SUNS 4352 Wednesday 13 January 1999

Trade: US and three Latins object to EC panel request on bananas



Geneva, 12 Jan (Chakravarthi Raghavan) -- The US envoy to the WTO, Amb. Rita Hayes indicated Tuesday, before the WTO's Dispute Settlement Body convened that the US and three Latin banana producers would object to reference of the EC request for an Art. 21.5 panel over its banana regime.

Trade envoys said that they expected a long procedural debate at the DSB.
Hayes told a press briefing that the United States, Honduras, Guatemala and Panama had notified the DSB chair, Mr. Kamal Morjane of Tunisia, that they did not accept that the EC request for an Art. 21.5 panel had been properly presented at the 16 December meeting of the DSB to be treated as a request at the first meeting, (and thus entitled to automatic reference at the second meeting) and that they would object to the reference of the EC request at this meeting.

The US Ambassador said that the US 'understood' the Ecuador frustration leading to its request for an expedited Art. 21.5 panel hearing on whether the EC had complied with the earlier ruling, and being the second time it comes up at the DSB it could be referred.

The US did not also see any conflict between Ecuador (one of the banana producers which, with the US, had challenged the EC regime successfully) taking the Art. 21.5 route and the US exercising its WTO rights through Art. 22 for trade sanctions against the EC, and the two could proceed in parallel.

The US, she said, was still intent on seeking the DSB authority (automatic under Art. 22.6) for the withdrawal of concessions to the EC, and this would be brought up at the next regular meeting of the DSB on 25 January, unless before then the EC showed "willingness" to deal with the substance of the banana regime issue.

But the US still sought a solution and would want the EC to agree to sit and negotiate the banana tangle on "substance". Hayes was evasive whether the US would definitely go forward with the sanctions move, pending the negotiations in "substance" with the EC.

EC sources which had expected Monday evening that both the Ecuador and EC request for panels would be accepted, said in response to the Hayes press briefing that the DSB would agree to the Art. 21.5 panel (the original panel with a mandate to provide a ruling within 90 days)
request of Ecuador, and that if the EC request was blocked Tuesday, it would come back with the same request within a week or ten days and get an automatic reference to the panel.

Apart from the banana dispute, the US and EC are also involved in other bitter wrangles, including over beef hormone issue, and Hayes indicated that the US was looking forward even more anxiously to a solution to the dispute in which a panel has ruled against the EC, but the ruling
has left open the possibility of the EC consulting scientific experts again to decide on the health and safety questions involved.

Hayes told the press that the EC was not seeking a review of its regime and its compliance with the WTO ruling under the Art. 21.5 route, but in fact seeking an interpretation of the article.

Some trade diplomats said that it was difficult to see how even on Ecuador's request, a panel could avoid looking into the proper interpretation of Art. 21.5. They also noted that the EC has also raised a dispute with the US over the S.301 issue, and in due course could bring it up before the DSB for a panel.

However, the two major trading nations appear to be engaged in a game of brinkmanship to see who would chicken out first, but the two would avoid getting a definitive ruling from the WTO on these questions, which lie at the heart of their mercantilist strategy of pressure and threats to gain market access and power.

Nor was it conceivable that the two greatest beneficiaries of the trading system willingly risk jeopardising the system, though their "brinkmanship" could result in that.