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Countries Involved

Request for consultation: 5 th Feb 1996. Countries Involved. Ecuador, Guatemala, Honduras, Mexico, U.S(Complainant) and EU(Respondent). Background:. Since 1993 EU followed a preferential trade regime that provided preferential market.

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Countries Involved

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  1. Request for consultation: 5th Feb 1996 Countries Involved Ecuador, Guatemala, Honduras, Mexico, U.S(Complainant) and EU(Respondent)

  2. Background: • Since 1993 EU followed a preferential trade regime that provided preferential market. • The regime came to be known as Common Market Organization for Bananas (CMOB). • US multinationals owned and controlled of the Latin American banana plantation industry and three quarters of the EU markets was directly hit by the CMOB. • Its account deficit could reach $300 billion in 1999, surpassing previous record levels in 1986/7.

  3. What was CMOB? Under the preferential regime adopted there was a differential tariff policy which was followed: • 1. The ACP banana producing countries being the former colonies of EU were allowed a duty free entry up to 857 thousand tonnes and subject to 750 European Currency Unit (ECUs) per metric tonne above that amount. • 2. On the other hand, the non-ACP banana producing countries were subject to a duty of 100 ECUs per metric tonne on imports up to two million metric tonnes, and 850 ECUs on imports above that amount.

  4. Phase 1: GATT panels • Five Latin American countries Guatemala, Colombia, Costa Rica, Nicaragua, and Venezuela complained against EU’s discriminatory restrictive regime in June, 1992. • The complainants argued that the new regime violated. (a) Article I: 1 of GATT – Most Favored Nation (MFN) principle (b) Article: 4 of GATT – National Treatment principle. • In February 1994 2nd GATT finding was released. The Lome convention is a trade and aid agreement between the European community and 71 African Caribbean and Pacific countries, 1st signed in February 1995 in Lome.

  5. Phase 1: GATT panels • The 2nd GATT finding did not give the EU the right to apply preferential tariff rates on Bananas. • Hence the GATT panel concluded that the EUs tariff and allocation of tariff quota licenses should be brought into conformity with the GATT rules. • EU persuaded four of the five complaining countries to except Guatemala to enter into an agreement called the Framework agreement in bananas. • EU raises the non-ACP quota from 2million tonnes to 2.2 million tonnes in 1995 and along with lowering tariff of 100ECUs 275 ECUs per metric tonnes.

  6. Phase II: WTO panels on the Lome waiver • In 1996 another dispute was initiated in the newly form WTO by US along with Guatemala, Ecuador, Honduras and Mexico by WTO which provided for reverse consensus for adoption of panel reports as well as retaliation authorization. • Complainants Argument: The complainants argue that the EUs banana regime violated several of the trade agreements administered by WTO namely the GATT and agreement on import licensing procedures.

  7. Phase II: WTO panels on the Lome waiver • WTO Panel Report: The WTO panel report issued on 22nd may 1997, the panel report found that the EUs banana regime was discriminatory and inconsistent with the GATT. On 25th September 1997 the appellate body report and the panel report were adopted by the DSB. • Reasonable Period of Time: The arbitrator determined the RPT to be 15 months and 1 week from the date of adoption of the reports i.e. it expired on 1st January 1999.

  8. Phase III: Arbitration Pursuant to the Doha Waiver • On 14th November 2001, the WTO adopted to bananas related ministerial decision 1. The Doha Waiver waived ECs obligations to permit preferential treatment for the ACP for further period. 2. The 2nd decision waived ECs obligations related to the application of tariff quotas and the associated licensing regime for imported bananas. • The Doha waiver authorizes two rounds of special arbitration to resolve any disputes it mandates if both arbitration determine that the Ec has failed to meet its obligations, the waiver of GATT article I will cease to apply.

  9. Phase III: Arbitration Pursuant to the Doha Waiver • In the light of Doha Waiver the EU proposed to modify, one more time, the CMOB regulation. • It pledged to replace its complex quotas and license system with a tariff only regime by January 2006, in return for being allowed to maintain its ACP trade preferences for the intervening 5 years. • Following this the US agreed to suspend the retaliatory sanction has imposed on EU imports in 1999.

  10. Phase III: Arbitration Pursuant to the Doha Waiver The true arbitration awards have gone against the ECs 2006 banana regime. • 1. The first award issued on 1st august 2005, found that the ECs proposed increased in MFN banana tariff to 230 euro (US $352) per tonne would not satisfy the minimum market access obligation. • 2. The second award issued on 27th October 2005 found that the ECs new proposed 187 euro (US $286) per tonne MFN tariff would also failed to meet the obligation.

  11. Phase IV: Recent Developments • Having exhausted the litigation opportunities available under the Doha waiver. • The parties are now again at it under the DSM. Initially the new banana regime was challenged by Ecuador. • In late 2006 followed by Colombia in early 2007 an much later by US and Panama.

  12. Learning • The series of banana disputes are significant and remarkable in many senses. Such never ending disputes within the multilateral framework have not only become spiteful but have even questioned the viability of DSB as trade resolution body. • Largely because of the fact that the recommendation of panel and appellate body are often being delayed on one pretext or other and have many times not been implemented many times. • The ACP continued to receive preferential market access despite many Latin American countries litigating and willing disputes because the EC was backing them • once the US entered the dispute due to the interest of its banana companies the Latin American countries also found success in the form of dismantling of the CMOB and shift to a tariff only regime.

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