6:48 AM Jul 22, 1993

DIVIDED GATT COUNCIL MULLS HOW TO DEBATE BANANA ISSUE

Geneva 22 July (Chakravarthi Raghavan) -- A sharply divided GATT Council Wednesday put off further discussions, pending procedural consultations by its Chairman, on the report of a panel which ruled against the EEC banana regime that ended on June 30.

GATT sources said the consultations by Hungary's Andras Szepezi would be on how to organise the debate on the issue at the next meeting of the Council set for 22 September.

In other decisions, the Council set up a working party to look into the application of Saudi Arabia for accession, heard a Canadian complaint over the US targeted subsidy for wheat exports to Mexico and EC subsidised exports, and an Asean complaint over EC restrictions on preserved sardines and tuna.

The Council heard the Chilean request for a panel over EC restrictions on imports of pears and apples. Chile advised the Council that consultations were being held with the EC, but that if it was not satisfactorily resolved, Chile would press for a panel at the next meeting (when its establishment would be automatic)

This is the second time the panel report on bananas has come before the Council. At its last meeting in June, the Council had a procedural debate, with members on all sides needing time to study the just issued report.

Besides the complainants Costa Rica and Colombia (who pressed for adoption of the report, the European Community, Jamaica (which presented the ACP case to reject the report), Argentina, Malaysia, St. Lucia and St. Vincent and Grenadines and El Salvador spoke in the Council before further debate was put off for procedural consultations, after an intervention from the United States.

The banana regime that the panel held to be contrary to GATT involved quota restrictions maintained by some of the EC states against imports from Latin America to protect the domestic production and/or in their overseas territories and the preferential (duty free) tariffs by others on bananas imported from the ACP countries.

The Community wide new regime under the EC single market provides for a tariff quota for banana imports from Latin American sources, and a penal tariff on imports exceeding the quota, and continued duty-free preferential imports from the ACP region.

That regime has also been challenged by the Latin American banana producers and has been referred to a new panel, headed by Amb. M.K.Kesavapany of Singapore and two others (T. Cottier and U.Petersmann) -- all functioning in their independent capacities.

The panel was constituted on 16 July and is yet to start work.

A GATT member said the discussions in the Council Wednesday, not only brought out the sharp division of opinion between banana-exporting and other ACP countries and the Latin American exporters, with the European Community States divided and thus forcing the EC Commission (which speaks for all of them in the GATT) to filibuster without making clear its views on substance, but the even sharper division involving others.

Many of the other developing countries, with no trade interest in bananas, and sympathetic to the acute economic problems that the ACP countries might face, nevertheless are opposed to the concepts of "market-shares" and want to uphold what they term a "rule-based GATT system", namely which would define and enforce the 'rules and disciplines' of international trade irrespective of the effects of individual traders or exporting countries and their market shares.

In its report of 3 June, the panel headed by I.G.Patel (from India) had ruled that the quota restrictions on bananas in France, Italy, Portugal, Spain and the UK were illegal and that the preferential tariff regime (zero duty on ACP bananas and the EC bound tariff of 20 percent on bananas from other sources) levied in Belgium, Denmark, Greece, Ireland, Luxembourg and the Netherlands, violated the GATT most-favoured-nation requirement.

The European Community had contended that its preferences to the ACP States was under its Lome trade and aid pact, and was covered by Art. XXIV of GATT enabling setting up of free trade areas.

The panel ruled against it and said the tariff preferences favouring some (both members and non-members of the GATT in the ACP-EC Lome agreement) but not all developing GATT contracting parties, was not saved by Part IV of GATT or the Enabling Clause and that the only such preferences could be saved in the GATT would be through a waiver.

The EC should either get a GATT waiver for the preferences favouring the ACP banana imports or bring its measures into compliance with GATT, the panel recommended.

Some Third World cps said that it was conceivable that the EC might get a twothirds majority vote for a waiver, but that the Commission does not want to take that route since it would set a precedent for the complicated web of preferential and discriminatory trade arrangements it has with the EFTA countries, with the east Europeans, Mediterranean and other countries and waivers in each of these individual agreements may not be possible.

Also, any waiver (unlike in the past when it was time-less and almost without restrictions) is likely to be for limited times and multilateral scrutiny and approval for extension.

In any event under the Uruguay Round proposals, supported by the EC, any waivers would automatically be time-bound.

The problems of the ACP banana exporters, and particularly of some of the Carribbeans for whom this is the sole export earner, is caught up in this tangle, with the non-ACP Third World contracting parties as well as several others, looking at the issue from the aspect of a rule-based GATT system and refusal to accept any market-sharing concepts.

When the Council took up the panel report Wednesday, Costa Rica and Colombia (the complainants) reiterated their call for adoption of the report. Amb. Tran Van-Thinh for the European Community spoke for 20 minutes but said nothing of substance beyond that the EC would need to consult fully with the ACP countries before taking a position. Some participants said that it was clear that with the EC members themselves divided, Tran's intervention was full of flowery language but said nothing.

Jamaica's Amb. Richard Pierce argued the case for the Council to "soundly and overwhelmingly" reject the report on the ground that there were serious errors in the ruling, that the panel's reasoning was flawed and adopting the report would do grave injustice to countries directly affected.

Pierce argued that the panel had exceeded its terms of reference by considering the GATT's Art I (MFN provision), Art XXIV and Part IV visavis the Lome Convention and that this had caused serious prejudice.

Pierce also criticised the panel's view that it was for the EC to prove that the measures held to be contrary to GATT provisions had not caused "nullification and impairment" of rights of the complainants.

The panel had cited the GATT Understanding on dispute settlement and had said that in view of its finding about the GATT inconsistency of the EC measures, it was not necessary to examine the claims of nullification or impairment.

Pierce complained that by doing this the panel had ignored that this was essential to the arguments of several cps and hence had not given "equal and balanced consideration" to arguments of cps "directly concerned" (namely, the ACP banana exporters).

Jamaica then cited market share figures of Latin American and ACP countries to argue that there had been no "nullification or impairment", since the market share of the complaints in France, Italy, Portugal, Spain and UK had increased, while that of the ACP countries had declined. Also, the production of the Latin Americans had increased by 12.78 percent as against only 6.19 percent by ACP countries.

Banana exports also accounted only for 33 percent of Costa Rica's export earnings, ten percent for Colombia, Guatemala and Nicaragua and 0.1 percent for Venezuela whereas it accounted for 55.6 percent for Dominica, 54.0 percent for St Lucia, 49.7 percent for St. Vincent and Grenadines, 19.5 percent for Grenada and 3.9 percent for Jamaica.

In this view of the role of bananas in export earnings and market shares, Pierce contended that by not going into this, panel had made recommendations for major changes inimical to the ACP interests.

Since the complainants had been increasing their market share under the EC regime, they could not claim nullification or impairment.

Pierce also faulted the panel's view that the regimes of the EC states were not saved by the "existing legislation clause" of the GATT and for its refusal to accept the concepts of "acquiescence, estoppel and subsequent practice" to rule against the complainants. He also further contended that the panel should not have considered whether the Lome Pact fell under the GATT provisions for Free Trade areas (Art XXIV) and ruled against it.

Among the other interventions, Malaysia speaking for the Asean countries called for the adoption of the report for safeguarding the rule-based GATT system.