World Trade WT/DS27/R/GTM

WT/DS27/R/HND

22 May 1997

Organization

(97-2078)

Original: English

European Communities - Regime for the Importation,

Sale and Distribution of Bananas

Complaint by Guatemala and Honduras

Report of the Panel

The report of the Panel on European Communities - Regime for the Importation, Sale and Distribution of Bananas is being circulated to all Members, pursuant to the DSU. The report is being circulated as an unrestricted document from 22 May 1997 pursuant to the Procedures for the Circulation and Derestriction of WTO Documents (WT/L/160/Rev.1). Members are reminded that in accordance with the DSU only parties to the dispute may appeal a panel report, an appeal shall be limited to issues of law covered in the panel report and legal interpretations developed by the panel, and that there shall be no ex parte communications with the panel or Appellate Body concerning matters under consideration by the panel or Appellate Body.

Note by the Secretariat: This Panel Report shall be adopted by the Dispute Settlement Body (DSB) within 60 days after the date of its circulation unless a party to the dispute decides to appeal or the DSB decides by consensus not to adopt the report. If the Panel Report is appealed to the Appellate Body, it shall not be considered for adoption by the DSB until after the completion of the appeal. Information on the current status of the Panel Report is available from the WTO Secretariat.

The reports of each of the Complaining parties in the dispute have identical paragraph and footnote numbering. In the Findings section of each report, however, certain paragraph and footnote numbers are not used.

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TABLE OF CONTENTS

I. INTRODUCTION 1

Terms of reference 1

Panel composition 2

II. PROCEDURAL ISSUES 3

(a)Adequacy of the consultations and specificity of the request for panel establishment 3

(b)The requirement of legal interest 8

(c)Multiple panel reports 13

III. FACTUAL ASPECTS 15

(a)Banana production and trade 15

(b)The EC's common organization of the banana market 15

(i) Tariff treatment 16

(ii) Quantitative aspects, including country allocations 17

(iii) Licensing requirements 20

(c)Trade policy developments concerning bananas 24

(i) Disputes relating to bananas under the GATT 24

(ii) Framework Agreement on Bananas 24

(iii) Tariff changes 24

(iv) Lomé waiver 25

(v) Accession of Austria, Finland and Sweden to the EC 25

IV. MAIN ARGUMENTS 26

A. GENERAL 26

B. TRADE IN GOODS 28

1.GENERAL OVERVIEW OF THE CASE 28

(a)Overview of the claims presented by the Complaining parties 28

(i) Tariff issues 28

(ii) Allocation issues 28

(iii) Import licensing issues 29

(b)Overview of the responses presented by the European Communities 29

(i) Separate regimes 30

(ii) GATT schedules and Articles I and XIII in the context of the Agreement on Agriculture 30

(iii) The non-applicability of the Agreement on Import Licensing Procedures to tariff quotas 31

(iv) The non-applicability of Articles III:4 and X of GATT to border measures 32

(v) The Lomé waiver 32

2.DETAILED ARGUMENTS 34

(a)Tariff issues 34

(i) Tariff preferences for non-traditional ACP banana imports 34

Arguments of the Complaining parties 34

Arguments of the EC 35

The Lomé waiver 35

Parties' subsequent arguments - non-traditional ACP tariff preferences 52

(ii) Third-country tariff rates 54

(b)Allocation issues 59

(i) General allocations 59

Article XIII:2 of GATT 59

Arguments of the Complaining parties 59

Arguments of the EC 66

Separate regimes 66

GATT schedules and Articles I and XIII in the context of the Agreement on Agriculture 72

Parties' arguments - interpretive issues 79

Article XIII:1 of GATT 96

Article I of GATT 97

The Lomé waiver 98

(ii) Reallocation of shortfalls 102

(c) Import licensing issues 105

(i) The licensing regime as a whole 105

Arguments of the Complaining parties 105

Arguments of the EC 109

The non-applicability of the Agreement on Import Licensing Procedures to tariff quotas 109

The non-applicability of Articles III:4 and X of GATT to border measures 112

Parties' subsequent arguments - the licensing regime as a whole 114

Claims under the GATT 120

Claims under the Licensing Agreement 131

Claims under the Agreement on Agriculture 143

(ii) Operator category licence allocation 145

Claims under the GATT 147

Claims under the Licensing Agreement 159

Claims under the Agreement on Trade-Related Investment Measures 166

(iii) Activity function licence allocation 171

Licence distribution issues 171

Claims under the GATT 173

Claims under the Licensing Agreement 178

Issues concerning "over-filing" or "double-counting" 182

(iv) Export certificates 187

Claims under the GATT 187

Claims under the Licensing Agreement 192

(v) Publication of regulations and timing of licences 194

Claims under the GATT 195

Claims under the Licensing Agreement 200

(vi) Licences provided to EC banana producers 201

(vii) Hurricane licences 203

C. GENERAL AGREEMENT ON TRADE IN SERVICES (GATS) 208

Introduction 208

Issues of scope 212

(a)The relationship between the GATS and the multilateral agreements on trade in goods 212

