Split Grows Between EU, U.S. on Bananas

21 December 1998

Last week proved perhaps the most complicated week yet in the banana dispute between the EU and U.S. It seemed early last week that the EU would extend an olive branch to the U.S. and call for a speedy review of its proposed banana import regime to the U.S. - in an effort to settle the two sides' dispute over whether the EU has 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 48, December 14, 1998). What the EU actually proposed left the co-complainants in the dispute - the U.S., Ecuador, Guatemala, Mexico and Honduras (G-5) feeling that rather than an olive branch the EU wielded a blunt instrument of "procedural conditions" in an attempt to secure a favourable decision in the case.
In its proposal to the WTO Dispute Settlement Body (DSB) December 15 the EU requested "the establishment of a panel under Article 21.5 of the DSU with the mandate to find that [the proposed revised banana import regime] must be presumed to conform to WTO rules unless their conformity has been duly challenged under the appropriate DSU procedures." Article 21.5, a provision not previously applied in a WTO dispute, specifies that if one country disagrees with another countries' approach to the implementation of a DSB ruling--in this case the EU's proposed banana import regime--the disagreement "shall be decided through recourse to these dispute settlement procedures,
including wherever possible resort to the original panel." The EU proposal last week, in simple terms, challenges the G-5 to join the EU request for review under Article 21.5 if they believe the EU regime is not consistent with the WTO, and that the absence of challengers should indicate the regime is consistent.

The G-5 immediately rejected the EU proposal. The U.S. noted that Article 21.5 offers "no basis in the text for establishing a panel with the 'mandate' requested by the EC." Further, U.S. Ambassador to the WTO Rita Hayes said in a letter to the DSB chairperson last week, "I can only conclude that the EC is neither seeking to have a panel review its banana import regime to determine whether it is consistent with EC obligations under the WTO, nor providing the DSB with any legal basis for taking action at today's meeting." The December 15 DSB meeting ended without taking action on the EU request.

However, Ecuador later independently requested a panel review of the EU regime in an effort to settle the dispute. "Ecuador is putting its trust in the multilateral trade system, enough damage has been done, and we hope the step is in the right direction," Roberto Betancourt, Ecuador's Ambassador to the WTO, said. The DSB was expected to meet on this request today (December 21) as BRIDGES Weekly Trade News Digest goes to press. Meanwhile, the U.S.-EU summit last week in Washington yielded no progress on the matter. However, the U.S. delayed publication - due December 15 - of the list of products subject to 100 percent duties effective early next year unless the EU changes its revised regime. Observers note that beyond the specifics of this case, the dispute highlights a flaw in WTO rules, specifically, how to enforce WTO rulings.

In related news, Associate U.S. Trade Representative Ralph Ives earlier this month urged Caribbean countries to discuss alternatives to the EU banana regime. Mr. Ives addressed dispute-related questions from reporters and trade experts from the Caribbean, during which he adamantly rejected the suggestion that U.S. policy in the banana matter has been at all influenced by U.S.-based Chiquita Brands International.

"US presses ahead with sanctions against EU in bitter banana dispute," JOURNAL OF COMMERCE, December 21, 1998; "U.S. rejects EU bid to end banana fight, delays retaliation list;" "Request for the Establishment of a Panel by the European Communities," INSIDE US TRADE, December 18, 1998; "WTO meet on EU-US banana row likely Friday - diplomats," THE HERALD (St. Vincent-Grenadines); "Banana cease-fire," JOURNAL OF COMMERCE, December 17, 1998; "U.S., Latin Americans fume over EU banana move," REUTERS, December 15, 1998; "Improbable conciliation euro-américaine sur la banane," LA TRIBUNE, December 17, 1998.

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