RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/195 
6 September 2005 
 (05-3875) 
Dispute Settlement Body 
3 August 2005  
 
 
   
MINUTES OF MEETING 
 
Held in the Centre William Rappard
 
on 3 August 2005  
 
Acting Chairman:  Ms  Amina Mohamed (Kenya) 
  Prior to the adoption of the agenda
, the Chairman of the General Council, 
Ambassador Amina Mohamed, welcomed delegations and said that she had the pleasure of chairing 
the present meeting in the absence of Ambassador Eirik Glenne, the Chairman of the Dispute 
Settlement Body.  She said that this was in accord ance with the Rules of Procedure for meetings of 
the Dispute Settlement Body which provided that:  "If the DSB Chairperson is absent from any 
meeting or part thereof, the Chairperson of th e General Council or in the latter's absence, the 
Chairperson of the Trade Policy Review Body, shal l perform the functions of the DSB Chairperson." 
 Subjects discussed
: Page  
 
1. United States – Countervailing duty in vestigation on dynamic random access 
memory semiconductors ( DRAMS) from Korea ...................................................................2  
(a) Implementation of the recommendations of the DSB.................................................................2  
2. European Communities – Countervailin g measures on dynamic random access 
memory chips from Korea .......................................................................................................2  
(a) Report of the Panel............................................................................................................ ..........2  
3. European Communities and certain member States – Measures affecting trade 
in large civil aircraft ........................................................................................................ .........6  
(a) Initiation of the procedures for developing information concerning serious prejudice 
under Annex V of the SCM Agreement and designation of the representative referred 
to in paragraph 4 of that Annex ............................................................................................... ..6 
4. "European Communities – The ACP–EC Pa rtnership Agreement – Recourse to 
Arbitration Pursuant to the Decision of 14 November 2001":  Award of the 
Arbitrator ..................................................................................................................... .............8  
(a) Statement by Colombia, on behalf of Brazil, Colombia, Costa Rica, Ecuador, 
Guatemala, Honduras, Nicaragua , Panama and Venezuela ........................................................8  
 
 
 WT/DSB/M/195 
Page 2  
 
1. United States – Countervailing duty inv estigation on dynami c random access memory 
semiconductors (DRAMS) from Korea 
(a) Implementation of the recommendations of the DSB 
1. The Chairman
 recalled that, in accordance with the DS U provisions, the DSB was required to 
keep under surveillance the implementation of reco mmendations and rulings of the DSB in order to 
ensure effective resolution of disputes to the benefit of all Members.  In this respect, Article 21.3 of 
the DSU provided that the Member concerned shall in form the DSB, within 30 days after the date of 
adoption of the panel or Appellate Body report, of its intentions in respect of implementation of the 
recommendations and rulings of the DSB.  She recalled that at its meeting on 20 July 2005, the DSB had adopted the Appellate Body Report in the case:  "United States – Countervailing Duty 
Investigation on Dynamic Random Access Memory Semiconductors (DRAMS) from Korea" and the 
Panel Report on the same matter, as modified by th e Appellate Body Report.  She then invited the 
United States to inform the DSB of its inten tions in respect of implementation of the 
recommendations. 
2. The representative of the United States
 said that his delegation was pleased to inform the DSB 
that the United States intended to implement the DSB's recommendations in a manner that respected 
the US WTO obligations.  The United States would n eed a reasonable period of time in which to do 
so. His delegation stood ready to discuss this matter with Korea, in accordance with Article 21.3(b) of 
the DSU. 
3. The representative of Korea  said that his country welcomed the statement made by the 
United States, that it intended to comply with the DSB's rulings and recommendations in the DRAMS 
dispute.  Korea noted that the United States had indicated that it would need a reasonable period of 
time in order to bring its measure into compliance.  Korea was ready to discuss with the United States 
on a reasonable period of time as well as on how th e United States would discharge its obligations, as 
recommended by the Panel and the Appellate Body. 
4. The DSB took note  of the statements, and of the information provided by the United States 
regarding its intentions in respect of implementation of the DSB's recommendations. 
2. European Communities – Countervailing me asures on dynamic random access memory 
chips from Korea 
(a) Report of the Panel (WT/DS299/R) 
5. The Chairman  recalled that at its meeting on 23 January 2004, the DSB had established a 
panel to examine the complaint by Korea pertaining to  this matter.  The Report of the Panel, contained 
in document WT/DS299/R, had been circulated on 17 June 2005 as an unrestricted document, 
pursuant to the Procedures for the Circulation a nd Derestriction of WTO Documents contained in 
WT/L/452. The Panel Report was now before the DSB for adoption at the request of Korea.  This adoption procedure was without prejudice to the right  of Members to express their views on the Panel 
Report. 
6. The representative of Korea
 said that his country had asked that the Panel Report pertaining to 
the DRAMS dispute be placed on the agenda of the present meeting for adoption.   He noted that the Panel had found that the EC countervailing duty on DRAMS from Hynix of Korea was inconsistent 
with the SCM Agreement.  Korea welcomed that c onclusion of the Panel and appreciated the efforts 
of the members of the Panel and the Secretariat in this dispute.  However, there were a number of 
areas where the Panel had come up with wrong inte rpretations that were not supported by neither 
WTO jurisprudence nor simple logic.  WT/DSB/M/195 
 Page 3 
 
