WORLD TRADE  
ORGANIZATION  WT/DS27/RW2/ECU 
7 April 2008 
 (08-1447) 
 Original:   English 
  
 
     
EUROPEAN COMMUNITIES – REGIME FOR THE 
IMPORTATION, SALE AND DISTRIBUTION OF BANANAS 
 
Second Recourse to Article 21.5 of the DSU by Ecuador  
  
Report of the Panel 
  WT/DS27/RW2/ECU 
 Page i 
 
 
  TABLE OF CONTENTS 
 
Page  
I. INTRODUCTION ................................................................................................................... .1 
II. FACTUAL ASPECTS ..............................................................................................................4  
A. BACKGROUND .............................................................................................................................4  
1. Object of the current dispute .................................................................................................. .4 
2. Basic chronology ............................................................................................................... ........5  
B. PRODUCT DESCRIPTION .............................................................................................................10  
C. EUROPEAN COMMUNITIES ' LEGAL FRAMEWORK FOR BANANAS IMPORTS ...............................10  
1. European Communities' WTO commitments regarding bananas.....................................10  
2. European Communities' banana import regime..................................................................13  
3. European Communities' current banana import regime....................................................16  
D. EUROPEAN COMMUNITIES ' BANANAS MARKET ........................................................................19  
1. European Communities' bananas production......................................................................19  
2. European Communities' bananas consumption...................................................................20  
3. European Communities' bananas imports ...........................................................................20  
4. European Communities' bananas import s under Council Regulation 1964/2005 ............21  
5. Ecuador's banana exports to the European Communities..................................................23  
E. PANEL AND APPELLATE BODY FINDINGS IN THE ORIGINAL PROCEEDINGS ..............................24  
1. Measures subject to the original proceedings.......................................................................24  
2. Panel and Appellate Body main findings in the original proceedings................................24  
3. Panel findings in the first compliance proceedings..............................................................28  
F. MEASURES CHALLENGED BY ECUADOR IN THIS DISPUTE ........................................................31  
G. SPECIAL AND DIFFERENTIAL TREATMENT ................................................................................31  
III. PARTIES' REQUESTS FOR FIND INGS AND RECOMMENDATIONS.......................32  
IV. ARGUMENTS OF THE PARTIES ......................................................................................33  
A. ECUADOR ........................................................................................................................ .......34  
1. First written submission of Ecuador .....................................................................................34  
(a) The measures of the European Communities that are subject to this challenge .......................34  
(b) The EC measures are inconsistent with the General Agreement on Tariffs and Trade 
1994 ........................................................................................................................... ...............35  
(i) Tariff preferences contrary to Article I.....................................................................................35  
(ii) Allocation of Tariff Rate Quota contrary to Article XIII ..........................................................36  
(iii) Applied duty of €176/mt contrary to  EC binding under Article II ............................................37  
(c) Conclusion ..................................................................................................................... ...........37  
2. Second written submission of Ecuador .................................................................................37  WT/DS27/RW2/ECU 
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  (a)
 Argument ....................................................................................................................... ...........37  
(i) The EC-Ecuador Understanding on Bananas is not a bar to this Article 21.5 
proceeding ..................................................................................................................... ...........37  
(ii) The EC tariff preferences infringe Article I and are not covered by the Doha Waiver ............38  
(iii) Allocation of Tariff Rate Quota is contrary to Article XIII.......................................................41  
The European Communities' prelim inary issue on Article XIII.............................................................. 41  
The absence of nullifi cation or impairment..................................................................................... ........ 42  
The European Communities' erroneous interpretation of Article XIII .................................................... 42  
(iv) Breach of tariff bindi ngs under Article II .................................................................................43  
The European Communities' GATT binding at €75/mt was not limited in time by the 
Framework Agreement on Bananas ................................................................................................. ....... 43  
The European Communities' Artic le XXVIII:5 no tifications.................................................................. 44  
The binding at €75/mt did not expire with  the elimination of the volume limit...................................... 45  
(b) Conclusions.................................................................................................................... ...........45  
3. Oral statement of Ecuador.....................................................................................................4 5 
(a) Response to the European Communities' preliminary objections.............................................46  
(i) The EC-Ecuador Understanding on bananas is  not a bar to this Article 21.5 
proceeding ..................................................................................................................... ...........46  
(ii) The Panel's suggestions also do not bar Ecuador's claims ......................................................47  
(b) Article I...................................................................................................................... ...............47  
(c) Article XIII ................................................................................................................... ............48  
(d) Article II: I (a) and (b) ...................................................................................................... ........49  
B. EUROPEAN COMMUNITIES ........................................................................................................51  
1. First written submission of the European Communities.....................................................51  
(a) The facts of  the case.......................................................................................................... ........51  
(b) The legal analysis............................................................................................................. .........52  
(i) Preliminary issues............................................................................................................. ........52  
(ii) There is no violation of GATT Article I ....................................................................................53  
(iii) There is no violation of Article XIII.......................................................................................... 54 
Preliminar y Issues ............................................................................................................. ...................... 54  
Absence of nullification or impairment of a benefit accruin g to Ecuador............................................... 54  
The European Communities' tariff treatment of bananas from Ecuador and other MFN 
countries does not infr inge GATT Ar ticle XIII.................................................................................. ..... 54  
(iv) There is no violation of GATT Article II...................................................................................56  
The European Communities' concession of a tariff quota for 2.2 million tons of bananas at a 
rate of €75 per ton expi red at the en d of 2002................................................................................. ........ 56  
The abolition of the tariff quota for 2.2 million tons results in the automatic abolition of the 
tariff rate of €75 per ton ..................................................................................................... ..................... 57  
(c) Conclusion ..................................................................................................................... ...........57   WT/DS27/RW2/ECU 
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  2. Second written submission of the European Communities.................................................58  
(a) The Cotonou Preference ......................................................................................................... ..58 
(i) Preliminary objections......................................................................................................... .....58  
The Understanding .............................................................................................................. .................... 58  
The findings and suggestions of the Article 21.5 Panel ......................................................................... .5 8 
(ii) There is no violation of GATT Article I ....................................................................................59  
(iii) There is no violation of GATT Article XIII ...............................................................................60  
Absence of nullification or impairment of a benefit accruin g to Ecuador............................................... 60  
The European Communities' tariff treatment of bananas from Ecuador and other MFN 
countries does not infr inge GATT Ar ticle XIII.................................................................................. ..... 60  
(b) The applied tariff does not violate GATT Article II.................................................................61  
(i) The expiration of the concession for 2.2 million tons of bananas ............................................61  
(ii) The abolition of the tariff quota on 1 January 2006.................................................................63  
(c) Conclusion ..................................................................................................................... ...........63  
3. Oral statement of the European Communities.....................................................................63  
(a) The timing of these proceedings is unfortunate........................................................................63  
(b) The challenge to the Cotonou Preference .................................................................................63  
(c) The Article XIII claims........................................................................................................ .....65  
(d) The challenge to the European Communities' applied tariff.....................................................66  
(e) Conclusion ..................................................................................................................... ...........66  
4. Closing statement of the European Communities................................................................66  
V. ARGUMENTS OF THE THIRD PARTIES ........................................................................68  
A. BELIZE , CAMEROON , CÔTE D 'IVOIRE , DOMINICA , DOMINICAN REPUBLIC , GHANA , 
JAMAICA , MADAGASCAR , SAINT LUCIA , SAINT VINCENT AND THE GRENADINES , AND 
SURINAME ............................................................................................................................... ..68 
1. Written submission of th e ACP third parties.......................................................................68  
(a) Ecuador cannot challenge the new EC banana  import regime pursuant to Article 21.5 
of the DSU ..................................................................................................................... ...........68  
(b) There is no violation of GATT Article I because the Doha Waiver still applies......................69  
(c) There is no violation of GATT Article XIII .............................................................................70  
(d) There is no violation of GATT Article II..................................................................................70  
B. CAMEROON ............................................................................................................................... 71 
1. Oral statement of Cameroon..................................................................................................71  
(a) Introduction................................................................................................................... ............71  
(b) Ecuador cannot challenge the new EC banana  import regime under Article 21.5 of the 
DSU ............................................................................................................................ ..............72  
(c) The new EC banana import regime has not only maintained but has significantly 
improved market access for MFN bananas...............................................................................72  WT/DS27/RW2/ECU 
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  (d)
 The preference granted to ACP countries is the expression of a long-standing 
commitment to offer viable trading opportunities to ACP banana producers in a market dominated by MFN producers ......................................................................................74
 
(e) Conclusion ..................................................................................................................... ...........75  
C. CÔTE D 'IVOIRE ..........................................................................................................................75  
1. Oral statement of Côte d'Ivoire .............................................................................................75  
D. DOMINICAN REPUBLIC ..............................................................................................................80  
1. Oral statement of the Dominican Republic ..........................................................................80  
E. JAMAICA ............................................................................................................................... .....81  
1. Oral statement of Jamaica .....................................................................................................8 1 
F. SAINT LUCIA .............................................................................................................................82  
1. Oral statement of Saint Lucia................................................................................................82  
G. SURINAME ............................................................................................................................... ..84 
1. Oral statement of Suriname...................................................................................................84  
H. BRAZIL ............................................................................................................................... .......85  
1. Oral statement of Brazil ....................................................................................................... ..85 
I. COLOMBIA ............................................................................................................................... ..87 
1. Written submission of Colombia ...........................................................................................87  
(a) The preferential tariff treatme nt accorded to ACP bananas is not justified under the 
Article I D oha Waiver.......................................................................................................... .....87  
(i) The Article I Doha Waiver has ceased to apply to bananas as of 1 January 2006, and 
the European Communities was no longe r entitled to "rectify the matter" ..............................87  
(ii) Assuming, arguendo, that the European Co mmunities had the opportunity to "rectify 
the matter", the tariff level of €176/tonne  does not comply with the Tariff Level 
Standard....................................................................................................................... .............87  
The European Communities has not discharged its burden of showing compliance with the 
elements required under  the Waiver Annex ....................................................................................... ..... 87  
The European Communities' quantity- or volumes- based analysis is contrary to the Tariff 
Level Standard................................................................................................................. ........................ 88  
The applied tariff of €176/tonne does not result in  at least maintaining total market access for 
MFN banana suppliers........................................................................................................... .................. 88  
(b) The Preferential Tariff Rate Quota accorded  to ACP bananas is inconsistent with 
Article XIII of the GATT 1994.................................................................................................8 9 
(c) Conclusion ..................................................................................................................... ...........90  
2. Oral statement of Colombia...................................................................................................90  
J. JAPAN ............................................................................................................................... .........92  
1. Written submission of Japan .................................................................................................92  
(a) The EC-Ecuador Understanding on Ba nanas does not preclude Ecuador from 
resorting to this Article 21.5 proceeding...................................................................................92  
K. NICARAGUA ..............................................................................................................................9 5  WT/DS27/RW2/ECU 
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  1. Written submission of Nicaragua ..........................................................................................95  
(a) Introduction................................................................................................................... ............95  
(b) The European Communities' banana measu res are properly before the Panel for 
review......................................................................................................................... ...............95  
(c) The European Communities' ACP Tariff Preference is inconsistent with GATT 
Article I:1.................................................................................................................... ..............95  
(d) The European Communities' ACP Tariff Quota is inconsistent with GATT 
Articles XIII:1 and XIII:2 ..................................................................................................... ....96  
(e) The European Communities' €176/mt tariff is  inconsistent with its GATT Article II 
concessions .................................................................................................................... ...........97  
(f) Conclusion ..................................................................................................................... ...........98  
L. PANAMA ............................................................................................................................... .....98  
1. Written submission of Panama..............................................................................................98  
(a) Introduction................................................................................................................... ............98  
(b) The European Communities' banana measu res are properly before the Panel for 
review......................................................................................................................... ...............98  
(c) The European Communities' ACP Tariff Preference is inconsistent with GATT 
Article I:1.................................................................................................................... ..............99  
(d) The European Communities' ACP tariff  quota is inconsistent with GATT 
Articles XIII:1 and XIII:2 ..................................................................................................... ....99  
(e) The European Communities' €176/mt tariff is  inconsistent with its GATT Article II 
concessions .................................................................................................................... .........100  
(f) Conclusion ..................................................................................................................... .........101  
2. Combined oral statement by Panama and Nicaragua.......................................................101  
(a) The inconsistency with GATT Article I .................................................................................105  
(b) The inconsistency with  GATT Article XIII............................................................................107  
(c) The inconsistency with  GATT Article II ................................................................................108  
M. UNITED STATES .......................................................................................................................109  
1. Written submission of the United States.............................................................................109  
2. Oral statement of the United States ....................................................................................109  
(a) Preliminary objections ......................................................................................................... ...109  
(b) Mutually agreed solution ....................................................................................................... .110 
(c) Suggestion by the Panel........................................................................................................ ..111  
(d) Article I waiver ............................................................................................................... ........111  
(e) Article XIII ................................................................................................................... ..........111  
VI. INTERIM REVIEW.............................................................................................................112  
(a) Waivers adopted by the WTO Ministerial Conference...........................................................112  
(b) Corrigendum to the European Communities'  Commission Regulation (EC) 1549/2006 .......112  WT/DS27/RW2/ECU 
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  (c)
 Factual description of the European Communities' bananas market ......................................113  
Alleged increase in prices paid to  Ecuadorian banana producers.......................................................... 113  
Increase in imports of bananas from MFN countries, compared to growth of 
European Communities'  bananas market........................................................................................... .... 113  
Increase in imports of bananas from MFN coun tries, compared to increase in imports of 
bananas from ACP countries..................................................................................................... ............ 114  
Increase in imports of bananas from  Ecuador between 1999 and 20 06 ................................................ 114  
Decrease in imports of bana nas from ACP countries............................................................................ 11 4 
(d) Costs for import licences ...................................................................................................... ..114  
(e) European Communities' aguments concerni ng Ecuador's claim under Article XIII of 
the GATT 1994.................................................................................................................. .....114  
(f) Additional revisions and corrections.......................................................................................115  
VII. FINDINGS....................................................................................................................... ......115  
A. ATTEMPTS AT HARMONIZING THE TIMETABLES .....................................................................115  
B. PRELIMINARY ISSUES RAISED BY THE EUROPEAN  COMMUNITIES ..........................................116  
1. Summary of the two preliminary issues..............................................................................116  
2. Order of analysis of the two preliminary issues .................................................................117  
3. First preliminary issue raised by the European Communities .........................................117  
(a) Arguments of the parties....................................................................................................... ..117  
(i) Main arguments by the European Communities.....................................................................117  
(ii) Main arguments by Ecuador...................................................................................................122  
(b) Panel's analysis ............................................................................................................... ........126  
(i) The scope of this preliminary issue and Article 21.5 of the DSU ...........................................126  
(ii) Is Ecuador barred by the Bananas Underst anding from bringing this compliance 
challenge?..................................................................................................................... ..........127  
Panel's ap proach ............................................................................................................... ..................... 127  
The terms and main elements of the Bananas Understanding............................................................... 129  
The importance of providing a positive solution and effective settlement to WTO disputes, 
in conformity with th e covered agreements ...................................................................................... .... 131  
The Bananas Understanding provides only for a means for resolving and settling the 
dispute........................................................................................................................ .................... 132  
The adoption of the Bananas Understanding subsequent to recommendations and 
suggestions by  the DSB ......................................................................................................... ........ 134  
Parties' conflicting communications to the WT O concerning the Bananas Understanding........... 135  
Remaining key arguments raised un der this prelimin ary issue ............................................................. 137  
Did Ecuador accept, through the Bananas U nderstanding, the existence of the ACP 
preference beyo nd 2005? ........................................................................................................ ....... 138  
Arguments by the European Communities concerning parties' compliance with the 
Bananas Understanding .......................................................................................................... ....... 139   WT/DS27/RW2/ECU 
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  Arguments by the European Communities on contentiousness, pacta sunt servanda and 
good faith..................................................................................................................... .................. 140  
Withdrawal of the banana dispute from the DSB agenda .............................................................. 141  
(iii) Conclusion ..................................................................................................................... .........142  
C. ECUADOR 'S CLAIM UNDER ARTICLE I OF THE GATT  1994.....................................................142  
1. Ecuador's claim................................................................................................................ .....142  
2. The European Communities' response ...............................................................................143  
3. Article I:1 of the GATT 1994...............................................................................................144  
4. Panel's analysis............................................................................................................... .......144  
(a) Is the ACP preference inconsistent with Article I:1 of the GATT 1994?...............................145  
(i) Whether the preference granted by the European Communities constitutes an 
advantage of the type covered by Article I of the GATT 1994................................................145  
(ii) Whether the relevant products in this dispute are like products.............................................145  
(iii) Whether the preference granted by the European Communities is immediately and 
unconditionally extended ....................................................................................................... .146 
(iv) Preliminary conclusion regarding Ecuador's claim under Article I:1 of GATT 1994 ...........147  
(b) Is the preference covered by a waiver?...................................................................................147  
(i) Terms and conditions of the Doha Waiver and the Bananas Annex.......................................147  
(ii) Uncontested facts.............................................................................................................. ......148  
(iii) Issue contested between the parties ........................................................................................149  
(iv) Conditions envisaged in the Bananas Annex ..........................................................................151  
(v) Is the European Communities' current bananas regime "the new EC tariff regime"? ...........151  
(vi) Is the maintenance of total market access for MFN banana suppliers a relevant 
consideration for extending the Doha Waiver in regard to bananas?....................................152  
(vii) Conclusion regarding the Doha Waiver .................................................................................156  
5. General conclusion............................................................................................................. ...156  
D. ECUADOR 'S CLAIM UNDER ARTICLE XIII  OF THE GATT  1994 ...............................................156  
1. Introduction................................................................................................................... ........156  
(a) Summary of parties' arguments...............................................................................................156  
(i) Ecuador's claim ................................................................................................................ ......156  
(ii) The European Communities' arguments.................................................................................157  
(b) Order of analysis.............................................................................................................. .......159  
2. The European Communities' preliminary objection.........................................................159  
(a) Parties' main arguments ........................................................................................................ ..159  
(i) The European Communities' arguments.................................................................................159  
(ii) Ecuador's response ............................................................................................................. ....160  
(b) Panel's analysis ............................................................................................................... ........161  WT/DS27/RW2/ECU 
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  (i)
 Relevance of Article 21.5 of the DSU in this dispute ..............................................................161  
(ii) The European Communities' arguments on res iudicata ........................................................164  
(iii) Conclusion ..................................................................................................................... .........168  
3. Ecuador's claims under paragraphs 1 and 2 of Article XIII of the GATT 1994.............169  
(a) The interrelation of Articles I and XIII of  the GATT 1994 and the latter's applicability 
to the EC banana import regime .............................................................................................169  
(i) Parties' main arguments ........................................................................................................ .169 
The European Commun ities' arguments............................................................................................ .... 169  
Ecuador's argumen ts............................................................................................................ .................. 173  
(ii) Panel's analysis............................................................................................................... ........175  
Relevance of Article XIII of  the GATT 1994 to tariff quotas in ag riculture ......................................... 175  
Analysis of Article XI II:5 of the GATT 1994.................................................................................... ... 177  
Interrelation of Articles I and XIII of th e GATT 1994.......................................................................... 177 
(b) Ecuador's claim under Article  XIII:1 of the GATT 1994 .......................................................180  
(i) Parties' main arguments ........................................................................................................ .180 
Ecuador's argumen ts............................................................................................................ .................. 180  
The European Commun ities' arguments............................................................................................ .... 181  
(ii) Panel's analysis............................................................................................................... ........184  
The relevant language of Article XIII:1 of the GATT 1994 for this dispute......................................... 184  
Analysis of the applicab ility of Article XIII:1 of the GATT  1994........................................................ 184  
Whether all bananas are like products .......................................................................................... .1 8 5 
Whether any prohibition or restriction is applied by the European Communities on the 
importation of bananas of th e territory of  Ecuador........................................................................ 185  
Whether the importation of bananas from AC P countries is simila rly restri cted........................... 187  
(c) Ecuador's claim under Article  XIII:2 of the GATT 1994 .......................................................191  
(i) Parties' main arguments ........................................................................................................ .191 
Ecuador's argumen ts............................................................................................................ .................. 191  
The European Commun ities' arguments............................................................................................ .... 192  
(ii) Panel's analysis............................................................................................................... ........193  
Chapeau of Article XIII:2 of  the GATT 1994 ...................................................................................... 193  
Subparagraph (d) of Article XI II:2 of the GATT 1994 ......................................................................... 196  
(d) No applicable waiver ........................................................................................................... ...198  
4. General conclusion............................................................................................................. ...198  
E. ECUADOR 'S CLAIM UNDER ARTICLE II OF THE GATT  1994 ...................................................199  
1. Ecuador's claim................................................................................................................ .....199  
2. The European Communities' response ...............................................................................200  
3. Article II:1 of the GATT 1994 .............................................................................................201   WT/DS27/RW2/ECU 
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  4. Panel's analysis............................................................................................................... .......202  
(a) Treatment accorded by the European Communities to bananas from MFN countries ...........203  
(b) Treatment provided for bananas from WTO Members under the European 
Communities' Schedule.......................................................................................................... .203 
(i) Description of the relevant language in  the European Communities' Schedule.....................203  
(ii) The task before this Panel..................................................................................................... ..204  
(iii) General rules of interpretation ...............................................................................................2 05 
(iv) Interpretation of the European Communiti es' Schedule as it refers to bananas ....................207  
Uncontested facts .............................................................................................................. .................... 207  
Ecuador's argument ............................................................................................................. .................. 207  
The European Comm unities' response ............................................................................................. ..... 208  
Consideration of all relevant terms contained in the Europe an Communities' Schedule ...................... 208  
Consideration of the object and pur pose of the WTO Agreements....................................................... 210  
Subsequent agreement between the parties ....................................................................................... .... 211  
Treatment of subsequent agreem ent between the parties............................................................... 211  
Evidence of subsequent agreement between the parties regarding the interpretation of the 
treaty or the applicati on of its provisions.................................................................................... ... 211  
The extension of the European Communities' tariff quota concession for bananas beyond 
the date of expiration in the Ba nanas Framework Agreement....................................................... 213  
Conclusion regarding the subsequent agreement between the parties ........................................... 215  
Consideration of supplementary means of interp retation...................................................................... 215  
Treatment of supplementary m eans of interp retation .................................................................... 215  
Arguments provided by the parties.............................................................................................. .. 215 
Modalities for Uruguay Round agricultu ral market access negotiations............................................... 218  
Expectations of the parties when negotia ting the Bananas Framework Agreement.............................. 219  
Negotiations under Article XX VIII of the GATT 1994 ........................................................................ 220  
Statements in the Arbitrator Award issu ed pursuant to the Bananas Annex ......................................... 221  
(v) General conclusion regarding the Europe an Communities' Schedule as it refers to 
bananas........................................................................................................................ ...........221  
(c) Is the €176/mt tariff on bananas in excess of that provided in the European 
Communities' Schedule?......................................................................................................... 221 
(d) Conclusions regarding Ecuador's claims under Article II:1(a) and (b) of the GATT 
1994 ........................................................................................................................... .............222  
(i) Conclusion regarding the first sentence of Article II:1(b) of the GATT 1994 ........................222  
(ii) Conclusion regarding Article II:1(a) of the GATT 1994 ........................................................222  
5. General conclusion............................................................................................................. ...223  
F. FINAL REMARKS ......................................................................................................................223  
VIII.  CONCLUSIONS AND RECOMMENDATIONS..............................................................224  
 WT/DS27/RW2/ECU 
Page x  
 
  LIST OF ANNEXES 
 
ANNEX A 
 
Contents Page 
Annex A-1 Request for the Establis hment of a Panel (WT/DS27/80) A-2 
Annex A-2 Working procedures for th e Panel, dated 29 June 2007 A-7 
Annex A-3 Revised working procedures fo r the Panel, dated 23 August 2007 A-10 
 
 
ANNEX B 
 
Contents Page 
Annex B-1 Notification of a Mutually Agreed Solution (WT/DS27/58) B-2 
Annex B-2 Communication from the United States (WT/DS27/59) B-10 
Annex B-3 Understanding on Ba nanas between Ecuador and the EC (WT/DS27/60) B-14 
Annex B-4 The ACP-EC Partnerhsip Ag reement, Decision of 14 November 2001 
(WT/MIN(01)/15) B-20 
Annex B-5 Transitional Regime for the EC Autonomous Tariff Rate Quotas on 
Imports of Bananas, Decision of  14 November 2001 (WT/MIN(01)/16) B-24 
 
 
ANNEX C 
 
Contents Page 
Annex C-1 Article XXIV:6 – Negotiations, En largement of the European Union:  
Communication from the European  Communities (G/SECRET/20), 
30 January 2004 C-2 
Annex C-2 Article XXIV:6 – Negotiations, En largement of the European Union:  
Communication from the European  Communities (G/SECRET/26), 
28 September 2006 C-4 
 
  WT/DS27/RW2/ECU 
 Page xi 
 
 
  ANNEX D 
 
REPLIES BY THE PARTIES AND THIRD PARTIES TO QUESTIONS 
POSED BY THE PANEL AFTER THE SUBSTANTIVE MEETING OF THE PANEL 
 
Contents Page 
Annex D-1 Responses by Ecuador to questions posed by the Panel D-2 
Annex D-2 Responses by the European Co mmunities to questions posed by the 
Panel D-38 
Annex D-3 Responses by Belize, Cameroon, Côte d'Ivoire, Dominica, Dominican 
Republic, Ghana, Jamaica, Madagascar, Saint Lucia, Saint Vincent and 
the Grenadines, and Suriname to  questions posed by the Panel D-75 
Annex D-4 Responses by Brazil to questions posed by the Panel D-82 
Annnx D-5 Responses by Colombia to questions posed by the Panel D-84 
Annex D-6 Response by Japan to the question posed by the Panel D-87 
Annex D-7 Responses by Nicaragua and Panama  to questions posed by the Panel D-88 
Annex D-8 Responses by the United States to questions posed by the Panel D-107 
Annex D-9 Comments by Ecuador to the responses of the European Communities 
and third parties D-111 
Annex D-10 Comments by the European Communities to the responses of Ecuador 
and third parties D-116 
 
  WT/DS27/RW2/ECU 
Page xii  
 
  TABLE OF CASES CITED IN THIS REPORT 
 
Short Title Full Case Title and Citation 
Argentina – Hides and Leather  Panel Report, Argentina – Measures Affecting the Export of Bovine Hides and 
Import of Finished Leather , WT/DS155/R and Corr.1, adopted 16 February 2001, 
DSR 2001:V, 1779 
Argentina – Poultry Anti-Dumping Duties Panel Report, Argentina – Definitive Anti-Dumping Duties on Poultry from 
Brazil , WT/DS241/R, adopted 19 May 2003, DSR 2003:V, 1727 
Argentina – Textiles and 
Apparel  Appellate Body Report, Argentina – Measures Affecting Imports of Footwear, 
Textiles, Apparel and Other Items , WT/DS56/AB/R and Corr.1, adopted 22 April 
1998, DSR 1998:III, 1003 
Australia – Automotive Leather II 
(Article 21.5 – US)
  Panel Report, Australia – Subsidies Provided to Producers and Exporters of 
Automotive Leather – Recourse to Article 21.5 of the DSU by the United States , 
WT/DS126/RW and Corr.1, adopted 11 February 2000, DSR 2000:III, 1189 
Canada – Aircraft  
(Article 21.5 – Brazil)  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft – Recourse by Brazil to Article 21.5 of the DSU , WT/DS70/AB/RW, 
adopted 4 August 2000, DSR 2000:IX, 4299 
Canada – Autos  Appellate Body Report, Canada – Certain Measures Affecting the Automotive 
Industry , WT/DS139/AB/R, WT/DS142/AB/R, adopted 19 June 2000, 
DSR 2000:VI, 2985 
EC – The ACP-EC 
Partnership Agreement Award of the Arbitrator, European Communities – The ACP-EC Partnership 
Agreement – Recourse to Arbitration Purs uant to the Decision of 14 November 
2001 , WT/L/616, 1 August 2005 
EC – The ACP-EC 
Partnership Agreement II Award of the Arbitrator, European Communities – The ACP-EC Partnership 
Agreement – Second Recourse to Arbitration Pursuant to the Decision of 
14 November 2001 , WT/L/625, 27 October 2005 
EC – Approval and Marketing 
of Biotech Products Panel Report, European Communities – Measures  Affecting the Approval and 
Marketing of Biotech Products , WT/DS291/R, WT/DS292/R, WT/DS293/R, 
Corr.1 and Add.1, 2, 3, 4, 5, 6, 7, 8 and 9, adopted 21 November 2006 
EC – Bananas III  Appellate Body Report, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas , WT/DS27/AB/R, adopted 25 September 1997, 
DSR 1997:II, 591 
EC – Bananas III (Ecuador)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by Ecuador , WT/DS27/R/ECU, adopted 
25 September 1997, as modified by Appellate Body Report, WT/DS27/AB/R, 
DSR 1997:III, 1085 
EC – Bananas III (Guatemala 
and Honduras)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by Guatemala and Honduras , 
WT/DS27/R/GTM, WT/DS27/R/HND, adopted 25 September 1997, as modified by Appellate Body Report, WT/DS27/AB/R, DSR 1997:II, 695 
EC – Bananas III (Mexico)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by Mexico , WT/DS27/R/MEX, adopted 
25 September 1997, as modified by Appellate Body Report, WT/DS27/AB/R, DSR 1997:II, 803 
EC – Bananas III (US)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas, Complaint by the United States , WT/DS27/R/USA, 
adopted 25 September 1997, as modified by Appellate Body Report, WT/DS27/AB/R, DSR 1997:II, 943  WT/DS27/RW2/ECU 
 Page xiii 
 
 
  Short Title Full Case Title and Citation 
EC – Bananas III  Award of the Arbitrator, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas – Arbitration under Article 21.3(c) of the DSU , 
WT/DS27/15, 7 January 1998, DSR 1998:I, 3 
EC – Bananas III  
(Article 21.5 – EC)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas – Recourse to Article 21.5 of the DSU by the European 
Communities , WT/DS27/RW/EEC and Corr.1, 12 April 1999, unadopted, 
DSR 1999:II, 783 
EC – Bananas III   
(Article 21.5 – Ecuador)  Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas – Recourse to Article 21.5 of the DSU by Ecuador , 
WT/DS27/RW/ECU, adopted 6 May 1999, DSR 1999:II, 803 
EC – Bananas III (Ecuador) 
(Article 22.6 – EC)  Decision by the Arbitrators, European Communities – Regime for the 
Importation, Sale and Distribution of Bananas – Recourse to Arbitration by the 
European Communities under Article 22.6 of the DSU , WT/DS27/ARB/ECU, 
24 March 2000, DSR 2000:V, 2237 
EC – Bananas III (US)  
(Article 22.6 – EC)  Decision by the Arbitrators, European Communities – Regime for the 
Importation, Sale and Distribution of Bananas – Recourse to Arbitration by the 
European Communities under Article 22.6 of the DSU , WT/DS27/ARB, 9 April 
1999, DSR 1999:II, 725 
EC – Chicken Cuts (Brazil) Panel Report, European  Communities – Customs Classification of Frozen 
Boneless Chicken Cuts, Complaint by Brazil , WT/DS269/R, adopted 
27 September 2005, as modified by Appellate Body Report, WT/DS269/AB/R, WT/DS286/AB/R 
EC – Chicken Cuts (Thailand) Panel Report, European  Communities – Customs Classification of Frozen 
Boneless Chicken Cuts, Complaint by Thailand , WT/DS286/R, adopted 
27 September 2005, as modified by Appellate Body Report, WT/DS269/AB/R, WT/DS286/AB/R 
EC – Computer Equipment  Appellate Body Report, European Communities – Customs Classification of 
Certain Computer Equipment , WT/DS62/AB/R, WT/DS67/AB/R, 
WT/DS68/AB/R, adopted 22 June 1998, DSR 1998:V, 1851 
EC – Export Subsidies on 
Sugar Appellate Body Report, European Communities – Export Subsidies on Sugar , 
WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R, adopted 19 May 2005 
EC – Export Subsidies on 
Sugar (Australia) Panel Report, European Communities – Export Subsidies on Sugar, Complaint by 
Australia , WT/DS265/R, adopted 19 May 2005, as modified by Appellate Body 
Report, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R 
EC – Export Subsidies on 
Sugar (Brazil) Panel Report, European Communities – Export Subsidies on Sugar, Complaint by 
Brazil , WT/DS266/R, adopted 19 May 2005, as modified by Appellate Body 
Report, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R 
EC – Export Subsidies on Sugar (Thailand) Panel Report, European Communities – Export Subsidies on Sugar, Complaint by 
Thailand , WT/DS283/R, adopted 19 May 2005, as modified by Appellate Body 
Report, WT/DS265/AB/R, WT/DS266/AB/R, WT/DS283/AB/R 
EC – Poultry Appellate Body Report, European Communities – Measures Affecting the 
Importation of Certain Poultry Products , WT/DS69/AB/R, adopted 23 July 1998, 
DSR 1998:V, 2031 
EEC – Apples I (Chile) GATT Panel Report, EEC Restrictions on Imports of Apples from Chile , 
adopted 10 November 1980, BISD 27S/98 
EEC – Import Restrictions GATT Panel Report, EEC – Quantitative Restrictions Against Imports of 
Certain Products from Hong Kong , adopted 12 July 1983, BISD 30S/129 WT/DS27/RW2/ECU 
Page xiv  
 
  Short Title Full Case Title and Citation 
EEC – Newsprint GATT Panel Report, Panel on Newsprint , adopted 20 November 1984, 
BISD 31S/114 
India – Autos  Panel Report, India – Measures Affecting the Automotive Sector , WT/DS146/R, 
WT/DS175/R and Corr.1, adopted 5 April 2002, DSR 2002:V, 1827 
India – Patents (US)  Appellate Body Report, India – Patent Protection for Pharmaceutical and 
Agricultural Chemical Products , WT/DS50/AB/R, adopted 16 January 1998, 
DSR 1998:I, 9 
India – Quantitative 
Restrictions  Panel Report, India – Quantitative Restrictions on Imports of Agricultural, Textile 
and Industrial Products , WT/DS90/R, adopted 22 September 1999, upheld by 
Appellate Body Report, WT/DS90/AB/R, DSR 1999:V, 1799 
Indonesia – Autos  Panel Report, Indonesia – Certain Measures Affecting the Automobile Industry , 
WT/DS54/R, WT/DS55/R, WT/DS59/R, WT/DS64/R and Corr.1, 2, 3 and 4, 
adopted 23 July 1998, DSR 1998:VI, 2201 
Japan – Alcoholic Beverages II  Appellate Body Report, Japan – Taxes on Alcoholic Beverages , WT/DS8/AB/R, 
WT/DS10/AB/R, WT/DS11/AB/R, adopted 1 November 1996, DSR 1996:I, 97  
Korea – Alcoholic Beverages  Appellate Body Report, Korea – Taxes on Alcoholic Beverages , WT/DS75/AB/R, 
WT/DS84/AB/R, adopted 17 February 1999, DSR 1999:I, 3 
Mexico – Corn Syrup  
(Article 21.5 – US)  Appellate Body Report, Mexico – Anti-Dumping Investigation of High Fructose 
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the DSU  
by the United States , WT/DS132/AB/RW, adopted 21 November 2001, 
DSR 2001:XIII, 6675 
Turkey – Textiles  Panel Report, Turkey – Restrictions on Imports  of Textile and Clothing Products , 
WT/DS34/R, adopted 19 November 1999, as modified by Appellate Body Report, 
WT/DS34/AB/R, DSR 1999:VI, 2363 
US – DRAMS  (Article 21.5 – Korea)
  Panel Report, United States – Anti-Dumping Duty on Dynamic Random Access 
Memory Semiconductors (DRAMS) of One Megabit or Above from Korea – 
Recourse to Article 21.5 of the DSU by Korea , WT/DS99/RW, 7 November 2000, 
unadopted  
US – Gasoline  Appellate Body Report, United States – Standards for Reformulated and 
Conventional Gasoline , WT/DS2/AB/R, adopted 20 May 1996, DSR 1996:I, 3 
US – Line Pipe  Panel Report, United States – Definitive Safeguard Measures on Imports of 
Circular Welded Carbon Quality Line Pipe from Korea , WT/DS202/R, adopted 
8 March 2002, as modified by Appellate Body Report, WT/DS202/AB/R, 
DSR 2002:IV, 1473 
US – Non-Rubber Footwear GATT Panel Report, United States – Countervailing Duties on Non-Rubber 
Footwear from Brazil , adopted 13 June 1995, BISD 42S/208 
US – Offset Act  
(Byrd Amendment ) Appellate Body Report, United States – Continued Dumping and Subsidy Offset 
Act of 2000 , WT/DS217/AB/R, WT/DS234/AB/R, adopted 27 January 2003, 
DSR 2003:I, 375 
US – Section 301 Trade Act  Panel Report, United States – Sections 301-310 of the Trade Act of 1974 , 
WT/DS152/R, adopted 27 January 2000, DSR 2000:II, 815 
US – Shrimp  Appellate Body Report, United States – Import Prohibition of Certain Shrimp and 
Shrimp Products , WT/DS58/AB/R, adopted 6 November 1998, DSR 1998:VII, 
2755 
US – Softwood Lumber IV 
(Article 21.5 – Canada) Appellate Body Report, United States – Final Countervailing Duty Determination 
with Respect to Certain Softwood Lumber from Canada – Recourse by Canada to 
Article 21.5 of the DSU , WT/DS257/AB/RW, adopted 20 December 2005   WT/DS27/RW2/ECU 
 Page xv 
 
 
  Short Title Full Case Title and Citation 
US – Softwood Lumber VI 
(Article 21.5 – Canada) Appellate Body Report, United States – Investigation of the International Trade 
Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the DSU by Canada , WT/DS277/AB/RW and Corr.1, adopted 9 May 2006  
US – Softwood Lumber VI 
(Article 21.5 – Canada) Panel Report, United States – Investigation of the International Trade 
Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of the 
DSU by Canada , WT/DS277/RW, adopted 9 May 2006, as modified by Appellate 
Body Report, WT/DS277/AB/RW  
US – Steel Plate  Panel Report, United States – Anti-Dumping and Countervailing Measures on 
Steel Plate from India , WT/DS206/R and Corr.1, adopted 29 July 2002, 
DSR 2002:VI, 2073 
US – Sugar Waiver GATT Panel Report, United States – Restrictions on the Importation of Sugar 
and Sugar-Containing Products Applied under the 1955 Waiver and under the 
Headnote to the Schedule of Tariff Concessions , adopted 7 November 1990, 
BISD 37S/228 
 WT/DS27/RW2/ECU 
Page xvi  
 
  TABLE OF ABBREVIATIONS AND SYMBOLS USED IN THIS REPORT 
 
ACP Africa, Caribbean and Pacific countries, signatories of the Cotonou 
Agreement 
Bananas Annex  Annex to the Doha Waiver Deci sion approved in November 2001 
by the WTO Ministerial Conference 
BFA Bananas Framework Agreement or iginally negotiated in 1994 by 
the European Communities with Co lombia, Costa Rica, Nicaragua 
and Venezuela 
Bananas Understanding Understanding on Ba nanas, signed between the European 
Communities and Ecuador in April 2001 
DSB Dispute Settlement Body DSU Dispute Settlement Understanding EC European Communities FAO Food and Agriculture Organization of the United Nations 
GATT General Agreement on Tariffs and Trade 
GATT 1947 General Agreement on Tariffs and Trade 1947 GATT 1994 General Agreement on Tariffs and Trade 1994 HS Harmonised Commodity Description and Coding System MFN Most-Favoured Nation mt Metric Ton 
TRQ Tariff-rate Quota 
WCO World Customs Organization WTO World Trade Organization WTO Agreement Marrakesh Agreement esta blishing the World Trade Organization 
 
 
  WT/DS27/RW2/ECU 
 Page 1 
 
 
  I. INTRODUCTION 
1.1 On 28 November 2006, Ecuador requested cons ultations with the European Communities, 
under Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes 
(DSU) and Article XXII of the General Ag reement on Tariffs and Trade 1994 (GATT 1994), 
regarding measures taken by the European Communities allegedly to comply with the 
recommendations and rulings of the Dispute Settlement Body (DSB) in the dispute European 
Communities – Regime for the Importati on, Sale and Distribution of Bananas  (EC – Bananas III ).  
According to the request, the measures identified (i.e., those contained in Council Regulation (EC) 
No. 1964/2005 and its associated implementing regulati ons), are inconsistent with the obligations of 
the European Communities under Artic les I, II and XIII of the GATT 1994.1  Consultations were held 
on 14 December 2006, but failed to resolve the disagreement between the parties.2 
1.2 On 23 February 2007, Ecuador requested the est ablishment of a panel pursuant to Article 21.5 
of the DSU concerning the alleged inconsiste ncy of the measures adopted by the European 
Communities to comply with the rulings and recommendations of the DSB in the dispute EC – 
Bananas III  and subsequent related rulings.3 
1.3 At its meeting on 20 March 2007, the DSB deci ded, in accordance with Article 21.5 of the 
DSU, to refer to the original Panel, if possi ble, the matter raised by Ecuador in document 
WT/DS27/80.4  The Panel's terms of reference were the following: 
"To examine, in the light of the relevant provisions of the covered agreements cited 
by Ecuador in document WT/DS27/80, the ma tter referred to the DSB by Ecuador in 
that document, and to make such findings as will assist the DSB in making the 
recommendations or in giving the rulings provided for in those agreements."5 
1.4 On 5 June 2007, Ecuador requested the Directo r-General to determine the composition of the 
Panel, pursuant to paragraph 7 of Article 8 of the DSU.6  On 15 June 2007, the Director-General 
composed the Panel as follows: 
 Chairperson: Mr  Christian Häberli 
 
 Members: Mr Kym Anderson    Mr Yuqing Zhang
7 
 1.5 Belize, Brazil, Cameroon, Colombia, Côte d'Ivoire, Dominica, the Dominican Republic, 
Ghana, Jamaica, Japan, Madagascar, Nicaragua, Pana ma, St. Lucia, St. Vincent and the Grenadines, 
Suriname and the United States reserved their th ird-party rights to participate in the Panel's 
proceedings.
8  At the request of some third parties, the Panel decided that third parties would have, in 
addition to the rights provided for under the DSU, the following additional rights:  (i) the right to be 
present during the entirety of the substantive meeting of the Panel with the parties and the third parties;  
                                                      
1 EC – Bananas III (Article 21.5 – Ecuador II) , Request for Consultations (WT/DS27/65), 
20 November 2006. 
2 EC – Bananas III (Article 21.5 – Ecuador II) , Request for the Establishment of a Panel 
(WT/DS27/80) 26 February 2007. 
3 Ibid. 
4 EC – Bananas III (Article 21.5 – Ecuador II) , Constitution of the Panel (WT/DS27/82), 18 June 2007, 
para. 1. 
5 Ibid., para. 2. 
6 Ibid., para. 3. 
7 Ibid., para. 4. 
8 Ibid., para. 5. WT/DS27/RW2/ECU 
Page 2  
 
  (ii) the right to receive copies of the Parties' fi rst written submissions and rebuttals, as well as copies 
of the questions posed by the Panel to the parties an d to the other third parties and copies of parties' 
and third parties' responses to such  questions;  and, (iii) the right to ask oral questions to the parties 
during the course of the substantive meeting, alt hough the parties would be under no obligation to 
respond to those questions. 
1.6 On 18 June 2007, the Panel addressed a communi cation to the parties (Ecuador and the 
European Communities), submitting draft Working Procedures and the timetable that the Panel 
proposed to follow in these proceedings and inviting them to an organizational meeting in order to 
receive the views of the parties.  The organizati onal meeting was held with the parties on 21 June 
2007.  On 29 June 2007, the Pane l notified the parties (Ecuador and the European Communities) and 
the third parties of the adopted Working Procedures and timetable. 
1.7 On 29 June 2007, the United States (US) requ ested the establishment of a panel pursuant to 
Article 21.5 of the DSU concerning the alleged inconsistency of the measures adopted by the 
European Communities to comply with the recomme ndations and rulings of the DSB in the dispute 
EC – Bananas III  and subsequent related rulings.
9 
1.8 On 6 July 2007, in a communication addressed  to the Panel, the European Communities 
requested a modification of the timetable in these proceedings, in order to take into account the 
timetable of the proceedings of the compliance pane l requested by the United States.  The European 
Communities requested that the deadline for its fi rst written submission to this Panel be postponed 
until after the United States had filed its own fi rst written submission in the compliance panel 
proceedings initiated by the United States.  The Eu ropean Communities cited its concern that, were 
the United States to file its first written submission after the European Communities had filed its own, 
this would amount "to a de facto reversal of the order in which first written submissions should be 
submitted" and "create "very serious due process problems".10  When asked by the Panel to comment 
on the European Communities' request, in a comm unication dated 9 July 2007, Ecuador strongly 
objected to any delay in the proceedings.  In Ecua dor's view, the timetable in the proceedings "is 
already much more protracted than the 90 days called for in Article 21.5" and "Ecuador would be 
prejudiced by a further delay, which [would] only [f avour] the interests of the EC as the defending 
Party".11  Ecuador additionally noted that the European  Communities had only filed its request "after 
Ecuador had submitted its first submission" and mo re than a week after the European Communities 
had received copy of the United States' request for the establishment of a compliance panel.12  Also on 
9 July 2007, the United States sent a communicat ion to the Panel, providing comments to the 
European Communities' request for the Panel's c onsideration.  The United States noted that the 
European Communities had received a copy of the United States' request for the establishment of a 
compliance panel on 29 June 2007.  In the view of  the United States, the European Communities 
"does not appear to have identified any 'very serio us due process problems' that would arise if the 
current timetable were maintained in the present proceeding".13  On 10 July 2007, the Panel notified 
the parties that it did "not find it necessary, at this point, to amend the timetable for its proceedings 
fixed on 29 June".  The Panel informed the parties that it would "follow closely developments relating 
to the US request for the establishment of an Artic le 21.5 panel regarding the EC's compliance in the 
EC – Bananas III  case [and in] the eventuality of a DSB d ecision to establish such an Article 21.5 
                                                      
9 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83) 2 July 
2007. 
10 Communication by the European Communities to the Panel, dated 6 July 2007. 
11 Communication by Ecuador to the Panel, dated 9 July 2007. 
12 Ibid. 
13 Communication by the United States to the Panel, dated 9 July 2007.  WT/DS27/RW2/ECU 
 Page 3 
 
 
  panel, [it would] promptly consult with the parti es in order to decide whether the new developments 
should affect the timetable in the current proceedings."14 
1.9 At its meeting on 12 July 2007, the DSB decided,  in accordance with Article 21.5 of the DSU, 
to refer to the original Panel, if possible, the matter raised by the United States in document 
WT/DS27/83.15  The Panel's terms of reference were the following: 
"To examine, in the light of the relevant provisions of the covered agreements cited 
by the United States in document WT/DS27/83 , the matter referred to the DSB by the 
United States in that document, and to ma ke such findings as will assist the DSB in 
making the recommendations or in giving the rulings provided for in those agreements."
16 
1.10 On 3 August 2007, the United States requested the Director-General to determine the 
composition of the Panel, pursuant to paragraph 7 of Article 8 of the DSU.17  On 13 August 2007, the 
Director-General composed the Panel as follows: 
 Chairperson: Mr  Christian Häberli 
 
 Members: Mr Kym Anderson 
   Mr Yuqing Zhang18 
 1.11 On 15 August 2007, the Panel addressed a communication to the parties (Ecuador and the 
European Communities), regarding the possibility of  harmonizing the timetable in these proceedings 
with that of the panel requested by the United St ates.  The Panel also consulted the parties on the 
possibility of introducing adjustments to the Work ing Procedures in these proceedings.  In its 
communication, the Panel invited the parties to a meeting on 20 August 2007, to be followed by a 
separate organizational meeting of the compliance Pane l requested by the United States to be held in 
the presence of the parties to that case.
19 
1.12 On 20 August 2007, the Panel held a meeting w ith the parties (Ecuador and the European 
Communities) and received their comments regarding the possibility of harmonizing the timetable in 
these proceedings with those of the panel requested  by the United States, as well as on the possibility 
of introducing adjustments to the Working Procedures.   On the same date, the Panel held a separate 
organizational meeting with the parties to the compliance Panel requested by the United States. 
1.13 On 23 August 2007, the Panel notified the parti es (Ecuador and the Eu ropean Communities) 
that, after consideration of the comments receiv ed from both parties, the timetable originally 
established remained unchanged.  The Panel also notif ied the parties of the amendments incorporated 
into the Working Procedures, in order to allow fo r the possibility of holding panel meetings in joint 
sessions of both the proceedings requested by Ecua dor and those requested by the United States and 
to allow the Panel to copy its comm unications to the parties in both cases.20 
                                                      
14 Communication by Panel to the parties, dated 10 July 2007. 
15 EC – Bananas III (Article 21.5 – US) , Constitution of the Panel, Note by the Secretariat 
(WT/DS27/84), 13 August 2007, para. 1. 
16 Ibid., para. 2. 
17 Ibid., para. 3. 
18 Ibid., para. 4.  Belize, Brazil, Cameroon, Colombia, Côte d'Ivoire, the Dominican Republic, Ecuador, 
Jamaica, Japan, Mexico, Nicaragua, Panama and Suriname reserved their third-party rights to participate in the 
proceedings of the compliance Panel requested by the United States.  Ibid., para. 5. 
19 Communication by Panel to the parties, dated 15 August 2007. 
20 Communication by Panel to the parties, dated 23 August 2007. WT/DS27/RW2/ECU 
Page 4  
 
  1.14 In accordance with the timetable approved by  the Panel, Ecuador filed its first written 
submission on 6 July 2007 and the European Commun ities on 20 July 2007.  Ec uador filed its rebuttal 
on 1 August 2007 and the European Communities on 13 August 2007.  The Panel received third party 
submissions from Colombia, Nicaragua, Panama, and the United States, as well as a joint third party 
submission from Belize, Cameroon, Côte d'Ivoi re, Dominica, the Dominican Republic, Ghana, 
Jamaica, Madagascar, St. Lucia, St. Vi ncent and the Grenadines, and Suriname. 
1.15 The Panel met with the parties and th ird parties on 18 and 19 September 2007. 
1.16 On occasion of its oral statement at the meeting of  the Panel with the parties and third parties, 
the European Communities again reque sted a modification of the timetables of these proceedings.  At 
the end of the meeting the Panel communicated to the parties that it had looked into the matter and 
decided that, notwithstanding the Panel's initial inte ntions to either harmonize the timetable of both 
proceedings or totally separate both cases, it could not at that point in time find a better alternative for 
the timetable of proceedings.  This despite the fact that the Panel was aware that the approved 
timetable implied a considerable burden of work, p eaking at particular moments for the parties, as 
well as for the Panel and the Secretariat. 
1.17 On 4 October 2007, parties and third parties submitted replies to questions posed by the 
Panel.  On 5 October 2007, the European Comm unities requested that the deadline for submitting 
comments to replies to questions be delayed un til 22 October 2007.  After having considered the 
views of both parties, the Panel extended the dead line for submission of comments to replies until 
16 October 2007.  On 16 October 2007, parties and th ird parties submitted comments on the replies to 
questions. 
1.18 The Panel issued the descriptive sections of the draft report to the parties to the dispute on 
12 November 2007.  On the same date, the Panel is sued the relevant sections with their respective 
arguments to each of the third parties.  On 15  November 2007, the Panel received comments from 
both parties regarding the descriptive sections of the draft report and from the ACP third parties, 
Brazil and Japan regarding the releva nt section with its own arguments. 
1.19 The Panel submitted its interim report to the pa rties on 27 November 2007.  Issuance of the 
interim report had been originally scheduled for 23 November, but was delayed by the Panel in order 
to ensure that replies to questions and comments on replies in the proceedings requested by the United 
States had been received by that panel, before th e interim report in the current proceedings was 
issued.  The Panel issued its final report to the parties on 10 December 2007. 
II. FACTUAL ASPECTS 
A. B
ACKGROUND  
1. Object of the current dispute 
2.1 This dispute concerns measures adopted by th e European Communities (EC) with the alleged 
purpose of complying with the rulings and recommendations of the Dispute Settlement Body (DSB) in the case European Communities – Regime for the Importation, Sale and Distribution of Bananas  
(EC – Bananas III ) and with subsequent related rulings a nd recommendations.  Parties disagree as to 
whether these measures are in conformity with the European Communities' obligations under the 
WTO covered agreements.  WT/DS27/RW2/ECU 
 Page 5 
 
 
  2. Basic chronology 
2.2 At its meeting on 25 September 1997, the DSB adopted the Appellate Body Report on EC – 
Bananas III  (WT/DS27/AB/R) and the four panel repor ts on the same case (WT/DS27/R/ECU, 
WT/DS27/R/GTM-WT/DS27/R/HND, WT/DS27/R/MEX and WT/DS27/R/USA), as modified by the 
Appellate Body's Report.21  Pursuant to these reports, the DS B requested the European Communities 
to bring its banana regime, as found to be incons istent with the General Agreement on Tariffs and 
Trade 1994 (GATT 1994), the General Agreement on Tr ade in Services (GATS) and the Agreement 
on Import Licensing Procedures (Import Licensing Agreem ent), into conformity with its obligations 
under those Agreements. 
2.3 On 7 January 1998, the arbitral award requeste d by Ecuador, Guatemala, Honduras, Mexico and 
the United States (US), pursuant to Article 21.3(c) of the DSU, was circulated.  The Arbitrator 
concluded that the "reasonable period of time" for the European Communities to implement the rulings 
and recommendations of the DSB adopted on 25 September 1997 in EC – Bananas III , would be the 
period from 25 September 1997 to 1 January 1999.22 
2.4 On 18 December 1998, Ecuador requested the DSB to  re-establish the original panel in order 
to examine the consistency of the measures adopted  by the European Communities to implement the 
rulings and recommendations adopted by the DSB in September 1997.23  On 12 January 1999, the 
DSB decided, in accordance with Article 21.5 of the DSU, to refer to the original panel the matter 
raised by Ecuador in document WT/DS27/41.24  The report issued by th e compliance Panel requested 
by Ecuador was adopted by the DSB on 6 May 1999. 
2.5 On 23 June 2000, the European Communities a nd certain developing countries concluded a 
partnership agreement in Cotonou of Benin (the  "Cotonou Agreement").  The Cotonou Agreement 
provided that the European Communities would allo w the importation of products originating from 
beneficiary developing countries free of customs duti es and charges having equivalent effect (or, at 
least, at preferential terms), until 31 December 2007.  In the sector of bananas, this trade preference is 
applied in the form of an annual importation into the European Communities of up to 775,000 mt of 
bananas subject to zero duty.25 
2.6 Through a communication dated 22 June 2001, the European Communities notified the DSB 
that it had: 
"[R]eached, with the United States of Am erica and Ecuador, a mutually satisfactory 
solution within the meaning of Article 3.6 of the DSU regarding the implementation by the EC of the conclusions and recommendations adopted by the DSB in the 
dispute 'Regime for the importation, sale and distribution of bananas' (WT/DS27)."
26 
                                                      
21 EC – Bananas III , Appellate Body Report and Panel Reports, Action by the Dispute Settlement Body 
(WT/DS27/12), 10 October 1997. 
22 EC – Bananas III , Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes, Award of the Ar bitrator (WT/DS27/15), 7 January 1998.  See also EC –  
Bananas III , Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes (WT/DS27/16), 7 January 1998. 
23 EC – Bananas III (Article 21.5 – Ecuador) , (WT/DS27/41), 18  December 1998. 
24 EC – Bananas III (Article 21.5 – Ecuador) , Constitution of the Panel, Note by the Secretariat 
(WT/DS27/44), 18 January 1999. 
25 European Communities' first written submission paras. 11 and 13. 
26 EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001. WT/DS27/RW2/ECU 
Page 6  
 
  2.7 Through a communication dated 26 June 2001 and addressed to the DSB, the United States 
referred to the understanding reached with the European Communities on 11 April 2001.
27  In its 
communication, the United States stated that the understanding: 
"[I]dentifies the means by which the long- standing dispute over the EC's banana 
import regime can be resolved, but, as is obvious from its own text, it does not in 
itself constitute a mutually agreed solution pursuant to Article 3.6 of the DSU.  In 
addition, in view of the steps yet to be take n by all parties, it would also be premature 
to take this item off the DSB agenda."28 
2.8 Through a communication dated 3 July 2001 and addressed to the DSB, Ecuador referred to 
the understanding reached with the Eu ropean Communities on 30 April 2001.29  In its communication, 
Ecuador stated that the understanding: 
"[I]dentifies means by which a long-standing dispute can be resolved.  However, the 
Understanding also comprises of the execution of two phases and requires the implementation of several key features, which demands the collective action of the WTO membership ...  [T]he Understanding reach ed with the EC refers to the current 
banana import regime in force as of 1 July  2001 as one of a transitory nature since, 
beginning at the latest on 1 January 2006,  a new and definitive Tariff Only regime 
will be in force ...  Since the new EC bana na import regime which is currently in 
force still requires that several steps be ta ken in the context of the DSB and other 
WTO bodies, it would be premature to take this item off the DSB agenda which considers this issue at ever y regular meeting pursuant to Article 21.6 of the DSU ...  
In light of the above and although Ec uador sees the Understanding as an agreed 
solution which can contribute to an overa ll, definite and universally accepted 
solution, it must be made clear that the provisions of Article 3.6 of the DSU are not applicable in this case."
30 
2.9 On 14 November 2001, the WTO Ministerial Conference decided to waive Article I:1 of the 
GATT 1994: 
"[U]ntil 31 December 2007, to the extent necessary to permit the [EC] to provide 
preferential tariff  treatment for products originating in ACP States as required by 
Article 36.3, Annex V and its Protocols of the ACP-EC Partnership Agreement,31 
without being required to extend the same preferential treatment to like products of 
any other member".32 
                                                      
27 EC – Bananas III , Communication from the United States (WT/DS27/59), 2 July 2001. 
28 Ibid. 
29 EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 
2001. 
30 Ibid. 
31 (footnote original ) Any reference to the Partnership Agreemen t in this Decision shall also include the 
period during which the trade provisions of this Agreement are applied on the basis of transitional measures 
adopted by the ACP-EC joint institutions. 
32 Ministerial Conference, European Communities, Th e ACP – EC Partnership Agreement, Decision of 
14 November 2001 (WT/MIN(01)/15), 14 November 2001.  WT/DS27/RW2/ECU 
 Page 7 
 
 
  2.10 While in principle this waiver wa s to be valid until 31 December 200733, in regard to bananas 
this was subject to the terms and conditions set out  in the text of the Decision, which include the 
additional provisions contained in the Annex to the Doha Waiver Decision (Bananas Annex).34 
2.11 Also on 14 November 2001, the WTO Ministerial Conference decided to waive Article XIII:1 
and XIII:2 of the GATT 1994: 
"With respect to the EC's imports of bananas, as of 1 January 2002, and until 
31 December 2005 ... with respect to the EC's separate tariff quota of 750,000 tonnes for bananas of ACP origin."
35 
2.12 On 21 January 2002, the European Commun ities addressed a communication to the DSB, 
concerning its progress in the implementation of the DSB's recommendations and rulings in the EC – 
Bananas III  dispute.  The European Communities informed the DSB that Regulation (EC) No. 
2587/2001 had been adopted by the Council on 19 December 2001 and published in the Official 
Journal of the European Communities L 345 of 29 December 2001.36  It stated that: 
"By this Regulation, the EC has implemente d Phase 2 of the Understandings with the 
United States and Ecuador (circulated as document WT/DS27/58 of 2 July 2001)37 
2.13 On its session of 1 February 2002, the DSB considered a report submitted by the European 
Communities concerning its progress in the implemen tation of the DSB's recommendations regarding 
its bananas import regime.  At the meeting, the European Communities expressed its view that "this 
matter should now be withdrawn from the DSB agenda".38  The European Comm unities stated that it 
had implemented on schedule the second phase of the Understandings on Banan as concluded with the 
United States and Ecuador in April 2001, and had co mplied with its interna tional obligations.  The 
European Communities added that the regime set out in Regulation (EC) No. 2587/2001, adopted on 
19 December 2001, would be applicable until the time  the EC's banana import regime would become 
a tariff-only regime.  This would take place by 1 Ja nuary 2006 at the latest, following the negotiations 
under Article XXVIII, which in principle would begin in 2004.  In response, at the same meeting, 
Ecuador stated that "like other countries, [it] also  considered that this item should no longer appear on 
the agenda of future DSB meetings".  Ecuador a dded that the bilateral understanding signed with the 
European Communities on 30 April 2001: 
"[C]onstituted a sound basis for the EC to implement a transiti onal banana import 
regime so that by 1 January 2006, at the latest, a WTO-compatible tariff-only regime would be put into place.  The transitional regime contained various phases, stages and elements to be implemented.  One elemen t was to obtain waivers from Articles I and 
XIII of the GATT 1994.  However, the decision to grant these waivers included new 
stages which would have to be carried out in  order to ensure a proper transition to a 
tariff-only banana import regime, as from 1 January 2006.  Accordingly, insofar as 
the EC continued to implement the DSB's recommendations by meeting its 
commitments, Ecuador wished to reserve its rights under Article 21 of the DSU.  
                                                     
 
33 Ministerial Conference, European Communities, Th e ACP – EC Partnership Agreement, Decision of 
14 November 2001 (WT/MIN(01)/15), 14 November 2001, p. 2, para. 1. 
34 Ibid., p. 3, para. 3bis. 
35 Ministerial Conference, European Communities, Transitional Regime for the EC Autonomous Tariff 
Rate Quotas on Imports of Bananas, Decision of 14 November 2001 (WT/MIN(01)/16), 14 November 2001. 
36 EC – Bananas III , Status Report by the European Communities, Addendum ("WT/DS27/51/Add.25), 
21 January 2002. 
37 Ibid. 
38 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on 1 February 
2002 (WT/DSB/M/119), 6 March 2002, para. 3. WT/DS27/RW2/ECU 
Page 8  
 
  Therefore if there was any disagreement c oncerning the measures applied by the EC, 
the matter could be referred to the origin al Panel pursuant to Article 21.5 of the 
DSU."
39 
2.14 On 19 January 2004, the European Communities, in  view of the enlargement of the European 
Union, resulting from the accession of Cyprus, th e Czech Republic, Estonia, Hungary, Latvia, 
Lithuania, Malta, Poland, the Slovak Republic and Slovenia, notified, within the framework of 
procedures laid down in Article XXIV GATT 1994, and in particular Article XXIV:6, the withdrawal 
on 1 May 2004 of the commitments in Schedules CXL of the EC-15, and in the Schedules of Cyprus, 
the Czech Republic, Estonia, Hungary, Latvia, Lith uania, Malta, Poland, th e Slovak Republic and 
Slovenia.  The European Communities added that it w as ready to enter into Article XXIV and Article 
XXVIII GATT 1994 procedures, including tariff ne gotiations or consultations, to address 
compensatory adjustments provided for under Artic le XXIV:6 of the GATT 1994.  The European 
Communities also stated that, pending the comple tion of the procedures under Article XXIV and 
Article XXVIII of the GATT 1994, and the creation of a new schedule valid for the EC-25, the commitments in Schedule CXL would be fully respected and that the new member States of the 
European Communities intended to align their Sche dules with those of th e European Communities on 
1 May 2004.
40 
2.15 On 15 July 2004, the European Communiti es announced, in a communication to WTO 
Members, that it intended to modify, in acco rdance with the provisions and procedures of 
Article XXVIII:5 of the GATT 1994, its concessions w ith respect to tariff item 0803 00 19 (bananas) 
included in the EC Schedule CXL.41 
2.16 On 31 January 2005, the European Communitie s notified the WTO Members that it intended 
to replace its concessions on tariff item 0803 00 19 (ban anas) included in the EC Schedule CXL with 
a bound duty of €230/mt.42  It also indicated that the communication constituted: 
"[T]he announcement under the terms of the Annex to the Decision of the WTO 
Ministerial Conference of 14 November 2001 concerning the ACP-EC Partnership 
Agreement (WT/MIN(01)/15)."43 
2.17 On 30 March 2005, Colombia, Costa Rica, Ecuador, Guatemala, Honduras and Panama, 
followed by Venezuela and Nicaragua on 31 Marc h 2005 and Brazil on 1 April 2005, notified the 
WTO that they were requesting arbitration pursuant to the procedures contained in the Annex to the Doha Waiver, in order to determine whether th e envisaged rebinding on the European Communities' 
tariff on bananas (at €230/mt), announced under the A nnex to the Waiver, fulfilled the requirements 
of the Waiver Decision.
44  The Arbitrator's award was circulated on 1 August 2005.45  The Arbitrator 
concluded that: 
                                                      
39 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on 1 February 
2002 (WT/DSB/M/119), 6 March 2002, paras. 4-5. 
40 Article XXIV:6 Negotiations, Enlargement of the European Union:  Communication from the 
European Communities (G/SECRET/20), 30 January 2004. 
41 Article XXVIII:5 Negotiations, Schedule CXL – European Communities (G/SECRET/22), 2 August 
2004. 
42 Article XXVIII:5 Negotiations, Schedule CXL – European Communities (G/SECRET/22/Add.1), 
1 February 2005. 
43 Ibid. 
44 European Communities, The ACP – EC Partnership Ag reement, Recourse to Arbitration Pursuant to 
the Annex to the Decision of 14 November 2001 (WT/L/607), 1 April 2005.  See also, European Communities, The ACP – EC Partnership Agreement, Recourse to Arbitration Pursuant to the Annex to the Decision of 14 
November 2001, Communication from Colombia , Addendum (WT/L/607/Add.1), 1 April 2005;   WT/DS27/RW2/ECU 
 Page 9 
 
 
  "[T]he European Communities' envisaged re binding on bananas would not result in at 
least maintaining total market access for MFN banana suppliers, taking into account all EC WTO market-access commitments relating to bananas".
46 
2.18 On 13 September 2005, the European Communities notified the interested parties that it had 
revised its proposal to provide as from 1 January 2006 for an MFN tariff for bananas at €187/mt and a 
tariff quota for ACP countries of 775,000 mt per year at zero duty.47 
2.19 In a communication dated 26 September 200 5, the European Communities notified the 
Arbitrator that, after consultations with the interested  parties, there was at that point no basis for even 
seeking a mutually satisfactory solution within a ti meframe that would allow for implementation of 
the new European Communities' banana regime by 1 January 2006.   The European Communities 
therefore requested that the matter be referred back  to the same Arbitrator, in accordance with the 
Annex to the Doha Waiver.48  The Arbitrator's award was circulated on 27 October 2005.49  T h e  
Arbitrator concluded that: 
"[T]he European Communities' proposed rectif ication, consisting of a new MFN tariff 
rate on bananas of €187 per metric ton a nd a 775,000 mt tariff quota on imports of 
bananas of ACP origin, would not result 'in at least maintaining total market access 
for MFN banana suppliers', taking into account 'all EC WTO market-access commitments relating to bananas'.  Con sequently... the European Communities has 
failed to rectify the matter, in accordance with  the fifth tiret of the Annex to the Doha 
Waiver."
50 
2.20 On 27 September 2006, the European Communities, noting the enlargement of the European 
Union, resulting from the accession of Bulgaria and Romania that would take place from 1 January 
2007, notified, within the framework of procedur es laid down in Article XXIV GATT 1994, and in 
particular Article XXIV:6, the modification of the EC Schedule, as well as the fact that the two new members of the European Union would be subject  to the EC Schedules from 1 January 2007 and, 
consequently the commitments in the Schedules of  Bulgaria and Romania would be withdrawn from 
that date.
51 
                                                                                                                                                                     
Communication from Costa Rica , Addendum (WT/L/607/Add.2), 1 April 2005;  Communication from Ecuador , 
Addendum (WT/L/607/Add.3), 1 April 2005; Communication from Guatemala , Addendum (WT/L/607/Add.4), 
1 April 2005;  Communication from Honduras , Addendum (WT/L/607/Add.5), 1 April 2005;  Communication 
from Panama , Addendum (WT/L/607/Add.6), 1 April 2005;  Communication from Nicaragua , Addendum 
(WT/L/607/Add.7), 4 April 2005;  Communication from Venezuela , Addendum (WT/L/607/Add.8), 4 April 
2005;  and, Communication from Brazil , Addendum (WT/L/607/Add.9), 4 April 2005. 
45 European Communities, The ACP – EC Partnership Ag reement, Recourse to Arbitration Pursuant to 
the Decision of 14 November 2001, Award of the Arbitrator (WT/L/616), 1 August 2005.  See also, European Communities, The ACP – EC Partnership Agreement, Reco urse to Arbitration Pursuant to the Annex to the 
Decision of 14 November 2001, Communication from the Secretariat  (WT/L/607/Add.13), 5 September 2005. 
46 Award of the Arbitrator, EC – The ACP-EC Partnership Agreement , para. 94. 
47 See Award of the Arbitrator, EC – The ACP-EC Partnership Agreement II , para. 7. 
48 European Communities, The ACP – EC Partnership Ag reement, Recourse to Arbitration Pursuant to 
the Annex to the Decision of 14 November 2001, Addendum, Communication from the European Communities  
(WT/L/607/Add.14), 28 September 2005. 
49 Award of the Arbitrator, EC – The ACP-EC Partnership Agreement II .  See also, European 
Communities, The ACP – EC Partnership Agreement, Reco urse to Arbitration Pursuant to the Annex to the 
Decision of 14 November 2001, Communication from the Chairman of the General Council  
(WT/L/607/Add.15), 28 October 2005. 
50 Award of the Arbitrator, EC – The ACP-EC Partnership Agreement II , para. 127. 
51 Article XXIV:6 Negotiations, Enlargement of the European Union:  Communication from the 
European Communities (G/SECRET/26), 28 September 2006. WT/DS27/RW2/ECU 
Page 10  
 
  B. 
PRODUCT DESCRIPTION  
2.21 Under the Harmonized Commodity Description and Coding Systems (Harmonized System or 
HS) developed by the World Customs Organizatio n (WCO), bananas are cl assified under the HS 
Code 0803.00 which also includes plantains, fresh or dried.  The European Communities applies a 
"combined nomenclature" (CN) comprised of the harmonized system nomenclature and the 
Community subdivisions.52  The European Communities' combined nomenclature is revised on an 
annual basis.  The revised version entered in to force 1 January 2007 as a result of Commission 
Regulation (EC) No. 1549/2006 of 17 October 2006  amending Annex I to Council Regulation (EEC) 
2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff.53  This EC 
Commission Regulation establishes that the CN code  for "bananas, including plantains, fresh or 
dried," is 0803 00 with the following sub-divisions54:  0803 00 11 for Fresh- Plantains;  0803 00 1955 
for Fresh- Other (bananas);56  0803 00 90 for Dried (bananas, including plantains).57  The Panel notes, 
however that, in some documents, including in  its WTO Schedules LXXX and CXL, the European 
Communities refers to fresh bana nas under tariff item 0803 00 12. 
2.22 The Food and Agriculture Organization of the United Nations (FAO) considers bananas to be 
the world's most exported fruit in terms of volume a nd second in terms of value.  According to the 
FAO, bananas represent a substantial source of income and employment for several tropical 
countries.58 
C. EUROPEAN COMMUNITIES ' LEGAL FRAMEWORK FOR BANANAS IMPORTS  
1. European Communities' WTO co mmitments regarding bananas 
2.23 The European Communities' co mmitments under the WTO with respect to trade in goods 
were established in Schedule LXXX , which was incorporated to the results of the Uruguay Round on 
15 April 1994.59  On 15 December 1994, the European Communities announced its intention to 
withdraw Schedule LXXX, effective from 1 January 1995, due to the accession of Austria, Finland and Sweden into the Communities.
60  On this occasion, the Europ ean Communities d eclared that, 
pending the submission of the new Schedule, it would continue to respect the commitments 
established in Schedule LXXX. 
                                                      
