retaliation stating Ecuador has not followed the principles and procedures set forth in Article 22.3 of the DSU. The European Communities  therefore requested,  pursuant to Article 22.6 of the DSU, the matter be referred to arbitration.. At its meeting on 19 November 1999, the DSB referred the issue to the original panel for arbitration in accordance with Article 22.6 of the DSU.

The Arbitrator's decision on the Ecuadorian request for suspension of concessions was circulated to Members on 24 March 2000. The Arbitrator found that the level of nullification and impairment suffered by Ecuador amounted to USD201.6 million per year. The Arbitrator found that Ecuador's request for retaliation did not follow the principles and procedures set forth in Article 22.3, especially regarding the suspension of concessions under the GATT 1994 with respect to goods destined for final consumption and that the level of suspension requested by Ecuador exceeded the level of nullification and impairment suffered by it as a result of the European Communities' failures to bring the EC banana import regime into compliance with WTO law within the RPT. Accordingly, the Arbitrator found that Ecuador may request authorization by the DSB to suspend concessions or other obligations under GATT 1994 (not including investment goods or primary goods used as inputs in manufacturing and processing industries); under GATS with respect to “wholesale trade services” (CPC 622) in the principal distribution services; and, to the extent that suspension requested under GATT 1994 and GATS was insufficient to reach the level of nullification and impairment determined by the Arbitrator, under TRIPS in the following sectors of that Agreement: Section 1 (copyright and related rights); Article 14 on protection of performers, producers of phonograms and broadcasting organisations), Section 3 (geographical indications), Section 4 (industrial designs). The Arbitrator also noted that, pursuant to Article 22.3 of the DSU, Ecuador should first seek to suspend concessions or other obligations with respect to the same sectors as those in which the panel reconvened at the request of Ecuador pursuant to Article 21.5 of the DSU had found violations, i.e. GATT 1994 and the sector of distribution services under GATS. On 8 May 2000, Ecuador requested, pursuant to Article 22.7 of the DSU, that the DSB authorize the suspension of concessions to the EC equivalent to the level of nullification and impairment, i.e. US$201.6 million. On 18 May 2000, the DSB authorized Ecuador to suspend concessions to the European Communities as requested.

 

Compliance proceedings (second recourse)

On 30 November 2005, Honduras, Nicaragua and Panama requested consultations with the European Communities under Article 21.5 of the DSU concerning the measures adopted on 29 November 2005 by the European Communities to address the requirements provided for by the Waiver adopted in Doha Ministerial in November 2001 with regard to banana trade (“Doha Waiver”) (see below). The measures at issue are relevant provisions of the recently passed EC Council Regulation governing the import regime for banana.  The measures at issues were adopted following two Arbitrations under the Doha Waiver, both of which ruled against previous proposals by the European Communities to address the same matter. According to the requests, the EC Council Regulation is WTO-inconsistent in the following respects:

  • The 176€/mt MFN rate is inconsistent with the Doha Waiver in all its parts, the Arbitration Awards of 1 August and 27 October 2005, GATT Article XXVIII, and the Appellate Body report and the Panel report as modified by the Appellate Body Report in EC-Bananas III; and
     
  • The zero-duty ACP tariff quota of 775,000 mt and over-quota ACP tariff of 176€/mt are inconsistent with the Doha Waiver in all its parts, the Arbitration Awards of 1 August and 27 October 2005, GATT Articles I and XIII, and the Appellate Body report and the Panel report as modified by the Appellate Body Report in EC-Bananas III.

On 16 November 2006, Ecuador requested consultations under Article 21.5 of the DSU and Article XXIII of the GATT 1994 with respect to measures taken by the European Communities to comply with the recommendations and rulings contained in Council Regulation No. 1964/2005 (“Regulation 1964”) and its associated implementing regulations taken in the framework of the two “Understandings on Bananas” the European Communities reached in April 2001 with the United States and Ecuador (see below). On 28 November 2006, Ecuador submitted a revised request for consultations under Article 21.5 of the DSU and Article XXII of the GATT 1994. On 30 November 2006, Belize, Côte d'Ivoire, Dominica, the Dominican Republic, St. Lucia, St. Vincent and the Grenadines, and Suriname requested to join the consultations. On 4 December 2006, Cameroon requested to join the consultations. On 6 December 2006, Jamaica requested to join the consultations. On 11 December 2006, Panama and the United States requested to join the consultations. The European Communities informed the DSB that they had accepted all the requests to join the consultations.  On 23 February 2007, Ecuador requested the establishment of a compliance panel.  At its meeting on 20 February 2007, the DSB deferred the establishment of a compliance panel.  At its meeting on 20 March 2007, the DSB agreed to refer to the original panel, if possible, the question of whether the new EC banana regime was in conformity with the DSB's recommendations and rulings.   Cameroon, Colombia, Côte d'Ivoire, Dominica, the Dominican Republic, Ghana, Jamaica, Japan, St. Kitts and Nevis, St. Lucia, St. Vincent and the Grenadines, and the United States reserved their third-party rights.  Subsequently, Belize, Brazil, Madagascar, Nicaragua, Panama and Suriname reserved their third-party rights.