 
7. With regard to facts available, he said that  the Panel had wrongly permitted the investigating 
authority to take alleged non-c ooperation into account when "assessi ng and evaluating the facts" not 
just in establishing what the facts were.  Pane ls might draw adverse inferences when conducting 
proceedings under Part II of the SCM Agreemen t dealing with adverse effects.  However, 
investigating authorities did not have that authority; they might make use of facts available when a 
party was not forthcoming, but by simple a contrario  analysis they did not have the authority to make 
adverse inferences.  The Panel had found that it w as appropriate to make adverse inference since 
relevant information had been withheld by Korea.  There was no information withheld in fact. The 
EC's request was extremely broad.  In counterva iling duty investigation, where the administrative 
entity of one Member was investigating the sovereig n acts of another Member, the request had to be 
sufficiently specific and precise.  A convincing expl anation had been given when Korea had not been 
able to submit the requested information. With out showing minimum respect for the reasonable 
explanation, the Commission had drawn adverse infe rence and the Panel had regrettably endorsed it.  
In any event, all of the informa tion had been available to the Commission in one way or another.  
Thus, facts available were not even applicable.  The extension of the "facts available" provision to 
authorize adverse legal inferences by an administ rative agency of a Member government was neither 
supported by the treaty nor appropriate under intern ational law.  The Panel had misunderstood the 
fundamental difference between domestic administ rative proceedings and international tribunal 
proceedings.  That aspect of the Panel's findings was so flawed and illogical. 
8. With regard to the flipping the "benefit" and "f inancial contribution" analyses, he said that  
non-commercial behaviour by the private body was one  of the key aspects of the EC's finding that 
there was entrustment or direction by the Kor ean government.  "Non-commercial" behaviour should 
be determined by using market benchmarks.  Ho wever, the EC had made a non-commercial behaviour 
finding based on nothing but the assessment of EC bureau crats, and then it had used it to declare that 
private bodies' actions had resulted from government entrustment or direction. In that manner, the 
possible market benchmarks had been conveniently eliminated.  He recalled that these private bodies 
were Hynix creditors.  As such, they had had to make some difficult choices in taking risks in an 
effort to secure their credits. In that regard, Korea regretted that the Panel had come to a different 
judgment from that of "Korea – Shipbuilding" (DS 273) Panel, which had gi ven much more rational 
review of such behaviour of the creditors.  The EC  had made the benefit dete rmination first and then 
had used that to make a finding of entrustment or di rection.  A desired conclusion was used to justify 
its own premises.  Inexplicably, the Panel had been satisfied with that reversed reasoning. 
9. With regard to the government ownership of priv ate entities, he said that  the EC had correctly 
found, that the commercial banks in which Korea's government had taken te mporary ownership were 
private bodies.  However, the EC had then undercut that determination by assuming that there was entrustment or direction based on mere government ownership.  In upholding the Commission's determination, the Panel had found that there was a different level of "quality of the evidence" based 
on whether or not there was government ownership.
1  Indeed, the Panel had created a presumption of 
entrustment or direction based on government ownershi p.  It stated that "Korea has not provided any 
evidence that the government shareholding powe r did not allow the government to exercise 
substantial management power."2  Thus, the Panel had demanded that Korea prove the negative, an 
impossible task.  The Panel had used that impr oper presumption to uphold several key aspects of the 
Commission's subsidy findings. 
10. With regard to specificity and injury, he said that the Panel had found that the specificity 
criteria had been satisfied because a certain fund was disproportionately granted to Hynix.  However, 
the Panel had not considered relative size of the re cipient companies.  Under the Panel's analysis, 
large companies would always be found to have r eceived disproportionate grants, even if the funds 
were disbursed in proportion to the size of the comp anies.  Under that approach, small- or medium-
                                                      