(b)Standard of discrimination under the MFN and national treatment obligations 216

(i) Measures affecting trade in services - Articles I:1 and XXVIII(c) 216

(ii)Measures affecting trade in services - Article XVII:1 218

(iii)Standard of discrimination: ArticleII 220

(c) Wholesale trade services 223

Operator category licence allocation 232

(a) Article XVII 232

(b) Article II 243

Activity function licence allocation - Articles II and XVII 245

Hurricane licences - Articles II and XVII 249

Export certificates - Articles II and XVII 250

V. ARGUMENTS PRESENTED BY THIRD PARTIES 253

ACP THIRD PARTIES 253

Introduction 253

The Lomé Convention and the Lomé waiver 258

Article I of GATT 263

Article XIII of GATT 265

Article X of GATT and the Licensing Agreement 266

The GATS 267

Conclusion 269

CANADA 270

The relationship between trade in goods and trade in services 270

The Lomé waiver 271

Conclusion 272

COLOMBIA, COSTA RICA, NICARAGUA AND VENEZUELA 273

Introduction 273

Principal legal arguments 273

Subsidiary legal arguments 277

Conclusions 283

INDIA 285

The Lomé Convention and the Lomé waiver 285

Conclusion 285

JAPAN 286

Non-applicability of the Agreement on Import Licensing Procedures to tariff quota systems 286

