RESTRICTEDWORLD TRADE
ORGANIZATIONWT/GC/M/37
30 March 1999
(99-1280)
General Council
8 March 1999
MINUTES OF MEETING
Held in the Centre William Rappard
on 8 March 1999
Chairman:  Mr. Ali Mchumo (Tanzania)
1. Trade measures taken by the United States on 3 March 1999 against European
Communities' Imports  (WT/GC/20)
The Chairman said he had convened this special meeting of the General Council at the request
of the European Communities in accordance with Rule 2 of the Rules of Procedure of the General
Council, which provides that meetings of the Gene ral Council may be convened with shorter notice
than ten days for matters of significant importance or urgency at the request of a Member concurred in
by the majority of the Members.  He drew attention to the communication from the EuropeanCommunities in document WT/GC/20.
The Director-General emphasized the essential importance of the DSU in the life of the
organization and for the peaceful development of the multilateral trading system, and said that this
was a shared responsibility of all the Members.  The banana issue had been, and continued to be,
difficult and complex.  An outcome was just a few weeks away.  The rule-based system was working,
and would continue to work, even if there were different interpretations about some important aspectsrelated to the banana issue.  The road map for the legal settlement of this question was in place, and
he recommended that Members follow it.  This was contained in the final statement made by the DSB
Chairman on 29 January 1999, which contained three important points:  first, the two parties should
find a mutually agreed solution to their problems in the bilateral consultations under Article 4 of the
DSU.  This was not a procedural suggestion, but rather at the heart of the WTO legal system.  Thesolution to a problem was first sought by mutual agreement and not by imposing rulings on either
side.  He invited both parties to renew their efforts in this direction.  Second, because there were
different interpretations of the assumptions which had to be taken into account in applying
compensatory measures - the question of Articles 21.5 and 22 - the same individuals had been given
the task of arbitrating the level of suspension and determining the consistency of the new ECmeasures with the rules of the WTO.  In the ne xt few weeks, both determinations would be ready.
The credibility of the WTO system would then prove its strength.  Third, the systemic issues
concerning the differences between the two parties over the relationship between Articles 21.5 and 22
had to be clarified.  Examination of these Articles would begin on 16 March.  Members needed to
draw a lesson from what was happening at present.  There would be other difficult issues in the future- ones which would also have a high profile for public opinion and for the trading system.  They
would require very careful handling in order to avoid a situation which could endanger the system.
All parties to a dispute needed to work positiv ely towards a solution within the WTO rules and
procedures.  The real issue was not the credibility of the dispute settlement system.  That system was,
and would continue to be, ready to give its legal response to the disputes brought to it.  It was theWT/GC/M/37
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users of the system who would put their credibility at stake if they did not act in conformity with the
letter and the spirit of the system, which sought above all to produce mutually acceptable settlements.
The representative of the European Communities said that on the Director-General's first
point, the two parties were indeed proceeding with bilateral consultations.  Regarding the reasons for
requesting the present meeting, he said that the Community was faced with the fact that a leading
WTO Member had decided to defy the rules and procedures of the organization and had taken action
in blatant disregard of its fundamental obligations.  On 3 March the US Trade Representative had
announced that the US had taken measures affecting imported products from the EC of a value of over
US$500 million in retaliation for alleged non-compliance with certain DSB recommendations and
rulings in the matter of the EC banana import regime.  While these measures had been presented as
provisional pending the final decision of the arbitrators in that case, they were as damaging to ECexport trade as if the full 100 per cent duties had been applied immediately.  EC exports of these
products had been effectively stopped.  The wording of a press release by the US Trade
Representative indicated that the measures were being taken, and importers were reacting by stopping
imports immediately.  The measures were unlawful and unacceptable.  The United States had not been
authorized by the DSB to take any action, and no determination of EC non-compliance had been madeunder any WTO procedures.  Thus, the action had to be considered as having been taken outside the
WTO rules and procedures, and was therefore totally unilateral in nature.  Had the United States
waited until the arbitrators made a final decision – a wait of some three weeks – it could have taken
action consistent with that decision, assuming that non-compliance was found and retaliatory action
found necessary.  In order to gain a few weeks, the US had flouted the DSU and taken action which, ifnot promptly withdrawn, would put at risk the fundamental multilateral basis of the DSU as agreed in
the Uruguay Round.  The Community was asking the General Council to address this serious
situation, and Members to take a position that woul d make clear to the United States that its actions
were neither authorized nor lawful, were rejected due to their unilateral character and should be
withdrawn pending the conclusion of the ongoing arbi tration procedure.  In short, the US should be
asked to respect its obligation under Article 22.6 of the DSU that "concessions or other obligations
shall not be suspended during the course of the arbitration process".
He quoted from recent remarks by the US Trade Representative to the effect that the EC had
four times lost its case regarding its banana import regime and refused to comply with the WTO rules,
and that the US would enforce its rights under the WTO to take appropriate action against the EC or
any other country's non-compliance with panel rulings (emphasis added).  The US was declaring war
on any and all Members whose compliance it decided was inadequate, and on the basis that it would
enforce its rights but not respect its obligations.  This was not acceptable in a rules-based system.  The
US presentation of this case had been biased and misleading.  For example, it had neglected to say
that each of the four panels had examined a different banana import regime, and that each time the EC
had taken action to modify the practices which had been condemned.  To say, as the US had, that theEC refused to comply with WTO rules was a travesty of the truth and a failure to recognize the
changes made.  The EC had a much more difficult task to perform than the US, in that it had to
respect its contractual obligations vis-à-vis all WTO Members, including the banana exporters of
South America, and also to respect its treaty oblig ations towards the ACP countries.  The US had only
to pursue the interests of one company.  The EC would abide by the outcome of the current disputesettlement procedure as to whether it had complied or not, and would follow whatever
recommendations were made.  The US reference to "appropriate action" seemed to indicate that the
US would pursue unilateral action if that was judged necessary.  Whether Members liked it or not,
they were at a juncture where a precedent for future action in dispute settlement cases was going to be
established.  He called on Members to make clear that unilateral trade measures such as thoseimposed by the US were never justified, and were neither lawful nor acceptable.
The WTO had been designed to be a rules-based system with the certainties and predictability
this implied.  This meant that Members had accepted  the logic of globalization and - in the collectiveWT/GC/M/37
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interest – to merge to some extent their individu al sovereignties into a supranational legal trading
system.  This concept was familiar to the EC member States and to others who had agreed to merge
their trading policies within customs unions.  Greater efforts had to be made by governments to
explain the ways in which the WTO Agreements as a whole, and the DSU in particular, limited
Members' individual freedom to act, while offering an alternative but mutually exclusive approach tosolving trade disputes through the force of due legal process, and of collective multilateral peer
pressure, and the willingness of each Member to respect its obligations.  Excessive expectations flew
in the face of the system, which was based on the careful, patient implementation of Members'
respective obligations.