1 Panel Report, para. 7.140. 
2 Ibid, para. 7.129. WT/DSB/M/195 
Page 4  
 
sized companies would not satisfy the specificity requirements, but large ones always would.  The 
Panel had also erred with respect to the specificity analysis by upholding the EC's finding that certain 
restructurings were "specific restru cturing exercise undertaken for Hynix."
3  Apparently that was 
because there was a restructuring plan developed specifically to Hynix under the general framework 
agreements.  Of course, a restructuring plan was al ways particular to the company it applied to.  As 
long as the framework approach was generalized and the particular plan was consistent with such 
approach, then there could not be any specificity.  Korea believed that the general framework was not 
specific to Hynix at all.  Hynix had been created dur ing the period of investigation by the merger of 
two companies.  One would logically count the im ports from the two companies at the beginning of 
the period of investigation and compare them to the imports of the merged company at the end of the 
period.  The Commission had not done so and regretta bly the Panel had upheld it.  The Panel had even 
accepted the EC's argument that absolute volume incr eases alone could undercut prices.  But, if the 
Panel was going to place such reliance on the issue of  volume increases, it would have been helpful if 
it had, at least, counted them properly in the first place. 
11. With respect to the EC's obligation of complianc e, he said that despite various flaws that had 
been mentioned, the Panel had found that the EC's measure was not consistent with the SCM 
Agreement and had put the EC under an obligation to  bring its measure into conformity with that 
Agreement.  The Panel had correctly found that the benefit was inflated.  The Panel had made it clear 
that accurate benchmarking was required and compar ison of the differences between the actual rates 
and the market rates was indispensable in order to correctly calculate the amount of benefit.  Korea 
was convinced that a number of these so-calle d subsidies would either disappear or be found de 
minimis  when properly benchmarked. 
12. The Panel had clearly rejected the injury fi nding of the Commission.  Important injury and 
causation factors such as wages and overcapacity ha d not been even considered by the Commission. 
The Panel had further found that the Commission ha d failed to analyze the impact on prices of non-
subsidized imports.  The non-subsid ized imports had been far greater in number than those subject to 
investigation and they had undersold the products  of both Hynix and the domestic industry.  
Moreover, the Commission had failed to properly sep arate and distinguish the overall impact of non-
subsidized imports both from Korea and elsewhere.  Korea remained convinced that an objective 
review of the facts would demonstrate that the s upposedly subsidized Hynix imports had not caused  
material injury to the EC domestic  industry.  The EC had an obliga tion of prompt compliance with the 
DSB's rulings and recommendations. Korea expected  a good faith, accurate and thorough effort from 
the EC in that regard.  Korea considered that the only appropriate manner of proceeding was to 
terminate the countervailing duty order. 
13. In conclusion, he said that, believing that the EC would lose no time in discharging its 
obligation, Korea recommended that the Panel Repor t be adopted by the DSB at the present meeting. 
14. The representative of the European Communities  said that the EC wished to thank the Panel 
for producing what was, in the main, an objective and balanced Report.  The EC was particularly 
pleased that the Panel had applied a reasonable standa rd for "entrustment and direction" of private 
banks by the government, which was an essential element in preventing circumvention of WTO 
Members' subsidy obligations.  The standard applied by the Panel made it feasible for an investigating 
authority, operating in the real world, to find e nough evidence to support a finding of entrustment and 
direction without being required to produce an e xplicit written order from the government.  The Panel 
had also correctly examined the totality of th e evidence relied on by the EC, which allowed due 
weight to be given to all the elements, for exam ple, non-cooperation and circumstantial evidence.  
The EC noted that in that respect the Panel's appro ach had coincided with that of the Appellate Body 
in the recent DS296 case. 
                                                      