52 Council Regulation (EEC) No. 2658/87 of 23 July 1 987 on the tariff and st atistical nomenclature and 
on the Common Customs Tariff, OJ L 256, 7.9.1987, p.1-675. 
53 The Combined Nomenclature is annually updated on October 31.  This Commission Regulation 
refers to the version, published on the Official Journal of the European Union, 31 October 2006. 
54 Commission Regulation (EC) No. 1549/2006 of 17 October 2006 amending Annex I to Council 
Regulation (EEC) 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, 
Official Journal of the European Union, 31 October 2006, p. 87. 
55 In Exhibit EC-1 Schedule CXL- European Communities, fresh bananas appear under the CN Code  
0803 00 12.  The same applies to Schedule LXXX- European Communities, which is also part of Exhibit EC-1. 
56 Annex 7 "WTO Tariff quotas to be opened by the competent Community Authorities" of the Council 
Regulation (EEC) No. 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff 
refers to CN Code 0803 00 19 Bananas.  Official Journal of the European Union, 31 October 2006, p. 853. 
57 Commission Regulation (EC) No. 1549/2006 of 17 October 2006 amending Annex I to Council 
Regulation (EEC) 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff, 
Official Journal of the European Union, 31 October 2006, p. 87 
58 Available at:  http://www.fao.org/DOCREP/006/ Y4343E/y4343e06.htm (as of 6 November 2007). 
59 European Communities' first written submission, para. 5. 
60 Ibid., para. 5.  WT/DS27/RW2/ECU 
 Page 11 
 
 
  2.24 The European Communities submitted its propo sed new Schedule CXL to the WTO on 14 
March, 1996.  However, this schedule has not been certified, following objections by WTO 
Members.61 
2.25 For all practical purposes, with respect to tariff heading 0803, Part I, Section I.A (Tariffs) of 
EC Schedule LXXX and EC Schedule CXL have identical provisions.62  The relevant text in this 
section reads: 
Tariff item 
number Description of products Base rate of 
duty Bound rate 
of duty Special 
safeguard 
1 2 3 4 6 
0803 00 Bananas, including plantains, fresh or dried:    
0803 00 1 - Fresh:    
0803 00 11 -- Plantains 20.0% 16.0%  
0803 00 12 -- Other 850ECU/T 680ECU/T SSG 
0803 00 90 - Dried 20.0% 16.0%  
 
2.26 Likewise, Part I, Section I.B (Tariff quotas)  of EC Schedule LXXX and EC Schedule CXL 
have identical provisions for tariff line 0803.00.12.  The text reads: 
Description of 
product Tariff item 
number(s) Initial quota 
quantity 
and in-
quota tariff 
rate Final quota 
quantity 
and in-
quota tariff 
rate Implemen-
tation 
period 
from/to Initial 
negotiating 
right Other terms 
and 
conditions 
1 2 3 4 5 6 7 
Fresh bananas, other 
than plantains 0803 00 12 2.200.000 t 
75 ECU/t 2.200.000 t 
75 ECU/t   As indicated 
in the Annex 
 
2.27 The Annex referred to in both EC Schedule LXXX and EC Schedule CXL is the so-called 
"Framework Agreement on Bananas" (Bananas Fr amework Agreement or BFA).  The Bananas 
Framework Agreement was originally negotiated in 1994 by the European Communities with the 
following GATT Contracting Parties:  Colombia, Costa Rica, Nicaragua and Venezuela.63  Under the 
Bananas Framework Agreement: 
"1. The global basic tariff quota is fixed at 2.100.000 t for 1994 and at 
2.200.000 t for 1995 and the following y ears, subject to any increase resulting from 
the enlargement of the Community. 
This quota is divided up into specific quotas allocated to the following countries: 
                                                      
61 European Communities' first written submission para. 6. 
62 See Exhibit EC-1. 
63 See Panel Report on EC – Bananas III (Ecuador) , para. 3.30. WT/DS27/RW2/ECU 
Page 12  
 
  Country Percentage of the global quota 
Costa Rica 23.4 Colombia 21.0 Nicaragua 3.0 Venezuela 2.0 
Dominican Republic 
and other ACP concerning non-traditional quantities  
    90.000 t 
Others 46.32% (1994) – 46.15% (1995) 
 
...  7. The in-quota tariff rate shall be 75 Ecus tonne. 
8. The agreed system will be operational by 1 October 1994 at the latest, 
without prejudice to any provisional or transitional measures to be examined for the year 1994. 
9. This agreement shall apply until 31 December 2002.  Full consultations with 
the Latin American suppliers that are GA TT Members should start no later than in 
year 2001. 
The functioning of the agreement will be revi ewed before the end of the third year, 
with full consultation of GATT Me mber Latin American suppliers. 
10. This agreement will be incorporat ed into the Community's Uruguay Round 
Schedule. 
11. This agreement represents a settleme nt of the dispute between Colombia, 
Costa Rica, Venezuela, Nicaragua and th e Community on the Community's banana 
regime.  The parties to this agreemen t will not pursue the adoption of the GATT 
panel report on this issue." 
2.28 The panel notes that, as a result of the replaceme nt of the currency unit "ECU" by the "Euro" 
(€), on a one to one basis,
64 the European Communities' commitments contained in the respective 
Schedules would have to be read accordingly. 
2.29 As noted above, on 19 January 2004, the Eur opean Communities announced the withdrawal 
from 1 May 2004 of the commitments in Schedule CXL, due to the accession of ten new member States into the European Union.
65  At this moment, the negotiations under Article XXIV and Article 
XXVIII of the GATT have not been concluded a nd the European Communities has not submitted a 
new Schedule. 
                                                      
64 Enlargement of the European Union:  Rectification and Modification of Schedule CXL - European 
Communities, Addendum (G/L/Rev.1/Add.3), 23 November 1998. 
65 Article XXIV:6 Negotiations, Enlargement of the European Union:  Communication from the 
European Communities (G/SECRET/20), 30 January 2004.   See also, European Communities' first written 
submission, para. 7.  WT/DS27/RW2/ECU 
 Page 13 
 
 
  2. European Communities' banana import regime 
2.30 European Communities' Council Regulati on (EEC) No. 404/93 of 13 February 199366 
established the common organization of the banana  market.  This regulation established the free 
circulation of bananas within the common market , it regulated the domestic production of bananas, 
and established the regime for the importation of  bananas into the Eu ropean Communities.  
Regulation 404/93 accorded different treatment to bananas depending on their origin.  It divided the 
system into community bananas, which were  the bananas produced within the European 
Communities;  traditional ACP bananas, which were bananas originated in any of 12 ACP countries 
within the quantities established in the annex;67  non-traditional ACP imports, which referred to the 
quantities of imported bananas in any of the ACP countries that exceeded the quantity established in 
the Annex;  and bananas imported from non-ACP third countries.68  Regulation 404/93 established a 
quota of 854,000 mt for Community bananas69 and of 857,700 mt for traditional ACP bananas as 
established in the annex.  A tariff quota of two million mt was opened each year for imports of third country bananas and non-traditional ACP bananas.
70  Within this tariff quota, third country bananas 
were subject to an in-quota tariff of 100 ECU/mt , while imports from non-traditional ACP countries 
were subject to zero duty.71  The out-of-quota tariff was 750 ECU/ mt for non-traditional ACP-bananas 
and 850 ECU/mt for out-of-quota third country bananas.72  Imports from both the non-ACP third 
country bananas and non-traditional ACP countries we re subject to import licences granted in the 
following proportions:  (a) 66.5 per cent to operator s established in third country and non traditional 
ACP bananas;  (b) 30 per cent to operators estab lished in the European Communities or traditional 
ACP bananas;  and, (c) 3.5 per cent to operato rs established in the European Communities that 
marketed bananas other than community and traditional ACP bananas from 1992.73  The Regulation 
also provided that, no later than the end of the third year after the entry into force of this Regulation, 
the Commission had to submit a report to the Euro pean Parliament and the Council on the operation 
of the Regulation.  The report had to contain among other things "an analysis of the development of 
Community, third-country and ACP banana marke ting flows since the implementation of these 
arrangements."  The same provision also established that the "Commission shall again report to the 
European Parliament and the Council by 31 Dece mber 2001 on the operation of this Regulation and 
make appropriate proposals concerning new a rrangements to apply after 31 December 2002."74 
2.31 Commission Regulation (EEC) No. 1442/93 of 10 June 199375 complemented Council 
Regulation (EEC) No. 404/93 by laying down detailed  rules for the application of the arrangements 
for importing bananas into the European Commun ities.  Regulation 1442/93 established the licensing 
procedures for imports from traditional ACP and non traditional ACP and thir d country bananas.  
Applications for traditional ACP imports were requi red to be accompanied by a certificate of origin 
                                                      
66 Council Regulation (EEC) No. 404/93 of 13 February 1993 on the common organization of the 
market in bananas, Official Journal L 047, 25/02/1993 P.0001-0011. 
67 The Annex of the Council Regulation (EEC) No. 404/93 established the following traditional 
quantities of bananas from ACP states:  Cote d'Ivoire 155 000, Cameroon 155 000, Suriname 38 000, Somalia 
60 000, Jamaica 105 000, St Lucia 127 000, St Vincent and the Grenadine 82 000, Dominica 71 000, Belize 40 000, Cape Verde 4 800, Grenada 14 000, Madagascar 5 900 for a total of 857 700 tonnes. 
68 Council Regulation (EEC) No. 404/93 of 13 February 1993, Article 15. 
69 Ibid., Article 12. 
70 Ibid., Article 18.1. 
71 Ibid., Article 18.1. 
72 Ibid., Article 18.2. 
73 Ibid., Articles 17 and 19.1. 
74 Ibid., Article 32. 
75 Commission Regulation (EEC) No. 1442/93 of 10 June 1993 laying down detailed rules for the 
application of the arrangements for importing bananas into the Community, Official Journal L142, 12/06/1993 
P.0006-0015. WT/DS27/RW2/ECU 
Page 14  
 
  testifying the status as traditional ACP bananas.
76  Import licences for non traditional bananas and 
third country bananas were subject to several cumula tively procedures.  These applicable procedures 
included:  "(i) allocation of licences based on thre e operator categories;  (ii) allocation of licences 
according to three activity functio ns;  (iii) export certif icate requirements for im ports from Costa Rica, 
Colombia and Nicaragua;  and (iv) a two-r ound quarterly procedure to administer licence 
applications."77 
2.32 Council Regulation (EC) No. 3290/94 of 22 December 1994 on the Adjustments and 
Transitional Arrangements Required in the Agricultural  Sector in order to Implement the Agreements 
Concluded during the Uruguay Round of Multilateral Trade Negotiations,78 modified Council 
Regulation (EEC) No. 404/93 and incorporated in to EC Law the European Communities' banana 
import commitments established in Schedule LXXX a nd the Bananas Framework Agreement.  In this 
regard, a tariff quota of 2.2 million mt was opene d to third country bana nas and non traditional ACP 
bananas.  Within the framework of this quota, imports  of third country bananas were subject to a duty 
of 75 ECU/mt and imports of non-traditional ACP bananas were subject to a zero duty.  Non-
traditional ACP bananas imported outside this quota we re subject to the custom duty specified in the 
European Communities' Common Customs Tariff, less 100 ECU/mt. 
2.33 Commission Regulation (EC) No. 478/95 of 1 March 199579 established additional rules for 
the application of Regulation 404/93 as regards the ta riff quotas arrangements for imports of bananas.  
Regulation 478/95 incorporated country-specifîc shar es allocated to the countries mentioned in the 
Bananas Framework Agreement, as well as the othe r provisions established in this agreement.  
Therefore, tariff quotas for imports of bananas fro m third countries and non- traditional ACP bananas 
were subject to the following distribution:  Co sta Rica 23.4 per cent;  Colombia 21 per cent;  
Nicaragua 3 per cent;  Venezuela 2 per cent;  no n-traditional ACP countries and other ACP countries 
and others were allocated up to 90,000 mt. 
2.34 Regulation 404/93 and its subsequent EC rules were reviewed in the EC – Bananas III  case.  
The Panel and Appellate Body Report found that certa in aspects of these regulations were inconsistent 
with Articles I:1, III:4, X:3 and XIII:1 of the GA TT 1994, Article 1.2 of the Licensing Agreement and 
Articles II and XVII of the GATS.80 
2.35 Council Regulation (EC) No. 1637/98 of 20  July 1998 amended Regulation 404/93.81  
Regulation 1637/98 maintained the tariff quota for imports of third countries and non-traditional ACP 
bananas at 2.2 million mt.82  The in-quota tariff imports from third country bananas were subject to a 
duty of 75 ECU/mt, while imports from non-tr aditional ACP countries were free of duty.83  As a result 
of the European Communities' enlargement in 1995, an additional tariff quota of 353,000 mt was 
opened for imports of third countries and non-traditi onal ACP bananas.  Under this quota, imports of 
                                                      
76 Panel Report on EC – Bananas III , para. 6.18 
77 Ibid., para. 6.20. 
78 Council Regulation (EC) No. 3290/94 of 22 Decembe r 1994 on the adjust ments and transitional 
arrangements required in the agricultural sector in order to implement the agreements concluded during the Uruguay Round of multilateral trade negotiations, Official Journal L349, 31/12/1994, P.0105-0200. 
79 Commission Regulation (EC) No. 478/95 of 1 March 1995 on additional rules for the application of 
Council regulation (EEC) 404/93 as regards the tariff quotas arrangements for imports of bananas into the Community and amending Regulation (EEC) No. 1442/93, Official Journal L049, 04/03/1995 P.0013-0017. 
80 Panel Report on EC – Bananas III, para. 9.1, as modified by the Appellate Body Report on EC – 
Bananas III, paras. 255-256 . 
81 Council Regulation (EC) No. 1637/98 of 20 July 1998 amending Regulation (EEC) No. 404/93 on 
the common organization of the market in bananas, Official Journal of the European Communities L210/28, 
28/7/98. 
82 Council Regulation (EC) No. 1637/98 of 20 July 1998, Article 18.1. 
83 Ibid., Article 18.1.  WT/DS27/RW2/ECU 
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  bananas from third countries were subject to 75 ECU/mt, while imports of non-traditional ACP 
bananas were free of duty. 84  No import duty was charged on banana imports from traditional ACP 
origin.85  All bananas imports to the European Communities were subject to import licences.86  
Regulation 1637/98 also established that, if there was no reasonable possibility of securing the agreement of all WTO Members with  a substantial interest in the supply of bananas, the European 
Communities' Commission could proceed to allocate the tariff quotas for traditional and non-
traditional ACP bananas and for third country bananas.
87  The out-of-quota tariff for non-traditional 
ACP bananas was reduced by ECU200.88  Regulation 1637/98 also abolished the operator categories. 
2.36 Commission Regulation (EC) No. 2362/98 of 28 October 199889 repealed Commission 
Regulation (EEC) No. 1442/93 as amended by Regulati on (EC) No. 702/95 and it laid down detailed 
rules for the implementation of Council Regulati on (EEC) No. 404/93 regarding imports of bananas 
into the European Communities.  According to Regulation 2362/98, the tariff quotas and the 
traditional ACP quantities were to be allocated ta king into account traditional trade flows, in the 
following way:  92 per cent to traditional operators and 8 per cent to newcomers.90  Annex I of 
Regulation 2362/98 established the distribution of the tariff quota for third country imports in the 
following way:  Ecuador 26.17 per cent;  Costa Rica 25.61 per cent;  Colombia 23.03 per cent;  
Panama 15.76 per cent;  and, "Other" 9.43 per cent.  The quantity for traditional ACP bananas 
remained at 857,700 mt. 
2.37 Council Regulation (EC) No. 1637/98 and Comm ission Regulation (EC) No. 2362/98 were 
challenged by Ecuador in its first recourse to a compliance proceeding under Article 21.5 of the DSU 
in the EC – Bananas III  dispute.  The compliance Panel found certain aspects of these Regulations 
inconsistent with the European Communities' oblig ations under Article I:1 and XIII:1 and 2 of the 
GATT 1994 and under Articles II and XVII of the GATS.91 
2.38 Council Regulation (EC) No. 216/2001 of 29 January 200192 further amended Regulation 
(EEC) No. 404/93 on the common organization of the European Communities' market in bananas.  
Regulation 216/2001 opened a third autonomous tariff quota of 850,000 mt for bananas of all origins 
(quota C) subject to a customs duty of €300/mt.93  This quota was in addition to the first tariff quota of 
2.2 million mt at a rate of €75/mt bound in the WTO (or quota A) and a second tariff quota of 353,000 
mt due to the enlargement of the European Communities in 1995 (or quota B).94  All of these tariff 
quotas were opened for imports of pr oducts originating in all third countries.  ACP bananas under and 
outside the tariff quotas were subject to a tariff preference of €300/mt.95  Regulation 216/2001 
established that the Commission, on the basis of an agreement with the WTO Members with a 
substantial interest in the supply of bananas,  would allocate tariff quotas A and B among supplier 
countries.  According to Regulation 216/2001, im ports under tariff quota A and B were subject to a 
                                                      
84 Ibid., Article 18.2. 
85 Ibid., Article 18.3. 
86 Ibid., Article 17. 
87 Council Regulation (EC) No. 1637/98 of 20 July 1998, Article 18.4. 
88 Ibid., Article 18.5 
89 Commission Regulation (EC) No. 2362/98 of 28 October 1998 laying down detailed rules for the 
implementation of Council Regulation (EEC) No. 404/93 regarding imports of bananas into the Community, 
Official Journal of the European Communities, L293/32, 31/10/98. 
90 Ibid., Article 2.1. 
91 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para.7.1. 
92 Council Regulation (EC) No. 216/2001 of 29 January 2001 amending Regulation (EEC) No. 404/93 
on the common organization of the market in bananas, Official Journal of the European Communities, L31/2, 
2/2/2001. 
93 Ibid., Article 18.1. 
94 Ibid., Article 18.1. 
95 Ibid., Article 18.4. WT/DS27/RW2/ECU 
Page 16  
 
  custom duty of €75/mt, while imports under the ta riff quota C were subject to a duty of €300/mt.
96  
Regulation 216/2001 also established that the tariff quotas would be administered by taking into account the traditional trade flows ("traditionals "/"newcomers") or through other methods.
97 
2.39 Council Regulation (EC) No. 2587/2001 of 19 December 200198 further amended Regulation 
(EEC) No. 404/93 on the common organization of the European Communities' market in bananas.  
Regulation 2587/2001 cha nged the quotas in the following way:  Quota A of 2.2 million mt for 
imports from third countries subject to a customs dut y of €75/mt;  Quota B of 453,000 mt for imports 
from third countries subject to a tariff duty of €75/mt;  Quota C of 750,000 mt open to imports from ACP countries subject to a zero duty.
99  A tariff preference of €300/mt was established for imports 
originating in ACP countries.100 
3. European Communities' current banana import regime 
2.40 The current regime for imports of bananas to  the European Communities has been established 
in Council Regulation (EC) No. 1964/2005 of 29 November 2005.101  Regulation 1964/2005 entered 
into force on 1 January 2006 and established a tariff rate of €176/mt for bananas (tariff 
item 0803 00 19).102  Regulation 1964/2005 also  established a tariff quota for bananas originating in 
ACP countries pursuant to the European Communiti es' commitments under the ACP-EC partnership 
Agreement, also known as the Cotonou Agreement.103  The Cotonou Agreement allows imports 
originating from participating developing countr ies (ACP countries) to enter the European 
Communities free of customs duties and charges having equivalent effect, or under preferential terms, 
until 31 December 2007.104  Regulation 1964/2005 grants an annual autonomous tariff quota of 
775,000 mt subject to a zero-duty rate to impor ts of bananas originating in ACP countries.105 
2.41 In addition to the preferences under the Cotonou Agreement, bananas originating in least 
developed countries (LDCs) also enjoy duty-free access to the European Communities' market from a 
generalized tariff preferences scheme known as the Everything But Arms (EBA) arrangement, which is laid down in Council Regulation (E C) No. 980/2005 of 27 June 2005.
106 
2.42 Implementing regulations have been adopted by the European Communities subsequent to 
Regulation 1964/2005.  According to the European Communities, these regulations are:  Commission 
Regulation (EC) No. 2015/2005 of 9 December 2005,  on imports during January and February 2006 
                                                      
96 Ibid., Article 18.2 and 18.3. 
97 Ibid., Article 19.1. 
98 Council Regulation (EC) No. 2587/2001 of 19 December 2001 amending Regulation (EEC) 
No. 404/93 on the common organization of the markets in bananas, Official Journal of the European Communities, L345/13, 29/12/2001. 
99 Ibid., Article 18.1, 18.2, 18.3. 
100 Ibid., Article 18.4. 
101 Exhibit ECU-1. 
102 Exhibit ECU-1, Article 1.1 of Council Regulation (EC) No. 1964/2005. 
103 Exhibit ECU-1, para. (6) of Council Regulation (EC) No. 1964/2005. 
104 European Communities' first written submission, para. 13. 
105 Exhibit ECU-1, Article 1.2 of Council Regulation (EC) No. 1964/2005. 
106 Council Regulation (EC) No. 980/2005 of 27 June 2005.  European Communities' response to 
question 53 paras. 109-112.  Regulation 980/2005 establishes that the common customs tariff duties on tariff 
item 0803 00 19 (bananas) would be reduced by 20 per cent annually from 1 January 2002 and would be 
entirely suspended as from 1 January 2006.  European Communities' response to question 53, para. 110.  Ecuador clarified that within the period 1999-2007 its bananas exports to the EC have not beneficiated from any 
preferential system.  Ecuador's response to panel question No. 33.  However, according to the information 
provided by the European Communities, all least develo ped countries that could enjoy tariff preferences under 
the EBA arrangement already benefited from the Cotonou Agreement trade preferences.  European 
Communities' comments to the draft descriptive sections of the Panel's Report.  WT/DS27/RW2/ECU 
 Page 17 
 
 
  of bananas originating in ACP countries;  Commiss ion Regulation (EC) No. 219/2006 of 8 February 
2006, on imports of bananas from ACP countries for the period 1 March to 31 December 2006;  and, 
Commission Regulation (EC) No. 1789/2006 of 5 D ecember 2006, on imports of bananas from ACP 
countries for the period 1 January to 31 December 2007.107 
2.43 Besides those identified by the European Communities, Ecuador has mentioned other 
implementing regulations108, such as Commission Regulation (EC) No. 2014/2005 of 9 December 
2005109;  Commission Regulation (EC) No. 2149/2005 of 23 December 2005110;  Commission 
Regulation (EC) No. 325/2006 of 23 February 2006111;  Commission Regulation (EC) No. 566/2006 
of 6 April 2006112;  Commission Regulation (EC) No. 966/2006 of 29 June 2006113;  Commission 
Regulation (EC) No. 1261/2006 of 23 August 2006114;  Commission Regulation (EC) No. 34/2007 of 
16 January 2007115;  and Commission Regulation (EC) No. 47/2007 of 19 January 2007.116 
2.44 In addition to these regulations, Commission Regulation (EC) No. 1549/2006 of 17 October 
2006117 amending Annex I to Council Regulation (E EC) No. 2658/87 on the tariff and statistical 
nomenclature and the Common Customs Tariff, shows under tariff item 0803 00 19 (bananas) a conventional rate duty of €176/mt subject to f ootnote 1 which indicates a WTO tariff quota explained 
in Annex 7.
118  This annex refers to the "WTO Tariff quotas to be opened by the competent 
Community authorities - qualifications for these quotas is subject to conditions laid down in the relevant Community provisions."  According to th is annex, tariff item 0803 00 19 (bananas) appears 
with a quota quantity of 2.2 million mt to a rate of duty €75/mt.
119  The general rules concerning 
duties laid down in this regulation provide that  when autonomous rates of duty are lower than 
                                                      
107 European Communities' response to question 3, para. 5. 
108 Ecuador's response to question 3. 
109 Commission Regulation (EC) No. 2014/2005 of  9 December 2005 on licences under the 
arrangements for importing bananas into the Community in respect of bananas released into free circulation at 
the common customs tariff rate of duty (OJ L 324, 10.12.2005, p. 3. 
110 Commission Regulation (EC) No. 2149/2005 of 23 December 2005 fixing the reduction coefficients 
to be applied to applications for import licences for bananas originating in the ACP countries for the months of 
January and February 2006. 
111 Commission Regulation (EC) No. 325/2006 of 23 February 2006 fixing the reduction coefficient to 
be applied to applications for import licences for bananas originating in the ACP countries for the period 1 
March to 31 December 2006. 
112 Commission Regulation (EC) No. 566/2006 of 6 April 2006 amending and derogating from 
Regulation (EC) 2014/2005 on licences under the arrangements for importing bananas into the Community in 
respect of bananas released into free circulation at the common customs tariff rate of duty and amending 
Regulation (EC) No. 219/2006 opening and providing for the administration of the tariff quota for bananas 
falling under CN code 0803 00 19 originating in ACP countries for the period 1 March to 31 December 2006. 
113 Commission Regulation (EC) No. 966/2006 of 29 June 2006 amending Regulation (EC) No. 
219/2006 opening and providing for the administration of the tariff quota for bananas falling under CN code 
0803 00 19 originating in ACP countries for the period 1 March to 31 December 2006. 
114 Commission Regulation (EC) No. 1261/2006 of 23 August 2006 amending Regulation (EC) 
219/2006 opening and providing for the administration of the tariff quota for bananas falling under CN code 
0803 00 19 originating in ACP countries for the period 1 March to 31 December 2006. 
115 Commission Regulation (EC) No. 34/2007 of 16 January 2007 fixing the allocation coefficient to be 
applied to applications for import licences for bananas originating in the ACP countries for the period to 
31 December 2007. 
116 Commission Regulation (EC) No. 47/2007 of 19 January 2007 amending Regulation (EC) No. 
34/2007 fixing the allocation coefficient to be applied to applications for import licences for bananas originating 
in the ACP countries for the period to 31 December 2007. 
117 Commission Regulation (EC) No. 1549/2006 of 17 October 2006 amending Annex I to Council 
Regulation (EEC) No. 2658/87 on the tariff and statistical nomenclature and the Common Customs Tariff, 
Official Journal of the European Union, 31/10/2006. 
118 Ibid., page 87. 
119 Ibid., page 853. WT/DS27/RW2/ECU 
Page 18  
 
  conventional rates of duty, the autonomous du ties (shown by means of a footnote) would be 
applicable.  On 9 June 2007, a corrigendum to Regulation 1549/2006 was published, deleting the 
reference to the tariff quota for tariff item 0803 00 19 (bananas).
120 
2.45 The following table summarizes th e main aspects of the different import regimes for bananas. 
EC's Different Banana  Import Regimes 
 
Tariff 
(ECU/€ per metric tonne)  EC Regulation 
(applicable from ) Beneficiaries Quotas 
(tonnes net weight) in-quota out-of quota 
 
▪Traditional ACP 
(country specific allocations)  
857 700 
  
zero duty 
  
 
Council Regulation 
(EEC) No 404/93 
(1 July 1993)  
▪Non- traditional ACP 
 ▪Third Country 
  
 
2 000 000 
   
zero duty 
 
ECU100  
ECU750 
 
ECU850 
 ▪Traditional ACP 
(country specific allocations)  
857 700 
  
zero duty 
  
  
Council Regulation 
(EC) No 3290/94 
(1 July 1995)  
▪Non- traditional ACP 
  ▪Third Country 
  
 
2 200 000* 
   
zero duty 
  
ECU75  
ECU100 tariff 
preference** 
 
 ▪Traditional ACP 
(country specific allocations)  
857 700  
zero duty  
 
 ▪Non- traditional ACP 
(country specific allocation)  
90 000  
zero duty  Commission 
Regulation (EC) No 478/95 
(5 March 1995)   
▪Third Country 
(country specific allocation)  
2 200 000 
  
ECU75  
 
▪Traditional ACP 
(elimination country specific 
allocations)    
857 700 
   
zero duty 
   
   
 ▪Non-traditional ACP 
(elimination country specific 
allocations) 
 ▪Third Country 
(country specific allocations)  
  
2 200 000 
   
zero duty 
   
ECU75 
  
ECU200 tariff 
preference** 
  
ECU737 
 
Council Regulation 
(EC) No 1637/98 
(1 January 1999) 
 
▪Non-traditional ACP 
(elimination country specific 
allocations) 
 ▪Third Country 
(country specific allocations)   
  
353 000 
  
zero duty 
   
ECU75  
ECU200 tariff 
preference** 
  
ECU737 
                                                      
120 Corrigendum to Commission Regulation (EC) No. 1549/2006 of 17 October 2006 amending 
Annex I to Council Regulation (EEC) No. 2658/87 on the tariff and statistical nomenclature and the Common 
Customs Tariff, Official Journal of the European Union, 9/06/2007.  WT/DS27/RW2/ECU 
 Page 19 
 
 
   
▪Quota A   
  ACP   Third Country   
  
2 200 000  
 zero duty  € 75   
 €300 tariff 
preference** 
 ▪Quota B  
  ACP    Third Country   
  
353 000  
 zero duty   € 75   
 €300 tariff 
preference** 
Council Regulation 
(EC) No 216/2001 
(1 April 2001) 
▪Quota C    
  ACP 
   Third Country 
  
 
850 000  
€ 300 with a € 300 
tariff preference 
 € 300  
€300 tariff 
preference** 
 ▪Quota A   
 ACP   Third Country   
2 200 000 
  
 zero duty   €75   
 €300 tariff preference    
 ▪Quota B   
ACP   Third Country   
453 000 
  
 zero duty   €75   
 €300 tariff preference     
Council Regulation 
(EC) 
No 2587/2001 (1 January 2002)  
 
▪Quota C    
 ACP 
  
 
750 000  
 zero duty  
 €300 tariff preference 
 
 
Bananas of all origin   
   
€176   
€176   
Council Regulation 
(EC) 
No 1964/05 (1 January 2006 )  
ACP   
775 000  
zero duty  
€176 
 
* In 1994 this tariff quota was 2 100 000t. In 1 January 1995 it was increased to 2 200 000t. 
** This tariff preference is deducted from the rate of duty established in the Common Customs Tariff that was in 
force at that time. Council Regulation (EC) No 3290/94, Articles 15.1 and 18.2.  
 
D. EUROPEAN COMMUNITIES ' BANANAS MARKET  
1. European Communities' bananas production 
2.46 According to the available data provided by th e parties, the European Communities' domestic 
banana production comes from Greece (Crete), Spai n (Canary Islands), Cyprus, Portugal (continental 
Portugal, Madeira, and the Azores) and France ( overseas territories of Martinique and Guadeloupe).121  
In 2006, the European Communities' domestic banana production amount ed to 641,754 mt.  
According to information provided by the Eur opean Communities, domestic production for 2007 is 
expected to be lower than the previous year, sinc e banana plantations were damaged by the passage of 
Hurricane Dean through the territori es of Martinique and Guadeloupe.122 
                                                      
121 Exhibit EC 16.  See also Nicaragua and Panama's response to question 108. 
122 European Communities ' response to question 51(a). WT/DS27/RW2/ECU 
Page 20  
 
  2.47 There are no exports of bananas from the European Communities, as all production is 
destined for domestic consumption.
123 
2. European Communities' bananas consumption 
2.48 Due to factors such as the Eur opean Communities' successive en largements and the operation 
of a European single market with free movement of goods among the different countries, the Panel 
has no available data on the cons umption volumes of bananas for each of the European Communities 
member States.  However, statistical informati on provided by the European Communities shows total 
domestic sales of bananas.124 
Total Sales of Bananas in the EU (mt) 
(figures provided by the EC in Exhibit EC-17) 
 
Origin 1999 2000 2001 2002 2003 2004 2005 2006 
EU 742,804 790,675 777,068 801,122 765,416 758,206 648,375 641,754 
(share of total) 18.8% 16.9% 17.1% 17.4% 16.3% 16.4% 14.8% 13.3% 
ACP  Countries  688,707 771,857 748,779 739,825 799,896 784,427 763,675 891,218 
(share of total) 17.4% 16.5% 16.5% 16.0% 17.0% 17.0% 17.5% 18.5% 
non-LDC 688,158 771,451 748,181 739,483 798,538 783,810 763,675 891,133 
LDC-other 549 406 598 342 1,358 617 0 85 
Non-ACP LDCs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 
MFN 2,521,823 3,119,605 3,015,474  3,073,124 3,143,631 3, 078,430 2,963,745 3,293,679 
(share of total) 63.8 % 66.6% 66.4% 66.6% 66.8% 66.6% 67.7 68.2% 
Ecuador (Eurostat) 696,789 * 1,042,350 1,043,306 1,089,019 1,081,787 993,825 1,062,735 1,027,209 
(share of total) 17.6% 22.3% 23.0% 23.6% 23.0% 21.5% 24.3% 21.3% 
Total 3,953,334 4,683,137 4,541,321 4,614, 071 4,708,943 4,621,063  4,375,795 4,826,651 
* For the amount of Ecuador's exports to the EC in 1999 there is a difference between the figures provided by the EC and 
those provided by Ecuador. Exhibit ECU-9 shows that the amount of bananas exported by Ecuador to the European 
Communities in 1999 was of 1,074,407 representing 24.8% of the EU sa les for that year.  This figure assumes that the higher 
volume of trade from Ecuador leads to an increase in th e MFN total for 1999 to 2,889,441 and an increase in the total 
amount of sales in the EU for 1999 to 4,330,952.  
Source:   Figures provided by the EC in Exhibit EC-17. Imports  from non-ACP LDCs provided by Eurostat (2007)   "Intra- 
and extra- EU trade data, CD-ROM,"  ISSN : 1725-3365. Figures from Eurostat refer to EC25.  
 
3. European Communities' bananas imports 
2.49 The European Communities is the world's biggest export market for bananas, followed by the 
United States.125  Bananas in the European Communities' market are mainly imported from MFN or 
so-called "Dollar Zone" countries and to a lesser extent from ACP countries.  The term MFN bananas 
is generally used by both parties to indicate bananas originating in WTO Members that are not 
signatories of the Cotonou Agreement. 
2.50 For the year 2006, the main MFN countries that exported bananas to the European 
Communities were Ecuador, Colombia, Costa Rica , Panama, Brazil, Guatemala, Peru, Honduras, 
Venezuela, Mexico, and Nicaragua.126  Among the ACP countries exporting bananas to the European 
Communities were Cameroon, Côte d'Ivoire, Domi nican Republic, Belize, Suriname, Saint Lucia, 
Jamaica, Ghana, Saint Vincent and the Grenadines, and Dominica.127 
                                                      
123 European Communities ' response to question 51(b). 
124 Exhibit EC-17, Table 15. 
125 Exhibit EC-20. 
126 Exhibit EC-17.  See also Exhibit EC-3. 
127 Exhibit EC-17.  See also Exhibit EC-8.  WT/DS27/RW2/ECU 
 Page 21 
 
 
  2.51 According to information provided by Cameroon,  some natural, economic and human factors 
make ACP bananas less competitive than MFN bananas.128  Among these factors would be scarcity of 
land appropriate for growing bananas;  poor qualit y of the ground in which bananas are grown;  
higher input costs;  impossibility of achieving eco nomies of scale due to limited size of production 
volumes;  and higher shipping costs.129  
2.52 With respect to imports under the Eur opean Communities' EBA preference scheme130, the 
European Communities mentioned that since 2000 only four LDCs (Rwanda, Uganda, Somalia and 
Cape Verde131) have benefited from the EBA pr eference and in limited quantities.132  The European 
Communities considers that this is because only a limited number of LDCs have the capacity to 
export bananas.133  According to information provided by Ecuador134, EBA imports to the EC-25 in 
2006 amounted to 1,187 mt.  The European Communities has contested this figure.135 
4. European Communities' bananas imports under Council Regulation 1964/2005  
2.53 Since 1 January 2006, the European Communities has been applying the €176/mt tariff to all 
bananas of MFN origin and to ACP origin bana nas in excess of the 775,000 mt duty free quota.  
According to information provided by the Europ ean Communities, in 2006 the aggregate volume of 
bananas imported into the Europ ean Communities was 4,184,897 mt.136  The €176/mt tariff was 
applied to 3,409,897 mt137 and a zero duty was applied to the 775,000 mt of ACP Bananas.138  The 
information provided by the European Communities re flected that its tariff revenue for 2006 was of 
€600,141,907, from which €579,687,363 corresponded to duties paid by trading companies importing bananas from Latin American countries and €20, 454,544 represented the out-of-quota exports from 
ACP countries.
139  In 2005, under the previous system w ith an in-quota €75/mt tariff, trading 
companies importing bananas from Ecuador paid €79,705,148 on tariff duties to the European 
Communities.  Following the introduction of the new system on 1 January 2006 with the €176/mt tariff duty, the amount paid by trading companies importing bananas from Ecuador rose to €180,788,696 in 2006.
140  This calculation does not take into c onsideration the costs borne by trading 
companies before 2006, in order to acquire import licences.  Following the elimination of the licence 
system for MFN imports on 1 January 2006, these costs have ceased to exist.  Ecuador and the 
European Communities did not submit any data th at would allow the Panel to accurately estimate 
these costs. 
                                                      
128 Cameroon's response to question 86. 
129 Ibid. 
130 See para. 2.41 above. 
131 However, Exhibit EC-17 Table 15 shows that Cape Verde has not been exporting bananas to the EC  
since 2001. 
132 European Communities ' response to question 53, pa ra. 111.  But see the statement in the study by 
the Centre for International Economics, provided by  Nicaragua and Panama, that "from 2008 onwards Latin 
American access will decline sharply, and under some scenarios, by 2010, ACP/EBA exports to the EU could 
exceed those of Latin America."  Centre for Internationa l Economics, "The detrimental effects of a €176 per 
tonne ACP banana tariff preference on MFN suppliers" (August 2007), in Exhibit N-2 and Exhibit P-2. 
133 European Communities' response to question 53, para. 111. 
134 Exhibit ECU-6. 
135 Exhibit ECU-6 shows banana imports from Uganda in 2006 to be 1,128 mt.  According to Exhibit 
EC-19, the EC imported only 28mt of bananas from Uganda. 
136 European Communities ' response to question 2. 
137 This amount is different to the one presented by Ecuador in response to question 2.  According to 
Ecuador the volume of imports subject to the €176/mt tariff was 3,473, 521mt of which 116, 190 mt were ACP 
over quota imports. 
138 European Communities' response to question 2, para. 4. 
139 Exhibit EC-14 
140 Ecuador's response to question 35.  See also Exhibit ECU-8 in response to Panel's Question 29(d). WT/DS27/RW2/ECU 
Page 22  
 
  2.54 Banana import conditions to the European Co mmunities have also been affected by the 
European Communities enlargement that took place on 1 May 2004, increasing the number of European Communities member States from 15 to 25.  In this regard, for the period between 1 May 
and 31 December 2004, the European Communities opened an autonomous tariff quota of 300,000 mt 
subject to the in-quota tariff of €75/mt.  In 2005, the tariff quota was extended to 460,000 mt.
141  
Before the 2004 enlargement, MFN suppliers expor ted "from 560,000 to 570,000 mt of bananas per 
annum to the 10 new Member States."142  Ecuador's share in the autonomous tariff quota for imported 
bananas into the 10 new member States was 58.2 per cent.143 
2.55 With respect to Romania and Bulgaria, whic h acceded to the European Communities in 
January 2007, in 2005 Romania imported approximate ly 143,000 mt of Latin American bananas, 
subject to a tariff of 16 per cent ad valorem , and Bulgaria imported 55,000 mt subject to a tariff of 
11.2 per cent ad valorem .144  Since enlargement, MFN banana imports into Romania and Bulgaria 
have been subject to the €176/mt tariff duty.145 
2.56 Parties do not agree on the impact that Regulation 1964/2005 has had on European 
Communities' banana imports.  For the European Communities, following the introduction of the 
€176/mt tariff duty, there has been a significant incr ease in the volumes of bananas imported into the 
European Communities from all groups  of exporting developing countries146;  new developing 
countries have started or have increased ba nanas exports to the European Communities;147  and there 
has been relative stability in wholesal e prices for bananas of all origins.148 
2.57 According to the European Communities, the 3.28 million mt of bananas imported from MFN 
countries into the European Communities in 2006149 is the "highest annual volume of bananas 
imported into the European Communities from MF N countries since 1999 and represents an increase 
of 10.7 per cent in comparison with 2005".150  However, Ecuador notes that "ACP exports increased 
by 16.70%, which is higher than the raise of exports  [of] Latin American bana na suppliers during this 
year (11%)."151  Ecuador, Nicaragua and Panama pointed out that between 1999 and 2006, ACP 
banana exports to the European Communities have systematically increased by around 30 per cent.152  
On the other hand, Ecuador's exports towards th e European Communities have increased by more 
than 25 per cent during the same period.153 
2.58 The European Communities also argues that its 2006 banana import regime has allowed new 
market access opportunities, since new developing c ountries such as Brazil, Guatemala and Peru have 
started to increase their exports to the European Communities.154  Also, countries like Bolivia, 
                                                      
141 European Communities' response to question 54. 
142 Ecuador's response to question 34. 
143 Ibid. 
144 Ibid. and Exhibit ECU-10. 
145 Ecuador's response to question 34. 
146 European Communities' first written submission, paras. 38-39. 
147 Ibid., para. 40. 
148 Ibid., para. 41. 
149 Ibid., para. 43. 
150 Ibid.  As noted by the European Communities, the increase in the quantity of bananas imported from 
MFN countries in 2007, with respect to 2006, is bigger  than the growth of total sales of bananas from every 
origin in the European Communities during the same period.  See Exhibit EC-17 and European Communities' first written submission, para. 49. 
151 Ecuador's response to question 31. 
152 Ibid.  See also, Exhibit ECU-9.  Nicaragua and Panama response to question 104 and Exhibit N/P-3. 
153 See table in para. 2.45 above. 
154 Ibid., paras. 54-55.  WT/DS27/RW2/ECU 
 Page 23 
 
 
  Thailand and Sri Lanka have started to e xport bananas to the European Communities.155  However, 
Ecuador notes that, while MFN exporters like Braz il and Peru recorded significant increases in 
exports in 2006, other countries like Venezuela,  Mexico and Honduras experienced important 
decreases in sales to th e European Communities.156 
2.59 According to Ecuador, Regulation 1964/2005 has more than doubled the MFN tariff from 
€75/mt to €176/mt, while also reducing by more than half the ACP out-of-quota tariff from €380/mt 
to €176/mt and increasing the zero tariff quota for bananas from ACP countries from 750,000 mt to 775,000 mt.
157 
5. Ecuador's banana exports to  the European Communities 
2.60 Ecuador is the leading MFN exporter of banan as to the European Communities.  In 2006, 
Ecuador exported to the European Communities 1,026,447 mt of bananas.158  Ecuador's exports 
represented 24.5 per cent of the Euro pean Communities' bananas market.159  This amount represents a 
decrease from the quantity exported by Ecuador to the European Communities in 2005, which 
was 1,059,269 mt.160 
2.61 According to the European Communities, the d ecline in Ecuador's banana exports to the 
European Communities is not related to the 176 €/mt  tariff duty imposed in 2006.  Difficulties faced 
by Ecuador's banana industry, such as adverse cl imatic conditions (drought  at the end of 2005 and 
heavy rain at the beginning of 2006);  the eruption of the Tungurahua volcano in August 2006;  and administrative measures introduced by the Govern ment of Ecuador, would instead explain this 
decline.
161  The European Communities identified two ad ministrative measures in particular:  the 
Ecuadorian decree providing that the fruits should be inspected at the plantation and not at the port;  
and an administrative measure which "imposed a minimum price of US$3.25 per box and obliged 
exporters to pay producers via the Central Bank."162 
2.62 Ecuador has responded that the volcano erupti ons affected only 108,000 mt of production, 
and that the administrative measures did not affect  the growth of total Ec uadorian exports in 2006.163  
Ecuadorian exports of bananas to all destin ations increased from 4,331,300 mt in 2005 to 
4,402,390 mt in 2006 (an increase of 71,090 mt).164  In recent years, Ecuador has increased banana 
exports to countries such as Russia and Ukraine.165 
2.63 Ecuador has also stated that, although the quantiti es of Latin American banana exports to the 
European Communities increased in  2006, the total value of those exports was lower than that 
registered in 2005.166  In 2005 the value for Latin Ameri can bananas was €1,907,502 million in 
comparison with that of 2006, which was €1,903,244 million.  According to the calculations provided 
                                                      
155 European Communities' first written submission, paras. 54-55. 
156 Ecuador's response to question 31. 
157 Ibid. 
158 Ecuador's response to question 29. 
159 Exhibit EC-18, Table 16, and Ecuador response to question 29 (c). 
160 This is according to the statistics provided by Ecua dor in response to question 29.  According to the 
statistics provided by the European Communities in Exhibit- EC 17, the amount of Ecuador exports to the European Communities in 2005 was 1,062,735 mt and 1,027,209 mt in 2006. 
161 European Communities' first written submission, para. 50. 
162 Ibid., para. 50(iii) 
163 Ecuador's response to question 32. 
164 Ibid. 
165 Ibid.  See also, European Communities' comments to Ecuador's response to question 32 and Exhibit 
EC-23. 
166 Ecuador's response to question 31. WT/DS27/RW2/ECU 
Page 24  
 
  by both parties
167, the average unit price for bananas from Ec uador increased by approximately 5.7 to 
6.7 per cent in 2006, with respect to 2005, in US  dollars/mt.  The same prices, however, when 
estimated in €/mt, decreased by 4.8 per cent over the same period.168 
E. PANEL AND APPELLATE BODY FINDINGS IN THE ORIGINAL PROCEEDINGS  
1. Measures subject to the original proceedings 
2.64 The original panel and Appellate Body pro ceedings concerned the European Communities' 
common market organization for bananas, as es tablished through Council Regulation (EEC) No. 404/93 
(Regulation 404/93), introduced on 1 July 1993, a nd implemented, supplemen ted and amended through 
subsequent European Communities' legislati on, regulations and administrative measures.169 
2. Panel and Appellate Body main findi ngs in the original proceedings 
2.65 With regard to the challenged European Commun ities' measures, the original panel made the 
following main substantive findings: 
(a) The European Communities' allocation of tariff quota shares by agreement and by 
assignment to some Members not having a s ubstantial interest in supplying bananas 
to the European Communities (including Nicaragua, Venezuela and certain ACP 
countries in respect of traditional and non- traditional exports) but not to other 
Members (such as Guatemala) and the tariff quota reallocation rules of the Bananas Framework Agreement, were in consistent with the requirements of Article XIII:1 of 
the GATT 1994.
170 
(b) To the extent that the Panel had found that the European Communities had acted 
inconsistently with the requirements of Article XIII:1 of the GATT 1994, the Lomé 
waiver waived that inconsistency with Ar ticle XIII:1, to the extent necessary to 
permit the European Communities to allocat e shares of its banana tariff quota to 
specific traditional ACP banana supplying c ountries in an amount not exceeding their 
pre-1991 best-ever exports to the European Communities.171 
(c) Neither the negotiation of the Bananas Fram ework Agreement and its inclusion in the 
European Communities' Schedule, includi ng the Bananas Framework Agreement 
tariff quota shares, nor the Agreement on Agriculture permitted the European 
Communities to act inconsistently with th e requirements of Article XIII of the GATT 
1994.172 
                                                      
167 See Ecuador's response to Panel question No. 29 and Exhibit EC-11. 
168 See Ecuador's response to Panel question No. 29. 
169 Panel Report on EC – Bananas III (Ecuador) , paras. 3.1 and 3.4. 
170 Ibid., paras. 7.90 and 7.399;  Panel Report on EC – Bananas III (Guatemala and Honduras) , 
paras. 7.90 and 7.399;  Panel Report on EC – Bananas III (Mexico) , paras. 7.90 and 7.399;  Panel Report on EC 
– Bananas III (US) , paras. 7.90 and 7.399. 
171 Panel Report on EC – Bananas III (Ecuador) , paras. 7.110 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.110 and 7.399;  Panel Report on EC – Bananas III (Mexico) , 
paras. 7.110 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.110 and 7.399. 
172 Panel Report on EC – Bananas III (Ecuador) , paras. 7.118, 7.127 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.118, 7.127 and 7.399;  Panel Report on EC – Bananas III 
(Mexico) , paras. 7.118, 7.127 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.118, 7.127 and 7.399.  WT/DS27/RW2/ECU 
 Page 25 
 
 
  (d) To the extent that the European Commun ities' preferential tariff treatment of non-
traditional ACP bananas was inconsistent with  its obligations under Article I:1 of the 
GATT 1994, those obligations had been waived by the Lomé waiver.173 
(e) The allocation to Category B operators of 30 per cent of the licences allowing the 
importation of third-country and non-traditi onal ACP bananas at in-quota tariff rates 
was inconsistent with the requireme nts of Article III:4 of the GATT 1994.174 
(f) The application in general of operator cate gory rules in respect of the importation of 
third-country and non-traditional ACP bananas at in-quota tariff rates, in the absence of the application of such rules to trad itional ACP imports, and in particular the 
allocation to Category B operators of 30 per cent of the licences allowing the 
importation of third-country and non-traditi onal ACP bananas at in-quota tariff rates, 
were inconsistent with the requireme nts of Article I:1 of the GATT 1994.
175 
(g) The Lomé waiver did not waive the European Communities' obligations under 
Article I:1 of the GATT 1994 in respect of licensing procedures applied to third-country and non-traditional ACP imports, in cluding those related to operator category 
rules.
176 
(h) The application of operator cate gory rules in respect of the importation of third-country 
and non-traditional ACP bananas at in-quota tariff rates, in the absence of the 
application of such rules to traditional ACP imports, was inconsistent with the 
requirements of Article X:3(a) of the GATT 1994.177 
(i) The use of activity functions in connection w ith the allocation of licences allowing the 
importation of third-country  and non-traditional ACP banana s at in-quota tariff rates 
was not inconsistent with the require ments of Article III :4 of the GATT 1994.178 
(j) The application of activity function rules in respect of the importation of third-
country and non-traditional ACP bananas at in -quota tariff rates, in the absence of the 
application of such rules to traditional ACP imports, was inconsistent with the 
requirements of Article I:1 of the GATT 1994.179 
                                                      
173 Panel Report on EC – Bananas III (Ecuador) , paras. 7.136 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.136 and 7.399;  Panel Report on EC – Bananas III (Mexico) , 
paras. 7.136 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.136 and 7.399. 
174 Panel Report on EC – Bananas III (Ecuador) , paras. 7.182 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.182 and 7.399;  Panel Report on EC – Bananas III (Mexico) , 
paras. 7.182 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.182 and 7.399. 
175 Panel Report on EC – Bananas III (Ecuador) , paras. 7.195 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.195 and 7.399;  Panel Report on EC – Bananas III (Mexico) , 
paras. 7.195 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.195 and 7.399. 
176 Panel Report on EC – Bananas III (Ecuador) , paras. 7.204 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.204 and 7.399;  Panel Report on EC – Bananas III (Mexico) , 
paras. 7.204 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.204 and 7.399. 
177 Panel Report on EC – Bananas III (Guatemala and Honduras) , paras. 7.212 and 7.399;  Panel 
Report on EC – Bananas III (Mexico) , paras. 7.212 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 
7.212 and 7.399. 
178 Panel Report on EC – Bananas III (Guatemala and Honduras) , paras. 7.219 and 7.399;  Panel 
Report on EC – Bananas III (Mexico) , paras. 7.212 and 7.399. 
179 Panel Report on EC – Bananas III (Ecuador) , paras. 7.223 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.223 and 7.399;  Panel Report on EC – Bananas III (US) , 
paras. 7.223 and 7.399. WT/DS27/RW2/ECU 
Page 26  
 
  (k) The application of activity function rules in respect of the importation of third-
country and non-traditional ACP bananas at in -quota tariff rates, in the absence of the 
application of such rules to traditional ACP imports, was inconsistent with the 
requirements of Article X:3(a) of the GATT 1994.
180 
(l) The requirement to match European Communities import licences with Bananas 
Framework Agreement export certificates was inconsistent with the requirements of 
Article I:1 of  the GATT 1994.181 
(m) The issuance of hurricane licences exclusively to European Communities producers and 
producer organizations or operators incl uding or directly representing them was 
inconsistent with the requirements of Article III:4 of the GATT 1994.182 
(n) The issuance of hurricane licences exclusively to traditional ACP producers and 
producer organizations or operators incl uding or directly representing them was 
inconsistent with the requirement s of Article I:1 of the GATT 1994.183 
(o) The issuance of hurricane licences exclusively to ACP and European Communities 
producers and producer organizations or opera tors including or directly representing 
them was inconsistent with the requiremen ts of Article 1.3 of the Import Licensing 
Agreement.184 
(p) To the extent that specific aspects of th e European Communities licensing procedures 
were found not to be in conformity with Articles I, III or X of the GATT 1994, an inconsistency was necessarily also found w ith the requirements of Article 1.2 of the 
Import Licensing Agreement.
185 
(q) The allocation to Category B operators of 30 per cent of the licences allowing the 
importation of third-country and non-traditi onal ACP bananas at in-quota tariff rates 
created less favourable conditions of co mpetition for like service suppliers of 
Complainants' origin and was therefore inconsistent with the requirements of 
Articles II and XVII of the General Agreement on Trade in Services (hereinafter 
"GATS").186 
(r) The allocation to ripeners of 28 per cent of the Category A and B licences allowing 
the importation of third-country and non-tr aditional ACP bananas at in-quota tariff 
rates created less favourable conditions of competition for like service suppliers of 
                                                      
180 Panel Report on EC – Bananas III (Ecuador) , paras. 7.231 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.231 and 7.399;  Panel Report on EC – Bananas III (Mexico) , 
paras. 7.231 and 7.399. 
181 Panel Report on EC – Bananas III (Ecuador) , paras. 7.241 and 7.399;  Panel Report on EC – 
Bananas III (Guatemala and Honduras) , paras. 7.241 and 7.399;  Panel Report on EC – Bananas III (Mexico) , 
paras. 7.241 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.241 and 7.399. 
182 Panel Report on EC – Bananas III (Guatemala and Honduras) , paras. 7.250 and 7.399;  Panel 
Report on EC – Bananas III (Mexico) , paras. 7.250 and 7.399. 
183 Panel Report on EC – Bananas III (Guatemala and Honduras) , paras. 7.256 and 7.399. 
184 Ibid., paras. 7.263 and 7.399;  Panel Report on EC – Bananas III (Mexico) , paras. 7.263 and 7.399;  
Panel Report on EC – Bananas III (US) , paras. 7.263 and 7.399. 
185 Panel Report on EC – Bananas III (Ecuador) , paras. 7.271 and 7.399;  Panel Report on EC – 
Bananas III (Mexico) , paras. 7.271 and 7.399. 
186 Panel Report on EC – Bananas III (Ecuador) , paras. 7.341, 7.353 and 7.399;  Panel Report on EC – 
Bananas III (Mexico) , paras. 7.341, 7.353 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.341, 
7.353 and 7.399.  WT/DS27/RW2/ECU 
 Page 27 
 
 
  Complainants' origin and was therefore inconsistent with the requirements of 
Article XVII of the GATS.187 
(s) The exemption of Category B operators of  European Communities origin from the 
requirement to match European Comm unities import licences with Bananas 
Framework Agreement export certificates  created less favourable conditions of 
competition for like service suppliers of Complainants' origin and was therefore 
inconsistent with the requirement s of Article XVII of the GATS.188 
(t) The exemption of Category B operators of ACP origin from the requirement to match 
European Communities import licences w ith Bananas Framework Agreement export 
certificates created less fav ourable conditions of competit ion for like service suppliers 
of Complainants' origin and was therefore inconsistent with the requirements of 
Article II of the GATS.189 
(u) The allocation of hurricane licences exclusively to operators who include or directly 
represent European Communities producer s created less favoura ble conditions of 
competition for like service suppliers of Complainants' origin and was therefore 
inconsistent with the requirement s of Article XVII of the GATS.190 
(v) The allocation of hurricane licences exclusively to operators who include or directly 
represent ACP producers created less favour able conditions of competition for like 
service suppliers of Complainants' origin and was therefore inconsistent with the 
requirements of Articl e II of the GATS.191 
2.66 In summary, the original panel found that the cha llenged measures were inconsistent with the 
European Communities' obligations under Articl es I:1, III:4, X:3 and XIII:1 of the GATT 1994, 
Articles 1.2 and 1.3 of the Import Licensing Ag reement and Articles II and XVII of the GATS. 
2.67 In turn, the Appellate Body decided to: 
(a) Uphold the Panel's conclusion that the Ag reement on Agriculture did not permit the 
European Communities to act inconsistently with the requirements of Article XIII of 
the GATT 1994;192 
(b) Uphold the Panel's finding that the allo cation of tariff quota shares, whether by 
agreement or by assignment, to some, but not to other, Members not having a substantial interest in  supplying bananas to the European  Communities was inconsistent 
with Article XIII:1 of the GATT 1994;
193 
                                                      
187 Panel Report on EC – Bananas III (Ecuador) , paras. 7.368 and 7.399;  Panel Report on EC – 
Bananas III (US) , paras. 7.368 and 7.399. 
188 Panel Report on EC – Bananas III (Ecuador) , paras. 7.380 and 7.399;  Panel Report on EC – 
Bananas III (US) , paras. 7.380 and 7.399. 
189 Panel Report on EC – Bananas III (Ecuador) , paras. 7.385 and 7.399;  Panel Report on EC – 
Bananas III (Mexico) , paras. 7.385 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.385 and 7.399. 
190 Panel Report on EC – Bananas III (Ecuador) , paras. 7.393 and 7.399;  Panel Report on EC – 
Bananas III (US) , paras. 7.393 and 7.399. 
191 Panel Report on EC – Bananas III (Ecuador) , paras. 7.397 and 7.399;  Panel Report on EC – 
Bananas III (Mexico) , paras. 7.397 and 7.399;  Panel Report on EC – Bananas III (US) , paras. 7.397 and 7.399. 
192 Appellate Body Report on EC – Bananas III , para. 158. 
193 Ibid., para. 162. WT/DS27/RW2/ECU 
Page 28  
 
  (c) Uphold the Panel's finding that the tariff  quota reallocation rules of the Bananas 
Framework Agreement were inc onsistent with Article XIII:1  of the GATT 1994, and to 
modify the Panel's finding by concluding that the Bananas Framework Agreement tariff quota reallocation rules we re also inconsistent with the chapeau of Article XIII:2 
of the GATT 1994;
194 
(d) Reverse the Panel's finding that the Lomé  Waiver waived any inconsistency with 
Article XIII:1 of the GATT 1994 to the ex tent necessary to permit the European 
Communities to allocate  tariff quota shares to traditional ACP States;195 
(e) Uphold the Panel's conclusions that the Eu ropean Communities activity function rules 
and the Bananas Framework Agreement export certificate requirement were 
inconsistent with Article I:1 of the GATT 1994;196 
(f) Uphold the Panel's finding that the Europ ean Communities practice  with respect to 
hurricane licences was inconsistent w ith Article III:4 of the GATT 1994;197 
(g) Uphold the Panel's conclusions that the allo cation to Category B operators of 30 per 
cent of the licences allowing the importati on of third-country and non-traditional ACP 
bananas at in-quota tariff rates was incons istent with Articles II and XVII of the 
GATS;198 
(h) Uphold the Panel's conclusions that the alloca tion to ripeners of a certain portion of the 
Category A and B licences allowing the importation of third-country and non-
traditional ACP bananas at in-quota tariff rate s was inconsistent with Article XVII of 
the GATS;  and,199 
(i) Uphold the Panel's conclusions that the Europe an Communities practice with respect to 
hurricane licences was inconsistent w ith Articles II and XVII of the GATS.200 
3. Panel findings in the first compliance proceedings 
2.68 The compliance panel requested by Ecuador made the following main substantive findings: 
(a) Imports from different non-substantial  supplier countries were not similarly restricted 
in the meaning of Article XIII:1 of the GATT 1994.  Moreover, the allocation of a 
collective tariff quota for traditional ACP St ates did not approach as closely as 
possible the share which these countries might be expected to obtain in the absence of 
the restrictions as required by the chap eau to Article XIII: 2 of the GATT 1994.  
Therefore, the reservation of the quantit y of 857,700 mt for traditional ACP imports 
under the revised regime is inconsistent with paragraphs 1 and 2 of Article XIII of the 
GATT 1994.201 
(b) While Members have a degree of discreti on in choosing a previous representative 
period, the period 1994-1996 was not a "representative period".  Accordingly, the 
                                                      
194 Appellate Body Report on EC – Bananas III , para. 163. 
195 Ibid., para. 188. 
196 Ibid., paras. 206-207. 
197 Ibid., para. 214. 
198 Ibid., para. 244. 
199 Ibid., para. 246. 
200 Ibid., para. 248. 
201 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.29.  WT/DS27/RW2/ECU 
 Page 29 
 
 
  country-specific allocations assigned by th e European Communities to Ecuador, as 
well as to the other substantial suppliers, were  not consistent with the requirements of 
Article XIII:2 of the GATT 1994.202 
(c) On the basis of the data offered by the European Communities, it was not 
unreasonable for the European Communities to conclude that the level of 857,700 mt 
for duty-free traditional ACP exports could be considered to be required by the Lomé 
Convention because it appeared to be b ased on pre-1991 best-ever exports and not on 
allowances for investments.203 
(d) It was not reasonable for the European Comm unities to conclude that Protocol 5 of 
the Lomé Convention required a collective allocation for traditional ACP suppliers.  
Therefore, duty-free treatment of imports in excess of an individual ACP State's pre-
1991 best-ever export volumes was not required by Protocol 5 of the Lomé Convention.  Absent any other applicable re quirement of the Lomé Convention, those 
excess volumes were not covered by the Lomé waiver and the preferential tariff thereon was therefore inconsistent with Article I:1 of the GATT 1994.
204 
(e) It was not unreasonable for the European Communities to conclude that non-
traditional ACP imports at zero tariff within  the "other" category of the MFN tariff 
quota was required by Article 168 of the Lomé Convention.  Therefore, the violation of Article I:1 of the GATT 1994, as alleged by Ecuador, was waived by the Lomé waiver.
205 
(f) It was not unreasonable for the European Communities to conclude that including the 
tariff preference of 200 Euro per mt fo r out-of-quota imports of non-traditional ACP 
bananas was within the scope of what the European Communities was required to 
accord to non-traditional ACP supplies by virtue of the Lomé Convention.  Therefore, the violation of Article I:1 of the GATT 1994, as alleged by Ecuador, was covered by the Lomé waiver.
206 
(g) Under the revised regime, Ecuador's suppliers of wholesale services were accorded de 
facto less favourable treatment than European Communities/ACP suppliers of those 
services in violation of Articles II and XVII of the GATS.207 
(h) The criteria for acquiring "newcomer" stat us under the revised licensing procedures 
accorded de facto  less favourable conditions of competition, in the meaning of 
Article XVII of the GATS, to Ecuador's service suppliers than to like European 
Communities service suppliers.208 
2.69 The compliance panel requested by Ecuador concluded that: 
(a) The reservation of the quantity of 857,7 00 mt for traditional ACP imports under the 
revised regime was inconsistent with paragr aphs 1 and 2 of Article XIII of the GATT 
1994.  Additionally, the c ountry-specific allocations to Ecuador, as well as to the 
                                                      
202 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.50. 
203 Ibid., para. 6.65. 
204 Ibid., para. 6.69. 
205 Ibid., para. 6.78. 
206 Ibid., para. 6.80. 
207 Ibid., para. 6.134. 
208 Ibid., para. 6.149. WT/DS27/RW2/ECU 
Page 30  
 
  other substantial suppliers, were not consistent with the requirements of 
Article XIII:2 of  the GATT 1994.
209 
(b) The level of 857,700 mt for duty-free traditiona l ACP imports could be considered to 
be required by the Lomé Convention becau se it appeared to be based on pre-1991 
best-ever exports and not on allowances for investments.  However, it was not 
reasonable for the European Communities to conclude that Protocol 5 of the Lomé 
Convention required a collective allocation fo r traditional ACP suppliers.  Therefore, 
duty-free treatment of imports in excess of  an individual ACP State's pre-1991 best-
ever export volumes was not required by Protocol 5 of the Lomé Convention.  
Accordingly, absent any other applicable re quirement of the Lomé Convention, those 
excess volumes were not covered by the Lomé waiver and the preferential tariff 
thereon was therefore inconsistent with Article I:1 of the GATT 1994.210 
(c) In respect of preferences for non-traditional ACP imports, it was not unreasonable for 
the European Communities to conclude that  (i) non-traditional ACP imports at zero 
tariff within the "other" category of the tariff quota and (ii) the tariff preference of 
200 €/mt for out-of-quota imports, were required by Article 168 of the Lomé 
Convention.  Therefore, the violations of Article I:1 of the GATT 1 994, as alleged by 
Ecuador in respect of preferences for n on-traditional ACP imports , were covered by 
the Lomé waiver.211 
(d) Under the revised regime, Ecuador's suppliers of wholesale services were accorded 
de facto  less favourable treatment in respect of licence allocation than European 
Communities/ACP suppliers of those services in violation of Articles II and XVII of 
the GATS.212 
(e) The criteria for acquiring "newcomer" stat us under the revised licensing procedures 
accorded to Ecuador's service suppliers de facto  less favourable conditions of 
competition than to like European Commun ities service suppliers in violation of 
Article XVII of the GATS.213 
2.70 In its report, pursuant to the request ma de by Ecuador, the compliance panel found 
appropriate to make suggestions on how the Eur opean Communities could br ing its banana import 
regime into conformity with WTO rules.  In the panel's view, the European Communities had at least 
the following options: 
"6.156. First, the European Communities could choose to implement a tariff-only 
system for bananas, without a tariff quota. This could include a tariff preference (at 
zero or another preferential rate) for ACP bananas.  If so, a waiver for the tariff preference may be necessary un less the need for a waiver is obviated, for example, by 
the creation of a free-trade area consistent with Article XXIV of GATT.  This option 
would avoid the need to seek ag reement on tariff quota shares. 
Second, the European Communities could choose to implement a tariff-only system 
for bananas, with a tariff quota for AC P bananas covered by a suitable waiver. 
                                                     
 
209 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.160. 
210 Ibid., para. 6.161. 
211 Ibid., para. 6.162. 
212 Ibid., para. 6.163. 
213 Ibid.  WT/DS27/RW2/ECU 
 Page 31 
 
 
  Third, the European Communities could ma intain its current bound and autonomous 
MFN tariff quotas, either without allocati ng any country-specific shares or allocating 
such shares by agreement with all subs tantial suppliers cons istently with the 
requirements of the chapeau to Article XIII:2.  The MFN tariff quota could be combined with the extension of duty-free tr eatment (or preferential duties) to ACP 
imports.  In respect of such duty-free treatment, the European Communities could 
consider with the ACP States whether the Lo mé Convention can be read to "require" 
such treatment within the meaning of the Lomé waiver. We recall that some 
important preferences found by the original  panel and Appellate Body reports to be 
required by the Lomé Convention cannot be  implemented consistently with WTO 
rules (the most important being the quantitativ e protections foreseen in Protocol 5).  
If such a view of the Lomé Convention is  challenged, a waiver covering such duty-
free treatment could be sought.  The MFN ta riff quota could also be combined with a 
tariff quota for ACP imports, whether traditional or not, provided an appropriate waiver of Article XIII is obtained.  We note that waivers for duty-free treatment for 
developing country exports have been gr anted on several occasions by Members.
214  
In this context, some action may be required  soon in respect of the Lomé waiver since 
it expires on 29 February 2000."215 
F. MEASURES CHALLENGED BY ECUADOR IN THIS DISPUTE  
2.71 The measures challenged by Ecuador through this  recourse to Article 21.5 of the DSU are the 
following: 
(a) The tariff quota, with a current volume of 775,000 mt, which allows bananas of ACP 
origin to enter the European Communities market duty-free;  and, 
(b) The European Communities' tariff, curren tly set at €176/mt, which applies to all 
European Communities imports of banan as, except those benefiting from access to 
the zero-duty TRQ.216 
2.72 These measures are contained in the Council Regulation (EC) 1964/2005 (hereinafter 
"Regulation 1964")217 and its associated implementing re gulations, including the European 
Communities' autonomous tariff provisions.218 
G. SPECIAL AND DIFFERENTIAL TREATMENT  
2.73 Pursuant to Article 12.11 of the DSU: 
"[W]here one or more of the parties is a developing country Member, the panel's 
report shall explicitly indicate the form in which account has been taken of relevant 
provisions on differential and more-favour able treatment for developing country 
                                                      
214 (footnote original ) See WT/L/104 (United States – Caribbean Basin Economic Recovery Act); 
WT/L/183 (United States – Former Trust Territory of th e Pacific Islands); WT/L/184 (United States - Andean 
Trade Preferences Act); WT/L /185 (Canada – CARICAN). 
215 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , paras. 6.156-6.158. 
216 EC – Bananas III (Article 21.5 – Ecuador II) , Request for the Establishment of a Panel 
(WT/DS27/80) 26 February 2007, p. 4.  See also, Ecuador's first submission, para. 21. 
217 Council of the European Union, Council Regulation (EC) No. 1964/2005 of 29 November 2005 on 
the tariff rate for bananas , Official Journal of the European Union , 2 December 2005, L 316/1. 
218 EC – Bananas III (Article 21.5 – Ecuador II) , Request for the Establishment of a Panel 
(WT/DS27/80) 26 February 2007, p. 4.  See also, Ecuador's first submission, para. 21. WT/DS27/RW2/ECU 
Page 32  
 
  Members that form part of the covered ag reements which have been raised by the 
developing country Member in the cour se of the dispute settlement procedures." 
2.74 In addition, the DSU provides in Article 12.10 that: 
"[I]n examining a complaint against a de veloping country Member, the panel shall 
accord sufficient time for the developing c ountry Member to prepare and present its 
argumentation." 
2.75 The Panel notes that Ecuador is a developing co untry Member.  However, in the course of 
these Panel proceedings Ecuador did not raise an y specific provisions on differential and more-
favourable treatment for developing country Member s that would require additional consideration, 
nor do we find that these specialized provisions are relevant for the resolutio n of the specific matter 
brought before this Panel. 
2.76 In any event, during the Panel proceedings, the Panel took into account the complainant's 
status as a developing country Member when prepari ng and revising the timetable for the proceedings.  
The Panel also took into account the complainant's status as a developing country Member, and its 
interest in a prompt decision, when considering the European Communities' repeated requests for the 
proceedings to be delayed. 
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS 
3.1 Ecuador has requested that the Panel find th at the European Communities has failed to 
implement the rulings and recommendations of the DSB in the original dispute and continues to be in breach of its obligations as a WTO Member.  More specifically, Ecuador has requested that the Panel 
find that the EC measures are inconsistent with  the following obligations contained in the WTO 
agreements: 
(a) Article I of the GATT 1994, because the Eur opean Communities applies different and 
more favourable duties to bananas originati ng in ACP countries than those applied to 
bananas originating in Ecuador and most or all other WTO members; 
(b) Article II of the GATT 1994, because the European Communities applies a tariff 
(currently €176/mt) on the import of banan as originating in Ecuador (and other WTO 
Members) that is above the EC bound rate of  duty under Article II, which is €75/mt;  
and, 
(c) Article XIII:1 and 2 of the GATT 1994, because the European Communities 
continues to provide a tariff rate quota syst em reserved exclusively for bananas of 
ACP origin, while Ecuador is denied any share of the preferential quota, let alone the share to which it is entitled under Article XIII. 
3.2 The European Communities raises two preliminar y issues.  First, the European Communities 
argues that Ecuador should not be allowed to ch allenge the European Communities' current import 
regime for bananas, including the preference  for ACP countries.  The European Communities 
contends that the Understanding on Bananas, si gned by Ecuador and the European Communities in 
April 2001 (Bananas Understanding)
219, is a mutually agreed solution to the banana dispute.220  
                                                      