On 5 June 2007, Ecuador requested the Director-General to determine the composition of the compliance panel.  On 15 June 2007, the Director-General composed the compliance panel.  On 5 December 2007, the Chairman of the compliance panel informed the DSB that it would not be possible to circulate its report within 90 days after the date of referral.  The compliance panel expected to issue its final report to parties in December 2007 and, following translation, the final report was expected to be circulated to Members in February 2008.

On 29 June 2007, the United States requested the establishment of a compliance panel as it considered that the European Communities had failed to bring its import regime for bananas into compliance with its WTO obligations and the regime remains inconsistent.  At its meeting on 12 July 2007, the DSB referred the matter to the original panel, if possible.  Brazil, Cameroon, Colombia, the Dominican Republic, Ecuador, Jamaica, Japan, Nicaragua and Panama reserved their third-party rights. Subsequently, Belize, Côte d'Ivoire, Dominica, Mexico, St. Lucia, St .Vincent and the Grenadines, and Suriname reserved their third-party rights.

On 3 August 2007, the United States requested the Director-General to determine the composition of the compliance panel.  On 13 August 2007, the Director-General composed the compliance panel.  On 21 February 2008, the Chairman of the compliance panel informed the DSB that it would not be possible to circulate its report within 90 days after the date of referral.  The compliance panel expected to issue its final report to parties no later than the end of the first week of March 2008.

On 7 April 2008, the compliance panel report requested by Ecuador was circulated to Members.  The Panel rejected the preliminary issue raised by the European Communities that Ecuador is prevented from challenging the EC current import regime for bananas, including the preference for ACP countries, because of the Understanding on Bananas, signed by both Members in April 2001.  Accordingly, and after having examined the substantive claims raised by Ecuador as well as the defences invoked by the European Communities, the compliance panel concluded that:

  • The preference granted by the European Communities to an annual duty-free tariff quota of 775,000 mt of imported bananas originating in ACP countries constitutes an advantage for this category of bananas, which is not accorded to like bananas originating in non-ACP WTO Members, and is therefore inconsistent with Article I:1 of GATT 1994;
     
  • With the expiration of the Doha Waiver from 1 January 2006 as it applied to bananas, there is no evidence that, during the period that is relevant for this Panel's findings, that is, from the time of the establishment of the Panel until the date of this Report, any waiver from Article I:1 of GATT 1994 has been in force to cover the preference granted by the European Communities to the duty-free tariff quota of imported bananas originating in ACP countries;
     
  • The EC current banana import regime, in particular its preferential tariff quota reserved for ACP countries, is inconsistent with Article XIII:1, with the chapeau of Article XIII:2, and with Article XIII:2(d) of the GATT 1994;
     
  • The tariff applied by the European Communities to MFN imports of bananas, set at €176/mt, without consideration of the tariff quota for 2.2 million mt bound at an in-quota tariff rate of €75/mt, is an ordinary customs duty in excess of that set forth and provided for in Part I of the EC Schedule.  This tariff is therefore inconsistent with the first sentence of Article II:1(b) of the GATT 1994;  and,
      
  • It is unnecessary, for the resolution of this dispute, to make a separate finding on Ecuador's claim under Article II:1(a) of the GATT 1994.

In consequence, the compliance panel concluded that, through its current regime for the importation of bananas, established in Council Regulation (EC) No. 1964/2005 of 29 November 2005, including the duty-free tariff quota for bananas originating in ACP countries and the MFN tariff currently set at €176/mt, the European Communities had failed to implement the recommendations and rulings of the DSB.

The compliance panel recommended that the DSB request the European Communities to bring the inconsistent measures into conformity with its obligations under the GATT 1994.