3 Panel Report, para. 7.231 (emphasis in original).  WT/DSB/M/195 
 Page 5 
 
 
15. The EC was also pleased that the Panel had reject ed almost all of Korea's complaints about its 
injury finding.  With regard to those points on which the Panel had found against the EC, the EC 
accepted the Panel's judgement and would comply in  accordance with the findings.  Notwithstanding 
that position, one issue did call for some further co mment.  In calculating the benefit of the subsidies 
to Hynix, the EC had taken the view that, given that Hynix had been unable to obtain any funding 
from the private market, it was appropriate to cons ider the whole amount of the so-called loans or 
debt-for-equity swaps to be a subsidy, because th e Korean government had known, or should have 
known, that there was no reasonable prospect of an y repayment.  The Panel had found that approach, 
even in these exceptional circumstances, to be unr easonable and had made a finding against what it 
termed the "EC's grant methodology". 
16. The EC would not wish to go into the legal arguments behind its objections; suffice to say 
that there must be some circumstances where a co mpany was in such a bad state and the chances of 
repayment so slight, that a notional loan or equity infusion could legitimately be treated as a grant.  If 
not, another door to circumvention of subsidy disci plines would have opened up.  Having said that, 
the EC considered that, whatever method or benchm ark was used, the egregious levels of financial 
support granted to Hynix would permit it to implemen t in such a way as to maintain a legitimate level 
of protection against injurious subsidies for its do mestic industry.  Therefore, on the understanding 
that the findings only applied to the case at hand, and in the interest of the timely resolution of 
disputes in the WTO, the EC would support the adopti on of the Panel Report and  would take steps to 
implement in accordance with its findings. 
17. The representative of the United States  said that the subject of this dispute was similar to the 
subject of the dispute in the "US – DRAMS" disput e, the reports for which had been adopted by the 
DSB at its previous meeting.  At the outset, the Un ited States noted the marked difference in approach 
taken by the panels in these two different disput es.  As Members were aware, in the US case, the 
Appellate Body had found that the pa nel had engaged in an impermissible de novo  review of the US 
subsidy determination.  In its comments on the Appe llate Body Report at the previous meeting, Korea 
had repeatedly stated that the Appellate Body had ignored or had not properly considered the panel's 
weighing of the evidence.  But the fact that the panel had engaged in a weighing of the evidence was 
the panel's major error.  While panels must care fully scrutinize determinations by investigating 
authorities, it was well-established that they were  not to engage in their own weighing of the 
evidence.  As Korea admitted, the panel in the US  dispute had engaged in its own weighing of the 
evidence, and because of that, the Appellate  Body had properly reversed the panel. 
18. With respect to the EC case, the United States had acknowledged at the outset that, as a third 
party, it was not as familiar with the record in that  dispute as were the parties.  However, it appeared 
to the United States that, by and la rge, the Panel in that dispute ha d not only articulated the correct 
standard of review, but, more impor tantly, had applied the correct standard of review.  From the US 
perspective, one did not see in the EC case the type  of second-guessing of investigating authorities on 
factual matters that permeated the panel report in the US dispute. 
19. Turning to the substantive issues in the "E C – DRAMS" Panel Report, the United States 
wished to make a few comments about the Panel's di sposition of injury issues.  The United States was 
concerned about the Panel's statem ent, at paragraph 7.405 of the Report, that to satisfy the 
requirements imposed by the non-attribution langua ge of Article 15.5 of the SCM Agreement, an 
investigative authority "must make a better effort  to quantify the impact of other known factors, 
relative to subsidized imports, preferably using elementary economic constr ucts or models".  The 
Report had thereafter criticized the EC several times for not attempting to provide a quantitative 
analysis of the effects of causes other than the subsidized imports, although it had also found that the 
EC had not conducted a satisfactory qualitative anal ysis either.  Why the Panel had deemed it 
necessary to encourage authorities to conduct quantita tive analyses was unclear.  Just four sentences 
before its endorsement of quantitative analysis, th e Panel had acknowledged that Article 15.5 did not 
require authorities to use any particular methodolog y.  The Panel had further acknowledged that the WT/DSB/M/195 
Page 6  
 
