SUNS  4287 Thursday 24 September 1998


MORE RECRIMINATIONS OVER EC BANANA REGIME

Geneva, 22 Sep (Chakravarthi Raghavan) -- The United States and the European Communities continue to be engaged in protracted and recriminatory, public and private, exchanges at the WTO over how the EC will give effect to the recommendations of the Dispute Settlement Body (DSB), adopting the panel ruling on this.

The EC has time until the beginning of 1999 to give effect to the ruling. The quarrel now between the EC on one side and the US and other complaining countries (Ecuador, Guatemala, Honduras and Mexico) is over how the EC will be implementing the ruling and attempts of the complainants to get WTO process going on this before the expiry of the time limit for implementation.

The EC, in accord with its internal regulations for decision-making, has decided on and notified a new quota regime for banana imports. It is still in the process of formulating and deciding on a regime for licensing of imports and marketing (in terms of its obligations under the GATS). It has published its proposals, and in the light of views, these will be put before the EC Council of Ministers, who have to approve it (with or without changes) before promulgating it.

Specifically, the US, Ecuador, Guatemala, Honduras and Mexico have been trying to use a so far untested provision of the Dispute Settlement Understanding, Rule 21. (5) under which disagreement between parties on measures taken to comply with rulings are to be decided through recourse to the dispute settlement procedures, including where possible reference to the original panel and a decision by that panel within 90 days. The US and its partners say that their complaints have to automatically go to the old panel for a ruling within 90 days, while the EC insists that other procedures of the DSU (for consultations etc) must also be gone through.

In the discussions Tuesday, the Philippines brought up the probability that the WTO/DSU processes might result in a perpetual cycle of rulings, appeals, measures by a country losing the case to
implement, and this again being challenged.

At the last meeting of the DSB (in July), the US and its four Latin American banana exporting countries, who are joint complainants in the dispute, expressed their dissatisfaction with the EC proposals and decisions to implement the ruling, and had in effect served notice of their intent to use the DSU Art. 21.5. A document by the five before the DSB has formalised this view, but stopped short of seeking a DSB decision to activate the Art. 21.5 process.

The DSB meeting on Tuesday was twice postponed, as the two sides, with the DSB chairman participating at one stage, attempting to reach an accord, and when it finally met heard exchanges between the US and the EC, and several members intervening on what they considered to be systemic issues raised.

There have been prolonged consultations between the US and the EC on the issue, including on the night of 21 - with EC sources suggesting some ad referendum deal was struck between the two, but which Washington did not accept and hence fell through, and the US denying any such deal had been struck. The DSB meeting convened on Tuesday afternoon, after an apparent understanding between the US and EC that the US inscribed item about 21.5 would be "for
information purpose" only and not for actual proposal for action, and that on basis of such clarification, the EC would not object to the adoption of the agenda.

This was brought up formally and confirmed - with the EC raising the question even before adoption of the agenda, and the US confirming that its objective on the item was to give information. WTO officials noted that the DSU rules and procedure provided for 10 days notice to bring an item on the draft agenda, which have to be approved at the start of the meeting. They could not clarify whether this meant that while the DSU provided for an automatic, negative consensus process in disputes - from the stage of seeking consultations through reference to a panel, appeals and adoption of
the rulings - any party could hold up the issue coming on the agenda. They could only say that consensus for adoption of an agenda had never been withheld before, but they could not say what
would have happened if the US and EC had not agreed before hand that the item would be only for information purpose.

The DSB agenda had two separate items listed on the agenda on the issue, one under the catch-all surveillance of implementation of DSB recommendations (with the EC to make a status report), and
another item inscribed by the US and four others on the "recourse to Art. 21.5 of the DSU" on this issue.

On the status of implementation, the EC reported that its Council of Ministers had taken a decision on the partial implementation, namely a quota regime to be applied, and the Commission had been
authorized to start negotiations on quotas with substantial suppliers and third parties concerning their claims. The EC processes for implementing the other recommendations, regarding the issue of licences, was still to be adopted and made into EC regulations.

At the end of the discussions, separate, on the two items, the DSB took no decision, beyond one to keep on the DSB agenda the surveillance report item, but not the US item. The next meeting of
the DSB is set for 21 October, when the US and complainants could again bring up their item.

But with the US not wanting to test under 21.5 the new proposed quota regime but both the quota regime and the licensing issue (not yet decided and notified), it is difficult to see how a quick DSB
resolution can be envisaged, excepting by accord of the two sides.

In a statement at the DSB on behalf of the five complainants, the US complained that the EC had refused to agree to the reference of their differences over implementation under Art. 21.5 of the DSU, that prolonged consultations with the EC (at its insistence) had confirmed that the US and the EC did not agree on the WTO-consistency of the measures taken to comply. The proposed EC
measures to allocate its import markets between the ACP and Latin America was almost the same as the flawed earlier quota regime. And the EC's "new criteria" for distributing licenses would perpetuate the discriminatory regime that the panel found inconsistent with its GATS obligations.

The US complained that the EC was insisting on "consultations", and was not agreeable to a straight reference under 21.5 of the issues to the panel, and that this was a "delaying tactic"

The EC in response to what it called "fiery" US statement, claimed it was rhetorical and "implementation" was a matter of interpretation, that the EC was well-ahead of the time for implementation given to it, that in the EC view Art. 21 (5) provisions were limited to two specific points for the DSU process, and that the other DSU provisions, including the formal consultations and 60 day period before invoking a panel, would still apply. And, how could the (reconvened) panel, under 21.5 be asked to review "measures" that are yet to be decided and put in place?

In comments from other DSB members, mostly on the procedural issues raised by the exchanges, Colombia suggested that the DSB chair should hold consultations on the procedural questions, including on how the DSU time-tables for panels that ordinarily have a six-month time to rule, could be reconciled with the 90-day time-limit in 21.5 requirements.

Argentina, Costa Rica, Cote d'Ivoire, and Venezuela also supported suggestion for consultations.

Cuba underscored the fact that the economies of several of the small Caribbean island states would be hit, and their interests need to be taken into account. St. Lucia (one of the Caribbean banana producer/exporter countries affected) said the procedural questions should not divert attention from the real economic issues, and consultations could avoid an escalation of the dispute. Jamaica said the terms of reference to the panel (under 21.5) was an issue that should form part of the consultations.

Brazil was concerned about the issue of allocation of quotas, but had no position on the procedures. Japan saw some systemic issues involved.

The US and complaining countries rejected the need for any consultations, while the EC, without committing itself, spoke approvingly of the Colombian suggestion.

EC sources said that while the community, faced with a difficult internal problem (of differences among its members), the problem of the ACP countries, and the others would like to find an agreed
solution, but would insist on the full DSU procedures for any reference, even under DSU's Art. 21.5.