SUNS  4326 Wednesday 18 November 1998

Geneva, 16 Nov (Chakravarthi Raghavan) -- Ecuador, one of the complainants in the dispute against the EC over its banana regime, has sought reactivation of consultations with the EC, as a
preliminary to seek a ruling from the original banana panel on whether the new EC regime complies with the WTO rules and the dispute settlement body (DSB) recommendations.

The Ecuador's move in a notification to the DSB comes even as its co-complainant, the United States, has announced that it would take retaliatory action and impose 100% duties out of a list of goods and products from the EC of a trade value of about one billion dollars.

The original panel ruling, as modified by the appellate body, holding the EC banana import regime, and the licensing procedures for import of bananas, to be inconsistent with the GATT and the
GATS. That ruling was adopted on 25 September 1997, and an arbitration award granted the EC time till 1 January 1999, to comply with the ruling.

The EC has announced changes in its regime in two stages, one in July this year for a new tariff and quota regime, and more recently measures to comply with its obligations under the GATS.

The complaints, the Latin American banana exporting countries (Ecuador, Guatemala, Honduras, Mexico and the United States) have been repeatedly complaining at the DSB that the new EC rules did not comply with the panel rulings.

In August Ecuador and others sought consultations with the EC on this, and for reconvening of the panel under Art. 21.5 to examine whether the rulings had been complied with. But the EC insisted
that decisions by its Ministers on the entire regime had been reached, it could not agree to this. The EC also raised the issue that though Art. 21.5 provided for the reconvening of the original panel and a speedy procedure to rule on compliance, the other provisions of the DSU for prior consultations etc had to be satisfied.

The US, which has been pursuing the dispute on behalf of the chiquita banana Transnational and the EC's whole-sale and retail marketing arrangements, announced recently that it would bypass the panel procedure for judging the new regime, but proceed to seek authority for imposing trade sanctions against the EC.

It has notified a broad range of products, worth an annual billion dollar trade, from which it will choose products for sanctions.

The EC in turn said that if the US persisted in this move, it would complain against the US sanctions at the WTO.

Privately, the EC officials have been saying that they had a difficult time, given the differences among its members, with France and Britain backing strongly the ACP preferences and Germany
and some others backing the Latin American banana exporters and suppliers.

They had however indicated last week that they were ready to consult with the original complainants on the compatibility of their new regime with the panel rulings, and if necessary go before the reconvened panel, but that they did not what to do in the face of the US threat of retaliation.

Ecuador on Monday notified the DSB that without prejudice to its position (that it need not hold consultations prior to seeking the reconvening of the panel), it was ready to consult with EC at their
earliest convenience between 17-23 November.

The US could seek to join such consultations, rather go ahead straightaway with the retaliation route.

Under the DSU, Art. 21.5 if there is a dispute on the consistency of measures taken to comply with rulings, the dispute is to be decided through recourse to the dispute settlement procedures, including where possible resort to the original panel.

In such a case, the panel is to circulate its report within 90 days of the referral of the dispute.

If the EC's view that other procedures of the DSU, including the consultation procedures, have also to be complied with, reference to the panel may take, depending on whether consultations are held
or not, anywhere from 10 to 60 days.

And under 21.7, in any dispute raised by a developing country member, the DSU is also mandated to consider what further action it might taken that would be appropriate in the circumstances.

But this -- like other special and differential treatment provisions of the WTO agreements -- could prove an illusory remedy for Ecuador and other Latin American banana producers.

As for retaliation that the US is threatening, under Art. 22.6 of the DSU, the US has to seek the authorization of the DSB for withdrawal of equivalent concessions to the nullification and impairment of its rights, and the DSB is to give the sanction within 30 days.

The negative consensus procedures of the DSU is to apply, that is sanction is automatic unless there is a consensus to be contrary.

But if the EC were to challenge the extent of compensation/retaliation proposed by the US, this is to be arbitrated, preferably by the original panel or an arbitrator appointed by the WTO's Director-General.

While the US can retaliate to compensate for its 'losses' (the loss suffered by the chiquita and/or dole banana tncs in terms of the marketing etc), it would not resolve the problems of the Latin
banana exporters.

They have tied their fate to that of the US in pursuing this case, on the basis that if the US banana TNCs are able to increase their exports to the EC, to that extent the TNCs would buy more bananas
from them.

But that logic would not help them in their trade loss. They have to undertake their own "retaliation".