SUNS  4332 Thursday 26 November 1998



US SPURNS EC "OFFER", WILL PURSUE RETALIATION

Geneva, 25 Nov (Chakravarthi Raghavan) -- The United States made clear Wednesday that it would not accept the EC moves for an expedited process on the compatibility of its banana regime with the WTO rulings, and made clear it would go ahead with its moves for retaliations, subject to the approval of the WTO and the Dispute Settlement Body, which was automatic under the rules.

Earlier, the European Communities' top official in a media briefing repeated its willingness to agree to an expedited WTO panel process to resolve the dispute with the USA over the new EC banana regime and whether it complies with the panel rulings.

However, insisted the EC, this would be contingent on the US agreeing that the WTO processes is only basis for resolving the dispute, and the US should drop its moves for unilateral determinations under S.301 of its trade act, and seek the DSB authorization to impose trade sanctions from February as announced.

But the United States, in a statement due to be made at the DSB, has in effect spurned the offer, and insisted that its announced measures in respect of trade sanctions were just its internal procedures to be able to invoke trade sanctions in accord with WTO procedures. In terms of
Art. 22 of the DSU (which required the DSU to authorize such trade sanctions), the US could withdraw concessions no later than the 60 days after the expiration of the time-limit for the EC to comply. The only way the US request for retaliation authorization could be denied by the WTO was by consensus, and since the US as requesting party is not likely to accept a consensus, the authorization is virtually automatic.

The US has also said that it was willing to the reconvening of the original panel to rule by 15 January the compliance of the EC regime with the ruling.

The US insisted that its S.301 actions did not violate the WTO, but if the EC put forward a proper for consultations, it would agree on it.

A senior EC official had earlier explained that the EC was ready to engage in expedited panel procedures in the dispute was to whether the new regime complies with the panel rulings, provided "such expedited panel processes remain the only basis for resolving the dispute." If the expedited panel process results in a ruling in favour of the EC, the US muse accept and not have recourse to unilateral trade sanctions.

The United States Trade Representative has set in motion in Washington, by publishing in the Federal Register, a list of products imported from the US from out of which it will select a final list by 15 December, and impose such retaliatory duties as early as February.

If the US proceeds on this path, even ahead of any actual retaliatory measures, the EC will raise a dispute over the S.301 provisions, and seek formal consultations as an essential step to seek a panel to resolve this issue, EC commission officials told a press briefing Wednesday.

The banana dispute, and the EC actions to implement the rulings, were on the agenda of the WTO's Dispute Settlement Body (DSB) when it met Wednesday morning, but the order of the agenda was changed, and consideration of the item was put off till the afternoon meeting.

By that time EC commission officials were due to meet with the US ambassador to the WTO, and formally present their position, which had been conveyed a few days ago by the EC Commissioner, Sir Leon Brittan, in a letter to the USTR, Mrs. Charlene Barshevsky.

Initial Washington reactions to the proposal had not been favourable.
The US side has been suggesting that the EC should agree to the reconvening of the original panel under Art. 21.5 of the Dispute Settlement Understanding (DSU) and for the panel to give a ruling

EC officials here while reiterating their willingness to accept expedited panel processes, seemed unwilling to commit themselves (as the Americans want) for the panel to convene and give a ruling within 45 days (as under Art. 21.5) -- well in time before the US S.301 processes kick in.

The EC officials note that there were other parties involved. And while the EC for its part was not interested in delays, the procedures required under the DSU had to be followed, including consultations between parties.

The US invoking S.301, and announcement of a list of products for retaliatory action from which a choice is to be made by 15 December, and duties imposed after seeking authorization from the DSB in January, appeared to be based on a reading of Art. 22.6 (which envisages the DSB granting authorization, unless there is a consensus against it), but ignoring other provisions before such a step.

The EC officials said that they need not wait for actual retaliatory actions before raising a dispute, but that in their reading of the WTO rules, even the existence of the S.301 was sufficient to raise a
dispute and challenge it.

And while, the US has been invoking and threatening the use of sanctions under S.301, special 301, and Super 301 against several countries since the WTO came into force, this was the first time it had been invoked against the EC, giving the EC a cause for action, the officials explained.

But there was some uncertainty as of Wednesday noon whether the two sides will push the issues to the brink, or draw back at the last moment and avoid a confrontation - as they have done before.

Even the US has always avoided a WTO process that will go into the various 'trade sanctions' processes of its trade law - preferring rather to settle matters, rather than take them over the brink and face the risk of its laws being declared WTO illegal.