The representative of the United States thanked the Director-General for his remarks which
she understood to be aimed at bringing the two parties together.  She agreed that it was the
responsibility of the parties to find a mutually agreed solution.  That was what the US had tried, and
would continue to try, to do.  Unfortunately these efforts had not been successful to date.  The US
agreed that it was necessary to re-examine Articles 21.5 and 22.  Months earlier her delegation had
called for clarification and improvement of these provisions and would continue to work in the
context of the DSU review process.  The US looked forward to receiving the arbitrators' final reportwhich the Director-General had said would be issued within the next few weeks.  The US action
under discussion ensured that the US would be able to implement the arbitrators' decision, and to
implement it as though the arbitrators had issued it by the date set forth in the DSU rules.  The US
President, when asked about this dispute, had said that it was not really about bananas, but about
rules, and that one could not maintain an open trading system – which was essential to globalprosperity – unless the rules were abided by.  The US had done that.  Her delegation was struck by the
fact that the EC had requested discussion of this matter in the General Council when it had also asked
for consultations under Article 4 of the DSU.  Discussion of this matter was important to the integrity
of the dispute settlement system, but the EC had shown little faith in that system, since it had brought
this matter to the General Council before taking it to the dispute settlement system.  Her delegationwas particularly concerned about the precedent this would set - that every time a Member was
concerned about the actions of another Member it would ask for an urgent meeting of the General
Council to discuss its complaint, in addition to hold ing consultations.  If the EC disputed the right of
the US to postpone liquidation of entries – i.e. not to impose additional duties at the present time – it
could simply follow the normal procedures of the DSU.  This was the second time in 1999 that the EC
had requested a General Council meeting to claim that the US was acting outside the bounds of its
WTO obligations.  The real reason for the present meeting was the EC's failure to implement a WTO-consistent banana regime within the reasonable peri od of time, and its lack of respect for the plain
meaning and purpose of the dispute settlement system.  One month earlier the EC had attempted to
block the adoption of a DSB agenda and had called for a point of order to prevent that body from
doing its job, and in January it had taken the unusual step of having a panel established against itself.
The EC had put itself above the DSU by failing to implement the DSB's recommendations and rulings
concerning the banana regime within the specified reasonable period of time, and had recklessly
sought to have its dispute settlement problems solved by a vote in the General Council.  It had earlier
requested the General Council to make an authoritative interpretation of the DSU by vote,
undermining the amendment provisions of the WTO Agreement and attempting to rewrite Article 22.
That Article was a necessary part of the DSU because Members had to implement the results ofdispute settlement proceedings even when it was not convenient for them to do so.  The time frames
in Article 22 were necessary to establish some endpoint at which the prevailing party would no longer
have to continue suffering nullification or impair ment without compensation or recourse.  Given the
EC's failure to implement a WTO-consistent banana regime, the US was completely within its rights
to seek recourse to Article 22.  Given that the arbi trators had failed to comple te their work within the
clear Article 22 deadlines, the US was also within its rights to preserve its ability to suspend
concessions as of 3 March.  She clarified that the action taken by the US on 3 March was not itself a
suspension of concessions, as duties had not been increased.  The US had merely preserved its rights
to increase duties as of 3 March depending on the outcome of the arbitration proceeding.  If the ECWT/GC/M/37
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was convinced that the arbitrators' decision would be in its favour, it should encourage its exporters to
continue shipping to the US.  She reaffirmed that the US would abide by the arbitrators' decision.
Regarding the EC's attempt to circulate what it purported to be an official US document, she
asked what would motivate a Member of this organization to circulate what was clearly anotherMember's internal, draft document that was not attributable to any official or agency.  This was
nothing more than an attempt by the EC to divert  attention from the EC's failure to implement a
WTO-consistent banana regime.  Regarding the reference in the EC's communication (WT/GC/20) to
the fact that Members had invested too much in the dispute settlement system to allow it to be
destroyed by unilateral action, she asked what the EC had invested.  The US had fully implemented
three adverse DSB recommendations and was in the process of implementing a fourth.  Others, apart
from the EC, had done the same.  The EC, however, had put itself above the WTO dispute settlementsystem by refusing to do this and by attempting to abuse the DSU procedures.  Regarding questions
raised by a number of delegations, she said that it was not true that in the normal US import system,
importers had the right to immediate liquidation of entries.  Under normal procedures, the US
Customs Service did not schedule liquidation of entries until 314 days after entry, and an importer did
not have a right to liquidation until 365 days after entry.  No WTO Member had ever challenged thispractice. The US action to withhold liquidation ensured that no entries of the selected products from
the EC would be scheduled for liquidation until 314 days after entry, consistent with normal Customs
Service practice and statutory obligations  Regard ing bonding requirements, the US Customs Service
had bonding requirements for all entries, and the auth ority to review the sufficiency of bonds for all
entries.  An entry bond included a provision guaranteeing payment of any increased duties later foundto be due.  Given that the selected product might be subject to 100 per cent duties as a result of the
arbitration proceeding, Customs would review the bonds and require additional or increased bonds for
entries of the selected products consistent with its normal practice and authority.  Regarding the EC
claim that withholding liquidation or requiring additional or increased bonds would stop imports of
the selected products, this question would have to be put to the importers.  The EC's repeated claimsthat its banana regime was WTO-consistent indicated that the EC should not be concerned about any
contingent liability for withheld duties.  The EC had requested consultations concerning the US
withholding of liquidation, and the US would endeav our to answer any reasonable requests for factual
information concerning this matter.  Regarding one delegation's statement that the US had only to
wait two weeks in order to follow the DSU rules, she said that the arbitrators had been unable to meet
a deadline stipulated in the DSU rules, which had led to the US exercising its rights and withholding
liquidation.  The US action would give the arbitrators time, and at the same time preserve the USrights in this matter.  The US had acted in a very  restrained manner.  This case had involved more
than seven years of negotiation over one import regime.  The US had waited patiently, and additional
duties would be imposed only if the arbitrators ruled in that direction.
In conclusion, she said Members had repeatedly been convened at the request of the EC to
hear its complaints regarding threats to the system posed by the behaviour of the US.  In a case which
centered on the EC's failure to observe its WTO obligations during the better part of a decade, and
where the EC had not even afforded the US the common courtesy of consulting on its planned
implementation during the 15-month period, the EC's continued resort to procedural tactics was
wearing thin.  The EC had used every delaying tactic available and every forum possible in order toavoid implementation and to stall.  In doing so, the EC had shown a willingness to take tremendous
risks with the rules-based system of the WTO.  It was regrettable that the EC had not instead used its
resources to develop a WTO-consistent regime that could resolve the banana dispute.  It was ironic
that after years of defying WTO obligations and blocking trade, the EC suddenly considered this
matter urgent.