Appellate Body had not specified any particular methodologies authorities must use to satisfy their obligations under Article 15.5.  Because Article 15. 5 set forth no requirement that authorities conduct 
a quantitative analysis, there was no basis fo r the Panel to state that authorities " must  make a better 
effort to quantify the impact of other known factor s" (emphasis supplied).   The United States also 
contrasted the statement of the Panel in "EC – DRAMS" with one made by the Panel in "US – 
DRAMS".  Paragraph 7.353 of the "US – DRAMS" Panel Report stated that Article 15.5 did not 
require an authority to quantify the effects of factor s other than subsidized imports.  The United States 
believed that statement by the "US – DRAMS" Panel accurately set forth the requirements of the SCM Agreement. 
20. Finally, the United States wished to make a few comments about the findings at 
paragraphs 7.211-7.215 of the "EC – DRAMS" Repo rt regarding the EC methodology for calculating 
the amount of the benefit.  The US comments were limited to the findings as they pertained to equity 
infusions in particular.  Having concluded that a reasonable commercial investor would not have 
made equity investments in Hynix, the EC had treated  these equity infusions as if they were grants.  
At paragraph 7.212, the Panel had faulted the EC  methodology, because, according to the Panel, the 
new equity "dilutes the ownership claims of existi ng shareholders" and thus provided less benefit than 
a grant.  The US concern was that in making that fi nding, the Panel had created an obligation with no 
basis in the SCM Agreement.  Article 14(a) of th e SCM Agreement provided only that the provision 
of equity capital might be consider ed as conferring a benefit where such provision "can be regarded as 
inconsistent with the usual investment practice".  Article 14(a) did not go on to specify how the 
amount of the subsidy benefit should be calculated once a determination had been made that an equity 
investment was inconsistent with  usual investment practice.  T hus, as the Panel ha d acknowledged at 
paragraph 7.213, an investigating authority was "entitled to considerable leeway in adopting a 
reasonable methodology".  The United States believed it was not unreasonable to calculate a benefit to 
the recipient equal to the equity infusion as a w hole in the case of an "unequityworthy" company, 
inasmuch as that company would not normally have access to that additional ca pital.  For that same 
reason, the United States could not agree with th e Panel's contention at paragraph 7.212 that the 
EC calculation methodology "focuses on the expectation of  the provider," rather than on the benefit to 
the recipient. 
21. The DSB took note
 of the statements and adopted  the Panel Report contained in 
WT/DS299/R. 
3. European Communities and certain member States – Measures affecting trade in large 
civil aircraft 
(a) Initiation of the procedures for developing in formation concerning serious prejudice under 
Annex V of the SCM Agreement and designa tion of the representative referred to in 
paragraph 4 of that Annex (WT/DS316/2) 
22. The Chairman  said that this item was on the agenda of the present meeting at the request of 
the United States.  She then drew attention to the communication from the United States contained in 
document WT/DS316/2, and  invited the representative of the United States to speak. 
23. The representative of the United States  recalled that on 20 July 2005, the DSB had established 
a panel to examine the US claims regarding th e massive subsidies that France, Germany, the 
United Kingdom, Spain, and the European Comm unities had provided to Airbus, the European 
manufacturer of large civil aircraft.  At that mee ting, the United States had also sought to have the 
DSB initiate the procedures provided for in Annex V of the SCM Agreement, pursuant to paragraph 2 
of that Annex.  Regrettably, the EC had blocked in itiation of the Annex V process.  At that meeting, 
the United States had also responded to the reasons th at the EC had given for blocking the process.   
The United States had invited the EC to reconsider its  stance and to allow the DSB to go forward with 
the decision that paragraph 2 required it to take.  The information-gathering process provided for in  WT/DSB/M/195 
 Page 7 
 
