EC KEEPS BANANA OFFER ON TABLE, FOR THE PRESENT

5:19 AM Jan 20, 1994

EC KEEPS BANANA OFFER ON TABLE, FOR THE PRESENT
Geneva 20 Jan (Chakravarthi Raghavan) -- The European Community appears to have slightly reversed itself and is still keeping, atleast till 15 February, its 14 December revised offer in the Uruguay Round on bananas, in an effort to reach a compromise and ensure that the panel ruling is effectively buried.

The EC had in its 14 December offer had agreed to increase the tariff quota from two million to 2.2 million in 1994, and with country-quotas, but made it conditional on the Latin American banana exporting countries withdrawing their complaint before the GATT panel and that, failing this, the EC would revert to its original offer and in its agriculture schedule put the 2-million tonne tariff quota at 20 percent ad valorem duty.

In subsequent communications to the Latin American complainants, the EC Commission had said it would withdraw its 14 December offer, unless the complaints were withdrawn before the GATT panel had communicated its draft conclusions to the parties, a preliminary step to publication.

While four of the complainants were agreeable to the compromise, the fifth, Guatemala was not and, in order to maintain their unity, the others too kept their complaint.

On Tuesday, the GATT panel headed by Singapore's Amb. Kesavapany, after having held up its report at the instance of the two sides for several days, sent its draft report and conclusions to the two sides, and the report is to be issued to the contracting parties on 12 February.

The panel had been looking into the complaint brought by five banana exporting countries from Latin America, who are members of the GATT -- Colombia, Costa Rica, Guatemala, Nicaragua and Venezuela -- against the EC's single market banana regime that came into effect on 1 July last.

The five, along with Ecuador, Honduras and Panama are grouped in the Union of Banana Exporting Countries (UPEB, its Spanish acronym). They had successfully challenged in the GATT the earlier regime -- with its individual country-quotas and preferential zero tariff benefits for imports from ACP sources and a 20 percent ad valorem on imports from non-ACP sources.

While that report is still on the table, and has not been adopted, the new report is equally damaging and troublesome to the EC in terms of the Lome accord, and other trade and cooperation accords and preferences -- in Europe, Mediterranean and elsewhere.

Though the report (with its findings and reasoning) is yet to be published, its conclusions have become known. The panel has concluded that:

* the tariff quota on imports of bananas is not inconsistent with Articles XI (QRs) and XIII (non-discriminatory administration of QRs) of the General Agreement;

* the security requirements and other formalities connected with the importation of bananas were not inconsistent with Art. VIII (fees and formalities for importation); and

* the EEC has not acted inconsistently with its obligation under Art XVI:1 (subsidies) to discuss, upon request, the possibility of limiting the subsidization of bananas.

While these three conclusions, went in favour of the EC, three others went against it:

* the specific duties levied by the EEC on imports of bananas were inconsistent with Art. II (schedule of tariff concessions);

* the preferential tariff rates on bananas accorded by the EEC to ACP countries were inconsistent with Art. I (most favoured nation treatment) and could neither be justified by Art. XXIV (customs unions and free trade areas) nor by Art. XX (h) (general exceptions relating to commodity agreements); and

* the allocation of import licences granting access to imports under the tariff quota was inconsistent with Art. III (national treatment) and Art I and could neither be justified by Art XXIV nor by Art. XX (h).

The panel recommended that the CPs ask the EC to bring its tariffs on bananas and allocation of its tariff quota licences into conformity with its obligations under the General Agreement.

The full report is to be in the hands of the GATT CPs on 12 February, and the earliest it would come up for consideration would be at the GATT Council meeting thereafter. There will be one set in second half of February and another in March.

GATT delegations informally said Wednesday that while they would have to await the report and study the reasoning used by the panel, on the face of it the conclusions against the EC appeared to follow the same line of reasoning as the earlier panel and whether or not it is adopted by the GATT Council, future panels would find it difficult to depart from this line of reasoning and reach contrary conclusions.

In Brussels late Wednesday, the EC Commission said it would still leave on the table, till 15 February, its 14 December offer -- presumably to promote a compromise and enable both sides to notify the GATT CPs that a compromise had been reached and that no action be taken on the report.

Some of the exporting countries too still favour a settlement, rather than be satisfied by a phyrric victory since the panel ruling could be blocked by the EC and the ACP countries.

A statement issued in Bogota by the Colombian foreign trade ministry on Wednesday said that it had been ready to accept the EC offer and withdraw the complaint since the offer had "significantly improved" market access conditions for bananas compared to the current regime.

It was an opportunity to resolve the conflict to the satisfaction of the parties, taking into account the fact that the panel ruling would have no effect on trade in the medium term, Colombia said, adding that much to its regret "the plurality of interests at stake and differences visavis the European Union" made it impossible to achieve a compromise.

The statement reiterated Colombia's willingness to accept the offer and keep the door open for a dialogue between the Latin American countries involved and the EEC to seek a satisfactory solution to the conflict.

GATT sources were not clear on the future situation if the compromise efforts fail and the EC restores its original offer, attempting to enshrine in its agricultural schedule its current banana regime.

Under the WTO and its Dispute Settlement Understanding (DSU), new complaints would be subject to a quasi-judicial process and the findings would be binding -- a consensus would be needed to set aside a panel ruling, unlike now when a consensus is needed for adoption.

The Uruguay Round agriculture accord has a 'peace clause' preventing disputes being raised on other grounds during the implementation period of six years. And generally schedules, reflecting concessions offered and exchanged, once filed and accepted are not challenged.

But the schedules on agricultural products is to reflect not merely tariff concessions exchanged as normally in GATT trade negotiations, but also in terms of compliance with the agriculture accord and the modalities for market access commitments. Participants have to file their schedules by 15 Feb. There is time till March end for the verification process.

If no settlement is reached, the banana exporting countries could enter an "objection" to the EC schedule (several of them said they would be doing this if everything fails) -- on the ground that the schedule does not fully comply with the agriculture agreement or other parts of the Final Act -- and reserve their GATT rights, so that they may raise a fresh dispute later.

GATT delegations not directly involved in this dispute, but have an interest in the systemic implications, were not quite clear about the legal situation and what view the panels and its appellate authority might take.