219 See Understanding on Bananas between the EC and Ecuador of 30 April 2001, in EC – Bananas III , 
Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001;  and  EC – Bananas III , Understanding 
on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001. 
220 European Communities' first written submission, paras. 61-65.  See also European Communities' 
second written submission, paras. 7-18.  WT/DS27/RW2/ECU 
 Page 33 
 
 
  The European Communities adds that, even if it wa s to be assumed that the Bananas Understanding is 
not a "mutually agreed solution" for purposes of the DSU, it would still constitute a bilateral 
agreement that must be taken into consideration in  analysing the rights and obligations of the parties 
to this dispute.221 
3.3 As a second preliminary issue, the European  Communities argues that Ecuador's complaint 
against the Cotonou Preference under Article XIII of  the GATT 1994 should be rejected, because in 
effect Ecuador is challenging a suggestion made  by the first compliance panel requested by 
Ecuador.222  According to the European Communities,  such suggestion can be challenged only 
through recourse to appellate review , but not through a compliance panel.223 
3.4 The European Communities has not made any sp ecific arguments to contest Ecuador's claim 
that the preference granted to bananas of ACP orig in would be inconsistent  with Article I of the 
GATT 1994.224  The European Communities argues, however , that this preference is covered by a 
waiver from Article I:1 of the GATT 1994, the Doha Waiver.225  According to the European 
Communities, the duration of that waiver is not li nked to the number of arbitrations lost by the 
European Communities, but rather depends on wh ether the new import regime for bananas it 
introduced on 1 January 2006 at least mainta ins total market access for MFN suppliers.226 
3.5 As regards Ecuador's claim under Article XIII of  the GATT 1994, in addition to its second 
preliminary objection, the European Communities requ ests the Panel to reject Ecuador's claims in 
regard to both paragraphs 1 and 2 of Article XIII, arguing in part that its current banana import regime 
cannot violate both Articles I and XIII of the GATT 1994 at the same time. 
3.6 Finally, the European Communities responds th at Ecuador's claims under Article II of the 
GATT 1994 are "completely unfounded"227 because: 
"[T]he bound tariff for bananas in the 'GATT schedule of concessions' of the 
European Communities is €680 per ton and the tariff applied since January 1, 2006 is 
€176 per ton".228 
IV. ARGUMENTS OF THE PARTIES 
4.1 The arguments presented by the parties in thei r written submissions and oral statements are 
reflected below.229  The parties' answers to questions and comments on each other's responses are 
reproduced in Annex D to this report. 
                                                      
221 Final written version of the European Communities' closing oral statement at the substantive 
meeting of the Panel with the par ties and third parties, para. 4. 
222 See European Communities' first written submission, paras. 79-86. 
223 See European Communities' second written submission, paras. 19-35. 
224 European Communities' response to panel question No. 61, para. 125.  See also, Ecuador's second 
written submission, para. 16;  and written version of Ecua dor's oral statement during substantive meeting with 
the parties and third parties, para. 34. 
225 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision 
of 14 November 2001 (WT/MIN(01)/15), 14 November 2001. 
226 European Communities' first written submission, paras. 67 and 69. 
227 Ibid., para. 112. 
228 Ibid. 
229 The summaries of the parties' arguments are ba sed on the executive summaries submitted to the 
Panel by the parties.  All footnotes in this section are original, unless otherwise specified. WT/DS27/RW2/ECU 
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  A. ECUADOR 
1. First written submission of Ecuador 
(a) The measures of the European Communiti es that are subject to this challenge 
4.2 In this submission, the Government of Ecuador is challenging the conformity with Articles I, 
II and XIII of the General Agreement on Tariffs and Trade 1994 (GATT 1994) of certain measures 
taken by the European Communities to conform with  the rulings and recommendations of this Panel 
in its Report on European Communities – Regime for the Importation, Sale and Distribution of 
Bananas , 22 May 1997, WT/DS27/R/ECU (hereinafter "Pan el Report"), as modified by the Appellate 
Body in its Report on European Communities – Regime for the Importation, Sale and Distribution of 
Bananas , 9 September 1997, WT/DS27/AB/R (her einafter "Appellate Body Report").
230 
4.3 The challenged EC measures are containe d in EC Council Regulation No. 1964/2005 
("Regulation 1964")231 and its associated implementing regulations, including the European 
Communities' autonomous tariff provisions.  These measures include: 
• A tariff-rate quota, with a current volume of  775,000 mt, exclusively reserved for bananas 
of ACP origin.  Bananas of ACP origin enter the EC duty-free up to a quantity of 
775,000 mt, while bananas of Ecuadorian origin  and any other  non-ACP origin, as well 
as ACP origin bananas in excess of 775,000 mt are currently charged a duty of €176/mt.  
Ecuador does not get any share of this ta riff-rate quota, let alone receive the share 
required under Article XIII, as confirmed by pr ior rulings of the Panel, the Appellate 
Body, and the previous Article 21.5 Panel. 
• The European Communities applies a tariff at  €176/mt to EC imports of bananas of 
Ecuadorian origin and to all other bananas except those bananas of ACP origin that are favourably treated as described above. 
4.4 The measures at issue in this dispute are similar to, but far less complex than, those 
considered by the Panel a nd the Appellate Body in EC – Bananas III  and by the Article 21.5 Panel in 
1999.  The original EC regime, and the revised regi me considered (and found inconsistent with the 
European Communities' obligations) in those pro ceedings involved two tariff rate quotas, separate 
country allocation regimes, and complex import lic ensing measures.  The current measures involve 
only a single tariff-rate quota that is reserved en tirely for ACP countries and from which Ecuador and 
other countries are excluded, and a tariff applie d above the European Communities' bound rate to 
bananas from Ecuador as well as to all other banan as not benefiting from the zero duty tariff quota. 
                                                     
 
230 At the DSB meeting of 20 March 2007, the EC ar gued that Article 21.5 does not apply to this 
dispute because the EC considered that  its current banana regime is not taken to comply with the prior DSB 
rulings and recommendations, which the EC said had been "implemented" in 2001.  Dispute Settlement Body - 
Minutes of Meeting of 20 March 2007, WT/DSB/M/228, 2 May 2007.  Article 21.5 contains no time limitation on when its procedures may be invoked, and the adm ittedly long period of time since the prior invocation of 
Article 21.5 is, in this case, readily explained by the Agreements reached by the Parties in 2001, and supported 
by the waivers granted that same year.  In effect, the Agreement allowed the EC a prolonged period to phase in a 
system that would remove the inconsistencies with th e WTO found by successive DSB rulings, with the cover 
of  appropriate waivers for the temporary and conditional phase-in  period in which the EC measures would 
continue not to conform with its obligations.  This agreement does not cut off Ecuador's right to invoke Article 21.5 when Ecuador consider s that the European Communities' re placement measures have failed to 
achieve the conformity from which the EC was excused on a conditional and time-limited basis.  Ecuador 
reserves the right to comment further if the EC pursues this argument. 
231 Council Regulation (EC) No. 1964/2005 of 29 November 2005, Official Journal of the European 
Union  of 2 December 2005, L 316/1 on the tariff rates for bananas.  WT/DS27/RW2/ECU 
 Page 35 
 
 
  4.5 As discussed below, the simplification of the EC measures has not remedied the inconsistency 
with WTO obligations and the discrimination against non-ACP bananas. 
(b) The EC measures are inconsistent with th e General Agreement on Tariffs and Trade 1994 
(i) Tariff preferences contrary to Article I 
4.6 Article I:1 of the GATT provides, in part: 
"With respect to customs duties and charges of any kind imposed on or in connection 
with importation ..., any advantage, favour, privilege or immunity granted by any 
contracting party to any product originating in  or destined for any other country shall 
be accorded immediately and unconditionally to the like product originating in or 
destined for the territories of all other contracting parties." 
4.7 The EC banana tariff preferences, while less complex than those examined in EC – Bananas 
III and by the first Article 21.5 Panel, neverthel ess are plainly inconsistent with the European 
Communities' obligations under Article I of the GATT 1994, in according tariff preferences to bananas of ACP origin that are not accorded to bananas originating in Ecuador or other non-ACP 
countries.  There is no dispute that all bananas ar e like products, nor that the European Communities 
accords bananas of ACP origin duty-free treatment up to  the 775,000 mt tariff quota, while bananas of 
Ecuadorian origin (as well as other bananas not be nefiting from the duty-free tariff quota) are subject 
to a duty of €176/mt.  Absent some applicable ex ception or waiver, it could not seriously be asserted 
that Article I permits a WTO member to grant a duty preference limited to one group of WTO members, and excluding others. 
4.8 In WTO discussions, the European Communities has argued that the tariff discrimination was 
justified by the waiver that the European Co mmunities was granted in 2001 at the ministerial 
conference.
232  The burden is on the European Communities if it wishes to claim that it still has a valid 
waiver with respect to bananas, a nd that this waiver covers the EC measures at issue.  Ecuador notes 
that, even if the burden were on Ecuador to prove the lack of an applicable waiver, the record is clear 
in this matter.  The European Communities failed to meet the conditions of the Article I waiver for it 
to continue past 1 January 2006.  The European  Communities was supposed to have withdrawn its 
prior banana concessions and, observing Article  XXVIII requirements and procedures, to have 
rebound its banana duty at a level meeting the sta ndards expressed in the waiver.  Notably, the 
European Communities had two opportunities to satis fy an arbitrator, under the conditions of the 
waiver, that the level at which it proposed to rebind its banana duty would meet the standards of the 
waiver.  The European Communities failed in both opportunities.  In 2005, the European 
Communities twice proposed a new MFN rate for ba nanas that was, in each case, challenged by 
substantial suppliers and reject ed by Arbitrators as not meeting the standards of the Article I 
waiver.233  The European Communities, nevertheless,  proceeded to impose a new MFN duty at 
                                                      
232 European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15, 14 November 
2001. 
233 European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15, 14 November 
2001.  The Article I Waiver included an Annex on bananas requiring that the European Communities' future tariff-only regime "result in at l east maintaining total mark et access for MFN banana suppliers," taking into 
account "all EC WTO market-access commitments relating to  bananas..."  In the event of disagreement over 
whether the proposed regime met the conditions of the Annex, the Annex provided for arbitration.  If the EC was found by the Arbitrator twice to have failed to sa tisfy the terms of the Annex standard, the waiver of 
Article I with respect to bananas would expire.  Id at Annex, tirets 3 and 4. WT/DS27/RW2/ECU 
Page 36  
 
  €176/mt, with a tariff rate quota for ACP countries at a zero duty for 775,000mt., notwithstanding the 
termination of the Article I waiver with respect to bananas.
234 
4.9 The waiver did not and does not give the Eu ropean Communities the opportunity to keep 
proposing duties that it considers appropriate, while continuing to apply GATT- inconsistent measures 
on bananas.  The European Communities in fact  has met none of the conditions required for 
continuation of the waiver for bananas under Article  I past 1 January 2006.  Should the European 
Communities claim otherwise, Ecuador reserves the right to respond. 
(ii) Allocation of Tariff Rate Quota contrary to Article XIII 
4.10 As the original Panel235 found, and the Appellate Body236 affirmed in EC – Bananas III , and 
as again affirmed in the first Article 21.5 Panel,237 Article XIII of the GATT applies to tariff-rate 
quotas as well as other quotas.  The European Commun ities was granted a conditional waiver of its 
obligations under Article XIII, but this waiver  expired by its own terms on 31 December 2005.238  
Notwithstanding the expiration of that waiver, th e European Communities now imposes a tariff rate 
quota on bananas in which only ACP countries have access to the duty free quota, while Ecuador and 
all other countries are excluded from that quota. 
4.11 The EC measures are inconsistent with Article XIII:1 in that Ecuadorian (and other non-ACP) 
bananas cannot be considered "similarly restricted " in comparison to ACP bananas, when Ecuadorian 
(and other non-ACP) bananas are simply excluded from access to the duty free tariff quota.239 
4.12 The EC measures are also inconsistent with Article XIII:2.  The Panel in EC – Bananas III  
noted the general rule that, if Members apply quotas to a product, then, in the terms of the chapeau to 
Article XIII:2, "Members shall aim at a distribution of trade in such product approaching as closely as 
possible the shares which the various Members might be expected to obtain in the absence of such 
restrictions".240  This interpretation, not surprisingly, was al so affirmed by the Appellate Body in that 
case.241 
4.13 Though the EC system has eliminated the count ry allocations that previously existed as 
between non-ACP countries, the discrimination rema ins as between ACP and non-ACP bananas.  The 
Appellate Body in EC – Bananas III  vigorously condemned this discrimination.242 
4.14 The allocation of the duty free quota exclusively to ACP countries bears no relation to trading 
patterns in the world or EC markets.  As it was sh own in the charts submitted by Ecuador on 6 July 
2006, Ecuador is a pre-eminent e xporter of bananas to the world market.  Further, Ecuador and 
several other countries that are excluded from the zer o duty quota, are substantial suppliers to the 
European Communities, while ACP countries, many of  whom are minor suppliers at best, are allowed 
to ship duty free under the tariff quota. 
                                                      
234 Award of the Arbitrator, EC – The ACP-EC Partnership Agreement , para. 94;  Award of the 
Arbitrator, EC – The ACP-EC Partnership Agreement II , para. 127. 
235 Panel Report at para. 7.68. 
236 Appellate Body Report at para. 160. 
237 Panel Report at para. 6.160. 
238 European Communities – Trans itional Regime for the EC Autonomous Tariff Rate Quotas on 
Imports of Bananas , WT/MIN(01)/16, 14 November 2001, para. 7. 
239 Panel Report at para. 7.69;  Appellate Body Report at para. 160. 
240 Panel Report at para. 7.68. 
241 Appellate Body Report at para. 161. 
242 Appellate Body Report at paras. 190 and 191.  WT/DS27/RW2/ECU 
 Page 37 
 
 
  (iii) Applied duty of €176/mt contrary to EC binding under Article II 
4.15 The EC duty on bananas was not previously subj ect to challenge, except for its discriminatory 
aspect.  However, in replacing its previous measure s with a tariff-rate quota with a single duty rate 
applicable to bananas not benefiting from the zer o duty tariff-rate quota, the European Communities 
has breached its tariff binding on bananas.  Th e EC tariff on bananas (HTS 0803.00.12) remains 
bound in the EC GATT schedule of concessions (Sche dule CXL of the EC – 15) at a level of €75/mt, 
subject to the annexed Agreement on Bananas, wh ich elaborates the tariff rate quota regime.  
Article II of the GATT forbids imposition of duties in excess of bound rates in a schedule. 
4.16 The inconsistency with other GATT provisions of the Agreement annexed to the EC bananas 
concession does not release the European Comm unities from its binding nor does it entitle the 
European Communities unilaterally to determine to apply a duty well in excess of the bound rate, 
which was not itself found inconsistent with EC obligations.  Article II does not contain any such 
exception, nor has the European Communities followed provisions of Article XXVIII to withdraw its 
concessions.  Accordingly, the EC applied duty of  €176/mt must be held inconsistent with the 
European Communities' obligations under Artic le II of the GATT and the EC Schedule of 
Concessions. 
(c) Conclusion 
4.17 For the reasons set forth above, the EC measur es taken to conform with the rulings and 
recommendations of the DSB in EC – Bananas III  do not comply with the European Communities' 
obligations under the WTO.  Ecuador, a developi ng country, continues to be deprived of the 
competitive opportunities in the EC market to whic h Ecuador is entitled as a WTO Member.  Neither 
the factual nor legal issues are complex in this disput e.  Ecuador asks that the Panel proceed fairly and 
promptly to its decisions, as called for under Article 21.5. 
2. Second written submission of Ecuador 
(a) Argument 
(i) The EC-Ecuador Understanding on Bananas is not a bar to th is Article 21.5 proceeding 
4.18 The European Communities argues as a "preliminar y matter" that Ecuador's claims in this 
Article 21.5 proceeding should all be dismissed because the European Communities considers that:  
the Ecuador-EC "Understanding on Bananas"243 constitutes "a mutually agreed solution" in the sense 
of Article 3 of the DSU in 2001;244 the solution contemplated a preference for ACP bananas;  and 
Ecuador's challenge to the preferences now gr anted by the European Communities constitutes 
"question[ing] a mutually agreed solution";245 which "goes against" Article 3.7 and 3.10, of the DSU. 
4.19 The European Communities' argument must be  rejected on several independent grounds.  
First, even if the Understanding on Bananas we re considered a "mutually agreed solution", 
Articles 3.7 and 3.10 do not preclude a disput e settlement challenge to any measures. 
                                                      
243 See European Communities – Regime for the Importation, Sale, and Distribution of Bananas – 
Understanding on Bananas between the European Communities and Ecuador , WT/DS27/60, 9 July 2001 ("EC 
– Ecuador Understanding"). 
244 European Communities' first written submission, at para. 64. 
245 European Communities' first written submission, at para. 64. WT/DS27/RW2/ECU 
Page 38  
 
  4.20 Second, the Understanding on Bananas might have  turned out to be "a mutually accepted 
solution," but unfortunately, the European Communiti es did not comply with the requirements of the 
last phase of the Agreement.  A mutually agreed  solution is not a solution without compliance. 
4.21 Third, Article 3.7 provides that the solution to be "preferred" is not merely "mutually 
accepted" but also "consistent with the covered agreem ents."  That is consistent with the requirement 
in Article 3.5 that "[a]ll solutions to matters fo rmally raised under the consultation and dispute 
settlement provisions of the covered agreements ... shall be consistent with  those agreements ..." 
4.22 Fourth, Ecuador does not agree that the EC measures at issue are covered by the Doha 
Waiver.  The Understanding did not  commit Ecuador to accept whatever preferences or "tariff only" 
scheme that the European Communities might decide to apply as of 1 January 2006, regardless of 
whether the measures were covered by the waiver  or conformed with the European Communities' 
obligations under the WTO Agreement. 
4.23 In this proceeding, Ecuador is challenging the c onformity of EC measures with the European 
Communities' obligations under the WTO Agreemen t.  The European Communities cannot claim 
immunity from this challenge of its measures b ecause it alleges that the challenged measures fell 
within what the European Communities unilatera lly conceives to be its rights and Ecuador's 
obligations under the Understanding. 
4.24 For each and all of the above reasons, the Eu ropean Communities' "preliminary" challenge 
should be dismissed. 
(ii) The EC tariff preferences infringe Article  I and are not covered by the Doha Waiver 
4.25 The European Communities does not contest that it grants preferences that are contrary to 
Article I, but argues that the preferences it grants to bananas of ACP origin are covered by the Doha 
Waiver through 31 December 2007.  The essence of  the dispute under Article  I is that Ecuador 
considers that the Doha Waiver of Article I for ba nanas expired following the Arbitrator's rejection of 
both of the tariff rebinding proposals made by the European Communities. while the European 
Communities, in effect, contends that the waiver allowed it to implement unilaterally a third regime 
(or any other regime) that the European Commun ities considers to meet the standard that the 
"envisaged rebinding would result in at least maintaining total market access for MFN banana suppliers, taking into account the EC's commitments".
246  The European Communities then argues that 
its current applied regime meets that standard as the European Communities conceives it.  The 
European Communities concedes that  it has not rebound its duties or fulfilled the requirements with 
respect to Article XXVIII as also required by the waiver, but the European Communities claims that 
this is a matter of "good faith" out of deference to the views of Ecuador. 
4.26 The European Communities' arguments should be  rejected.  In accordance with the Doha 
Waiver, having failed in its two opportunities to e nvisage a tariff rebinding that would meet the 
waiver standard, the European Communities cannot cl aim the protection of the waiver for the system 
it then established unilaterally.  Ecuador does not cons ider that the current EC banana measures, had 
they been proposed as the second EC proposal prior to 2006, would have been found to meet the 
requirements of the waiver.  However, that is irreleva nt to the task of this Panel, because, the terms of 
the waiver did not grant the EC banana regime the continued protection of the waiver for this or any 
other regime it might establish unilaterally. 
                                                      
246 Doha Waiver Annex, fourth tiret.  WT/DS27/RW2/ECU 
 Page 39 
 
 
  4.27 Applying the principles of treaty inte rpretation of the Vienna Convention247, it is apparent that 
the European Communities' argument is not suppor ted by the terms of the waiver, read in their 
context and in light of the object and purpose of the WTO and this waiver. 
4.28 The European Communities has not disputed that  the Arbitrator found that both the European 
Communities' initial "envisaged rebinding" and the Eu ropean Communities' proposed "rectification," 
did not meet the standards of the waiver. 
4.29 Nevertheless, the European Communities proceeded , effective 1 January 2006, unilaterally to 
institute the measures that are the subject of Ec uador's present challenge, without withdrawing the 
existing binding or binding the new system, with a duty of €176/mt, and a tariff quota of 775,000 mt 
at a zero duty, available exclusively to bananas of ACP origin. 
4.30 The Doha Waiver of Article I expired on 1 January 2006, following the Arbitrator's 
determinations that neither the initial nor the se cond "envisaged rebinding" met the requirements of 
the waiver.  The second arbitration award explicitly found that the European Communities had "failed 
to rectify the matter."  The terms of the fifth tiret explicitly provide that following the second 
arbitration award: 
"If the EC has failed to rectif y the matter, this waiver sha ll cease to apply to bananas 
upon entry into force of the new EC tariff regime."248 
This sentence, in the context of the waiver, can onl y mean that the Arbitrator having found that the 
European Communities had failed to rectify the matter, the waiver ceas ed to apply on 1 January 2006, 
when the current EC measures entered into force. 
4.31 The European Communities' arguments to the cont rary are unpersuasive.  First, the European 
Communities argues that Ecuador's interpretati on of the waiver "would lead to unreasonable 
conclusions".  On the contrary, it would de-stabili ze the entire premise of the WTO tariff system if 
concessions were to be adjusted according to whet her the concessions had the result contemplated at 
the time that the concession was granted.  The term s of the Doha Waiver itself refute the European 
Communities' argument.  The waiver makes explic it that the Arbitrator had to assess the European 
Communities' "envisaged rebindings" to determine whet her they met the "at least maintain" standard 
before  the European Communities would be permitted to implement the envisaged rebinding and 
therefore obviously before it could be known base d on experience what the actual effect of the 
rebinding would be. 
4.32 The European Communities argues th at the reference to having "failed to rectify the matter" 
in the fifth tiret means that the European Commun ities was "obliged to introduce a new import regime 
that would maintain total mark et access for MFN suppliers in reality  and not in theory", and that the 
assessment as to whether this standard is met can onl y be determined "based on an analysis of the real 
effects of the new import regime on the banana market".249  The European Communities does not 
explain how such a detailed rule for its conduct could be derived from those four words of that 
sentence.  The logical reading is that the refere nce to failure to rectify the matter is precisely a 
reference to the European Communities having faile d a second time to establ ish a proper rebinding.  
Had the WTO Members wished to establish the rule that the European Communities struggles to 
extract from these words, the waiver could simply  have provided that the European Communities 
could institute the system of its choosing, provided  that it at least preserved access for MFN suppliers. 
                                                      
247 Vienna Convention on the Law of Treaties, 23 May 1969, 1155 U.N.T.S. 331. 
248 Doha Waiver Annex, fifth tiret. 
249 European Communities' first written submission, at para. 70. WT/DS27/RW2/ECU 
Page 40  
 
  4.33 The European Communities goes on to argue that  the provision of the fifth tiret that the 
waiver ceases to apply "upon entry into force of the new EC tariff regime" should be interpreted to 
mean that: 
"The Doha Waiver would cease to a pply only if the European Communities 
implemented the exact import regime analy zed by the Arbitrator and found not to 
satisfy the standard of the Doha Waiver.  If the European comm unities introduced a 
different  import regime... and that import regime did indeed maintain the total market 
access of the MFN suppliers, then the Doha  Waiver would continue to apply."
250 
4.34 The plain language of that sentence, even view ed in isolation, does not support the European 
Communities' view that "the new tariff regime" means only the exact regime that was disapproved by 
the Arbitrator may not be implemented.  To the c ontrary, the measures examined by the Arbitrator are 
never referred to by the term "the new tariff regi me".  The matter examined by the Arbitrator is 
described as "the envisaged rebinding of the EC tariff on bananas,"251 or, in shorthand as "the 
rebinding", while the second arbitration simply re fers to a determination "whether the European 
Communities has rectified the matter".252  "The new tariff regime" is not even the same term as the 
"EC tariff only regime," which is the term used in th e first and fifth tirets when the waiver is referring 
to a regime that has met or will have met the waiv er requirements for a tariff only system that will 
continue to benefit from the waiver, i.e. one that is tariff only, with a tariff level that either has been 
agreed upon by interested parties or has been approved by the Arbitrator applying the waiver 
standard. 
4.35 The structure, context and object of the waiver  also supports Ecuador's understanding of the 
waiver and conflicts with that of the European Commun ities.  First, both the first tiret of the Annex, as 
well as the last sentence of the last tiret, clearly re quire as a condition of the waiver that the processes 
be concluded and the agreed upon or approved tariff-only system be in place by 1 January 2006.  
Second, the creation of special and expedited di spute settlement procedures show both that WTO 
members wanted to ensure that the European Communities was not free to act unilaterally, and that 
the WTO members wanted a dispute settlement system  that would provide results quickly, in keeping 
with the requirement that there would be cer tainty whether the European Communities had 
established a system meeting the standards of the wa iver by 1 January 2006, an essential prerequisite 
for the waiver of Article I for bana nas to continue past that date. 
4.36 The penultimate clause of the prea mble to the Doha Waiver s upports Ecuador's interpretation 
of the Annex, explicitly noting that the Parti es to the Cotonou Agreement "accept a multilateral 
control on the implementation" of the commitmen t to at least maintain market access for MFN 
suppliers of bananas.253 
4.37 By contrast, the European Communities' interpretation would make a nullity of most of the 
provisions of the Doha Waiver's Annex.  The di spute settlement provisions would provide no control 
over European Communities' unilateral actions becau se the only consequence of a negative finding of 
the Arbitrator would be to preclude the preci se scheme that was ruled on.  The European 
Communities could then apply whatever scheme it unilate rally chose (other than the two that had been 
found to fail the standard) and maintain the waiver , subject to possible challenge under the relatively 
lengthy dispute settlement processes of the DSU, with the European Communities enjoying the 
benefit of an undeserved waiver all the time that  the dispute settlement processes were pending.  
Furthermore, a successful challenge would lik ely result only in the European Communities 
                                                      
250 European Communities' first written submission, at para. 71. 
251 First Arbitration Award, at para. 8. 
252 Second Arbitration Award, at para. 23. 
253 Doha Waiver, at 2.  WT/DS27/RW2/ECU 
 Page 41 
 
 
  unilaterally imposing yet another non-compliant regi me that would have to be taken through dispute 
settlement processes again – in short, precisely the so rt of endless pattern of non-compliance that the 
waiver was intended finally to stop. 
4.38 The European Communities also failed to meet other requirements of the Doha Waiver.  The 
European Communities has not concluded the Artic le XXVIII process, nor has it withdrawn its prior 
bindings and rebound at a new level. 
(iii) Allocation of Tariff Rate Quota is contrary to Article XIII 
4.39 The European Communities does not contest that it applies a zero duty tariff quota of 775,000 
mt exclusively open to bananas of ACP origin.  As Ecuador explained in its first submission, such a 
tariff quota is a patent violation of Article XIII:1 of the GATT 1994, in that Ecuador (and other MFN 
suppliers) are restricted from an y duty free access to the EC mark et, while ACP bananas are not 
similarly restricted.  The EC measures infringe Artic le XIII:2, in that the allocation of the duty free 
tariff quota exclusively to bananas of ACP origin, wh ile Ecuador and most of the rest of the world's 
largest suppliers are excluded, in no sense could be considered to result in shares of the duty-free 
quota that approached what Ecuador and other me mbers could expect to obtain in absence of 
restrictions on duty free access. 
4.40 The European Communities, in its first submi ssion, attempts various defenses, all without 
merit. 
The European Communities' preliminary issue on Article XIII  
4.41 First, the European Communities argues as anot her "preliminary issue" that the tariff quota 
without an Article XIII waiver is implementi ng the suggestion of the Article 21.5 Panel in EC – 
Bananas III  that the European Communities could "impleme nt a tariff only system for bananas, with a 
tariff quota for ACP bananas covered by a suitable waiver."254  The European Communities then 
asserts that, in its view, the reference to a "suitabl e waiver" meant only a waiver of Article I, because 
the Panel did not explici tly say that the suitable waiver woul d include a waiver of Article XIII, 
whereas an alternative suggestion of the Panel di d explicitly refer to a waiver of Article XIII. 
4.42 The European Communities did in fact obtai n a waiver of Article XIII which applied 
exclusively  to the tariff quota limited to bananas of ACP origin, and which expired on 31 December 
2005.  Further, in its second award, the Arbitrator , in agreeing to consider the tariff quota for ACP 
countries along with the envisaged rebinding of €187 /mt, noted that the European Communities "also 
intends to seek a waiver of its obligations under Article XIII of GATT 1994 to implement its proposed 
tariff quota," and that the European Comm unities had applied for such a waiver.255 
4.43 The European Communities also ignores the findings of EC – Bananas III  with regard to 
Article XIII.  The Appellate Body sustained the Pa nel finding that "Articles I:1 and XIII apply to the 
relevant EC regulations, irrespective if there is one  or more 'separate regimes' for the importation of 
bananas."256  When the European Communities atte mpted to preserve a tariff quota reserved 
exclusively for bananas of ACP origin, the first Article 21.5 Panel in EC – Bananas III  again found 
                                                      
254 European Communities' first written submission, at para. 79  (quoting Panel Report , European 
Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Article 21.5 of the 
DSU by Ecuador , WT/DS27/RW/ECU, 12 Apr. 1999, at para. 6.157). 
255 Second Arbitration Award, at para. 33. 
256 Ibid., at para. 191. WT/DS27/RW2/ECU 
Page 42  
 
  that the EC measure was inc onsistent with the European Communities' obligations under 
Article XIII.
257 
4.44 The European Communities then goes on to cont end that "claims cha llenging the consistency 
with the covered agreements of the measures suggested  by the Panel cannot be brought before an 
Article 21.5 Panel," because this would be contrary to the principle of res judicata  that the European 
Communities says is embodied in Article 19.1 of the DSU (permitting panels  to make suggestions) 
and of Article 17.14 (dealing with a doption of Appellate Body reports).258  The European 
Communities is wrong on all counts.  The Panel neve r suggested or even implied that the European 
Communities would not require a waiver of Article XIII to implement a tariff quota reserved for ACP 
countries.  Further, none of the provisions of th e DSU would have precluded this challenge of the 
conformity of the European Communities' measures ta ken to comply with the Panel Report, even if 
the particular measures had been suggested by the Panel.  Finally, it is not necessary to challenge 
before the Appellate Body the suggestions of a pa nel in order to preserve the right to make a 
challenge under Article 21.5. 
The absence of nullification or impairment  
4.45 The European Communities next contends that  its tariff quota does not cause nullification or 
impairment to Ecuador by limiting the quantity of  duty free bananas of ACP origin that may be 
imported into the EC market.  The European Comm unities, however, completely misses the point.  
The violation of Article XIII is the denial of Ecuador's  right to participate in the zero-duty quota.  It is 
obvious that, if allowed to participate in that qu ota, Ecuador could reasonably expect to benefit 
substantially, based on its efficiency and large shar e of world trade in bananas.  The issue is not 
whether the quota results in less harm than an unr estricted preference for ACP countries, but rather 
the harm that Ecuador suffers by reason of being excluded from the favourable quota. 
The European Communities' erroneous  interpretation of Article XIII  
4.46 The European Communities, in its first submissi on, goes on at great length in its effort to 
defend itself based on a series of false premises, most  of which relate to the European Communities' 
contention that Ecuador is not restricted by the European Communities' tariff quota because Ecuador 
is excluded from that quota and therefore, in the European Communities' view "not subject to any 
quantitative restrictions."259  This is patently false and turns on its head what is restricted by a quota or 
a tariff quota.  The restricted products are those th at are denied access, outside the preferential tariff 
quota.  A zero share of the preferential quota is  a worse violation of Article XIII than a 
disproportionately small share. 
4.47 The European Communities' argument that Article XIII:2 does not apply fails for similar 
reasons.  The European Communities contends that Ec uador is not subject to restrictions other than 
the tariff, and therefore cannot complain about rul es that apply when "applying import restrictions."  
To the contrary, the European Communities' tariff quota does apply restrictions – total exclusion – 
from access under the tariff quota, and it obviously does so inconsistently with Article XIII:2, as 
explained in Ecuador's first submission. 
                                                      
257 Panel Report, European Communities – Regime for the Importation, Sale and Distribution of 
Bananas – Recourse to Article 21.5 by Ecuador , WT/DS27/RW/ECU, 12 Apr. 1999, at para. 6.29. 
258 European Communities' first written submission, para. 85. 
259 Ibid., para. 98.  WT/DS27/RW2/ECU 
 Page 43 
 
 
  4.48 The US – Line Pipe  Panel did not hold otherwise.260  The Panel found that the US quota 
allocation system favoured small over large exporters  by allocating identical shares of low duty quota 
to countries with different shares of the world and US markets.261 
(iv) Breach of tariff bindings under Article II 
4.49 Ecuador demonstrated in its first submission th at the EC duty of €176/mt  applied to all 
bananas originating in Ecuador or other MFN count ries was in breach of the EC binding duty of 
€75/mt, as contained in Schedule CXL.  In its firs t submission, the European Communities defends its 
applied tariff level on two groun ds, both unfounded.  The Eur opean Communities argues that: 
"(1) The European Communities no longer has a binding at €75/mt for any 
quantity of bananas because the European Communities now contends that that bound 
tariff quota expired on 31 December 2002, under the terms of the Framework 
Agreement on Bananas ('BFA')262, leaving in effect only the upper level binding at the 
essentially prohibitive leve l of €680/mt duty; and 
(2) Even if the €75/mt concession did not expire with the termination of the 
BFA, that duty concession 'automatically' di sappeared with the elimination of the 
Tariff quota of 2.2 million mt to which it was 'attached'." 
The European Communities' GATT binding at €75/mt was not limited in time by the 
Framework Agreement on Bananas  
4.50 The EC Uruguay Round schedule for its tariff quota provides for an initial and final 
concession of €75/mt for a quantity of 2.2 million mt, as provided in columns 3 and 4 of the schedule.  
under column 7 – "other terms and conditions" – it states "[a]s indicated in the Annex".  The Annex 
simply sets out the BFA, which provides for matters  such as the allocation of quotas, allocation of 
shortfalls in the quota shares, and management  of the tariff quotas, by licensing and export 
certificates.  Many, if not all of these terms of the BFA were found inconsistent with the European Communities' obligations and became moot or were superseded as a result of the EC – Bananas III  
rulings and of the actions that the European Communities agreed to  undertake in the Understanding 
on Bananas and under the terms of the Doha Waiver. 
4.51 The European Communities' first argument is  based on the European Communities' new 
premise that the BFA does not merely set other terms and conditions for the bound tariff quota, but 
also that the existence of the concession is entirely dependent on the continuation in force of the BFA. 
4.52 Neither the terms of the tariff quota concessi on nor its context and history support the 
European Communities' position that the €75/mt c oncession for 2.2 million mt was made subject to 
the continued existence of the Annex or the BFA.   Paragraph 9 of the BFA provides that "this 
agreement" (the BFA) applies until the end of 20 02, but it does not provide that the European 
Communities' GATT tariff quota concession expires at any time.  The duty and quantity of the tariff 
concession does not depend on the other terms and conditio ns as set out in the Annex, but rather is 
laid out in the schedule itself.  Had the Parties inte nded to bind the tariff quota only for so long as the 
BFA applied – which would have been an extraord inary step, contrary to normal practice and the 
                                                     
 
260 Panel Report, United States – Definitive Safeguard Measures on Imports of Circular Welded 
Carbon Quality Line Pipe from Korea , WT/DS202/R, 29 Oct. 2001 (" US – Line Pipe "). 
261 US – Line Pipe , at paras. 7.53, 7.54 and 7.55. 
262 Annex to Schedules CXL and LXXX of the European Communities, "Framework Agreement on 
Bananas." WT/DS27/RW2/ECU 
Page 44  
 
  modalities of the Uruguay Round – they would ha ve specified the limited duration of the concession  
in the BFA. 
4.53 Several factors support the view that the tariff quota concession did not terminate with the 
expiration date of the BFA.  First, it is scarcely likely that the negotiators of the BFA would consider 
a satisfactory solution a system that, as of 2003, wo uld leave all their banana exports to the European 
Communities subject to an essentially prohibitive duty of €680/mt.  Second, a time limited tariff quota 
concession would have been gro ssly inconsistent with the Ur uguay Round modalities, because it 
would leave the European Communities with the WT O right to apply an essen tially prohibitive duty 
on all bananas. 
4.54 Third, throughout the many chapters of the banana  dispute, all parties, the Arbitrators and the 
WTO members acting collectively in the Doha Waiver have proceeded on the justifiable basis that the 
€75/mt binding for the tariff quota would not expire  until withdrawn and replaced with a rebound duty 
through the Doha Waiver process, or some other valid WTO procedure such as Article XXVIII or a 
new round of negotiations.  There are many examples  on the record, and Ecuador will refer to just a 
few. 
The European Communities' Article XXVIII:5 notifications
 
4.55 First, the Doha Waiver required conclusion of  Article XXVIII negotiations for the rebinding 
of the tariff that could comply with the terms of the waiver.  The European Communities filed 
Article XXVIII:5 notifications in Augu st 2004, and again in February 2005.263  Both notifications 
explicitly referred to the European  Communities' intention to wit hdraw "concessions" (in the plural) 
on bananas.  Its second notification announced the European Communities' intention to replace its 
"concessions" with a bound duty of €230/mt.  If €680/mt was the European Communities' only bound 
rate as of January 1, 2003, the European Co mmunities would never even have issued an 
Article XXVIII notification in the first instance, much  less referred to its concessions in the plural.  
No Member would invoke Article XXVIII:5 procedures to lower  its bound rate. 
4.56 In the Arbitration proceedings , conducted in 2005, the Eur opean Communities made clear 
that it considered that the tariff quota was binding.   For example the European Communities stated: 
"The EC also has a bound tariff rate quota of 2,200,000 tonnes, with an in-quota rate 
of €75/t."264 
4.57 The first award of the Arbitrator in 2005 re flects the common understanding that  tariff quota 
remained bound in Schedule CXL.265  Even the European Communities' own first submission to this 
Panel continues to assume that the European Communiti es needs to comply with Article XXVIII to 
rebind its tariff at the current applied rate.266 
4.58 For all the above reasons, the Panel should em phatically reject the European Communities' 
unfounded and unsavory attemp t to avoid its responsibilities under its bound tariff quota. 
                                                      
263 Article XXVIII:5 Negotiations:  Sche dule CXL – European Communities , G/SECRET/22, 2 August 
2004; Article XXVIII:5 Negotiations:  Schedule CXL – European Co mmunities – Addendum , 
G/SECRET/22/Add.1, 1 February 2005. 
264 Communication by the European Communities,  Arbitration under the Annex to the Doha 
Ministerial Decision of the AC P-EC Partnership Agreement, 13 May 2005, para. 9.  Available at the European 
Commission – External Trade I Centre  through (http://trade.ec.europa.eu). 
265 Ibid.,at  para. 18. 
266 European Communities' first written submission, at paras. 30, 35.  WT/DS27/RW2/ECU 
 Page 45 
 
 
  The binding at €75/mt did not expire with the elimination of the volume limit  
4.59 The European Communities makes a second, equa lly groundless, defense;  the European 
Communities contends that, even if the binding cont inued past the expiration of the BFA, the binding 
at €75/mt nevertheless "automatically" disappeared  when the European Co mmunities eliminated the 
2.2 million mt tariff quota and replaced it with its curr ent regime, consisting of an autonomous duty at 
€176/mt, together with a tariff quota exclusively for bananas of ACP origin. 
4.60 Nothing in the waiver and nothing in the suggestions of the Article 21.5 Panel in any way 
suggested that the European Comm unities could escape its tariff bindings  by unilaterally replacing the 
bound tariff quota at €75/mt ton with an autonomous  MFN duty of €176/mt.  Such a proposition is 
contrary to the obligations of a tariff concession and the principles of good faith. 
4.61 If the European Communities wishes to eliminat e the quota element limiting a tariff quota, it 
may do so.  Equally, it may maintain one or more ta riff quotas so long as it does so consistent with its 
obligations under Article XIII and its schedule of concessions.  Howe ver, autonomously eliminating 
the volume restraint element of a tariff quota does not authorize ignoring the tariff binding.  If that 
was the case, the hundreds of tariff quotas introduced by all WTO members could be expunged by the 
simple expedient of declaring an end to their existence. 
(b) Conclusions 
4.62 Ecuador, in its first submission proved that the EC measures at issue were inconsistent with 
Articles I, II and XIII of the GATT 1994.  For reasons discussed above, the European Communities 
has failed to provide any valid defence for the breaches of Articles I, II and XIII. 
3. Oral statement of Ecuador 
4.63 Ecuador's per capita GDP for 2005 was about 8 per cent of the per capita average of the 
European Communities, and also is  less than that of many of the ACP countries.  Last year, the 
European Communities' tariff on bananas required the payment of additional tariffs for Ecuador in the 
order of €103 million more than the previous year as a result of the European Communities' unilateral 
"tariff only" scheme.  The European Communities,  meanwhile, is giving more than 200 million euros 
in subsidies to the EC producers of bananas, so the increased duties on Ecuadorian bananas in effect 
finances half of the EC subsidies to its own banana producers. 
4.64 Ecuador is a developing country, but it has one  of the most efficient banana producing 
industries in the world. 
4.65 The task of an Article 21.5 panel is to dete rmine whether measures that the defending party 
has taken to conform with the rulings and recomme ndations of the DSB are consistent with that 
Party's obligations under the WTO agreements. 
4.66 The European Communities has not contested, indeed has insisted, that the measures 
challenged by Ecuador in this Ar ticle 21.5 proceeding were taken to  conform with the rulings and 
recommendations of the DSB in EC – Bananas III .  In light of that, and of the short explanation 
provided by Ecuador in its first submission, Ecuador  does not see merit to the ACP's objections in this 
regard. 
4.67 Ecuador's claims are that these EC measures ar e inconsistent with the anti-discrimination 
provisions of both Articles I and XIII of the GATT 1 994, and that the duty of €176/mt applied to all 
bananas of Ecuadorian and other MFN origin also violates the European Communities' tariff bindings 
under Article II of the GATT, in particular th e €75/mt tariff quota bound in the EC Schedule. WT/DS27/RW2/ECU 
Page 46  
 
  (a) Response to the European Communities' preliminary objections 
(i) The EC-Ecuador Understanding on bananas is not a bar to th is Article 21.5 proceeding 
4.68 The European Communities raises a "preliminary objection" that the EC-Ecuador 
Understanding bars Ecuador from complaining abou t preferences that the European Communities 
grants on bananas to the ACP countries.  The Eur opean Communities' premises are:  (1) that the 
Understanding is a mutually agreed solution of the bananas dispute;  (2) that the measures at issue 
were "accepted" by Ecuador in the Understanding;  and (3) that allowing Ecuador to challenge the 
conformity of these measures with the WTO rules is contrary to the preference for mutually agreed 
solutions under the DSU. 
4.69 Ecuador set out in its second submission the reasons that this European Communities' 
preliminary objection is unfounded. Ecuador st ands behind the position it expressed in the second 
submission. 
4.70 To summarize, this European Communities' ar gument fails on a few independent grounds. 
4.71 First, a mutually agreed solution by the terms of Article 3 of the DSU must conform with the 
WTO agreements.  It would be illogical to exempt measures from challenge to their consistency with 
WTO rules on grounds that they were part of a mu tually agreed solution which, by definition, must 
conform with those rules.  As the European Co mmunities has conceded, Ecuador did not agree that 
the Understanding was a mutually agreed solution in the sense of Article 3.6, though Ecuador 
believed and hoped that proper impl ementation of the various phases of the agreement would result in 
a mutually satisfactory and permanent solution, consistent with the rules. 
4.72 Second, the European Communities did not comply with the Understanding.  The 
Understanding plainly requires a waiver  of Article I (for which Ecuador agreed to lifts its reserve) and 
a waiver of Article XIII, which Ecuador committed  to promote to permit the European Communities' 
tariff quota for ACP countries until 1 January 2006.  Ecuador did its part regarding the waivers and 
for the most part in the early years, the EC complied regarding the gradual liberalization of its measures, which would have been illegal but for the waivers, as the EC – Bananas III  case had 
established. 
4.73 However, the European Communities then failed to  comply with the terms of the waiver of 
Article I, causing it to expire at the same time that the Article XIII waiver expired by its own terms. 
The European Communities squandered its opportuni ty to propose a proper rebinding, proposing 
instead levels that would vastly increase the pref erence for ACP bananas.  When Ecuador and other 
countries would not agree to those proposals and the Arbitrator found that in each case the European 
Communities failed to meet the waiver standards,  the European Communiti es nevertheless proceeded 
unilaterally to implement the measures that are now  before this panel.  The European Communities 
also, did not follow the Article XXVIII process requi red as a condition of the waiver. The European 
Communities thus tries to claim protection under an Understanding with which it does not comply. 
4.74 Third, the European Communities does says it is  a breach of Ecuador's obligations for 
Ecuador to challenge the WTO consis tency of measures that are inconsistent with the waiver and the 
Understanding. 
4.75 In the Understanding, Ecuador did not commit not to bring a WTO dispute against any EC 
measures, and there is nothing in the WTO rules or in the Understanding that could justify implying 
such a limitation.  WT/DS27/RW2/ECU 
 Page 47 
 
 
  (ii) The Panel's suggestions also do not bar Ecuador's claims 
4.76 The European Communities also argues that its  measures conform to a "suggestion" of the 
Article 21.5 Panel.  On that basis, and because Ecuador did not appeal th e Panel's suggestion and 
because the Panel report was adopted, the Europ ean Communities argues that Ecuador should be 
barred from challenging the EC measures that  conform to the Panel's suggestion. 
4.77 Ecuador disagrees, again on several grounds. First,  the Panel suggestion in question was that 
the European Communities could adopt a "tariff only system for bananas, with a tariff quota for ACP bananas covered by a suitable waiver".  That s uggestion might have been implemented in a way 
consistent with WTO obligations, but of course the European Communities failed to get a suitable 
waiver that would cover the actions that the Europ ean Communities took.  This Panel, of course, will 
be making rulings on whether the EC system does c onform with EC obligations .  Ecuador is confident 
that the first Article 21.5 Panel did not view  its suggestions as conveying any suggestion or 
authorization of WTO-illegal measures. 
4.78 Ecuador would also urge the panel to reject  the European Communities' argument.  WTO 
rules prevent a party from making an argument previously rejected by a Panel report that was not 
appealed.  Indeed, the European Communities is doing just that in this proceeding. The European 
Communities' proposed rule would force needless appeals of Panel suggestions in any case where a 
suggestion might be open to impreci se interpretation by the defending party.  Further, it is wholly 
unnecessary to create such a rule, even if Panels had th at authority, since in fact Article 21.5 panels, 
who preferably are composed of the same members as the original panel, are certainly well equipped 
to determine whether the measures that a party has taken indeed are consistent with the WTO rules, 
which any panel suggestion must be. 
(b) Article I 
4.79 The European Communities does not contest the rather obvious point that its Cotonou tariff 
preferences are inconsistent with Article I if not covered by the Doha Waiver. Rather, the European 
Communities argues that the preferences it grants to bananas of ACP origin are covered by the Doha 
Waiver through 31 December 2007.  Ecuador disagrees. 
4.80 The essence of the dispute is that Ecuador cons iders that the Doha Waiver of Article I for 
bananas expired following the Arbitrator's rejec tion of both of the European Communities' tariff 
rebinding proposals, when the Eu ropean Communities unilaterally put into force the so-called tariff 
only system that is before you.  The European Co mmunities, in effect, contends that the waiver 
allowed it to implement unilaterally a regime that  the European Communities considers to meet the 
standard that the "envisaged rebinding would result in at least maintaining total market access for 
MFN banana suppliers, taking into account the EC's commitments".
267  The European Communities 
then argues that its current applied regime m eets that standard as the European Communities 
conceives it.  The European Co mmunities concedes that it has not rebound its duties or fulfilled the 
requirements with respect to Article XXVIII as al so required by the waiver, but the European 
Communities claims that this is a matter of "good faith" out of deference to the views of Ecuador. 
4.81 The European Communities continues to argue that  the waiver remains in effect despite the 
failure to propose a rebinding acceptable to interested  parties or to the Arbitrator, so long as the 
European Communities' system allows access for MF N countries at least equivalent to previous 
access. 
                                                      
267 Doha Waiver Annex, fourth tiret. WT/DS27/RW2/ECU 
Page 48  
 
  4.82 The European Communities' argument illustra tes why MFN countries, including Ecuador, 
were insistent that the continuation of the waiver  be subject to the establishment of a bound MFN duty 
rate by 1 January 2006 that was either agr eed or had been approved by the Arbitrator. 
4.83 It was no part of the waiver that, having faile d to satisfy the Arbitrator, and having failed to 
reach agreement with Ecuador and other intere sted parties, the European Communities could 
unilaterally impose the regime of its choosing on 1 January 2006.  
4.84 The European Communities argues that the Pane l should ignore the European Communities' 
failure to conclude Article XXVIII proceedings because Ecuador has not brought a claim under Article XXVIII in this proceeding.  However, Ec uador has raised Article XXVIII not as a separate 
claim, but rather to point out that the European Communities' failing is another respect in which the 
European Communities did not comply with the requ irements for a continuation of the waiver for 
bananas after 31 December 2005. 
4.85 Ecuador expresses its wish to associate its dele gation with the helpful additional arguments 
put forward by Latin American third parties in this proceeding as to why the European Communities 
is wrong that the waiver continued after 1 January 20 06.  It is evident that the European Communities 
is arguing as if it got the waiver it wanted rather than the waiver that was granted and to which it 
agreed. 
(c) Article XIII 
4.86 The existence of the European Co mmunities' tariff quota on bananas is not in dispute, nor is 
the fact that Ecuador and other MFN suppliers are entirely excluded from that quota, nor that the previous waiver of Article XIII has expired. 
4.87 Ecuador's claim is, first, that the European Communities' tariff quota violates Article XIII.1, 
because it restricts Ecuadorian and other bananas by depriving them of any access to the duty-free 
tariff quota, while bananas of ACP origin, which do  have access to this tariff quota, are not similarly 
restricted.  Second, the tariff quota, by excluding ba nanas of Ecuadorian and other origin, plainly does 
not meet the requirements of Article XIII:2. 
4.88 The European Communities had a waiver of Artic le XIII for its tariff quota, but that waiver 
expired on 31, December 2005. The European Comm unities sought a renewal of the waiver, but it 
was not granted. 
4.89 The European Communities tries to  argue that Article XIII does not apply to exclusion from a 
tariff quota, at least when it is a single tariff quota rather than two or more tariff quotas. 
4.90 The European Communities' argument is that denying Ecuador access to the tariff quota 
means that Ecuador is not restricted by the tariff quot a.  Plainly that is not true, as Ecuador's exports 
are restricted by the high duty compared to those who participate in the zero duty quota.  The only 
difference between a straight quota and a tariff quota in  this regard is that exclusion from a straight 
quota means no access, while exclusion from a tariff quot a means access restricted by the higher duty 
that applies to imports not benefiting from the ta riff quota, which may be prohibitive in effect.  The 
European Communities would presumabl y not find it difficult to see the violation of Article XIII if it 
were denied participation in a quota of another me mber in regard to a product of which it was a 
principal supplier.  Likewise, outside of the time when the European Communities is arguing in this 
proceeding, we are reasonably confident that the European Communities would think that denying it a 
share of a favourable tariff quota of another member is no less a violation of Article XIII.  WT/DS27/RW2/ECU 
 Page 49 
 
 
  4.91 The European Communities argu es that its tariff quota regime confers a benefit on MFN 
countries, because it would be worse for them if there were no quantitative limit on duty free entry of bananas of ACP origin.  It is true that unlimited  preferences for ACP bananas would be worse than the 
tariff quota only for ACP countries, but exclusion from the tariff quota is more restrictive of Ecuador and other members than if they were allowed to participate in the zero duty tariff quota as they are 
entitled under Article XIII. 
4.92 This is also the response to the European Communities' argument that there is no nullification 
or impairment to Ecuador because the tariff quota is  better for Ecuador than if the ACP countries had 
unlimited preferential access.  Leaving aside that nullification or impairment does not have to be 
proven in cases of violation, the harm to Ecuador is  the exclusion from participation in the tariff 
quota. 
4.93 The European Communities says that applying Article XIII:1 would have the effect of 
requiring benefits for non-member countries.  That  is not true.  Granting fair access to all WTO 
members would fully satisfy Article XIII:1, because  the obligation extends only to fellow members. 
On the other hand, if the Europ ean Communities, for example, gave  access to a non-member that was 
not accorded to a member, then the member woul d have grounds for complaint because the member 
was restricted more than the non-member. This is no less true of a straight quota than a tariff quota, so it is no basis for distinguishing tariff quotas. 
4.94 The European Communities argues that applying Article XIII to exclusion from a tariff quota 
could make Article XIII duplicative of Article I.  However, the underlying assumption of the 
European Communities - that there must be no overlap  in what is prohibited by different WTO rules – 
is plainly wrong.  In this instance, the exclus ion from a tariff quota does breach both Article XIII and 
Article I, but there are many examples of this  in the WTO rules.  The European Communities' 
successful challenge of Canada in the Automotive Products  case is just one example of a single 
regime violating multiple rules. The overlap of local content prohibitions in the GATT, TRIMS, and the SCMA is another example. 
4.95 The European Communities argues th at the previous rulings in Bananas III are not applicable, 
because those rulings were dealing with a situation that involved more than one tariff quota.  We see 
nothing in those rulings or in the text of Article X III to justify such a distinction, nor did the DSB in 
EC – Bananas III . 
4.96 It is a fact that the restriction in a tariff quota is achieved by means of a tariff – the higher 
duty applied to products imported outside the quota than inside the quota.  That is not a problem 
because Article XIII specifically applies to any tari ff quota, and, unlike Article XI  the reference to 
restrictions in Article XIII does not ex clude taxes, duties or other charges. 
(d) Article II: I (a) and (b) 
4.97 Ecuador considers that almost everybody, including in the European Communities, was 
startled to read that the Europ ean Communities, at least for purposes of its defence here, considers 
that it has not been bound by the €75/mt tariff quota since either 2002 or alternatively 2006. As a 
result, the European Communities c onsiders that its only binding is and has been at a level of 
680€/mt. 
4.98 The European Communities first argues that th e 75 ecu tariff quota expired in 2002. The 
European Communities concession setting out this ta riff quota concession as both the initial and final 
rate also includes under column 7 – "other terms a nd conditions" – "[a]s indicated in the Annex."  The 
Annex in turn simply provides a copy of the Banana Framework Agreem ent (BFA) between the WT/DS27/RW2/ECU 
Page 50  
 
  European Communities and Colombia, Costa Rica, Ve nezuela, Nicaragua.  Paragraph 9 of the BFA 
provides that the BFA "shall apply until 31 December 2002." 
4.99 The European Communities argues that, because  the BFA expired at the end of 2002, 
therefore so did the European Communities' en tire concession, leaving only the ceiling binding at 
680€/mt. 
4.100  Ecuador considers that the provision of an expi ration date in the BFA did not imply expiration 
of the WTO concession.  Ecuador does not doubt th at a concession can be limited in time, but the 
BFA itself and the schedule do not provide that th e concession was meant to terminate with the 
termination of the BFA.  In instances where a concession has been found limited in time, the 
condition was explicit. Further, the European Co mmunities' own words and actions, as well as those 
of the WTO members as a whole, make clear that the concession was not and is not limited in time. 
4.101  The European Communities does not deny that a time-limited concession would have been 
inconsistent with the agreed Uruguay Round moda lities, but the European Communities complains 
that those modalities should be ignored because they  were not to be used as a basis for dispute 
settlement.  Ecuador is not making a claim that the European Communities is violating  the 
modalities, but only pointing out that the modalities were such that, if the European Communities 
intended or was thought by anyone to have made  a time limited access commitment on a product as 
important as bananas, it is inconceivable that it would have passed unnoticed. 
4.102  The European Communities argues th at the BFA would not have been referenced in column 7 
if the parties had not intended to limit the concessi on in time. However, this disregards the various 
other conditions of the BFA pertaining to quota a llocation, albeit most of these have since been 
superseded. 
4.103  The European Communities stre sses that the BFA provides for consultations among its 
limited parties in 2001, which the European Co mmunities says was included as a term of the BFA 
because the European Communities had undertaken to negotiation a replacement system.  That would 
not explain why those countries would agree that in  the absence of a new ag reement, the concession 
would simply expire, leaving an essentially prohibitive binding at €680/mt. 
4.104  Ecuador has pointed out that the inclusion of a requirement to make the waiver subject to 
compliance with Article XXVIII, and the European Communities' conduct in that regard, is further 
evidence that all WTO members, including the Europ ean Communities, considered that the €75 tariff 
quota was not limited in time by the BFA.  If the only binding that was effective after 2002 (or after 2005) was €680, then there was no need for Article  XXVIII negotiations, since applying a lower duty 
than the bound rate does not infringe the rights of other members.  As Nicaragua and Panama have 
pointed out, the Newsprint  case does not imply to the contrary.  Article XXVIII has frequently been 
used where a party is going to undertake a change of form of duty, such as from specific to ad 
valorem duties, because otherwise suppliers could clai m a violation of bindings whenever, as a result 
of market forces, an intended neutral conversion resulted in a duty higher than specified in the 
schedule.  The notion is absurd that a party woul d invoke article XXVIII to reduce a duty from €680 
to some much lower level specific duty. 
4.105  The European Communities dismisses the many ex amples in the Arbitrator awards in which 
the European Communities argues a nd the Arbitrator accepts that the European Communities has a 
tariff quota binding at €75/mt.  Nicaragua and Pa nama have provided additional examples.  The 
European Communities dismisses these as "arguments ma de in the heat of litigation".  With respect, 
the European Communities seems in the current proceeding to have b een consumed with the "heat of 
litigation."  WT/DS27/RW2/ECU 
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  4.106  The European Communities probably realizes the implausibility of its newly contrived view 
that its concession expired at the end of 2002, an d so argues in the alternative that the €75/mt 
concession expired when the European Communities el iminated the quota to which it was "attached".  
A member cannot escape its tariff quota bindings by un ilateral action on grounds that it is eliminating 
the quota element, so of course it get to eliminat e the favourable tariff along with the quota, all for 
free. 
4.107  Tariff quota concessions can be withdrawn, but the withdrawing member must follow 
Article XXVIII procedures which the Doha Waiver required and the European Communities failed to 
do.  There is accordingly no basis for this a lternative argument of the European Communities. 
B. EUROPEAN COMMUNITIES  
1. First written submission of the European Communities 
(a) The facts of the case 
4.108  The history of the facts shows that the EC bound rate for bananas is €680 per ton, and that the 
Cotonou preference granted to ACP countries amounts currently to 775 000 tons.  It also highlights that the previous Article 21.5 Panel initiated by  Ecuador provided three suggestions whereby the 
European Communities could comply with WTO rules, among which the second was to implement a 
tariff only system with a tariff quota for ACP banan as (Panel Report, paragraph 6.157), provided that 
a suitable (Article I) waiver be gr anted to the European Communities. 
4.109  To comply with this suggestion, the Europ ean Communities introduced a tariff only system 
with a duty free tariff quota of 775 000 tons on 1 January 2006, having secured the necessary WTO 
waiver through the negotiation and conclusion of an  "Understanding on bananas", which entered into 
force between Ecuador and the Euro pean Communities on 30 April 2001. 
4.110  This understanding committed the European Communities to continue importing MFN 
countries' bananas at the tariff rate of €75 par ton,  until the implementation, by 1 January 2006 at the 
latest, of a definitive import regime co mplying with the 1999 Panel conclusions. 
4.111  The counterpart for this understanding was the granting to the Eu ropean Communities of 
WTO waivers for the interim import regime applie d between 1 July 2001 and 1 January 2006 and for 
the subsequent tariff only system applied from 1 January 2006. 
4.112  The first "Doha Waiver" related to GATT Article  XIII related to the interim all-tariff-quota 
import regime applied until 1 January 2006, since it was comparable to a quota regime according to 
the findings of the Panel;  since the terms and conditi ons applied to different groups of countries were 
different, a waiver from the application of GATT Arti cle XIII paragraphs 1 and 2 was then necessary;  
the second waiver to GATT Article 1 was sought in  relation to the preferences granted under the 
Cotonou agreement to ACP countries;  the duration of this waiver is commensurate to the duration of 
these preferences, to be found under Article 37 of th e Cotonou Agreement, i.e. 31 December 2007. 
4.113  In the terms contained in the Annex to the re levant Doha Waiver (WT/L/436), the European 
Communities accepted to negotiate a rebinding of its ta riff for bananas imports that would result in "at 
least maintaining total market access for MFN ba nanas suppliers", subject to an arbitration 
mechanism in case of disagreement.  This waiver would expire either on 31 December 2007 or would 
cease to apply upon the entry into force of an EC regime that would have been found by the second 
Arbitrator award as not satisfying the standard of "maintaining total market access for MFN bananas suppliers", taking into account all EC WTO mark et-access commitments relating to bananas.  The WT/DS27/RW2/ECU 
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  European Communities has complied w ith all the conditions contained in the waiver and this fact is 
not disputed by Ecuador. 
4.114  The situation of the bananas import market si nce 1 January 2006 confirms the positive effect 
of the EC tariff only regime in general, for all gr oups of developing exporting countries in particular.  
It triggered an increase of import from developing countries which had no or little exports of bananas 
into the European Communities, while not affecting the relative stability in wholesale prices. 
4.115  More importantly for the present case even, th e total volume of imports from MFN countries 
increased to a record 3.28 million tons, the high est since at least 1999, increasing by 10.7% from 
2005.  This trend is confirmed by market data fo r the first quarter of 2007, with a further 10.1% 
increase from the preceding year, and this evidence  alone suffices to establish that the new regime 
more than maintain total market access for MFN suppliers. 
4.116  For the sake of completeness, the EC submissi on evidences the reasons why Ecuador's banana 
industry could not fully benefit from this trend for reasons unrelated to the new regime.  Firstly, the 
objective increase in the market access opportunities provided to all MFN countries is evidenced by 
the fact that the increase in imports from that group in 2006 (10,7%) in greater than the total growth 
of the market (10,3%). 
4.117  Secondly, there is ample evidence of aut onomous difficulties experienced by Ecuador's 
industry during this period:  adverse climatic c onditions, a volcanic eruption damaging approximately 
35% of the plantations in the Los Rios province,  which produces about a third of Ecuador's total 
production, new administrative measures encouraging traders to source bananas from other countries.  
It should be noted that these difficulties impacted the export potential of Ecuador also toward the 
USA. 
4.118  Thirdly, the exports of ACP countries followed similar patterns as those of the MFN countries 
group:  although the group as a whole could increase their exports, some countries (Jamaica, Belize, 
Surinam or Ivory Coast) have experienced significan t reductions unrelated to the implementation of 
the new tariff only regime. 
4.119  Finally, it appears that the new regime triggered new market access opportunities for 
countries which had little exports to the European Communities, such as Guatem ala, Peru and Brazil, 
or no exports at all, such as Bolivia, Thailand a nd Sri Lanka.  This positive trend observed in 2006 is 
confirmed during the first quarter of 2007. 
(b) The legal analysis 
(i) Preliminary issues 
4.120  As a preliminary matter, it must be recalle d that Ecuador entered with the European 
Communities into the Understanding on bananas, whic h is pursuant to its own terms "a mutually 
agreed solution to the banana dispute".  Notw ithstanding the subsequent  ambiguous and unilateral 
declaration that "the provisions of Article 3.6 of the DSU are not applicable in this case", the 
Understanding is a binding international agreement in its own right which commit its parties, and 
which must be taken into account in analysing the righ ts and obligations of the parties to this dispute, 
in accordance with the Vienna Convention on the Law of Treaties (Article 31.3.c). 
4.121  The legally binding nature of this instrument  is confirmed by the fact that both parties 
implemented the terms and conditions of the U nderstanding, the European Communities through the 
implementation of a tariff only regime in partic ular, Ecuador through the support it gave to the 
adoption of the Doha Waivers request ed by the European Communities.  WT/DS27/RW2/ECU 
 Page 53 
 
 
  4.122  On this basis, Ecuador should not be allowe d to challenge the preference granted by the 
European Communities for ACP bananas, using Article 21.5 of the DSU for challenging a mutually agreed solution between the parties, in violation of  Articles 3:7 and 3:10 of the DSU, which provides 
that mutually agreed solutions should be preferred to resorting to dispute settlement procedures, and 
the corresponding Ecuador's claims shoul d be dismissed in their entirety. 
(ii) There is no violation of GATT Article I 
4.123  Accepting Ecuador's interpretation of the Doha Wa iver's Annex (i.e. that the duration of the 
Doha Waiver for Article I concerning bananas s hould be based on the findings of the arbitration 
mechanism provided for in that Annex, rather than on the European Communities actually  "rectifying 
the matter" de facto , as provided for by the text), would lead to absurd results. 
4.124  For instance, the Arbitrator in such an in stance could find the defendant formally in 
compliance, when the facts would demonstrate th at total market access of the MFN suppliers as a 
whole would not
 be maintained.  In such a case, the waiv er would continue to protect a non compliant 
system.  Alternatively, the Arbitrator could have ruled in favour of an interim EC regime prior to 
1 January 2006, while the system introduced as from that date would be blatantly inconsistent, and 
would still be operable under a waiver undul y sustained by the Arbitrator's ruling. 
4.125  For the European Communities, it is clear that the WTO Ministerial Conference could not 
have linked the operation of such a major exemption to a basic WTO rule to the number of arbitration 
results reached on the basis of theoretical analyses and arithmetic calculations, such a standard being 
in "clinical isolation" from the real effects of the import regime in the real world. 
4.126  Indeed, the text of the Doha Waiver itself provi de in the Annex that it would cease to apply if 
the European Communities "failed to rectify the matter"; this means for the European Communities 
that it was due to introduce a new regime that w ould maintain total market access for MFN suppliers 
in reality and not merely in theory.  This assessment  must be made on the basis of the real effects of 
the system on actual market access for the group of MFN suppliers, i.e. assessing the regime "as applied", pursuant to the terms of the First Arbitration Award. 
4.127  Further, the text of the Annex provide that the waiver would cease to apply "upon entry into 
force of the new EC tariff regime";  this means "the" re gime that was submitted to the Arbitrator and 
found by him inconsistent.  Pursuant to these term s of the Annex and to a negative finding in the 
second Arbitration Award, the European Communities must  have retained the discretion to review its 
plans and to introduce a different new tariff regime so as to comply with such findings.  This is 
exactly what the European Communities did. 
4.128  To avoid repetition on this evidence provided in  the previous section of its submission, the 
European Communities draws the attention of the Pa nel on three mere points:  firstly, the volume of 
imports of bananas from MFNB countries has incre ased significantly, exceeding even the growth of 
the bananas market as a whole;  this demonstrates  that MFN suppliers have more than maintained 
their total market access opportunities.  Secondly, as highlighted in the First Arbitration Award, 
maintaining total market access  "is not a guarantee for any particular volume of trade or price" 
(para.37), and refers to "the entirety of the opport unity actually afforded the MFN suppliers" (para. 
33), definitely not guaranteeing a particular leve l of trade for any single MFN supplier such as 
Ecuador.  Thirdly, the trends in the export of any particular country cannot by themselves be used to determine whether total market access is being ma intained for the group of countries concerned. WT/DS27/RW2/ECU 
Page 54  
 
  (iii) There is no violation of Article XIII 
Preliminary Issues
 
4.129  The European Communities recalls the terms of the Panel's findings presenting the three 
options found to allow for the Eu ropean Communities to remedy the situation (paras 6.155 to 6.158):  
(1) to introduce a tariff only system without a tariff quota and with a tariff preference for ACP 
bananas, and with either a waiver for the tariff pref erence or the creation of a free trade area;  (2) to 
introduce a tariff only system with a tariff quota for ACP bananas covered by a suitable waiver;  (3) to 
maintain the previous system of MFN tariff quot a either without allocation or with negotiated 
allocations consistently with Article XIII.2, wh ich could be combined with an ACP tariff quota 
covered with an appropria te Article XIII waiver. 
4.130  The European Communities has fu lly implemented the second Pane l's suggestion, covered by 
a "suitable" Article I waiver, since it is a tariff only regime with a preferential treatment for ACP bananas.  This interpretation of what "suitable" means in this context is supported by the language 
used by the Panel for formulating its suggestions, an d by the consistent explan ations and behaviour of 
the European Communities, notwithstanding th e EC request for an Article XIII waiver. 
4.131  The European Communities notes that Ecua dor does not claim that the European 
Communities failed to take the measures suggested by  the Panel in its second option, or that such 
measures were implemented incorrect ly;  Ecuador merely claims that a tariff only import regime with 
a preferential tariff quota would violate Article XIII. 
4.132  Thus the European Communities submits that Ecua dor's claims are in reality a challenge to 
the measures suggested  by the Panel, rather than to the measures actually taken  by the European 
Communities.  Such claims are inconsistent with the terms of Article 21.5 DSU, whereby a Party can 
bring claims against "measures taken to comply" w it the findings of the Panel, and not against the 
measures suggested by the Panel.  Were Ecuador to  take issues with these suggestions, it should have 
appealed pursuant to Article 17 DSU. In the absence of such action, Ecuador is bound by res judicata , 
pursuant to Article 19, paragraph 1 and 17, paragraph 14 of the DSU. 
Absence of nullification or impairme nt of a benefit accruing to Ecuador
 