The representative of St. Lucia said that the Director-General had pointed out that the banana
dispute was just a few weeks from an outcome, that the systemic issues regarding the relationship
between Articles 21.5 and 22 would be examined, and that the two parties were proceeding withWT/GC/M/37
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bilateral consultations.  It was clear that a Member could suspend concessions only with the
authorization of the DSB.  She recalled the statement of the DSB Chairman on 29 January in which he
had said that a request for arbitration under Article 22.6 would mean that the DSB would not
authorize suspension of concessions at that meeting, and that after the arbitrators' award was
circulated, a new request for the suspension of concessions could be made to the DSB.  Thearbitrators' award had not been circulated.  The DSB had clearly not authorized the suspension of
concessions by the US.  The US action to withhold customs liquidation combined with the
announcement of the proposed retroactive imposition of 100 per cent duties was a de facto suspension
of concessions in violation of the WTO Agreement.  It introduced a level of uncertainty in US/EC
trade which operated as a disincentive to the importation of EC products.  The viability of her
country's economy depended on the outcome of the bananas dispute.  However, it was important that
all WTO Members condemn the US action as an unacceptable precedent in the conduct of economicaffairs, and that a clear message be sent that unilateral measures were never warranted or justified,
and were unlawful.  It had been asked whether every time a Member had a dispute there was to be an
urgent meeting of the General Council, especially when consultations were under way.  The answer
was that the weight of opinion in this forum was important in shaping a compromise, and that the
General Council had to be a forum where fundamen tal systemic issues could be raised and the
membership allowed to express its views.
The representative of Canada said it was important for Members to have the right to have the
General Council convened when urgent or important matters affecting their interests arose, and
suggested that a clearer procedure was needed in this regard.  The Director-General's statement wasboth wise and positive.  It was important to look at this matter in as positive a light as possible.
Canada supported the Director-General's recomm endation, which was not aimed at any one party but
at all the parties in this dispute, and which went beyond the instant dispute to the way Members
needed to operate in the dispute settlement system and in the WTO.  It was also important that the
parties try to reach a solution to this matter that would allow Members to get on with the otherimportant challenges and work that lay before the organization, such as preparations for the next
Ministerial Conference and consideration of important requests for accession.  Canada's views on this
matter had been set out at the 15 February meeting of the General Council, including the point that
unilateral action should not be taken under Article 22 before there had been a multilateral finding
under Article 21.  He reiterated the need to proceed as expeditiously as possible to clarify these
provisions so that it would be clear how to deal with this kind of dispute should it arise again.  Canada
was prepared to work with others to try to find a solution to this issue in its generic sense before thecompletion of the review of the DSU at the end of July.  Regarding the withholding of liquidation and
whether or not this was a measure taken by the US, he said that it seemed to have had an effect, and
that various criteria pointed to its being a measure.  However, the General Council was not the forum
for a discussion of the finer legal points involved in this matter.
The representative of Dominica said that part of the reason this was a complex issue was that
the EC's banana regime was not an arrangement wh ich had been built wholly and exclusively within
GATT/WTO rules.  There was a settlement reflected in the Lomé Convention which had been
incorporated into WTO law through a waiver which had been adopted by consensus.  That waiver
provided that  Dominica together with other ACP producers were entitled within the WTO system tohave access and advantages to the level of their best-ever pre-1991 sales.  Translating that into a
mechanism which was easily applicable in the WTO context was not simple.  Central to building the
high degree of confidence required to resolve these issues in a sustainable way over time was respect
for the rule of law.  At present, the rule of law wa s reflected in the DSU, in particular in Articles 21
and 22.  Dominica supported the EC's raising this matter in the General Council.  Any challenge to thecredibility of the DSU was a challenge to the WTO system itself, and his delegation associated itself
with the statement by St. Lucia.  The central element of the present discussion was what was meant by
Articles 21 and 22.  The last sentence of Article 22.6 provided that "concessions or other obligations
shall not be suspended during the course of the arbitration".  The measures taken by the US wereWT/GC/M/37
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clearly inconsistent with Article 22.6.  What was at issue was the maintenance of the rule of law in
order to ensure that those countries not able to take the type of measures taken by the US felt
comfortable in a system in which their long-term in terests could be maintained.  It was indispensable
that the rule of law continued to apply.  The measures taken by the US would have a direct effect not
only on the EC but on the long-term sustainability of the Lomé regime for bananas, withconsequential implications for investment in that industry in Dominica.
The representative of Japan said that in 1995 the US had taken a similar measure in
announcing a list of products, namely luxury cars, that would be subject to 100 per cent duties, and in
withholding liquidation of entries of the listed products.  This had had the immediate effect of curbing
imports of the listed products into the US.   Japan had requested consultations under Article XXII:1 of
the GATT 1994 stating that the US measures were in violation of, inter alia , Articles I and II of the
GATT 1994 and Article 23 of the DSU.  Since then, the US had not resorted to such measures and
Japan had been encouraged by the US respect for the WTO dispute settlement system. Thus, his
Government regretted that the US had decided to begin withholding liquidation, effective 3 March, on
selected products from the EC, despite the fact that  the WTO had not authorized the US to suspend
concessions.  Japan hoped that the two parties woul d find an amicable solution to this dispute, in
accordance with WTO rules.
The representative of Hungary, speaking also  on behalf of Bulgaria, the Czech Republic,
Poland, Romania, the Slovak Republic and Slovenia, said that the recent news that the US had taken
"customs actions" against EC exports for alleged non-compliance with rulings and recommendations
of the DSB in the banana dispute was of serious concern.  These countries, like others, had joined the
consensus on the DSB Chairman's statement of 29 January outlining a compromise solution, with the
understanding that the dispute at issue would be re solved within the multila teral framework of the
WTO.  In view of this unfortunate situation, they ap pealed to the parties involved to be aware of their
special responsibility for the fate of the multilateral trading system, and to make every effort toresolve their dispute within the framework of that system.
The representative of Panama fully supported the Director-General's statement.  He asked for
clarification as to whether the EC was asking the General Council to take a position that the US action
was unacceptable.  He recalled that his delegation had stated in the informal meeting preceding the
present meeting that it would oppose the holding of this meeting if any formal action was to be taken
at it.  The General Council was the wrong forum for airing the issue raised by the EC.  It would be
decided in the course of consultations, or in the context of a panel which might subsequently be
established, whether the action at issue was a legal measure.  The convening of special meetings in
addition to regular meetings added to the heavy burden on small delegations like his.  Consultations
on this matter had to be multilateral and include banana-exporting countries like Panama, without
whose agreement one would be prolonging the process;  thus far the EC had given only lip service tothis.  His delegation had not seen any urgency in addressing this matter until the time when the EC
was directly affected.  Regarding the communication in WT/GC/20, he said that although a refund of
any bonds posted was uncertain, this refund would depend entirely on any future action taken by the
EC.
The representative of Korea said that his delegation had repeatedly urged both parties to this
dispute to settle it promptly and in a manner that conformed to WTO rules and disciplines.  However,
the dispute remained unresolved and the situation had not improved despite the time and effort
invested in this matter by the entire WTO member ship  Korea regretted that a measure affecting a
Member's interests had been taken without the authorization of the DSB and before a final decisionhad been taken by the arbitrators concerning the level of suspension of concessions.  Korea's interest
lay solely in safeguarding the multilateral tr ading system whose foundations currently faced an
unprecedented test.  This dispute was straining the dispute settlement system and putting the
credibility of the WTO system as a whole at risk.  Korea again urged both parties to look beyond theirWT/GC/M/37
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narrow national interests and to renew efforts to find practical solutions.  Given the turmoil in the
world economy and the upcoming new round of negotiations, the EC and the US should demonstrate
their leadership as befitted major economic powers.