On 19 May 2008, the compliance panel report requested by the United States was circulated to Members.  Regarding the preliminary objections advanced by the European Communities, the compliance panel found that:

  • the United States had, under the DSU, the right to request the initiation of the current compliance dispute settlement proceedings;
     
  • the European Communities has not succeeded in making a prima facie case that the United States is prevented from challenging the EC current import regime for bananas, including the preference for ACP countries, because of the Bananas Understanding, signed between the United States and the European Communities in April 2001;  and
     
  • the European Communities has failed in making a case that the United States' complaint under Article 21.5 of the DSU should be rejected, because the EC current import regime for bananas, including the preference for ACP countries, is not a “measure taken to comply” with the recommendations and rulings of the DSB in the original proceedings.

The compliance panel accordingly rejected the preliminary issues raised by the European Communities.

After having examined the substantive claims raised by the United States, as well as the defences invoked by the European Communities, the compliance panel concluded that:

  • The preference granted by the European Communities to an annual duty-free tariff quota of 775,000 mt of imported bananas originating in ACP countries constitutes an advantage for this category of bananas, which is not accorded to like bananas originating in non-ACP WTO Members, and is therefore inconsistent with Article I:1 of the GATT 1994;
     
  • With the expiration of the Doha Waiver from 1 January 2006 as it applied to bananas, the European Communities has failed to demonstrate the existence of a waiver from Article I:1 of the GATT 1994 to cover the preference granted by the European Communities to the duty-free tariff quota of imported bananas originating in ACP countries;  and
      
  • the EC current banana import regime, in particular its preferential tariff quota reserved for ACP countries, is also inconsistent with Article XIII:1 and Article XIII:2 of the GATT 1994;

In consequence, the compliance panel concluded that, through its current regime for the importation of bananas, established in Council Regulation (EC) No. 1964/2005 of 29 November 2005, in particular its duty-free tariff quota for bananas originating in ACP countries, the European Communities had failed to implement the recommendations and rulings of the DSB.

The compliance panel also concluded that, to the extent that the current EC bananas import regime contains measures inconsistent with various provisions of the GATT 1994, it has nullified or impaired benefits accruing to the United States under that Agreement.

Since the original DSB recommendations and rulings in this dispute remain operative through the results of the current compliance proceedings, the compliance panel made no new recommendation.

Pursuant to a request from Ecuador and the European Communities, at its meeting on 2 June 2008, the DSB agreed to an extension of the time-period in Article 16.4 to enable them to explore the possibility of reaching a mutually agreed solution.

Pursuant to a request from the United States and the European Communities, at its meeting on 24 June 2008, the DSB agreed to an extension of the time-period in Article 16.4 to enable them to explore the possibility of reaching a mutually satisfactory solution.

On 28 August 2008, the European Communities notified its decision to appeal to the Appellate Body certain issues of law and certain legal interpretations developed by the compliance panel relating to the compliance panels requested by Ecuador and the United States.  On 9 September 2008, Ecuador notified its decision to appeal to the Appellate Body certain issues of law and certain legal interpretations developed by the compliance panel. 

On 21 October 2008, the Chairman of the Appellate Body notified the DSB that it would not be able to circulate its reports within 60 days due to the time required for completion and translation of the report.  It was estimated that the reports would be circulated no later than 26 November 2008.

On 26 November 2008, the Appellate Body reports were circulated to Members.

In the appeal of the compliance panel report requested by Ecuador, with respect to procedural issues, the Appellate Body found the compliance panel did not act inconsistently with Article 9.3 of the DSU by maintaining different timetables in the Article 21.5 proceedings between the European Communities and Ecuador and between the European Communities and the United States; and upheld the compliance panel's finding, albeit for different reasons, that Ecuador was not barred by the Understanding on Bananas from initiating this compliance proceeding.

With respect to Article XIII of the GATT 1994, the Appellate Body upheld the compliance panel's findings that, to the extent that the European Communities argues that it has implemented a suggestion pursuant to Article 19.1 of the DSU, the compliance panel was not prevented from conducting, under Article 21.5 of the DSU, the assessment requested by Ecuador; and that, therefore, the compliance panel did not need to assess whether the European Communities has effectively implemented any of the suggestions of the first compliance panel requested by Ecuador. The Appellate Body also upheld, albeit for different reasons, the compliance panel's finding that the EC Bananas Import Regime, in particular, its duty-free tariff quota reserved for ACP countries, was inconsistent with Article XIII:1 and Article XIII:2 of the GATT 1994.