4.133  The European Communities recalls that pursu ant to the Cotonou agreement, it has an 
obligation to grant a preference for banana trade to ACP countries.  It also undertook in the context of 
the Doha Waiver to "maintain total market access for MFRN suppliers".  In interpreting the above 
condition, the Arbitrator found that the European Communities had to ensure that the new system 
would maintain the "entirety of the opportunity actually afforded to MFN suppliers", by the 
"conditions of entry to the EC market" existing unde r the import regime that was in place before 
1 January 2006.  Thus, the capping of the ACP pr eference under the new 2006 regime effectively 
ensured that this standard was respected. 
4.134  In light of these facts, the European Commun ities respectfully submits that the limit on the 
quantities of ACP bananas that can be imported in to the European Communities free of duty does not 
cause any nullification or impairment of any benefit accruing to Ecuador, in the meaning of GATT 
Article XXIII and Article 3.8 of the DSU. 
The European Communities' tariff treatment of bananas from Ecuador and other MFN 
countries does not infringe GATT Article XIII  
4.135  The European Communities notes that the texts of the provisions of Article I and Article XIII 
have a very important difference.  GATT Article I: 1 obliges each Member to extend to all Members  WT/DS27/RW2/ECU 
 Page 55 
 
 
  the exact same advantage that it grants to one si ngle Member.  In contrast, Article XIII:1 obliges each 
Member not to impose a restriction on a single Member, unless it imposes the same restriction on all other Members. 
4.136  The difference in the titles and texts of these tw o provisions demonstrate the intention of the 
drafters to give them different purposes, and that certain types of measures may violate GATT 
Article I without violating Article XIII:1. 
4.137  In addition, a claim of violation of Article X III:1 requires the meeting of two conditions:  (i) 
the allegedly offending Member im poses a prohibition or restrictio n which establishes a nullification 
or impairment of a right accruing to the complaining Member, and (ii) this prohibition or restriction is 
not imposed on the like products originating from all other countries.  The application of these 
principles to the facts of the present case shows that the Cotonou Preference does not constitute a 
violation of Article XIII, for a number of reasons. 
4.138  Firstly, bananas imports from Ecuador and other MFN suppliers are not subject to any 
quantitative restriction, and thus none of the two conditions for invoking Article XIII:1 can thus be 
fulfilled. 
4.139  Secondly, in the present case, if one tries to apply the conditions of GATT Article XIII:1 on 
the countries that actually are subjected to a r estriction (the ACP group), the provision becomes 
inoperable:  the MFN countries are then the "all th ird countries", whose position should be taken as a 
basis in order to determine whether the ACP countri es are treated "worse" than them.  But not being 
subject to any quantitative restriction, there is  nothing on which the comparison can be based.  
Moreover, even assuming arguendo that there is  a quantitative restriction imposed on the ACP 
countries, Ecuador cannot successfully challenge it, because this quantitative restriction does not 
result in any nullification or impairment of any be nefit accruing to Ecuador;  quite to the contrary. 
4.140  Thirdly, the facts that the ACP countries enjoy a trade preference and that there is a "cap" 
imposed on this preference may be relevant fo r purposes of GATT Article I, but are completely 
irrelevant for the application of GATT Article XIII.  Unlike Article I, paragraph 1, the provisions of 
Article XIII:1 do not impose on a Member the oblig ation to extend to all other Members a tariff 
preference granted to some Members only.  Article  XIII:1 obliges each Member simply not to impose 
a quantitative restriction on another Member, unless it imposes a similar quantitative restriction on all Members. 
4.141  In the present case, this me ans that GATT Article XIII:1 does not oblige the European 
Communities to extend to all Members the tariff pref erence granted to the ACP countries, but simply 
obliges the European Communities not to impose a quantitative restric tion on Ecuador, unless a 
similar quantitative restriction was imposed on all other WTO Members. 
4.142  Fourthly, Ecuador cannot legitimately claim that  the European Communities is involved in a 
"discriminatory administration of quantitative restri ctions", unlike the situation analysed by the 
Appellate Body in the EC – Bananas III  case.  Ecuador's exports are subject to a simple and ordinary 
tariff, and it is clear, both textually and contextual ly, that GATT Article XIII does not apply to tariffs. 
4.143  The European Communities draws support for this point from the report of the Appellate 
Body in EC – Bananas III , where it found that the European Co mmunities was indeed involved in a 
"discriminatory administration of quantitative restri ctions" in violation of GATT Article XIII:1, and 
found that the restriction imposed on certain count ries through the allocation of the "Other" quota was 
not "similar" to the restriction imposed on the pr oducts of the countries to which country-specific 
quotas were allocated.  This finding shows that GA TT Article XIII:1 covers only situations where a 
Member applies tariff quotas with different terms to different groups of countries in a market where WT/DS27/RW2/ECU 
Page 56  
 
  all imports are made under tariff quotas, and conseq uently, GATT Article XIII:1 does not apply to a 
tariff only import regime. 
4.144  For the same reasons, the current import regime of the European Communities does not 
violate GATT Article XIII:2.  The text of the chap eau starting with "In appl ying import restrictions" 
shows that paragraph 2 like paragr aph 1 is solely concerned with quantitative restrictions, and does 
not regulate the relationship between quantitative r estrictions and other measures, notably simple 
tariffs, that a Member may be applying. 
4.145  The context also provides support for this inte rpretation, as the same limited scope of the 
Article can be seen in the way that the four sub-pa ragraphs of Article XIII:2 are entirely focused on 
the scope and internal distribution of the quota, and disregard any trade that falls outside the quota. 
4.146  Given that GATT Article XIII:2 is directed at the administration of quantitative restrictions 
and tariff quotas, it does not extend to the EC banana import regime in so far as that concerns Ecuador 
and the other MFN countries, because their exports ar e not subject to any non-tariff restrictions or 
tariff quotas.  The European Commun ities draws support for this interpretation from the panel's report 
in US – Line Pipe .  In that case, the United States had impo sed a safeguard measure in the form of a 
tariff quota.  The panel invoked GATT Article XIII:2 onl y as regards the internal division of the tariff 
quota and the setting of the total amount of imports permitted at a lower tariff rate (Panel Report, US 
– Line Pipe , paras. 7.54 and 7.58). 
(iv) There is no violation of GATT Article II 
4.147  Ecuador claims are completely unfounded both in fact and in law.  The bound tariff for 
bananas in the EC schedule is €680 per ton and the ta riff applied since 1 January 2006 is €176 per ton. 
The European Communities' concession of a tari ff quota for 2.2 million tons of bananas at a 
rate of €75 per ton expired at the end of 2002  
4.148  As mentioned in the Facts section of the submission, Schedule CX L and its predecessor 
Schedule LXXX provide that the bound tariff rate for bananas is €680 per ton.  Both Schedules also 
included an additional concession in the form of a ta riff quota for 2.2 million tons of bananas at a rate 
of €75 per ton, but the Schedules expressly provid ed that this additional concession applied "as 
indicated in the Annex".  The European Communiti es notes with satisfaction that Ecuador accepts this 
fact in paragraph 33 of its first written submission, and observes that the Annex, which is an integral 
part of the Schedules, provides that this tariff quota would expire on December 31, 2002.  Therefore since 1 January 2003, the only bound rate for bananas in the Schedules of concessions of the 
European Communities is €680 per ton. 
4.149  It is settled law that WTO Members can lawf ully grant concessions subject to "terms, 
conditions or qualifications ", and that a time limitation in the duration of the concession, qualifies as 
such.  Moreover, such time limitations do not even need to be expressly provided for in the Schedules, 
and can simply result from a link between the du ration of the concession and the existence (or 
duration) of some domestic legislation or other measure, as exemplified in the US – Sugar Waiver  
case (See the GATT Panel Report in United States-Re strictions on the importation of sugar and sugar 
containing products applied under the 1955 waiver and under the headnote to the schedule of the tariff 
concessions, dated 22 January 1990, L/6631-37S/228, at paragraph 5. 8.).  The European Communities 
respectfully submits that the case for the legality of its own time limitation for the tariff quota of bananas is even stronger than for the measures examined by the Panel in the US – Sugar Waiver  case 
since it has incorporated the time limitation and the date of expiry of the concession into the body of 
the Schedule itself.  WT/DS27/RW2/ECU 
 Page 57 
 
 
  4.150  The fact that the European Communities continue d to allow significant imports of bananas at 
a tariff rate of €75 per ton even after the expira tion of the relevant concession in its Schedules on 
31 December 2002, does not in any way imply that  the European Communities considered itself 
bound by the expired concession, or that it acted in a way that is inconsistent with the arguments 
presented before this Panel.  As already mentioned, within the context of the Doha Waiver granted in 
2001, the European Communities undertook to allocat e to MFN countries a quota at this low tariff 
until the introduction of the new import regime on 1 January 2006.  The European Communities 
undertook the same obligation in the Understandi ngs with Ecuador and the United States.  The 
European Communities' good faith compliance with  the conditions of the Doha Waiver and the 
Understandings cannot have any br oader legal significance, especially when considering that the 
European Communities duly discontinued this practi ce on the date provided for in the Doha Waiver 
and the Understanding (i.e. 1 January 2006). 
4.151  It may be noted that the expiration of this  concession was not fully discussed in the two 
Arbitration Awards that were issued in 2005.  Th is is due to the fact that the purpose of the 
Arbitration was to determine the "total market access" enjoyed by MFN suppliers prior to the 
introduction of the new import regime, based on th e actual import opportunities enjoyed by MFN 
suppliers.  The fact that the binding for 2.2 million tons in the Schedules had expired was not relevant 
for the Arbitration. 
The abolition of the tariff quota for 2.2 million t ons results in the automatic abolition of the 
tariff rate of €75 per ton  
4.152  In light of the preceding section, it is clear th at the concession in question expired  However, 
even if that concession had not expired at the end of 2002, it is clear that it was lawfully terminated on 
1 January 2006, when the European Communities in troduced the tariff only import regime.  There are 
two considerations underp inning this conclusion. 
4.153  Firstly, the tariff rate of €75 was not a simp le and unconditional "bound tariff rate", as 
Ecuador appears to imply in paragraph 33 of its firs t written submission.  As with any tariff quota in 
the WTO system, the tariff rate of €75 was attached to the quota of 2.2 million tons and its existence 
depended upon the existence of that quota. 
4.154  Secondly, the Panel had strongly suggested that  the European Communities abolish its tariff 
quota system and replace it with a tariff-only import regime, which would inevitably bring the automatic abolition of the tariff quota for the 2.2 milli on tons of bananas, was also a condition in the 
Doha Waiver and in the Understandings that the European Communities entered into with Ecuador 
and the United States. 
4.155  On the basis of these considerations, it is  clear that (a) the European Communities 
legitimately abolished the quota for 2.2 million tons  of bananas on 1 January  2006, in compliance 
with the suggestions of the Panel and the conditions of the Doha Wa iver and the Understanding, and 
(b) the abolition of this quota led to the automatic  abolition of the corresponding tariff of €75 per ton. 
(c) Conclusion 
4.156  In light of the facts and argument presente d above, the European Communities respectfully 
requests the Panel to dismiss all of Ecuador's claims. WT/DS27/RW2/ECU 
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  2. Second written submission of the European Communities 
(a) The Cotonou Preference 
(i) Preliminary objections 
The Understanding
 
4.157  Ecuador accepts the principle that a "mutually agreed solution" entered into between two 
WTO members must be taken into consideration in or der to determine those parties' mutual rights and 
obligations within the WTO legal order.  Therefor e, it is uncontested that bilateral agreements 
between two WTO members, such as the Understanding,  form part of the "applicable rules of law" 
between the parties to the dispute, as defined in the Vienna Convention. 
4.158  The application of the principles of Articles 3.7 and 3.10 of the DSU on the facts of this case 
leads to the conclusion that Ecuador is barred from challenging the Cotonou Preference, because (i) 
Ecuador has already contractually accepted the exis tence of the Cotonou Preference and (ii) Ecuador 
has already been compensated fo r accepting the existence of the Cotonou Preference.  Both the 
language used in Article 3.10 of the DSU and its natu re as a general principle of law, make clear that 
the principle of good faith runs through the entire DSU and defines the outer limits of the application 
of all rights recognized by the DSU to WTO Me mbers.  The European Communities has fully 
complied with all its obligations under the Understa nding and Ecuador does not explain which of its 
obligations the European Communities has allegedly failed to implement.  Ecuador cannot escape its 
obligations by claiming that they are not compliant  with the WTO rules, because Ecuador has already 
accepted the legality of the Understanding, by in itially complying with its provisions and does not 
explain why and how the Understanding has sudde nly become "inconsistent with the covered 
agreements".  Moreover, the application of the pr inciple of good faith bars this Ecuador objection, 
because Ecuador has already drawn the benefits of  the Understanding and had full knowledge of the 
legal status of the Understanding when it entered in to it.  The Understanding does not provide that the 
new import regime, or the Cotonou Preference should have any specific characteristics and, therefore, 
Ecuador cannot claim that the lack of these undefined characteristics allow it to  escape its obligations.  
Finally, Ecuador's position if accepted would create important "systemic" problems for the WTO legal 
order. 
The findings and suggestions of the Article 21.5 Panel  
4.159  Ecuador is barred from challenging the Cotonou Pr eference under Article XIII, because this 
amounts to a challenge to a suggestion made by th e Panel (and consequently a ruling adopted by the 
DSB) that is binding on Ecuador.  Ecuador's argume nts to the contrary should be rejected.  Panel 
reports that have been adopted by the DSB are binding for both the complaining and the defending 
parties to the dispute.  A panel's suggestions are not binding for the defending party, but this does not 
mean that suggestions are entirely devoid of lega l significance.  With the suggestion the Panel is 
indicating that such action is lawful and its implementation will lead to the defending party's 
compliance with its obligations.  Following the adop tion of the panel's report by the DSB there is a 
presumption of legality covering the suggestions which makes them binding on the complaining 
party.  If the defending party decides to impl ement the measures suggested by the panel, the 
complaining party may not challenge the conformity of these measures with the WTO rules in an Article 21.5 procedure, because this way the comp laining party would not "unconditionally accept" 
the report.  To hold otherwise would create an  undue legal uncertainty for the defending party, 
seriously compromise the credibility of panels and of the DSB and would render Article 19.1 of the 
DSU inoperative.  WT/DS27/RW2/ECU 
 Page 59 
 
 
  4.160  Allowing a complaining party to initiate an Arti cle 21.5 procedure in order to challenge the 
suggestions of a panel, even where it has not ch allenged these suggestions before the Appellate Body 
would also open the door for an abuse of Article 21.5 of the DSU, as well as of Article 16.4 of the 
DSU and of Article 17 of the DSU.  There should be  no confusion between the roles of the Appellate 
Body and Article 21.5 panels.  To hold otherwi se would amount to giving complaining parties the 
right to "bypass" the strict procedural requirements for appellate review and "replace" the procedures 
before the Appellate Body with pr ocedures before Article 21.5 panels. 
4.161  Finally, the implementation of the specific Pane l suggestion required an Article I waiver and 
not an Article XIII waiver.  This can be seen from the textual differences between paragraphs 6.157 
and 6.158 of the Article 21.5 Panel report and the diffe rences in the import regime that each of these 
paragraphs provided for.  The Second Arbitrati on Award does not support Ecuador's position.  The 
Arbitrator took it as a given that the proposed import regime would be compatible with Article XIII either by itself or through a waiver and did not d ecide the issue.  The Ba nanas III jurisprudence does 
not support Ecuador's position.  The system analy sed by the Appellate Body and the Article 21.5 
Panel has nothing to do with the current import regime of the EC. 
(ii) There is no violation of GATT Article I 
4.162  The evidence submitted by the European Commun ities establishes that the total market access 
enjoyed by MFN suppliers prior to 1 January 2006 has been more than main tained with the current 
import regime of the European Communities.  Ec uador's second written submission chooses to ignore 
completely the market reality. 
4.163  The Doha Waiver's objective was that Ecuador  and the MFN countries would allow the ACP 
countries to benefit from the Cotonou Preference un til the end of 2007, in exchange for the EC' 
ensuring that the MFN countries' to tal market access would be maintained.  It is a well established 
fact that the current import regime more than ma intains the market access of Ecuador and the other 
MFN countries.  If Ecuador manages to succeed in these proceedings, it will have achieved a result 
that was not envisaged by the Doha Waiver's arrangement: it will have both maintained its access 
opportunities into the market of the European Communities and abolish the Cotonou Preference. 
4.164  The proper interpretation of the Doha Waiver is that the waiver would continue to apply until 
the end of 2007, provided that the European Co mmunities introduced an import regime that (i) 
actually maintained the total market access of the MF N suppliers and (ii) was different to the regime 
that the Arbitrators had found not likely to main tain such market access. Ecuador's formalistic 
argumentation to the contrary should be reject ed.  Ecuador accepts that its position leads to 
unreasonable conclusion, but still invites the Pa nel to reach findings that produce unreasonable 
results, so that Ecuador can earn more than what  the Doha Waiver's arrangement was intended to 
provide it with.  Ecuador's insistence that the term ination of the Doha Waiver depended exclusively 
on the entry into force of any
 "new tariff regime ", without any reference to that regime's 
characteristics, leads to the unreasonable conclusion  that the European Comm unities would have been 
able to prolong the duration of the Doha Waiver by not  introducing any new tariff regime and simply 
continuing to apply the old import regime. 
4.165  The Doha Waiver's provisions on the Arbitrations  cannot be used to support a formalistic and 
unreasonable interpretation of the waiver's terms.  The Doha Waiver provided that the interested 
parties would enter into good faith negotiations to  agree on an import regime that would strike a 
balance between the interests of all banana exporte rs.  The Arbitrations were included in order to 
ensure that these negotiations would indeed take place.  This is precisely what has happened. WT/DS27/RW2/ECU 
Page 60  
 
  4.166  Ecuador argues that the Doha Waiver termin ated because the European Communities has 
breached Article XXVIII.  Ecuador's claims unde r Article XXVIII should be rejected, because 
Ecuador has not included any Article XXVIII claims in  its request for the establishment of the Panel. 
(iii) There is no violation of GATT Article XIII 
Absence of nullification or impairme nt of a benefit accruing to Ecuador
 
4.167  The limitation of the Cotonou Preference to sp ecific quantities does not cause the nullification 
or impairment of any benefit accrui ng to Ecuador.  This limitation is to Ecuador's advantage, because, 
in its absence, the preference given to ACP countries would have been even more important.  Ecuador 
accepts the factual accuracy  of the point raised by the European  Communities.  The only injury that 
Ecuador may suffer stems from the fact that it cannot benefit from the Cotonou Agreement's trade 
preference, which is compatible with Article I.  The limitation on the quantities of this preference 
neither results in any other injury for Ecuador, nor adds anything to any injury that the trade 
preference itself may already cause to Ecuador. 
The European Communities' tariff treatment of bananas from Ecuador and other MFN 
countries does not infringe GATT Article XIII  
4.168  Article XIII is concerned with quantitative measures.  Provisions explicitly designed for 
dealing with quantitative measures give rise to diffi culties of interpretation when applied to tariffs.  
There are important differences between "prohi bitions and restrictions" and tariff quotas.  
"Prohibitions and restrictions" are prejudicial to the trade of the affected WTO Member, while tariff quotas may in certain circumstances be beneficial.  A rule which is designed to constrain measures 
that are disadvantageous to WTO Members produ ce odd results if it is applied without further 
consideration to measures that confer benefits.  One odd result would be that WTO Members would 
be required to confer benefits on non-WTO Members,  because paragraph 1 would be taken to say that 
a tariff quota could be conferred on one WTO Member only if similar tariff quotas had been conferred 
on "all other countries" and not just on WTO Memb ers.  A protection for WTO Members would be 
converted into a benefit for non-WTO Members. 
4.169  Having strict regard to the wording of paragra ph 1, there is no way in which this provision 
can be applied in circumstances such as those being considered in the present dispute.  Even regarding 
a "prohibition or restriction" as including a tariff quota, it cannot be said that any such measure is applied to the imports from MFN countries: such im ports are merely subject to a tariff.  Ecuador 
attempts to argues that " the products not quantitatively restricted are those that are within the quota, 
while the restricted products a re those that are denied access ".  The European Communities does not 
see how it can be that products within a quota  are those that are " not
 quantitatively restricted ".  
Ecuador in effect claims that alongside the real ta riff quota of X tons at zero tariff there is a notional 
tariff quota of zero tons at zero tariff, so the two tariff quotas are not "similarly restricted".  The truth 
is that there is no tariff quota of zero tonnes at zero duty.  Imports from MFN countries are not subject to any tariff quota.  Ecuador's interpretation is al so in conflict with the object and purpose of the 
GATT.  It would lead to Article XIII:1 effec tively duplicating Article I:1.  Situations of 
straightforward tariff discrimination could be artif icially presented as involving notional tariff quotas 
which would fall within the ambit of Article XIII.   The distinction between  obligations regarding 
tariffs and obligations regarding quantitative measure s can be maintained only if a tariff quota relates 
to a positive quantity or value of goods.  It cannot have unlimited or zero scope. 
4.170  Ecuador's analysis of paragraph 2 presents the sa me legal fiction, but in a slightly different 
way, describing as a "restriction" a "total excl usion" of imports from MFN countries from access 
under the tariff quota given to ACP products.  Ecuador in giving a meaning to the term "restriction" 
which is entirely different from the one found in Arti cle XIII (or in any of Articles XI to XIV).  The  WT/DS27/RW2/ECU 
 Page 61 
 
 
  term "restriction" is something that can be identif ied without reference to the actions taken against 
other Members or products.  It is a quantitative li mit on the volume of goods.  Ecuador is saying that 
the discrimination constitutes the "restriction". On  this logic an unduly small tariff quota within a 
system of tariff quotas would be a restriction tw ice over, firstly because it was a tariff quota and 
secondly because it was excluded from its fair share of the tariff quota.  Similarly, Ecuador could also 
make a claim that the failure to accept any MFN co untry products at the ACP tariff-quota rate would 
constitute an infringement of Article XI: 1 becau se it would amount to a forbidden prohibition or 
restriction.  These bizarre consequences of Ecuador's  interpretation of the term "restriction" serve to 
underline its falseness. 
4.171  Article XIII is intended to deal with discrimi nation in quantitative limitations and is not aimed 
at tariff discrimination, as seen by its heading and the te xt of all its paragraphs.  It is hardly likely that 
a single phrase in paragraph 5 was intended to tran sform the Article into one that could also be 
targeted at tariff discrimination.  Moreover, the wo rding of paragraph 5 says that the "provisions of 
this Article shall apply to any ta riff quota instituted or maintained" by a Member, suggesting that it is 
the tariff quota itself, and not its relationship with other import arrangements, at which the application 
of GATT Article XIII is directed. 
4.172  In a scenario of simple tariff discrimination, s ubject to any exception that might be applicable, 
the situation would constitute a breach of Article I:1.   If a limit is placed on the goods that may benefit 
from the lower tariff, the effect is to limit the extent of the discrimination, an action that would surely 
lessen the seriousness of the breach.  However, according to Ecuador, the action would actually increase the level of infringement of GATT because now an infringement of Article XIII:1 would be 
added to that of Article I:1.  While the harm caused to other Members was lessened, the GATT 
inconsistency would be aggravated.  The very perver sity of this result is a further argument against 
Ecuador's claims. 
4.173  The provisions of paragraph 5 can be applied to those aspects of tariff quotas that involve 
quantitative restrictions.  If tariff quotas are assigne d to a number of countries, paragraph 1 will 
require that the restrictions placed on the one tariff quota are similar to those applied to other tariff 
quotas.  The precise way in which that similarity wo uld be achieved is elaborated in paragraph 2. 
(b) The applied tariff does not violate GATT Article II 
4.174  Ecuador seems to imply that the European Co mmunities is still obliged to operate a tariff 
quota system, allocating to Ecuador a part of the ol d 2.2 million tons quota at €75 per ton.  This would 
mean that Ecuador wishes to ha ve the European Communities reinst ate the old tariff quota system.  
However, it was Ecuador itself that negotiated in to the Understanding and the Doha Waiver the 
abolition of the tariff quota system and the introduction of the tariff only system as of 1 January 2006.  
If Ecuador does not seek a return to the old tariff q uota system, it wishes to influence the negotiations 
on the banana tariffs that are held in parallel with  the general negotiations in the Doha Development 
Round.  By initiating these proceedings Ecuador im plicates this Panel in the tariff negotiations 
between the European Communities an d the banana exporting countries. 
(i) The expiration of the concession for 2.2 million tons of bananas 
4.175  The Annex to Section I-B of Schedule CXL set s the start date and the end date for the 
existence and operation of that tariff quota. 
4.176  Ecuador invokes the "Modalities Paper" published in 1993 and argues that it is inconsistent 
with the expiration date.  Ecuador is attempting to  use the Modalities Paper as a "basis for dispute 
settlement" in the current proceedings against the Pa per's own provisions, whic h have been upheld by 
the Appellate Body.  Ecuador's arguments shoul d be disregarded.  Moreover, the Marrakesh WT/DS27/RW2/ECU 
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  Agreements constituted a fresh start in the process  of accumulating obligations from the schedules 
and, as a consequence, the EC' concessions in its Uruguay Round Schedule must be read as they 
stand, without any reference to earlier concessions and without any reference to the Modalities Paper. 
4.177  Ecuador interprets the column "other terms a nd conditions" as not being capable of including 
time limitations on the concessions.  However, th e fact that the title reads "other terms and 
conditions" does not
 mean that a WTO Member cannot  insert in that column time limitations, or other 
limitations on its concessions.  To hold otherwis e would disrupt numerous carefully negotiated 
concessions and limitations found in the GATT schedules of all WTO Members. 
4.178  Ecuador states that the time limitation should be "laid out in the Schedule itself", and not in 
the Annex.  But the Annex is part of the Schedul e and Ecuador itself accepts this fact.  The Panel 
should not give an unwarranted legal significance to the space limitations of page 9 of Section I-B in 
Schedule CXL. 
4.179  Ecuador attempts to draw an argument from the fact that the Annex uses the word 
"agreement" instead of "concession".  However, Ec uador does not explain why the parties would set 
an expiration date in the agreement, if it did not also cover the tariff quota concession which was the 
main object of the agreement.  Ecuador also does not explain why the parties would incorporate the 
agreement together with the expiration clause in to the Schedule of Concessions of the European 
Communities.  If their intention was to establish a perpetual concession for the 2.2 million tons, they 
would simply include in the Schedule the con cession and would not incorp orate the Annex which 
limits the concession's duration.  Moreover, Ecuador ignores the fact that the Annex provides that "full consultations with the Latin American supp liers that are GATT Members should start no later 
than in year 2001".  This means that the parties ha d agreed to negotiate the system that would replace 
the concession for the 2.2 million tons in view of  its expiration and that these negotiations should 
commence well in advance of the concession's expira tion, which was agreed for the end of 2002. 
4.180  Ecuador's argument that the MFN parties coul d not have agreed to such terms is wrong 
because it ignores the fact that the parties had agreed  to negotiate a new banana import system as of 
2001, i.e., one year before the expiration of the concession for the 2.2 million tons.  Therefore, the 
banana exporting countries had ensured that they w ould have an important quantity exported at a low 
tariff until the end of 2002 and that before the expiration of this concession they would have the 
opportunity to negotiate new concessions. 
4.181  The fact that the European Communities did not argue in previous dispute settlement 
procedures that the concession for the 2.2 million t ons of bananas expired at the end of 2002 is 
irrelevant.  This the first time that the European Communities is accused of having breached Article II 
by applying a tariff that is above the concessions in its Schedules and its tariff concessions are the 
main subject matter of the dispute. 
4.182  The reference to Article XXVIII negotiations in th e Doha Waiver is irrelevant.  Ecuador itself 
had negotiated into the Understa nding the Article XXVIII negotiations.  The Doha Waiver simply 
repeats the terms of the Understanding that was signed  earlier.  Ecuador's assertion that the European 
Communities would have been in a strong negotiating  position is wrong.  At the time, the European 
Communities had already lost the Article 21.5 Panel and was seeking a waiver for the entire Cotonou 
Agreement, to the grant of which Ecuador had reached reservations. 
4.183  Ecuador cannot claim a breach of GATT Article XXVIII in these proceedings, because it has 
not included such a claim in its request  for the establishment of this Panel. 
4.184  Ecuador argues that no member would invoke  Article XXVIII:5 procedures to lower its 
bound rate.  The European Commun ities was obliged to initiate Artic le XXVIII:5 negotiations both by  WT/DS27/RW2/ECU 
 Page 63 
 
 
  the Understanding and the Doha Waiver.  The Anne x in Schedule CXL also provided for negotiations 
for the import regime that would replace the conc ession after its expiration at the end of 2002.  
Therefore, the initiation and continuation of the Article XXVIII negotiations does not amount to a 
supposedly de facto "rebinding" of that tariff quota.  Moreover, it is not clear that Ecuador's interpretation of Article XXVIII is correct, although the Panel does not need to decide on this point in 
this case. 
4.185  The Arbitration Awards' description of the European Communities' import regime is not 
relevant for the present procedure.  The Arbitration was not held within the context of the DSU.  The 
subject matter of the Arbitration was not to dete rmine what were the concessions bound in Schedule 
CXL.  Therefore, any relevant statements in the Ar bitration Awards should be treated as simple dicta.  
The same applies to any relevant arguments  advanced by the parties at the time. 
(ii) The abolition of the tariff quota on 1 January 2006 
4.186  Ecuador attempts to raise an Article XXVIII claim, which should be rejected because it was 
not included in the request for the establishment of this Panel. 
4.187  Ecuador argues that once a tariff quota is granted, the tariff part becomes obligatory and 
perpetual, while the quota part may be freely elimin ated.  Ecuador should explain why the rule that it 
proposes should not be the other way round, i.e., that  the "tariff element" of a tariff quota may be 
freely amended, while the "quota element" should be treated as obligatory and perpetual.  Moreover, 
there is no legal basis for this argument. 
(c) Conclusion 
4.188  The European Communities requests the Panel to reject Ecuador's challenge to its banana 
import regime. 
3. Oral statement of the European Communities 
(a) The timing of these proceedings is unfortunate 
4.189  The first point the European Communities would like to make is that these proceedings are 
taking place at the wrong time.  As already men tioned in its written submissions, the European 
Communities and the MFN banana producers are curren tly negotiating new tariffs for bananas.  The 
European Communities remains co mmitted to reaching an agreement in the pending negotiations, 
despite the fact that the proceed ings initiated by Ecuador are presenting a big impediment to the 
successful conclusion of the discussions. 
(b) The challenge to the Cotonou Preference 
4.190  The European Communities has been wanting to close the chapter of the banana dispute for 
many years.  And this is why it reached a deal with  the complainants in 2001.  The deal was that the 
complainants would not object to the ACP countri es having their trade preference in bananas until the 
end of 2007.  In exchange, the European Commun ities would ensure that the MFN exporters would 
maintain their access to the Europ ean market under the new import regime that would be introduced 
in 2006.  The European Communities even accepted to  negotiate with the MFN suppliers the level of 
its bound banana tariffs, just to get them to agree to the ACPs' having their preference extended for an 
extra two years.  This fact alone shows how co mmitted the European Communities is to supporting 
the development efforts of the ACP countries.  At the same time, the procedural safeguards offered to 
the MFN countries shows how committed the Europ ean Communities is in reaching a solution that 
addresses their concerns. WT/DS27/RW2/ECU 
Page 64  
 
  4.191  The year is 2007.  It is now possible to verify  whether the European Communities has kept its 
promise and whether the MFN exporters' access to th e European market has b een maintained.  There 
is ample market data and statistics, hard figures show ing what is really happening in the market.  The 
European Communities has provided some of it in its  two written submissions.  What does the market 
data show?  It shows a clear fact.  Without an y doubt, clearly and unequivocally, the group of MFN 
exporters has more than maintained  its market access.  The group of  MFN banana suppliers had never 
exported so many bananas into the European Communities as it did in 2006. 
4.192  The European Communities has updated its figures a nd it is now possible to see the results for 
the first six months of 2007 (relevant table attached as Exhibit EC-10).  What can be seen?  Even more growth in the quantities of MFN bananas coming into Europe.  And that is not all.  The MFN 
growth is bigger than the growth of the total ma rket for bananas in the European Communities.  And 
that is not all either.  The MFN growth is bigger th an the ACP growth in 2007.  And again that is not 
all.  We have calculated the average f.o.b. pr ices paid to Ecuadorian and Colombian producers for 
every year between 2004 and 2007 (relevant table attach ed as Exhibit EC-11).  And what can be seen?  
That the plantation owners in Ecuador and Colo mbia received in 2006 and are receiving in 2007 
better prices than in 2005 and 2004. 
4.193  Larger quantities and higher prices for MFN supplie rs.  What does this mean?  It means that 
the MFN producers are much better off than before .  It means that the European Communities has 
done more than simply maintaining the market acce ss of the group of MFN suppliers.  The European 
Communities has actually helped increase the income of the MFN banana producers. 
4.194  All of this shows that the European Commun ities has kept its promises.  The European 
Communities has respected its part of the deal. 
4.195  The European Communities regrets to say that these proceedings show that the complainants 
do not intend to keep their part of the deal.  They  do not wish to allow the ACP countries to have their 
trade preference until the end of this year.  The Euro pean Communities finds this regrettable.  And it 
invites the Panel to preserve the arrangement that it had reached with the complainants in the context 
of the Doha Waiver and to reject the complain ants' claims in their entirety.  The European 
Communities has explained in its written submissi ons the legal bases justifying this result. 
4.196  The third party submissions of Nicaragua and Pa nama include certain statements alluding that 
the European Communities does not really care about the development needs of the developing countries, but about its own "Treasury".  The Euro pean Communities believe th at the facts are clear 
and establish that these allusions are not correct.  First of all, this very proceeding is a challenge to a 
development friendly trade preference.  More im portantly, the European Communities grants more 
than €500 million every year to Latin America in th e form of development aid and it plans to spend 
more than €2.7 billion of development aid during the next 5 years.  Another €2.5 billion will come 
from the European Investment Bank for the financing of projects in Latin America.  And this does not 
take into consideration the trade development aid,  which would bring the figure to €one billion per 
year.  In light of the power of these facts, the European Communities invites the Panel not to take 
these allusions into consideration. 
4.197  Coming back to the legal claims of the comp lainants, the European Communities notes that 
their entire case is based on the interpretation of the text of the Doha Waiver.  The complainants argue 
that it did not matter whether the European Co mmunities would actually put in place an import 
regime that would maintain the market access of the MFN countries.  What mattered was whether the 
European Communities could convince the Arbitrators that its tariff calculations were correct.  In 
other words, the Doha Waiver was not based on mark et reality.  It was based on "virtual reality".  WT/DS27/RW2/ECU 
 Page 65 
 
 
  4.198  The European Communities disagrees.  The Eu ropean Communities believes that the Doha 
Waiver was meant to achieve a certain situation in  the market, namely maintaining the MFN market 
access for the duration of the Cotonou Preference.  The European Communities does not believe that 
the Doha Waiver was meant to be based solely  on predictions for the future.  The European 
Communities does not believe that the Doha Waiver w as meant to disregard the reality of the present.  
The European Communities has explained in its writte n submissions what it considers to be the proper 
application of the GATT rules and of the terms of  the Understanding and the Doha Waiver on the 
facts of this case.  The European  Communities invites the Panel not to  take a formalistic interpretation 
of the texts.  The legal interpretation of the words in  a document can be meaningful only if it is based 
on market reality.  In this case, the reality of th e market leads to a single conclusion: that the 
complainants must respect their deal with th e European Communities, the way the European 
Communities has respected its deal with them. 
(c) The Article XIII claims 
4.199  The complainants have tried to use the GA TT provisions on quantitative restrictions in 
Article XIII in order to challenge the Cotonou Preference.  The European Communities disagrees for 
a number of reasons. 
4.200  First of all, the banana import regime of  the European Commun ities has exactly the 
characteristics suggested by this Panel in 1999.  Ther e is a single tariff and the ACP countries have a 
preference.  There must be a presumption of legality covering the solutions suggested by a Panel.  Otherwise the defending parties would be complete ly lost when they try to implement their 
compliance measures. 
4.201  But the fact that this import regime is exactly the import regime suggested by this Panel is not 
the only reason for which the compla inants' claims should be rejected .  Ecuador's interpretation of 
Article XIII and its application on the facts of th is case leads to absurd results.  The European 
Communities offers a trade preference to the ACP countries.  This preference takes the form of a 
lower tariff.  This might be tariff discrimination, but this is an issue to be dealt with under Article I of 
the GATT.  The fact that the Cotonou Preference is subject to a "cap" does not, by some kind of 
magic, transform this preference in to an Article XIII issue.  If this was the case, then what would be 
the reason to have a separate Article I and a separate Article XIII? 
4.202  The complainants attempt to draw some analogy with the regimes analysed by this Panel in 
1997 and 1999.  This is not correct.  Following the abolition of the tariff-quota-based system in 2006, 
the current regime is so different to those of the 1990s that no analogy can be drawn. 
4.203  But what is really astonishing is that the co mplainants are basing their claims on a measure 
that has been put in place in order to protect thei r market access.  This th e best illustration of the 
absurd results to which the complainants' position lead s.  What they are saying is that if the Cotonou 
Preference did not have any limit and the ACP countries had the right to export as many bananas as they wanted free of duty, then the import regime of the European Communities would be fully 
compatible with Article XIII of the GATT.  The fact that the European Communities has tried to 
protect the complainants by imposing a "cap" on the ACP preference somehow makes the system 
illegal!  Does this mean that the complainants wa nted the European Commun ities to offer to the ACP 
countries an unlimited preference? 
4.204  The European Communities still fails to understa nd what is the nullification or impairment 
that the "cap" on the Cotonou Preference causes to  the complainants.  Indeed, if the European 
Communities were to abolish this limit on the ACP preference, would the complainants be in a better 
position? WT/DS27/RW2/ECU 
Page 66  
 
  (d) The challenge to the European  Communities' applied tariff. 
4.205  The last claim of the complainants relates to the tariff applied by the European Communities.  
As already mentioned, the European Communities is negotiating with the MFN countries new tariffs 
for bananas.  These negotiations are being held in a transparent way, in accordance with the 
provisions of Article XXVIII of the GATT.  This is  what the European Communities had promised to 
do when it entered into the Understanding in 2 001, and this is exactly what the European 
Communities is doing.  And in the middle of the ne gotiations, Ecuador decides to bring this case.  In 
light of how this case has developed, it is difficult to  avoid suspicion that its objective is to influence 
these negotiations.  The dispute settlement system should  not be used for such tactics.  The European 
Communities does not think that panels should be  dragged into tariff ne gotiations between WTO 
Members. 
4.206  In any event, the challenge to  the European Communities' app lied tariff is baseless.  The 
provisions of the European Communities' Schedule are clear.  The concession for the tariff quota of 2.2 million tons of bananas terminated at the end of 2002.  The fact that the European Communities 
decided to continue to import bananas at a lower applied tariff does not mean that the tariff was 
rebound.  If every WTO Member was bound by its applie d tariff and not by its officially bound rate, 
then the whole GATT system would collapse. 
4.207  The complainants have also come up with th e argument that the two elements of a tariff 
quota, that is to say the tariff and the quantity, ar e completely separable and that a country can only 
abolish the quantity, but not the tariff.  We believe the Panel should reject this argument.  There is no 
legal basis or precedent that would justify a panel finding that the tariff "part" of a tariff quota is 
perpetual, while the "quantity" part is not.  And it is not clear what the re percussions for the entire 
GATT and WTO system would be, if the Panel were to create such a new rule in this case. 
4.208  The European Communities does not understand what is the import regime that the 
complainants would like the Eur opean Communities to have.  Are they saying that the European 
Communities is still bound to have a tariff quota based system?  Do they want the European 
Communities to undo the reform of 2006, in  disregard of the Understanding of 2001? 
(e) Conclusion 
4.209  In concluding its statement, the European Co mmunities would like to invite the Panel to 
contribute to a definitive solution to this dispute by  confirming two things.  First, that the Cotonou 
Preference can be maintained until the end of this  year.  And, second, that the tariff applied by the 
European Communities is consistent  with its Schedule of concessions. 
4. Closing statement of the European Communities 
4.210  The first point the European Communities wi shes to address is the assertion advanced by 
Ecuador, Nicaragua and Panama that the Understa nding is not a "mutually agreed solution" for 
purposes of the DSU.  The European Communities has already explained in it written submissions 
that the text itself of the Understanding provides th at it is a "mutually agreed solution".  Ecuador's 
accepting to have its retaliation rights terminated pr ovides further support to this conclusion.  In any 
event, even if it was to be assumed that the U nderstanding is not a "mutually agreed solution" for 
purposes of the DSU, which the European Communiti es does not consider to be the case, it cannot be 
denied that it is a bilateral agreement that must be  taken into consideration in analysing the rights and 
obligations of the parties to this dispute.  Through the Understanding Ecuador accepted that the 
Cotonou Preference would continue until the end of  2007.  The European Communities considers that 
this bars Ecuador from challenging th e operation of the Cotonou Preference to the end of this year.  
The European Communities also c onsiders that the principle of good faith, which covers the entire  WT/DS27/RW2/ECU 
 Page 67 
 
 
  DSU, bars Ecuador from escaping its obligations by asserting the alleged non-compliance of the 
Understanding with the WTO rules. 
4.211  The second point is the assertion advanced by Ecua dor, Nicaragua and Panama that the Doha 
Waiver terminated at the end of 2005, because the Arbitrators had found that the import systems 
proposed by the European Communities at that time  failed to meet the waiver standards.  The 
European Communities considers that this interpreta tion is wrong.  The Doha Waiver states that it 
would terminate if "the EC has failed to rectify th e matter".  If the Doha Waiver wanted to say what 
Ecuador, Nicaragua and Panama are arguing, the te xt should have read that the waiver would 
terminate "if the Arbitrator concludes  that the EC has failed to rectif y the matter".  The Doha Waiver 
does not say so.  This shows that the crucial fa ctor was whether the import regime actually 
implemented by the European Communities ma intains the MFN countries' market access. 
4.212  Nicaragua and Panama have tried to use the ne gotiating history of the Doha Waiver to support 
their position.  Their effort has failed.  The truth is that the negotiating history of the Doha Waiver 
supports the interpretation of the European Communi ties.  Indeed, the draft dated 2 November 2001, 
which Nicaragua has attached to its Third Party submission as Exhibit N-1, provided that the Doha 
Waiver would be terminated automatically within tw o months from the notification of the arbitration 
award to the General Council.  However, this provi sion was not included in the final version of the 
Doha Waiver.  The link between the awards of the Ar bitrator and the termination of the Doha Waiver 
was abandoned.  This shows that th e parties agreed that the termination of the Doha Waiver would not 
be linked to the outcome of the arbitration awards, but on whether the European Communities 
actually "rectified the matter". 
4.213  Moreover, the Doha Waiver provides that it woul d terminate "upon the entry into force of the 
new EC tariff regime".  As we have already explai ned in our written submissions, this means that the 
Doha Waiver would terminate if the European Co mmunities implemented the tariff regime that the 
Arbitrators had found not to satisfy the standard  of maintaining the MFN countries' market access. 
4.214  The European Communities would like to draw th e attention of the Panel to two important 
facts.  First, the import regime implemented by  the European Communities in 2006 is not the import 
regime that the Arbitrators found not to meet the waiver's standards.  Second, it has been established 
that the import regime of the European Comm unities maintains the MFN countries' total market 
access.  Therefore, the European Communities "r ectified the matter" and the condition for the 
continued application of the Doha Waiver has been satisfied. 
4.215  As regards Article XIII, it is not the European Communities' intention to repeat the arguments 
that it has already presented to the Panel. Howeve r, in its opening statement Ecuador has made a 
number of assertions regarding this Article that require a response. Behind some of these assertions 
lies unwillingness on the part of Ecuador to understa nd the fundamental distinction made by the 
GATT between tariff and non-tariff measures. Thus, in its statement it seeks to confuse the notion of a 
"restriction" (the term used in Articles XI and X III of the GATT) with that of the level of tariffs, 
saying that Ecuador's exports are "restricted by th e high duty". Later in its statement Ecuador claimed 
that "the reference to restrictions in Article X III does not exclude taxes, duties and other changes."  
This is an interpretation for which there is no b asis in the GATT or GATT jurisprudence.  Such an 
interpretation would remove any need for Artic le I:1 in the GATT.  Parties alleging tariff 
discrimination would simply have to  invoke Article XIII:1 to claim that the tariff in question was not 
"similar" to that imposed on goods from another count ry.  Furthermore, on such an interpretation of 
"restrictions" it would hardly have been necessary for the drafters to insert in paragraph 5 an explicit 
rule on tariff quotas. 
4.216  The fundamental GATT distinction between tari ff and non-tariff measures is an important 
element in this case. Tariff measures are subject to Articles I and II, and non-tariff measures are WT/DS27/RW2/ECU 
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  governed by Articles XI and XIII. The European Co mmunities is unaware of any instance in which a 
single measure has been found to be in breach of both Article I and Article XIII. The fact that, as Ecuador observes in its Statement, other WTO provisi ons may overlap in their application detracts in 
no way from this fundamental GATT principle. 
4.217  Finally, Ecuador, Nicaragua and Panama have tried to show that the Schedule of concessions 
of the European Communities does not say what it cl early says.  They ask the Panel to disregard the 
language in the Annex to the Schedule, which prov ides that the tariff quota for the 2.2 million tons 
would expire at the end of 2002, and to try to dete rmine what might have been logical for the parties 
to the Banana Framework Agreement to agree in the early 1990s.  It is noted that this argument does 
not seem to be very consistent with the position they  are taking in the interpretation of the terms of the 
Doha Waiver.  The European Communities also notes the continued efforts of the complainants to 
rely on the modalities paper, despite the fact that the modalities paper states that it cannot be used in 
dispute settlement proceedings.  The European Co mmunities considers that the situation with its 
bound tariffs is clear and that the tariff quota for th e 2.2 million tons expired at the end of 2002 in 
accordance with its terms. 
V. ARGUMENTS OF THE THIRD PARTIES 
5.1 The arguments presented by Belize, Brazil, Cameroon, Colombia, Côte d'Ivoire, Dominica, 
Dominican Republic, Ghana, Jamaica, Japan, Madag ascar, Nicaragua, Panama, St Lucia, St Vincent 
and the Grenadines, Suriname and the United States in their written submissions and oral statements 
are reflected in the summaries below. 
A. B
ELIZE , CAMEROON , CÔTE D 'IVOIRE , DOMINICA , DOMINICAN REPUBLIC , GHANA , JAMAICA , 
MADAGASCAR , SAINT LUCIA , SAINT VINCENT AND THE GRENADINES , AND SURINAME  
1. Written submission of the ACP third parties 
5.2 Belize, Cameroon, Côte d'Ivoire, Domini ca, Dominican Republic, Ghana, Jamaica, 
Madagascar, Saint Lucia, Saint Vincent and the Gr enadines, and Suriname, referred to as "the ACP 
third parties", respectfully request the Panel to reject as inadmissible and unfounded Ecuador's claim 
against the new EC banana import regime which entered into force on 1 January 2006. 
5.3 By way of introduction, the ACP third parties underline that Ecuador's complaint is an 
attempt to use dispute settlement proceedings as a tool to increase Ecuador's leverage in the still pending GATT Article XXVIII negotiations with the aim of forcing down the EC tariff and, with it, 
undermine and reduce the ACP preference.  Ecuador cl early disregards the fact that the new regime 
against which its complaint is directed has actua lly improved total market access for MFN suppliers 
and has fully complied with the letter and spirit of  the "Understanding on Bananas" agreed between 
Ecuador and the European Communities.  Ecuador  purposefully ignores the delicate balance which 
this new regime seeks to achieve between the leg itimate interests of the MFN and ACP countries.  In 
order to accomplish this, Ecuador raises a number of formalistic arguments relating to the Doha 
Waiver, GATT Article XIII and the EC Schedule of Concessions. 
(a) Ecuador cannot challenge the new EC banana im port regime pursuant to Article 21.5 of the 
DSU 
5.4 The ACP third parties submit that Ecuador cannot challenge the ne w EC banana import 
regime by Article 21.5 pr oceedings as a measure taken to comply  with the rulings in the original EC –
Bananas III  case, due to the fact that the mutually ag reed solution between Ecuador and the European 
Communities in the form of an "Understanding on Ba nanas" has settled that dispute and therefore  WT/DS27/RW2/ECU 
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  constitutes a bar to Article 21.5 proceedings. If Ec uador considers that the new EC banana import 
regime is inconsistent with its  WTO obligations, it should start ne w dispute settlement proceedings. 
5.5 The issues involved in the present dispute are ra dically different from those examined in the 
original EC –Bananas III  dispute.  What the Panel is required to analyse in the present case is the 
WTO consistency of the new banana import regime  which is a tariff-only regime adopted by the 
European Communities under the provisions of the wa iver granted at Doha in order to enable it to 
implement the Cotonou Agreement and the Unders tandings on Bananas with Ecuador and the US, 
i.e. legal instruments which came into existen ce after the original dispute.  These issues are 
fundamentally different from those examin ed in the framework of the original EC – Bananas III  case 
and the subsequent Article 21.5 Panel which examined a tariff q uota regime under which different 
quotas were allocated to various groups of supplie rs. The issues raised in the present case cannot 
therefore be challenged via a compliance panel but re quire that they be examined through new dispute 
settlement proceedings. 
5.6 Authorizing Ecuador to challenge the new EC banana import regime in a compliance 
proceeding would adversely affect the ACP third par ties' interests and rights.  Indeed, the importance 
for the ACP third parties of preserving their rights and the possibility of full y participating in the 
proceedings as third parties is essential in the co ntext of the present dispute which may have grave 
consequences for them.  The expedited nature of co mpliance proceedings and, in particular, the very 
strict deadlines within which parties must make th eir views known, adversely affect the possibility for 
the ACP third parties to defend their interests.  This would not be the case in original panel 
proceedings. 
(b) There is no violation of GATT Article I because the Doha Waiver still applies 
5.7 Ecuador's argument that the European Commun ities no longer enjoys the Doha Waiver is 
based on the view that the existence of two arbi tration awards concluding that the European 
Communities' rebinding proposals were not such as to  maintain total market access for MFN suppliers 
has automatically led to the waiver ceasing to apply u pon entry into force of the new EC tariff regime.  
Ecuador's argument must be rejected as it is refute d by the facts evidenced by  the sustained growth in 
MFN imports and ignores the object and purpose of the Doha Waiver. 
5.8 The purpose of the Doha Waiver is to allo w the implementation of the Cotonou Agreement 
and, in particular, of the preferential tariff tr eatment granted by the European Communities to 
products originating in ACP countries until 31 Dece mber 2007.  The specific procedures with respect 
to bananas contained in the Annex to the Doha Wa iver confirm the application of the waiver with 
respect to bananas until 31 December 2007, even if they also allow for the possibility of the waiver 
ceasing to apply prior to that date.  However, th is possibility would only occur if the European 
Communities has failed to implement a new banana import regime which at least maintains total 
market access for MFN suppliers. 
5.9 This is not the case.  Indeed, all available ma rket data indisputably demonstrate that the 
competitive position of MFN bananas on the EC market has improved both as far as volumes and 
prices are concerned since the introduction of the ne w EC banana import regime on 1 January 2006.  
The import volume of MFN bananas significantly in creased in 2006 and even more in 2007.  Cost 
savings arising from the abolition of the quota licensing system and the reduction of the out of tariff 
rate quota tariff of €680 per tonne to the new flat tariff of €176 per tonne more than outweighed the 
cost of the perceived increase in the in quota rate of €75 euro, an improvement in the terms of access 
that has led both to higher import volumes and improved prices paid to producers in Ecuador. 
5.10 In light of the object and purpose of the Doha Wa iver, it is not possible to cogently argue that 
the waiver has ceased to apply on purely procedur al grounds as submitted by Ecuador, since the new WT/DS27/RW2/ECU 
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  regime which has actually been implemented mo re than maintains total market access for MFN 
suppliers. 
5.11 In addition, ACP countries were not allowed to fu lly participate in the arbitration proceedings.  
This significantly reduced their opportunities to defe nd their positions.  The fact that in the first 
arbitration the Arbitrator ignored crucial ACP ar guments had an unfortunate effect on the way the 
issues were addressed in the second arbitration and he nce may have had a decisive impact on its final 
outcome.  The finding in the second arbitration that  the European Communities had not rectified the 
matter should not override the undeniable fact that the new implemented import regime effectively 
improves total MFN market access. 
(c) There is no violation of GATT Article XIII 
5.12 Ecuador's contention that the new EC banana  import regime violates GATT Article XIII 
because it imposes a tariff rate quota to which only ACP countries have access but not Ecuador and other countries, is not valid. 
5.13 First, the cap on the amount of bananas which can be imported duty-free from ACP countries 
into the European Commun ities has been put in place in order to address MFN suppliers' concerns 
with respect to an unlimited preferential access granted to ACP countries.  Such limitation is therefore 
beneficial to Ecuador.  As a result, there is no nullif ication or impairment of Ecuador's benefits within 
the meaning of GATT Article XXIII. 
5.14 Second, there cannot be any violation of GATT Article XIII:1 and 2 since, in the new EC 
banana import regime, there is  no prohibition or restriction within the meaning of GATT 
Article XIII:1 and a fortiori , none imposed on Ecuador or MFN suppliers. 
5.15 What Ecuador is challenging is not the limita tion placed on the quantit y of duty-free banana 
imports from ACP countries but the preferential duty which is granted to these countries.  However, 
this is not the object of GATT Article XIII but of  GATT Article I.  Ecuador 's interpretation would 
have the effect of blurring the distinctio n between GATT Article I and GATT Article XIII. 
5.16 The new banana import regime implemented by  the European Communities, complies with 
the second suggestion of the compliance panel in the original EC – Bananas III  dispute.  The fact that 
no Article XIII waiver is necessary for the implementation of the new EC banana import regime is confirmed by the fact that an express reference to an  Article XIII waiver is only made in the context 
of the third option, which covers a tariff quota re gime under which different quotas are allocated to 
various groups of suppliers. 
(d) There is no violation of GATT Article II 
5.17 Ecuador's argument that the EC tariff of €176 per tonne breaches GATT Article II because it 
would exceed the European Communities' binding must be rejected because a proper reading of the EC Schedule of Concessions shows that the binding to grant a tariff rate quota of 2.2 million tonnes at €75 per tonne expired at the end of 2002. 
5.18 In any case, the tariff of €75 per tonne is neces sarily linked to the quota. Therefore, the 
abolition of the quota necessarily implies the termination of the corresponding tariff. 
5.19 In conclusion, on the basis of the above argumen ts, the ACP third parties respectfully request 
the Panel to reject Ecuador's challenge to the European Communities' new banana import regime.  WT/DS27/RW2/ECU 
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  B. CAMEROON  
1. Oral statement of Cameroon 
(a) Introduction 
5.20 The dispute before you is crucial to the ACP countries, inasmuch as Ecuador's purpose in this 
case is no more and no less than to challenge the import regime for bananas provided for by the 
Cotonou Agreement, whereas the fact is that, without that regime, the ACP producers would be 
unable to export their bananas. 
5.21 The ACP States are deeply concerned by Ecuador 's attack on the preferences granted under 
the Cotonou Agreement.  It should be recalled that Ecuador has repeatedly acce pted the principle that 
a preference for ACP bananas was justified.  This  is clear from the Understanding on Bananas reached 
by Ecuador and the European Communities on 30 Ap ril 2001.  Ecuador also supported at Doha the 
European Communities' request for a waiver cove ring the ACP preference.  Moreover, when the 
bananas dispute was placed on the agenda of th e WTO Ministerial Conference in Hong Kong in 
December 2005, Ecuador challenged neither the waiver  nor, by extension, the preference itself.  On 
the contrary, it even agreed to participate in th e monitoring system put in place to determine, under 
the responsibility of Mr Store, the Norwegian Mini ster for Foreign Affairs, whether market access 
was maintained for MFN bananas under the new EC regime for the importation of bananas. 
5.22 Obviously, Ecuador's support had a price.  Indeed, the European Communities granted a 
number of concessions to Ecuador in exchange for it s consent to the maintenance of the waiver until 
31 December 2007.  Thus, the European Commun ities agreed to increase the tariff quota for 
MFN bananas and committed itself to putting in place a tariff-only regime as of 1 January 2006.  The 
Panel will recall that tariff quota B, open to MFN producers, was increased by 100,000 tonnes, from 
353,000 to 453,000 tonnes.  This increase was introdu ced at the expense of the ACP countries, whose 
quota was reduced from 850,000 to 750,000 tonnes.  Furthermore, this reduced quota, which had 
originally been reserved for the 12 traditional ACP supplier countries, now had to be shared with the 
non-traditional ACP suppliers, bearing in mind th at imports of non-traditional ACP bananas had 
previously been included under the MFN quota.  The resulting transfer had the effect of increasing the 
quota available to the MFN producers by 100,000 tonnes at the expense, of course, of the ACP countries. 
5.23 The European Communities and the ACP countries t hus had to pay a heavy price in order to 
be able to maintain the ACP preference until the end of this year, especially since the reduction of the 
ACP quota by 200,000 tonnes as a result of the U nderstanding on Bananas and the Doha Waiver 
drove a number of banana producers and exporte rs in our countries out of business.  The ACP 
countries are therefore extremely concerned by Ecuador's current attempt to eliminate the ACP preference after it has itself reaped major be nefits from the Understanding and the waiver. 
5.24 The ACP countries accordingly consider that Ecuador's claim against the new EC banana 
import regime, which entered into force on 1 Janua ry 2006, is both inadmissible and unfounded.  
Inadmissible because Ecuador's claim does not co ncern a compliance issue which would justify 
recourse to a panel established under Article 21.5;   unfounded because the new EC banana import 
regime has considerably improved access to th e EC market for MFN bananas and is in full-
compliance with the European Communities' WTO obligations. 
5.25 Lastly, Ecuador's claim deliberately ignores or fe igns to ignore the delicate balance which this 
new regime has sought to achieve between the legitimate interests of both the ACP and the 
MFN countries, that is to say a tariff-only sy stem which maintains total market access for 
MFN bananas, while at the same time offering viab le preferential access to ACP producers.  In this WT/DS27/RW2/ECU 
Page 72  
 
  connection, it is curious and surprising that Ecuador completely disregards the fact that the disputed 
regime has in fact more than adequately maintained total market access for MFN suppliers and has fully complied with the letter and the spirit of the Understanding on Bananas reached by Ecuador and 
the European Communities.  It is obvious that Ecua dor, by challenging the already limited preferential 
access enjoyed by the ACP banana producers, is qu ite simply seeking to capture the market share 
currently held by the ACP producers which would be unable to survive without the preference regime. 
(b) Ecuador cannot challenge the ne w EC banana import regime under Article 21.5 of the DSU 
5.26 Cameroon, on behalf of the ACP c ountries, would like to draw the Panel's attention to the fact 
that Ecuador cannot challenge the new EC banana  import regime under Article 21.5 of the DSU. 
5.27 The ACP countries consider that Ecuador cannot  bring this case before an Article 21.5 panel 
because the disputed measure is not a comp liance measure related to the original Bananas III  dispute. 
5.28 This is a completely new and different impor t regime, one which was adopted, not as a result 
of the original Bananas III  dispute, but in the framework of the mutually agreed solution and the 
Doha Waiver.  It would in any event be unreasonabl e for Ecuador to use the dispute settlement system 
to challenge the new banana import regi me as if it were a compliance issue. 
5.29 The distinguished Minister of Agriculture of  Suriname, Mr Raghoebarsing, will shortly go 
into greater detail on this issue, which the ACP countries regard as crucially important. 
(c) The new EC banana import regime has not onl y maintained but has significantly improved 
market access for MFN bananas 
5.30 Market data show that the new EC banana import regime has not only maintained but has 
significantly improved market access for MFN bananas.  To recall, this is a completely new tariff 
regime which complies with the commitments u ndertaken by the Europ ean Communities in its 
Understanding with Ecuador and in  the Doha Waiver.  As provided by the Doha Waiver, the new 
regime should, at the very least, maintain tota l market access for MFN banana suppliers.  This 
condition has been fulfilled. 
5.31 Ecuador ignored this fact in its written submissions as well as in its oral statement of this 
morning, as we all observed.  This is all the more surprising since Ecuador has always maintained that 
market access was the benchmark or, indeed, the criterion – to take the expression used by the Chairman yesterday – against which the new EC regime had to be assessed. 
5.32 Unless it can provide proof to the contrary, which is the burden incumbent on Ecuador in this 
case, all the available statistical data show th at the competitive position of MFN bananas on the 
EC market has improved in terms of both export volumes and prices paid to MFN producers ever 
since the EC banana import regime was introduced. 
5.33 First, the import volume of MFN bananas increased significantly in 2006, by 325,270 tonnes 
in fact, compared with 2005, bringing the share of  MFN bananas in total EC banana imports to 
80 per cent. 
5.34 The first six months of 2007 show the same upward trend, with a further increase of 
144,203 tonnes compared to the same period in 2006 (according to the figures provided yesterday by 
the European Communities).  This is evidence, if any were needed, that the new EC import regime 
has improved market access for MFN bananas.  WT/DS27/RW2/ECU 
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  5.35 It is at the same time interesting to note, on th e basis of a detailed analysis of the statistics, 
that most MFN suppliers have reduced the volum e of their exports to the United States while 
increasing exports to the European market.  The representative of Côte d'Ivoire, Ambassador Guy 
Alain Emmanuel Gauze, will have an opportunity  to return to this point in a moment. 
5.36 Secondly, the wholesale prices of MFN bananas have remained the same or have even 
decreased following the introduction of the new regime.  It is clear, therefore, that the introduction of 
the duty of €176 per tonne, without any restriction on volume, has not had the effect of excluding MFN bananas from the EC market.  Moreover, price movements during the year have been similar to 
price movements in previous years.  This shows th at the new tariff has not had a disruptive effect on 
market price trends. 
5.37 Finally, the liberalization brought about by th e abolition of the import licensing system has 
created new opportunities for MFN exporters.  For ex ample, Guatemala, Peru and Brazil, which had 
supplied only small quantities in recent years, shar ply increased their exports to the EC market once 
the new regime entered into force. 
5.38 Interestingly, the main beneficiaries of the new EC regime are actually the small local 
MFN exporters, who have repeatedly expressed thei r satisfaction with the new opportunities offered 
by this regime.  Indeed, for the first time th ey are no longer dependent on a small number of 
intermediaries exercising control over import licen ces.  Several examples of such statements have 
been included in the ACP submissions.  They include, among others, the following statement by the President of the El Oro chamber of banana producers: 
"El cambio del sistema de exportacion, que comenzó el 1 de enero pasada y que reemplazó 
las licencias por un arancel de 176 euros por t onelada cambia las regl as de juego del negocio 
y trae a nuevos actores. La diversificación de los importadores va acompañada de una racha 
de buenos precios. […] Segun Julio Ullauri, pr esidente de la camara de Productores de 
Banano de El Oro, el nuevo sistema rompe el monopolio de las exportadoras tradicionales y saca del juego a los famosos 'cuperos'."
268 
 
5.39 The opening of the market to new importers and the increased competition for the available 
bananas between buyers have also enabled MFN prod ucers to charge higher prices for their products.  
As a result, the price paid to producers in Ecuador  reached its highest ever level in 2006.  Moreover, 
the differential with the official minimum price set  by the Ecuadorian Government had never been so 
great. 
5.40 All the aforementioned market data lead to onl y one conclusion:  the new EC banana import 
regime has significantly improved MFN access to the EC market thanks to the elimination of the tariff 
quota and, hence, the quota rent. 
5.41 The substantive conditions for maintaining in force the Doha Waiver covering the 
ACP banana preferences until 31 D ecember 2007 have thus been met. 
                                                      
268 In English:  "The change in the export syst em which started on 1 January and which replaced 
licences by an import duty of €176 per tonne changes the rules of the game and brings new players to the table.  
Importer diversification coincides with a period of good pr ices.  [ … ]  According to Julio Ullauri, President of 
the El Oro chamber of banana producers, the new system  breaks the monopoly of the traditional importers and 
has put the famous ' cuperos ' out of business."  See Exhibit ACP-5, press clipping from El Comercio  dated 15 
January 2006, "El importador toca la puerta del pequeño productor". WT/DS27/RW2/ECU 
Page 74  
 
  (d) The preference granted to ACP countries is the expression of a long-standing commitment to 
offer viable trading opportunities to ACP bana na producers in a market dominated by MFN 
producers 
5.42 Cameroon would like at this stage to emphasi ze that the preference granted to the ACP 
countries is the expression of a long-standing commit ment to offer viable trading opportunities to 
ACP banana producers in a market dominated by MFN producers. 
5.43 The banana sector is essential for the economic and social development of the ACP countries, 
and the long-term survival of the sector depends on the continued existence of preferential access to 
the EC market. 
5.44 Bananas account for a major share of ACP agri cultural exports.  Hundreds of thousands of 
jobs have been created.  The introduction of regu lar shipping services to transport bananas to the 
European Communities on a weekly basis has signifi cantly reduced the economic isolation of these 
countries.  The existence of these regular maritime  services has enabled the ACP countries to export 
other goods to Europe and, in return, to import goods essential to the development and daily life of 
their inhabitants.  The banana sector thus plays a majo r role in the fight against poverty, particularly in 
rural areas. 
5.45 For more than 40 years, the European Commun ities has sought to promote the banana sector 
as an important tool for the economic and social  development of the ACP countries.  Providing 
preferential access to the EC market has always been the best way of achieving that objective.  
However, as mentioned earlier, this preferential access has increasingly been eroded in order to accommodate Ecuador and other MFN countries.  Se veral banana producers in the ACP countries are 
experiencing serious economic and social difficultie s and some of these countries, which previously 
exported to the European Communities, no longer do so. 
5.46 WTO Members have repeatedly recognized the legitimacy of this development objective and 
of preferential tariff treatment as a tool for achievi ng it.  Many WTO Members use tariff preferences 
to foster development objectives, and the WTO Ag reements expressly provide for this possibility.  
Similarly, under the EC Generalized System of Preferences (GSP), the MFN countries benefit from 
improved preferential access in sectors where they are not the dominant producers.  The Cotonou Agreement, and the banana import regi me in particular, have been and mu st be considered in this light 
as providing trading opportunities for the weakest market players like the ACP banana producers. 
5.47 The importance of the Cotonou Agreement to  the ACP producers was accepted by the 
WTO Members in their Decision on the ACP-EC Partnership Agreement  adopted at the Doha 
Ministerial Conference on 14 November 2001.  The D ecision grants a waiver enabling the European 
Communities to accord preferential tariff treatment to  products originating in ACP countries, and this 
waiver covers not only bananas but practically all agricultural and industrial products exported by the 
ACP countries to the European Communities.  Such pr eferential access is of particular importance for 
the survival of the ACP banana producers. 
5.48 It is a well known fact that ACP banana produ cers are less competitive than MFN producers.  
Compared to the latter, ACP producers have higher production costs.  For historical and geographical 
reasons, they do not enjoy the same economies of  scale as the MFN producers.  As a result, 
ACP producers can only compete with MFN producer s in markets where they enjoy preferential 
access.  This is evidenced by the fact that even the Caribbean ACP countries, despite their proximity 
to the United States, are unable to compete with the MFN countries on the US market, given that the 
lack of preferential access and their higher cost st ructure make access to that market impossible.  
Since the European Communities is the only major ba nana market offering trading opportunities to  WT/DS27/RW2/ECU 
 Page 75 
 
 
  ACP banana producers, the ACP countries are entirely dependent on the EC market.  All the other 
developed markets are completely dominated by MFN suppliers. 
(e) Conclusion 
5.49 To conclude, Ecuador has one objective in institu ting this proceeding, namely to challenge the 
preferential access granted by the Communities to AC P bananas.  Ecuador does not hesitate to abuse 
the dispute settlement system by presenting this case as if it concerned a compliance issue in relation 
to the original Bananas III  dispute.  Moreover, Ecuador has re lied on a whole range of formalistic 
arguments in order to attack the new EC banana  import regime.  Not only are these unfounded, but 
they do not take into account the benefits that  have accrued to the MFN producers under the new 
regime. 
5.50 In 2006 alone, imports of MFN bananas increased by more than 10 per cent.  Many new 
smaller producers, no longer hampered by a licensing system monopolized by a few large companies, have in consequence been able to enter the EC mark et, thus contributing to the diversification of its 
sources of supply.  Moreover, they have seen their income increase.  European consumers have also 
benefited from the new regime.  Prices have remained  stable or even declined, thus ensuring that 
bananas remain the cheapest fruit av ailable to European consumers. 
5.51 Prices paid to MFN producers are higher, import quantities have increased, and wholesale 
prices on the EC market have fallen slightly despit e a rise in the customs duty.  There is a single 
incontrovertible explanation for these seemingly contradictory phenomena:  the few large-scale 
operators which previously held import licences are no longer able to abuse their position in order to 
obtain extraordinary profits.  A ll these elements show that the European Communities was in full 
compliance with its obligations when it introduced the new banana import regime on 1 January 2006. 
5.52 Mr Chairman, members of the Panel, you will ag ree that developments in the EC banana 
market have demonstrated that the abolition of the quota system and the introduction of a single tariff 
of €176 per tonne has done more than simply mainta in market access for MFN bananas.  The market 
has done what statistical projections and econometri c models could not achieve during the arbitration 
proceedings, by demonstrating beyond a shadow of a doubt that the replacement of a quota system by 
a tariff-only system has worked to the benefit of both MFN producers and European consumers. 
5.53 The ACP countries wish to express their confiden ce in the multilateral trading system and, of 
course, their confidence in the dispute settlement system.  Our representation at the political level 
attests to the importance we attach to the WTO system  in general and the banana dossier in particular.  
In any event, the ACP countries attach high hop es to the decision or recommendations you will be 
adopting. 
C. C
ÔTE D 'IVOIRE  
1. Oral statement of Côte d'Ivoire 
5.54 In its decision of 14 November 2001 granti ng a waiver for the ACP–EU Partnership 
Agreement, the Doha Ministerial Conference stated th at "in the field of trade, the provisions of the 
ACP–EC Partnership Agreement requires preferentia l tariff treatment by the EC of exports of 
products originating in the ACP States", and that "t he Agreement is aimed at improving the standard 
of living and economic devel opment of the ACP States". 
5.55 The Ministerial Conference also considered that  "the preferential tariff treatment for products 
originating in the ACP States as required by Article  36.3, Annex V and its pr otocols of the Agreement 
is designed to promote the expansion of trade and economic development of beneficiaries in a manner WT/DS27/RW2/ECU 
Page 76  
 
  consistent with the objectives of the WTO and with the trade, financial and development needs of the 
beneficiaries and not to raise undue barriers or to create undue difficulties for the trade of other Members". 
5.56 In the context of this waiver and the manageme nt of the new EC regime for the importation of 
bananas, what was the situation of AC P and MFN banana suppliers in 2006? 
5.57 The Côte d'Ivoire notes that in the course of  2006, European banana imports from the ACP 
countries reached a total of 906,000 tonnes, and the le vel of imports at the end of June 2007 confirms 
this stability:  imports from the ACP countries ha d increased by only 6,000 tonnes as compared to 
2006.  This figure of approximately 900,000 tonnes should come as no surprise, since it corresponds 
to the actual capacity of the ACP countries which, unfortunately, was masked by the poor production 
conditions in 2005, the reference year, and by the concessions made by the EC  to the United States 
and Ecuador in April 2001 as a result of the Lamy-Zoellick Agreement: 
• Under this Agreement, the ACP quota, which until then had been set on the basis of 
historical records at 850,000 tonnes, was to be reduced by 100,000 tonnes while the autonomous quota B of the MFN countries would be increased from 353,000 tonnes to 453,000 tonnes, i.e. an  additional 100,000 tonnes. 
 