The representative of Guatemala regretted that the item before the General Council was not
aimed at arriving at the settlement the complainants had been expecting for so many years.  Although
the reasonable period of time had expired on 1 January 1999, every day there were further obstacles to
the EC's implementing the recommendations and ruli ngs of the panel and the Appellate Body;  the
WTO system was undergoing a crisis.  This matter had to be tackled in the context of all present and
future disputes the WTO was called upon to settle.  The question that concerned all was Members'
ability to comply with negotiated rules and procedur es so as to achieve a trading system which would
preserve the rights and obligations of all its Members under the covered agreements, and their abilityto use a secure and predictable dispute settlement system.  In recent months the effectiveness of the
system appeared to exist only in theory, and there were still opportunities to postpone the
implementation of decisions.  One had to ask whether the present discussion served some constructive
purpose or would simply make for further delays.  Members had to proceed in the interest of the
system and call upon the EC to bring its banana import regime into compliance, as this was the onlyway to demonstrate that Members were capable of resolving this and future disputes.  The General
Council was not competent to deal with this matter.  There were specific procedures under the DSU to
handle such a request.
The representative of India said that this meeting had been convened to discuss a subject of
great systemic importance, namely, the trade measures taken by the US on 3 March against EC
exports. The Director-General's statement was a clear exhortation to both parties to act in conformity
with the letter and spirit of the system.   India re cognized that the banana dispute was a complex one
involving the vital interests of many countries.  The interests of many banana-producing and
exporting countries were directly affected by it.  This dispute was no less important for the rest of themembership since it had grave systemic implications.  It had to be admitted that what happened in this
case would establish precedents that could not be ignored in future.  When this matter had been before
the DSB, the issue had been whether a prevailing party could unilaterally determine compliance or
non-compliance with the recommendations of the DSB, and on the basis of that unilateral
determination proceed to seek DSB authorization to suspend concessions.  At that time India had said
that when there was disagreement as to the existence or consistency with a covered agreement of
measures taken to comply with recommendations and rulings, Article 21.5 procedures should be gonethrough before resorting to suspension of concessions under Article 22.6.  Almost all Members in the
DSB had shared this view.  A way had been found in the DSB to preserve the primacy of the
multilateral trading system while at the same time ensuring that the rights of the parties under the
DSU were not compromised in any way.  A solution had been found in which the EC had been
persuaded to make a request for arbitration under Article 22.6 before the original panel, engaged intwo Article 21.5 proceedings, had given its verdict, and the US had been persuaded to agree that the
same individuals who constituted the original panel could be given the task of arbitrating the level of
suspension.  The problem of how the panel and the arbitrators would coordinate their work was left to
them.  Regarding the action taken by the US on 3 March, it was clear that this was a measure and that
it had an adverse effect on trade.  He recalled the DSB Chairman's statement on 29 January to theeffect that a request for arbitration under Article 22.6 would mean that the DSB would not authorise
suspension of concessions at that meeting.  The arbitrators had requested the parties to supply them
with additional information and had indicated that th ey expected to be in a position to issue a final
decision in this matter after this information had been analysed.  Thus, it was clear that the arbitrators
had not made their final decision.  According to Article 22.6, concessions or other obligations shallnot be suspended during the course of arbitration.  However, this is what the US had done on
3 March.  It seemed that the US was faulting the arbitrators for not giving their final decision by
2 March;  however, the arbitrators had clearly found it impossible to issue a final decision without the
additional information they had sought.  Not all panel and Appellate Body reports were issued withinWT/GC/M/37
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the indicative deadline.  Furthermore, in another forum the US had stated that an unrealistic deadline
for the harmonisation work programme might not be of benefit to the credibility of the Committee on
Rules of Origin and the WTO.  His delegation could not understand why, in a dispute which had gone
on for some time, the US could not have waited a few more weeks.  It appeared that the US had put
the requirements of its own domestic legislation ahead of its WTO obligations.  A strong disputesettlement system was intended to encourage Members to refrain from unilateral actions, but this had
not been the case.  India urged the US to look into  this dichotomy between its domestic legislation and
WTO obligations and to devise a system which would guarantee that the US would abide by its WTO
obligations.  A major trading power in this organization appeared to be saying that it had a right to
ignore its international obligations in order to maintain the supremacy of its domestic law.  The US
had said that as the EC was certain of the WTO consistency of its banana regime, it had nothing to
worry about regarding the US measure.  However, other Members had an interest in this matter.  Heasked what harm the US would suffer if it waited just a few weeks more for the determinations under
Articles 21.5 and 22.  He recalled that under the old GATT system the US, too, used to block panel
reports adverse to its interests.  The General Council was the highest forum of the WTO and could
assume the competence of any WTO body, and discussion of this matter in it was not useless.  The
debate in the DSB had enabled the membership to give a clear indication of its position.  That washow the Chairman's concluding statement on 29 January had been possible.  Similarly, the present
discussion would sensitise both parties to the concerns of the rest of the membership.  The measure
taken by the US on 3 March struck at the root of multilateralism and was therefore a matter of
concern.  The WTO had no future if powerful trading partners resorted to unilateral trade measures.
This was why in the preparatory process for the next Ministerial Conference India had circulated apaper on unilateral trade measures (WT/GC/W/123) and had strongly urged that "full and faithful
implementation of WTO Agreements would require that not only must WTO Members undertake
never to resort to unilateral trade measures, but that they must also take immediate steps to modify
national legislations that implicitly or explicitly authorize such actions".  The WTO was too important
to be left to the US and EC alone.  The bananas dispute had made it clear that it was the responsibilityof the entire WTO membership to ensure that the rules prevailed.
The representative of Honduras said that when his Government had had recourse to the WTO
to halt the devastating effects on its banana industry of the EC's banana import regime, it had been
aware that the procedures would be long and complex.  However, it had trusted that the DSU
contained clear and precise rules, not only on procedures to restore a Member's rights, but also to
ensure that once the work of the panel and Appellate Body was concluded, the adoption of the reportsand their effective implementation could not be subject to delaying tactics.  Unfortunately, there was a
gap between theory and practice, and Honduras' expectations of a definitive and expeditious
settlement had been disappointed.  It had seen th at DSU procedures could be compounded by a series
of delaying tactics and related questions which merely postponed the settlement.  These tactics
included unnecessary discussions in the DSB and also in the General Council.  After all of this, theonly thing that was clear was that the procedures and time-limits for implementing decisions were
uncertain.  The reasonable period of time set for the EC to bring its banana regime into compliance
had long been exceeded, and the period granted in the DSU for the arbitrators to rule on the level of
suspension of concessions proposed by one of the complainants had also expired.  The virtual
paralysis of the system had been attributed to so-called inconsistencies in the DSU.  Those whoadopted this stance gave simplistic responses that harmed the credibility of the system and that
showed that a secure and predictable system had not been set up.  Any initiative to introduce further
elements of polarization would be viewed as a means to postpone the implementation of decisions.