With respect to Article II of the GATT 1994, the Appellate Body reversed the compliance panel's finding that the Doha Article I Waiver constituted a subsequent agreement between the parties extending the tariff quota concession for bananas listed in the European Communities' Schedule of Concessions beyond 31 December 2002, until the rebinding of the EC tariff on bananas. The Appellate Body also reversed the compliance panel's finding that the E C' tariff quota concession for bananas was intended to expire on 31 December 2002 on account of paragraph 9 of the Bananas Framework Agreement.

The Appellate Body upheld, albeit for different reasons, the compliance panel's findings that the tariff applied by the European Communities to MFN imports of bananas, set at €176/mt, without consideration of the tariff quota of 2.2 million mt bound at an in-quota tariff rate of €75/mt, is an ordinary customs duty in excess of that provided for in the EC Schedule of Concessions, and thus inconsistent with Article II:1(b) of the GATT 1994 and that the European Communities, by maintaining measures inconsistent with different provisions of the GATT 1994, including Article XIII, had nullified or impaired benefits accruing to Ecuador under that Agreement.

The Appellate Body recommended that the DSB request the European Communities to bring its measure, found to be inconsistent with the GATT 1994, into conformity with its obligations under that Agreement.

In the appeal of the compliance panel report requested by the United States, with respect to procedural issues, the Appellate Body found that the compliance panel did not act inconsistently with Article 9.3 of the DSU by maintaining different timetables in the Article 21.5 proceedings between the European Communities and Ecuador and between the European Communities and the United States, albeit for different reasons, upheld the compliance panel's findings that the United States was not barred by the Understanding on Bananas from initiating this compliance proceeding and that the EC Bananas Import Regime constituted a “measure taken to comply” within the meaning of Article 21.5 of the DSU and was therefore properly before the compliance panel. The Appellate Body also found that the compliance panel did not err in making findings with respect to a measure that had ceased to exist subsequent to the establishment of the compliance panel, but before the compliance panel issued its report. The Appellate Body also found that the deficiencies in the European Communities' Notice of Appeal do not lead to dismissal of the European Communities' appeal.

With respect to Article XIII of the GATT 1994, the Appellate Body upheld, albeit for different reasons, the compliance panel's finding that the EC Bananas Import Regime, in particular, its duty-free tariff quota reserved for ACP countries, was inconsistent with Article XIII:1 and Article XIII:2 of the GATT 1994 and the compliance panel's finding that to the extent that the EC Bananas Import Regime contained measures inconsistent with various provisions of the GATT 1994, it nullified or impaired benefits accruing to the United States under that Agreement.

As the measure at issue was no longer in existence, the Appellate Body did not make any recommendation to the DSB pursuant to Article 19.1 of the DSU.

At its meeting on 11 December 2008, with respect to the compliance panel requested by Ecuador, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.

At its meeting on 22 December 2008, with respect to the compliance panel requested by the United States, the DSB adopted the Appellate Body report and the Panel report, as upheld by the Appellate Body report.

 

Implementation of adopted reports

At the DSB meeting on 19 November 1999 and following the first series of compliance panel proceedings (see above), the European Communities informed the DSB of its proposal for reform of the banana regime, which envisages a two-stage process, comprising a tariff rate quota system for several years. This system should then be replaced by a tariff only system no later than 1 January 2006. The proposal includes a decision to continue discussions with interested parties on the possible systems for distribution of licences for the tariff rate quota regime. If no feasible system can be found, the proposal for a transitional tariff rate quota regime would not be maintained and negotiations under Article XXVIII of GATT 1994 would be envisaged to replace the current system with a tariff only regime. At the DSB meeting on 24 February 2000, the EC explained that there continued to be divergent views expressed by the main parties concerned and that, as a result, no agreed conclusions could be reached.