• The Agreement also provides that the ACP quota, which until then had been reserved 
for the EU's 12 traditional ACP banana supplie rs, would be extended to cover all of 
the non-traditional ACP suppliers.  At that time, these countries exported 
approximately 100,000 tonnes to Europe through MFN quotas A and B.  Access by these ACP countries to the ACP quota and their exclusion from MFN quotas A and B has increased the quantities available to the MFN countries by 100,000 tonnes and 
reduced the amounts available to the ACP by the same amount. 
 
• Thus, the two measures combined have r esulted in a 200,000 tonne increase in MFN 
access to the European market, and conver sely, a 200,000 tonne decrease in ACP 
access.  The 906,000 tonnes exported to Euro pe by the ACP countries in 2006 fall 
short of the 950,000 tonnes that the ACP c ould have exported to Europe had these 
two major concessions not been made. 
 
• Moreover, the first-come first-served quota management system, announced too late 
under the new system, has inevitably caused ACP exporters to export more than the 
allocated quota of 775,000 tonnes of bananas to Europe and to pay an import duty of 
€176 per tonne for the excess which, in  2006, amounted to 131,000 tonnes. 
 
Indeed, under the first-come first-served syst em, it is not possible to ensure that the 
quota volume is not exceeded if the exportable quantities are higher than the quota volume.  An exporter cannot decide on its own to reduce its exports, because unless 
there is an understanding among all of the exporters (which would of course be unethical), the volume that it refrains from exporting will be taken up by other ACP 
suppliers. 
 
In addition, because the ripeners require  a regular supply of referenced quality 
bananas, exporters have to deliver regularl y on a weekly basis throughout the year.  
This leads to the importation of bananas w ith payment of the tariff during the periods 
in which the zero tariff quota has come to an end – which is why in 2006, ACP 
producers exported volumes corresponding to their capacity of 900,000 tonnes, even though it meant taking a loss.  WT/DS27/RW2/ECU 
 Page 77 
 
 
   
5.58 Also, at the same time, or conversely, Eur opean banana imports from the MFN countries 
experienced an overall increase of more than 325,00 0 tonnes in 2006 as compared to 2005, reaching 
3,290,000 tonnes.  This upward trend has continued at the same pace in 2007:  indeed, during the first 
six months of the year, the MFN countries increased their exports to the European market by 144,000 
tonnes as compared to 2006, in contrast to the stab ility of the ACP supply.  In other words, the MFN 
countries have more than maintain ed their access to the European ma rket, and the objective set by the 
Ministers in Doha has clearly been achieved throu gh the implementation of the new European banana 
importation regime. 
5.59 These statistical data show that most of the MFN countries have reduced their supply to the 
American market, of which they are the exclusive su ppliers, in order to increase their shipments to the 
European market.  For example: 
• In 2006, Columbia increased its exports to the European Union by 59,000 tonnes 
compared to 2005, and decreased its exports to the US market by 40,000 tonnes. 
 
• Costa Rica increased its exports to the Eu ropean Union by some 200,000 tonnes, and 
its exports to the United States by 105,000 tonnes. 
 
• Panama also preferred to increase its ship ments to the European market by 29,000 
tonnes, while increasing its exports to the United States by only 5,500 tonnes. 
 
• Peru doubled its exports to the European  Union with a 22,400 tonne increase, while 
its exports to the United States in creased by only 2,700 tonnes. 
 
5.60 These figures are all the more interesting in that in terms of volume, purchasing power and 
consumer habits, the American market is similar to the European market.  For the Latin American 
producers it has the geographical advantage of being mu ch closer than the European market, so that 
the logistical costs are obviously lower;  added to which, no duties are levied on bananas from the 
MFN countries.  And yet in spite of these advantag es, many MFN countries, including some of the 
leading ones, have preferred to step up their expor ts to the European market which is geographically 
more remote, and pay the customs duty th at they are now challenging – oddly enough. 
5.61 It therefore seems clear that this duty, which was established with the introduction of the new 
European banana importation regime  on 1 January 2006, has not been an obstacle to exports from the 
Latin American countries, but on the contrary, has en couraged them to export even greater volumes to 
Europe. 
5.62 Other MFN countries have apparently adopted di fferent strategies, and have exported less to 
the European market for internal reasons:  for example Ecuador, which in 2006 increased its exports 
to the United States by 90,000 tonnes while decreasi ng its exports to the EU by 40,000 tonnes. 
5.63 The Côte d'Ivoire questions the reasons for these contradictions: 
• Can it be linked to Ecuador's geographical s ituation and to the difficulties it may have 
encountered in using the Panama canal? 
 
• Or is it because Ecuador preferred to devel op its exports towards new markets, such 
as Russia, which have experienced rapid growth? 
 WT/DS27/RW2/ECU 
Page 78  
 
  • Or finally, is this situation not attributab le to the internal production difficulties that 
Ecuador has experienced? 
 5.64 The Côte d'Ivoire cannot answer for Ecuador ;  but it is clear that Ecuador's relative 
underperformance in exporting bananas to Europe cannot  and must not be attributed to the customs 
duty.  This reduction of a mere 40,000 tonnes represent s less than 4 per cent of Ecuador's total exports 
in 2005, which amounted to 1,026,000 tonnes. 
5.65 The Côte d'Ivoire is of the view that this statistical overview reflects actual market figures 
resulting from 18 months of operation of the new bana na importation regime in the European Union. 
5.66 In spite of this irrefutable reality, certain MFN countries continue to claim that with a 
preference of €176 per tonne, Europe's ACP banana  suppliers will considerably increase their exports 
in the future.  Panama, for example, has presented th e conclusions of a study carried out on its behalf 
by an Australian consultancy firm, the Centre fo r International Economics (CIE), according to which 
important investments can be expected in the ba nana sector, in particular among the African LDCs. 
5.67 As far back as the arbitration hearings of 2005, the author of this study, Mr Borell, went to 
great lengths to demonstrate to the arbitrators that  African exports to Europe would be growing very 
rapidly.  Since the actual figures proved him wrong, he now claims that the weak growth in ACP 
exports was due to poor climatic c onditions both in Côte d'Ivoire and Cameroon.  But, he claimed, in 
Cameroon, Angola and Mozambique, for example, i nvestors would be quick to seize the opportunity 
offered by this preference to invest massively. 
5.68 Without wishing to spark a controversy, it is  worth noting that Mozambique is not in a 
particularly good position to devel op the production of bananas for e xport to Europe, if only because 
the long sea journey is incompatible with the preservation of the quality of the fruit. 
5.69 Finally, to illustrate the difficulty for the A frican countries to compet e with MFN bananas, 
Côte d'Ivoire attaches to this statement the interv iew given by the President of Chiquita Europe to 
Eurofruit Magazine last July.  In that interview,  he states that as a prerequisite to any new 
developments, the competitiveness of the Africa n banana sector will have to be improved, 
notwithstanding the preference granted to them. 
5.70 According to Côte d'Ivoire, a model based on sc ientific reasoning, whether mathematical or 
econometric, must be verifiable within a reasonabl e time-frame.  If not, it becomes a mere prediction 
or prophecy.  In its submission, Panama has su ggested that once again reliance is placed on the 
Bananarama model of the Centre for International Economics.  In August 2007, Mr Borell is still 
predicting hellfire for Latin American produ cers, but for 2012 this time, if not 2014. 
5.71 This same forecaster, using the same variabl es in his mathematical analyses, has already 
predicted: 
• In 2004, that "the results of the Bananarama model showed that with a duty of €187 
per tonne: 
 
• The Latin Americans would see their ma rket access reduced because the ACP 
quota would be exceeded and because of the development of production in 
the least developed countries (LDCs), and this even in the case of the most 
optimistic scenarios
; 
  WT/DS27/RW2/ECU 
 Page 79 
 
 
  • the average loss for the Latin American  producers would be more than a 
million tonnes."269  
 5.72 Cote d'Ivoire notes that the decline predicted as soon as the tariff of more than €75 per tonne 
was introduced actually turned into an increase of  more than 300,000 tonnes in 2006, and probably as 
much in 2007, i.e. 600,000 tonnes more in two years. 
• In 2005, Mr Borell announced that "the development of the ACP countries and LDCs 
would cause a million tonnes of bananas to be displaced from the developing countries of Latin America."
270 
 5.73 Although they have had unlimited access at a zero  duty rate since 1 January 2006, not a single 
exporter among the least developed countries has app eared on the European market.  So where are the 
investments which, according to the Centre for In ternational Economics, we re supposed to be so 
profitable? 
5.74 In 2007, the Centre for International Economic s pushed its predictions forward to 2014 in 
order to cover up the failure of its forecasti ng model.  Projects are allegedly under way in 
Mozambique and Angola.  Côte d' Ivoire questions why there is a wait until 2014 to see the results
271 
when less than a year suffices to produce and export bananas. 
5.75 Côte d'Ivoire prefers to keep its intervention brief and will therefore avoid talking about the 
numerous basic errors already reported during the ar bitration, which suggest that the model of the 
Centre for International Economics was merely th e reflection of a determination to push the ACP 
producers out of the European market for once and for all. 
5.76 Before concluding, Côte  d'Ivoire would like to recall once again the actual market data which 
show to what extent the statements of some MFN countries conceal their single objective of supplying 
the entire world market alone, with still one small exception in Asia. 
5.77 It has been clearly established that the MF N countries dominate the world banana market.  
According to the FAO, in 2005 they exported some  9.5 million tonnes of bananas:  3,800,000 tonnes 
to the United States, where they are the only suppliers, and 3 milli on tonnes to the European market 
where they already account for more than 80 per cent of total imports. 
5.78 The MFN countries also supply much of the rest  of the world.  The Russian market has 
developed considerably over the past few years,  and now represents one million tonnes.  The MFN 
countries, thanks to their lower production costs, export to all countries in the world.  They even compete with regional producers in Asia and Oceania in spite of the high logistical costs involved.  A 
single figure sums up the situation:  from 1993 to 20 04, banana exports from Ecuador alone increased 
by 1.5 million tonnes, i.e. close to 60 per cent. 
5.79 Côte d'Ivoire repeats and stresses that contra ry to the MFN suppliers, the ACP countries have 
only one outlet for their exports:  the territory of the European Union. 
5.80 At the end of the day, it is the MFN exporters that really have the capacity and the powerful 
means needed to eliminate the ACP suppliers on th e European market, and not the contrary.  The 
                                                     
 
269 EU banana drama:  Not Over Yet – CIE March 2004. 
270 Latin American will suffer crippling access losse s under the European Co mmunities' €176/t tariff 
and other increased tariff rates – CIE December 2005. 
271 Annex 2 to Panama's submission. WT/DS27/RW2/ECU 
Page 80  
 
  900,000 tonnes from the ACP countries cannot possibly represent a threat to the 10 million tonnes 
from the Latin American suppliers. 
5.81 Let us approach the problems of world trade in bananas intelligently and bear in mind that the 
equivalent of the total exports of all the ACP c ountries is supplied by a single Ecuadorian exporter.  
This should give an idea of what is really at stake and of the injustices surrounding this dispute. 
5.82 Côte d'Ivoire points out that while the ACP count ries reputed to be "preferential" are confined 
to their zero duty tariff quota without any real prospects for growth in their production and in their exports to the European Communities, the MFN countries, which until recently were marginal 
producers, have doubled or even tripled their produc tion in the space of three years from 50,000 to 
100,000 and even 150,000 tonnes. 
5.83 After all, Brazil became the fifth MFN supplie r with a continuous and steadily increasing 
supply over the past four years: 
• 13,120 tonnes during the first six months of 2004; 
 
• 20,800 tonnes in 2005; 
 
• 28,500 tonnes in 2006; 
 
• 30,000 tonnes in 2007. 
 5.84 Preference here is not a barrier, nor does it limit production, let alone access, of MFN bananas 
to the Community market. 
5.85 The statistics show that access by new exporters to the European market and the increase in 
the exports of certain MFN countries would appear to answer the concerns expressed by Colombia 
with respect to improvement of the conditions of competition. 
D. D
OMINICAN REPUBLIC  
1. Oral statement of the Dominican Republic 
5.86 The Dominican Republic wants to underline th e importance and the priority of the present 
case for the Dominican Republic, particularly for the survival of its banana producers, who are 
struggling so hard to maintain this sector. 
5.87 The preferential system given to the ACP c ountries by the European Union has allowed a 
solid banana industry to develop in the Dominican  Republic, guaranteeing a livelihood to thousands 
of poor producers and making a major economic and so cial contribution.  Consequently, the banana 
sector is a catalyst for development in the Dominican Republic. 
5.88 It is therefore a matter of deep concern to the Government of the Dominican Republic that 
Ecuador is questioning this system through the curre nt procedure and, as stated by other colleagues 
from ACP countries, it should not be allowed.  Firs tly, Ecuador's complaints do not refer to any issue 
of non-compliance, which is the basis for Artic le 21.5 of the Dispute Settlement Understanding 
(DSU) and secondly because the data show that with the new regime the European Union has 
substantially improved access for MFN suppliers and has met its commitments at the WTO.  WT/DS27/RW2/ECU 
 Page 81 
 
 
  5.89 The Dominican Republic hopes that the Panel will take its arguments into account in such a 
way that this preferential EU scheme for ACP count ries for the marketing of bananas is not modified, 
thus enabling its producers to survive. 
E. JAMAICA  
1. Oral statement of Jamaica 
5.90 The case at hand  is of paramount importance to Jamaica and to banana exporting countries 
within the ACP Group.  It underscores the cha llenges faced by developing countries within the 
multilateral trading system as illustrated by the fact that the issue of ACP banana exports within the 
framework of the EC banana regime  has accounted for a disproportionate  share of the cases that have 
been brought within the ambit of the dispute settlement regime. 
5.91 Jamaica and other ACP third parties affirm that there is no justifiable  interest for Ecuador in 
the present proceedings. The purpose of the dispute se ttlement system is to ensure prompt settlement 
of situations in which a Member considers that any benefit  accruing to it directly or indirectly under 
the WTO Agreements is  being impaired  by measures  taken by another Member. 
5.92 Ecuador is ostensibly seeking to  demonstrate that the European Communities' Article I waiver 
ended on 1 January 2006 and is doing so in proceedings  that are unlikely to be completed near the end 
of the period for which the Doha Waiver was gran ted, i.e. 31 December 2007.  It is apparent, 
however, that Ecuador's sole purpose in bringing this claim forward is to exert pressure on the 
European Communities in the ongoing tariff negot iations.  By initiating Article 21.5 compliance 
proceedings, Ecuador is seeking to accelerate the pr ocedure in order to be able to use the Panel's 
findings during the ongoing negotiations with the Eur opean Communities. This is a clear misuse of 
the dispute settlement provisions. 
5.93 The proceedings initiated by Ecuador are also ve ry surprising, given that country's explicit 
commitment via the Understanding on Bananas c oncluded with the European Communities, to 
support a waiver of GATT Article I in order to enab le the European Communities to grant preferential 
tariff treatment, until the end of 2007, to the ACP states which are Parties to the Cotonou Agreement. 
The timing of Ecuador's latest action therefore calls  into question the principle of good faith on which 
the Understanding was constructed. 
5.94 The Understanding on Bananas and the Doha  Waiver have enabled ACP exporters to 
maintain a presence in the European market but th e attendant reduction in the ACP tariff quota has 
also put several local banana growers and exporte rs out of business. They suffered both from the 
reduction in the ACP quota of 100,000 tonnes and from the inclusion within this reduced quota of 
non-traditional ACP suppliers which previously had preferential access within the MFN quota.  This 
vividly applies to the Jamaican banana industry which is dominated by small-scale producers, who 
rely almost exclusively on market access to the EU for their livelihoods and those of the communities 
in which they operate. It is clear that after securing all the benefits at our expense, Ecuador now wishes to renege on the Understanding and in the process, completely eliminate Jamaican producers 
from the EU market.  Ecuador should therefore not  be allowed to use Article 21.5 procedures to 
challenge the implementation of the final phase of a mutually agreed solution, after it has gained the 
advantages given to it by the Understanding concerned. 
5.95 Bananas represent a major share of total ACP agri cultural exports and in Jamaica's case, ranks 
among the top five export items.  The industry is a prime contributor to rural development, job 
creation and poverty reduction.  It is also extrem ely vulnerable to natural disasters, particularly 
hurricanes, which in recent years have wreaked havoc on long term produc tion and export earnings. WT/DS27/RW2/ECU 
Page 82  
 
  5.96 Caribbean banana producers are not the only ones affected by natural disasters and Jamaica 
readily acknowledges that a number of the MFN s uppliers are also impacted, even by the same 
hurricanes that pass through the Caribbean region.  In terms of the scope for recovery and the 
resumption of export earnings, however, MFN suppliers  have a distinct advantage given that they 
have access to a global market for their exports whereas Jamaica and nearly all ACP exporters are 
restricted to the EU market.  
5.97 The case under consideration could be construed as an attack on the development prospects of 
ACP banana exporting countries particularly as the elimination of the preferential arrangements for 
bananas in the EU market will have a negative and far-reaching impact on the scope for economic 
growth and development in the ACP.  Jamaica subm its that this is not a desired objective of the 
multilateral trading system which continues to champion special and differential treatment for 
developing countries, particularly the small and vulnerable among them.  Both the European 
Communities and the ACP have delivered sound argum ents regarding the inappropriateness of the 
instant case and Jamaica therefore looks forward to  a ruling that will contribute to the long term 
growth and development of the ACP banana industry. 
F. S
AINT LUCIA  
1. Oral statement of Saint Lucia 
5.98 St Lucia recalls several years ago in a meeting of the DSB noting that "[a]lthough we did not 
negotiate the solution [referring to the Ecuador/E C and US/EC accords] we accept it as a reasonable 
settlement.  …  [T]he time has now come to consider the matter closed and move on.  With the removal of sanctions the dispute has now been  resolved and the item should be removed from 
subsequent agendas."  The attempt to now invoke Ar ticle 21.5 compliance proceedings in this case is 
simply an abuse of process.  It is merely a cynical tactic to gain leverage to force the European Communities to reduce the level of its tariff, using vulnerable ACP countries as pawns. 
5.99 After all that St Lucia's farmers have gone thro ugh in recent years to be back here before a 
dispute panel that has the power to decide whether or not my country will be able to continue the 
export of bananas to Europe is a real disappointment  for all of our people who depend on this vital 
industry for their livelihood.  Ever since the 1950s  when Saint Lucia made the switch from sugar cane 
to bananas, this fruit grown exclusively for expor t to the United Kingdom and the industry has been 
the bedrock of St Lucia's economy.  It transformed St Lucia's society and created an independent peasantry that for the first time owned their small fa rms on which they worked.  St Lucia has in the 
past already stressed how important bananas are for it, not only economically, socially and politically, 
but also because they give St Luci a a real chance to achieve sustaina ble development.  For this west 
Lucia appreciates that economic diversification will be necessary but this can only be successful in the 
context of the stability of income and employment that the banana industry provides. 
5.100  The successive reforms that have been made to  the EC banana import regime since the 1990s 
have been most damaging to St Lucia and resu lted in the undermining of our market access and 
deterioration of prices received by our farmers.  St Lucia was not able to prevent those changes but 
instead has consistently sought to  secure an accommodation of the legitimate interests of both ACP 
and MFN suppliers.  In April 2001 Ecuador concluded an accord with the European Communities that 
gave it and MFN suppliers, new advantages whilst fu rther disadvantaging us.  As a result many of 
St Lucia's farmers were driven out of business and rural poverty increased, but at least some farmers were able to continue.  Part of that deal in itiated by Ecuador was that the MFN quotas would have 
been tariffied by 2006.  The deal  was that the TRQ would be replaced by a single tariff that would 
keep the conditions of competition unchanged for the MFN, i.e. that they would be no worse off.  
That Ecuadorian deal was incorporated into the A nnex on Bananas of the Doha  Declaration.  In 2005 
WTO Ministers in Hong Kong accepted the tariffication proposal in which the TRQ was replaced by a  WT/DS27/RW2/ECU 
 Page 83 
 
 
  single tariff of €176 per tonne.  Indeed, the Ecuador ian delegation was the leading campaigner for this 
change and Minister Store of Norway was charged with monitoring trade flows that would indicate if 
the change had in fact disadvantaged MFN supp liers.  Saint Lucia accepted the Annex and the 2005 
Ministerial decision on bananas because it was merely  one of tariffication.  There was no intention 
that it would reduce the effective level of our pr eference and therefore our ability to access the EC 
market (after all, we are not so naive and would not have consented to a deal that would undermine 
the viability of our industry).   
5.101  Following the arbitrations on the proposed level of  the tariff, the second arbitration award was 
notified to the Ministerial Conference in Hong Kong.  At that meeting St Lucia clearly stated its position.  "Should countries seek to use WTO rulings as a ploy to deprive Saint Lucia of its rights, 
they would be calling into question not only their own good faith, but undermining any residual 
illusions that the system existed to advance the inte rests of all, and not just some, of its Members."
272   
5.102  It is completely unreasonable for Ecuador, ha ving obtained what it sought for both in 2001 
and 2005 to now seek to exact, through misinterpr etation and distortion the reduction, indeed, the 
removal of ACP preferences that would result in Saint Lucia’s exclusion from the market. 
5.103  St Lucia asks the Panel to reject this proce dural manoeuvre.  The mutually agreed solution 
which the European Communities has implemente d in good faith cannot now be thrown out in 
Article 21.5 proceedings by the party which has al ready gained the most from successive reforms of 
the EC banana market which it designed, demanded, a nd St Lucia paid for.  This is even more so, 
where it is clear and has been demonstrated by those before us that the European Communities has 
"rectified the matter" and indeed, had in fact alread y done so in its second proposal to the Arbitrator.   
5.104  This can clearly be seen from th e way the market has developed.  With a tariff of €176/tonne 
MFN exports to the European Communities rose by about ten per cent (10%) in 2006 and they have 
continued to rise in 2007.  In its written submission Colombia argues that these figures are irrelevant 
because market access is not the same as the volume of  imports.  Indeed, the Arbitrator said that it 
relates to market opportunities not a guarantee of a particular level or volume or price.  Certainly it 
isn’t a guarantee.  Many factors can influence the av ailability of bananas for export.  But this does not 
make irrelevant the plain fact that EC imports from MFN countries have actually increased, and increased significantly.  They could not have done so if the opportunity
 of improved access was not 
there. 
5.105  Indeed, the Understanding on the Interpre tation of Article XXVIII of GATT 1994, 
paragraph 6, provides WTO rules for comparing the access provided by a tariff quota with that 
provided by a flat tariff.  According to these rules, if  a member wishes to change a flat tariff to a tariff 
quota it must set the volume of the tariff quota at the average levels of imports in the most recently available reference period plus ten per cent .  Th e ten per cent represents compensation for the loss of 
future opportunity to increase exports to that me mber.  The European Communities has moved in the 
opposite direction as it was required to do by the U nderstandings with the US  and Ecuador.  It has 
moved from a tariff quota to a flat tariff.  So by deduction from the Understanding on the 
Interpretation of Article XXVIII one can say that even if initially exports under the flat tariff had been 
somewhat lower than those that occurred under the TRQ, this coul d still have constitu ted equivalent 
access, because a flat tariff provides a possibility of future growth.  But in reality MFN imports under 
the flat tariff rose immediately by ten per cent in 2006 and they are still rising in 2007.   
5.106  The factual evidence of the way the market has developed provides more certainty than price 
gap analysis which is inevitably subject to a marg in of uncertainty because it is never possible to 
                                                     
 
272 See WT/MIN(05)/SR/4, p. 21, remarks of the Repr esentative of Saint Lucia at the formal plenary 
meeting WT/DS27/RW2/ECU 
Page 84  
 
  ascertain and demonstrate the exact level of the in ternal or external price.  Market facts are 
undoubtedly far more eloquent than forecasts based on theoretical models and projections.  And what 
the market is showing us is not only that €176/tonne  more than maintains MF N access but also that 
€187/tonne would also have done so. 
5.107  Exactly the same point arises in relation to  what the Arbitrator said about terms of 
competition.  Certainly, he identified terms of comp etition as a relevant criterion.  But he did not by 
so doing reject the use of market data.  An abstract  examination of terms of competition is subject to 
uncertainties of detail and interpretation.  Market da ta shows the real effect of real conditions of 
competition. 
5.108  St Lucia is not asking  the Panel to review the aw ards of the Arbitrator.  The Panel's task is to 
consider whether the claims now made by Ecuado r are well founded and, in particular, whether the 
Article I waiver disappeared on 1 January 2006 wh en the European Communities applied the flat 
tariff regime.  The wording of the waiver is clear on this.  The loss of the waiver depends on whether 
the European Communities has "rectifie d the matter", not directly on the awards of the arbitrator.  
And "rectifying the matter" means preserving MFN market access.  The increase in MFN imports 
since January 2006, incontestably shows that a tariff  of €176/tonne more than meets this test.  But 
Ecuador argues that this is irrelevant because th e European Communities w as allowed only one shot 
at "rectifying the matter".  St Lucia trusts that  the Panel will reject this narrow and self-serving 
reading of the waiver – a reading that even Ec uador did not share when it agreed to join the 
monitoring group that kept under review the actual effects on import volumes of the tariff of €176/tonne.  There is nothing in the wording of th e waiver that makes the ending of the waiver 
directly dependent on the second award.  What ma tters, is whether the European Communities did 
rectify the matter, and this it most assuredly di d from 1 January 2006.  This would have been 
achieved, both with the proposed tariff of €187/tonne  and even more so with the lower tariff of 
€176/tonne that was actually applied. 
5.109  These proceedings are taking place at a highly symbolic time for us.  Sir John Compton the 
long serving Prime Minister of St Lucia, who had for decades been a leading defender of the 
Windward Island and ACP banana ex ports to Europe, was buried yesterday.  Sir John, that most 
respected Caribbean Statesman, said that "without  bananas we have no boats  and without boats no 
trade", which means no future.  St Lucia trusts th at these deliberations taking place here on the other 
side of the Atlantic will not put the final nail in  the coffin of the industry for which he fought so 
vigorously for and so long and on wh ich so many left behind depend. 
G. S
URINAME  
1. Oral statement of Suriname 
5.110  In its oral statement, Suriname submits that  Ecuador should not be allowed to bring the 
present case under Article 21.5 of the DSU.  In suppor t, Suriname raises two issues of particular 
importance to the ACP third parties and which are of a systemic nature. . 
5.111  The first issue is the fact that Ecuador has already concluded with the European Communities 
in April 2001 an Understanding on Bananas.  Th is Understanding on Bana nas which constitutes a 
mutually agreed solution to the Bananas III  dispute has settled that dispute and therefore constitutes a 
bar to Article 21.5 proceedings.  
5.112  It is indisputable that the "Understanding on Bananas" was reached by the European 
Communities and Ecuador in order to resolve the original Bananas III  dispute.  This Understanding is 
an agreement under public international law which is binding upon its parties.  This Understanding 
constitutes a mutually agreed solution to the original Bananas III  dispute.  Once a mutually agreed  WT/DS27/RW2/ECU 
 Page 85 
 
 
  solution has been reached, it is not admissible to ch allenge the consistency of subsequent measures 
with the recommendations and ruling of the original  Panel pursuant to Article 21.5 of the DSU.  
Article 21.5 provides a mechanism for dispute reso lution "where there is disagreement as to the 
existence or consistency with a covered agr eement of measures taken to comply with the 
recommendations and rulings".  In this case there can be no doubt that a mutually agreed  solution 
exists.  Therefore, there cannot be any disagreement  in the sense of Article 21.5 of the DSU.  The 
existence of the mutually agreed solution constitut es a bar to a subsequent Article 21.5 proceeding. 
5.113  The fact that Ecuador cannot bring its claim as a compliance issued is further supported by 
the fact that, after the Understanding was agreed, the DSB took the Bananas III  case off its agenda as 
an issue which has been "r esolved" in accordance with Article 21.6 of the DSU. 
5.114  If Ecuador considers that the new EC banana im port regime is inconsistent with its WTO 
obligations, it should start new dis pute settlement proceedings.  To allow Ecuador to challenge the 
new EC banana import regime in the framework of Article 21.5 proceedings would be equivalent to 
ignoring the legal effects of the mutually agreed solution reached between Ecuador and the European 
Communities. This would create a very dangerous precedent since it would undermine the clear 
preference given by Article 3.7 of the DSU to negotiated solutions to disputes. 
5.115  The second reason why Ecuador should not be allo wed to bring this case before a compliance 
panel is the fact that the measures now being chal lenged are not measures taken to comply with the 
recommendations and rulings in the original Bananas III  dispute.  
5.116  What the Panel is required to analyse in the present case is the WTO consistency of the new 
EC banana import regime which is a tariff-only regime adopted by the European Communities under 
the provision of the waiver granted at Doha in or der to enable it to implement the Cotonou Agreement 
and the Understandings on Bananas with Ecuador and the United States.  This new regime is 
completely different from the quota regime examined in the original Bananas III  case.  Also, the legal 
framework, namely the Understanding and the Doha Wa iver, is entirely new.  The Doha Waiver and 
the Understanding on Bananas were  negotiated after the DSB a dopted its recommendations and 
rulings in the original Bananas III  case.  These two instruments constitute new secondary WTO law 
and create an entirely new legal framework for the i ssues that are now pending before the Panel.  This 
legal framework did not exist at the time the original  dispute was examined.  The issues raised in the 
present case cannot therefore be challenged via a compliance Panel. 
5.117  Suriname also submits that Ecuador cannot ch allenge the preference it has accepted in the 
mutually agreed solution.  Indeed, each party to  the Understanding on Bananas has made concessions 
and obtained concessions in return.  It would be tota lly unfair if Ecuador was now allowed to call into 
question the Understanding on Bananas from which it h as already reaped the benefits.  This would 
also amount to denying any legally binding effect  to the Understanding and would be contrary to 
Article 3.7 of the DSU which necessarily implies that mutually agreed solutions have legal effects in 
subsequent proceedings. 
H. BRAZIL  
1. Oral statement of Brazil 
5.118  The European Communities claims that the par ties to a mutually agreed solution would be 
precluded from challenging elements of such an agre ement through recourse to the dispute settlement 
mechanism because, accord ing to the European Communities' understanding, Articles 3.7 and 3.10 of 
the DSU provide that mutually negotiated solutions  should be preferred to resorting to dispute 
resolution procedures. WT/DS27/RW2/ECU 
Page 86  
 
  5.119  For Brazil, this is partially true .  Article 3.7 of the DSU should be  interpreted in its integrality, 
with due account of all the provisions contained ther ein, that is to say the preference for negotiated 
solutions and the conformity with the WTO agreem ents.  Those two elements permit to draw the 
conclusion that compliance with the covered agreem ents has precedence over negotiated solutions and 
that parties to an agreed solution are not authorized by such instrument to circumvent their obligations 
under the multilateral trading rules. 
5.120  Therefore, the fact that the DSU favours nego tiated solutions over the litigation avenue does 
not allow concluding that any negotiated solution is preferred by  the DSU.  The negotiated solution 
must be compatible with the covered agreements. 
5.121  The European Communities also argues that the mere fact that a Member chooses to adopt 
and implement a suggestion made by a panel woul d automatically establish that this Member has 
complied with the obligations it was found to be in breach of. 
5.122  In Brazil's opinion, by solely declaring, unilaterally, that the current import regime is 
compatible with the WTO rule b ecause it derives from a suggestion made by the panel, the European 
Communities is not supporting its claim.  Braz il concurs with the European Communities on the 
binding nature of the panel and Appellate Body  reports.  However, the European Communities 
abruptly jumps to the flawed conclusion that because the Member has chosen to implement a 
suggestion by the panel such Member would always  be in compliance with its obligations under the 
covered agreements.  In the European Commun ities' view, the implementation of a suggestion 
contained in a panel report would lead to automatic
 compliance with the covered agreements, 
regardless of the means chosen  and the effects achieved. 
5.123  In no provision does the DSU grant Members certa inty as to the "lawfulness" of a measure 
taken to comply just becau se such measure is intended  to implement a suggestion made by a panel.  
To the contrary, Article 21.5 sets forth the Member s' right to resort to a panel where there is 
disagreement as to the consistency with covered agreements of the measures taken to comply. 
5.124  Whether or not a Member's intention to comply  meets the test of consistency with covered 
agreements is an assessment that should be left to  a panel.  That is so because even in the case a 
Member chooses to implement a suggestion by the panel, such a measure is still subject to an 
Article 21.5 review. 
5.125  If the European Communities' arguments were to pr evail, they would lead to absurd results.  
If accepted, they would render Article 21.5 devoid  of any significance, for the reason that any 
measure based on a panel's suggestion would automa tically escape the test of consistency with the 
covered agreements.  Thereby it would give the implementing Memb er a blanket waiver from proving 
that it has met its obligations and depriving th e complaining party of any surveillance of the 
implementation process. 
5.126  In addition, according to the European Communitie s, by resorting to an Article 21.5 panel, 
Ecuador would be using the current proceedings as an appeal procedure.  In Brazil's opinion, it is 
crystal clear that Ecuador's claims relate to the conformity of the EC measures with its obligations 
under Articles I, II and XIII of the GATT 1994.  Th erefore, Ecuador is neither challenging the 
suggestions of the panel nor the terms of the Unde rstanding.  Rather, the thrust of the case addresses 
the consistency of the measures taken by the Eu ropean Communities to comply with the covered 
agreements, in accordance with the mandate of Article 21.5. 
5.127  To Brazil's knowledge there is nothing in the DSU that precludes a Member from challenging 
under Article 21.5 any kind of measure taken by  the defending party to comply with the 
recommendations and rulings of the DSB.  In Brazil's view, a Member is not exempted from  WT/DS27/RW2/ECU 
 Page 87 
 
 
  discharging its burden of proof as regards the compliance of the new measures with the DSB 
recommendations and rulings even if such measures are intended  to implement a suggestion by the 
panel. 
I. COLOMBIA  
1. Written submission of Colombia 
(a) The preferential tariff treatment  accorded to ACP bananas is not justified under the Article I 
Doha Waiver 
(i) The Article I Doha Waiver has ceased to appl y to bananas as of 1 January 2006, and the 
European Communities was no longer entitled to "rectify the matter" 
5.128  The Waiver Annex contemplates that the determ ination at the Second Arbitration that the 
European Communities "has failed to rectify the matte r" would have definite legal consequences.  
These consequences are that following a negative dete rmination, the Article I Doha Waiver ceases to 
apply to bananas upon the entry into force of the new EC tariff regime, and the European Communities has no additional legal op portunity to "rectify the matter". 
5.129  In the light of the fifth tiret of the Waiver Annex, and based on the determination "that the 
European Communities ha[d] failed to rectify the ma tter", Colombia submits that the Article I Doha 
Waiver ceased to apply to bananas as of 1 Janua ry 2006. Colombia agrees with Ecuador that the 
Arbitrator's determination in this regard is a matter of the record that no party has disputed. 
5.130  Thus, following the adverse finding in the S econd Award, the European Communities was not 
entitled to any additional o pportunity to "rectify the matter", and the Article I Doha Waiver ceased to 
apply to bananas as of 1 January 2006. 
(ii) Assuming, arguendo, that the European Comm unities had the opportunity to "rectify the 
matter", the tariff level of €176/tonne does not comply with the Tariff Level Standard. 
The European Communities has not discharged its burden of showing compliance with the 
elements required under the Waiver Annex  
5.131  To prove compliance with all the terms and c onditions of the Waiver Annex, the European 
Communities should have addressed the three elements  referred to by the Arbitrator, against which 
that compliance must be assessed:  (i) whether th ere is a rebinding of the European Communities' 
tariff on bananas;  (ii) whether any such rebound tariff would result in at least maintaining total 
market access for MFN suppliers;  and (iii) whet her the rebound tariff takes into account all EC WTO 
market-access commitments relating to bananas.  However, the European Communities has failed to 
address the first and the third elements and has not  been able to demonstrate compliance with the 
second element. 
5.132  With respect to the first element, while the European Communities submits that the 
introduction of a different import regime than the one  analyzed by the Arbitrator "… maintain[s] the 
total market access of the MFN suppliers", the Euro pean Communities has failed to indicate what is 
the "envisaged rebinding of the EC tariff on bananas"  within the meaning of the Waiver Annex.  An 
applied  tariff of €176/tonne does not constitute a "rebinding ".  With respect to the third element, the 
European Communities has failed to explain how it  has taken into account all its WTO market-access 
commitments relating to bananas in designing its current import regime.  The European Communities 
has referred in its submissions only to the second el ement, on which it confines itself to a conclusion WT/DS27/RW2/ECU 
Page 88  
 
  of law – that the second element contemplates a quantity- or volum e- based standard – and has not 
even presented arguments to substa ntiate that conclusion of law. 
The European Communities' quantity- or volumes-b ased analysis is contrary to the Tariff 
Level Standard  
5.133  According to the European Communities, "the volume of total imports of bananas from MFN 
countries has increased significantly since the introduction of the new import regime … This shows 
that MFN suppliers have maintained the market access opportunities they had before the introduction 
of the new system."  In effect, the European  Communities asserts that the determination of 
compliance with the Tariff Level Standard requi res a volumes-based (or quantity-based) assessment.  
In other words, the European Comm unities argues that the Tariff Level Standard contemplates a tariff 
level that would result in at least maintaining the export volumes  of MFN banana suppliers. 
5.134  Agreeing with the European Comm unities, the Arbitrator rejected the contention that "market 
access" should be assessed in terms of trade volumes.  In its Rebuttal Submission at the first arbitration, the European Communities asserted that  "market access in the WTO is a legal concept 
which enshrines the level of protection or liberali zation. The extent to which trade flows, or one 
Member has a particular market share, has neve r been part of the WTO understanding of market 
access".  Then the European Communities added: "I n the WTO the phrase 'market access' is not to be 
understood as a measurement of the volume of impor ts or of market shar e (between either MFN 
suppliers or between MFN and other suppliers)".  Thus, the notion of volumes  as the benchmark for 
purposes of compliance with the Tariff Level St andard was thoroughly discussed and squarely 
rejected in the First Arbitration. 
5.135  Accordingly, there is no legal basis for a volumes-based assessment for purposes of 
determining compliance with the Tariff Level Standa rd.  It is irrelevant that MFN export volumes 
have increased. 
The applied tariff of €176/tonne does not result in at least maintaining total market access for 
MFN banana suppliers  
5.136  In its First Arbitration, the Arbitrator noted  that a determination of the conditions of 
competition between MFN bananas and both EC bananas and ACP bananas was necessary to 
determine compliance with the Tariff Level Standard. 
5.137  Colombia submits that, even if bound, a tariff  of 176€/tonne does not maintain the conditions 
of competition between either (i) MFN bananas and EC bananas or (ii) MFN bananas and ACP 
bananas.  Using the methodology, reference period and figures endorsed by the Arbitrator a tariff of 
€176/tonne does not maintain conditions of compet ition between either (i) MFN bananas and EC 
bananas or (ii) MFN bananas and ACP bananas. 
5.138  With respect to conditions of competition between MFN bananas and EC bananas , the 
Arbitrator found that the price-gap methodology "w ould accurately reflect the level of protection 
accorded to domestic or EC growers from foreign competitors." 
5.139  Regarding the appropriate reference period, the Arbitrator found that "the use of the most 
recent representative period minimizes the need for ad  hoc adjustments to be made to the data and 
corresponds as closely as possible to th e trade regime as applied."  The Arbitrator determined that the 
appropriate reference period was the period 2002-2004. 
5.140  With respect to the figures for the internal  price for bananas, at the Second Arbitration, the 
European Communities presented and relied on figur es based on data derived from Sopisco News.   WT/DS27/RW2/ECU 
 Page 89 
 
 
  The Arbitrator found that it "does not consider that  the European Communities' use of Sopisco News 
data to estimate the internal price of ba nanas on the EC market was inappropriate." 
5.141  With respect to the figures for the external  price for MFN bananas, at the First Arbitration, 
the European Communities relied on Eurostat c.i.f. pr ice data.  The appropriateness of the European 
Communities' use of Eurostat data to establish the external price was not disputed by any of the 
interested parties. 
5.142  Thus, using the methodology that was used by  the European Communities, endorsed by the 
Arbitrator, and based on statistics from sources re lied upon by the European Communities (Sopisco 
News) or generated by the Europ ean Communities' agencies (Eurostat) , and which were also endorsed 
by the Arbitrator, it is evident that a tariff of 176€/tonne does not maintain conditions of competition 
between MFN bananas and EC bananas . 
5.143  Based on the figures provided by the European  Communities, the Sopisco-based weighted 
average internal  price for bananas in the EC-25 dur ing the reference period 2002-2004 was 
€702/tonne.  Based on Eurostat statistics, the weighted  average external price for MFN bananas in the 
EC-25 during the reference period 2002-2004 was €605/tonne.  The price gap for MFN bananas 
during the reference period was, therefore, €97/tonne.  In short, the tariff level that would result in at 
least maintaining the conditions of competition between MFN bananas and EC bananas  cannot be 
more than €97/tonne. 
5.144  In the course of the First Arbitration, the Arbitr ator emphasised that a tariff meeting the Tariff 
Level Standard also needed to take in to account conditions of competition between MFN and ACP 
bananas .  Based on Eurostat statistics, the weighted average external price for ACP bananas in the 
EC-25 during the reference period 2002-2004 was €616/tonne.  Deducting this external price from the 
Sopisco-based weighted average inte rnal price in the EC-25 during the same period, as provided by 
the European Communities of €702/tonne, the price gap for ACP bananas during the reference period 
was €86/tonne. 
5.145  Accordingly, the tariff level that would resu lt in at least maintaining the conditions of 
competition between MFN bananas and ACP bananas  is the difference between the price gap for 
MFN bananas (€97/tonne) and the price gap fo r ACP bananas (€86/tonne), or €11/tonne. 
5.146  Hence, a tariff of 176€/tonne in no way main tains the conditions of competition between 
MFN bananas and ACP bananas  and, just as it does with respec t to the conditions of competition 
between MFN bananas and EC bananas , fails the Tariff Level Standard. 
(b) The Preferential Tariff Rate Quota accorded to ACP bananas is inconsistent with Article XIII 
of the GATT 1994 
5.147  Colombia recalls that the Appellate Body in EC – Poultry  stated that: 
"In applying import restrictions to any produc t, Members shall aim at a distribution of 
trade in such product approaching as clo sely as possible the shares with the various 
Members might be expected to obtain in the absence of such restrictions." 
5.148  The TRQ granted by the European Communities to ACP bananas clearly does not conform to 
this standard.  While MFN bananas must always bear a tariff, ACP bananas do not, because of the 
preferential intra-quota zero tariff.  It can hardly be argued that such a distribution of trade complies 
with the standard set out in Article XIII:2 of aiming "at a distribution of trade in such product approaching as closely as possible the shares which the various [Members] might be expected to 
obtain in the absence of such restrictions". WT/DS27/RW2/ECU 
Page 90  
 
  5.149  Likewise, Colombia believes that the TRQ gran ted by the European Communities to the ACP 
countries excludes all MFN bananas from the zero-dut y quota, and in doing so, violates Article XIII:1 
of the GATT 1994.  This discriminatory treatment de nies other WTO Members the right to participate 
in the European Communities' TRQ, and thereby to improve their access to the EC banana market. 
(c) Conclusion 
5.150  In light of the foregoing, Colombia respectfully requests the Panel to find that the measures at 
issue is inconsistent with Article I of the GATT 1994,  or alternatively, does not comply with the terms 
and conditions of the Article I Doha  Waiver, and is inconsistent with  Article XIII of the GATT 1994. 
2. Oral statement of Colombia 
5.151  The dispute on bananas is the longest dispute in the history of GATT/WTO.  Regrettably, this 
Panel proceeding is the tenth since 1992 examining the EC banana import regime.  Fifteen years on, 
in 2007, that regime is still not  in conformity with WTO law. 
5.152  Bananas are a product of paramount importance for the Colombian economy.  They are the 
main source of employment in rural areas crucia l for our national security, and are also one of 
Colombia's main export products. 
5.153  In its third-party written submission, Colombia  establishes why the EC banana import regime 
is inconsistent with Articles I and XIII of the GATT.  Colombia will take this opportunity to 
emphasize the most salient aspects of that submission. 
5.154  It is evident that the preferential tariff treatment  granted to ACP bananas is inconsistent with 
the MFN obligation in Article 1:1 of the GATT.  Th e Article I Doha Waiver temporarily justifying 
this treatment was granted subject to an EC obligation to rebind the EC MFN tariff on bananas at a 
level that results in at least maintaining total market access for MFN banana suppliers, taking into 
account all EC WTO market-access commitments relati ng to bananas.  The process of rebinding of 
the EC tariff contemplated a two-stage arbitra tion procedure and a waiver-termination provision. 
5.155  The fifth tiret of the Annex to the Article I Doha Waiver provided for a second arbitration to 
determine "whether the EC has rectified the matter ll and that "[i]f the EC has failed to rectify the 
matter, this waiver shall cease to apply to bananas up on entry into force of the new EC tariff regime".  
The European Communities reads this provision to mean that if the European Communities 
introduced a different import regime than the one an alyzed in the second arbitration, and that import 
regime did indeed maintain the total market acce ss of the MFN suppliers. then the Article I Doha 
Waiver would continue to apply. Colombia  cannot agree with this interpretation. 
5.156  The structure of fifth tiret of the Annex clea rly indicates that the European Communities had 
only one opportunity to rectify.  If the first arb itration award resulted in a determination that the 
rebinding would not result in at least maintaining total market access. an opportunity was given for 
the parties to reach a mutually sa tisfactory solution.  Thereafter, a last opportunity to rectify the 
matter was contemplated.  This created a powerfu l incentive for the parties to seek a negotiated 
solution.  An additional opportunity to rectify th e matter would nullify this incentive to negotiate. 
5.157  Furthermore, had the European Communities an additional opportunity to rectify the matter, 
and unilateral authority to judge whether or not th at import regime maintained the total market access 
of MFN suppliers, the purpose and rationale of the banana-specific dispute settlement mechanism in 
the waiver would be defeated.  The MFN suppliers  would have never gran ted the Article I Doha 
Waiver for bananas were this the case.  WT/DS27/RW2/ECU 
 Page 91 
 
 
  5.158  In any event, assuming arguendo that the European Comm unities had an additional 
opportunity to "rectify the matter", the applied tariff of €176/ton does not meet the terms and 
conditions of the Article I Doha Waiver. 
5.159  First, an applied tariff of €176/ton does not c onstitute a "rebinding".  Second, the European 
Communities has failed to take into account all its WTO market-access commitments relating to 
bananas. 
5.160  Third, and of greatest concern to Colombia, th e applied tariff €176/ton does not meet the tariff 
level standard of "at least maintaining tota l market access for MFN banana suppliers". 
5.161  Yesterday, the Panel asked the parties in th ese proceedings whether it should approach the 
question of whether the EC tariff meets the tariff le vel standard in the same manner as the Arbitrator 
in the banana tariff arbitrations. 
5.162  The European Communities invited the Panel not  be too formalistic and asserted that the 
assessment of whether the new import regime does indeed maintain total market access for MFN 
suppliers can only be based on an analysis of the real effects of the new import regime on MFN 
bananas.  For the European Communities, this requires a volumes-based assessment. 
5.163  Colombia has provided a detailed argument in pa ragraphs 18 to 24 of its third party written 
submission for why compliance with the tariff level standard ought to be assessed in the same manner 
as the Arbitrator and therefore in terms of cond itions of competition between MFN bananas and both 
EC and ACP bananas. 
5.164  In this statement, Colombia simply highlights that a volumes based assessment is contrary to 
the position put forward by the European Communiti es in the banana tariff arbitrations where it 
argued that the "legal notion of market access can only guarantee the legal conditions of imports, not 
the actual imports" and the "EC therefore urges the Arbitrators to reject the argument that market 
access should be measured in trade volumes or market shares". 
5.165  It is also contrary to the rulings of the Arbitrator.  The Arbitrator squarely rejected the 
contention that "market access" should be assessed in terms of trade volumes.  It noted that "total 
market access for MFN banana suppliers" is "not a guarantee of any particular level or volume of 
trade or price.  Rather, it relates to the opportuni ty for MFN suppliers to enter and compete on the EC 
banana market".  Instead, the Arbitrator endorsed  a tariff level standard based on conditions of 
competition. 
5.166  A test based on conditions of competition rather than actual trade flows is consistent with a 
long line of GATT and WTO jurisprudence and reflects the pr actical reality that it is impossible to 
isolate the impact of a measure from the myriad of other factors in the real world that constantly affect 
fluctuations in international trade.  It is clear , then, that a quantity or volume based analysis is 
contrary to the tariff level standard and should be rejected. 
5.167  Colombia also submits that, even if bound,  a tariff of €176/ton does not maintain the 
conditions of competition between either (i) MFN ba nanas and EC bananas or (ii) MFN bananas and 
ACP bananas. 
5.168  The Arbitrator endorsed the price gap methodology which, using correct prices, would 
produce an estimate of the tariff equivalent that woul d confer the same level of protection to domestic 
producers as the border measures being replaced by the tariff equivalent.  The Arbitrator also endorsed the following elements of the price gap methodology: WT/DS27/RW2/ECU 
Page 92  
 
  • The period 2002-2004 as the appropriate reference period. 
 
• The Sopisco-based weighted average inte rnal price of €702/ton in the EC-25. 
 
• The Eurostat weighted average external pri ce of €605/ton for MFN bananas in the EC-25. 
 
• The Eurostat weighted average external pri ce of €616/ton for ACP bananas in the EC-25. 
 
5.169  Therefore, the price gap for MFN bananas during the reference period was €97/ton.  In short, 
the tariff level that would result in at least ma intaining the conditions of competition between MFN 
bananas and EC bananas cannot  be more than €97/ton. 
5.170  Furthermore, the price gap for ACP bananas during the reference period was €86/ton.  Thus, 
the tariff level
 that would result in at least maintaining the conditions of competition between MFN 
bananas and ACP bananas is €11/ton. 
5.171  Hence, a tariff of €176/ton – even if bound – in no way maintains the conditions of 
competition between MFN bananas and EC bananas or between MFN bananas and ACP bananas and, 
therefore, fails to comply with the tariff level standard. 
5.172  For all the above reasons, Colombia submits that  the Article I Doha Waiver cannot justify the 
preferences granted by the European Communities. 
5.173  Colombia also asserts that the preferential tariff-rate quota accorded to ACP bananas is 
inconsistent with Articles XIII:1 and XIII:2 of the GATT. 
5.174  The essence of GATT Article XIII, and, therefore Article XIII:1 is that like products should 
be treated equally irrespective of their origin.  Ar ticle XIII:1, as applied to tariff quotas, prohibits the 
European Communities from establishing duty-free qua ntities for some Members, but not others, and 
from denying equal treatment to ba nana imports of all origins. 
5.175  Furthermore, given that the European Commun ities' tariff-rate quota is reserved exclusively 
for ACP bananas it does not comply with the standard  set out in Article XIII:2 of the GATT.  This 
standard requires that "in applying import restri ctions to any product, Members shall aim at a 
distribution of trade in such product as closel y as possible the shares which the various Members 
might be expected to obtain in the absence of su ch restrictions.  While MFN bananas must always 
bear a tariff, ACP bananas do not, because of the pref erential intra-quota zero tariff.  It can hardly be 
argued that such a distribution of trade complies with the standard set out in Article XIII:2. 
5.176  In the light of the foregoing, Colombia r espectfully requests the Panel to find that the 
measures at issue are inconsistent with Articles I and XIII of the GATT.   
J. JAPAN  
1. Written submission of Japan 
(a) The EC-Ecuador Understanding on Bananas does not preclude Ecuador from resorting to this 
Article 21.5 proceeding 
5.177  The European Communities preliminarily argues th at the Ecuador's challenge to the current 
banana import regime of the European Communities should be dismissed entirely because bringing  WT/DS27/RW2/ECU 
 Page 93 
 
 
  such a challenge is not allowed due to the Understanding.273  The European Communities considers 
that Ecuador's challenge to the said European Co mmunities' import regime goes against Articles 3.7 
and 3.10 of the DSU since Ecuador has accepted in the Understanding that the import regime taken by 
the European Communities on and after 1 January 2006 will include a preference for bananas 
imported from African, Caribbean and Pacific ("ACP") countries.274 
5.178  Ecuador primarily contends on the above-menti oned European Communities' argument that it 
is not barred by the Understanding to refer the European Communities' current import regime of 
bananas to this panel establishe d under Article 21.5 proceeding because "Articles 3.7 and 3.10 [of the 
DSU] do not preclude a challenge to measures based on the contention of the defending party that the measures have been 'accepted' in  a mutually agreed solution."
275 
5.179  As to the legal status and the effect of  mutually agreed solutions, the panel in India – Autos  
has given some useful indication.  The panel has not ed that there is no such provision in the DSU that 
precludes parties to the mutually agreed solutions from resorting to subsequent dispute settlement 
procedures.276  Regarding this absence of such provision, the panel, on one hand, has mentioned that 
"it could not be lightly assumed in what particular circumstances the drafters of the DSU might have 
indicated [the rights of the Members to bring a di spute] to be foregone"; on the other hand, however, 
the panel has also indicated that "it could not be lightly assumed that those drafters intended mutually 
agreed solutions… to have no meaningful legal eff ect in subsequent proceedings", recognizing that 
"[mutually agreed solutions] are expressl y referred to and supported by the DSU".277  In this regard, 
Japan particularly would like to take a note of  the panel's following observation presented in a 
precedent paragraph in its report: 
"It is certainly reasonable to assume, particularly on the basis of Article 3 of the 
DSU … that these agreed solutions are intende d to reflect a settlement of the dispute 
in question, which both parties expect will bring a final conclusion  to the relevant 
proceedings."278  (Emphasis added.) 
5.180  Japan agrees with the panel's observation in India – Autos . 
5.181  However, Japan believes that the Understa nding between the European Communities and 
Ecuador in this banana dispute279 does not affect Ecuador's right to challenge the European 
Communities' current import regime in the course of this Article 21.5 proceeding for the following 
reasons. 
                                                      
273 Japan notes that the European Communities argues  that Ecuador's challenge to the preference for 
ACP bananas for another reason;  Ecuador should not challenge a measure which is the implementation of the 
recommendations and rulings contained in the adopted panel report.  Please see para. 5.185, below, with respect 
to this argument. 
274 European Communities' first written submission, para. 64;  European Communities' second written 
submission, para. 8. 
275 Ecuador's second written submission , para. 8. 
276 Panel Report,  India – Autos , para. 7.113. 
277 Ibid., para. 7.115. 
278 Ibid., para. 7.113. 
279 With regard to the nature of the Understanding, although Ecuador does not clearly states so, there 
seems to be a disagreement between the parties: the EC alleges that the Understanding constitutes a "mutually 
agreed solution" in the sense of Article 3 of the DSU while Ecuador sees it contrary by declaring that the "provisions of Article 3.6 of the DSU are not applicable in this case. "  Japan is not a party to the Understanding 
and it refrains from commenting on whether the Understanding constitutes a "mutually agreed solution" for the 
purpose of Article 3 of the DSU or not.  However, as Ecuador bases its arguments on an assumption that the Understanding is a "mutually agreed solution" for the purpose of Article 3 of the DSU (see paras. 8-13 of its 
second written submission), Japan argues on the ba sis of the same assumption in this submission. WT/DS27/RW2/ECU 
Page 94  
 
  5.182  As pointed out by Ecuador in its Second Written Submission, it has to be made clear that any 
solutions which serve the purpose of Article 3 of the DSU should be consistent with the WTO rules
280 
and the terms of the agreement should be observed281. Concerning the European Communities' current 
banana import regime, the European  Communities claims that the import regime is the exact measure 
agreed between the European Communities and Ecua dor under the Understanding to be taken by the 
European Communities on and after 1 January 2006,  since the Understanding clearly prescribes that 
such a measure should have two characteristics, na mely, "tariff only" and "granting preference to 
ACP countries."282  Japan believes, however, in addition to  these two characteristics, implementation 
of the measure prescribed in the Understanding, by de finition, requires at least one more element to be 
satisfied, that is, to maintain a valid waiver fro m Article I of the GATT.  Since the said regime 
explicitly grants a preference to bananas im ported from ACP countries over those from non-ACP 
countries, implementation of the regime would plainl y violate Article I:1 of the GATT but for a valid 
waiver from it.  As stated at the beginning of this  paragraph, a mutually ag reed solution needs to be 
consistent with WTO rules and to be  adhered to.  Therefore, in Japan's view, in order for the European 
Communities to claim that its current import regime is implemented as prescribed in the 
Understanding, it is indispensable for the Europ ean Communities to implement the regime with a 
valid relevant waiver because such a wavier is in  the nature of a mutually  agreed solution for the 
purpose of Article 3 of the DSU. 
5.183  Then, the question comes down to the issue wh ether the European Communities maintains a 
valid waiver from GATT Article I or not, which wa iver is necessary for th e European Communities' 
current import regime to be implemented in line with  the mutually agreed solution.  As the condition 
for the application of the waiver has been set in the subsequent arrangement, the "Doha Waiver",283 it 
is therefore necessary to examine if the Europ ean Communities has satisfi ed the condition for the 
application of the Doha Waiver.  In this rega rd, as both the European Communities and Ecuador 
recognize, there is a disagreement between them regarding the application of the waiver:  the 
European Communities asserts that it "has fully satisfi ed the condition for the continued application of 
the Doha Waiver";  in contrary, Ecuador conte nds that the waiver expired on 1 January 2006, 
following the second arbitration award finding that th e European Communities had "failed to rectify 
the matter", which is a condition of the waiver to cease its application.284 
5.184  The validity of the waiver, and, the Eur opean Communities' current import regime's 
compliance with the Understanding, may, as indi cated by the European Communities in its second 
written submission285, require the examination of relevant facts.  Japan, however, understands the 
point here to be that the fact that the European  Communities' current import regime is the measure 
taken in accordance with the Understanding, that is, a mutually agreed solution, itself was not 
established at the time when Ecuador initiated this panel proceeding.286  Therefore, even if European 
Communities' argument concerning the validity of th e Doha Waiver for Article I of the GATT is 
justified in the later proceeding, and thus the European Communities' current import regime is 
established to be in compliance with the mutually agr eed solution, there is still a merit in bringing this 
claim to the panel under Article 21.5 of the DSU. 
                                                      
280 Second written submission of Ecuador, para. 12. 
281 Ibid., para. 11. 
282 The Understanding, point B. 
283 European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15, 14 November 
2001; European Communities – Transitional Regime for the EC Autonomous Tariff Rate Quotas on Imports of 
Bananas, WT/MIN(01)/16, November 14, 2001. 
284 Ecuador's second written submission, para. 24. 
285 European Communities' second written submission, paras. 36-38. 
286 In this regard, Japan notes that the European Communities argues in its second written submission 
that "[i]t is a well established fact that the current import regime more than maintains the market access of Ecuador… and Ecuador already knew  this fact when it initiated the current proceedings" (para. 38).  Japan is not 
aware of statements in the parties' submissions whic h confirm this European Co mmunities' argument, though.  WT/DS27/RW2/ECU 
 Page 95 
 
 
  5.185  Moreover, Japan recognizes that the European  Communities further argues in its second 
written submission that Ecuador is barred from ch allenging the preference existed in European 
Communities' measure "because it amounts to a ch allenge to a suggestion made by the panel."287  
Japan considers that European Co mmunities' assertion here does not stand, either.  The panel in EC – 
Bananas III (Article 21.5 – Ecuador)  has indicated possible measures that the European Communities 
may take to comply with the recommendations and ru lings.  It is important to note that the panel 
suggested the European Communiti es to take those measures with relevant waiver, if necessary.288  
Thus, Japan believes that the European Communiti es needs to implement the current import regime 
with a necessary valid waiver in order to claim that  it is implementing the regime as suggested in the 
panel report, for the same reason stated so far, since it is not considered that the panel in EC – 
Bananas III (Article 21.5 – Ecuador)  has suggested that the European Communities may take a 
measure inconsistent with WTO rules. 
5.186  For the above reasons, Japan believes that, even  if the Understanding constitutes a "mutually 
agreed solution" under Article 3 of the DSU, it does not become an obstacle for Ecuador to bring a case under this Article 21.5 proceeding.  Therefore,  Japan considers that European Communities' 
preliminary argument should be rejected to this extent. 
K. N
ICARAGUA  
1. Written submission of Nicaragua 
(a) Introduction 
5.187  The European Communities' latest banana me asures, a more-than-doubled MFN tariff and 
duty-free ACP quota, represent yet another instalment of recurring EC non-compliance in the 
Bananas  dispute.  They are again the outgrowth of an internal negotiating mandate that primarily aims 
to guarantee a tariff-only arrangement under which "Community production is maintained and [EC] 
producers are not put in a less favourable situation as before the entering into force of the import quota regime in 1993."  Like Ecuador, Nicaragua considers that the measures introduced by the 
European Communities on 1 January 2006 to fulfil its internal protectionist mandate are properly 
before the Panel for review, and c onstitute prima facie violations of  GATT Articles I:1, XIII:1 and 2, 
and II:1. 
(b) The European Communities' banana measures are properly before the Panel for review 
5.188  The European Communities' first and second wr itten submissions concede that its current 
measures were taken for the purpose of trying to comply with the rulings of EC – Bananas III  and EC 
– Bananas III (Article 21.5 – Ecuador) .  Since the European Communities would also have to 
concede that a "disagreement" exis ts as to whether its current measu res are in conformity with the 
European Communities' compliance ob ligations, all elements needed for an Article 21.5 review are 
present. 
(c) The European Communities' ACP Tariff Prefer ence is inconsistent with GATT Article I:1 
5.189  GATT Article I:1 requires that any customs adva ntage granted to the product of one Member 
must be accorded immediately and unconditionally to the like product of another Member.  The 
European Communities is granting ACP bananas a zero-duty tariff preference within a 775,000 mt 
ACP tariff quota, while subjecting all MFN bananas to a €176/mt rate.  Its ACP tariff preference is, 
therefore, inconsistent with GATT Article I:1. 
                                                     
 
287 European Communities' second written submission, para. 19. 
288 Panel Report, EC – Bananas III (Article 21.5 – Ecuador) , paras. 6.155-6.158. WT/DS27/RW2/ECU 
Page 96  
 
  5.190  The European Communities does not contest that  GATT Article I incons istency, but wrongly 
asserts that the inconsistency continues to be c overed by its GATT Article I waiver.  Under the 
European Communities' interpretation, the waiver a nd its special banana Annex required it to subject 
its pre-2006 tariff proposals to successive arbitration reviews under defined terms of reference, but 
then allowed the European Commun ities, after it lost twice in arbitration, to impose whatever 2006 
regime it unilaterally determined would satisfy the terms of reference for those proceedings.  Properly 
interpreted, the waiver requires that once the S econd Arbitration determined that the European 
Communities "has failed to rectify the matter", the waiver automatically terminated for bananas upon 
implementation of the European Communities' 2006 regime, making any ACP banana preference 
granted thereafter inconsistent with Article I. 
5.191  As the ordinary meaning of the chapeau and five tirets of the waiver Annex make clear, the 
Annex establishes pre-2006 approval requireme nts governing "tariff only".  Under those 
requirements, the European Communities' waiver for bananas was only authorized  to continue beyond 
2006 if the European Communities received a First Arbitration determination that its "envisaged 
rebinding ... would result in at least maintaining to tal market access for MFN banana suppliers, taking 
into account ... all EC WTO market access commitments";  or "rectified the matter" by reaching a 
"mutually satisfactory solution" with the interested parties; or "rectified the matter" by receiving a 
Second Arbitration determination that the European  Communities "has rectified the matter".  Because 
none of these pre-requisites was fulfilled, the waiver  automatically lapsed on 1 January 2006, upon 
implementation of the current EC "tariff only" regime. 
5.192  The European Communities seeks to override th e textually-mandated termination of the 
waiver by highlighting what it refers to as the "real wo rld and ... real situation in the banana market."  
As concerned as Nicaragua is about the actual  detrimental MFN effects of the current regime, those 
effects have no legal relevance  to the conditions attaching to the continuation of the European 
Communities' waiver for bananas.  Nevertheless, as  confirmed in a recently updated market analysis 
published by the Centre for International Econom ics ("CIE"), the €176/mt tariff preference and 
775,000 mt duty-free ACP quota regime are already eroding access for the developing countries of 
Latin America, which damage will gr ow substantially worse over time. 
(d) The European Communities' ACP Tariff Quota is inconsistent with GATT Articles XIII:1 
and XIII:2 
5.193  Paragraph one of GATT Article XIII sets fo rth an uncategorical prohibition against 
discriminatory quantitative restrictions.  Paragraph 5 of GATT Article XIII extends that prohibition to 
tariff quotas.  The EC – Bananas III  Panel Report carefully analyzed the text of Article XIII:1 and 
affirmed that, consistent with its text, the like pr oducts of all Members must be similarly restricted, 
finding that " a Member may not limit the quantity of imports from some Members but not from others 
[and] [a] Member may not restrict imports from some Members using one means and restrict them 
from another using another means ".  In upholding the Panel's findings, the EC – Bananas III  
Appellate Body added that the "essence" of GATT Artic le XIII, and, therefore Article XIII:1, "is that 
like products should be treated equally, irrespective of their origin ".  The European Communities is 
applying its current zero-duty tariff quota to bana nas of ACP origin, but not to bananas of MFN 
origin.  Bananas from Nicaragua and other MFN orig ins are subject, instead, to a €176/mt tariff.  As 
its tariff quota is not "similarly restricting" or "tr eating equally" all EC banana imports, it is facially 
inconsistent with GATT Article XIII:1. 
5.194  The chapeau of Article XIII:2, made appli cable to tariff quotas through paragraph 5, 
establishes an equally strict companion requirement governing the distribution of any tariff quota applied by a Member.  In its interpretation of that chapeau text, the EC – Bananas III  Panel found that 
if tariff quotas are used, and a Member wishes to a llocate shares of a tariff quota to some Members 
without a substantial interest, then shares must be allocated to all Members to be consistent with the  WT/DS27/RW2/ECU 
 Page 97 
 
 
  "similarly restricted" requirement of Article XIII: 1.  The European Communities' current zero-duty 
tariff quota has been distributed in its entirety to the non-substantial supplying interests of the ACP.  
Nicaragua, which like the ACP countries, is a non-substa ntial supplier of bananas to the EC market, is 
receiving no share whatsoever of that tariff quota.  The European Communities' ACP tariff quota is, 
thus, also inconsistent with Article XIII:2. 
5.195  The European Communities seek s to escape Article XIII review by essentially reformulating 
three defenses it previously attempted in earlier EC – Bananas III  proceedings.  All three of those 
arguments were expressly rejected in the EC – Bananas III  and EC – Bananas III (Article 21.5 – 
Ecuador)  reports, and are equally groundless today.  First, the European Co mmunities proposes, as it 
did in EC – Bananas III (Article 21.5 – Ecuador) , that prior findings confirm the ACP tariff quota is 
covered only by Article I,  not Article XIII.  The EC – Bananas III (Article 21.5 – Ecuador)  panel 
directly rejected this argument and would not ha ve issued a "suggestion" that nullified its own 
findings.  Its use of the words "suitable waiver" m eant only that all necessary coverage would need to 
be pursued under Articles I and XIII, and that the European Communities had the drafting option 
under WTO practice of consolidating the necessary c overage into a single waiver decision if it so 
chose. 
5.196  Second, the European Communities argues that Artic le XIII is not applicable to its ACP tariff 
quota because Article XIII does not "regulate the re lationship between quantitative restrictions [an 
ACP tariff quota] and other measures [a MFN tariff regime ]."  Its effort to divide the EC market into 
different types of regimes to escape Article XIII revi ew is an obvious variation of its prior "separate 
regimes" argument, which was also decisively rejected in the EC – Bananas III  and EC – Bananas III 
(Article 21.5 – Ecuador)  reports.  The panels and Appellate Body in those proceedings affirmed that, 
if Article XIII could be bypassed by assigning a tariff quota to one set of countries [ACP suppliers] 
and an entirely different import measure to others  [MFN suppliers], as the European Communities 
proposes, tariff-quota discrimination would prolifer ate, and Article XIII would be "eviscerated". 
5.197  Third, the European Communities reasserts its  old argument that "even if there is a 
quantitative restriction imposed on ACP countries" s ubject to GATT Article XIII, this "cap" is a 
"benefit" to MFN countries because it limits the qua ntity of ACP imports entering the Community at 
zero duty.  Article XIII does not require a showing of  nullification or impairment to sustain a claim 
under its provisions.  In any case, MFN suppliers are being denied the benefit of zero-duty access 
within a protected quota.  Moreover, as found in prior EC – Bananas III  rulings, a quantitative limit 
reserved only for preferred suppliers enables vari ous beneficiaries of the tariff preference " to compete 
more effectively than [they] would [under] the tariff preference alone ," and "will have repercussions 
on the import performance  of other substantial or non-s ubstantial supplier countries." 
(e) The European Communities' €176/mt tariff is  inconsistent with its GATT Article II 
concessions 
5.198  GATT Article II:1 prohibits a Memb er from treating imported product less favourably  than 
provided in its Schedule and forbids the imposition of tariffs in excess of  the bound rates set out in a 
Member's Schedule.  The European Communities is  applying a tariff of €176/mt on all MFN banana 
imports, a rate more than double the €75/mt in-quota bound rate.  As the application of an ordinary 
customs duty far in excess of €75/mt to all impor ts of MFN bananas constitutes treatment obviously 
less favourable than the concessions provided for in the European Communities' Schedule, the 
European Communities' €176/mt "autonomous" rate  is inconsistent with GATT Article II:1. 
5.199  The European Communities disingenuously asserts, for the first time in this decade-long 
dispute, that its €75/mt concession lapsed as of 31 December 2002 by reason of the BFA annexed to 
its Schedule.  It incorrectly argues in the alternativ e that even if the €75/mt binding did not expire at 
the end of 2002, it was "lawfully" terminated on  1 January 2006 because the abolition of the MFN WT/DS27/RW2/ECU 
Page 98  
 
  tariff quota would "inevitably bring along the aboliti on of the corresponding tariff".  As demonstrated 
by Ecuador, the ordinary meaning, context, and object of the European Communities' Uruguay Round banana concessions, in combination with the Eur opean Communities' own conduct, make clear that 
the €75/mt binding continues to have legal ef fect and did not, as alleged by the European 
Communities, terminate in 2002. 
5.200  By its terms, the 1994 BFA was a free-standing "settlement" agreement between the European 
Communities, on the one hand, and Nicaragua, Colomb ia, Costa Rica, and Venezuela, on the other.  
When the BFA stated that "this agreement  shall apply until 31 December 2002", it meant just that, 
i.e., that the European Communities' agreement with the four BFA Latin American countries , not the 
Uruguay Round concessions applicable to all WTO Me mbers, would terminate at the end of 2002.  
Insofar as the European Communities' WTO stat ements, legal instruments, and internal 
communications repeatedly acknowledge the continuing validity of the €75/mt binding, it is in no position now to argue otherwise.  Likewise, it cannot  argue that its move from a MFN tariff quota to 
"tariff-only" "automatically" dissolved all GATT Article II obligations attaching to its €75/mt 
binding.  The very purpose of GATT Article II is to preserve the value of a Member's tariff 
concessions and prohibit the "automatic abolition"  of those concessions.  Indeed, the European 
Communities has itself officially acknowledged the continuing bound commitment of €75/mt under 
Article II upon discontinuation of the MFN tariff quota. 
(f) Conclusion 
5.201  To ensure that this decade-long dispute does not  culminate in discrimination and restrictions 
equal to or worse than those already condemned in  prior WTO reviews, Nicaragua joins Ecuador in 
urging a prompt determination that the measures now before the Panel are inconsistent with GATT 
Articles I:1, XIII:1 and XIII:2, and II. 
L. P
ANAMA  
1. Written submission of Panama 
(a) Introduction 
5.202  The European Communities' latest banana me asures, a more-than-doubled MFN tariff and 
duty-free ACP quota, represent yet another instalment of recurring EC non-compliance in the Bananas  dispute.  They are again the outgrowth of an internal negotiating mandate that primarily aims 
to guarantee a tariff-only arrangement under which "Community production is maintained and [EC] 
producers are not put in a less favourable situation as before the entering into force of the import quota regime in 1993".  Like Ecuador, Panama considers that the measures introduced by the 
European Communities on 1 January 2006 to fulfil its internal protectionist mandate are properly 
before the Panel for review, and c onstitute prima facie violations of  GATT Articles I:1, XIII:1 and 2, 
and II:1. 
(b) The European Communities' banana measures are properly before the Panel for review 
5.203  The European Communities' first and second wr itten submissions concede that its current 
measures were taken for the purpose of trying to comply with the rulings of EC – Bananas III  and EC 
– Bananas III (Article 21.5 – Ecuador) .  Since the European Communities would also have to 
concede that a "disagreement" exis ts as to whether its current measu res are in conformity with the 
European Communities' compliance ob ligations, all elements needed for an Article 21.5 review are 
present.  WT/DS27/RW2/ECU 
 Page 99 
 