 
Annex V was an important part of a disput e concerning actionable subsidies under the SCM 
Agreement.  It provided a way for both parties as well as the panel to have access to relevant 
information.  The EC had, in th e past, agreed with the importan ce of the process and the need to 
engage promptly and constructively.  At the presen t meeting, the United States renewed its request 
that the DSB initiate the Annex V procedures in this  dispute, and hoped that the EC would not stand 
in the DSB's way. 
24. The representative of th e European Communities  said that the EC had been consulting with 
the United States with a view to reaching a mu tual agreement on the initiation of the Annex V 
procedure and, in particular its scope, modalities and the name of the facilitator.  Unfortunately, these 
consultations had yet to produce a result.  The EC remained comm itted to continuing these 
consultations with a view to reaching a mutually acc eptable solution. He noted that the United States 
itself had insisted in the "Cotton" dispute that there must be an agreement between the parties  to that 
end and the then Chairman of the DSB had agreed with the United States.  Indeed, that practice had 
also been followed in the "Korea – Shipbuilding" dispute.  The EC had been consulting with the 
United States with a view to reaching an agreemen t on the initiation of the A nnex V procedure and, in 
particular its scope, modalities and the name of the facilitator, but these consultations had not yet been 
successful.  The EC was not trying to stall the proces s, but rather to cooperate with the United States 
in the spirit called for in Annex V itself.  He noted  that a full team of lawyers had come from Brussels 
to Geneva to negotiate as rapidly as possible an agreement. 
25. The representative of Brazil  said that her country regretted the lack of systemic coherence 
concerning some Members' positions on Annex V of  the SCM Agreement.  In 2003, Brazil had 
requested the DSB to initiate the procedures provide d for in Annex V of the SCM Agreement in the 
context of the dispute "United States – Subsidi es on Upland Cotton".  At that time, Brazil had 
expressed its understanding, which remained unchanged , contrary to some other Members' position, 
on the mandatory nature of that Annex.   Brazil noted with concern that the systemic incoherence 
verified at present of two of the major players in the dispute settlement mechanism impaired the 
functioning and the predictability of the relations hip among Members, one of the main goals of the 
multilateral trading system. 
26. The provisos of Annex V were clear and unc onditional. Paragraphs 2 and 5 set out no 
additional requirement for the establishment of the fact-finding procedure, but the request itself and 
the "referral of the matter to the DSB under paragr aph 4 of Article 7 of the SCM Agreement". As to 
the designation of the facilitator, paragraph 4 of th at Annex was even more straightforward:  "The 
DSB shall designate a representative to serve the function of facilitating the information-gathering 
process".  
27. None of the paragraphs mentioned included any reference whatsoever to  a consensus rule.  
Nowhere in that Annex was there a need for mutual  agreement between the parties to a dispute as a 
pre-condition for establishing the fact-finding proce dure and for designating the facilitator for the 
information-gathering process.  The only requireme nts for the development of evidence under the 
mentioned procedures were the request  for initiating of the process and th e referral of the matter to the 
DSB under paragraph 4 of Article 7 of the SCM Agreement. 
28. In Brazil's view, the information gathered pursu ant to the Annex V procedures would be a key 
element for the panel to make its judgment on the case.   As a third party to the dispute, Brazil wished 
to reserve its third-party rights to participate in the Annex V procedure and to  receive the information 
to be gathered by the representative that the DSB would designate for that purpose. 
29. The representative of the United States  said that his country was disappointed that the EC had 
chosen, once again, to block the initiation of the Anne x V process.  It regrettably appeared that the EC 
wished simply to delay allowing the dispute settleme nt process to review the terms and conditions of 
the launch aid and other subsidies th at Airbus had received.  The United States had discussed the EC's WT/DSB/M/195 
Page 8  
 
reference to the Cotton dispute at the previ ous DSB meeting. At the present meeting, the 
United States wished to state ag ain that the situation in the dispute under consideration did not 
resemble the Cotton dispute at all:  the EC had no  basis to argue that it was "exempt" from actions 
based on the provisions of the SCM Agreement that  the United States had invoked, and consequently 
no basis to argue against initiation of the Annex V pr ocedure.  And the EC had not argued that there 
was any legal barrier to initiating of the process, wh ich made it all the more puzzling why the EC had 
simply refused to permit the process to proceed. 
30. While it was true that the EC and Korea ha d reached an agreemen t on how to conduct the 
Annex V procedures before the DSB had initiated th em in the "Korea – Shipbuilding" dispute,  
nothing in the SCM Agreement required such an agre ement.  In fact, Annex V provided for the exact 
opposite:  paragraph 4 of Annex V stat ed that the facilitator could have  a role in "suggest[ing] ways to 
most efficiently solicit necessary information".  Howeve r, the United States was pleased to hear that 
the EC was ready to work to r each an agreement.  Given that its panel request of 31 May 2005 
contained a request that the Annex V procedures be  initiated, the United States would hope that the 
EC was willing to move toward an agreement exped itiously.  For example, the United States had been 
waiting several weeks for the EC to provide feedback  on a proposal that the United States had  made. 
31. Likewise, when the United States had asked  the Chairman of the DSB to assist the 
United States and the EC in trying to make some progress on this issue, the EC had stated that it was not prepared to meet with the United States and the DSB Chairman at that time, notwithstanding all of 
its statements in past disputes that the Chairman might have an important role to play in developing the procedures and time-table for the Annex V pr ocess and in identifying appropriate facilitator 
candidates.  The United States hoped that the EC w ould work with the United States to move the 
process forward without any further delay. 
32. The DSB took note
 of the statements. 
4. "European Communities – The ACP–EC Partnership Agreement – Recourse to 
Arbitration Pursuant to the Decision of 14 November 2001":  Award of the Arbitrator 
(WT/L/616) 
(a) Statement by Colombia, on behalf of Brazil, Colombia, Costa Rica, Ecuador, Guatemala, 
Honduras, Nicaragua, Panama and Venezuela 
33. The representative of Colombia , speaking under "Other Business", on behalf of Brazil, 
Colombia, Costa Rica, Ecuador, Guatemala, Honduras,  Nicaragua, Panama and Venezuela, said that 
she was making the statement on behalf of  the above-mentioned countries, which were interested 
parties in the arbitration on the tariff proposed by the EC for the import of bananas.  The countries 
that subscribed to the statement welcomed the Award of the Arbitrator, circulated on 1 August 2005 
in document WT/L/616  entitled:  "European Commun ities – The ACP–EC Partnership Agreement –   
Recourse to Arbitration Pursuant to the Decision of 14 November 2001".  
34. She recalled that the conclusions and recommendati ons of the third banana dispute adopted by 
the DSB in 1997 had led to an agreement, which provided, inter alia , for arbitration. During the Doha 
Ministerial Conference, through the Ministerial De cision WT/MIN(01)/15, the EC had undertaken to 
put in place a tariff applicable to bananas that woul d result in at least maintaining total market access 
for MFN banana suppliers. In fulfilment of that undertaking, the EC had announced that, as of 
1 January 2006, a single tariff of €230 per ton would apply to MFN banana suppliers. 
35. That announcement would result in raising the c onsolidated tariff of €75 per ton to €230 per 
ton both for the currently bound quota of 2.2 milli on tons and for the unbo und quota or autonomous 
quota of 913,000 tons and, at the same time, the zer o tariff for the ACP countries would be maintained 
by virtue of the waiver applicable to products of ACP origin covered by the Cotonou Agreement until  WT/DSB/M/195 
 Page 9 
 
