12:19 PM Mar 19, 1997

WTO BANANA PANEL RULES AGAINST EC

Geneva 19 Mar (Chakravarthi Raghavan) -- A dispute settlement panel at the World Trade Organization which has been hearing a challenge to the European Community's single market regime on bananas has found the EC regime contrary to its WTO obligations, according to trade diplomats.

The panel handed over Tuesday to the parties its interim report, and has invited comments from the parties which it would consider before handing down its final ruling in the coming days, trade diplomats said. While the panel in the light of comments, could change its views, this has not so far happenned.

Until the ruling is handed down, and circulated to the WTO members, it is confidential, but the broad conclusions in this hotly disputed trade issue became known.

The EC regime was challenged by the US and four Latin American countries - Mexico, Honduras, Ecuador and Guatemala. The EC, which appears to have lost the case, or any of the complainants could take up the case to the Appellate body on any legal grounds.

The ACP countries in general (whose Lome preferences are under challenge) and the Caribbean banana producers who probably stand to lose most, have no locus standi to take the case to the Appellate body.

Two earlier panels under the old GATT have also found the EC regime on bananas, and the preferences given by the EC under it to the ACP countries, to be violative of the EC's GATT obligations. But those reports were never adopted, the EC and the Caribbean countries having denied consensus.

Under the WTO, rulings of panels, subject to the modifications by the Appellate body are adopted automatically.

The banana case has divided the Caribbean and Latin American exporters bitterly.

Some of the Latin Americans, Costa Rica, Colombia, Nicaragua and Venezuela accepted some compromises from the EC in the form of tariff quotas, but Ecuador, Honduras, Mexico and Guatemala refused.

But the case itself was pursued by the United States, which produces or exports very little bananas (except a small amount in Hawaii), but has been vigorously pursuing the dispute at the WTO at the instance of the US transnational, Chiquita Brands International Inc.

Among other things, the US challenged the EC regime on the ground that it violated the EC obligations under the General Agreement on Trade in Services (which opened up the distribution and marketing services).

US media reports have linked the US pursuit of this case to the campaign contributions of the Chiquita owner, Carl Lindner, to the two political parties. As a result both the then USTR, Mickey Kantor, and the Republican US Presidential Candidate Bob Dole, pushed the chiquita case vigorously. A Washington Post story has identified Lindner as one of those who were invited to the famous coffee meetings with President Clinton and for a sleep-over at the White House.

Trade diplomats and observers said that the panel ruling (and any appellate body modifications) on various aspects would need to be studied to make a judgement on what would happen and what the EC would need to do comply with the ruling.

But it was clear from the outset to many trade diplomats that the EC would be unable to defend its case, in the light of the WTO rules and the EC's own GATT and GATS commitments.

The EC has justified the special banana regime as essential to provide aid to the small Caribbean nations, and their single commodity (banana) economy.

A World Bank study last year said this was an inefficient way of providing aid, and the EC could more directly provide aid from its aid budgets.

But EU-members are not exactly united either -- Germany and some others who used to import Latin American bananas (exported by US chiquita or dole brands) have been opposed to the special banana regime. France and UK are among those stoutly supporting it.

Nevertheless there is wide agreement that the Caribbean nations do stand to lose, and even if they get some aid benefits now, it will evaporate in future budgeting exercises of donor countries.

Other trade experts argue that the entire banana dispute and trade competition is between two sets of transnational corporations, and not really between small and big producers and traders.

But that is what the WTO trading system is turning out to be, and this is going to be its greatest weakness, and Achilles heel in the rising concerns and worries about 'globalization' under the neo-liberal paradigm.