 
  (c) The European Communities' ACP Tariff Prefer ence is inconsistent with GATT Article I:1 
5.204  GATT Article I:1 requires that any customs adva ntage granted to the product of one Member 
must be accorded immediately and unconditionally to the like product of another Member.  The 
European Communities is granting ACP bananas a zero-duty tariff preference within a 775,000 mt 
ACP tariff quota, while subjecting all MFN bananas to a €176/mt rate.  Its ACP tariff preference is, 
therefore, inconsistent with GATT Article I:1. 
5.205  The European Communities does not contest that  GATT Article I incons istency, but wrongly 
asserts that the inconsistency continues to be c overed by its GATT Article I waiver.  Under the 
European Communities' interpretation, the waiver a nd its special banana Annex required it to subject 
its pre-2006 tariff proposals to successive arbitration reviews under defined terms of reference, but 
then allowed the European Commun ities, after it lost twice in arbitration, to impose whatever 2006 
regime it unilaterally determined would satisfy the terms of reference for those proceedings.  Properly 
interpreted, the waiver requires that once the S econd Arbitration determined that the European 
Communities "has failed to rectify the matter," the waiver automatically terminated for bananas upon 
implementation of the European Communities' 2006 regime, making any ACP banana preference 
granted thereafter inconsistent with Article I. 
5.206  As the ordinary meaning of the chapeau and five tirets of the waiver Annex make clear, the 
Annex establishes pre-2006 approval requireme nts governing "tariff only".  Under those 
requirements, the European Communities' waiver for bananas was only authorized  to continue beyond 
2006 if the European Communities received a First Arbitration determination that its "envisaged 
rebinding ... would result in at least maintaining to tal market access for MFN banana suppliers, taking 
into account ... all EC WTO market access commitments;"  or "rectified the matter" by reaching a 
"mutually satisfactory solution" with the interested parties;  or "rectified the matter" by receiving a 
Second Arbitration determination that the European  Communities "has rectified the matter."  Because 
none of these pre-requisites was fulfilled, the waiver  automatically lapsed on 1 January 2006, upon 
implementation of the current EC "tariff only" regime. 
5.207  The European Communities seeks to override th e textually-mandated termination of the 
waiver by highlighting what it refers to as the "real wo rld and ... real situation in the banana market."  
As concerned as Panama is about the actual  detrimental MFN effects of the current regime, those 
effects have no legal relevance  to the conditions attaching to the continuation of the European 
Communities' waiver for bananas.  Nevertheless, as  confirmed in a recently updated market analysis 
published by the Centre for International Econom ics ("CIE"), the €176/mt tariff preference and 
775,000 mt duty-free ACP quota regime are already eroding access for the developing countries of 
Latin America, which damage will gr ow substantially worse over time. 
(d) The European Communities' ACP tariff quota is  inconsistent with GATT Articles XIII:1 and 
XIII:2 
5.208  Paragraph one of GATT Article XIII sets fo rth an uncategorical prohibition against 
discriminatory quantitative restrictions.  Paragraph 5 of GATT Article XIII extends that prohibition to 
tariff quotas.  The EC – Bananas III  Panel Report carefully analyzed the text of Article XIII:1 and 
affirmed that, consistent with its text, the like products of all Members must be similarly restricted, 
finding that " a Member may not limit the quantity of imports from some Members but not from others 
[and] [a] Member may not restrict imports from some Members using one means and restrict them 
from another using another means ".  In upholding the Panel's findings, the EC – Bananas III  
Appellate Body added that the "essence" of GATT Artic le XIII, and, therefore Article XIII:1, "is that 
like products should be treated equally, irrespective of their origin ".  The European Communities is 
applying its current zero-duty tariff quota to bana nas of ACP origin, but not to bananas of MFN 
origin.  Bananas from Panama and other MFN origins are subject, instead, to a €176/mt tariff.  As its WT/DS27/RW2/ECU 
Page 100  
 
  tariff quota is not "similarly restricting" or "trea ting equally" all EC banana  imports, it is facially 
inconsistent with GATT Article XIII:1. 
5.209  The chapeau of Article XIII:2, made appli cable to tariff quotas through paragraph 5, 
establishes an equally strict companion requirement governing the distribution of any tariff quota applied by a Member.  In its interpretation of that chapeau text, the EC – Bananas III  Panel found that 
if tariff quotas are used, and a Member wishes to a llocate shares of a tariff quota to some Members 
without a substantial interest, then shares must be allocated to all Members to be consistent with the 
"similarly restricted" requirement of Article XIII: 1.  The European Communities' current zero-duty 
tariff quota has been distributed in its entirety to the non-substantial supplying interests of the ACP.  
Panama, which like Ecuador, has been recognized by the European Communities as a principal 
supplier of bananas to the EC market, is receivi ng no share whatsoever of that tariff quota.  The 
European Communities' ACP tariff quota is, thus , also inconsistent with Article XIII:2. 
5.210  The European Communities seek s to escape Article XIII review by essentially reformulating 
three defenses it previously attempted in earlier EC – Bananas III  proceedings.  All three of those 
arguments were expressly rejected in the EC – Bananas III  and EC – Bananas III (Article 21.5 – 
Ecuador)  reports, and are equally groundless today.  First, the European Co mmunities proposes, as it 
did in EC – Bananas III (Article 21.5 – Ecuador) , that prior findings confirm the ACP tariff quota is 
covered only by Article I,  not Article XIII.  The EC – Bananas III (Article 21.5 – Ecuador)  panel 
directly rejected this argument and would not ha ve issued a "suggestion" that nullified its own 
findings.  Its use of the words "suitable waiver" m eant only that all necessary coverage would need to 
be pursued under Articles I and XIII, and that the European Communities had the drafting option 
under WTO practice of consolidating the necessary c overage into a single waiver decision if it so 
chose. 
5.211  Second, the European Communities argues that Artic le XIII is not applicable to its ACP tariff 
quota because Article XIII does not "regulate the re lationship between quantitative restrictions [an 
ACP tariff quota] and other measures [a MFN tariff regime ]."  Its effort to divide the EC market into 
different types of regimes to escape Article XIII revi ew is an obvious variation of its prior "separate 
regimes" argument, which was also decisively rejected in the EC – Bananas III  and EC – Bananas III 
(Article 21.5 – Ecuador)  reports.  The panels and Appellate Body in those proceedings affirmed that, 
if Article XIII could be bypassed by assigning a tariff quota to one set of countries [ACP suppliers] 
and an entirely different import measure to others  [MFN suppliers], as the European Communities 
proposes, tariff-quota discrimination would prolifer ate, and Article XIII would be "eviscerated". 
5.212  Third, the European Communities reasserts its  old argument that "even if there is a 
quantitative restriction imposed on ACP countries" s ubject to GATT Article XIII, this "cap" is a 
"benefit" to MFN countries because it limits the qua ntity of ACP imports entering the Community at 
zero duty.  Article XIII does not require a showing of  nullification or impairment to sustain a claim 
under its provisions.  In any case, MFN suppliers are being denied the benefit of zero-duty access 
within a protected quota.  Moreover, as found in prior EC – Bananas III  rulings, a quantitative limit 
reserved only for preferred suppliers enables vari ous beneficiaries of the tariff preference " to compete 
more effectively than [they] would [under] the tariff preference alone ," and "will have repercussions 
on the import performance  of other substantial or non-s ubstantial supplier countries". 
(e) The European Communities' €176/mt tariff is  inconsistent with its GATT Article II 
concessions 
5.213  GATT Article II:1 prohibits a Memb er from treating imported product less favourably  than 
provided in its Schedule and forbids the imposition of tariffs in excess of  the bound rates set out in a 
Member's Schedule.  The European Communities is  applying a tariff of €176/mt on all MFN banana 
imports, a rate more than double the €75/mt in-quota bound rate.  As the application of an ordinary  WT/DS27/RW2/ECU 
 Page 101 
 
 
  customs duty far in excess of €75/mt to all imports of MFN bananas constitutes treatment obviously 
less favourable than the concessions provided for in the European Communities' Schedule, the 
European Communities' €176/mt "autonomous" rate  is inconsistent with GATT Article II:1. 
5.214  The European Communities disingenuously asserts, for the first time in this decade-long 
dispute, that its €75/mt concession lapsed as of 31 December 2002 by reason of the BFA annexed to 
its Schedule.  It incorrectly argues in the alternativ e that even if the €75/mt binding did not expire at 
the end of 2002, it was "lawfully" terminated on  1 January 2006 because the abolition of the MFN 
tariff quota would "inevitably bring along the aboliti on of the corresponding tariff."  As demonstrated 
by Ecuador, the ordinary meaning, context, and object of the European Communities' Uruguay Round banana concessions, in combination with the Eur opean Communities' own conduct, make clear that 
the €75/mt binding continues to have legal ef fect and did not, as alleged by the European 
Communities, terminate in 2002. 
5.215  By its terms, the 1994 BFA was a free-standing "settlement" agreement between the European 
Communities, on the one hand, and Nicaragua, Colomb ia, Costa Rica, and Venezuela, on the other.  
When the BFA stated that "this agreement  shall apply until 31 December 2002", it meant just that the 
European Communities' agreement with the four BFA Latin American countries , not the Uruguay 
Round concessions applicable to all WTO Members, w ould terminate at the end of 2002.  Insofar as 
the European Communities' WTO statements, lega l instruments, and internal communications 
repeatedly acknowledge the continuing validity of  the €75/mt binding, it is in no position now to 
argue otherwise.  Likewise, it cannot argue that its move from a MFN tariff quota to "tariff-only" 
"automatically" dissolved all GATT Article II obliga tions attaching to its €75/mt binding.  The very 
purpose of GATT Article II is to preserve the value of a Member's tariff concessions and prohibit the 
"automatic abolition" of those concessions.  Indeed , the European Communiti es has itself officially 
acknowledged the continuing bound commitment of €75/mt under Article II upon discontinuation of 
the MFN tariff quota. 
(f) Conclusion 
5.216  To ensure that this decade-long dispute does not  culminate in discrimination and restrictions 
equal to or worse than those already condemned in prior WTO reviews, Panama joins Ecuador in 
urging a prompt determination that the measures now before the Panel are inconsistent with GATT 
Articles I:1, XIII:1 and XIII:2, and II. 
2. Combined oral statement by Panama and Nicaragua 
5.217  Panama begin this morning with brief comments on what the European Communities' 
renewed WTO violations, and enduring history of  non-compliance, have meant for the people of 
Panama.  Nicaragua, will then briefly discuss the Eu ropean Communities' ine quitable access treatment 
from the standpoint of her own country.  Finally, th e legal advisor to the Governments of Panama and 
Nicaragua, will explain why the  European Communitie s' banana measures are plainly in violation of 
GATT Articles I, II, and XIII, and fail to bring th e European Communities into compliance with prior 
DSB rulings. 
5.218  Thirteen years ago, Panama was negotiating its accession to the WTO.  Then, as now, 
bananas were Panama's principal agricultural expor t and an indispensable source of income for the 
poorest rural populations.  Then, as now, the European  Communities restricted access to bananas from 
Panama and other Latin American countries in obviously discriminatory ways.  Although the 
accession process was not an easy one for Panama, Panama promised its people that in exchange for 
accession sacrifices, Panama would be part of a rule-b ased system that would finally help it protect its 
trading interests against unfair restrictions  and discrimination on products like bananas. WT/DS27/RW2/ECU 
Page 102  
 
  5.219  Once Panama's accession was finalized in 1997, Panama was procedurally foreclosed from 
joining Bananas III , but spent substantial time and res ources in Geneva and at the 2001 Doha 
Ministerial helping to lead the GATT Article I waiver  negotiations relating to bananas.  As the record 
of those negotiations makes perfectly clear, Panama and other Latin American suppliers declined to 
accept the  European Communities' waiver request for many months until strict Arbitration controls, 
and the "two strikes and you're out" rule in partic ular, were built into the waiver's text.  Upon 
receiving those commitments, Panama returned from the Doha Ministerial meeting once again 
promising its people that the multilateral controls of  the Annex were certain to safeguard its banana 
interests. 
5.220  These various rule-related promises, which initiall y gave the people of Panama such comfort, 
have now sadly given way to reality.  Shaken  first by the European Communities' extended 
Bananas III  non-compliance in 1999, they have now been all but shattered by the European 
Communities' obviously non-compliant transition to "tariff-only." 
5.221  Two years ago, during the 2005 Arbitration hearing, Panama listened with dismay and alarm 
as the European Communities defended its high-tariff discrimination using justifications that would 
dismantle the protections of the Annex word-by- word.  Panama heard th e European Communities 
insist then:  
• that it had done the right and responsible thing in "balancing all interests" by 
increasing the €75 tariff by several multiples;  
• that the Arbitrator should not read the word s of the waiver Annex with "mechanistic" 
formality, meaning it should ignore the words as they were written;  
• that the Arbitrator should not consider the preferential treatment accorded to ACP 
suppliers, which the European Communities claimed was separate and apart from the 
MFN arrangement;  
• that MFN access should be reduced to the €75  tariff for 2.2 million tonnes of bananas 
scheduled in the Uruguay Round, alt hough MFN access had grown considerably 
since then; and  
• that the European Communities was entirely w ithin its right to structure its banana-
access arrangement primarily to protect its subsidized banana producers.   
5.222  In listening to the vigour with which those argu ments were made, it was hard for Panama to 
find any comfort that the European Communities w ould faithfully respect the Annex as of 2006.  
Indeed, it did not.   
5.223  After losing twice in Arbitration, and without so much as a single negotiation with Latin 
America, the European Communities enacted in haste a new arrangement virtually identical to the one 
already condemned in Arbitration, with ACP pr eferences that were no longer allowed under the 
waivers of Article I and XIII.  The European Communities presented its 2006 arrangement to us as a 
fait accompli , explained that its effects would be "monitored" in the "real world."  
5.224  So, today, Panama is here again to protect its rural producers and communities that depend on 
this product, Panama hopes you will understand its deep sense of inju stice and disappointment.  Even 
now, in ways both disturbingly familiar and strange ly contradictory, Panama hears the European 
Communities argue:  WT/DS27/RW2/ECU 
 Page 103 
 
 
  • that it has struck a successful balance be tween all interests involved, which would 
"not be in the interest of any country involved ... to undo;" 
• that the Panel must avoid a "formalistic"  reading of the Annex, meaning it should 
ignore the words of the text as they were written; 
• that the relationship between the MFN a nd the ACP treatment cannot be compared; 
and  
• that the €75 tariff is not even bound, despite its insistence throughout Arbitration that 
its Uruguay Round concessions (€75/mt for 2.2 million tonnes) were the only 
effective commitments the Arbitrator could use to measure "market access." 
5.225  What should Panama make of a dispute in wh ich after over a decade of successful multilateral 
challenges, extensive panel and Appellate B ody findings against the European Communities, 
compliance and suspension actions, and two WTO arb itration determinations against the European 
Communities, the European Communities is still unila terally installing discrimination that it defends 
with the same failed claims?  The frustrations fe lt by those who worked hard to accomplish accession 
for Panama are nothing compared to the concerns of Panama's banana producers, whose livelihood is 
inseparably linked to a successful, non-discriminatory resolution of this dispute.   
5.226  Panama knows there is nothing that can be done  to restore the hundreds of millions of dollars 
in lost revenues, and nothing that can be done to rest ore the thousands of lost jobs Panama has already 
suffered from years of EC banana discrimination.  All Panama can respectfully seek is a ruling against 
the European Communities on all counts that is time ly, decisive, and leaves no room for European 
Communities misinterpretation.  A ruling of that nature will hopefully enable Panama, as a principal 
banana supplier to the EC market, to negotiate acceptable access reforms that finally accord its 
producers the opportunity to trade in a market run acco rding to the rules.  Only then can Panama's 
banana producers prosper and have  a legitimate opportunity to trade their way out of poverty. 
5.227  Like Panama, Nicaragua finds the circumstances of these proceedings to be most 
disappointing.  The bananas issue is by no means new to us either.  In virtually all of the many litigation proceedings that have occurred over bana nas since the early 1990s, Nicaragua has been a 
participant. 
5.228  Nicaragua's reason for remaining engaged in the dispute is a simple one.  Bananas are one of 
the agricultural sectors in Nicara gua that offers the people econom ic hope.  As this Panel knows, 
Nicaragua is a severely indebted country.  Its a nnual Gross National Income of $910 is below the 
GNIs of several LDCs and well behind the GNIs of  most ACP countries.  Bananas are one of 
Nicaragua's major agricultural crops and genera te thousands of jobs across its agricultural 
departments.  An additional 30,000 Nicaraguans ar e working on banana farm s elsewhere in Central 
America, making the health of th e entire Latin American banana i ndustry important to large portions 
of our population. 
5.229  Nicaragua's banana production h as good competitive advantages:  fertile soil, ample labor, the 
latest technologies, excellent quality, and reasonable proximity to ports.  Because of its structural 
advantages, this is a sector that should be able to  raise the economic standards of Nicaragua's most 
vulnerable regions if it is given a fair opportunity to compete.  
5.230
 Although the European Communities has said in th is proceeding, and in all prior banana 
proceedings, that it is committed to assisting de veloping countries overcome their economic problems 
through trade, it is hard to see how this is so in the case of Nicaragua's banana industry.  Nicaragua's 
opportunities to compete in the European Commun ities' banana trade have essentially vanished. WT/DS27/RW2/ECU 
Page 104  
 
  5.231  When the dispute first began years ago, Nicara gua was able to market 60,000 mt of bananas 
annually to the northern European markets that now represent the European Communities.  Access 
was possible because those markets were encumbered by a simple tariff of 20% ad valorem and, in 
the case of Germany, no tariff at all.  The 20 pe r cent tariff, which was the European Communities' 
scheduled banana concession from 1963-1994, was the e quivalent of about €80 per tonne.  Thereafter 
in 1994, Nicaragua was one of the Banana Framewor k Agreement countries that helped negotiate the 
European Communities' €75 in-quota concession, a rate subsequently scheduled by the European 
Communities in the Uruguay Round.  Under that sche duled arrangement, Nicara gua was still able to 
maintain reasonable EC imports, although the signs of discrimination were becoming more 
pronounced. 
5.232  Today, after years of "winning" multilateral challenges against the European Communities' 
banana policies, this long dispute has left Nicara gua with measures more discriminatory than those 
first challenged at the outset of the dispute years ago.  Nicaragua, like other developing countries of 
Latin America, faces an insurmountable duty of €1 76 (or $4.33/box), a rate several multiples higher 
than the rates we relied on to enter our bananas ove r the course of more than four decades.  To make 
matters worse, Nicaraguan producers are denied all access to the European Communities' duty-free 
quota, which is reserved for suppliers that in mo st cases are economically far better situated than 
Nicaragua.   
5.233  By favouring its own subsidized producers a nd certain developing countries over Nicaraguan  
suppliers, the European Communiti es has come close to defeating our banana industry.  Today, 
Nicaraguan banana shipments to the European Communities are non-existent.  Until the European 
Communities opens its market on an equitable basis to  all suppliers irrespective of origin, Nicaragua 
sees no prospect of ever again shipping to this once-promising market. 
5.234  Nicaragua, like Ecuador, seeks the Panel's help  in clarifying to the European Communities 
and its member States that equitable market access, c onsistent with the EC schedule, is not a matter of 
EC discretion.  It is unconditionally mandated by  Articles I, II, and XIII, and is long overdue. 
5.235  Before handing over to Nicaragua and Panama's le gal advisor to discuss the various details of 
law, Nicaragua would like to share two negotiating r ealities, about which it is quite clear because of 
Nicaragua's direct participation on these matters. 
5.236  Nicaragua, like Panama, actively negotiated the GATT Article I waiver Decision in the 
months and days leading up to November 2001.  Th at waiver's negotiating history is a matter of 
record and uncontestable.  It shows that the Euro pean Communities tried for nearly two years to get 
open-ended discretionary authority for its 2006 regi me, but was explicitly denied a waiver on that 
basis.  It was only after the negotiators bu ilt into the waiver an express commitment that any future 
tariff would be subject to WTO arbitration and that  the waiver would terminate in the event of two 
failed arbitrations that a multilateral consensus was po ssible.  Absent those strict controls, the waiver 
would not have been granted.   
5.237  The story is an equally clear one in the case of the Banana Framework Agreement, to which 
Nicaragua was a signatory.  The Government of Ni caragua was seeking in that Agreement improved 
EC access in exchange for a Bananas II "peace clause".  Nicaragua never once discussed revoking all 
current access opportunities as of 2003, would obviously have never agreed to such a revocation, and 
would certainly never have cons idered ourselves authorized to  revoke access commitments on a 
plurilateral basis that were otherwise required on a multilateral basis. 
5.238  These two EC notions – that the BFA signatories would have agreed to a Bananas II peace 
clause in exchange for a virtual ban on access as of  2003, and that the Latin American negotiators 
would have lifted their two-year banana waiver reservation in exchange for EC unilateralism as of  WT/DS27/RW2/ECU 
 Page 105 
 
 
  2006 – defy everything those two agreements stood for.   They are arguments, Nicaragua is sorry to 
say, reminiscent of countless comparable EC arguments  in the past that have contributed to chronic 
EC non-compliance over the years and have placed su ch an intolerable resource burden on a country 
like Nicaragua to defend its basic WTO rights. 
5.239  In almost all of the proceedings that have  ever occurred on bananas, the WTO reviewing 
bodies have closed with a common reflection.  They ha ve made the point that whatever policy priority 
the European Communities may assign to protecting its  subsidized producers and ACP suppliers, the 
fundamental principles of the WTO are designed to foster the development of all countries, not just some, and must be fulfilled through WTO-c onsistent trade and non-trade measures.   
5.240  In keeping with that same immutable WTO pr inciple, and the ample demonstration of non-
compliance now on the record, Nicaragua respectfully  asks the Panel to uphold Ecuador's case on all 
claims.  With your strong support, lasting EC compliance may finally be possible. 
5.241  The legal advisor to the Governments of Pa nama and Nicaragua will now explain why the 
European Communities' banana measures are inconsis tent with its WTO obligations and fail to bring 
the European Communities into compliance with DSB rulings. 
5.242  Rather than repeating Ecuador's affirmative case, with which Panama and Nicaragua fully 
agrees, Panama and Nicaragua will put principal emphasis this morning on the European Communities' flawed defences and certain issues raised in yesterday's session. 
5.243  In the ten GATT and WTO proceedings involving this product, EC compliance problems 
under GATT Articles I, II, and XIII have all come up be fore. So as not to be later arguing, once again, 
retried versions of failed EC defenses – some of wh ich are already in their third generation – Panama 
and Nicaragua believe that clarity is needed on all three claims, and that no one of these claims should 
be subordinate  to another. 
(a) The inconsistency with GATT Article I 
5.244  In the case of the European Co mmunities' tariff preference, which violates GATT Article I, 
the European Communities opens its defence with  the unwarranted "preliminary objection" that 
Ecuador's claim should be dismissed because Article  21.5 can not be used to question a "mutually 
agreed solution" between the parties.  This objecti on tries to mire you in a systemic question when the 
necessary predicate of that question, a proper DSU Article 3 "solution," is not even present.   
5.245  Under the clear terms of DSU Articles 3.5 and 3. 7, there can be no "solution" to a dispute, 
including a "mutually agreed solution," unless it is "c onsistent with the covered agreements."  As the 
European Communities has already acknowledged, the Understanding, in and of itself, was not WTO-
consistent.  It was a "means" to a solution involv ing phased steps, each of which would not become 
consistent with the covered agreements unless wa ivers of GATT Article I and GATT Article XIII 
were achieved, and the conditions of those waivers we re then met.  When it ca me to the final phase of 
the Understanding, "tariff only," the European Co mmunities never met the terms of the Article I 
waiver or its other WTO obligations.  It was the European Communities, through its own illegal 
actions, that obstructed a solution consistent with the covered agreements.  The European 
Communities cannot be allowed to prevent a cons istent Article 3 solution by reverting to non-
compliance, and then deprive Ecuador of its ab ility to challenge these re newed illegalities in DSU 
non-compliance procedures. 
5.246  In fact, to try to prevent this very problem , when the European Co mmunities requested that 
the matter be withdrawn from the DSB agenda in Fe bruary 2002, the minutes confirm that Ecuador 
and other countries were only willing to accept its re moval from the agenda on a conditional basis.  WT/DS27/RW2/ECU 
Page 106  
 
  As expressed by Ecuador, because "these waivers in cluded new stages which would have to be carried 
out in order to ensure a proper transition to a tariff-only banana regime … if there was any 
disagreement concerning the measures applied by th e European Communities, the matter could be 
referred to the original Panel pursuant to Article 21.5."
289  Other countries made comparable 
reservations.  The European Communities' effort to  block Ecuador's reserved right would amount to 
double jeopardy, finds no support anywhere in th e DSU, and should itself be dismissed.   
5.247  The European Communities' substantive Article I defence is equally baseless.  As argued by 
the European Communities, the Doha waiver continu es to excuse its Article I violation because even 
after it lost twice in arbitration, the waiver still allowed it to implement another regime of its own 
choosing so long as it simply asserted that its definiti on of the waiver access standard had been met.  
There is literally nothing in the words, architecture, purpose, or negotiating history of the waiver that 
lends support to that claim. 
5.248  This waiver took nearly two years to approve precisely because of bananas.  Having suffered 
the "long-standing banana dispute," not a single La tin American banana supplier was willing to leave 
the 2006 banana regime to the European Commun ities' discretion.  The European Communities' 
second submission readily acknowledges the waiver difficulties the European Communities faced on 
bananas.290  As confirmed by its eleventh recital, this waiver was only able to receive the collective 
endorsement of the Membership after the European  Communities committed in the Annex to a strict 
"multilateral control" on " any rebinding."  
5.249  The words finally reflected in the Annex – inser ted at the insistence of the Latin American 
banana suppliers – narrowly limited the extension of the waiver for bananas beyond 2006 to three 
carefully controlled circumstances:  the European Co mmunities could prevail in the first arbitration, it 
could prevail in the second arbitration, or it coul d reach a "mutually satisfactory solution" with the 
MFN suppliers.  Whichever option the European Communities took, the plain words of the Annex 
required the process to be concluded, in its entirety,  before the 2006 arrangement took force.  This left 
no room for unilateral EC discretion from 2006 forw ard.  To make unmistakably clear that EC 
discretion was not allowed, the European Commun ities' penalty for failing the Annex controls, a 
lapsed waiver, was framed to take  effect automatically "upon entry in to force" of the new regime, and 
not a day later.   
5.250  These waiver provisions – the time-delineated arb itration controls; the prospective orientation 
of the Annex standard; the "upon entry into for ce" termination language; the "shall be concluded 
before the entry into force" language, and the ot her supportive passages of the Annex – would have no 
meaning whatsoever if the European Communities s till had the right as of 2006 to install whatever 
regime it wanted to.  No one would have bothered with  an Annex or two arbitration procedures if this 
were so. 
5.251  The European Communities asks the Panel to reject this "formalistic" reading of the Annex in 
favour of what it calls a "real world" analysis.  Th is is its euphemism for asking the Panel to ignore 
the Vienna Convention, the rules for interpretin g waivers, the words of the Annex, the ample 
negotiating history, and the very purpose of these mult ilateral controls in favour  of an approach under 
which there are no real Latin American protections  nor penalties for EC non-compliance of any kind.  
Here is how the European Communities' approach w ould work in practice.  As here, the European 
Communities would set the tariff wherever it wanted  to and wait for a DSB challenge.  If the DSB 
panel erroneously revisited the de funct waiver access standard and confirmed what the Arbitrator's 
prior analytical framework makes obvious – that a 135 per cent increase in the MFN tariff, and ACP 
and EBA margin of preference, definitionally fails to result "in at least maintaining" MFN conditions 
                                                      
289 Minutes of DSB Meeting of 1 February 2002, WT/DSB/M/119, 6 March 2002, para. 5. 
290 European Communities' second written submission, para. 83.  WT/DS27/RW2/ECU 
 Page 107 
 
 
  of competition into the future – the European Comm unities would be undeterred.  It would simply do 
what it did in late 2005.  It would reduce its tariff by only a few digits and call the matter "rectified".  
If the Latin American suppliers then returned to  the same panel, the European Communities could 
merely continue the same sequence for as long as it needed to, reducing its tariff by miniscule 
amounts, digit-by-digit, until the Partners hip Agreement expired by its own terms. 
5.252  After so many years of banana discord, that  EC unilateralism is exactly what the Latin 
American negotiators were unwilling to accept in the waiver negotiations, and exactly why they 
insisted on pre-2006 controls and a "two-strikes-and- you're-out" termination pr ovision before granting 
their approval.  
5.253  The European Communities has lost its waiv er for bananas, making its ACP banana 
preference illegal under Article I.   
(b) The inconsistency with GATT Article XIII 
5.254  The European Communities' Article XIII violation, arising from its discriminatory ACP tariff 
quota, is likewise inexcusable.   
5.255  Here, the European Communities begins its defe nce with another "preliminary objection."  
Under this one, its three-part contention is: (i) th at the simple use of the phrase "suitable waiver" in 
the "MFN tariff and ACP tariff-quota suggestion " of the first Article 21.5 panel must be read to mean 
that Article XIII is per se  inapplicable to all tariff and tariff- quota arrangements; (ii) that this EC-
defined meaning of the suggestion should be elevated to a binding determination of law; and (iii) that 
because Ecuador never contested these multi-layere d EC presumptions, it is terminally barred from 
challenging any tariff and tariff-quota arrangement u nder Article XIII.  For all the reasons Ecuador 
summarized yesterday, this is a tortured reading of the panel report and DSU.   
5.256  The panel's second suggestion never absolved any discriminatory ACP tariff quota from the 
obligations of Article XIII, however the larger impor t regime might be structured.  To the contrary, 
the panel, only paragraphs befo re, found the European Communities' exclusive ACP tariff quota, by 
its own specific shape and nature , to be a quantitative restriction c overed by Article XIII:5 that failed 
to treat like products "equally, irrespective of origin ," in violation of Article XIII.  No subsequent 
compliance suggestion can be read to nullify that actual finding of law.   
5.257  The only credible reading of the panel's se cond suggestion emerges from the structure and 
syntax of the recommendations them selves.  The first clause of th e second suggestion, relating to a 
MFN tariff, did not address the Article I waiver requirements simply because those requirements had just been addressed in the first pure-tariff-only su ggestion.  The ACP tariff quota was the new element 
differentiating suggestion two from suggestion one, explaining why the panel would add the clause, 
"with a tariff quota for ACP bananas covered by a suita ble waiver."  It was that added tariff quota that 
needed a "suitable waiver," as distinguished fro m the tariff-related waiver already discussed in 
suggestion one.   
5.258  The fiction the European Communities creates in its preliminary objection is further 
belabored in its "substantive" defence.  It insist s that while Article XIII does regulate arrangements 
under which all imports are entered under tariff quotas, it does not regulate those under which some 
sources are entered under quantitative restrictions and ot hers not.  This is its  old, failed "separate 
regime" argument.  The Bananas III  panel and Appellate Body already expressly found that 
Article XIII, including Article XIII:5, applies to all bananas irrespective of origin and irrespective of 
the regulatory means by which those bananas are entered.  If the unconditional obligations of 
Article XIII were interpreted otherwise, any Memb er could apply a discriminatory tariff quota with 
impunity, so long as one or more supplie rs were regulated by other means. WT/DS27/RW2/ECU 
Page 108  
 
  5.259  The European Communities' second substantive Article XIII defen ce is another failed relic of 
prior Bananas III proceedings.  Its essence is  that because the tariff quota is a "cap" on ACP imports, 
it "benefits" MFN suppliers.  While the European  Communities can no doubt find any number of 
ways to make its banana import arrangement more discriminatory, and certainly has over the years, 
that possibility does nothing to excuse the dissimila r Article XIII restrictions, nor to rebut the 
presumption of nullification and impairment created by that discrimination.  This is a measure that 
shields all ACP suppliers from competition within  the quota, guarantees them sole access to a 
discriminatory portion of the EC market, allows certa in ACP suppliers to compete more effectively in 
the European Communities than would otherwise have been the case absent the discriminatory 
reserve, and denies all MFN suppliers equivalent access to the zero-duty allocation.  No one can 
credibly consider this a "benefit" to MFN suppliers.   
5.260  The European Communities itself appears to recognize that its Article XIII defences are not 
convincing.  Why else would it still have a request pending for a renewed Article  XIII waiver to cover 
its exclusive ACP tariff quota under an arrangeme nt in which MFN bananas would separately be 
entered under a flat tariff?  At least in this r espect the European Communities is right.  Absent a 
waiver, its exclusive ACP tariff quota is a patent violation of Article XIII. 
(c) The inconsistency with GATT Article II 
5.261  As Ecuador stated yesterday, the European Co mmunities' Article II defences are, in some 
ways, the most dismaying EC claims of all.  Un like its other defences, many of which have been 
heard for years, these are a 180° reversal of prior EC statements, which have been documented again 
and again in EC legal instruments, internal communications, WTO notifications, and prior WTO 
proceedings. 
5.262  For the first time ever in this very long di spute, the European Communities asserts that its 
€75/mt concession expired at the end of 2002 under the BFA language annexed to its Schedule.  To 
accept that proposition, one would have to ignore:   
− the current-access rules of the Uruguay Rou nd, which informed these concessions and 
required all current-access opportunities to continue over time; 
− the European Communities' 1994 corrigendum, which specifically confirms that its in-quota 
concession of 75 ECU/mt for 2.2 million tonnes is its " final" bound "current access quota;"  
− the BFA's termination provision, which speaks onl y of the "agreement" reached by the five 
parties, and nowhere of the multilateral "concessions" the European Communities was 
independently required to schedule as its final Uruguay Round bound rates;   
− the European Communities' original Uruguay R ound proposal on bananas, a 100 ECU/mt in-
quota concession for an unlimited period, which the BFA sought to improve, not cancel altogether as of 2003;  
− the Bananas III panel report, which explicitly validates the €75/mt concession, as the 
European Communities itself has acknowledged;  
− the 2005 Arbitration Award, which e qually validates that concession;  
− the European Communities' official 2004 and 2005 Article XXVIII notifications, which in 
both cases refer to "concessions" in the plural, not the singular; and 
−
 a series of other EC statements and documents , too numerous to recount, that confirm the 
continuing bound effect of its €75/mt rate.   
 5.263  The European Communities now appears esp ecially discomforted by its adamant 
confirmation of the €75/mt bound rate during Arbitr ation.  To try to reconcile that awkward 
inconsistency, it argues that the bound rates were neve r really at issue in Arbitration.  Members of the 
Panel, with due respect, the European Commun ities made its in-quota Uruguay Round concessions  WT/DS27/RW2/ECU 
 Page 109 
 
 
  the centerpiece of its entire Arbitration argument, insis ting that its 2006 market-access arrangement 
should only have to approximate its bound €75/mt tari ff for 2.2 million tonnes.  It is disingenuous and 
fundamentally disheartening for the European Co mmunities now to pretend that those concessions 
disappeared years ago. 
5.264  For the European Communities to argue, alte rnatively, that the €75/mt binding "lawfully 
terminated" with the abolition of its MFN tariff quota is no less disingenuous.  Here, too, there is an 
ample paper trail of EC acknowledgements that its €75/mt concession would have to be accorded 
Article II protection in the European Co mmunities' move to "tariff only."   
5.265  The European Communities' €176/mt tariff on a ll MFN bananas represents far less favourable 
treatment than the concessions pr ovided for in the Eur opean Communities' Schedule in violation of 
Article II:1(a) and far exceeds those in-quota c oncessions in violation of Article II:1(b).   
5.266  When the European Communities closes its case by contending that its current arrangement 
"balances" the interests of all involved, Panama and Ni caragua, like Ecuador, must take issue.  This is 
a regime that was shaped primarily to protect its subsidized Community production; that was installed 
without so much as a single consultation with MFN interests; that replicates measures plainly 
disallowed by previous Banana rulings; that, perhaps more than  any other WTO case, has eroded 
confidence in the dispute settlement  mechanisms of this institution; and that, yes, in EC tariff 
payments alone, is drawing almost $1 billion an nually out of the developing countries of Latin 
America.  No WTO objective is served by this illegal regime.   
5.267  Panama and Nicaragua join Ecuador in urging the promptest possible determination that these 
banana measures are inconsistent with the European Communities' obligations under GATT 
Articles I, XIII, and II, and fail to bring th e European Communities into compliance.   
M. UNITED STATES  
1. Written submission of the United States 
5.268  The United States agrees with Ecuador that th e European Communities' import regime for 
bananas is inconsistent with Articles I and XIII of  the General Agreement on Tariffs and Trade 1994.  
The United States reserves the right to elaborate furt her on its views in a statement at the meeting of 
the Panel with the parties and third parties. 
2. Oral statement of the United States 
5.269  The United States believes that Ecuador is on so lid legal ground in challenging the European 
Communities' revised banana regime.  The United St ates will first address the preliminary objections 
raised by the European Communities in this pro ceeding before turning to our view on the merits. 
(a) Preliminary objections 
5.270  The European Communities argues that Ecuador  should be precluded from having recourse to 
DSU Article 21.5 on two grounds:  one, becau se the EC-Ecuador Understanding on Bananas 
constitutes a "mutually agreed solution" through wh ich Ecuador has allegedly agreed to the current 
EC banana regime, including the preference granted to the ACP countries;  and, two, because a WTO 
Member cannot challenge a measure that was "s uggested" by a WTO panel.  These arguments are 
groundless and should be rejected. WT/DS27/RW2/ECU 
Page 110  
 
  (b) Mutually agreed solution   
5.271  The EC-Ecuador Understanding on Bananas (and a similar understanding between the United 
States and the European Communities) described a phased series of step s to be taken by the European 
Communities over several years, in combination with  certain waivers, for the purpose of bringing 
itself into compliance with its WTO obligations.  The series of steps would culminate with a "tariff 
only regime" by 1 January 2006, not a "tariff-ra te-quota-only-for-some" regime.  The European 
Communities and Ecuador disagree whether as a ma tter of fact their Understanding constitutes a 
mutually agreed solution for purposes of Article 3.6 of the DSU.  But in the end this is irrelevant since 
the Understanding in any event does not preclude this dispute. 
5.272  Article 1.1 of the DSU restricts the application of the DSU to the "covered agreements" listed 
in Appendix 1 to the DSU.  The Understanding is not
 a "covered agreement".  Accordingly, the DSU 
cannot be used to settle a dispute as to the mean ing or effect of the Understanding, and the DSU 
cannot enforce the Understanding by blocking a party to the Understanding from recourse to the DSU.  
It is worth noting that, during the India – Autos  proceeding, the European Communities also held that 
view that a mutually agreed solution could not pr event recourse to the DSU:  "Even if the 1997 [EC-
India] Agreement had settled the matter in dispute in the present case, that would still not preclude the 
European Communities from bringing this dispute.  The 1997 Agreement was not a 'covered agreement' in the sense of Article 1.1 of the DSU. Therefore, the rights and obligations of the parties 
under the 1997 Agreement were not enforceable under the DSU." 
5.273  The European Communities argues that "using Ar ticle 21.5 ... to question a mutually agreed 
solution between the Parties, goes against Article 3.7 and 3.10 of the DSU."  But nothing in those 
provisions bars recourse to dispute settlement where one party claims to have a mutually agreed 
solution with the other party.  Article 3.7 expresses a clear preference for mutually agreed solutions, 
but it does not prohibit recourse to procedures under Ar ticle 21.5 or any other provision of the DSU.   
5.274  Further, the European Communities' proposed appro ach is directly contrary to Article 3.5 of 
the DSU.  Article 3.5 specifically requires mutually ag reed solutions to be cons istent with the covered 
agreements.  Yet the European Communities would bar the dispute settlement system from examining 
whether a measure alleged to be adopted pursuant to a mutually agreed solution is consistent with the 
covered agreements.  And the United States agrees with Ecuador's statement that Article 3.10 
"contains nothing remotely prohibiting resort to dispute settlement procedures." 
5.275  The European Communities stretches its argument  further by arguing that Ecuador is barred 
from challenging the ACP preference because "it is unc ontested that bilateral agreements between two 
WTO members form part of the 'applicable rules of law' between the parties to the dispute, as defined 
by the Vienna Convention."  The European Communiti es is referring to Article 31.3(c) of the Vienna 
Convention.  The European Communities has advan ced this argument, as a responding party, in a 
number of recent disputes, and the United States is  not aware that it has yet been successful.  For 
example, this argument was raised  by the European Communities in EC – Approval and Marketing of 
Biotech Products  and rejected by that panel.  The Unit ed States urges this Panel to do likewise. 
5.276  Nothing in the customary rules of interpreta tion of public international law reflected in 
Article 31.3(c) of the Vienna Convention suppor ts the European Commun ities' claim that the 
Understanding acts as a procedural defense for the European Communities.  Article 31.3(c) of the 
Vienna Convention deals with interpretation
 of the covered agreements.  The European Communities 
is not arguing that the Understanding indicates a par ticular interpretation of any term in any covered 
agreement, rather the European Communities is cl aiming the Understanding is a jurisdictional bar to 
this dispute.  Article 31.3(c) does not deal with jurisdiction.   WT/DS27/RW2/ECU 
 Page 111 
 
 
  5.277  Furthermore, Article 31.3(c) of the Vienna Convention provides for the taking into account, 
in the interpretation of a treaty, "any relevant rul es of international law applicable in the relations 
between the parties".  The EC – Approval and Marketing of Biotech Products  panel found that "the 
rules of international law" that are to be "tak en into account" in the interpretation of the WTO 
Agreements "are those which are applicable in th e relations between the WTO Members".  The panel 
expressly rejected the notion that the "rules of intern ational law" could be those applicable only to the 
disputing parties.  Since the Understanding is a bila teral agreement between only the parties to this 
dispute, not all Members of the WTO, it cannot be considered part of any "applicable rules of law" 
that could inform the panel's interpre tation of the covered agreements.   
(c) Suggestion by the Panel 
5.278  The European Communities argues that claims  challenging the consistency of measures 
suggested by a panel cannot be brought before an  Article 21.5 panel and that, Ecuador not having 
appealed those suggestions, it is supposedly bound by "res judicata", pursuant to Article 19.1 and 
17.14 of the DSU.  These arguments completely miss  the status of a panel "suggestion" and the scope 
of an Article 21.5 panel proceeding.  EC Regul ation 1964, which implemented the latest import 
regime for bananas, is a measure taken by the Eu ropean Communities to come  into compliance after  
Bananas III .  That this regime may fit the description of one of three suggestions made by the 
Bananas III 21.5 panel is irrelevant.  Contrary to  the European Communities' assertions, 
implementation by a Member of suggesti ons made by panels does not have a res judicata  effect, nor 
could it render that Member's measures per se  compatible with WTO rules.   Nothing in the DSU, in 
particular Article 19.1, can be interpreted to lead to that result.  That a Member chooses to implement 
a suggestion made by a panel does not relieve th e Member from ensuring that it does in a manner 
consistent with its WTO obligations. 
(d) Article I waiver 
5.279  Turning to the merits, the European Commun ities does not contest that the granting of 
preferences to ACP bananas is in breach of Artic le I of the GATT 1994.  Instead, it argues that the 
ACP Article I waiver is still valid with respect to bananas.  The United States agrees with Ecuador's 
analysis that the Article I waiver terminated w ith respect to bananas on ce the European Communities 
implemented the new regime in 1 January 2006.   
5.280  Under the express terms of the Annex, the European Communities had two opportunities to 
propose a regime that would "result in at least main taining total market access for MFN suppliers."  In 
2005, pursuant to the Annex arbitration mechanism,  two WTO arbitrators determined that the two 
proposals made by the European Communities did no t meet those conditions.  The phrase "[i]f the EC 
has failed to rectify the matter", at the beginning of  the fifth sentence in tiret 5 of the Annex can only 
refer back to the determination made by the sec ond arbitrator following the European Communities' 
effort to "rectify the matter".  Therefore, as require d by the fifth sentence, the waiver "shall cease to 
apply to bananas upon entry into force of the new EC tariff regime". 
5.281  The European Communities seems to be claiming that Members decided that, after the 
European Communities had twice failed to provide th e type of regime required under the Annex, the 
European Communities was allowed to unilaterally in stitute any regime, whether it met the conditions 
of the Annex or not, and still retain the cover of the waiver.  This approach finds no basis in the 
Annex. 
(e) Article XIII  
5.282  Article XIII applies with respect to the current  tariff rate quota regime, just as it did with 
respect to the European Communities' prior banana import regimes.  In EC – Bananas III (Article 21.5 WT/DS27/RW2/ECU 
Page 112  
 
  – Ecuador) , the panel explained that "by definition,  a tariff quota is a quantitative limit on the 
availability of a specific tariff rate".  The Panel in Bananas III explained that GATT Article XIII:1 
requires that "no import restriction shall be app lied to one Member's products unless the importation 
of like products from other Members is similarly rest ricted".  According to the Appellate Body, the 
"essence" of GATT Article XIII, and therefore Article XIII:1, "is that like products should be treated 
equally, irrespective of origin". 
5.283  The European Communities is maintaining a tariff rate quota under which MFN-origin 
bananas are neither "treated equally" nor restricted  "similarly" to "like" ACP-origin bananas.  ACP 
bananas receive preferential, protected access under th e EC's banana regime, entering the EC market 
duty-free up to a quantity of 775,000 tons.  No MFN supplier receives any such tariff rate quota 
treatment.  By using a tariff rate quota on ACP imports, and an entirely different means to restrict 
MFN imports, the European Communities is in violation of GATT Article XIII:1. 
5.284  Furthermore, the Bananas III panel found that GATT Article XIII:2 requires that "[i]f 
quantitative restrictions are used ... they are to be used in the least trade-distorting manner possible".  
Any tariff rate quota allocations must attempt to "approximate ... the trade shares that would have 
occurred in the absence of the regime ".  In addition, if a Member allocates tariff rate quota shares to 
Members not having a substantial interest in supplyi ng the product, then shares must be allocated to 
all suppliers.  The European Communities' exclus ive 775,000 ton ACP tariff rate quota fails to 
distribute any share whatsoever to MFN suppliers, let al one a share they would have expected to 
obtain in the absence of restrictions.  This, despite the fact that many of the excluded MFN suppliers 
are principal or substantial suppliers of bananas to the European Communities, and leading exporters 
of bananas to the world.  For all these reasons, we agree with Ecuador that the European 
Communities' tariff rate quota for ACP origin bananas established thro ugh Regulation 1964 is 
inconsistent with Articles XIII:1 and XIII:2.  Th e European Communities has no Article XIII waiver 
currently in force – its last waiver having expired on its own terms on 31 December 2005. 
VI. INTERIM REVIEW 
6.1 On 27 November 2007, the Panel submitted its inte rim report to the parties.  On 4 December 
2007, the European Communities submitted a written re quest for the review of precise aspects of the 
interim report.  On the same date, Ecuador stated  that it had no comments on the interim report. 
6.2 The Panel modified aspects of its report in light of the European Communities' comments 
where it considered that appropriate, as explained below.  The Panel has also made some minor 
editorial adjustments to the text and footnotes, as e xplained below.  Referenc es to paragraph numbers 
and footnotes in this Section refer to those in  the interim report, except as otherwise noted. 
(a) Waivers adopted by the WTO Ministerial Conference 
6.3 The Panel has amended paragraph 2.9 of  the interim report, as requested by 
the European Communities. 
(b) Corrigendum to the European Communitie s' Commission Regulation (EC) 1549/2006 
6.4 Paragraph 2.44 of the interim report referred to the European Communities' Commission 
Regulation (EC) No. 1549/2006 of 17 October 2006 amending Annex I to C ouncil Regulation (EEC) 
No. 2658/87 on the tariff and statistical nomenclature and the Common Customs Tariff.291  In its 
                                                      
291 Commission Regulation (EC) No. 1549/2006 of 17 October 2006 amending Annex I to Council 
Regulation (EEC) No. 2658/87 on the tariff and statistical nomenclature and the Common Customs Tariff, 
Official Journal of the European Union, 31/10/2006.  WT/DS27/RW2/ECU 
 Page 113 
 
 
  comments on the interim report, the European Co mmunities states that this paragraph was wrong and 
noted that a corrigendum to Regulation 1549/2006, de leting the reference to the tariff quota for tariff 
item 0803 00 19 (bananas) was published on 9 June 2007.  The Panel has noted the adoption of this corrigendum to Regulation 1549/2006 and adjusted pa ragraph 2.44 of the interim report accordingly. 
(c) Factual description of the European Communities' bananas market 
6.5 In its comments on the interim report, the Eu ropean Communities requests the Panel to make 
changes to several paragraphs in Section II.D, en titled "European Communities' bananas market".  In 
the European Communities' view, the description of the arguments of the parties in specific 
paragraphs of that section is not accurate.  Th e Panel has noted the European Communities' request 
and has incorporated changes into paragraphs 2.53 , 2.57 and 2.63, as explained below.  Preliminarily, 
however, the Panel must start by noting that the pu rpose of Section II of the report, entitled "Factual 
aspects", of which Section II.D.4 is a part, is not to provide a description of the arguments of the 
parties.  The arguments of the parties are mainly reflected in Section IV of the report, entitled "Arguments of the parties", and reproduced in other sections of the report, as appropriate.  The 
purpose of Section II of the report, entitled "Factual aspects", is rather to provide a description of the 
relevant facts, as supported by the evidence on record .  In those specific asp ects where the description 
of the facts made by each of the parties differed,  and there was no sufficient evidence on record for 
the Panel to make a factual determination, the Pane l has described such parties' views on the relevant 
facts and any discrepancies between those views. 
Alleged increase in prices paid to Ecuadorian banana producers
 
6.6 The European Communities requests the Panel to  note "the fact that the prices paid to 
Ecuadorian banana producers increased by 6.7% afte r the introduction of the new import regime".  
The Panel notes that, according to the calculations provided by both parties292, the average unit price 
for bananas from Ecuador increased by approximately 5.7 to 6.7 per cent in 2006, with respect to 
2005, in US dollars/mt.  The same prices, however, when estimated in €/mt, decreased by 4.8 per cent 
over the same period.293  The Panel has adjusted paragraph 2. 63 of the interim report and footnote 
165, in order to note this fact. 
Increase in imports of bananas from MF N countries, compared to growth of 
European Communities' bananas market  
6.7 The European Communities requests the Panel to  note "the fact that the increase in the 
quantity of bananas imported from MFN countries in 20 06 and 2007 is bigger than the increase of the 
total market for bananas in the European Communitie s during the same period".  The Panel notes that, 
indeed, according to the data available on record294, the percentage of incr ease in the quantity of 
bananas imported from MFN countries in 2006 from those imported in 2005 is greater than the percentage of increase in the quantity of bananas from all origins sold in the European Communities 
over the same period
295.  The Panel has noted this fact in a footnote to paragraph 2.57 of the report.  
There is, however, no definitive information on record  with regard to the year 2007 that would allow 
the Panel to make any determination comparing the da ta for that year with that for the year 2006. 
                                                      
292 See Ecuador's response to Panel question No. 29 and Exhibit EC-11. 
293 See Ecuador's response to Panel question No. 29. 
294 See Exhibit EC-17. 
295 See also European Communities' first written submission, para. 49. WT/DS27/RW2/ECU 
Page 114  
 
  Increase in imports of bananas from MFN count ries, compared to increase in imports of 
bananas from ACP countries  
6.8 The European Communities requests the Panel to  note "the fact that the increase in the 
quantity of bananas imported from MFN countries in 200 7 is bigger than the increase in the quantity 
of bananas imported from ACP countries during the same period".  The European Communities has 
provided market information corresponding to the firs t six months of 2007.  The information provided 
by the European Communities, however, does not al low the Panel to make any finding comparing the 
data for the whole year 2007 with that for the year  2006.  Accordingly, the Panel has not modified in 
this respect the language contained in paragraph 2.57 of the interim report. 
Increase in imports of bananas from Ecuador between 1999 and 2006  
6.9 The European Communities requests the Panel to no te "the fact that the quantity of bananas 
imported from Ecuador increased by more than 25 % between 1999 and 2006".  Based on the data 
available on record, as reflected in the table included in paragraph 2.57 of the interim report, the Panel 
has adjusted paragraph 2.57 of the interim report accordingly. 
Decrease in imports of bananas from ACP countries  
6.10 The European Communities request s the Panel to note "the fact that many ACP countries 
have seen significant reductions in the quant ities of the bananas they export to the 
European Communities following the introduction of the new import regime, just like some MFN countries".  The Panel notes that, according to the data available on record
296, most ACP countries 
(with the exception of Cameroon, Belize and Somalia ) increased their exports of bananas to the 
European Communities in the year 2006, followi ng the introduction of the new import regime, as 
compared to the previous year 2005.  There is no de finitive information on record with regard to the 
year 2007 that would allow the Panel to make any de termination comparing the data for that year with 
that for the year 2006.  Accordingly, the Panel has not modified in this respect the language contained 
in paragraph 2.57 of the interim report. 
(d) Costs for import licences 
6.11 Paragraph 2.53 of the interim report notes inter alia  that, following the introduction of the 
European Communities' new banana import system  on 1 January 2006, with the €176/mt tariff duty, 
the amount paid by trading companies importing bananas from Ecuador had increased.  In its 
comments on the interim report, the European Comm unities states that this description of the effects 
of the new import regime on the cost of impor ting bananas was misleading.  The European 
Communities notes that, under the old regime, banana  trading companies had to incur the cost of 
acquiring an import licence, in addition to the duties paid upon importation.  Following the 
introduction of the new system and the abolition of import licences, these import licence costs have ceased to exist.  The Panel has noted this fact and adjusted paragraph 2. 53 of the interim report 
accordingly. 
(e) European Communities' aguments concerning Ecuador's claim under Article XIII of the 
GATT 1994 
6.12 In its comments on the interim report, the Eur opean Communities requests that the structure 
of Section VII.D.3 of the interim report be amende d.  The European Communities states that certain 
of its arguments, summarised in Section VII.D.3 of  the interim report, had been mistakingly qualified 
as a preliminary objection, whereas these arguments were actually part of the European Communities' 
                                                     
 
296 See Exhibit EC-17.  WT/DS27/RW2/ECU 
 Page 115 
 
 
  defence on substantive claims advanced by Ecuador  under Article XIII of the GATT 1994.  The Panel 
has amended Section VII.D of the interim report accordingly. 
(f) Additional revisions and corrections 
6.13 In Section III, entitled "Parties' requests for findings and recommendations", the Panel 
included references to the European Communities' arguments that had been already described at 
length in other parts of the interim report.  The new la nguage is to be found in paragraphs 3.2 to 3.6 of 
the final report.  The Panel corrected some referenc es in the table of cases cited in the report.  The 
Panel also made some editorial changes in paragr aphs 2.76, 5.75, 7.7, 7.9, 7.340, 7.362, 7.376 and 
7.429 and in several footnotes of the report. 
VII. FINDINGS 
A. ATTEMPTS AT HARMONIZING THE TIMETABLES  
7.1 In the present proceedings the Panel is faced with an unprecedented situation.  The matter 
before this compliance Panel, requested by Ecuado r on 23 February 2007, is closely related to the 
matter that was raised by the United States in its request for the establishment of a panel on 2 July 
2007.  However, despite repeated attempts, the Pa nel was unable to harmonize the timetable of the 
current proceedings with the timetable of the compliance panel requested by the United States. 
7.2 Both disputes concern measures adopted by the European Communities with the alleged 
purpose of complying with the rulings and recommendations of the DSB in the dispute European 
Communities – Regime for the Importation, Sale and Distribution of Bananas  (EC – Bananas III ).  In 
both disputes, the parties disagree whether these m easures are in conformity with the European 
Communities' obligations under the WTO covered agreements. 
7.3 In their complaints, Ecuador and the United States each challenge the same specific measures 
adopted by the European Communities.  Namely: 
(a) The tariff quota, with a current volume of 775,000 mt, which allows bananas of ACP 
origin to enter the European Communities market duty-free;  and, 
(b) The European Communities' tariff, curren tly set at €176/mt, which applies to all 
European Communities imports of banan as, except those benefiting from access to 
the zero-duty TRQ.297 
7.4 The claims in each of the two cases are very similar.  Both Ecuador and the United States 
claim that the challenged measures are inconsistent w ith Article I:1 and Article  XIII, paragraphs 1 and 
2, of the GATT 1994.  Additionally, Ecuador clai ms in this dispute that these measures are 
inconsistent with Article  II of the GATT 1994. 
7.5 The Panel is aware that, according to Article 9.3 of the DSU: 
"If more than one panel is established to ex amine the complaints related to the same 
matter, to the greatest extent possible the same persons shall serve as panelists on each of the separate panels and the timetab le for the panel process in such disputes 
shall be harmonized." 
                                                     
 
297 EC – Bananas III (Article 21.5 – Ecuador II) , Request for the Establishment of a Panel 
(WT/DS27/80) 26 February 2007, p. 4.  See also, Ecuador's first submission, para. 21. WT/DS27/RW2/ECU 
Page 116  
 
  7.6 During the course of the proceedings, the Pane l received a number of requests from the 
European Communities to extend the deadlines and to harmonize the timetable for this case with that 
of the panel requested by the United Stat es.  These requests were made through written 
communications on 6 July and 20 August 2007, as we ll as orally, during the substantive meeting of 
the Panel with the parties and third parties, on 18 September 2007.  In all instances, the Panel 
considered, both the European Communities' request and the views expressed by Ecuador, the 
complaining party. 
7.7 Harmonization of the timetable in both cases was made particularly difficult because of the 
two-month period that elapsed between the dates on which the two panels began their respective 
work.  The Panel requested by Ecuador was compos ed by the WTO Director-General on 18 June.  In 
turn, the panel requested by the United States, whic h was established on 12 July 2007, was composed 
on 13 August by the WTO Director-General.  This  two-month difference between the disputes was 
particularly significant, since compliance proceedings, by their very nature, are intended to be brief. 
7.8 In all cases, when asked, Ecuador as the complain ing party, strongly objected to any changes 
in the timetable that would result in extending the proceedings further beyond the 90-day period 
envisaged in Article 21.5 of the DSU. 
7.9 As noted in the factual aspects section of this Report, Ecuador's status as a developing country 
Member, and its interest in a prompt decision of th e matter, were additional factors taken into account 
by the Panel when preparing and revi sing the timetable for its proceedings. 
7.10 In the light of these considerations, and no twithstanding the Panel's initial intention to 
harmonize the timetable of both the proceedings re quested by Ecuador and those requested by the 
United States, the Panel was unable to find a better a lternative for the timetable that was eventually 
adopted in these proceedings.  This despite the f act that the Panel was aware that the approved 
timetable implied a considerable burden of work, p eaking at particular moments for the parties, as 
well as for the Panel and the Secretariat.
298 
B. PRELIMINARY ISSUES RAISED BY THE EUROPEAN  COMMUNITIES  
1. Summary of the two preliminary issues 
7.11 The European Communities raises two preliminary issues. 
7.12 First, the European Communities argues that Ecuador should not be allowed to challenge the 
European Communities' current import regime fo r bananas, including the preference for ACP 
countries.  The European Communities contends that the Understanding on Bananas, signed by 
Ecuador and the European Communities in April 2001 (Bananas Understanding)299, is a mutually 
agreed solution to the banana dispute, "in which it is provided that the current import regime of the 
European Communities would includ e a preference for ACP bananas".300  According to the 
European Communities, Articles 3.7 and 3.10 of th e DSU prevent Ecuador from challenging, through 
an Article 21.5 compliance panel, a mutually  agreed solution reached by the parties.301 
                                                      
298 As noted above, however, issuance of the interim report was delayed by the Panel in order to ensure 
that replies to questions and comments on replies in the proceedings requested by the United States had been 
received by that panel, before the interim re port in the current proceedings was issued. 
299 See Understanding on Bananas between the EC and Ecuador of 30 April 2001, in EC – Bananas III , 
Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001;  and  EC – Bananas III , Understanding 
on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001. 
300 European Communities' first written submission, para. 64. 
301 Ibid., paras. 61-65.  See also European Co mmunities' second written submission, paras. 7-18.  WT/DS27/RW2/ECU 
 Page 117 
 
 
  7.13 As a supplementary argument under the same pr eliminary issue, the European Communities 
adds that: 
"[E]ven if it was to be assumed that the [Bananas] Understanding is not a 'mutually 
agreed solution' for purposes of the DSU, ... it cannot be denied that it is a bilateral 
agreement that must be taken into c onsideration in analysing the rights and 
obligations of the parties to this dis pute.  Through the Understanding Ecuador 
accepted that the Cotonou Preference w ould continue until the end of 2007.  
The European Communities considers that this bars Ecuador from challenging the 
operation of the Cotonou Preference to the end of this year.  The European Communities al so considers that the principle of good faith, which 
covers the entire DSU, bars Ecuador from escaping its obligations by asserting the 
alleged non-compliance of the Understanding with the WTO rules."
302 
7.14 As a second preliminary issue, the European  Communities argues that Ecuador's complaint 
against the Cotonou Preference under Article XIII of  the GATT 1994 should be rejected, because in 
effect Ecuador is challenging a suggestion made  by the first compliance panel requested by 
Ecuador.303  According to the European Communities,  such suggestion can be challenged only 
through recourse to appellate review , but not through a compliance panel.304 
2. Order of analysis of the two preliminary issues 
7.15 The first preliminary issue raised by the Eu ropean Communities relates more generally to 
whether Ecuador can bring this dispute under Article 21.5 of the DSU.  Therefore, the Panel addresses 
that first preliminary issue in this part of its repor t, in order to decide whether there is a need to 
proceed to assess the substantive claims by Ecuador. 
7.16 The second preliminary issue raised by the Eur opean Communities relates exclusively to the 
claim made by Ecuador under Article XIII of the GA TT 1994.  Therefore, the Panel intends to address 
it as a preliminary issue in the context of Ecuado r's claim under Article XI II, provided that the 
analysis of that claim is deemed warranted in the light of the Panel's findings on the 
European Communities' first preliminary objection. 
3. First preliminary issue raised by the European Communities 
(a) Arguments of the parties 
(i) Main arguments by the European Communities 
7.17 The European Communities points out that on 30 April 2001 it signed with Ecuador the 
Bananas Understanding.  The European Communities argues that, "in accordance with its terms, [the 
Bananas Understanding] is a 'mutually agreed solution to the banana dispute'305 and 'identified the 
means by which the long standing dispute over th e European Communities' banana import regime can 
be resolved'.306"307 
                                                      
302 Final written version of the European Communities' closing oral statement at the substantive 
meeting of the Panel with the par ties and third parties, para. 4. 
303 See European Communities' first written submission, para. 79-86. 
304 See European Communities' second written submission, paras. 19-35. 
305 (footnote original ) See the Understanding, at point G. 
306 (footnote original ) See the Understanding, at point A. 
307 European Communities' first written submission, para. 61. WT/DS27/RW2/ECU 
Page 118  
 
  7.18 In regard to the content of the Bananas Understanding, the European Communities asserts 
that: 
"Through the Understanding, Ecuador accepted that the banana import regime that 
the European Communities would implement after January 1, 2006, would have two 
main characteristics.  First, it would be tariff only.
308  Second, there would be a 
preference granted to bananas coming from th e ACP countries.  This is made clear by 
the fact that Ecuador undertook to actively support the grant of a waiver from GATT Article I for these preferences.
309"310 
7.19 According to the European Communities, the Bananas Understanding is "binding"311 on both 
Parties, including Ecuador, as confirmed by both si des' compliance "with the obligations undertaken 
in the Understanding".312 
7.20 In particular, the European Communities argues that it "has fully complied with all [three] 
obligations [set out in the Bananas Understanding]"313, namely:  "(i) to implement an interim import 
regime until January 1, 2006;  ( ii) to initiate negotiations unde r GATT Article XXVIII, recognizing 
Ecuador as the principal supplier in these negotiations ;  and (iii) to introduce a tariff only import 
regime on January 1, 2006."314  First, the European Communities argues that, before the introduction 
of the tariff only regime on 1 January 2006, it had accepted increased quantities of bananas from 
Ecuador and other MFN countries at a tariff of €75/ mt, and had introduced a corresponding decrease 
in the volume of preferential banana exports from ACP countries.315  Second, according to the 
European Communities, "Ecuador was recognised as  a principal supplier in the GATT Article XXVIII 
negotiations".316  Third, the European Co mmunities claims that on 1 January 2006 it introduced a 
tariff-only regime, as foreseen by the Understanding317, since: 
"The Understanding does not provide that this tariff only regime should have any 
particular characteristics and, indeed , the import regime introduced by the 
European Communities does not have any speci al features:  there is a single tariff 
applicable to all banana imports, with a preference granted to the ACP countries 
limited to certain quantities only.  This is the type of regime that the Article 21.5 
Panel had described as 'tariff only' in paragraph 6.157 of its report."318 
7.21 As regards Ecuador's compliance, the Eur opean Communities argues that "Ecuador had 
initially complied with the obligations  undertaken in the Understanding"319 by supporting the adoption 
of the waivers from Articles I and XIII of the GATT 1994, as provided in the Bananas Understanding.
320 
                                                      
308 (footnote original ) See the Understanding, at point B. 
309 (footnote original ) See the Understanding at point F. 
310 European Communities' first written submission, para. 63. 
311 Ibid., para. 61. 
312 Ibid., para. 62. 
313 European Communities' second written submission, para. 13. 
314 Ibid., para. 13. 
315 See European Communities' first written submission, para. 28. 
316 European Communities' second written submission, para. 13. 
317 See European Communities' first written submission, para. 29. 
318 European Communities' second written submission, para. 16. 
319 Ibid., para. 15. 
320 See European Communities' first written submission, para. 29.  WT/DS27/RW2/ECU 
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  7.22 Concerning Ecuador's communication on the Ba nanas Understanding to the DSB that the 
"provisions of Article 3.6 of the DSU are not applicable in this case"321, the European Communities 
claims that such a "subsequent unilateral ... decl aration cannot alter the binding nature of the 
Understanding between the parties to this dispute."322  According to the European Communities, 
"the analysis of the legal status and effect of the Understanding should be primarily based on its 
content and not on any unilateral statements issued by the signatories after its signing."323  
The European Communities points out that "the Ba nanas Understanding (i) describes in great detail 
the characteristics of the two banana import regimes that the European Communities should 
implement by July 1, 2001 and by January 1, 2002 respectively and (ii) expressly provides that Ecuador's right to retaliate will be terminated."
324 
7.23 The European Communities also  supports the argument made by a number of ACP third 
parties (namely Belize, Cameroon, Côte d'Ivoi re, Dominica, the Domi nican Republic, Ghana, 
Jamaica, Madagascar, St. Lucia, St. Vincent and th e Grenadines, and Suriname) that, with Ecuador's 
explicit agreement325, "the banana dispute was taken off the agenda of the DSB in accordance with 
Article 21.6 of the DSU ... at the DSB meeting held on 1 February 2002326"327.  In this regard, 
the European Communities argues that: 
"Given that ... Article [21.6 of the DSU] provides that the issue of implementation 
'shall remain on the DSB's agenda until the issue is solved', th e removal of the item 
from the agenda of the DSB supports the argu ment that Ecuador considered that the 
issue was solved with the introduction in 2002 of the new tariff-quota-based import regime as envisaged in the Understanding."
328 
7.24 Nevertheless, in response to a question by the Panel concerning that specific statement by 
ACP third parties, at a later stage in the proceedi ngs the European Communities stated that it "has not 
argued that the withdrawal of the issue on the implementation of the DSB rulings and recommendations from the agenda of the DSB has any particular legal significance."
329 
7.25 The European Communities also contends that , since the Bananas Understanding constitutes a 
mutually agreed solution, it "must be taken into c onsideration in analysing the rights and obligations 
of the parties towards each other, as provided by th e Vienna Convention on the Law of Treaties, at 
Article 31, paragraph 3(c)."330  According to the European Co mmunities, "[b]ilateral agreements 
between two WTO members form part of the 'appli cable rules of law' between the parties to the 
dispute, as defined in the Vienna Convention"331, and, therefore, "a party that has entered into a 
                                                      
321 EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 
9 July 2001, p. 1. 
322 European Communities' first written submission, para. 61. 
323 European Communities' response to Panel question No. 94. 
324 Ibid. 
325 See joint third-party submission of Belize, Cameroon, Côte d'Ivoire, Dominica, 
the Dominican Republic, Ghana, Jamaica, Madagascar , St. Lucia, St. Vincent and the Grenadines, and 
Suriname, para. 37. 
326 (footnote original ) Minutes of the DSB meeting held on 1 February 2002, WT/DSB/M/119, 
6 March 2002, at point 1 (a). 
327 Joint third-party submission of Belize, Cameroon, Côte d'Ivoire, Dominica, the Dominican 
Republic, Ghana, Jamaica, Madagascar, St. Lucia, St . Vincent and the Grenadines, and Suriname, para. 37. 
328 European Communities' response to Panel question No. 6. 
329 European Communities' response to Panel question No. 59. 
330 European Communities' first written submission, para. 62. 
331 European Communities' second written submission, para. 7. WT/DS27/RW2/ECU 
Page 120  
 