 
31 December 2007.  In paragraph 94 of the Award of the Arbitrator it was stated that " ... the 
Arbitrator determines that the European Communities'  envisaged binding on bananas would not result 
in at least maintaining total ma rket access for MFN banana supplie rs, taking into account all EC WTO 
market access- commitments relating to bananas". In  fact, the result of the EC's proposal to apply a 
tariff of €230 per ton would be to increase the pr eference which ACP suppliers enjoyed from 13.4 per 
cent to 41 per cent. 
36. She noted that the Award had been submitted by the three Arbitrators appointed by the 
Director-General;  i.e. two Arbitrators were curre nt Appellate Body members and one was a former 
Ambassador with wide experience in the field of international trade negotiations. 
37. The restrictions on the access of bananas to the EC market, which for many countries 
constituted one of the major trade products, had sy stematically violated WTO rules and the EC's 
commitments.  The banana dispute was one of the longest-lasting in the history of the WTO but, thus 
far, the EC had not provided a satisfactory solution,  despite the fact that Panels, the Appellate Body 
and the Arbitrators had systematically ruled against it.  The countries in question called on the EC to 
take this opportunity to comply with its commitments, which were stipulated in Decision 
WT/MIN(01)/15 of the Doha Ministerial Conf erence, as well as with the conclusions and 
recommendations adopted by the DSB in 1997.  That  commitment was that the tariff for the import of 
bananas should, as of 1 January 2006, maintain total market access for MFN banana suppliers. 
38. The countries in question welcomed the recent ruling on account of the following findings:  
(i) The tariff of €230 per ton would result in raising the ACP preference from 13.4 per cent to 41 per cent;  (ii) The impact of the margin of prefer ences for the ACP suppliers on the rebinding was a 
necessary consideration in assessing whether the envi saged rebinding would maintain total market 
access for MFN suppliers;  (iii) Any gains achieved by  the preferential suppliers in the EC market 
through the increase in the margin preference s to the ACP countries and to countries under the 
"Everything But Arms" initiative were at the expense of MFN banana suppliers;  (iv) In a tariff quota-
free environment, at least some of the preferen tial suppliers would have the capacity to respond 
positively to the increase in the marg in of preference, to the detrimen t of MFN banana suppliers;  (v) 
Not only bound commitments, but all other aspects of the import regime, such as the so-called 
autonomous quotas, should be taken into account;  a nd (vi) The requirement of "maintaining" total 
market access for MFN suppliers involves so me degree of perspective assessment.   
39. The Chairman
 reminded delegations that Rule 25 of th e Rules of Procedure for meetings of 
the General Council, which also applied to the Dispute Settlement Body, provided that: 
"Representatives should avoid und uly long debates under 'Other Business'.  Discussions on 
substantive issues under 'Other Business' should be avoided, and the General Council shall limit itself 
to taking note of the announcements...." 
40. The representative of Honduras  said that his delegation wished to be associated with the 
statement made by the delegation of Colombia on behalf of various ba nana exporting countries, 
including Honduras.  Honduras also wished to pl ace on record that through a communication, dated 
30 March 2005, it had transmitted to the Chairman of the DSB a copy of its request for arbitration pursuant to the Annex to the Decision of the WTO Ministerial Conference of 14 November 2001.  In that communication, Honduras stated that it consider ed that the request for arbitration represented one 
possible way of settling the protracted dispute concer ning the consistency of the EC's banana regime 
with its WTO obligations. 
41. The representative of the European Communities
 said that his delegation had no instructions 
in relation to the item under discussion since it had not  been made aware that this matter would be 
placed on the agenda of the present meeting.  In that  connection, he wished to draw attention to the 
fact that the Arbitration under the "Doha Waiver " in relation to bananas was not a subject-matter 
falling under the DSU.  Therefore, his delegati on had doubts whether the DSB was an appropriate WT/DSB/M/195 
Page 10  
 
