A COMPLICATED RULING ON A COMPLICATED BANANA REGIME

12:07 PM Mar 20, 1997

A COMPLICATED RULING ON A COMPLICATED BANANA REGIME
Geneva 20 Mar (Chakravarthi Raghavan) -- The WTO's Dispute Panel, in its preliminary findings and ruling on the European Community's banana regime has found fault with the EC's tariff quota regime for negotiating and allocating quotas in a discriminatory way, for the licensing procedures and for the violations of the EC's commitments under the General Agreement on Trade in Services (GATS).

The findings against the EC in respect of its GATS schedule commitments, to provide full national treatment for cross-border supply and through commercial presence under 'wholesale trade services' is probably a major gain for the United States which challenged the EC regime on behalf of its Chiquita TNC.

The preliminary report and findings were made available this week to the various parties before the panel, and the panel will make it final in the light of any views from the parties.

Though confidential at this stage, the contents of the long report (some 379 pages) and what it calls "unprecedented number of findings" have now become fairly widely known, but would need detailed study on what the options for the EC and the others would be.

The EC is expected to take the issue, on questions of law and interpretation, to the Appellate body. No appeal lies on facts, but the appellate body is required to provide a finding on every issue posed to it, and has a 60-day time limit, which could get extended (as happened for the panel itself.

The Appellate body ruling and its adoption could easily thus take things into July or early September. Implementation of recommendations could take a 15 to 18 month period thereafter.

All this, one trade observer said cynically, could roll the banana regime problems and the implementation of the ruling into the second round of agricultural trade negotiations and the Lome waiver that would come up for review in 2000.

The EC regime on bananas is quite a complicated one, providing tariff quotas amongst various suppliers -- those from the EC (including overseas territories), the ACP countries (governed by the EC-ACP Lome Agreement), the Banana Framework Agreement (BFA) countries with whom the EC negotiated and agreed on tariff quotas, and third countries.

The ruling and its ramifications seem to be equally complicated.

The EC regime provides for licences to various categories of importers, with the licences able to import various categories of quotas and under various conditions.

The panel has found the regime to be violating the requirement of GATT Art. XIII for non-discriminatory administration of quotas.

The panel saw nothing 'unreasonable' in the EC trying to negotiate with and concluding agreements with Colombia and Costa Rica, as countries with substantial supply interest in the EC market, under its BFA.

But the panel found it not reasonable that EC negotiated and gave quotas for Venezuela and Nicaragua who had no substantial interest.

As a result the panel found fault with the EC tariff quota regime, allocating by agreement and assignment, quotas to some countries not having a substantial interest as suppliers (Nicaragua, Venezuela and some ACP countries for traditional and non-traditional banana exports), but not to others who had substantial interest like Guatemala. The panel has found the tariff quota reallocation rules to be inconsistent with the EC's obligations under Art. XIII.

While the EC, in terms of the Lome accord for which a GATT waiver was given, could reasonably allocate country-specific tariff quotas to the traditional ACP banana supplying countries in terms of their pre-1991 best-ever exports to the EC, the allocation of quotas to these countries in excess of their pre-1991 best ever exports level was not required by Lome Convention.

The Lome waiver granted to the EC waives the EC's obligation under Art. XIII only to the extent necessary to allocate shares in tariff quota regime to specific ACP banana supplying countries at a level not exceeding their best pre-1991 exports.

The EC's obligations to observe Art. XIII requirements is not obviated by including the tariff quota regime in the EC's schedule to the GATT.

But the EC's preferential tariff treatment to non-traditional ACP bananas, though inconsistent with its Art 1 (MFN obligations) has been saved by the Lome waiver.

The licensing procedures of the EC for the banana regime is subject to the provisions of GATT 1994, the Import Licensing Agreement, Art. 2 of the TRIMs Agreement.

The allocation to the 'Category B' operators of 30% of licences allowing imports of third country and non-traditional ACP bananas at the in-quota tariff rates was inconsistent with the Art. III (National treatment on internal taxation and regulations to imported products).

The application of operator category rules to various categories of importers has also been inconsistent with the MFN obligations.

The Lome waiver granted to the EC does not waive the MFN obligations in respect of licensing procedures. The licensing procedures are also subject to the Art. X requirement for publication and administration of trade regulations.

The application of some of the rules for import of third country and non-traditional bananas at in-quota tariff rates, while not applying to the traditional ACP imports is thus inconsistent with the Art. I and Art. X requirements.

Asking one category of importers to match their licences with BFA export certificates (of the exporting countries), while exempting another category of importers from this requirement is also GATT illegal.

The panel has however not given a finding on whether the EC has met the requirement under the Licensing Agreement to take into accounts needs of developing countries.

The panel has also found that the distribution of bananas in the EC market is governed by the EC's commitment in its GATS schedule, where it has agreed to full 'national treatment' commitment under 'wholesale trade services' for cross-border supply and through commercial presence.

As a result, the panel has found fault with the allocation of quotas, and under differing conditions, to various categories of operators -- allowing some to import in-tariff quotas of third-country and non-traditional ACP bananas, while denying this privilege to others.

The allocation of socalled 'hurricane licences' to operators who include or represent EC or ACP producers, but not to others was also inconsistent with the EC's GATS obligations.