The answer to the crisis the system was facing la y with the EC.  Honduras hoped that the latter would
bring its banana regime into WTO compliance.
The representative of Indonesia said that her delegation supported the three points stressed by
the Director-General in his statement and supported the statement by Canada.  Like others, Indonesia
was concerned over the systemic implications caused by the dispute at issue.  It deeply regretted thatWT/GC/M/37
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while the parties concerned were to have pursued a mutually agreed solution through agreed
procedures, additional problems had arisen which had further complicated the issue.  She recalled that
in accordance with Article 22.6 of the DSU, "concessions on other obligations shall not be suspended
during the course of the arbitration".  Any action suspending concessions or obligations without
authorization by the DSB violated this provision.  Her delegation urged all parties concerned torefrain from taking unnecessary action which would only undermine the credibility of the dispute
settlement system as well as their own, and to continue pursuing an amicable solution under the DSU.
The representative of Barbados expressed his Government's grave concern over the action
taken by the US on 3 March.  In a statement issued on 5 March, the Heads of Government of the
Caribbean Community had deplored the US unilateral action, and had noted, inter alia , that the US
action was unauthorised, illegal and without basis in WTO rules.  It was a well-known principle ofinternational law that states could neither unilaterally determine infractions of an agreement nor
unilaterally take remedial or consequential action.  This matter transcended the bananas issue.  The
US action undermined the WTO and weakened the ve ry foundations of the multilateral trading
system..  As a small economy and a developing country, Barbados struggled to participate in a full
and effective way in the multilateral trading system.  If the membership of the WTO allowed thecontinuation of a situation where anarchy might ov erwhelm the rules of the system, not only would
the participation of countries like Barbados in that system be made more difficult, but their very
survival would be threatened.
The representative of Switzerland said that throughout the treatment of this matter his
delegation had been guided by a concern to preserve the multilateral character of the WTO dispute
settlement mechanism.  For this reason Switzerland had endorsed the solution proposed on 29 January
by the DSB Chairman.  The great merit of that proposal was that it preserved the rights of both parties
to the dispute.  In this context, the arbitration panel established under Article 22.6 had stated on
2 March that it was not yet in a position to rule on the conformity of the EC measures and,consequently, on the level of the suspension of concessions.  However, the US had imposed customs
duties with effect retroactive to 3 March, even before the arbitrators had given their final decision.  In
practice, and despite its provisional character, this measure had virtually the same restrictive effect on
trade as did a definitive measure.  The inevitable conclusion was that the US had imposed a trade
sanction that was contrary to Articles 22 and 23 of the DSU.  Switzerland urged the US to comply
with its WTO obligations.  He emphasized the responsibility incumbent on both parties to find a
solution to this dispute, with scrupulous respect fo r the multilateral character of the dispute settlement
system;  any other outcome would be prejudicial to the credibility of the WTO.
The representative of Norway said that it was appropriate in the light of the escalation of this
dispute that it be considered in the General Council.  Norway was concerned at this escalation.  His
delegation emphasized that, as the Director-General had said, the roadmap for the legal settlement ofthis matter was in place and the parties should follow it.  The forthcoming consultations would be at
the heart of this matter.  This situation arose at a time when the world was looking to the EC and the
US and also to the WTO for a solution.  Article 5 of the DSU dealt with good offices, conciliation and
mediation.  While the Director-General had already lent considerable assistance in this matter, the two
parties should consider asking for a more formal procedure under Article 5 in an effort to make theconsultations more fruitful.
The representative of Colombia said that in view of the nature of the US decision and the
implications for the stability and functioning of the multilateral trading system, as well as the fact that
this decision deepened the conflict between two of the organization's major players, his delegation hadthought it appropriate for the WTO's highest body to hear those delegations' views in this new chapter
of the banana dispute.  There had been a crisis as a result of the divergences between the EC and the
US regarding the latter's intention to retaliate against imports from the EC.  After much discussion and
many efforts at conciliation by the Chairman of the DSB and by the Director-General, a compromiseWT/GC/M/37
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had been reached to convene an arbitration body to study the merits of this case and the amount of
retaliation announced by the US.  At the same time the existing panel would examine the new EC
import regime.  Thus, a truce had been agreed which had provided an opportunity for the mechanisms
of the multilateral system to function.  Unfortunately, that truce had been broken off while the panel
and the arbitration body were still deliberating, and the matter had regressed to the critical juncture ofa few weeks earlier.  Colombia's intent was to defend multilateralism and implementation of the rule
of law by which all Members were governed.  His delegation reiterated the importance, effectiveness
and credibility of the WTO and particularly the DSU, which was its cornerstone.  Colombia urged all
the parties concerned to seek formulas for compromise and settlement and to avoid confrontation and
polarization at a time when Members were preparing for the start of a new round of negotiations.
The representative of the Philippines said that in his delegation's view there was no place for
unilateral action in the WTO.  Consultations had been requested in accordance with the DSU to
resolve the disagreements in this dispute.  Thus, the dispute settlement system was functioning.  The
DSU, which was at the core of the dispute se ttlement system, sought to resolve disputes
dispassionately and on the legal merits rather than through contentious debates of an essentially
political nature.  The Philippines was concerned with the process currently going on in the GeneralCouncil and its implications.  If a Member was of  the view that another Member had violated the
WTO Agreement, it should be encouraged to resort to the DSU.  The General Council should not be
used as a forum for obtaining redress or even for venting grievances which could only be resolved
through resort to the DSU.  To do otherwise would be to undermine the dispute settlement system.
Pending a legal determination on whether or not a violation had been committed, it was up to thejudgment, conscience and good faith of the Member concerned to desist from or suspend any action
which some might perceive as unilateral;  in the same way, it was up to the judgment, conscience and
good faith of the other Member concerned to implement correctly the relevant rulings and
recommendations.
The representative of Thailand said that her delegation had been following with concern the
latest developments in this dispute.  The system ic implications of this case were in evidence now
more than ever.  The case no longer concerned a small number of Members and one commodity, but
affected the interests of every Member of the WTO and was the shared responsibility of all.  Thailand
appreciated the efforts made by the two parties in January to pursue the multilateral path by referring
the case to arbitration under Article 22.6.  These mutual gestures of good will and cooperation had
convinced her delegation of the strength and the ability of the WTO system to cope even with asituation of the most extreme urgency.  It was only fair to the multilateral trading system to let
Article 22 procedures follow their course.  Thailand supported the Director-General's statement and
appealed to both parties to consult in good faith and to come to a constructive conclusion as soon as
possible.  Any delay would be detrimental to the multilateral trading system.