  'mutually agreed solution', such as the Unde rstanding, [is] bound by the obligations it has 
undertaken".
332 
7.26 In particular, the European Communities mainta ins that, "[g]iven that Ecuador has entered 
into a mutually agreed solution with the European Communities, in which it is provided that the 
current import regime of the European Communities would include a preference for ACP bananas, ... 
Ecuador should not be allowed to now challenge this preference."333  The European Communities 
requests "the Panel to dismiss the relevant Ecuador claims in their entirety"334, arguing that 
"using Article 21.5 of the DSU to question a mu tually agreed solution between the Parties, 
goes against Articles 3.7 and 3.10 of the DSU, wh ich provide that mutually negotiated solutions 
should be preferred to resorting to dispute resolution procedures."335 
7.27 The European Communities contends that "these provisions [of the DSU] are the corollary in 
the WTO legal order of the principles of good faith and ' pacta sunt servanda ', which are well 
established in customary international law."336  In particular, according to  the European Communities: 
"[I]t is wrong to assume that the principle of  good faith does not cover Article 21.5 of 
the DSU, as asserted in paragraph 9 of  Ecuador’s second submission.  Both the 
language used in Article 3.10 of the DSU (i.e., ' all Members will engage in these 
procedures in good faith ') and its nature as a general principle of law, make clear that 
the principle of good faith runs through the entire DSU and defines the outer limits of the application of all rights recognized by the DSU to WTO Members."
337 
7.28 In response to a question by the Panel, the European Communiti es also addresses the 
argument by the United States that: 
"The Understanding [on Banana s] is not a 'covered agreem ent' – it is not listed in 
Appendix 1.  Accordingly, the DSU cannot be used to settle a dispute as to the 
meaning or effect of the Understa nding, and the DSU cannot enforce the 
Understanding by blocking a party to the Understanding from recourse to the DSU.  
The EC itself has in fact conceded that th ere is no bar to proceeding with dispute 
settlement even in the face of a mutually ag reed solution.  It is worth noting that, 
during the India – Autos  proceeding (which, like the negotiation of the 
Bananas Understandings, took place in the spring of 2001), the EC also held that view that a mutually agreed solution could not prevent recourse to the DSU..."
338 
7.29 In response to that argument by the United States, the European Communities asserts that 
"India – Autos  was an ordinary Article XXIII dispute whereas the present dispute is a 'compliance' 
case under DSU Article 21.5."339  Further, according to the European Communities: 
"In effect, the mutually agreed settlement is an acceptance that the respondent has 
complied with the DSB recommendations and rulings, since it must be in accordance 
with WTO rules.  It would therefore be  perverse to allow the complainant to 
commence proceedings that explicitly denied  this.  By respecting the Understanding 
                                                      
332 European Communities' second written submission, para. 8. 
333 European Communities' first written submission, para. 64. 
334 Ibid., para. 65. 
335 Ibid., para. 64. 
336 European Communities' second written submission, para. 11. 
337 Ibid., para. 12. 
338 Final written version of the United States' oral statement at the substantive meeting of the Panel with 
parties and third parties, para. 4. 
339 European Communities' response to Panel question No. 60.  WT/DS27/RW2/ECU 
 Page 121 
 
 
  the panel would be doing what is required of it in the DSU, which is of course a 
covered agreement."340 
7.30 Moreover, the European Communities notes: 
"[T]hat the report of the panel in the India – Autos  case states in paragraph 7.113: 
'[…] such agreements are expressl y referred to and supported by the 
DSU.  It is certainly reasonable to assume, particularly on the basis 
of Article 3 of the DSU […] that these agreed solutions are intended to reflect a settlement of the dispute in question, which both parties expect will bring a final conclusi on to the relevant proceedings.'
341"342 
7.31 The European Communities also argues that: 
"[T]he [ India – Autos ] panel found in paragraph 7.115 of its report that 'it may also be 
the case that it cannot be lightly assumed that  those drafters intended mutually agreed 
solutions, expressly promoted by the DSU, to have no meaningful legal effect in subsequent proceedings'.  These stat ements confirm that the panel in India – Autos  
considered it possible that a mutually agreed solution could bar a party from 
commencing dispute settlement proceedings."
343 
7.32 Thus, the European Comm unities concludes that: 
"Granting to WTO members the right to re nege on the agreements with which they 
reach mutually agreed solutions to thei r disputes would seriously compromise the 
effectiveness of these mutually agreed so lutions and would foster the 'contentious' 
character of the dispute resolution system.  This would be inconsistent with the 
purpose of the DSU, as reflected in Article 3.10, and with the principles enshrined in 
Article 3.7 (where it is stated that mutua lly agreed solutions are to be preferred)."344 
7.33 In addition to claiming that the Bananas Unders tanding is a mutually agreed solution for the 
purposes of WTO dispute settlement, the Europ ean Communities advances the supplementary 
argument that, "even if it was to be assumed that th e Understanding is not a 'm utually agreed solution' 
for purposes of the DSU, ... it cannot be denied that it is a bilateral agreement that must be taken into 
consideration in analysing the rights and oblig ations of the parties to this dispute."345  Accordingly, if 
the Bananas Understanding were deemed not  to be a mutually agreed solution, 
the European Communities reaches the conc lusion that Ecuador should still be: 
"[B]arred from challenging the Cotonou Pref erence, because (i) Ecuador has already 
contractually accepted the existence of the Cotonou Preference and (ii) Ecuador has 
already been compensated for accepting the existence of  the Cotonou Preference."346 
                                                      
340 European Communities' response to Panel question No. 60. 
341 (footnote original ) See the report of the panel in India – Measures affecting the automotive sector , 
dated December 21, 2001, (" India – Autos "), paragraph 7.113. 
342 European Communities' response to Panel question No. 60. 
343 Ibid. 
344 European Communities' second written submission, para. 18. 
345 Final written version of the European Communities' closing oral statement at the substantive 
meeting of the Panel with partie s and third parties, para. 4. 
346 European Communities' second written submission, para. 11. WT/DS27/RW2/ECU 
Page 122  
 
  (ii) Main arguments by Ecuador 
7.34 While arguing that that "the EC 'preli minary' challenge s hould be dismissed"
347, in response to 
a question posed by the Panel, Ecuador confirms that it "signed the Understanding on Bananas with 
the EC on 30 April 2001".348  However, Ecuador also argues that it: 
"[W]as, and is, quite certain  regarding what it agreed to under the Understanding – 
a transitional regime comprised of several phased steps to be taken by the EC to 
ultimately bring about a resolution to the dispute, not an immediate end to the 
dispute.  Both the text of the Unders tanding and Ecuador's communication confirm 
this interpretation."349 
7.35 Referring to its communication to the DSB concerning the Bananas Understanding350, 
Ecuador adds that:  
"Immediately after the EC's communication [to the DSB concerning the 
Bananas Understanding], Ecuador clarifie d that the Understanding identified a ' means  
by which a long-standing dispute can be resolved,'351 comprised of 'the execution of 
two phases' and 'the implementation of several key features, which demands the 
collective action of the WTO membership.'  Ecuador viewed the EC's approach to the 
Understanding (as a mutually agreed solution within the meaning of Article 3.6) as 
denying the transitional nature of the Understanding."352 
7.36 When asked by the Panel about the purpose of Ecuador's communication to the DSB and the 
sentence therein that "the provisions of Article 3.6 of the DSU are not applicable in this case"353, 
Ecuador responded that:  
"[W]hat prompted [its] July 2001 communication to the DSB, was the EC's portrayal 
of the Understanding to the DSB in June 2001 – as a mutually satisfactory solution within the meaning of DSU Article 3. 6 and an end to the Bananas dispute.
354  
Ecuador did not, and to this day does not, share the EC's interpretation."355 
7.37 Ecuador also adds that: 
"[E]specially because of the EC purported notif ication, [Ecuador] came to realize that 
the EC might try to use the Understanding as means to restrict WTO control and 
Ecuador's rights under WTO dispute settlement rights.  Ecuador wished to make clear 
to the EC and WTO members generally, despite Ecuador's commitment to and hope 
                                                      
347 Ecuador's second written submission, para. 15. 
348 Ecuador's response to Panel question No. 37. 
349 Ibid. 
350 See EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 
9 July 2001, p. 1. 
351 (footnote original ) European Communities – Regime for the Importation, Sale and Distribution of 
Bananas – Understanding on Bananas between the European Communities and Ecuador , WT/DS27/60, 
9 July 2001("Ecuador Communication"), quoting EC-Ecuador Understanding, paragraph A. 
352 Ecuador's response to Panel question No. 37. 
353 EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 
9 July 2001, p. 1. 
354 (footnote original ) See Notification of Mutually Agreed Solution, European Communities – Regime 
for the Importation, Sale and Distribution of Bananas , WT/DS27/58, 2 July 2001. 
355 Ecuador's response to Panel question No. 37.  WT/DS27/RW2/ECU 
 Page 123 
 
 
  for the Understanding, it was not a mutual ly satisfactory solution in the sense of 
Article 2 [sic] of the DSU."356 
7.38 As to the legal effects of the Bananas Unde rstanding in the context of the WTO, Ecuador 
states that, "[a]s is evident [from] ... the different not ifications that were made, the parties did not have 
the same view of the significance and effect of the respective agreements."357  In particular, according 
to Ecuador, there is a difference between the legal st atus of waivers and bilateral agreements, such as 
the Bananas Understanding: 
"[T]he Doha waiver, which was granted by the WTO membership on a time-limited 
and conditional basis, does affect rights and obligations of WTO members.  A waiver 
granted by WTO Members in accordance with  the rules can modi fy those rules for 
WTO purposes.  However, the Understandi ng was between Ecuador and the EC, and 
is not an agreement that can modify ri ghts and obligations of anyone under the 
WTO."358 
7.39 In regard to the European Communities'  arguments about compliance with the 
Bananas Understanding, Ecuador argues that, even if the Bananas Understanding might eventually 
have come to be considered as a mutually agreed solution, "[its] terms ... were not adhered to by the 
EC"359: 
"The Understanding, together with the waivers that were granted, laid out a path that 
was supposed to result in a system by January  1, 2006, that would be consistent with 
the EC's obligations without the need fo r a waiver of any obligation except those 
under Article I, and then to further actions that, by January 1, 2008 would enable the 
system to operate fairly without any waiver at all.  ... [T]hough the system operated 
with reasonable success in its early years, in  the end the EC did not comply with the 
last phase.  A mutually agreed soluti on is not a solution without compliance."360 
7.40 Ecuador adds that it: 
"[D]oes not agree that the EC measures at issue are covered by the Doha Waiver.  
The Understanding did not commit Ecuador to accept whatever preferences or 
'tariff only' scheme that the EC might decide to apply as of January 1, 2006, regardless of whether the measures were c overed by the waiver or conformed with 
the EC's obligations under the WTO Agreement."
361 
7.41 Further, in Ecuador's view: 
"The EC squandered its opportunity to propose a proper rebinding, proposing instead 
levels that would vastly increase the prefer ence for ACP bananas.  When Ecuador and 
other countries would not agree to those proposals and the Arbitrator found that in each case the EC failed to meet the waiver standards, the EC nevertheless proceeded unilaterally to implement the measures that ar e now before this panel.  The EC also, 
as part of its same non-compliant behavior , did not follow the Article XXVIII process 
                                                     
 
356 Ecuador's response to Panel question No. 38. 
357 Ibid. 
358 Ecuador's response to Panel question No. 92. 
359 Ecuador's second written submission, para. 11. 
360 Ibid.  See also Ecuador's response to Panel question No. 41. 
361 Ecuador's second written submission, para. 13. WT/DS27/RW2/ECU 
Page 124  
 
  required as a condition of the waiver. The EC thus tries to claim protection under an 
Understanding with which it does not comply."
362 
7.42 While arguing that it had "complied with its obligations under the Understanding"363, 
Ecuador also argues that, in any event: 
"Compliance with the terms of the bilate ral Understanding does not remotely mean 
that Ecuador cannot complain under the WTO about measures that the EC never 
would have applied if the EC had complied  with the bilateral Understanding.  ...  
The intention of the parties that the U nderstanding result in a durable mutually 
satisfactory solution does not make the U nderstanding such a mutually satisfactory 
solution..."364 
7.43 In response to the argument advanced by some third parties that "the banana dispute was 
taken off the agenda of the DSB in accordance with Article 21.6 of  the DSU ... at the DSB meeting 
held on 1 February 2002365"366, and that "Ecuador agreed [to that] by stating that it 'also considered 
that this item should no longer appear on th e agenda of future DSB meeting [sic]'"367, Ecuador 
responds that it "agreed to the withdrawal of the item from the DSB agenda, subject to an explicit reservation of rights to bring a complaint under Article 21.5"
368, made at the same DSB meeting.  
Also, "Ecuador was clear that the Understanding invo lved staged obligations over several additional 
years, and that Ecuador was reserving Article 21.5 rights precisely because of concern that the terms might not be followed in subsequent years."
369 
7.44 Ecuador cites the following part from th e minutes of the DSB meeting held on 
1 February 2002, reflecting the statement made by  Ecuador before the issue was taken off the DSB 
agenda: 
"During the dispute settlement process, Ecuador had demonstr ated patience and 
flexibility and had, in this spirit, signed a bilateral Understanding on Bananas with the 
EC on 30 April 2001.  This Understanding c onstituted a sound basis for the EC to 
implement a transitional banana import regi me so that by 1 January 2006, at the 
latest, a WTO-compatible tariff-only regime would be put into place.  The transitional 
regime contained various phases, stages and elements to be implemented.  
One element was to obtain waivers from Articles I and XIII of the GATT 1994.  However, the decision to grant these waiv ers included new stages which would have 
to be carried out in order to ensure a pr oper transition to a tariff-only banana import 
regime, as from 1 January 2006.  Accord ingly, insofar as the EC continued to 
implement the DSB’s recommendations by  meeting its commitments, Ecuador 
wished to reserve its rights under Article 21 of the DSU.  Therefore if there was any 
disagreement concerning the measures app lied by the EC, the matter could be 
referred to the original Panel pursuant to Ar ticle 21.5 of the DSU.  Ecuador, like other 
                                                     
 
362 Final written version of Ecuador's oral statement at  the substantive meeting of the Panel with parties 
and third parties, para. 27. 
363 Ecuador's response to Panel question No. 39. 
364 Ibid. 
365 (footnote original ) Minutes of the DSB meeting held on 1 February 2002, WT/DSB/M/119, 
6 March 2002, at point 1 (a). 
366 Joint third-party submission of Belize, Cameroon, Côte d'Ivoire, Dominica, the Dominican 
Republic, Ghana, Jamaica, Madagascar, St. Lucia, St . Vincent and the Grenadines, and Suriname, para. 37. 
367 Ibid. 
368 Ecuador's response to Panel question No. 6. 
369 Ibid.  WT/DS27/RW2/ECU 
 Page 125 
 
 
  countries, also considered that this item should no longer appear on the agenda of 
future DSB meetings."370 
7.45 Ecuador adds that "[t]here was no objection to th is reservation, and similar reservations were 
expressed by other [Member]s."371 
7.46 In Ecuador's view, as underscored by Article 3.7 of the DSU, mutually agreed solutions are 
not exempt from the requirement in Article 3.5 of the DSU that all solutions to matters formally raised 
under the consultation and dispute se ttlement provisions of the covered agreements shall be consistent 
with those agreements.372  Therefore, Ecuador argues that, "even if [it] had wanted to agree to 
measures inconsistent with the c overed agreements, that would not be  a mutually satisfactory solution 
in the sense of Article 3 because of the lack  of conformity with covered agreements."373 
7.47 As to the argument of the European Comm unities that the Bananas Understanding, as a 
mutually agreed solution, would prevent Ecuador from bringing this case, Ecuador points out that it 
"is not challenging or questioning the EC-Ecuador  Understanding on Bananas, but rather is 
challenging the conformity of EC measures with the EC's obligations under the WTO Agreement".374  
Further, Ecuador argues that "[i]n the [Bananas] Understanding, Ecuador did not commit not to bring 
a WTO dispute against any EC measures, and there is nothing in the WTO rules or in the Understanding that could justif y implying such a limitation."
375  In particular, in Ecuador's view: 
"There is no provision of the DSU that precludes bringing a complaint under 
Article 21.5 simply on the basis that the challenged measure complied or was alleged 
to comply with an agreement alleged to constitute a mutually agreed solution.  
The DSU encourages mutually agreed so lutions, but carefully does not provide 
anywhere that a mutually agreed solution precludes or limits the right to bring dispute settlement proceedings.  The DSU drafters we re wise not to provide that a mutually 
agreed solution limits any DSU rights, for any such limitation would be a disincentive 
for parties to try to negotiate solutions.  This  is graphically illustrated in this dispute, 
where the EC is attempting to avoid scrutiny of it[s] flagrant violations of the WTO 
on grounds that the U nderstanding constituted a sub silencio  waiver of Ecuador's 
WTO rights.  The DSU authorizes and requires Panels to determine compliance with covered agreements.  The DSU does not au thorize a Panel to forego or limit its 
responsibilities because the defending part y in the dispute alleges that the 
complaining party waived its WTO rights in  a bilateral agreement.  Despite their 
protests, the EC and ACP countries are urging the Panel out of expediency in this 
dispute to fabricate rules regarding mutually agreed solutions that would make 
dispute parties, especially complaining parties, reluctant ever to enter into a mutually 
agreed solution, since that would cost th em their WTO rights.  The WTO Agreements 
do not provide such a rule, and it would be bad policy and bad law to try to contrive 
one."
376 
7.48 Ecuador adds that, even if the Bananas Understanding was to be considered a mutually agreed 
solution, "Articles 3.7 and 3.10 [of the DSU] do not preclude a challenge to measures based on the 
                                                      
370 Minutes of the Meeting of the Dispute Settlement Body Held at the Centre William Rappard on 
1 February 2002, WT/DSB/M/119 of 6 March 2002, para. 5. 
371 Ecuador's response to Panel question No. 6. 
372 See Ecuador's second written submission, para. 12. 
373 Ibid. 
374 Ibid, para. 14. 
375 Final written version of Ecuador's oral statement at  the substantive meeting of the Panel with parties 
and third parties, para. 29. 
376 Ecuador's response to Panel question No. 40. WT/DS27/RW2/ECU 
Page 126  
 
  contention of the defending party that the measures  have been 'accepted' in a mutually agreed 
solution."
377  In particular, Ecuador considers that Article 3.7 of the DSU "is not a prohibition of 
invoking the dispute settlement procedures, nor does it purport to override Article 21.5 or the other 
provisions of the DSU that make clear the right  to invoke dispute settlement procedures of the 
DSU."378  Further, Ecuador argues that Article 3.10 of the DSU "contains nothing remotely 
prohibiting resort to dispute settlement procedures."379  According to Ecuador, "[i]t would be illogical 
to exempt measures from challenge to their consis tency with WTO rules on grounds that they were 
part of a mutually agreed solution which, by  definition, must conform with those rules."380 
(b) Panel's analysis 
7.49 To establish its approach to this preliminary i ssue, the Panel will analyse first the nature and 
scope of this preliminary objection of the Europ ean Communities, in particular in regard to 
Article 21.5 of the DSU.  Subsequently, the Panel will apply the approach es tablished in order to 
assess the European Communities'  preliminary objection. 
(i) The scope of this preliminary issue and Article 21.5 of the DSU 
7.50 In its first preliminary objection, the European Communities calls into question Ecuador's 
right to contest the ACP preference, both in ge neral in the context of WTO dispute settlement381 and 
particularly in a compliance dispute.382  This Panel is bound by the term s of reference approved by the 
Dispute Settlement Body, at its meeting on 20 Ma rch 2007, which refer to the matter raised by 
Ecuador in its request for the establishment of  a panel made under Article 21.5 of the DSU.383  
Accordingly, the Panel will limit its considerat ion of the preliminary issue raised by the 
European Communities to whether Ecuador is prev ented, as a result of the Bananas Understanding, 
from bringing a compliance  dispute pursuant to Article 21.5 of the DSU.  An additional and more 
general consideration of whether Ecuador is barred by the Banana s Understanding from bringing any 
dispute under the WTO dispute settlement system, including a non-compliance dispute, would be 
unnecessary for the resolution of this dispute, and fo r the assessment of this preliminary issue in 
particular. 
7.51 The issue of whether the Bananas Unders tanding can prevent Ecuador from bringing a 
compliance dispute is closely related to the scope of compliance disputes.  In relevant part, Article 21.5 of the DSU provides that: 
"Where there is disagreement as to the existence or consistency with a covered 
agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, 
including wherever possible resort to the original panel." 
                                                     
 
377 Ecuador's second written submission, para. 9. 
378 Ibid. 
379 Ibid., para. 10. 
380 Final written version of Ecuador's oral statement at  the substantive meeting of the Panel with parties 
and third parties, para. 25. 
381 See European Communities' first written submissi on, para. 64;  and European Communities' second 
written submission, paras. 6 and 11. 
382 Ibid. 
383 See European Communities – Regime for the Importation, Sale and Distribution of Bananas , 
Recourse to Article 21.5 by Ecuador, Constitution of th e Panel (WT/DS27/82), 18 June 2007, paras. 1-2.  WT/DS27/RW2/ECU 
 Page 127 
 
 
  7.52 In the context of this preliminary issue, neither of the parties argues that the matter before this 
Panel would fall outside of the sc ope of Article 21.5 of the DSU.384  Ecuador has brought this dispute 
under Article 21.5 of the DSU, by making the following request: 
"As there continues to be a disagreemen t between Ecuador and the EC over the 
WTO-consistency of the EC banana  measures taken to comply with Bananas III and 
Bananas-DSU Article 21.5 (Ecuador) and subsequent related rulings, 
Ecuador respectfully requests that this matte r be referred to a Panel, if possible the 
original panel, in accordance with Article 21.5 of the DSU."385   
7.53 As for the European Communities, in respon se to a question from the Panel on whether the 
European Communities was arguing that the Panel ha d no jurisdiction to hear Ecuador's claims, 
the European Communities stated that it "does no t challenge the Panel's jurisdiction with this 
preliminary objection, but rather Ecuador's right to bring these claims."386  In its claim under 
Article 21.5 of the DSU, Ecuador challenges an EC measure under which, according to the 
European Communities: 
"There is a single tariff applicable to all banana imports, with a preference granted to 
the ACP countries limited to certain quantities onl y.  This is the type of regime that 
the [previous] Article 21.5 Panel [in this di spute] had described as 'tariff only' in 
paragraph 6.157 of its report [when ma king suggestions for implementing the 
recommendations under Article 19 of the DSU]."387  
7.54 Accordingly, there is no need  for the Panel to fully consider, in the context of the 
European Communities' first preliminary objection,  whether this is properly a compliance dispute 
under Article 21.5 of the DSU.  Rather, the Panel will focus on the more narrow issue of whether the 
Bananas Understanding bars Ecuador from bringing this  compliance challenge, in the light of parties' 
arguments in that specific regard. 
(ii) Is Ecuador barred by the Bananas Understanding from bringing this compliance challenge? 
Panel's approach  
7.55 Turning to the issue whether Ecuador is barre d by the Bananas Understanding from bringing 
this compliance challenge, the Panel notes that  the European Communities makes the following 
proposal on how the Panel might assess this first preliminary issue: 
"[T]he Panel should first find that Ec uador is bound by the terms of the 
Understanding.  Then, the Panel should find that, through the Understanding, 
Ecuador accepted that the Cotonou Preference  would continue to exist for the entire 
duration of the waiver that the European  Communities had requested at the time the 
Understanding was signed and the grant of which Ecuador accepted to support in the 
Understanding.  Finally, the Panel should find that Ecuador must now comply with its 
undertakings and, therefore, that Ecuador cannot challenge the Cotonou 
Preference."388 
                                                      
384 This issue is raised by the European Communities only in the specific context of its second 
preliminary objection, and will be addr essed in that context, if necessary. 
385 See  EC – Bananas III (Article 21.5 – Ecuador II) , Request for the Establishment of a Panel 
(WT/DS27/80) 26 February 2007, p. 5. 
386 European Communities' response to Panel question No. 58. 
387 European Communities' second written submission, para. 16. 
388 European Communities' response to Panel question No. 58. WT/DS27/RW2/ECU 
Page 128  
 
  7.56 As indicated above, the European Commun ities appears to be making a two-pronged 
argument under its first preliminary objection.
389  First, the European Communities argues that the 
Bananas Understanding constitutes a mutually agreed  solution providing for the ACP preference, and 
therefore Ecuador is prevented from contesting the conformity of the European Communities' current 
banana import regime in a compliance dispute.  Second, the European Communities makes a similar, 
residual argument if "it was to be assumed that the [Bananas] Understanding is not a 'mutually agreed 
solution' for purposes of the DSU"390.  If that were the case, the European Communities argues that 
the Bananas Understanding is a legally binding bi lateral agreement, which provides for the ACP 
preference, and therefore similarly prevents  Ecuador from challenging such preference. 
7.57 As the above suggestion by the European Co mmunities confirms, there seem to be three 
common elements in the two prongs of the Eu ropean Communities' arguments under the first 
preliminary issue: 
(a) The alleged legally binding nature of  the Bananas Understanding on Ecuador, 
whether or not such Understanding qualif ies as a mutually agreed solution; 
(b) That, as the European Communities puts it,  "through the [Bananas] Understanding, 
Ecuador accepted that the Cotonou Preference  would continue to exist for the entire 
duration of the waiver that the European  Communities had requested at the time the 
Understanding was signed and the grant of which Ecuador accepted to support in the 
Understanding"391;  and, 
(c) That, based on this, Ecuador could not  challenge the Cotonou Preference. 
7.58 These three questions are potentially relevant fo r addressing this prelimin ary objection by the 
European Communities.  The Panel will first asses s whether the Bananas Understanding bars Ecuador 
from bringing this compliance challenge, by first looking at the language of the Understanding.  
Only if the Panel was to find that the Bananas U nderstanding bars Ec uador from bringing this dispute, 
would the Panel then turn to assessing, as sugg ested by the European Communities, whether the 
Understanding indeed qualifies as a mutually agreed  solution or an agreement binding on Ecuador for 
the purposes of WTO dispute settlement. 
7.59 The Panel will follow the approach of the panel in India – Autos in that it will conduct a case-
specific analysis of the preliminary issue raised  by the European Communities.  Indeed, in the India – 
Autos  dispute, in which the question of whether a mu tually agreed solution can prevent a party from 
bringing a dispute was raised, the panel noted that: 
"Without clear guidance in the DSU, this ques tion raises an important systemic issue.  
...  There may be significant differences between the provisions of mutually agreed 
solutions from case to case, which may ... make it difficult to draw general 
conclusions as to the relevance of [mut ually agreed] solutions to subsequent 
proceedings other than on a case by case basis."392 (footnote omitted) 
7.60 Further, the panel in India – Autos  found that it "need[ed] to consider… the terms of the 
MAS"393 because "[u]ltimately, it is the terms of the MAS that are the only possible source of any 
                                                      
389 See summary of the European Communities' main  arguments under this preliminary issue above. 
390 Final written version of the European Communities' closing oral statement at the substantive 
meeting of the Panel with partie s and third parties, para. 4. 
391 European Communities' response to Panel question No. 58. 
392 Panel Report on India – Autos , para. 7.116. 
393 Ibid., para. 7.117.  WT/DS27/RW2/ECU 
 Page 129 
 
 
  restriction on our jurisdiction."394  The Panel agrees with the Eu ropean Communities' argument in 
these proceedings that "the analysis of the legal status and effect of the Understanding should be 
primarily based on its content ... ."395 
7.61 While the Panel intends to duly assess the preliminary issue raised by the 
European Communities in the context of this dispute, it does not consider it necessary for the 
resolution of this dispute to assess the more syst emic issue of whether or not mutually agreed 
solutions or legally binding agreements between parties to a dispute that might not qualify as a 
mutually agreed solution may prev ent parties to such instruments from bringing compliance disputes.  
The Panel agrees with the panel in India – Autos  that "this issue is not expressly addressed in the 
DSU".396  The Panel also recalls that, under Article 3.2 of the DSU, the WTO dispute settlement 
system "serves to preserve the rights and obligatio ns of Members under the covered agreements, and 
to clarify the existing provisions of those agre ements in accordance with customary rules of 
interpretation of public international law."  Furt her, under the same provision, "[r]ecommendations 
and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered 
agreements." 
7.62 With regard to the method of assessment, the panel in India – Autos recognized that "[a]s [an] 
MAS is not a covered agreement, it is not expr essly subject to the DSU requirement to utilise 
customary rules of interpretation of international law." 397  Nevertheless, that panel also stated that: 
"[S]ince [the MAS in question] is an agreement among States, the Panel finds it 
appropriate to address the terms of this ag reement in accordance with the customary 
rules of interpretation of international law.   It will therefore consider the ordinary 
meaning of the terms of the MAS in light of their context and taking into account 
their object and purpose."398 
7.63 In the light of that statement by the panel in India – Autos and given the argument of the 
European Communities that the Bananas Understandi ng would qualify as a mutually agreed solution, 
this Panel will analyse the terms of the Banan as Understanding in accord ance with the customary 
rules of interpretation of international law,  as expressed in Articles 31 and 32 of the 
Vienna Convention on the Law of Treaties to estab lish whether the Banan as Understanding prevents 
Ecuador from bring this compliance dispute.  This is without prejudice to the actual legal status of the 
Bananas Understanding, which, as stated earlier,  the Panel will not address at this stage. 
The terms and main elements of the Bananas Understanding  
7.64 Turning to the analysis of the terms of the Bananas Understanding, the Panel notes that the 
Understanding provides that "[t]he EC and Ecuador consider that th[e] Understanding constitutes a 
mutually agreed solution to the banana dispute."399  Further, the Understanding states in its first 
                                                      
394 Panel Report on India – Autos , para. 7.117. 
395 European Communities' response to Panel question No. 94. 
396 Panel Report on India – Autos , para. 7.114. 
397 Ibid., para. 7.118. 
398 Ibid., para. 7.118. 
399 EC – Bananas III , Notification of Mutually Agreed Solutio n (WT/DS27/58), 2 July 2001, para. G;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. G. WT/DS27/RW2/ECU 
Page 130  
 
  paragraph that "[t]he European Commission and Ec uador have identified the means by which the 
long-standing dispute over the EC's bana na import regime can be resolved."
400 
7.65 The Bananas Understanding sets out various future steps to be taken by its parties, who are 
also the parties to the dispute before this Panel.   The Understanding first addresses the three distinct 
steps to be taken by the European Communities following the adoption of the Understanding.  
First, the Understanding identifies the last, third step: 
"In accordance with Article 16(1) of Re gulation No. (EC) 404/93 (as amended by 
Regulation No. (EC) 216/2001), the European Communities (EC) will introduce a 
Tariff Only regime for imports of  bananas no later than 1 January 2006 .  
GATT Art XXVIII negotiations shall be in itiated in good time to that effect, 
recognizing Ecuador as the principa l supplier in these negotiations."401  
(emphasis added) 
7.66 Subsequently, the Bananas Understanding identif ies the initial two steps to be implemented 
by the European Communities in the following terms: 
"In the interim, the EC will implement an import regime on the basis of historical 
licensing as follows: 
1. Effective 1 July 2001, the EC will implement an import regime on the basis 
of historical licensing as set out in Annex 1. 
2. Effective as soon as possible thereafter, subject to Council and European 
Parliament approval and to adoption of the Article XIII waiver referred to in 
paragraph F, the EC will implemen t an import regime on the basis of 
historical licensing as set out in Annex 2. The Commission will seek to 
obtain the implementation of such an import regime as soon as possible."402 
7.67 As for Ecuador, the Bananas Understanding prescribes one main step: 
"Ecuador will lift its reserve concerning th e waiver of Article I of the GATT 1994 
that the EC has requested for preferential access to the EC of goods originating in 
ACP States signatory to the Cotonou Agre ement;  and will actively work towards 
promoting the acceptance of an EC request  for a waiver of Article XIII of the 
GATT 1994 needed for the management of quota C under the import regime described in paragraph C(2) until 31 December 2005."
403 
                                                      
400 EC – Bananas III , Notification of Mutually Agreed Solutio n (WT/DS27/58), 2 July 2001, para. A;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. A. 
401 EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, para. B;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. B. 
402 EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, para. C;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. C. 
403 EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, para. F;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. F.  WT/DS27/RW2/ECU 
 Page 131 
 
 
  The importance of providing a positive solution and effective settlement to WTO disputes, 
in conformity with the covered agreements   
7.68 Without addressing the legal status of the Ba nanas Understanding, the Panel agrees with 
European Communities that, as Article 3.7 of the DS U provides, mutually agreed solutions constitute 
the "clearly preferred" solution to WTO disputes.  Also, the Panel recognizes the systemic importance 
of mutually agreed solutions for WTO dispute se ttlement, and the importance of parties reaching a 
specific mutually agreed solution to comply with  the terms of such mutu ally agreed solution. 
7.69 Nevertheless, the Panel reaches a different c onclusion on Article 3.7 of the DSU than the 
European Communities as to whether the Bananas Understanding can bar Ecua dor from bringing this 
compliance challenge. 
7.70 Article 3.7 of the DSU also provides that "[t]he aim of the [WTO] dispute settlement 
mechanism is to secure a positive solution  to a dispute". (emphasis added) 
7.71 Further, under Article 3.2 of the DSU, "the dispute settlement system of the WTO is a central 
element in providing security and predictability to  the multilateral trading system", and one of the 
objectives of the WTO dispute settlement system is "to preserve the rights and obligations of 
Members under the covered agreements". 
7.72 Also, under Article 3.3 of the DSU,  
"The prompt settlement  of situations in which a Member considers that any benefits 
accruing to it directly or indirectly under the covered agreements are being impaired 
by measures taken by another Member is essential to the effective functioning of the 
WTO and the maintenance of a proper balance between the rights and obligations of 
Members ." (emphasis added) 
7.73 Finally, pursuant to Article 3.4 of the DSU, "[r]ecommendations or rulings made by the DSB 
shall be aimed at achieving a satisfactory settlement  of the matter in accordan ce with the rights and 
obligations under [the DS U]". (emphasis added) 
7.74 Accordingly, the Panel considers that any a lleged solution to WTO disputes must first and 
foremost "secure a positive solution" to the disput e in the sense of Article 3.7 of the DSU.  
This requirement also applies to a solution that is alleged to be a "clearly preferred" or a legally 
binding one, as the European Communities argues in regard to the Bananas Understanding.  
Further, given the emphasis in the DSU on the prom pt settlement of disputes, on the security and 
predictability of the multilateral trading system, a nd on the "central" role of WTO dispute settlement 
in providing such security and pred ictability, any solution to a WT O dispute, including an alleged 
mutually agreed solution or other legally binding agreement, can lead to a positive resolution of a 
dispute only if the solution provides a satisfactory an d effective settlement to the dispute in question 
in the sense of Article 3.4 of the DSU. 
7.75 Consequently, the Panel is of the view th at the Bananas Understanding can legally bar 
Ecuador from bringing this compliance challenge only if that Understanding constitutes a positive 
solution and effective settlement to the dispute in question. 
7.76 The Panel considers that that is not the case here – for the following three reasons taken 
together : 
(a) the Bananas Understanding provides only for a means, i.e. a series of future steps, 
for resolving and settling the dispute; WT/DS27/RW2/ECU 
Page 132  
 
  (b) the adoption of the Bananas Understandi ng was subsequent to recommendations, 
rulings and suggestions by the DSB;  and, 
(c) parties have made conflicting communi cations to the WTO concerning the 
Bananas Understanding. 
7.77 Before turning to these three issues, the Panel r ecalls that one of the main arguments of the 
European Communities under this preliminary issue is  that the Bananas Understanding is a mutually 
agreed solution or a legally binding agreemen t for the purposes of WTO dispute settlement.  
The Panel does not address that argument at this  point;  however, the Panel does note that, assuming 
that the Bananas Understanding qualifies as a mutually  agreed solution or a legally binding agreement 
for the purposes of WTO dispute settlement, there is a clear requirement for it to be consistent with 
the covered agreements. 
7.78 Article 3.7 of the DSU not only expresses a "clear preference" for mutually agreed solutions, 
it also provides that "[a] solution mutua lly acceptable to the parties to a dispute and consistent with 
the covered agreements  is clearly to be preferred." (emphasis added)  Article 3.5 of the DSU confirms 
this requirement of conformity in regard to all solutions, not only mutually agreed solutions, 
by stipulating that: 
"All solutions to matters formally raised under the consultation and dispute settlement 
provisions of the covered agreements, in cluding arbitration awards, shall be 
consistent with those agreements and shall not nullify or impair benefits accruing to 
any Member under those agreements, nor impe de the attainment of any objective of 
those agreements." 
7.79 This obligation of conformity is closely relate d to the requirement that an alleged mutually 
agreed solution or legally binding agreement can  prevent Ecuador from bringing this compliance 
challenge only if such alleged mutually agreed solution or legally binding agreement provides a 
positive solution and effective settlement of the disput e.  It is not clear how an alleged mutually 
agreed solution or legally binding agreement could provide a positive solution or effective settlement 
for the purposes of WTO dispute settlement without be ing in conformity with the covered agreements. 
The Bananas Understanding provides only fo r a means for resolving and settling the 
dispute 
7.80 As the analysis of the terms and main elements of the Bananas Understanding shows, 
the essence of the Understanding is a series of staged future steps that both sid es agreed to take over a 
period of several years following the adoption of the Understanding. 
7.81 The Panel notes that, by its terms, th e Bananas Understanding "identified the means by which  
the long-standing dispute over the Europ ean Communities' banana import regime can be resolved ."
404 
(emphasis added)  In the light of that language and the various subsequent steps set out in the Bananas Understanding, it is difficult to see how the Bananas Understanding, even if it was an alleged 
mutually agreed solution or a bindin g agreement, could be an effective solution  to a dispute in the 
absence of parties' full compliance w ith all the steps set out therein. 
7.82 Also, as indicated earlier, the Panel considers that one of the main functions of the 
Bananas Understanding, if it were a mutually ag reed solution or a binding agreement, as the 
                                                     
 
404 EC – Bananas III , Notification of Mutually Agreed Solutio n (WT/DS27/58), 2 July 2001, para. A;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. A.  WT/DS27/RW2/ECU 
 Page 133 
 
 
  European Communities argues, would be to provide an effective settlement to the dispute in question.  
The Panel agrees with the panel  in India – Autos , which was considering a mutually agreed solution 
providing for future steps by its parties,  that: 
"It is certainly reasonable to assume, particularly on the basis of Article 3 of the DSU, 
... that [mutually] agreed solutions are inte nded to reflect a settlement of the dispute 
in question, which both parties expect will bring a final conclusion to the relevant 
proceedings."405 
7.83 The same panel added that: 
"This does not necessarily resolve the issue of  what can be done if, despite the agreed 
solution, a subsequent disagreement emerges relating to the scope of the solution or 
to compliance with it.  This is not an issue expressly addressed in the DSU."406 
7.84 The Panel considers that an alleged mutually  agreed solution or binding agreement that 
essentially serves to provide for future steps by its parties, lik e the Bananas Understanding, can only 
"secure a positive solution" in the sense of Article 3.7 of the DSU after implementation, because it 
is inseparably linked to those futu re steps and to full compliance by the parties with each of those 
steps. 
7.85 The Panel does not assess whether there is the possi bility to enforce, under the DSU, the steps 
set out in an alleged mutually agreed solution or  other legally binding agreement between the parties 
to a dispute.  Nevertheless, th e Panel considers that, for the purposes of providing a positive solution 
and effective settlement to the dispute in question, the full effect of the Bananas Understanding will 
be realized only after parties' compliance with  all the steps set out in the Understanding.  
7.86 The Panel considers that one of the reasons fo r the "clear preference" for mutually agreed 
solutions under Article 3.7 of the DSU, would seem to  be that, by virtue of the mutual agreement of 
the parties that they involve, such solutions are su pposed to provide the mo st effective solution and 
settlement to the dispute in question. 
7.87 The Panel recalls the importance of the requi rement of consistency with the covered 
agreements of all solutions to WTO disputes.  Without assessing the legal status of the 
Bananas Understanding, the Panel considers that that requirement is twofold in regard to an alleged 
mutually agreed solution or legally binding solu tion, like the Bananas Understanding, that provides 
for a series of staged future steps by its parties. 
7.88 First, pursuant to Articles 3.7 and 3.5 of the DSU, any mutually agreed solution shall be 
consistent with the covered agreemen ts.  By virtue of Article 3.5 of the DSU, the same requirement of 
consistency with the covered agre ements applies to an alleged le gally binding agreement that is 
intended to provide an effective so lution to a particular dispute. 
7.89 Second, by virtue of the close link between Bananas Understanding and the future steps set 
out therein, to the extent that the Bananas Understa nding provides for future steps by its parties, such 
steps shall also be consistent with the covered ag reements.  The Panel does not see how conformity of 
an alleged mutually agreed solution or legally bi nding agreement providing for future steps by its 
parties may be achieved in a meaningful way wit hout making sure that the actual future steps 
enshrined in such mutually agreed  solutions are also in conformity  with the covered agreements.  
For the same reason, the Panel does not see how an  alleged mutually agreed solution or legally 
                                                      
405 Panel Report on India – Autos , para. 7.113. 
406 Ibid., para. 7.114. WT/DS27/RW2/ECU 
Page 134  
 
  binding agreement providing for future steps can be a positive solution or an effective settlement 
without conformity with the covered agreements. 
7.90 This link between on the one ha nd, alleged mutually agreed solutions or legally binding 
agreements and, on the other hand, the steps set out in  such solutions or agreements, in the context of 
compliance with the covered agreements, is perh aps more obvious for alleged mutually agreed 
solutions or legally binding agreements recording the implementation of past steps agreed upon by the 
parties.  However, despite the different time persp ective, the same link is equally valid in the context 
of alleged mutually agreed solutions or legally  binding agreements setting out future steps. 
7.91 In the light of that paramount requirement of conformity with the covered agreements, 
the Panel remains convinced that a complainant must have the possibility of having recourse to WTO 
dispute settlement in order to review the confor mity with the covered agreements of a measure 
purportedly taken by the respondent to implement a step  set out in an alleged mutually agreed solution 
or other legally binding agreement. 
The adoption of the Bananas Understandi ng subsequent to recommendations and 
suggestions by the DSB 
7.92 The Panel considers that the fact that th e parties adopted the Bananas Understanding 
subsequent to a series of reports in this dis pute by panels and the Appellate Body establishing 
inconsistency with the covere d agreements constitutes relevant context for assessing the 
European Communities' first preliminary objection. 
7.93 The Dispute Settlement Body adopted the rele vant reports with recommendations that the 
European Communities bring its measures into compliance, and suggestions as to how the 
European Communities might do that.
407  Through these recommendations and suggestions, the DSB 
thus repeatedly tried to promote a resolution of this dispute. 
7.94 The Panel notes that the European Communities argues that its current banana import regime, 
introduced on 1 January 2006, is the tariff-only regime foreseen by the Bananas Understanding408, 
since "[t]he Understanding does not provide that th is tariff only regime should have any particular 
characteristics and, indeed, the import regime in troduced by the European Communities does not have 
any special features:  there is a single tariff applicab le to all banana imports, with a preference granted 
to the ACP countries limited to certain quantities only."409  For this latter reason, the 
European Communities also argues that its current ba nana import regime "is th e type of regime that 
the [first] Article 21.5 Panel [requested by Ecuador ] had described as 'tariff only' in paragraph 6.157 
of its report."410 Further, the European Communities notif ied the Bananas Understanding with the 
following communication: 
"The European Communities (EC) wish to notify the Dispute Settlement Body (DSB) 
that they have reached, with the United States of America and Ecuador, a mutually 
satisfactory solution within the meaning of Article 3.6 of the DSU regarding the 
implementation by the EC of the conc lusions and recommendations adopted by the 
                                                      
407 See Minutes of the Meeting of the Dispute Settlement Body Held in the Centre William Rappard on 
25 September 1997, WT/DSB/M/37 of 4 November 1997, p. 27;  and Minutes of the Meeting of the Dispute Settlement Body Held in the Centre William Ra ppard on 6 May 1999, WT/DSB/M/61 of 30 June 1999, 
p. 6. 
408 See European Communities' first written submission, para. 29. 
409 European Communities' second written submission, para. 16. 
410 Ibid.  WT/DS27/RW2/ECU 
 Page 135 
 
 
  DSB in the dispute "Regime for the importation, sale and distribution of bananas" 
(WT/DS27) ."411 (emphasis added) 
7.95 Thus, the European Communities establishes a cl ose link between each of the following:  
(i) the DSB recommendations and suggestions made previ ously in this dispute;  (ii) the third, final 
step foreseen by the Bananas Understanding;  and, (iii) the measures contested by Ecuador before this 
Panel. 
7.96 As mentioned earlier, the Panel does not intend to assess whether – beyond the possibility of 
having alleged implementation steps reviewed under the DSU – there is also the possibility to enforce, 
under the DSU, the steps to be taken by parties under an alleged mutually agreed solution or legally 
binding agreement.  The Panel considers that  the close link that the European Communities 
establishes between the Bananas Understanding an d the recommendations and suggestions of the 
DSB underscores the relevance of the Bananas Unders tanding for the resolution and settlement of this 
dispute.  At the same time, the close link that  the European Communities establishes between the 
DSB recommendations and suggestions made previously in this dispute, the third, final step foreseen 
by the Bananas Understanding, and the measures contest ed by Ecuador before this Panel confirms that 
the Bananas Understanding in itself cannot prevent Ecuador from bringing this compliance dispute. 
7.97 Given that close link, parties' compliance with all future steps set out in the 
Bananas Understanding is an even more important precondition of a positive solution and an effective 
settlement of the dispute.  However, there is no recognition by the complainant that the 
European Communities has implemented all three steps set out in the Bananas Understanding.  
In particular, while Ecuador recognizes the European Communities' compliance with the first two 
steps under the Bananas Understanding412, Ecuador contests413 whether the European Communities 
has complied with the third step:  "to introduce a Ta riff Only regime for imports of bananas no later 
than 1 January 2006".414  Further, in its compliance challenge, Ecuador contests that the current EC 
banana import regime is in confor mity with the covered agreements. 
Parties' conflicting communicati ons to the WTO concerning the 
Bananas Understanding 
7.98 Article 3.6 of the DSU provides that: 
"Mutually agreed solutions to matters fo rmally raised under the consultation and 
dispute settlement provisions of the covered agreements shall be notified to the DSB 
and the relevant Councils and Committees, where any Member may raise any point 
relating thereto." 
7.99 In addition to conformity with the covered agreements, notification is the other main 
requirement with regard to mutually agreed solutio ns under the DSU.  The Panel notes that Article 3.6 
of the DSU uses the passive voice, and it does not sp ecify whether the parties shall notify a mutually 
agreed solution separately or jointly, or whether notif ication by one of the parties to a mutually agreed 
solution is sufficient, and if yes, whether the complainant or the respondent shall make the 
notification. 
                                                      
411 EC – Bananas III , Notification of Mutually Agreed Solu tion (WT/DS27/58), 2 July 2001, p. 1. 
412 Ecuador's second written submission, para. 11. 
413 Ibid. 
414 EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, para. B;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. B. WT/DS27/RW2/ECU 
Page 136  
 
  7.100  Accordingly, the Panel does not address whet her the Bananas Understanding was notified 
appropriately under Article 3.6 of the DSU or whether, as a result, it could qualify as a mutually agreed solution.  At the same time, the Panel cons iders that the explicit notification requirement under 
Article 3.6 of the DSU is evidence of the importanc e that the DSU attaches to the notification of 
mutually agreed solutions to the WTO.  Thus , for the purposes of WTO dispute settlement, the 
reaching of an alleged mutually agreed soluti on between parties to a dispute needs to be 
complemented with notifying such agreement to all WTO Members.  The indispensability of this 
latter, multilateral element of mutually agreed so lutions is underscored by the requirement, under 
Article 3.6 of the DSU, of notifying mutually agreed solutions not only to one WTO body or to the WTO in general but to the "DSB and the relevant Councils and Committees", and also by the explicit 
provision in Article 3.6 that in those bodies "any Member may raise any point relating thereto." 
7.101  The Panel recalls in this context that Article  3.5 of the DSU, the provision immediately 
preceding Article 3.6, sets out two basic requirements for "[a]ll solutions to matters formally raised 
under the consultation and dispute set tlement provisions of the covered agreements":  (i) they "shall 
be consistent with [the covered] agreements";  and, (ii) they "sha ll not nullify or impair benefits 
accruing to any Member under [the covered] agreem ents, nor impede the attainment of any objective 
of those agreements." 
7.102  The fulfilment of these two basic requirements of Article 3.5 of the DSU is an indispensable 
multilateral element of "[a]ll solutions to matters formally raised under the consultation and dispute 
settlement provisions of the covered agreements", including any alleged mutually agreed solution or 
legally binding agreement that is intended to provi de a positive solution and effective settlement to a 
dispute.  Notification is an additional multilateral element specific to mutually agreed solutions 
because, unlike other solutions to disputes, mutua lly agreed solutions are usually not developed 
multilaterally. 
7.103  It is a matter of fact that in this dis pute the European Commun ities sent to the DSB a 
communication, dated 22 June 2001 entitled "Not ification of a Mutually Agreed Solution".
415  
That EC communication stated that "[t]he European Communities (EC) wish to notify the 
Dispute Settlement Body (DSB) th at they have reached, with ... Ecuador, a mutually satisfactory 
solution within the meaning of Article 3.6 of the DSU"416, and it reproduced the text of the 
Bananas Understanding.  This communication by th e respondent was closely followed by a separate 
communication from the complainant, dated 3 July  2001, stating that, "although Ecuador sees the 
[Bananas] Understanding as an agreed solution wh ich can contribute to an overall, definite and 
universally accepted solution, it must be made clear that the provisions of Article 3.6 of the DSU are 
not applicable in this case."417 
7.104  The Panel notes that this latter communication by Ecuador also reproduced the text of the 
Bananas Understanding, with the same language as the Bananas Understanding annexed to the EC 
communication.  Also, Ecuador acknowledges that it signed the Bananas Understanding.418  
Without assessing whether the Bananas Understanding is a mutually agreed solution or legally 
binding agreement, the Panel notes that th ese circumstances seem to show that the 
Bananas Understanding created an important  bilateral link between Ecuador and the 
European Communities.  At the same time, these ci rcumstances also show that almost immediately 
after the European Communities' attempt to try to accord a poten tial multilateral element to the 
                                                      
415 See EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, p. 1. 
416 See Ibid., p. 1. 
417 EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 
2001, p. 1. 
418 See Ecuador's response to Panel question No. 37.  WT/DS27/RW2/ECU 
 Page 137 
 
 
  Bananas Understanding, Ecuador called into question the multilateral status of that Understanding and 
its role in definitively resolving the dispute. 
7.105  The Panel does not need to assess whether the Bananas Understanding was notified 
appropriately under Article 3.6 of the DSU or whet her, as a result, the Understanding could qualify as 
a mutually agreed solution.  However, the Panel notes that, under Article 3.6 of the DSU, so far nearly 
all mutually agreed solutions have been notifie d by the respondent and the complainant (whether 
jointly or separately), with two exceptions where the mutually agreed solution was notified by the 
complainant only.419  The Panel interprets this practice as illustrating the importance of the 
complainant's involvement in, or at least its consen t to, not only the bilateral but also the multilateral 
element, i.e. the notification to the DSB and relevant Councils and Committees, of any alleged 
mutually agreed solution.  
7.106  As mentioned earlier, under Article 3.5 of the DS U, "[a]ll solutions to matters formally raised 
under the consultation and dispute settlement provisions  of the covered agreements ... shall not nullify 
or impair benefits accrui ng to any Member under [the covered] agre ements".  If a solution to a dispute 
potentially affects the benefits accruing to WTO Me mbers, it is first and foremost the benefits 
accruing to the complainant in the dispute that might be affected.  This is particularly true for an 
alleged mutually agreed solution or legally bind ing agreement that the respondent argues would bar 
the complainant from bringing a challenge against a measure allegedly implementing a step set out in 
such alleged mutually agreed solution or legally binding agreement. 
7.107  Irrespective of whether the Bananas Understandi ng was properly notified under Article 3.6 of 
the DSU, which the Panel does not assess, in the light of the multilateral requirement set out in 
Article 3.5 of the DSU for all solutions, it is difficult for the Panel to see how the 
Bananas Understanding could provide a positive soluti on and effective settlement to the dispute when, 
immediately following the respondent's commun ication of the Understanding to the WTO, 
the complainant in the dispute contested the multilate ral status of the Unders tanding and its role in 
definitively resolving the dispute. 
7.108  It would seem appropriate to assume that an alleged mutually agreed solution or legally 
binding agreement that could bar the complainant from bringing a subsequent compliance dispute, 
would need to provide a solution to the dispute fo r both parties, including in particular for the 
complainant, and especially after the DSB establishe d the inconsistency with  the covered agreement 
of measures adopted by the respondent. 
Remaining key arguments raised under this preliminary issue  
7.109  The Panel will now turn to the remaining key ar guments raised under this preliminary issue, 
namely: 
(a) whether, through the Bananas Understanding , Ecuador accepted the existence of the 
ACP preference beyond 2005; 
(b) the EC arguments concerning parties' co mpliance with the Bananas Understanding; 
(c) the European Communities' arguments on contentiousness, pacta sunt servanda and 
good faith;  and, 
                                                      
419 See Mexico – Certain Pricing Measures for Customs Valuation and Other Purposes , 
Communication from Guatemala (WT/DS298/2), 1 September 2005;  and Colombia – Customs Measures on 
Importation of Certain Goods from Panama , Notification of a Mutually Agreed Solution  (WT/DS348/10), 
7 December 2006. WT/DS27/RW2/ECU 
Page 138  
 
  (d) the withdrawal of the matter from the DSB agenda. 
Did Ecuador accept, through the Bananas U nderstanding, the existence of the ACP 
preference beyond 2005? 
7.110  As noted earlier, one of the key argumen ts of the European Communities under this 
preliminary issue is that: 
"[T]hrough the [Bananas] Understanding, Ecuador accepted that the Cotonou 
Preference would continue to exist for th e entire duration of the waiver that the 
European Communities had requested at th e time the Understanding was signed and 
the grant of which Ecuador accepted to support in the Understanding."
420 
7.111  For the purposes of this compliance dispute, the relevant period is the one starting on 
1 January 2006, when the European Communities introduced its current banana import regime, 
contested by Ecuador.  Accordingly, the questio n is whether the European Communities makes a 
prima facie case that, through the Bananas Understa nding, Ecuador has accepted the extension of the 
ACP preference beyond 2005. 
7.112  The Bananas Understanding does not specify its period of applicability.  While the 
Understanding prescribes a step to be taken by  the European Commun ities "no later than 
1 January 2006"421, it does not explicitly prescribe any steps to be taken by Ecuador with effect 
beyond 2005. 
7.113  In arguing that, through the Bananas Unde rstanding, Ecuador has accepted the ACP 
preference, the European Communities must be maki ng reference to the following step prescribed in 
the Understanding for Ecuador: 
"Ecuador will lift its reserve concerning th e waiver of Article I of the GATT 1994 
that the EC has requested for preferential access to the EC of goods originating in 
ACP States signatory to the Cotonou Ag reement; and will actively work towards 
promoting the acceptance of an EC request  for a waiver of Article XIII of the 
GATT 1994 needed for the management of quota C under the import regime 
described in paragraph C(2) until 31 December 2005."422 
7.114  While this language in the Bananas Understanding might reflect an indirect acceptance of the 
ACP preference until the end of 2005, it does not appear to mention any acceptance of the ACP preference by Ecuador beyond 2005.  Indeed, the s econd element in the Unde rstanding with Ecuador 
referred to in the preceding paragra ph, relating to the waiver under Article XIII of the GATT 1994 is 
explicitly limited to the end of 2005.  In other words, it cannot extend to the period after 2005.  
Further, the first element of the step to be taken by Ecuador, relating to the waiver under Article I of 
the GATT 1994, requires Ecuador to lift its reserve in the context of a waiver requested by the 
European Communities. 
7.115  The acceptance of that waiver request, like an y waiver request, does not depend only on one 
Member, Ecuador, but on all WTO Members.  As Ecuador notes in its communication to the DSB 
                                                     
 
420 European Communities' response to Panel question No. 58. 
421 EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, para. B;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. B. 
422 EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, para. F;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. F.  WT/DS27/RW2/ECU 
 Page 139 
 
 
  concerning the Bananas Understanding, "the Unders tanding also comprises of the execution of two 
phases and requires the implementation of several key features, which demands the collective action of the WTO membership."
423 
7.116  Since Ecuador could have accepted the ACP pr eference only indirectly through committing to 
lifting its reserve concerning a waiver request, the period for which Ecuador might have indirectly 
accepted the ACP preference depends ultimately on th e waiver being adopted partly as a result of 
Ecuador's step under th e Bananas Understanding. 
7.117  The waiver ultimately adopted, namely th e Doha Waiver from Article I:1 of the 
GATT 1994424, does not provide that it would unconditio nally apply beyond 2005 in regard to 
bananas.  Even the European Communities accepts that the Doha Waiver sets out conditions for its 
applicability to bananas in the period between 1 Ja nuary 2006 and the overall expiration of the waiver 
on 31 December 2007. 
7.118  In the light of the above, the Panel finds th at the European Communities has not made a 
prima facie  case for one of its central arguments under this  preliminary issue, namely that Ecuador 
would have accepted, through the Bananas Understa nding, the extension of the ACP preference 
beyond 2005.  As a consequence, the Panel fails to  see how, as argued by the European Communities, 
Ecuador would be prevented from bringing this  compliance dispute against the ACP preference 
during the period starting on 1 January 2006. 
7.119  This is underscored by the fact that one of th e main points of contention between the parties 
to this compliance dispute concerns the conditions of  the validity of the Doha Waiver from Article I:1 
of the GATT 1994 to bananas in 2006-2007, a nd in particular the question whether the 
European Communities effectively complied with the final step envisaged in the 
Bananas Understanding and what implications that might have for the validity of the waiver for 
bananas in 2006-2007. 
Arguments by the European Communities concerning parties' compliance with the 
Bananas Understanding 
7.120  The Panel sees the European Communities' cont extual argument about parties' compliance 
with the Bananas Understanding as having li mited relevance for assessing whether the 
Bananas Understanding prevents Ecuador from bringing this compliance dispute. 
7.121  The Panel notes that neither of the parties cont ests having undertaken the above steps through 
the Bananas Understanding.  Fu rther, Ecuador recognizes that the European Communities has 
complied with its obligations for the first tw o interim phases set out in the Understanding425, and the 
European Communities recognizes that Ecuador h as complied with its main obligation under the 
Understanding.426 
7.122  At the same time, both parties seem to sugg est that compliance with Bananas Understanding 
remained partial.  Ecuador openly contests whethe r the European Communiti es has complied with the 
third phase set out in the Understanding.427  The European Communities' request that the Panel 
                                                      
423 EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 
9 July 2001, p. 1. 
424 See Ministerial Conference, European Communities, The ACP – EC Partnership Agreement, 
Decision of 14 November 2001 (WT/MIN(01)/15), 14 November 2001. 
425 See Ecuador's second written submission, para. 11. 
426 See European Communities' first written submission para. 62. 
427 See Ecuador's second written submission, para. 11. WT/DS27/RW2/ECU 
Page 140  
 
  enforce the Bananas Understanding because "Ecuador  must now comply with its undertakings"
428 
under the Understanding implies that even the European Communities sees compliance with the 
Understanding as being limited, at least on Ecuador's side. 
Arguments by the European Communities on contentiousness, pacta sunt servanda 
and good faith 
7.123  As mentioned earlier, the European Communiti es argues that Articles 3.7 and 3.10 of the 
DSU "are the corollary in the WTO legal order of the principles of good faith and ' pacta sunt 
servanda ', which are well established in customary international law."429  In particular, according to 
the European Communities: 
"[I]t is wrong to assume that the principle of  good faith does not cover Article 21.5 of 
the DSU, as asserted in paragraph 9 of  Ecuador’s second submission.  Both the 
language used in Article 3.10 of the DSU (i.e., ' all Members will engage in these 
procedures in good faith ') and its nature as a general principle of law, make clear that 
the principle of good faith runs through the entire DSU and defines the outer limits of the application of all rights recognized by the DSU to WTO Members."
430 
7.124  Further, the European Communities argues that: 
"Granting to WTO members the right to re nege on the agreements with which they 
reach mutually agreed solutions to thei r disputes would seriously compromise the 
effectiveness of these mutually agreed so lutions and would foster the 'contentious' 
character of the dispute resolution system.  This would be inconsistent with the 
purpose of the DSU, as reflected in Article 3.10, and with the principles enshrined in 
Article 3.7 (where it is stated that mutua lly agreed solutions are to be preferred)."431 
7.125  The European Communities makes re ference to Article 3.10 of the DSU, which, in relevant 
part, provides that: 
"It is understood that requests for concilia tion and the use of the dispute settlement 
procedures should not be intended or consid ered as contentious acts and that, if a 
dispute arises, all Members will engage in these procedures in good faith in an effort 
to resolve the dispute." 
7.126  As regards the contentious nature of disputes,  the Panel reads Article 3.10 of the DSU to 
exclude on its plain terms the interpretation ac corded to it by the European Communities.  
In particular, in the light of the language of Ar ticle 3.10 of the DSU, the Panel does not see how the 
European Communities could consider the current dispute settlement proceeding as a contentious act. 
7.127  As to pacta sunt servanda , the Panel does not address the more systemic issue of whether a 
Member may waive, under a bilateral agreement and for the purposes of WTO dispute settlement, 
its rights to action pursuant to the DSU.  The Pane l merely notes that the Bananas Understanding does 
not explicitly provide anywhere th at Ecuador would forego its rights to bring a compliance dispute.  
The following provision of the Bananas Understa nding is clearly not on point here, as it does not 
specifically address Ecuador's right to bring a compliance dispute: 
                                                      
428 European Communities' response to Panel question No. 58. 
429 European Communities' second written submission, para. 11. 
430 Ibid., para. 12. 
431 Ibid., para. 18.  WT/DS27/RW2/ECU 
 Page 141 
 
 
  "Upon implementation of the import regime d escribed in paragraph C, Ecuador's right 
to suspend concessions or other obligati ons of a level not exceeding US$201.6 
million per year vis-à-vis the EC will be terminated."432 
7.128  Finally, as to the arguments of the European Communities on good faith, the Panel notes that 
Ecuador points out that it "is not challenging or  questioning the EC-Ecuador Understanding on 
Bananas, but rather is challenging the conformity of  EC measures with the EC's obligations under the 
WTO Agreement".433  The Panel recalls that Article 3.2 of the DSU provides that the dispute 
settlement system of the WTO "serves to preserve  the rights and obligations of Members under the 
covered agreements."  Also, as mentioned above , the Panel attaches great importance to the 
conformity of an alleged mutually agreed solution or legally binding agreement, including the future 
steps set out therein, with the covered agreements, as well as to the possibility of the complainant to 
have recourse to WTO dispute settlement to revi ew the issue of conformity.  Nowhere in the 
Understanding has Ecuador accepted that it would fore go its right to challeng e the conformity with 
the covered agreements of any measure that the European Communities might take to implement a 
step set out in the Bananas Understanding. 
7.129  The Panel notes that in US – Offset Act (Byrd Amendment)  the Appellate Body stated that 
"there is a basis for a dispute settlement panel to determine, in an appropriate case, whether a Member 
has not acted in  good faith"434.  However, the Appellate Body added that: 
"Nothing ... in the covered agreements suppor ts the conclusion that simply because a 
WTO Member is found to have violated a substantive treaty provision, it has 
therefore not acted in good faith.  In our view, it would be necessary to prove more than mere violation to support such a conclusion."
435 
7.130  Interpreting those considerations by the Appellate Body, the panel in  Argentina – 
Poultry Anti-Dumping Duties  stated that: 
"[T]wo conditions must be satisfied before  a Member may be found to have failed to 
act in good faith.  First, the Member must have violated a substantive provision of the WTO agreements.  Second, there must be something 'more than mere violation'.
436 
7.131  Article 3.10 of the DSU provides in relevant part that "if a dispute arises, all Members will 
engage in these procedures in good faith in an effort to resolve the dispute."  It does not seem that the 
European Communities has succeeded in making a prim a facie case for the alleged violation of that 
provision, let alone also for something "more than mere violation". 
7.132  In light of the above, the Panel rejects the European Communities' arguments on 
contentiousness, pacta sunt servanda  and good faith. 
Withdrawal of the banana dispute from the DSB agenda 
7.133  Finally, the Panel refrains from considering in  detail the contextual argument, raised by a 
number of ACP third parties that, with Ecuador's explicit agreement437, "the banana dispute was taken 
                                                      
432 EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001, para. E;  
and EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July 2001, 
para. E. 
433 Ecuador's second written submission, para. 14. 
434 Appellate Body Report on US – Offset Act (Byrd Amendment), para. 297. 
435 Ibid. , para. 298. 
436 Panel Report on Argentina – Poultry Anti-Dumping Duties , para. 7.36. 
437 See joint third-party submission of Belize, Cameroon, Côte d'Ivoire, Dominica, 
the Dominican Republic, Ghana, Jamaica, Madagascar , St. Lucia, St. Vincent and the Grenadines, and 
Suriname, para. 37. WT/DS27/RW2/ECU 
Page 142  
 
  off the agenda of the DSB in accord ance with Article 21.6 of the DSU ... at the DSB meeting held on 
1 February 2002
438".439 
7.134  Indeed, it is unclear to what extent the Eur opean Communities wishes to use this as a legal 
argument.  While at one point the European Comm unities argued that that such withdrawal was 
supportive of its preliminary objection in this dispute440, at a later point the European Communities 
explicitly stated that it "has not argued that the withdrawal of the issue on the implementation of the 
DSB rulings and recommendations from the age nda of the DSB has any particular legal 
significance."441 
(iii) Conclusion 
7.135  In the light of the foregoing analysis of the terms and context of the Bananas Understanding, 
the Panel concludes that, even if the Bananas U nderstanding qualified as a mutually agreed solution 
or a legally binding agreement, it would not preven t Ecuador from bringing this compliance dispute.  
The Panel therefore does not need to assess whethe r the Bananas Understanding indeed qualifies as a 
mutually agreed solution or a legally binding agre ement, as argued by the European Communities.  
In particular, there is no need to assess the ar guments by the European Communities that the 
Bananas Understanding would constitute applicab le rules of law for WTO dispute settlement. 
7.136  In the light of the relevant arguments ra ised by the European Communities, the Panel 
concludes that the European Communities has not succeeded in making a prima facie case in favour 
of its preliminary objection.  Accordingly, th e Panel rejects the European Communities' first 
preliminary objection, and turns to assess Ecua dor's substantive claims in this dispute. 
C. ECUADOR 'S CLAIM UNDER ARTICLE I OF THE GATT  1994 
1. Ecuador's claim 
7.137  Ecuador argues that the European Communitie s' import regime for bananas and, more 
specifically, the tariff quota, which allows a specif ied yearly volume of 775,000 mt of bananas of 
ACP origin to enter the EC market duty-free, is inconsistent with Article  I of the GATT 1994.  
Ecuador considers that this regime "[accords] tariff preferences to bananas of ACP origin that are not 
accorded to bananas originating in Ecuador or other non-ACP countries".442  Ecuador adds that the 
preferences granted to bananas of ACP origin are not covered by the waiver from Article I:1 of the 
GATT 1994, the ACP-EC Partnership Agreement waiv er (Doha Waiver), which was granted to the 
European Communities by the WTO Ministerial Conference in Doha on 14 November 2001.443 
7.138  In Ecuador's view: 
                                                      
438 (footnote original ) Minutes of the DSB meeting held on 1 February 2002, WT/DSB/M/119, 
6 March 2002, at point 1 (a). 
439 Joint third-party submission of Belize, Cameroon, Côte d'Ivoire, Dominica, 
the Dominican Republic, Ghana, Jamaica, Madagascar , St. Lucia, St. Vincent and the Grenadines, and 
Suriname, para. 37. 
440 See European Communities' response to Panel question No. 6. 
441 European Communities' response to Panel question No. 59. 
442 Ecuador's first written submission, para. 25. 
443 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision 
of 14 November 2001 (WT/MIN(01)/15), 14 November 2 001.  See Ecuador's second written submission, paras. 
16-36, , and written version of Ecuador's oral statemen t during substantive meeting with the parties and third 
parties, paras. 34-44.  WT/DS27/RW2/ECU 
 Page 143 
 
 
  "There is no dispute that all bananas ar e like products, nor that the EC accords 
bananas of ACP origin duty-free treatment up to the 775,000 mt tariff quota, while bananas of Ecuadorian origin (as well as other bananas not benefiting from the duty-
free tariff quota) are subject to a duty of €176/mt.  Absent some applicable exception or waiver, it could not seriously be asserted that Article I permits a WTO member to 
grant a duty preference limited to one group of WTO members, and excluding 
others."
444 
7.139  Ecuador contends that, if the European Communities was to argue that its breach of Article I 
of the GATT 1994 is covered by an appropriate wa iver, the burden would then fall on the EC to 
demonstrate "that it still has a valid waiver with respect  to bananas, and that this waiver covers the ... 
measures at issue."445 
7.140  Ecuador adds that, in any event, the Europ ean Communities' preferen ce for bananas of ACP 
origin is no longer covered by the Doha Waiver.  In Ecuador's view, the European Communities failed 
to meet the conditions of the waiver, which would have allowed the waiver to continue to apply 
beyond 31 December 2005.446  In particular, Ecuador argues that: 
"In accordance with the Doha Waiver, ha ving failed in its two opportunities to 
envisage a tariff rebinding that would meet the waiver standard, the EC cannot claim 
the protection of the waiver for the system it then established unilaterally"447 
2. The European Communities' response 
7.141  The European Communities has not made any sp ecific arguments to contest Ecuador's claim 
that the preference granted to bananas of ACP orig in would be inconsistent  with Article I of the 
GATT 1994.448 
7.142  The European Communities argues, however, that this preference continues to be covered by 
a waiver from Article I:1 of the GATT 1994, the Doha Waiver.  According to the European Communities, the duration of that waiver is not li nked to the number of arbitrations lost by the 
European Communities, but rather depends on wh ether the new import regime for bananas it 
introduced on 1 January 2006 at least mainta ins total market access for MFN suppliers.
449 
7.143  The European Communities also argues that, in accordance with the language contained in 
the Doha Waiver, this waiver would only cease to a pply to bananas "upon entry into force of the new 
EC tariff regime", which the European Communities considers to mean "the tariff regime that was 
presented to the Arbitrator and on which the Arbitrator made a pronouncement in its Award."450 
7.144  In the European Communities' view: 
"The European Communities has fully sa tisfied the condition for the continued 
application of the Doha waiver ... .  The European Communities introduced on 
                                                      
444 Ecuador's first written submission, para. 25. 
445 Ibid., para. 26. 
446 Ibid. 
447 Ecuador's second written submission, para. 17.  See also, Ecuador's first written submission, 
para. 26. 
448 European Communities' response to panel question No. 61, para. 125.  See also, Ecuador's second 
written submission, para. 16;  and written version of Ecua dor's oral statement during substantive meeting with 
the parties and third parties, para. 34. 
449 European Communities' first written submission, paras. 67 and 69. 
450 Ibid., para. 71. WT/DS27/RW2/ECU 
Page 144  
 