Conclusion 286

THE PHILIPPINES 287

Preliminary arguments 287

Specific legal arguments 288

Conclusion 289

VI. INTERIM REVIEW 290

VII. FINDINGS 292

A. ORGANIZATIONAL ISSUES 292

1. PARTICIPATION OF THIRD PARTIES 292

2. PRESENCE OF PRIVATE LAWYERS 294

B. PRELIMINARY ISSUES 295

1. ADEQUACY OF THE CONSULTATIONS 296

2. SPECIFICITY OF THE REQUEST FOR PANEL ESTABLISHMENT 297

(a) Article 6.2 and the request for establishment of the Panel 297

(b) The arguments of the parties 298

(c) Analysis of the Article 6.2 claim 299

(i) Ordinary meaning of treaty terms 299

(ii) Context 301

(iii) Object and purpose 302

(iv) Past practice 302

(v) Cure 305

3. REQUIREMENT OF LEGAL INTEREST 305

4. NUMBER OF PANEL REPORTS 307

C. SUBSTANTIVE ISSUES 309

1. THE EC MARKET FOR BANANAS: ARTICLE XIII OF GATT 309

(a) Article XIII 310

(i) Separate regimes 314

(ii) Members with a substantial interest 316

(iii) Members without a substantial interest 318

(iv) New members 319

(v) Other arguments 320

(b) The allocation of tariff quota shares to ACP countries: The Lomé waiver 320

(i)Preferential treatment required by the Lomé Convention 321

(ii) Application of the Lomé waiver to the EC's ArticleXIII obligations 323

(c) The allocation of tariff quota shares to BFA countries 325

(i) Inclusion of the BFA tariff quota shares in the EC Schedule 325

(ii) Agreement on Agriculture 329

(d) Tariff quota share allocations and Article I:1 331

2. TARIFF ISSUES 331

3. THE EC BANANA IMPORT LICENSING PROCEDURES 334

(a) General issues 334

(i) Scope of the Licensing Agreement 334

(ii) GATT 1994 and the Annex 1A Agreements 337

(iii) Separate regimes 339

(iv) Examination of the licensing claims 339

(b) Operator categories 340

(i) Article III:4 of GATT 340

(ii) Article 2 of the TRIMs Agreement 345

(iii) Article I of GATT 346

(iv) Application of the Lomé waiver to the EC's ArticleI obligations 350

(v) Article X:3(a) of GATT 354

(vi) Other claims 355

(c) Activity functions 356

(i) Article III:4 of GATT 356

(ii) Article I:1 of GATT 357

(iii) Article X:3(a) of GATT 358

(iv) Other claims 360

(d) BFA export certificates 360

(i) Article I:1 of GATT 361

(ii) Other claims 363

(e) Hurricane licences 363

(i) Article III:4 of GATT 364

(ii) Article I:1 of GATT 366

(iii) Application of the Lomé waiver 367

(iv) Article 1.3 of the Licensing Agreement 368

(v) Other claims 369

(f) Other claims 369

(i) General 369

(ii) Article 1.2 of the Licensing Agreement 370

4. THE EC BANANA IMPORT LICENSING PROCEDURES AND THE GATS 370

5. NULLIFICATION OR IMPAIRMENT 370

D. SUMMARY OF FINDINGS 370

VIII. FINAL REMARKS 374

IX. CONCLUSIONS 374

ATTACHMENT 375

WT/DS27/R/GTM

WT/DS27/R/HND

Page 83

. INTRODUCTION

On 5 February 1996, Ecuador, Guatemala, Honduras, Mexico and the United States acting jointly and severally, requested consultations with the European Communities ("the Community" or the "EC") pursuant to Article 4 of the Understanding on Rules and Procedures governing the Settlement of Disputes ("DSU"), Article XXIII of the General Agreement on Tariffs and Trade 1994 ("GATT"), Article 6 of the Agreement on Import Licensing Procedures (to the extent that it related to Article XXIII of GATT), Article XXIII of the General Agreement on Trade in Services, Article 19 of the Agreement on Agriculture (to the extent that it related to ArticleXXIII of GATT), and Article8 of the Agreement on Trade-Related Investment Measures (to the extent that it related to Article XXIII of GATT) regarding the EC regime for the importation, sale and distribution of bananas established by Council Regulation (EEC) 404/93[1], and the subsequent EC legislation, regulations and administrative measures, including those reflecting the provisions of the Framework Agreement on Bananas, which implemented, supplemented and amended that regime (WT/DS27/1).

Consultations were held on 14 and 15 March 1996. As they did not result in a mutually satisfactory solution of the matter, Ecuador, Guatemala, Honduras, Mexico and the United States, in a communication dated 11 April1996, requested the establishment of a panel to examine this matter in light of the GATT, the Agreement on Import Licensing Procedures, the Agreement on Agriculture, the General Agreement on Trade in Services ("GATS") and the Agreement on Trade-Related Investment Measures (WT/DS27/6).

The Dispute Settlement Body ("DSB"), at its meeting on 8 May1996, established a panel with standard terms of reference in accordance with Article 6 of the DSU (WT/DS27/7). Belize, Canada, Cameroon, Colombia, Costa Rica, Côte d'Ivoire, Dominica, Dominican Republic, Ghana, Grenada, India, Jamaica, Japan, Nicaragua, the Philippines, Saint Vincent and the Grenadines, Saint Lucia, Senegal, Suriname, Thailand and Venezuela reserved their third party rights to make a submission and to be heard by the Panel in accordance with Article 10 of the DSU. Several of these countries also requested additional rights (see paragraph 7.4). Thailand subsequently renounced its third party rights.

Terms of reference

The following standard terms of reference applied to the work of the Panel:

"To examine, in the light of the relevant provisions of the covered agreements cited by Ecuador, Guatemala, Honduras, Mexico and the United States in document WT/DS27/6, the matter referred to the DSB by Ecuador, Guatemala, Honduras, Mexico and the United States in that document and to make such findings as will assist the DSB in making the recommendations or in giving the rulings provided for in those agreements."

Panel composition

On 29 May 1996, the Director-General was requested by Ecuador, Guatemala, Honduras, Mexico and the United States to compose the Panel by virtue of paragraph 7 of Article 8 of the DSU.

On 7 June 1996 the Director-General announced the composition of the Panel as follows:

Chairman: Mr. Stuart Harbinson

Members: Mr. Kym Anderson

Mr. Christian Häberli

The Panel submitted its interim report to the parties to the dispute on 18March1997 and the final report on 29 April 1997.


. PROCEDURAL ISSUES [2]

In this section, the parties' arguments are set out with respect to three procedural issues: (i)the adequacy of the consultations and the specificity of the request for panel establishment; (ii) the requirement of legal interest; and (iii) multiple panel reports. The organizational matter with respect to the participation of third parties in these proceedings and presence of private lawyers in meetings of the Panel is addressed in the "Findings" section of this report. Arguments presented by third parties on their participation in these proceedings are summarized in SectionV.

(a)Adequacy of the consultations and specificity of the request for panel establishment

The EC noted that consultations on the EC banana regime were held in the autumn of 1995 between the EC, a number of banana producing countries, parties to the Lomé Convention, Guatemala, Honduras, Mexico and the United States. These consultations were inconclusive and were terminated when a new round of consultations started. After Ecuador had become a WTO Member on 26January1996, Ecuador as well as Guatemala, Honduras, Mexico and the United States requested consultations with the EC on its banana regime by letter dated 5 February 1996 and circulated to Members as document WT/DS27/1 on 12 February 1996. It contained, in the view of the EC, only the barest outline of the complaints against the EC banana regime. Bilateral consultations were held with each of the Complaining parties on 14 and 15 March 1996 in Geneva.

The EC, being of the view that consultations were intended not only to "give sympathetic consideration" to the considerations and the questions of the Complaining parties, but also to enable the responding party to obtain a clear view of the case held against it, prepared a large number of questions in an attempt to better understand the complaints of Ecuador, Guatemala, Honduras, Mexico and the United States. These questions were transmitted on 3 April 1996. In the meantime, the EC was preparing its answers to the numerous questions posed by the Complaining parties. On 11April1996, however, Ecuador, Guatemala, Honduras, Mexico and the United States submitted a request for the establishment of a panel to the Chairman of the DSB (WT/DS27/6). Under these circumstances, the EC, concluding that the Complaining parties were of the view that the consultation phase was over, decided not to submit its answers to these questions nor received any answers to its own questions.