7:30 AM Jan 18, 1994

BANANA PANEL DISPUTANTS HAVE TIME TILL TUESDAY EVENING

Geneva 17 Jan (Chakravarthi Raghavan) -- Unless the five Latin American complainants and the European community reach an agreement and notify by Tuesday evening the GATT panel looking into the EC's banana regime introduced on 1 July, the report of the panel will be sent to the parties and within a week or so to the Contracting Parties, according to GATT sources.

The panel headed by Singapore's Amb. Kesavapani is looking into the complaint of the five Latin American exporting countries -- Colombia, Costa Rica, Guatemala, Nicaragua and Venezuela -- against the new regime introduced by the EC effective 1 July.

The EC regime provides for a 2 million tonne tariff quota at a 100 ECU per tonne or 20 percent duty, with any excess subject to prohibitive duties that would effectively ban imports from non-ACP sources. The regime is under challenge before a GATT panel.

The complainants had won a ruling against the EC over the previous regime and that panel, headed by an independent chairman (I.G.Patel from India) had not only ruled against the quantitative restrictions on imports from Latin American sources that had been maintained before by some of the EC states, but also against the discriminatory tariffs -- zero tariff for imports from the ACP countries and a higher tariff from Latin American sources.

The panel had held that the EC-ACP Lome agreements could not be called a customs union or free trade area or an interim accord towards a customs union or free trade area (governed by Art. XXIV) and in the absence of a specific waiver from GATT CPs, discrimination between two groups of developing countries could be neither justified by Part IV of the GATT nor by the 1989 Enabling Clause relating to autonomous GSP preferences.

The Uruguay Round agriculture accord requires full tariffication and ensuring minimum access commitments.

The EC had put forward in its original "offers", the tariff offer of the new banana regime for a two million tonne tariff quota on a global basis. On 14 December, it improved its offer but subject to the withdrawal of the complaints.

In its 14 December Uruguay Round offers, the EC has tried to win over the complainants through a sweetened offer -- for a 2.2 million tonne tariff global quota, further divided into country quotas with some increased market share (over their 1992 performance) for Costa Rica and Colombia, but conditional on all the Latin America banana exporting countries members of the GATT withdrawing their complaint before the panel issues its report.

After a meeting last week in Costa Rica, four of the complainants appear to have indicated that they would accept the EC's revised offers, but Guatemala is holding out, and is supported within the Latin American banana exporting group by Ecuador and Panama who are not GATT members and feel aggrieved that as non-GATT members they have been given a raw deal.

But unless Guatemala too yields to the pressures from the EC, and the other four banana exporting countries, the panel's report would issue. Like the earlier report, the adoption of this report too could be blocked by the EC and the ACP countries members of the GATT.

The EC could reinstate, in its agriculture market access schedule, its original offer on bananas, and this would be beyond challenge in terms of the agriculture agreement if accepted by others.

Guatemala or any of the others could reserve their position on the compliance of the EC banana tariff commitment visavis the agriculture accord of the Uruguay Round and thus keep their options under the WTO and its dispute settlement mechanisms. Otherwise, an challenge on grounds of non-compliance with other GATT provisions may be precluded in terms of the 'peace clause' over the six-year period of implementation.

But irrespective of the fate of the banana regime and tariffs, the EC has already served notice of its intent to safeguard beyond challenge the EC-ACP Lome accord and other EC association trade agreements.

The GATT CPs have neither approved nor disapproved in terms of compliance with GATT provisions of the Rome treaty setting up the EC as a customs union, or the various EC trade accords -- with EFTA, the mediterranean countries, the ACP Lome accords and other agreements -- which from time to time were notified to GATT and subject to scrutiny before working parties (who under the consensus rule were able to reach no definitive conclusions, but only set out the differing views).

Under current GATT practice where the CPs have not reached formal conclusions on Art.XXIV type agreements, the overall conformity of the agreements with the GATT could be questioned through the dispute settlement procedures.

The first banana panel had used this to rule against the Lome preferences (allowing zero tariff on ACP banana imports and a higher tariff on imports from other sources) which the EC had sought to justify as an Art XXIV free trade or customs union agreement.

Just three days before the Uruguay Round was concluded, on 12 December the EC put forward a proposal for amending the Uruguay Round Understanding on Art. XXIV. This could not be resolved within the time, but the participants in the Round agreed to discuss it at a later stage in an appropriate fora.

The EC proposal was for an amendment to the Dunkel DFA text (of December 1991) on Understanding on the Interpretation of Art XXIV (which without the EC amendment has now become part of the Final Act) which specifically enabled GATT cps to invoke dispute settlement mechanisms and procedures on matters arising out of the Art XXIV agreements for customs unions and free trade areas or interim accords towards such unions and free trade areas.

The EC has proposed add to this a proviso that "such recourse to dispute settlement provisions, however, shall not be allowed to question the conformity with GATT of existing customs unions, free-trade areas or interim agreements leading to customs unions or free trade areas, which have been notified to the CONTRACTING PARTIES, as long as the CONTRACTING PARTIES have not made a specific recommendation under Art XXIV:7 of the General Agreement."

The EC proposal is due to come up before next week's session of the GATT CPs, but to be adopted as an agreed Understanding in terms of the present General Agreement, it may need consensus.

The Uruguay Round, and particularly the texts of its various agreements, have been closed -- but given the GATT and its methods of functioning -- attempts to incorporate it into the Final Act to be signed at Marrakesh may not be completely ruled out either, though it would be more difficult.