The representative of Singapore said that his delegation shared the sentiments in the Director-
General's statement and supported his recommendations.  Singapore appealed to the parties concerned
to renew their efforts to find a mutually accepta ble solution, in accordance with WTO rules.  The
procedures to resolve this case were already in place.  It had been agreed at the DSB meeting of
29 January to allow the arbitrators to determine the WTO consistency or otherwise of the EC bananaregime, including the level of compensatory measur es.  This creative solution allowing for a single
process under both Articles 21.5 and 22.6 was based on the premise that any retaliation or claims for
compensation would be in accordance with the rules.  Singapore was concerned about the US
intention to backdate its countermeasures should the arbitrators rule in its favour.  This was
unprecedented in the WTO and had serious systemic implications.  His delegation urged both partiesto the dispute to comply with the arbitrators' fi ndings in an expeditious manner and in the spirit
underpinning the operation of the DSU.  Regarding the relationship between Articles 21 and 22,
Singapore shared many of the views expressed by Canada.  Many of the current problems had arisenWT/GC/M/37
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because of certain ambiguities in these two Articles, and Members should work to clarify the
relationship between them in an expeditious manner.
The representative of Malaysia said that his delegation was against any unilateral action.  The
latter had no place in the WTO.  Malaysia hoped that this dispute could be resolved by the parties to it
and not destroy in its wake the multilateral trading system.  While it was undeniable that any Member
could request the General Council to discuss any issue which it considered urgent, discussing the
present subject repeatedly in the General Coun cil only undermined the DSU and the DSB, and
politicized what was in effect a legal issue.  Malays ia joined other delegations calling for this issue to
be settled within the DSB.
The representative of Trinidad and Tobago said that the DSU was a critical element in the
continued viability and credibility of the multilateral trading system.  It was the users of the system,
and particularly the major players, who would put their credibility and the system itself at risk if they
did not act in conformity with  the letter and spirit of the rules.  Her delegation had supported the
convening of the present meeting.  In light of th e most recent developments in the banana dispute –
unilateral action that could set a negative precedent for future dispute settlement cases – it could notbe business as usual in the WTO.  It was important that Members have the opportunity to exchange
views on the course of action taken by the US, its unilateral nature and its implications for the dispute
settlement system and the multilateral trading system, particularly in light of the many delegations
who had spoken out against unilateralism at the January DSB meeting.  The General Council was the
ideal forum for such an exchange of views.  This issue had gone well beyond bananas and raisedcritical systemic questions which had to be addressed.  For a small developing country and one which
would never be able to impose its will on any of the larger or more powerful Members, the rule of law
constituted a key guarantee of fair play and equitable treatment, and justified belief in and
participation in the system, with the attendant responsibilities, obligations, sacrifices and benefits.
Trinidad and Tobago regretted that the system had not been given the necessary time to functionbefore action had been taken outside of the rules and framework of the WTO.  She referred to the
statement by the Heads of Government of the Caribbean Community at their recent meeting in
Surinam which deplored the precipitate, unilateral, unauthorised and illegal action of the US which
was in flagrant violation of WTO rules and procedures at a time when an arbitration panel had been
established and when two other panels were cons idering the WTO-conformity of the new EC banana
regime.
The representative of Australia recalled that the EC and the US had been among the leading
negotiators of the DSU, which was supposed to contribute to WTO objectives of predictability and
security of the multilateral trading system.  It was apparent that the DSU rules and procedures on
implementation were not satisfactory to either side in the bananas dispute and that most WTO
Members wanted those rules and procedures revisited in the DSU review.  The positions of the partiesin this case had the potential to adversely affect the rights of other WTO Members, including their
legitimate expectations that the application of DSU rules and procedures would be conducted in an
environment of predictability and security.  Australia appreciated the frustration at delays, procedural
complexity and uncertainty created by the current imperfect state of the rules on implementation.
However, in the context of the present discussion it would have been better for the system had actionbeen deferred pending the outcome of the current panel processes.  Australia encouraged both parties
to take account of the potential damage to the WTO system if this issue escalated further.
Th representative of Ecuador said that his delegation considered that this matter was not an
urgent one and that it should not have been submitted for consideration by the General Council.  What
was urgent was for the EC to settle the banana dispute, which had been postponed for more than six
years by the EC's use of delaying tactics.  Bringi ng this matter to the General Council was an attempt
to distract the attention of the panel examining the complaint by Ecuador, and his delegation feared
that this attempt might affect the work of that panel.  Ecuador rejected unilateralism since it wasWT/GC/M/37
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harmful to the WTO system and affected Members' rights, especially those of the developing
countries.  As the world's largest exporter of bananas, Ecuador could not agree to the imposition of
settlements agreed bilaterally by the EC and the US, in disregard of Ecuador's interests and rights.
The representative of Egypt said that his delegation shared the views expressed by India,
Canada, Japan and Korea.  Egypt was fearful of the systemic implications of this dispute, and had
expressed its concern in the DSB about the unilateral determination of compliance.  It was also
concerned that recent measures had been taken wi thout the approval of the DSB.  Egypt's major
concern was that both the EC and the US had taken positions based on narrow national interests, and
his delegation had urged them on numerous occasions to demonstrate leadership as the parties that
most benefited from the multilateral trading system.  His delegation was confident that they would
uphold the rule of law and preserve the multilateral trading system.  The dispute settlement processhad a number of deficiencies and was in need of the review currently taking place.  Egypt was also
concerned that the developing countries did not have the capacity to take measures that were in
support of the system and that would help them  when they felt their interests were being
compromised.  It was hoped that this issue would be addressed in the review of the DSU.
The representative of New Zealand said that the key to resolving difficult disputes was for
interested parties, and especially major players, to adopt a solution-oriented approach, which involved
adhering to the letter and spirit of the dispute settlement system.  It meant not exacerbating difficulties
or bringing about a deterioration in the climate for arriving at mutually acceptable solutions.  New
Zealand fully endorsed the positive and solution-oriented statement by the Director-General, inparticular the latter's reference to the vital mechanism for bilateral consultations under Article 4 of the
DSU.
The representative of Brazil said that the importance of the WTO to international trade rested
on two pillars of equal strength:  security and predictability.  Multilaterally agreed trade rules were
supposed to be predictable so as to assure traders that the rules that applied were known and that there
would not be unexpected changes that would affect their interests.  These trade rules were also
supposed to provide security, and this by two means:  their very predictability, and the fact that their
functioning and application was monitored by all Members of the WTO and by a multilateral dispute
settlement system.  The need for security and predic tability in international trade relations explained
the success of the GATT and of the WTO.  The current situation proved that the predictability and
security provided by the WTO were also very precarious, because they existed only while Membersremained committed to respecting the rules and to working together to surmount obstacles.  The
present situation could have been avoided.  While th ere might be different interpretations of existing
rules, the multilateral character of the organization should not be put in jeopardy.  The concept of
unilateralism was extraneous to the function ing of the WTO and undermined security and
predictability.  Compliance was fundamental to maintaining the credibility of the system.  If the WTOwas not a credible institution, it could not provide security and predictability.  All Members were
responsible for maintaining that credibility throug h compliance.  The timing of this crisis was an
additional reason for concern.  If the world financial crisis was compounded by a trade crisis, the
results could be very serious for all Members.  Another concept of fundamental importance for the
appropriate functioning of the WTO was the principle of decision-making by consensus, which hadbeen Members' means of negotiating and enforcin g multilaterally agreed rules.  Brazil was ready to
participate in any effort to solve the present proble m by consensus.  While it considered that the DSU
was functioning well, Brazil would engage in discussions relating to its modification, if this were to
provide increased security and predictability.