forum to discuss this matter.  The EC also wished to take the opportunity to thank the Arbitrator for 
its thorough job and for having delivered a re ward in time. The EC was currently carefully 
considering the award and, for transparency purposes,  he wished to inform Members that the EC had 
launched the consultation process with the interested parties as foreseen in the waiver process and had 
called for a meeting to be held later in the week. 
42. The representative of Costa Rica
 said that his delegation supported the statement made by 
Colombia. The Award of the Arbitrator, circulated  on 1 August  2005 in WT/L/616, determined that 
"...the European Communities' envisaged rebindi ng on bananas would not result in at least 
maintaining total market access for MFN banana supp liers..." (para. 94 of the Award).   The EC had, 
therefore, failed to fulfil the commitment, which it had accepted pursuant to  the Annex to the waiver 
to the Cotonou Agreement of November 2001. According to the provisions agreed at that time, the EC 
should initiate consulta tions with the interested parties within 10 days following the notification of the 
Award of the Arbitrator to the General Council and should rectify the situation.  In doing so, the EC 
should respect the clear conclusions of the Award of the Arbitrator, which should lead the EC to 
propose a tariff level that would enable the MFN banana  suppliers, at least, to maintain total market 
access. 
43. The EC's proposal for a tariff of €230 per to n was based on a series of criteria which the 
Award of the Arbitrator had rejected, and thus a new tariff would have to be at  a much lower level, as 
had always been asserted by Costa Rica.  The EC ha d claimed that its obligation in terms of market 
access was 2.1 million metric tons, bound during the Uruguay Round.  The Arbitrator had rejected 
that and considered that it should include, in a ddition, the autonomous quotas, which would amount to 
3.1 million metric tons.  The EC had claimed that the increase in preferen ces for the ACP countries 
was irrelevant with regard to market access fo r the MFN banana suppliers.  The Award of the 
Arbitrator had rejected those arguments and stated  that "it should be noted that any rebinding above 
€75 per metric ton automatically increases the preference enjoyed by ACP suppliers over MFN suppliers".  As stated in the Award, any gains ach ieved by the preferential suppliers in the EC's 
market as a result of that tariff increase from €75 to  €230 would come at the expense of MFN banana 
suppliers. 
44. The EC had asserted, in the oral hearing, that  it would place a cap or ceiling on the imports of 
bananas from the ACP countries by means of a quota.  The Arbitrator had stated in the Award that it was not convinced that such a ceiling would enable  the MFN banana suppliers to maintain their 
access.  Furthermore, the Arbitrator had noted th at the least developed countries benefiting from the 
"Everything But Arms" initiative would be granted unrestricted free access, and that might have an 
impact on the competitive situation of MFN banana s uppliers.  It was clear, given the emphatic nature 
of the conclusions of the Award of the Arbitrator, that  the EC, in the next stage of this process, would 
have to rectify the situation by putting in place a tariff that would not  increase the margin of 
preference and, likewise, would not modify the conditions of competition. 
45. The DSB took note
 of the statements. 
 
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