SUNS 4351 Tuesday 12 January 1999

Geneva, 11 Jan (Chakravarthi Raghavan) -- Trade diplomats returned to their desks this week, after the year-end holidays, facing the difficult task of naming a candidate to be the next Director-General of the World Trade Organization, and a potential trade war among majors in their bitter fight over bananas.

On the banana issue, where the EC has introduced a new regime claiming to be in conformity with the WTO ruling, but which is challenged by the United States and four Latin American banana producers, the Dispute Settlement Body is meeting Tuesday afternoon - facing a conflict of rules and their interpretation.

On the draft agenda is the Ecuador request for an expedited panel hearing of the EC banana regime under Art. 21.5, and another from the EC for a review of its regime under Art. 21.5.

While Ecuador among the four Latin producers has taken the Art. 21.5 route for expedited hearing on the EC regime's compliance, the US has spurned this course and has announced that it would proceed to retaliatory trade sanctions against the EC, and seek the DSB's authorization under the automatic procedures of Art. 22.

Trade diplomats privately say that Art. 21.5 wording gives rise to conflicting interpretations and procedures. But the US, which has never abandoned the 'retaliation' route, made sure of the drafting of Art. 22 of the DSU, and is now contending that there is no need for it to have recourse first to Art. 21.5 as to the compliance of the EC measures with the original ruling.

At stake is the issue of 'licences' in the EC to import and trade in bananas, which are 'traded' with a number of enterprises wishing to enter this trade. The market in the licences is said to be worth two
billion dollars - and the fight is in reality over this, and the determination of the US transnational companies (chiquita and dole) to ensure their dominance and control of the marketing - buying in Latin America and selling it to Europe.

And while the US can take the 'retaliation' route to try to preserve this stake, this is not one that any developing country can exercise without hurting itself.

In its request, Ecuador also wants the panel to specifically recommend what the EC needs to do to bring its regime in compliance with the ruling, and for the EC to implement it without any further time.

The issue had come up before a 16 December meeting of the DSB, which was 'suspended' and resumed on 21 December.

At the 21 December meeting of the DSB, there was agreement that the Ecuador request had come up for the first time. This made a reference to the panel automatic when it comes up a second time as now.

But more problematic is the EC's pending request also for a reference of the regime to the panel, and for the panel to go into all aspects of the regime in an expedited hearing. The EC's original request was that the panel should find the EC implementation to be in conformity with WTO rules unless it had been challenged under appropriate DSU procedures. But later, it orally amended the request saying that  the panel should review all aspects of the new regime.

However, Mexico, the Philippines and a few others insisted on seeing it in writing first before consideration. The Philippines has repeatedly spoken expressing its fears that the Art. 21.5 route could result in an endless 'loop' of a trade measure being challenged, ruled against and reformulated to be challenged again.

While nothing relating to the bananas can be certain, EC sources expect that both the Ecuador and EC requests for a reference to the panel under Art. 21.5 would go through.

But the issue of the US moves for sanctions, by recourse to Art. 22 while ignoring Art. 21.5, is expected to be referred for plurilateral consultations. The EC has also separately raised a dispute over the US S.301.

The EC legal experts have been in town over the last few days meeting key individual delegations to argue that the US moves under its S. 301, while purporting to be multilateral, was really recourse to unilateralism and this way is a threat to the trading system, and that once sanctions take effect "all bets will be off".

But as of Monday, it was unclear what the DSB would or could do.

On the selection of a successor to Ruggiero, who lays down office at end of April, heads of delegations are meeting informally on Tuesday morning to consider the suggestion of the WTO General Council Chair, Amb. John Weekes of Canada that the process of consultation to choose
a successor to Renato Ruggiero, be entrusted solely to the Swiss Ambassador, William Rossier.

Rossier, with Brazil's Celso Lafer had been named to conduct the consultations as 'facilitators', and did so in November and December. But Lafer has since left his post here to become the Minister for
Development, Trade and Industry in Brasilia.

While many envoys appear to be agreeable to Rossier alone conducting the consultations, there are also those who think that a developing country ambassador should be associated as joint facilitator with Rossier.

Before the year-end recess, Lafer and Rossier had reported that of the four candidates in the race, the Thai Deputy Prime Minister, Supachai Panitchpakdi was leading - on the basis of three criteria:
'arithmetical' one based on hierarchy of preferences among the four, geographical spread of support and non-acceptability of any candidate.

New Zealand's Michael Moore was said to be the second, and Hassan Abouyoub of Morocco the third, and Canada's Roy Maclaren the last.

However, with the US and EC said to be not still ready to indicate their choice and preferences, the task of naming a successor by the new target date of 16 February appears to be dicey.

Both the US and the EU have not officially conveyed their preferences and views, and there have been reports that the US favours the New Zealander, while the EU is divided - with France against Moore.

Reports from Bangkok, cited to the Thai foreign office spokesman, had spoken of a Moroccan protest over the procedures and criteria. There were also reports that the Thai Prime Minister will be visiting Washington to win the US support for Supachai.