The representative of Senegal said that beyond the actual measures taken by the US was the
way in which they had been taken and the risks in volved for the multilateral trading system.  The
WTO dispute settlement system was one of the most articulated and satisfactory results of the
Uruguay Round.  Members were duty-bound to preserve this accomplishment in ensuring that theirWT/GC/M/37
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actions and attitudes were in conformity with the letter and spirit of the dispute settlement system.
The primary objective of that system was not to sanction any Member for the infraction of a rule but
rather to restore a balance which had been upset.  There were clear indications in the case at hand that
this objective could be reached without resort to the measures under discussion.  Members had to
exercise restraint whenever there was a chance, even slim, of reaching a multilateral solution to adispute.  What was at issue was Members' attitude  rather than any shortcomings in the multilateral
system.  In the present situation, delegations such as Senegal had rights that could be seriously
undermined in this dispute.
The representative of Argentina said that the EC  and the US, given their role in trade, had an
additional responsibility in settling an issue of this kind.  The level to which the present dispute had
escalated jeopardized the normal functioning of the multilateral trading system.  Argentina urged theparties to the dispute to bear in mind the devastating effect on the multilateral trading system of the
accumulation of reciprocal actions by the two main partners in that system.  Argentina's views on the
dispute which had given rise to the present situation had been expressed in the DSB and at the
General Council meeting on 15 February.  The DSB should authorize the suspension of concessions
or other obligations pursuant to Article 22.6 and 22.7 of the DSU, unless it was decided by consensusto reject the request for such authorization.  Concessions or other obligations could not be suspended
unilaterally.  The obvious context for discussing an issue of this kind was the DSB under the
procedures established by the DSU.  It was not appropriate to involve the General Council in this
dispute, and still less to do so in such a way that Members, especially developing countries, did not
have a suitable opportunity to analyse, consult and ev aluate alternatives to issues that were of major
importance to the future viability of the dispute settlement system.
The representative of Côte d'Ivoire said that her delegation had repeatedly expressed its
concern regarding the way the US was handling the trade dispute on bananas.  The facts had
confirmed that those fears were well-founded.  In view of the consultations and the arbitration underway, and in view of the spirit in the General Council favouring conciliation, Côte d'Ivoire  had
expected that any unilateral measures would be suspended, and was profoundly frustrated that this had
not been the case.  Despite what was happening, her delegation continued to believe in the Members
consulting among themselves, as this created credibility for the system.  The Director-General's
statement should be given full attention.
The representative of Venezuela expressed his delegation's concern at the level of abuse of
the limits of the dispute settlement system that seemed  to have been caused as result of the lengthy
debate on the banana dispute.  The dispute settlement mechanism had shown too much leeway
regarding interpretation, and there was thus an urgent need to fill in the gaps.  His delegation, like
many others, was mindful of the need to clear up the DSU's shortcomings.  It was contributing to the
review process so that progress could be made and future interpretations avoided that would impairthe objective of the DSU, which was to permit predictability and implementation of the WTO
agreements.  For some time, political and economic interests had taken precedence over the interests
of the system, resulting in the loss of faith by parties to disputes.  This undoubtedly conflicted with
the spirit and objectives of the process.  No Member, even though affected by gaps in interpretations
allowed under the DSU, should proceed to take steps outside the multilateral context and thus openthe door to similar actions which jeopardised the credibility of the DSB and the WTO.  Otherwise, the
detractors of the system would find justification for their suspicions of its lack of virtues.
The representative of Uruguay reaffirmed Uruguay's support for and commitment to the
dispute settlement system.  This system was the only means small economies had to defend their
interests.  It was not acceptable for one Member to take unilateral measures that were counter to the
rules, nor was it acceptable for a Member to refuse to comply adequately with panel or Appellate
Body recommendations and rulings using subterfuges to prolong the situation.  Uruguay fully
supported the statement by the Director-General and the points made by Canada and hoped that bothWT/GC/M/37
Page 14
parties to this dispute would heed the message that had arisen from the present discussion.  He
stressed the point in the Director-General's statement that it was the users of the system who would
put their credibility at stake if they did not act in conformity with the letter and the spirit of the
system, which sought above all to produce mutually acceptable settlements.
The representative of Jamaica associated her delegation with the statements by Dominica,
St. Lucia, Trinidad and Tobago, Japan, India and the Director-General.  The US action of 3 March
merited special attention from the General Council.  Jamaica had always urged both the US and the
EC to work towards finding a mutually satisfactory  solution to the dispute on the EC's banana regime,
within the framework of the rules and procedures of the WTO.  On 2 March the arbitrators had
requested additional information from both parties, and the arbitration process was continuing.  The
DSB meeting of 3 March had been cancelled at the US request, given the arbitrators' request for moreinformation from both parties.  The cancellation of that meeting had not been to allow the US to adopt
unilateral measures pending a final decision by the arbitrators.  The US action undermined the DSB
and was a violation of Article 22 of the DSU.  It had serious implications not only for EC trade, but
for the trade of small WTO Members - in particular the Caribbean countries - and the WTO as a
multilateral organization.  He referred to the recent statement by the Heads of Government of theCaribbean Community in which it was stated that "This unauthorised and illegal action undermines
the World Trade Organization and threatens the economic survival and social and political stability of
several Caribbean countries".
The representative of Hong Kong, China said that his delegation held a principled position
against unilateralism.  Suspension of concessions or imposition of other measures with trade effects
should await the final decision of the arbitrators which would be available shortly.  In addition, there
was an emerging consensus that the ambiguities of the relevant DSU provisions should be dealt with
in the context of the DSU review as a matter of priority.  His delegation considered all these steps
conducive to the resolution of the dispute and to maintaining the health and credibility of the
multilateral trading system.  It urged the parties concerned to follow these steps in handling this
matter, and endorsed the Director-General's statement.
The representative of Turkey expressed his delegation's frustration that so much time and
energy had been devoted to a problem which could have been solved earlier had the directly interested
parties adopted a less confrontational approach.  In any event, this dispute would be solved in the next
few weeks, when the dispute settlement system gave its legal response to it.  His delegation shared theviews and concerns expressed by the Director-General, who had reminded Members of their
responsibilities.  This matter was currently under examination by the competent organs of the WTO,
and his delegation regretted the tenor of the present meeting.  The WTO was an institution where
good will should prevail and good faith should be the basis of all endeavours.  In the final analysis,
highly sensitive security and sovereignty issues were not at stake.  In a cooperative environmentgeared to creating a global economy to the benefit of all, Members should be able to reconcile their
commercial interests within the framework of a rule-based system.  Every Member of the WTO
should do everything in its power to exhaust all the available legal procedures to solve a dispute
before resorting to unilateral initiatives.  Retaliatory measures should be a last resort.  While the rules
provided for this possibility, it was similar to the provision for voting.  Turkey was concerned aboutthe measure taken by the US despite the fact that the US had clearly stated that the decision was of a
provisional nature, and that the entry into force of the measure would be contingent on the decision by
the arbitrators.  There was consensus in the General Council that Articles 21.5 and 22 of the DSU did
not shed sufficient light to settle this dispute.  These Articles contained certain ambiguities which
were subject to different interpretations, and it might be necessary to amend them.  The DSB washolding on 16 March an informal meeting on the DSU review to specifically deal with certain
ambiguities contained in these Articles.  Turkey would have preferred to see the US wait until the
original panel had reached a decision and the arbitration process had given a verdict on the case.  The
loss of time would be compensated by the gains in promoting the efficiency of the dispute settlementWT/GC/M/37
Page 15
system and in consolidating the WTO as an original and innovative international institution.  The
legal arguments of the parties were dwarfed by the prospect of such an outcome.