At the DSB meeting of 27 July 2000 and following the Arbitrator's decision on the Ecuadorian request for suspension of concessions (see above), the European Communities stated with respect to implementation of the recommendations of the DSB that it had begun examining the possibility of managing the proposed tariff rate quotas on a first come, first served basis because negotiations with interested parties on tariff rate quota allocation on the basis of traditional trade flows had reached an impasse. The European Communities also said that its examination would include a tariff only system and its implications. At the DSB meeting of 23 October 2000, the European Communities stated that it was finalizing its internal decision-making process with a view to implementing the new banana regime. To this effect, the European Communities considered that, during a transitional period of time, its new banana regime should be regulated by the establishment of tariff-rate quotas and managed on the basis of a “first-come, first-served” (FCFS) system. Before the end of transitional period of time, the European Communities would initiate Article XXVIII negotiations with a view to establishing a tariff-only system. On 1 March 2001, the European Communities reported to the DSB that on 29 January 2001, the Council of the European Union adopted Regulation (EC) No 216/2001 amending Regulation (EEC) No 404/93 on the common organisation of the market in bananas. The modifications made in Council Regulation 216/2001 provide for three tariff quotas open to all imports irrespective of their origin: (1) a first tariff quota of 2.200.000 tonnes at a rate of 75€/tonnes, bound under the WTO; (2) a second autonomous quota of 353.000 tonnes at a rate of 75€/tonnes; (3) a third autonomous quota of 850.000 tonnes at a rate of 300€/tonnes. Imports from ACP countries will enter duty-free. In view of contractual obligations towards these countries and the need to guarantee proper conditions of competition, they will benefit from a tariff preference limited to a maximum of 300€/tonnes. The tariff quotas are a transitional measure leading ultimately to a tariff-only regime. According to the European Communities, substantial progress has been achieved with respect to the implementing measures necessary to manage the three tariff rate quotas on the basis of the First-come, First-served method.

On 3 May 2001, the European Communities reported to the DSB that intensive discussions with the United States and Ecuador, as well as the other banana supplying countries, including the other co‑complainants, have led to the common identification of the means by which the long-standing dispute over the EC’s bananas import regime will be resolved. In accordance with Article 16(1) of Regulation No (EC) 404/93 (as amended by Council Regulation No (EC) 216/2001), the EC will introduce a Tariff Only regime for imports of bananas no later than 1 January 2006. GATT Article XXVIII negotiations will be initiated in good time to that effect. In the interim period, starting on 1 July 2001, the European Communities will implement an import regime based on three tariff rate quotas, to be allocated on the basis of historical licensing.

On 22 June 2001, the European Communities notified an “Understanding on Bananas between the European Communities and the United States” of 11 April 2001, and an “Understanding on Bananas between the European Communities and Ecuador” of 30 April 2001. Pursuant to these Understandings with the United States and Ecuador, the European Communities will implement an import regime on the basis of historical licensing as follows:

  • effective 1 July 2001, the European Communities will implement an import regime on the basis of historical licensing as set out in annex to each of the Understandings;
     
  • effective as soon as possible thereafter, subject to Council and European Parliament approval and to adoption of an Article XIII waiver, the European Communities will implement an import regime on the basis of historical licensing as set out in annex to each of the Understandings.

The Commission will seek to obtain the implementation of such an import regime as soon as possible. Pursuant to its Understanding with the European Communities, the United States:

  • upon implementation of the new import regime described under (1) above, would provisionally suspend its imposition of the increased duties;
     
  • upon implementation of the new import regime described under (2) above, would terminate its imposition of the increased duties;
     
  • may reimpose the increased duties if the import regime described under (2) does not enter into force by 1 January 2002; and
     
  • would lift its reserve concerning the waiver of Article I of the GATT 1994 that the EC has requested for preferential access to the EC of goods originating in ACP states signatory to the Cotonou Agreement; and will actively work towards promoting the acceptance of an EC request for a waiver of Article XIII of the GATT 1994 needed for the management of quota C under the import regime described under (2) above until 31 December 2005.

Pursuant to its Understanding with the European Communities, Ecuador:

  • took note that the European Commission will examine the trade in organic bananas and report accordingly by 31 December 2004;
     
  • upon implementation of the new import regime, Ecuador’s right to suspend concessions or other obligations of a level not exceeding US$201.6 million per year vis-à-vis the EC would be terminated;
     
  • Ecuador would lift its reserve concerning the waiver of Article I of the GATT 1994 that the European Communities has requested for preferential access to the European Communities of goods originating in ACP states signatory to the Cotonou Agreement; and would actively work towards promoting the acceptance of an EC request for a waiver of Article XIII of the GATT 1994 needed for the management of quota C under the import regime described in paragraph C(2) until 31 December 2005.