The representative of Cyprus said that the dispute settlement system concerned each and
every member of the WTO.  She expressed her Government's strong and firm support for the
procedures negotiated and agreed upon, which clearly provided for a multilateral, rules-based
approach within the DSB.  Her delegation reiterated that any unilateral action should be avoided, if
the organization was to continue to be considered a reliable and credible one, respectful of its own
decisions and protecting the interests of all its Members.
The representative of the United States expressed concern that some of the views heard at the
present meeting had failed to take into account the facts, or were based on untrue assumptions.  The
EC and others had used the word "urgent".  If anything was urgent it was the needs of WTO Members
like the US, who had waited seven years for the EC to bring its banana regime into compliance with
the EC's international obligations.  The EC had said  that it had changed that regime several times
during those seven years, but the fact was that after each change, that regime had again been found
not in compliance with the EC's obligations.  No GATT or WTO dispute settlement body had everfound any EC banana regime to be in compliance.  Second, under Article 22 of the DSU the US had a
right to an arbitrator's decision by 2 March 1999.  Many delegations had quoted the last sentence of
Article 22.6, but had failed to mention the mandatory language from the previous sentence in that
Article, which said that the arbitration "shall be completed within 60 days after the date of expiry of
the reasonable period of time".  This paragraph had to be read as a whole.  One sentence could not betaken out of context and applied to a particular need.  Given the EC's efforts to avoid arbitration and
its conduct during the arbitration, it was not surprising that the arbitrators had found it difficult to
compete their task on time.  However, the DSU did not provide for extending that deadline.  The US
would follow the arbitrators' decision and would abide by the rules, but in the interim it would
preserve its rights.  Third, contrary to what Dominica had said, the US had not suspended concessionsduring the course of the arbitration in violation of the last sentence of Article 22.6.  It had merely
postponed liquidation of entries – i.e. it had decided not to impose additional duties at the present
time.  This was the fact, notwithstanding claims of "de facto" suspension of concessions.
Furthermore, the US had stated that whatever action it might eventually take would be consistent with
the arbitrators' decision.  She asked how this was acting outside the WTO.  Finally, the EC had
already requested dispute settlement consultations on this matter, and any other Member with a
substantial trade interest could ask to join those consultations.  What, then, had been the purpose ofthe EC summoning all the WTO Members to a General Council meeting to hear the EC's
mischaracterization of the facts?  What was the urgency in so doing?  What distinguished the EC's
complaint from other complaints processed in the normal manner under the dispute settlement system,
some of which involved cases in which Members had actually taken measures to stop millions or
billions of dollars worth of trade?  While the present discussion had been good, it had not been aproductive use of Members' time.
Many Members had encouraged the US and the EC to continue negotiations.  The US had
engaged in negotiations with the EC recently and had asked the EC to take consultations – not only
with the US but also with the other G-5 complaining parties and Panama – seriously.  The US hadgiven the EC proposals that could result in a WTO-consistent banana regime for ACP countries.  She
clarified that the US was not against any kind of preference program or the need for preferences for
many of these countries.  The US itself had preference programs for the Caribbean countries.  But the
EC had to negotiate a preference program that was WTO-consistent.  The US had never said that
preferences could not be given, but rather that they had to be WTO-consistent.  Her delegationwelcomed comments by delegations that the WTO had much work to do in many areas.  The US
looked forward to hosting the next Ministerial Conference in Seattle and to working with other
Members to accomplish the tasks set to achieve global prosperity, i.e. growth in markets.  Global
prosperity required an organization like the WTO and the rules it provided, but those rules could notWT/GC/M/37
Page 16
be abided by selectively.  She regretted what the US had had to do to preserve its rights.  There had to
be a resolution of this dispute that would maintain the integrity of the multilateral trading system.  The
US had invested in that system – it had complied with three adverse decisions in the course of dispute
settlement, including changing its domestic regulati ons.  The EC had yet to show any respect for the
system.  It had used the system in employing delaying tactics and had itself acted unilaterally in notsitting down with the US to work out a WTO-consistent banana import regime.
The representative of the European Communities said that he saw a difference between what
the US said and what it did.  What the US had done was to take action that had not been authorized by
the DSB and was outside the rules.  It was a matter of dispute whether the US had been within its
rights in invoking Article 22 and in applying the measures.  At least one delegation had said that the
60 days provided for was not a mandatory deadline.  Article 17.5 relating to the Appellate Body saidthat "in no case shall the proceedings exceed 90 days".  However, he believed that in some cases it
had considered, its report had been adopted beyond 90 days and no one had said that the reports were
not valid or that the Appellate Body had exceeded its authority.  He was confident that the arbitrators
would uphold the point of view that these time periods were indicative, in which case the US
entitlement to act on 3 March disappeared.
He made the following two points which he said were factual.  First, regarding the question of
whether the US had or had not suspended a concession, while the US had not increased any duties, it
had clearly suspended a concession or an obligation under the WTO.  The suspending of the
concession arose because the withholding of liquidation denied an importer access, at the bound dutyrate and under the normal conditions he had a right to expect, to the US market.  The withholding of
liquidation was discriminatory; thus the US was no longer treating all imports in an m.f.n. manner.
Article 22.6 clearly stated that a Member should no t do this while an arbitration process was under
way.  Second, much had been made of the fact that the EC had requested consultations.  It was clear,
however, that that process would take time, and by the time those consultations got under way, theresults of the arbitration process would be availabl e and the whole picture would be different.  It had
been said that discussion of this matter was not urgent;  if a case where a leading Member deliberately
went outside the rules and took unilateral action with all the precedents that implied did not warrant
urgent discussion, what did?  This was a very important issue for the organization and for the future,
and it was important to hear Members' views on it.  Regarding the US claim that it had implemented a
number of cases in dispute settlement, those cases had been considered much earlier in the life of the
DSU, and no change of legislation had been necessary for the US to implement the recommendations.The EC had lost its first case on bananas in the fall of 1997 and despite major political sensitivities
and contractual problems had made a change in its regime within the required 15 months.  However,
the impression had been given by the US in the pre ss and in the Congress that nothing whatsoever had
been done.  This had been a useful discussion, and there had been considerable support for the EC's
views.
All delegations who spoke thanked the Director-General for his statement.The Chairman said that this had been a good discussion of this complex and serious matter,
and again expressed appreciation for the Director-General's statement.
The General Council took note of the statements.
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