The European Communities notified the Understandings as mutually satisfactory solutions within the meaning of Article 3.6 of the DSU. Both Ecuador and the United States communicated that the Understandings did not constitute mutually satisfactory solutions within the meaning of Article 3.6 of the DSU and that it would be premature to take the item off the DSB agenda. At the DSB meeting on 25 September 2001, Ecuador made an oral statement whereby it criticised the Commission proposal aimed at reforming the EC common organization for bananas in order to honour the above Understandings.

On 4 October 2001, the European Communities circulated a status report on the implementation where it indicated that it was continuing to work actively on the legal instruments required for the management of the three tariff quotas after 1 January 2002. In addition, the European Communities’ report indicated that no progress had been made since the previous DSB meeting regarding the waiver request submitted by the European Communities and the ACP States. The European Communities further indicated that in the event that no progress was made at the meeting of the Council of Trade in Goods scheduled for 5 October 2001, the European Communities and the ACP States would be forced to reassess the situation in all respects. At the DSB meeting on 15 October 2001, the European Communities recalled that the procedure for the examination of the waiver request had been unblocked at the meeting of the Council for Trade in Goods on 5 October 2001, and expressed its readiness to work and discuss with all interested parties in the course of this examination. Ecuador said that if the waiver was limited to what was required during the transitional import regime then it could be granted quickly. Guatemala said that it would carefully follow the outcome of the European Communities’ actions and requested that the item should remain on the DSB agenda. Honduras noted that the European Communities had an obligation to describe the measures to be put in place after 2005. It also reiterated its concerns that the rights of developing countries were not being respected. Panama supported the statement by Honduras and urged the European Communities to take into account the concerns of Latin American banana exporters. The United States expressed satisfaction that the examination procedure of the waiver request had started and hoped that the process would be expeditious. St. Lucia said that the statement by Honduras that the European Communities disregarded the rights of some developing countries was inaccurate. It welcomed the start of the examination procedure and hoped that any current differences would soon be resolved. At the DSB meeting on 5 November 2001, the European Communities informed that the Working Party to examine the waiver requests submitted by the European Communities and ACP had made some progress. Ecuador said that tariff preferences to be applied by the European Communities would reproduce the same inconsistencies in the banana import regime. Honduras indicated that it was necessary to ensure that the scope of the waiver did not go beyond what was required for the implementation of the new regime. Panama said that even if the waiver was granted, the dispute would not be settled.

At the DSB meeting on 18 December 2001, the European Communities welcomed the granting of the two waivers by the Ministerial Conference, which were the prerequisite for the implementation of phase II of the Understandings reached with the United States and Ecuador. The European Communities noted that the Regulation implementing phase II would be adopted on 19 December 2001, with effect on 1 January 2002. Ecuador, Honduras, Panama and Colombia noted the progress made and sought information from the European Communities concerning the granting of import licences by one EC member State in a manner that was inconsistent with the Understandings. On 21 January 2002, the European Communities announced that Regulation (EC) No. 2587/2001 had been adopted by the Council on 19 December 2001 and indicated that through this Regulation the European Communities had implemented phase 2 of the Understandings with the United States and Ecuador. Pursuant to the Understandings on Bananas and the Doha Waiver, the European Communities adopted the 2005 Regulation which was challenged in the second series of compliance panel proceedings (see above). Following the Appellate Body reports in such compliance proceedings, the European Communities informed the DSB on 9 January 2009 that it intends to bring itself into compliance with its recommendations and rulings by modifying its scheduled tariff commitments on bananas through an agreement on the level of the new EC bound tariff duty with Latin American banana supplying countries pursuant to negotiations under Article XXVIII of the GATT.

At the DSB meeting on 21 December 2009, the European Union reported that it had reached a historic agreement with Latin American banana suppliers the previous week (the so-called “Geneva Agreement on Trade in Bananas”).  The agreement, together with an agreement regarding the settlement of the case brought by the United States, had been initialled on 15 December 2009.  Those agreements provided for final settlement of all current disputes regarding the EU import regime on bananas upon certification of a new EU tariff schedule on bananas. On 7 January 2010, the European Union and Ecuador notified the DSB that in light of the Geneva Agreement on Trade in Bananas, it was not necessary for the European Union to continue to provide status reports in this dispute while the European Union is taking the necessary steps to implement the terms of the Agreement.

 

Mutually agreed solution

On 8 November 2012, the parties notified the DSB of a mutually agreed solution pursuant to Article 3.6 of the DSU.

 

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