  January 1, 2006 a different import regime than the one analysed by the Arbitrator.  
Moreover, the evidence derived from the real operation of this import regime clearly establishes that it maintains tota l market access for MFN suppliers."
451 
7.145  In conclusion, the European Communities argue s that, since the preference granted to 
imported bananas originating in ACP countries con tinues to be covered by the Doha Waiver, the 
Panel should reject Ecuador's clai m under Article I:1 of the GATT 1994.452 
3. Article I:1 of the GATT 1994 
7.146  Under Article I:1 of the GATT 1994: 
"With respect to customs duties and charges of any kind imposed on or in connection 
with importation or exportation or imposed on the international transfer of payments 
for imports or exports, and with respect to the method of levying such duties and 
charges, and with respect to all rules a nd formalities in connection with importation 
and exportation, and with respect to all matte rs referred to in pa ragraphs 2 and 4 of 
Article III ... any advantage, favour, privilege or immunity granted by any contracting 
party [Member] to any product originating in or destined for any other country shall 
be accorded immediately and unconditionally to the like product originating in or 
destined for the territories of all ot her contracting parties [Members]."453 
7.147  In Canada – Autos , the Appellate Body explained the obj ect and purpose of Article I:1 of the 
GATT 1994 as follows: 
"Th[e] object and purpose [of Article I:1] is to prohibit discrimination among like 
products originating in or destined for different countries.  The prohibition of 
discrimination in Article I:1 also serve s as an incentive for concessions, negotiated 
reciprocally, to be extended to all other Members on an MFN basis."454 
7.148  In Indonesia – Autos , referring to the Appellate Body's ruling in EC – Bananas III , the panel 
explained how to carry out the examination of  a measure under Article I:1 of the GATT 1994: 
"The Appellate Body, in Bananas III , confirmed that to establish a violation of 
Article I, there must be an advantage, of the type covered by Article I and which is 
not accorded unconditionally to all 'like products' of all WTO Members."455 
4. Panel's analysis 
7.149  The Panel starts by recalling that the Europ ean Communities has chosen not to contest 
Ecuador's claim that the preference granted to banan as of ACP origin is inconsistent with Article I of 
the GATT 1994. 
7.150  Following the approach set out by the Appellate Body in EC – Bananas III , as described by 
the panel in Indonesia – Autos , the Panel will nevertheless cons ider the arguments and evidence 
presented by Ecuador, in order to determine whether they are sufficient to establish a prima facie case 
of inconsistency with Article I of  the GATT 1994.  If this were determ ined to be the case, the Panel 
                                                      
451 European Communities' first written submission, para. 72.  See also, Ibid., para. 71;  and 
European Communities' second written submission, para. 36. 
452 European Communities' first written submission, paras. 34-37 and 68-73. 
453 Ad note omitted. 
454 Appellate Body Report on Canada – Autos , para. 84. 
455 Panel Report on Indonesia – Autos , para. 14.138.  WT/DS27/RW2/ECU 
 Page 145 
 
 
  would then turn to assessing whether the European  Communities has made a prima facie case that 
such inconsistency is covered by the Doha Waiv er granted by the WTO Ministerial Conference on 
14 November 2001. 
(a) Is the ACP preference inconsistent  with Article I:1 of the GATT 1994? 
7.151  As noted above, in order to analyse a clai m under Article I:1 of the GATT 1994, the Panel 
needs to determine first whether the measure cha llenged constitutes an advantage (or favour, privilege 
or immunity), of the type covered by Article I.  If that were the case, the Panel would then turn to the 
issues of the likeness of products and the immediate and unconditional extensio n of such advantage. 
(i) Whether the preference granted by the Eu ropean Communities constitutes an advantage of 
the type covered by Article I of the GATT 1994 
7.152  The following facts are not in dispute: 
(a) Under the terms of Council Regulation (E C) No. 1964/2005 of 29 November 2005, 
and in accordance with the European Co mmunities' commitments under the ACP-EC 
partnership Agreement, also known as the Cotonou Agreement, the European 
Communities allows a volume of 775,000 mt of bananas to enter the EC market free 
of tariff duties; 
(b) This duty-free treatment is only available to  imports of bananas originating in ACP 
countries, and not to like bananas originating in other Members;  and, 
(c) Imported bananas originating in other Members, as well as imports of bananas 
originating in ACP countries beyond the annual volumes prescribed in the tariff quota, are subject to a specific tariff of €176/mt.
456 
In other words, access elig ibility to this preference depends on th e origin of the bananas, as only ACP 
bananas qualify.  7.153  The Panel notes that the term "advantage" , under Article I:1 of the GATT 1994, has 
traditionally been given a broad scope by GATT and WTO panels, as well as by the Appellate 
Body.
457  In this regard, the Panel concludes that the duty-free treatment available to imports of 
bananas originating in ACP countries, solely because of their origin, constitutes an advantage, when 
compared to the ordinary treatment accorded to bana nas of all other origins, which are subject to a 
specific tariff of  €176/mt. 
(ii) Whether the relevant products in this dispute are like products 
7.154  As to whether the relevant produc ts in this dispute are "like products", the Panel notes that the 
original panel in this dispute already "consider[ed] whether bananas from the EC, ACP countries, 
BFA countries and other third countries are 'like' products for purposes of the claims made in respect of Articles I, III, X and XIII of GATT"
458, and found that: 
                                                      
456 See tariff regime for imports of bananas to th e EC, in Council Regulation (EC) No. 1964/2005 of 
29 November 2005, Exhibit ECU-1.  See also, Ecuado r's first written submission,  para. 21, and European 
Communities' first written submission, paras. 13 and 15. 
457 "[A] broad definition has been given to the term 'advantage' in Article I:1 of the GATT 1994 by the 
panel in United States – Non-Rubber Footwear ."  Appellate Body Report on EC – Bananas III , para. 206, 
quoting GATT Panel Report on US – Non-Rubber Footwear , para. 6.9. 
458 Panel Report on EC – Bananas III  (Ecuador) , para. 7.62. WT/DS27/RW2/ECU 
Page 146  
 
  "The factors commonly used in GATT prac tice to determine likeness, such as, for 
example, customs classification, end-use, and the properties, nature and quality of the product, all support a finding that bananas from these various sources should be treated as like products.
459  Moreover, all parties and third parties to the dispute have 
proceeded in their legal reasoning on th e assumption that all bananas are 'like' 
products in spite of any differences in quality, size or taste that may exist. 
We find that bananas are 'like' products, for purposes of Article I, III, X, and XIII of 
GATT, irrespective of whether they origin ate in the EC, in ACP countries, in BFA 
countries or in other third countries."460 
7.155  Similarly, in the original proceedi ngs the Appellate Body stated that: 
"As no participant disputes that all bana nas are like products, the non-discrimination 
provisions apply to all imports of bana nas, irrespective of whether and how a 
Member categorizes or subdivides these imports for administrative or other reasons."
461 
The Appellate Body concluded that "[i]n the presen t case, the non-discrimination obligations of the 
GATT 1994, specifically Articles I:1 and XIII462, apply fully to all imported bananas irrespective of 
their origin ..."463 
 7.156  The Panel agrees with Ecuador that, similar to th e earlier proceedings in this dispute, "[t]here 
is no dispute that all bananas are like products"
464 for the purposes of the proceedings before this 
Panel.  This is not contested  by the European Communities. 
7.157  Accordingly, and in the light of the relevant fi ndings in earlier proceedings in this dispute, the 
Panel confirms that the relevant products in this  dispute, fresh bananas (corresponding to tariff item 
080300 12 or 080300 19) originating in ACP countries, are like products to fresh bananas originating 
in other WTO Members. 
(iii) Whether the preference granted by th e European Communities is immediately and 
unconditionally extended 
7.158  Finally, it is not contested between the parties that the preference granted by the European 
Communities to bananas of ACP origin is not extende d to like bananas originating in the territories of 
any other WTO Members. 
7.159  As this advantage is not extended to the lik e products of any other WTO Members, it is 
necessarily not extended "immediately", nor "unconditi onally".  This is notwithstanding the fact that 
the Panel notes that, in addition to the preferen ces granted to bananas of ACP origin under the 
                                                      
459 (footnote original ) For a general discussion of relevant factors for determining the likeness of 
products, see Panel Report on "Japan  – Taxes on Alcoholic Beverages", adopted on 1 November 1996, 
WT/DS8/R, WT/DS10/R & WT/DS11/R, pp. 111-114, paras. 6.20-6.23, as modified by, Appellate Body Report 
on "Japan  – Taxes on Alcoholic Beverages", adopted on 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R & 
WT/DS11/AB/R, pp. 19-21. 
460 Panel Report on EC – Bananas III  (Ecuador) , paras. 7.62-7.63. 
461 Appellate Body Report on EC – Bananas III , para. 190. 
462 (footnote original ) We do not agree with the Panel's findings that Article X:3(a) of the GATT 1994 
and Article 1.3 of the Licensing Agreement  preclude the imposition of different import licensing systems on like 
products when imported from different Members.  S ee our Findings and Conclusions, paras. (l) and (m). 
463 Appellate Body Report on EC – Bananas III , para. 191. 
464 Ecuador's first written submission, para. 25.  WT/DS27/RW2/ECU 
 Page 147 
 
 
  Cotonou Agreement, the European Communities also grants autonomous duty-free access to its 
market to bananas originating in Least Develope d Countries (LDCs) under the Everything But Arms 
(EBA) arrangement.465 
(iv) Preliminary conclusion regarding Ecuador' s claim under Article I:1 of GATT 1994 
7.160  For the reasons indicated above, the Panel finds  that Ecuador has successfully made a prima 
facie case that the preference granted by the Eu ropean Communities to an annual duty-free tariff 
quota of 775,000 mt of imported ba nanas originating in ACP countr ies constitutes an advantage for 
this category of bananas, which is not accorded  unconditionally to like bananas originating in non-
ACP WTO Members.  The Panel therefore finds that this preference is inconsistent with Article I:1 of GATT 1994. 
(b) Is the preference covered by a waiver? 
7.161  Having found that the preference granted by the European Communities to imported bananas 
originating in ACP countries is inconsistent with  Article I:1 of the GATT 1994, the Panel will now 
turn to the issue of whether this pref erence is covered by the Doha Waiver. 
(i) Terms and conditions of the Doha Waiver and the Bananas Annex 
7.162  In examining the terms of conditions containe d in the Doha Waiver, the Panel recalls the 
words of the Appellate Body in its EC – Bananas III  report: 
"Although the WTO Agreement does not provide any specific rules on the 
interpretation of waivers, Article IX of  the WTO Agreement and the Understanding 
in Respect of Waivers of Obligations u nder the General Agreement on Tariffs and 
Trade 1994, which provide requirements fo r granting and renewing waivers, stress 
the exceptional nature of waivers and subject  waivers to strict disciplines.  Thus, 
waivers should be interpreted with great care."
466 
7.163  While in principle the Doha Waiver was to be valid until 31 December 2007467, in regard to 
bananas this was subject to the terms and conditions  set out in the text of the Decision by which the 
WTO Ministerial Conference adopted this waiver.  Those terms and conditions include the additional 
provisions contained in the Annex to the D oha Waiver Decision (the Bananas Annex).468 
7.164  Under the terms and conditions set out in the Bananas Annex, the European Communities was 
to announce a proposed rebinding of its tariff on bananas.469  Within a 60-day period following the 
announcement by the European Communities of its in tentions concerning the rebinding of the tariff 
on bananas, any WTO Member exporting bananas on an  MFN basis could request that an arbitrator 
determine "whether the envisaged rebinding of the EC tariff on bananas would result in at least 
                                                      
465 Council Regulation (EC) No. 980/2005 of 27 June 2005.  European Communities' response to Panel 
question No. 53 paras. 109-112.  See para. 2.41 above. 
466 Appellate Body Report on EC – Bananas III , para. 185.  See also GATT Panel Report on US – 
Sugar  Waiver, para. 5.9.  See also, Nicaragua's third pa rty written submission, para. 22, and Panama's third 
party written submission, para. 22.  See additionally, Ec uador's response to panel question No. 12, European 
Communities' response to panel question No. 12, para. 28, and No. 14, paras. 32-34, and European Communities' comments on Ecuador's response to panel question No. 12, paras. 3-7. 
467 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision 
of 14 November 2001 (WT/MIN(01)/15), 14 November 2001, p. 2, para. 1. 
468 Ibid, p. 3, para. 3bis.  The Bananas Annex is an integral part of the Doha Waiver. 
469 Bananas Annex, tirets 1, 2 and 5. WT/DS27/RW2/ECU 
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  maintaining total market access for MFN banana suppliers".
470  Should the arbitrator find that this was 
not the case, according to the first sentence in the fifth tiret of th e Bananas Annex, the European 
Communities was to "rectify the matter".  In this case, the second sentence in the fifth tiret of the 
Bananas Annex provides that the European Communiti es was to enter into consultations with those 
interested parties that had requested the arbitration.  According to the third sentence in the fifth tiret of 
the Bananas Annex, if, notwithstanding these cons ultations, no mutually satisfactory solution was 
agreed, the same arbitrator could be called upon ag ain, this time to determine "whether the EC had 
rectified the matter".  If the arbitrator found that the European Communities had failed to rectify the 
matter, the fifth sentence in the fifth tiret of the Bananas Annex provides that the waiver would "cease 
to apply to bananas upon entry into force of the new EC tariff regime".  Pursuant to the sixth sentence 
in the fifth tiret of the Bananas Annex, the entir ety of this process had to be conducted in such a 
manner that the "negotiations and the arbitration procedures [should] be concluded before the entry 
into force of the new EC tariff only regime on 1 January 2006".471 
7.165  Whether the Doha Waiver covers the European  Communities' current banana import regime 
may accordingly depend on whether or not, under the Bananas Annex, the Doha Waiver expired with 
the introduction of the "new EC tariff regime" on 1 January 2006.  Indeed, whether or not the Doha 
Waiver expired on this date is the main issue of  contention between the parties to this dispute. 
(ii) Uncontested facts 
7.166  The following facts are uncontested: 
(a) On 31 January 2005, the European Comm unities notified the WTO Members that it 
intended to replace its tariff concessions on tariff item 0803 00 19 (bananas) included 
in the European Communities' Schedule CXL, with a bound duty of €230/mt.  In its 
notification, the European Communities indicated that its communication constituted the announcement under the terms of the Bananas Annex to the Doha Waiver.
472 
(b) In March and April 2005, a number of WTO Members, including Ecuador, the 
complainant in these proceedings, requested arbitration, pursuant to the Bananas 
Annex.473 
(c) In August 2005, the arbitrator delivered its first award pursuant to the Bananas 
Annex, concluding that: 
"[T]he European Communities' envisaged rebinding on bananas 
would not result in at least maintaining total market access for MFN 
                                                      
470 Bananas Annex, tirets 2-4. 
471 Ibid., tiret 5. 
472 Article XXVIII:5 Negotiations, Schedule CXL – European Communities, Addendum 
(G/SECRET/22/Add.1), 1 February 2005.  See para. 2.16 above. 
473 European Communities, The ACP – EC Partnership Ag reement, Recourse to Arbitration Pursuant to 
the Annex to the Decision of 14 November 2001 (WT/L/607), 1 April 2005.  See also, European Communities, The ACP – EC Partnership Agreement, Recourse to Arbitration Pursuant to the Annex to the Decision of 14 
November 2001, Communication from Colombia , Addendum (WT/L/607/Add.1), 1 April 2005;  
Communication from Costa Rica , Addendum (WT/L/607/Add.2), 1 April 2005;  Communication from Ecuador , 
Addendum (WT/L/607/Add.3), 1 April 2005; Communication from Guatemala , Addendum (WT/L/607/Add.4), 
1 April 2005;  Communication from Honduras , Addendum (WT/L/607/Add.5), 1 April 2005;  Communication 
from Panama , Addendum (WT/L/607/Add.6), 1 April 2005;  Communication from Nicaragua , Addendum 
(WT/L/607/Add.7), 4 April 2005;  Communication from Venezuela , Addendum (WT/L/607/Add.8), 4 April 
2005;  and, Communication from Brazil , Addendum (WT/L/607/Add.9), 4 April 2005.  See para. 2.17 above.  WT/DS27/RW2/ECU 
 Page 149 
 
 
  banana suppliers, taking into acc ount all EC WTO market-access 
commitments relating to bananas".474 
(d) On 13 September 2005, the European Communities notified the interested parties its 
revised proposal to provide from 1 January 2006 for an MFN tariff for bananas at €187/mt and a tariff quota for ACP countries of 775,000 mt per year at zero duty.
475 
(e) On 26 September 2005, the European Commun ities requested arbitration, under the 
Bananas Annex, on its revised proposal.476 
(f) In October 2005, the arbitrator delivered  its second award pursuant to the Bananas 
Annex, concluding that: 
"[T]he European Communities' pr oposed rectification ... would not 
result 'in at least maintaining total market access for MFN banana 
suppliers', taking into account 'all EC WTO market-access commitments relating to bananas'  [and that] consequently ... the 
European Communities has failed to rectify the matter, in accordance 
with the fifth tiret of the Annex to the Doha Waiver [the Bananas 
Annex]".
477 
(g) On 1 January 2006, the European Communiti es put into force a new regime for the 
importation of bananas, through Counc il Regulation (EC) No. 1964/2005, which 
includes a €176/mt MFN tariff, as well as a 775,000 mt duty-free tariff-rate quota for ACP bananas.
478 
(iii) Issue contested between the parties 
7.167  As mentioned above, the main issue that is th e object of contention between the parties is 
whether, under the terms of the Bananas Annex, the Doha Waiver expired with  regard to bananas on 1 
January 2006.  Each of the parties suggests an alternative approach: 
(a) Ecuador argues that, with regard to banan as, the Doha Waiver expired automatically 
upon the entry into force of the new Europ ean Communities' tariff regime, inasmuch 
as two successive arbitrations determined that the European Communities' proposed 
rebinding of its tariff on bananas would not result in at least maintaining total market access for MFN suppliers;  and, 
                                                     
 
474 European Communities, The ACP – EC Partnership Ag reement, Recourse to Arbitration Pursuant to 
the Decision of 14 November 2001, Award of the Arbitrator  (WT/L/616), 1 August 2005, para. 94.  See also, 
European Communities, The ACP – EC Partnership Agreemen t, Recourse to Arbitration Pursuant to the Annex 
to the Decision of 14 November 2001, Communication from the Secretariat  (WT/L/607/Add.13), 5 September 
2005.  See para. 2.17 above. 
475 European Communities, The ACP – EC Partnershi p Agreement, Second Re course to Arbitration 
Pursuant to the Decision of 14 November 2001, Award of the Arbitrator (WT/L/625), 27 October 2005, para. 7.  
See para. 2.18 above. 
476 European Communities, The ACP – EC Partnership Ag reement, Recourse to Arbitration Pursuant to 
the Annex to the Decision of 14 November 2001, Addendum, Communication from the European Communities  
(WT/L/607/Add.14), 28 September 2005.  See para. 2.19 above. 
477 European Communities, The ACP – EC Partnershi p Agreement, Second Re course to Arbitration 
Pursuant to the Decision of 14 November 2001, Award of the Arbitrator (WT/L/625), 27 October 2005, para. 
127.  See para. 2.19 above. 
478 Exhibit ECU-1, Council Regulation (EC) No. 1964/2005.  See para. 2.40 above. WT/DS27/RW2/ECU 
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  (b) The European Communities argu es instead that, with regard to bananas, the Doha 
Waiver would expire after all the procedur al steps envisaged in the Bananas Annex 
had been completed, but only if the Europ ean Communities put into force an identical 
regime to that analysed by the arbitrator or  a new regime that would also fail to result 
in at least maintaining total market access for MFN suppliers. 
7.168  Indeed, Ecuador argues that: 
"[T]he Doha Waiver of Article I expi red on January 1, 2006, following the 
Arbitrator's determinations that neither the initial nor the second 'envisaged rebinding' met the requirements of the waiver ...  [T]he Arbitrator having found that the EC had 
failed to rectify the matter, the waiver ceased  to apply on January 1, 2006, when the 
current EC measures entered into force."
479 
7.169  The European Communities responds that, under the terms of the Doha Waiver, it was: 
"[O]bliged to introduce a new import regime  that would maintain total market access 
for MFN suppliers in reality  and not in theory.  The assessment of whether the new 
import regime does indeed maintain total market access for MFN suppliers can only 
be based on an analysis of the real effects of the new import regime on the banana 
market ...  [Furthermore,] the Doha waiver would cease to apply only if the European Communities implemented the exact  import regime analysed by the Arbitrator and 
found not to satisfy the standard of the Doha waiver.  If the European Communities 
introduced a different  import regime than the one analysed by the Arbitrator and that 
import regime did indeed maintain the tota l market access of the MFN suppliers, then 
the Doha waiver would continue to apply."
480 
7.170  In other words, Ecuador asks the Panel to not e the expiration of the Doha Waiver by noting 
the completion of the procedural steps identified in the Bananas Annex, namely, two negative arbitral 
awards and the introduction of a new EC tariff regime for bananas.481  Conversely, the European 
Communities argues that the Panel can establish the e xpiration of the Doha Waiver before the end of 
2007 only if, in addition to those procedural step s, it determines that the current EC regime for 
bananas is the exact regime that was analysed by the arbitrator under the procedures in the Bananas 
Annex482 and if the Panel further establishes that the European Communities' current regime for the 
importation of bananas has not resulted in at least maintaining total market access for MFN banana suppliers, taking into account th e relevant EC commitments.
483 
                                                      
479 Ecuador's second written submission, para. 24. 
480 European Communities' first written submission, paras. 70-71.  See also, European Communities' 
second written submission, para. 39, and European Communitie s' response to panel question No. 4, paras. 6-9, 
No. 10, paras. 20-21, and No. 67, para. 132.  But see, Ecuador's comment on the European Communities' response to panel question No. 13. 
481 Ecuador's second written submission, para. 17. 
482 European Communities' first written submission, paras. 71-72.  See also, European Communities' 
second written submission, para. 41, and , and European Co mmunities' response to panel question No. 4, paras. 
6-8. 
483 European Communities' first written submission, pa ras. 70, 72 and 73-77.  See also, European 
Communities' second written submission, paras. 36-37. 
  WT/DS27/RW2/ECU 
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  (iv) Conditions envisaged in the Bananas Annex 
7.171  As noted above, the completion of the intermed iate procedural steps envisaged in the terms 
and conditions set out in the Bananas Annex, i.e., the two negative arbitral awards, is an uncontested 
matter of fact.  Indeed, two successive arbitrations, as envisaged respectively in the fourth and fifth 
tirets of the Bananas Annex, reached the conc lusion that the European Communities' proposed 
rebinding of its tariff on bananas would not result in at least maintaining total market access for MFN 
suppliers.484  Furthermore, on 1 January 2006, the European Communities put into force a new regime 
for the importation of bananas, which was di fferent from the one previously applied.485 
7.172  As noted above, however, the European Commun ities argues that its current regime for the 
importation of bananas is not to be considered as "t he new EC tariff regime" in  the terms contained in 
the Bananas Annex.  Additionally, the European Communities argues that its current regime for the 
importation of bananas results in at least mainta ining total market access for MFN banana suppliers, 
taking into account the relevant EC commitments. 
7.173  The European Communities' arguments in this regard raise two main questions: 
(a) Whether the European Communities' current regime for the importation of bananas is 
to be considered as "the new EC tariff regi me" in the sense of the terms contained in 
the Bananas Annex;  and, 
(b) Whether, the Bananas Annex links the expira tion of the Doha Waiver in regard to 
bananas to the mere entry into force of such new regime or whether, under the 
Bananas Annex, only a new tariff regime that does not at least maintain total market 
access would result in such expiration of the waiver. 
7.174  The Panel will accordingly consider the Europ ean Communities' arguments in this regard. 
(v) Is the European Communities' current bananas  regime "the new EC tariff regime"? 
7.175  The first issue raised by the European Comm unities is whether the European Communities' 
current regime for the importation of bananas is to  be considered as "the new EC tariff regime" under 
the terms contained in the fifth sentence of  the fifth tiret of the Bananas Annex. 
7.176  Under the fifth tiret of the Bananas Annex: 
"The second arbitration award will be notifie d to the General Council.  If the EC has 
failed to rectify the matter, this waiv er shall cease to apply to bananas upon entry into 
force of the new EC tariff regime " (emphasis added). 
7.177  As noted above, the Europ ean Communities argues that: 
"[T]he phrase ' the new EC tariff  regime ' can only refer to the tariff regime that was 
presented to the Arbitrator and on which the Arbitrator made a pronouncement in its 
Award.  In other words, the Doha waiver would cease to apply only if the European 
Communities implemented the exact  import regime analysed by the Arbitrator and 
found not to satisfy the standard of the Doha waiver.  If the European Communities 
introduced a different  import regime than the one analysed by the Arbitrator and that 
                                                      
484 See above, paras. 2.17 and 2.19. 
485 See above, para. 2.40. WT/DS27/RW2/ECU 
Page 152  
 
  import regime did indeed maintain the tota l market access of the MFN suppliers, then 
the Doha waiver would continue to apply."
486 
7.178  The European Communities then concludes that, since it "introduced on January 1, 2006 a 
different import regime than the one analysed by the Arbitrator", it "has fully satisfied the condition 
for the continued application of the Doha waiver".487 
7.179  The Panel agrees with the European Communities that its current bananas import regime is 
different from the ones analysed by the arbitrator s under the Bananas Annex.  However, the Panel 
fails to see how the terms of the Bananas Annex su pport the conclusion drawn from that fact by the 
European Communities, namely that the European  Communities has satisfied the condition for the 
continued application of the Doha Waiver.  More specifically, the Panel disagrees with the European 
Communities that the phrase "the new EC tariff regime " can only refer to the tariff regime that was 
presented to the arbitrator and on which the arbitrator made a pronouncement in its award.  Indeed, the terms of the Doha Waiver do not support the in terpretation of the expression "the new EC tariff 
regime" proposed by the European Communities. 
7.180  The ordinary meaning of the word "new" suggest s something that is "[n]ot existing before;  
now made or existing for the first time ...  Different from a thing previously existing, known, etc."
488  
Taking into account this ordinary meaning of the word "new", the expression the "new EC tariff 
regime" for bananas, in the context in which it is us ed in the fifth tiret of the Bananas Annex, should 
be read as nothing else than a regime adopted by the European Communities th at is different from the 
one previously in existence. 
7.181  As noted by Ecuador, 
"[T]he measures examined by the Arbitrator are never referred to [in the Bananas 
Annex] by the term 'the new tariff regime'.  The matter examined by the Arbitrator is described as 'the envisaged rebinding of the EC tariff on bananas,' or, in shorthand as 
'the rebinding', while the second arbitration simply refers to a determination of 
'whether the EC has rectified the matter'."
489 
7.182  In any event, the European Communities' current  tariff regime is clearly different from the 
one previously in existence.  Furthermore, the si xth sentence of the fifth tiret of the Bananas Annex 
provides that "[t]he Article XXVIII negotiations an d the arbitration procedures shall be concluded 
before the entry into force of the new EC tariff only regime on 1 January 2006 ." (emphasis added) 
The European Communities' current banana import re gime entered into force exactly on that date. 
7.183  Consequently, the Panel is not persuaded that the expression "the new EC tariff regime" used 
in the fifth sentence of the fifth tiret of the Bananas Annex does not apply to the bananas import 
regime instituted by the European Communities from 1 January 2006, through Council Regulation 
(EC) No. 1964/2005. 
(vi) Is the maintenance of total market access for MFN banana suppliers a relevant consideration 
for extending the Doha Waiver in regard to bananas? 
7.184  The Panel now turns to the second question rai sed by the European Communities, namely, 
whether the European Communities' current regime fo r the importation of bananas results in at least 
                                                      
486 European Communities' first written submission, para. 71. 
487 Ibid., para. 72.  But see, Ecuador's response to panel question No. 4. 
488 The New Shorter Oxford English Dictionary , fifth edition (Clarendon Pres s, 2002), Vol. II, p. 1914. 
489 Ecuador's second written submission, para. 29.  WT/DS27/RW2/ECU 
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  maintaining total market access for MFN banana suppliers, taking into account the relevant EC 
commitments.  In order to address this argument, ho wever, the Panel needs first to verify whether, 
under the terms set out in the Bananas Annex, the Pa nel is required and has the authority to determine 
if the European Communities' current regime for the importation of bananas results in at least 
maintaining total market access for MFN banana suppliers. 
7.185  If the Panel were to verify that, under the terms set out in the Bananas Annex, it is required to 
make such a finding and that it has the authority to do so and if the Panel further found that, indeed, the European Communities' current regime for th e importation of bananas results in at least 
maintaining total market access for MFN banana supp liers, the question would then be whether such a 
determination implies that the Doha Waiver, as it applies to bananas, has remained in force. 
7.186  The Panel notes in this regard the Eu ropean Communities' argument that: 
"The Doha waiver states that it would term inate if 'the EC has failed to rectify the 
matter'.  If the Doha waiver wanted to say what Ecuador, Nicaragua and Panama are arguing, the text should have read that the waiver would terminate 'if the Arbitrator 
concludes  that the EC has failed to rectify the matter'.  The Doha waiver does not say 
so.  This shows that the crucial factor was whether the import regime actually 
implemented by the European Communiti es maintains the MFN countries' market 
access."
490 
7.187  However, this argument is not persuasive.  The te xt of the fifth tiret of the Bananas Annex is 
clear enough: 
"If the arbitrator determines  that the rebinding would not result in at least 
maintaining total market access for MFN supp liers, the EC shall rectify the matter.  
Within 10 days of the notification of the ar bitration award to the General Council, the 
EC will enter into consultations with tho se interested parties that requested the 
arbitration.  In the absence of a mutually satisfactory solution, the same arbitrator 
will be asked to determine ... whether the EC has rectified the matter .  The second 
arbitration award will be notified to the General Council.  If the EC has failed to 
rectify the matter , this waiver shall cease to apply to bananas upon entry into force of 
the new EC tariff regime" (emphasis added). 
7.188  In our view, the expression " If the EC has failed to rectify the matter , this waiver shall cease 
to apply" used in the last full sentence of the fift h tiret cannot be read in isolation from the expression 
"In the absence of a mutually satisfactory solution, the same arbitrator will be asked to determine ... 
whether the EC has rectified the matter ."  The Panel agrees in this rega rd with the United States' third 
party statement that: 
"The phrase '[i]f the EC has failed to rectify the matter', at the beginning of the fifth 
sentence in tiret 5 of the Annex can only refe r back to the determination made by the 
second arbitrator following the EC's effort to 'rectify the matter'."491 
7.189  Under the terms contained in the Bananas Anne x, the authority to determine whether the 
European Communities' proposed regime for the im portation of bananas would result "in at least 
                                                      
490 Written version of the European Communities' closing statement during substantive meeting with 
the parties and third parties, para. 5. 
491 Written version of the United States' oral statemen t during substantive meeting with the parties and 
third parties, para. 21. WT/DS27/RW2/ECU 
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  maintaining total market access for MFN banana s uppliers" fell on the arbitrator and not on any other 
WTO body. 
7.190  The Bananas Annex contemplated two successi ve rounds of examination by which the 
arbitrator would examine, first the European Co mmunities' original proposed rebinding of the EC 
tariff on bananas to determine whether it would ma intain total market access for MFN banana 
suppliers, and then, if such were the case, the revi sed proposal, to determine whether it had rectified 
the matter (i.e., if it would result in maintaining total market access for MFN banana suppliers, to the 
extent that the previous proposal had failed such test). 
7.191  The terms contained in the Bananas Annex do not envisage any further examination after the 
introduction of the new measure, which would in practice amount to a third round of examination 
beyond the two arbitrations provided in the Bananas Annex.  Nor do those terms entrust to this Panel 
the authority to review the findings made by the arbitrator.  If the intention of WTO Members had 
been to contemplate such additional round of exam ination, the Bananas Anne x would have included a 
provision to that effect.  In the absence of such language, the Panel fails to  see how it could introduce 
such new step. 
7.192  The European Communities argues that the duratio n of the Doha Waiver was not linked to the 
number of arbitrations lost by the European  Communities before the new import regime was 
introduced, but rather it depended on whether the new import regime actually maintains total market 
access for MFN suppliers.
492  In the European Communities' view, the WTO Members would not 
have linked the duration of such an important waiver: 
"[T]o the number of arbitration results r eached on the basis of theoretical analyses 
and arithmetic calculations, in 'clinical isol ation' from the real effects of the new 
import regime on the bananas market."493 
7.193  The Panel concurs with the European Comm unities' statement that any determination 
regarding the continued existence of the Doha wa iver should not be based on a purely "formalistic 
approach".494  However, under the terms of the Bananas A nnex, it was the arbitrator, and not a dispute 
settlement compliance panel, that had the authorit y to conduct a substantive analysis in order to 
determine whether the European Communities' propo sed regime for the importation of bananas would 
result in maintaining total market access for MFN ba nana suppliers.  Moreover, under the terms of the 
Bananas Annex, it was the European  Communities that had the burden to either propose a rebinding 
of its tariff on bananas that would result in mainta ining total market access for MFN banana suppliers 
or, if it had failed to do so through its original prop osal, to rectify the matter to the satisfaction of the 
same arbitrator through a second examination. 
7.194  The European Communities raises the issue of what would have happened if the arbitrator 
had found that the European Communities' proposed  regime for the importation of bananas would 
result in maintaining market access for MFN bana na suppliers and the European Communities had 
then implemented a different system from that examin ed by the arbitrator or if the actual operation of 
the system did not in fact maintain market access for bananas.495  However, this counterfactual 
argument does not change the terms actually contained in the Bananas Annex.  In any event, even if 
                                                      
492 European Communities' first written submission, paras. 67 and 69. 
493 Ibid., para. 69. 
494 European Communities' second written submission,  para. 39, and written version of the European 
Communities' oral statement during substantive meeting w ith the parties and third parties, paras. 14-15.  See 
also, Joint third party written submission by Belize, Cameroon, Côte d'Ivoire, Dominica, the Dominican 
Republic, Ghana, Jamaica, Madagascar, St. Lucia, St. Vincent and the Grenad ines, and Suriname (ACP 
Countries' third party written submission), paras. 54-55 and 61-64. 
495 European Communities' first written submission, para. 68.  WT/DS27/RW2/ECU 
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  the arbitrator had made such a finding and the Eu ropean Communities later implemented a different 
system from that examined by the arbitrator, there is nothing in the Bananas Annex that would have 
prevented any WTO Member from having recourse to dispute settlement procedures, as in the present 
case, in order to challenge whether in those circ umstances the system ultimately imposed by the 
European Communities was inconsis tent with the WTO agreements and whether the Doha Waiver 
was still in effect. 
7.195  On the other hand, it is undoubtedly true that, since the arbitrator w as expected to base its 
findings on a proposed regime, the actual operation of su ch regime in the future could result in effects 
on the bananas market different from those estimated by the arbitrator.496  This is of course an 
inherent limitation of any prosp ective determination, such as the one that, under the terms of the 
Bananas Annex, the arbitrator was to conduct rega rding the European Communities' proposed regime.  
The arbitrator based its determination on the term s of the European Communities' proposal, including 
through the use "of theoretical analyses and arithme tic calculations", and availing itself of the best 
available information at the time.  In any event, ev en if this was to be regarded as a shortcoming of 
the rules contained in the Bananas Annex, it would not change the terms of that text, nor would it 
insert new additional steps that were not provided for or even intended by the WTO membership. 
7.196  For the reasons explained above, the Panel not es that the Bananas Annex contemplated two 
successive rounds of examination by which the arbitr ator would determine, first whether the European 
Communities' original proposed rebinding of the EC tariff on bananas would maintain market access 
for MFN banana suppliers, and then, if that was f ound not to be the case, whether the revised proposal 
made by the European Communities had rectifie d the matter.  No further examination was 
contemplated in the Bananas Annex after the Eu ropean Communities had introduced its new import 
regime for bananas, nor did the terms of the Ba nanas Annex entrust any authority to a dispute 
settlement panel to review the findings made by the arbitrator. 
7.197  The Panel also notes that, under the terms contai ned in the Bananas Annex, the authority to 
determine whether the European Communities' propo sed regime for the importation of bananas would 
result "in at least maintaining total market access fo r MFN banana suppliers" fell on the arbitrator and 
could not be decided by a WTO dispute settlement compliance panel, or by any other WTO body. 
7.198  In view of the preceding analysis, the Panel c oncludes that the maintenance of total market 
access for MFN banana suppliers is not a relevant consideration for extending the Doha Waiver in 
regard to bananas beyond the date of its expi ration on 1 January 2006.  While the Panel notes the 
European Communities' arguments that its current  bananas import regime would maintain total 
market access for MFN suppliers497, it finds that this fact, even if found true, is irrelevant for assessing 
whether the Doha Waiver continued to apply to bananas beyond 1 January 2006. 
7.199  In consequence, the Panel finds that it does not  have the authority to determine whether the 
European Communities' current regime for the importa tion of bananas results in at least maintaining 
total market access for MFN banana suppliers, fo r the purposes provided in  the Bananas Annex. 
                                                      
496 Cf. Ecuador's second written submission, paras. 25-27. 
497 See, inter alia , European Communities' first written submission, paras. 72-77, European 
Communities' second written submission, para. 36, written version of the European Communities' oral statement during substantive meeting with the parties and third pa rties, paras. 8-10, European Communities' response to 
panel question No. 1, paras. 1-2, No. 8, paras. 15.-16, and No. 68, para. 133, and European Communities' 
comments on Ecuador's response to panel question No. 31, paras. 22-25, and No. 32, paras. 26-28..  See also, ACP Countries' third party written submission, paras. 69 -83.  But see also, Colombia's third party written 
submission, paras. 12-40, and Ecuador's response to panel questions Nos. 1, 8, 31 and 32. WT/DS27/RW2/ECU 
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  (vii) Conclusion regarding the Doha Waiver 
7.200  For the reasons indicated above, with the comple tion of the different intermediate procedural 
steps envisaged in the terms and conditions set out  in the Bananas Annex, and upon the entry into 
force of the bananas import regime instituted by the EC through Council Regulation (EC) No. 
1964/2005, the Doha Waiver cannot ex tend to the EC banana regime introduced from 1 January 2006.  
The European Communities has failed to make a prima facie case that, since the entry into force of the 
new EC tariff regime, on 1 January 2006, a waiver from Article I:1 of GATT 1994 has been in force 
to cover the preference granted by the European  Communities to imported bananas originating in 
ACP countries. 
5. General conclusion 
7.201  For the reasons indicated in this section, the Panel finds that the preference granted by the 
European Communities to an annual duty-free tariff quota of 775,000 mt of imported bananas 
originating in ACP countries constitutes an advantag e for this category of bananas, which is not 
accorded to like bananas originating in non-ACP WTO Members.  The Panel therefore finds that this 
preference is inconsistent with Article I:1 of GA TT 1994.  The Panel further finds that, with the 
expiration of the Doha Waiver from 1 January 2006 as  it applied to bananas, there is no evidence that, 
during the period that is relevant for this Panel's fi ndings, that is, from the time of the establishment of 
the Panel until the date of this Report, any waiver  from Article I:1 of GATT 1994 has been in force to 
cover such preference. 
D. E
CUADOR 'S CLAIM UNDER ARTICLE XIII  OF THE GATT  1994 
1. Introduction 
(a) Summary of parties' arguments 
(i) Ecuador's claim 
7.202  Ecuador has requested the Panel to find that  the European Communities' current banana 
import regime is inconsistent with paragra phs 1 and 2 of Article XIII of the GATT 1994.498 
7.203  Ecuador argues that, "[a]s the original Panel499 found, and the Appellate Body500 affirmed in 
Bananas III , and as again affirmed in the first Article 21.5 Panel501, Article XIII of the GATT applies 
to tariff-rate quotas as well as other quotas."502 
7.204  Ecuador adds that: 
"The EC was granted a conditional waiver of  its obligations under Article XIII, but 
this waiver expired by its own terms on December 31, 2005.503  Notwithstanding the 
expiration of that waiver, the EC now im poses a tariff rate quota on bananas in which 
                                                      
498 Ecuador's first written submission, paras. 29-30. 
499 (footnote original ) Panel Report at para. 7.68. 
500 (footnote original ) Appellate Body Report at para. 160. 
501 (footnote original ) Panel Report at para. 6.160. 
502 Ecuador's first written submission, para. 28. 
503 (footnote original ) European Communities – Trans itional Regime For The EC – Autonomous Tariff 
Rate Quotas On Imports Of Bananas , WT/MIN(01)/16, 14 November 2001, para. 7.  WT/DS27/RW2/ECU 
 Page 157 
 
 
  only ACP countries have access to the duty fr ee quota, while Ecuador and all other 
countries are excluded from that quota."504 
7.205  In Ecuador's view, on the one hand: 
"The EC measures are inconsistent with Ar ticle XIII:1 in that  Ecuadorian (and other 
non-ACP) bananas cannot be c onsidered 'similarly restricted' in comparison to ACP 
bananas, when Ecuadorian (and other non- ACP) bananas are si mply excluded from 
access to the duty free tariff quota.505"506 
7.206  On the other hand, Ecuador maintains that: 
"The EC measures are also inconsistent  with Article XIII:2.  The Panel on Bananas 
III noted the general rule that, if Member s apply quotas to a product, then, in the 
terms of the chapeau to Article XIII:2, 'Membe rs shall aim at a distribution of trade in 
such product approaching as closely as possible the shares which the various 
Members might be expected to obtain in the absence of such restrictions.'507"508 
7.207  Ecuador adds that "[t]hough the EC system has eliminated the country allocations that 
previously existed as between non-ACP countries, the discrimination remains as between ACP and 
non-ACP bananas"509, and "[t]he Appellate Body in Bananas III  vigorously condemned this 
discrimination."510 
7.208  Finally, in Ecuador's view the challenge d measures are also inconsistent with 
Article XIII:2(d) of the GATT 1994 because: 
"The allocation of the duty free quota exclusively to ACP countries bears no relation 
to trading patterns in the world or EC market s.  As can be seen in the charts annexed 
as Exhibits ECU-2 and ECU-3, Ecuador is a preeminent exporter of bananas to the 
world market.  Further, Ecuador and sever al other countries that are excluded from 
the zero duty quota, are substantial suppliers to the EC, while ACP countries, many of 
whom are minor suppliers at best, are allowed to ship duty free under the tariff 
quota."511 
(ii) The European Communities' arguments 
7.209  The European Communities has raised a prelimin ary objection in the context of Article XIII 
of the GATT 1994.  As mentioned earlier512, the European Communities has argued that Ecuador's 
complaint against the Cotonou preference under Article  XIII should be rejected because "Ecuador's 
claims are in reality a challenge on the measures suggested  by the [first compliance] Panel [requested 
by Ecuador], rather than on the measures actually taken  by the European Communities."513  
                                                      
504 Ecuador's first written submission, para. 28. 
505 (footnote original ) Panel Report at para. 7.69;  Appellate Body Report at para. 160. 
506 Ecuador's first written submission, para. 29. 
507 (footnote original ) Panel Report at para. 7.68. 
508 Ecuador's first written submission, para. 30. 
509 Ibid., para. 31. 
510 Ibid. 
511 Ibid., para. 32. 
512 See para. 7.14 above. 
513 European Communities' first written submission, para. 84. WT/DS27/RW2/ECU 
Page 158  
 
  According to the European Comm unities, such suggestion could onl y be challenged through recourse 
to appellate review, but not through a compliance panel.
514 
7.210  In addition to that preliminary objection to Ecuador's claims under Article XIII, the 
European Communities explicitly requests the Panel to  reject Ecuador's claims in regard to both 
paragraphs 1 and 2 of Article XIII.  In particul ar, the European Communities argues that Article XIII 
is not applicable to the measure challenged by Ecuador because that measure would fall within the 
scope of Article I of the GATT 1994 given the "differe nt purpose and different field of application [of 
those two provisions of the GATT 1994]."515  In particular, according to  the European Communities: 
"Ecuador's exports are subject to a simple and ordinary tariff.  And it is clear that 
GATT Article XIII does not apply to tariffs.  Textually, this is made clear from the 
title of GATT Article XIII.  Contextually, it is made clear by the fact that if GATT 
Article XIII was to also cover ordinary ta riffs, then there would be no more meaning 
or reason of existence for GA TT Article I, paragraph 1."516 
7.211  According to the European Communities' view, the current EC banana import regime is not 
inconsistent with Article XIII:1 of the GATT 1994 because: 
"[T]he Members on whose imports the quantitative restriction is imposed are the ACP 
countries.  The MFN countries, including Ecuador, are the 'all third countries', whose position should be taken as a basis in or der to determine whether the ACP countries 
are treated 'worse' than them.  However,  the MFN countries are not subject to any 
tariff quota, or other quantitative restriction.   As a consequence, there is nothing on 
which the comparison can be based."
517 
7.212  The European Communities adds that: 
"GATT Article XIII, paragraph 1 does not oblige the European Communities to 
extend to all Members (including Ecuador and the other MFN suppliers) the tariff 
preference granted to the ACP countries.  GATT Article XIII, paragraph 1 simply 
obliges the European Communities not to  impose a quantitative restriction on 
Ecuador, unless a similar quantitative rest riction was imposed on all other WTO 
Members."518 
7.213  According to the European Communities: 
"[E]ven assuming arguendo  that there is a quantitative restriction imposed on the 
ACP countries, Ecuador cannot successfully  challenge it, because this quantitative 
restriction imposed on the ACP countries does not result in any nullification or 
impairment of any benefit accruing to Ecuador.  Quite to the contrary, this 'cap' to the 
preference afforded to the ACP countries pr otects the interests of Ecuador and the 
other MFN countries, because it limits the quantities of ACP bananas that can be 
imported into the European Communities at zero duty."519 
7.214  Further, referring to the report of the Appellate Body in EC – Bananas III , the 
European Communities argues that: 
                                                      
514 See European Communities' second written submission, paras. 19-35. 
515 European Communities' first written submission, para. 94. 
516 Ibid., para. 104. 
517 Ibid., para. 100. 
518 Ibid., para. 103. 
519 Ibid., para. 101.  WT/DS27/RW2/ECU 
 Page 159 
 
 
  "GATT Article XIII, paragraph 1 covers only situations where a Member applies 
tariff quotas with different terms to differen t groups of countries in a market where all 
import are made under tariff quotas.  Conse quently, GATT Article XIII, paragraph 1 
does not apply to a tariff only import regime where there are no different tariff quotas allocated to different groups of countries,  such as the current import regime of the 
European Communities."
520 
7.215  As regards Article XIII:2 of the GATT 1994, the European Communities contends that "[f]or 
the same reasons, the current import regime of  the European Communities does not violate GATT 
Article XIII, paragraph 2."521  In the European Communities' view, 
"The ... limited ... scope of ... Article [XIII]  is seen in the way that the four sub-
paragraphs of GATT Article XIII, paragra ph 2 are entirely focused on the scope and 
internal distribution of the quota.  They disregard any trade that falls outside the quota (or tariff quota)".
522 
7.216  Also, according to the European Communities, "[t]he text ' In applying import restrictions ' 
shows that paragraph 2 (like paragr aph 1) is solely concerned with  quantitative restrictions, and does 
not regulate the relationship between quantitative r estrictions and other measures, notably simple 
tariffs, that a Member may be applying."523 
(b) Order of analysis 
7.217  The Panel will assess first the European Co mmunities' preliminary objection concerning 
Article 21.5 of the DSU.  If that preliminary objec tion was rejected, the Panel would turn to Ecuador's 
claim under Article XIII:1 and 2 of the GATT 1994. 
7.218  In that latter context, the Panel intends to start its analysis with addressing the 
European Communities' systemic ar guments concerning the interrelati on of Articles I and XIII of the 
GATT 1994 and the latter's applicability to the Europ ean Communities' banana import regime, as well 
as Ecuador's response to those arguments.  If the European Communities' arguments in that context 
were rejected, the Panel would address Ecuador's s ubstantive claim under both paragraphs 1 and 2 of 
Article XIII.  In the alternative, there would be  no need to assess Ecuador's substantive claim under 
Article XIII:1 and 2 of the GATT 1994. 
2. The European Communities' preliminary objection 
(a) Parties' main arguments 
(i) The European Communities' arguments 
7.219  In its preliminary objection, the European Communities argues that it "complied with the 
findings of the [first compliance] Panel [requested by Ecuador] by implementing one of the 
suggestions put forward by [that panel]"524, namely that "the European Communities could choose to 
implement a tariff-only system for bananas, with a tariff quota for ACP bananas covered by a suitable 
waiver."525 
                                                      
520 European Communities' first written submission, para. 105. 
521 Ibid., para. 106. 
522 Ibid., para. 108. 
523 Ibid., para. 107. 
524 Ibid., para. 23. 
525 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.157. WT/DS27/RW2/ECU 
Page 160  
 
  7.220  On the one hand, according to the European  Communities, "on January 1, 2006, the 
European Communities introduced a tariff only system and the Cotonou Preference took the form of a tariff quota for certain volumes of bananas coming from Cotonou beneficiary developing countries, as suggested by the Panel in paragraph 6.157 of its Report."
526  On the other hand, "prior to the 
introduction of this new import regime, the Europe an Communities received a suitable waiver from 
the application of GATT Article I, again as suggest ed by the Panel in the same paragraph of its 
Report."527 
7.221  According to the European Communities: 
"[I]t is clear that, in the second suggestion of the Panel, 'suitable waiver' meant a 
waiver from the application of GATT Article  I.  The reason for this is that the 
suggested import regime would be a tariff- only system with a preferential treatment 
granted to the ACP countries.  This interp retation is supported by the language used 
by the Panel in its third suggestion.  The third suggestion provided for the continuation of an all-tariff-quota import re gime, with different quotas allocated to 
different groups of countries.  The Panel expressly mentioned that a waiver from the 
application of GATT Article XIII would be need ed in the context of such an all-tariff-
quota system.
528"529 
7.222  Further, the European Communities contends that: 
"[U]nder Article 21.5 of the DSU a party can  bring claims on the 'consistency with a 
covered agreement of a measure taken  to comply' with the findings of the panel.  
Therefore, the European Communities submits that claims challenging the 
consistency with the covered agreements of the measures suggested  by the panel 
cannot be brought before an Article 21.5 Pane l.  If Ecuador disagreed with the Panel's 
suggestions, it should have filed an appeal with the Appellate Body, pursuant to the 
terms of Article 17 of the DSU.  Given that Ecuador did not file such an appeal, Ecuador is now bound by res judicata , pursuant to Article 19, paragraph 1 and 
Article 17, paragraph 14 of the DSU."
530 
(ii) Ecuador's response 
7.223  Ecuador argues that it is "obviously [a] fal se assertion that Ecuador has not challenged 
measures actually taken by the EC."531  Further, Ecuador contends that  "[t]he Panel never suggested or 
even implied that the EC would not require a wa iver of Article XIII to implement a tariff quota 
reserved for ACP countries"532: 
"The EC has no basis for assuming that th e Panel in any sense was suggesting that a 
suitable waiver would be limited to Article I.   To the contrary, it is apparent in the 
Panel's alternative suggestion that it considers that a tariff quota confined to bananas of ACP origin would require an Article XIII waiver.  What the EC purports to view as 
a Panel determination that a waiver of  Article XIII for duty free treatment of 
developing countries is required only if ther e is more than one tariff quota in the 
system can only be reasonably interpreted as in  fact a further explanation of the need 
                                                     
 
526 European Communities' first written submission, para. 23. 
527 Ibid. 
528 (footnote original ) See the Panel report, at paragraph 6.158. 
529 European Communities' first written submission, para. 81. 
530 Ibid., para. 85. 
531 Ecuador's second written submission, para. 43. 
532 Ibid., para. 44.  WT/DS27/RW2/ECU 
 Page 161 
 
 
  for a waiver.  It borders on insulting to th e Panel to argue otherwise, and it would be 
inconsistent with the Panel's own ruli ngs that confirmed the application of 
Article XIII to all tariff quotas."533 
7.224  Ecuador adds that: 
"[N]one of the provisions of the DSU woul d have precluded this challenge of the 
conformity of the EC's measures taken to co mply with the Panel Report, even if the 
particular measures had been suggested by the Panel.  [Also,] it is not necessary to challenge before the Appellate Body the s uggestions of a panel in order to preserve 
the right to make a challenge under Article 21.5."
534 
(b) Panel's analysis 
(i) Relevance of Article 21.5 of the DSU in this dispute 
7.225  Article 21.5 of the DSU provides in relevant part that: 
"Where there is disagreement as to the existence or consistency with a covered 
agreement of measures taken to comply with the recommendations and rulings such dispute shall be decided through recourse to these dispute settlement procedures, 
including wherever possible resort to the original panel." 
7.226  Further, the measure contested by Ecuador in this compliance dispute has been identified in 
Ecuador's request for the establishment of a panel in the following terms: 
"The challenged EC measures are c ontained in EC Council Regulation 
No. 1964/2005 ('Regulation 1964')
535 and its associated implementing regulations, 
including the EC's autonomous tariff provisions. These measures include: 
– A tariff-rate quota, with a current vol ume of 775,000 mt, exclusively reserved 
for bananas of ACP origin.  ACP bananas within the quota enter duty-free, quantities above the TRQ paying a current  duty of 176 €/mt.  The 775,000 mt 
ACP tariff quota volume is subject to  import licenses and allocation.  
Ecuador does not get any share of this tariff rate quota or related measures, 
let alone receive the share required under Article XIII. 
– An EC tariff, currently at 176 €/mt to EC imports of bananas, that applies to 
all bananas of Ecuadorian origin an d to all other bananas except those 
benefiting from access to the zero-duty TRQ."
536 
7.227  As also indicated in Ecuador's request for the est ablishment of a panel, Ecuador contends that 
"[t]hese measures are not justified under the Unde rstandings or any agreed settlement, and are not 
                                                      
533 Ecuador's second written submission, para. 40. 
534 Ibid., para. 44. 
535 (footnote original ) Council of the European Union, Council Regulation (EC) No. 1964/2005 of 
29 November 2005 on the tariff rate for bananas , OJL 316/1, 2 December 2005. 
536 Request for the Establishment of a Panel by Ecuador, EC – Bananas III (Article 21.5 – Ecuador II) , 
26 February 2007, WT/DS27/80, p. 4. WT/DS27/RW2/ECU 
Page 162  
 
  covered by any waiver of EC obligations"
537;  moreover, "Ecuador considers that the EC measures are 
inconsistent with [certain] oblig ations of the WTO Agreements."538 
7.228  Ecuador is, therefore, asking this Panel to asses s the conformity with the covered agreements 
of the European Communiti es' current banana import regime, i.e., of the measure  the 
European Communities alleges it has taken in line w ith the suggestions of the first compliance panel 
requested by Ecuador.  Ecuador is not asking this compliance Panel to assess the conformity with the 
covered agreements of the suggestions  of the first compliance panel requested by Ecuador. 
7.229  Since the European Comm unities argues in this dispute that its current banana import regime 
corresponds to the second suggestion of the fi rst compliance panel requested by Ecuador539, it would 
seem difficult for the European Communities to c ontest that that regime should be considered 
properly as a "measure taken to comply with the recommendations and rulings [of the DSB]" for the 
purposes of Article 21.5 of the DSU.  Indeed, the Eu ropean Communities states that "[i]n suggesting a 
particular course of action, the Panel is indi cating that such action is lawful and that the 
implementation of this suggestion will lead to the defending party's compliance with the obligations 
found to have been infringed ."540 (emphasis added) 
7.230  Under Article 21.5 of the DSU, compliance panels are required to assess "measures taken to 
comply with the recommendations and rulings" of the DSB.  In Canada – Aircraft (Article 21.5 – 
Brazil) , the Appellate Body held that: 
"Proceedings under Article 21.5 do not concern just any measure of a Member of the 
WTO;  rather, Article 21.5 proceedings are limited to those 'measures taken to comply 
with the recommendations and rulings' of th e DSB.  In our view, the phrase 'measures 
taken to comply' refers to m easures which have been, or wh ich should be, adopted by a 
Member to bring about compliance with  the recommendations and rulings of 
the DSB."541 
7.231  The Panel recalls that in its request for the establishment of the first compliance panel, 
Ecuador explicitly asked that panel to issue s uggestions pursuant to Article 19.1 of the DSU.542  In its 
request Ecuador argued that: 
"It considers that it is necessary to invoke Article 19 of the Understanding on Rules 
and Procedures Governing the Settlement of Disputes to ensure that the Panel, in 
addition to issuing its rulings, suggests how the European Communities might 
implement its recommendations ."543 (emphasis added) 
7.232  In turn, the first compliance panel requested by  Ecuador noted that "Ecuador requests this 
Panel to make specific suggestions to the European Communities on how it might implement our 
findings in this proceeding under Article 21.5 of the DSU ." (emphasis added) 
                                                      
537 Request for the Establishment of a Panel by Ecuador, EC – Bananas III (Article 21.5 – Ecuador II) , 
26 February 2007, WT/DS27/80, p. 4. 
538 Ibid. 
539 See European Communities' first written submission, para. 80. 
540 European Communities' second written submission, para. 23. 
541 Appellate Body Report on Canada – Aircraft (Article 21.5 – Brazil) , para. 36.  See also Appellate 
Body Report on Mexico – Corn Syrup (Article 21.5 – US) , paras. 78-79. 
542 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.154. 
543 Recourse to Article 21.5 of the DSU by Ecuador, EC – Bananas III (Article 21.5 – Ecuador) , 
18 December 1998, WT/DS27/41, p. 3.  WT/DS27/RW2/ECU 
 Page 163 
 
 
  7.233  The first compliance panel requested by Ecuado r in this dispute issued its suggestions 
pursuant to Article 19.1 of the DSU, which provides that: 
"Where a panel or the Appellate Body concl udes that a measure is inconsistent with a 
covered agreement, it shall recommend that the Member concerned544 bring the 
measure into conformity with that agreement.545  In addition to its recommendations, 
the panel or Appellate Body may suggest wa ys in which the Member concerned could 
implement the recommendations ."  (emphasis added) 
7.234  Through its last three words, Article 19.1 estab lishes a close link between suggestions and the 
recommendations of panels and the Appellate Body.  In issuing its suggestions pursuant to that 
Article 19.1, the first compliance panel requested by Ecuador in EC - Bananas III also emphasised 
that link: 
"Panels have not often made suggestions pursuant to Article 19.1.  While Members 
remain free to choose how they implement DSB recommendations and rulings , 
it seems appropriate, after one implementation attempt has proven to be at least 
partly unsuccessful , that an Article 21.5 panel make suggestions  with a view toward 
promptly bringing the dispute to an end ."546  (emphasis added) 
7.235  The reports of the panel and the Appellate Body  as well as the report of the first compliance 
panel requested by Ecuador in the EC – Bananas III dispute were adopted by the DSB.547  Thus, to the 
extent that the suggestions of the first complia nce panel requested by Ecuador are linked to the 
recommendations and rulings of those panels and the Appellate Body, they are also closely linked to 
the relevant DSB recommendations and rulings. 
7.236  In US – Softwood Lumber IV (Article 21.5) the Appellate Body found that the term "measures 
taken to comply" in Article 21.5 of the DSU refers to measures "taken in the direction of, or for the 
purpose of achieving, compliance"548: 
"In examining the meaning of 'measures taken to comply' in Article 21.5, we begin 
with the word 'taken'.  There is a wide range of dictionary meanings of the word 
'taken', which is the past participle of the verb 'take'.  The meanings of 'take' include, 
for example, '[b]ring into a specified positi on or relation';  '[s]elect or use for a 
particular purpose.'549  The preposition 'to' is '[u]sed in verbs ... in the sense of 
'motion, direction, or addition to', or as the mark of the infinitive.'550  ...  [T]he word 
'comply' is defined as 'accommodate oneself to (a person, circumstances, customs, etc.) ... Act in accordance with or with a request, command, etc.'
551  The French and, 
                                                      
544 (footnote original ) The "Member concerned" is the party to the dispute to which the panel or 
Appellate Body recommendations are directed. 
545 (footnote original ) With respect to recommendations in cases not involving a violation of 
GATT 1994 or any other covere d agreement, see Article 26. 
546 Panel Report on EC – Bananas III (Ecuador – Article 21.5) , para. 6.154. 
547 See Minutes of the Meeting of the Dispute Settlement Body Held in the Centre William Rappard on 
25 September 1997, WT/DSB/M/37 of 4 November 1997, p. 27;  and Minutes of the Meeting of the Dispute Settlement Body Held in the Centre William Rappard on 6 May 1999, WT/DSB/M/61 of 30 June 1999, p. 6. 
548 Appellate Body Report on US – Softwood Lumber IV (Article 21.5 – Canada) , para. 66. 
549 (footnote original ) Shorter Oxford English Dictionary , 5th edn, W.R. Trumble, A. Stevenson (eds) 
(Oxford University Press, 2002), Vol.  2, p. 3170. 
550 (footnote original ) Ibid., Vol.  2, p. 3284. 
551 (footnote original ) United States' appellant's submission, para. 30 (quoting The New Shorter Oxford 
English Dictionary , supra , footnote 37, p. 461 (original italics) (Exhibit US-15 submitted by the United States to 
the Panel)). WT/DS27/RW2/ECU 
Page 164  
 
  in particular, Spanish versions of this phrase ('mesures prises pour se conformer' and 
'medidas destinadas a cumplir', respectively) also imply that relevant measures are 
associated with the objective of complying.  On its face, therefore, the phrase 
'measures taken to comply' seems to refer to measures taken in the direction of , or for 
the purpose of achieving , compliance."
552 
7.237  The first compliance panel requested by Ecuador ma de its suggestions "for [the EC to] bring 
... its banana import regime into  conformity with WTO rules."553  Further, as noted earlier, Ecuador is 
asking this Panel to assess the conformity with the covered agreements of the European Communities' 
current banana import regime, which the European Communities alleges to have taken to implement a 
suggestion made, pursuant to Article 19.1 of the DSU, by the first compliance panel requested by 
Ecuador. 
7.238  In the light of the above, to the extent th at the European Communities argues that it has 
implemented such a suggestion, this Panel is not prevented from conducting, under Article 21.5 of the 
DSU, the assessment requested by Ecuador in this dispute. 
(ii) The European Communities' arguments on res iudicata 
7.239  As to whether this Panel would be neverthe less prevented from carrying out such assessment 
under Article 21.5 because the European Communiti es would be implementing a suggestion by the 
first compliance panel requested by Ecuador, the Panel notes that the European Communities invokes 
the concept of " res judicata , pursuant to Article 19, paragraph 1 and Article 17, paragraph 14 of the 
DSU."554 
7.240  Article 19.1 of the DSU provides that: 
"Where a panel or the Appellate Body concl udes that a measure is inconsistent with a 
covered agreement, it shall recommend that the Member concerned9 bring the 
measure into conformity with that agreement.10  In addition to its recommendations, 
the panel or Appellate Body may suggest wa ys in which the Member concerned could 
implement the recommendations. 
_______________ 
9 The 'Member concerned' is the party to the dispute to which the panel or Appellate Body 
recommendations are directed.  
10 With respect to recommendations in cases not involving a violation of GATT 1994 or any 
other covered agreement, see Article 26. " 
7.241  In turn, Article 17.14 of the DSU stipulates that: 
"An Appellate Body report sh all be adopted by the DSB and unconditionally accepted 
by the parties to the dispute unless the DS B decides by consensus not to adopt the 
Appellate Body report within 30 days following its circulation to the Members.8  
This adoption procedure is without prejudice to the right of Members to express their views on an Appellate Body report. 
_______________ 
                                                     
 
552 Appellate Body Report on US– Softwood Lumber IV (Article 21.5 – Canada) , para. 66. 
553 Panel Report on EC – Bananas III (Ecuador – Article 21.5) , para. 6.155. 
554 European Communities' first written submission, para. 85.  WT/DS27/RW2/ECU 
 Page 165 
 
 
  8 If a meeting of the DSB is not scheduled during this period, such a meeting of the DSB shall 
be held for this purpose. " 
7.242  The European Communities also invokes Article 16.4 of the DSU555, which provides that: 
"Within 60 days after the date of circul ation of a panel report to the Members, 
the report shall be adopted at a DSB meeting7 unless a party to the dispute formally 
notifies the DSB of its decision to appeal or the DSB decides by consensus not to 
adopt the report.  If a party has notified its decision to appeal, the report by the panel shall not be considered for adoption by the DSB until after completion of the appeal.  This adoption procedure is without prejudice to the right of Members to express their 
views on a panel report. 
_______________ 
7 If a meeting of the DSB is not scheduled within this period at a time that enables the 
requirements of paragraphs 1 and 4 of Article 16 to be met, a meeting of the DSB shall be 
held for this purpose. " 
7.243  Finally, the European Communities also refers  to Article 21.1 of the DSU, which provides 
that "[p]rompt compliance with recommendations or ru lings of the DSB is essential in order to ensure 
effective resolution of disputes to the benefit of all Members."556 
7.244  On the basis of those provisions of the DSU, the European Co mmunities argues that: 
"[S]uggestions [pursuant to Article 19.1 of th e DSU] are [not] entirely devoid of legal 
significance.  ...  [A] suggestion contains a significant legal ruling.  In suggesting a particular course of action, the Panel is indi cating that such action is lawful and that 
the implementation of this suggestion will lead to the defending party's compliance 
with the obligations found to have been infringed."
557 
7.245  The European Communities adds that: 
"[I]f the complaining party does not appeal  the suggestions made by the panel, 
then following the adoption of the panel's re port by the DSB there is a presumption of 
legality covering these suggestions which makes them binding on the complaining 
party.  This means that if the defending  party decides to implement the measures 
suggested by the panel, the complaining party may not challenge the conformity of 
these measures with the WTO rules in an Ar ticle 21.5 procedure.  Allowing such a 
challenge would be inconsiste nt with Article 17.14 of the DSU read together with the 
other DSU provisions mentioned above, b ecause it would mean that the complaining 
party does not 'unconditi onally accept' the panel's report.   To hold otherwise would 
create an undue legal uncertainty for the defending party as to the course of action 
that it should follow.  It would also seriously compromise the credibility of panels 
and of the DSB, because it would create the possibility for Article 21.5 Panels to reverse decisions taken by the DSB.  This would curtail the panels' ability to make suggestions and would render the relevant  provisions of Article 19.1 of the DSU 
inoperative."
558 
                                                      
555 European Communities' second written submission, footnote 5. 
556 Ibid., footnote 7. 
557 Ibid., para. 23. 
558 Ibid., para. 24. WT/DS27/RW2/ECU 
Page 166  
 
  7.246  As noted earlier, in line with Article 21.5 of  the DSU, the Panel will assess the conformity 
with the covered agreements of the measure  taken by the European Communities allegedly to 
implement a suggestion of the first compliance pane l requested by Ecuador.  This Panel is not 
requested by Ecuador to assess the conformity with the covered agreements of the suggestions  made 
by that first compliance panel, as endorsed by th e DSB, and this Panel will not conduct such an 
assessment of the suggestions . 
7.247  The Panel does not need to assess whet her the provisions invoked by the 
European Communities in this context, namely Artic les 16.4, 17.14, 19.1 and 21.1 of the DSU, can be 
read as establishing an automatic link between the al leged binding nature of a suggestion pursuant to 
Article 19.1 of the DSU and a measure purportedly take n by a Member to implement such suggestion.  
While suggestions are issued by panels or the A ppellate Body under Article 19.1, any measure to 
implement such suggestion is taken by a Member, a nd the conformity with the covered agreements of 
such measures will depend on the actual implementati on of the suggestion by the Member in question. 
7.248  The Panel notes that Article 19.1 states that  suggestions encompass "ways in which the 
Member concerned could implement the recommendations." (emphasis added)  The first compliance 
panel requested by Ecuador issu ed three alternative suggestions
559, introducing those with the 
following words: 
"In light of our findings and conclusions w ith respect to Articles I and XIII of GATT 
..., in our view, the European Communities has at least the following options  for 
bringing its banana import regime into conformity with WTO rules."560  
(emphasis added) 
7.249  Also, the same compliance panel explicitly rec ognized that "Members remain free to choose 
how they implement DSB recommendations and rulings."561 
7.250  In the light of the language in Article 19.1, the Panel underlines that Members' freedom to 
choose how they implement DSB recommendations and rulings is in no way diminished as a result of there being specific "suggestions" in a particular dis pute.  The Panel agrees in this respect with the 
panel on US - Steel Plate , which stated that "while a panel may suggest ways of implementing its 
recommendation, the choice of means of implementati on is decided, in the first instance, by the 
Member concerned".
562  The Panel notes that the European Communities does not contest this;  
indeed, the European Communities: 
"[A]cknowledges that a panel's suggestions  as to how the defending party may put 
itself in compliance with the WTO rules are not binding for the defending party :  
the defending party enjoys the freedom to choose any of the various options that may 
exist to bring about compliance.563"564 (emphasis added) 
7.251  None of the DSU provisions invoked by the European Communities in this context, namely 
Articles 16.4, 17.14, 19.1 and 21.1, indicates that  the fact that a Member adopts a measure to 
implement a suggestion pursuant to Article 19.1 would prevent another Member from challenging, 
pursuant to Article 21.5, the compliance of such meas ure with the covered agreements.  Even if there 
                                                      
559 See Panel Report on EC – Bananas III (Ecuador – Article 21.5) , paras. 6.156-6.158. 
560 Ibid., para. 6.155. 
561 Ibid., para. 6.154. 
562 Panel Report on US – Steel Plate, para. 8.8. 
563 (footnote original ) See, for example, the relevant refere nce in the "Handbook on the WTO Dispute 
Settlement System, A WTO Secretariat Publication prepared  for publication by the Legal Affairs Division and 
the Appellate Body", published in 2004, on page 58. 
564 European Communities' second written submission, para. 23.  WT/DS27/RW2/ECU 
 Page 167 
 
 
  was a presumption of the legality of measures taken to implement a suggestion pursuant to 
Article 19.1, there is nothing in the DSU suggesting that the alleged legality of such measures could 
not be reviewed by a compliance panel pursuant to Article 21.5. 
7.252  Any alternative reading of the DSU would make Article 21.5 of the DSU and Members' rights 
under that provision irrelevant.  The Panel recalls in  this context that Article 21.5 applies in all 
situations "where there is disagreement as to the ... consistency with a covere d agreement of measures 
taken to comply with the recommendations and rulings."  Further, Article 21.5 provides that "such dispute shall be decided through rec ourse to these dispute settlement procedures , including 
wherever possible resort to the original panel." (emphasis added) 
7.253  As the words "where" and "shall" indicate, Ar ticle 21.5 creates an unconditional requirement 
that any dispute resulting from "disagreement as to  the existence or consistency with a covered 
agreement of measures taken to comply with the recommendations and rulings" can be decided 
through WTO dispute settlement, and in particular in compliance proceedings pursuant to 
Article 21.5. 
7.254  Further, even under the European Communities' lo gic, for this preliminary objection to be 
successful, the EC measure in question would need to implement a suggestion pursuant to 
Article 19.1.  The European Communities argues that it implemented the second suggestion of the 
first compliance panel requested by Ecuador
565, namely that "the European Communities could 
choose to implement a tariff-only system for bananas,  with a tariff quota for ACP bananas covered by 
a suitable waiver."566 
7.255  A core element of this argument is that th e current EC measure would be tariff only.  
The Panel notes that Ecuador contests whether the current EC regime indeed shows that 
characteristic: 
"The EC contends accurately that it was supposed to provide a tariff only system and 
therefore eliminate tariff quotas, but fails to  mention that this was to be done in 
conjunction with the elimination of all tariff quotas and the establishment of a bound 
tariff in compliance with the requirements of the waiver and in conformity with 
Article XXVIII."567 
Ecuador disagrees that the term "suitable waiver" in  the above suggestion is limited to a waiver under 
Article I.568 
7.256  In the light of the fact that Ecuador disagrees that the current EC banana import regime 
implements the suggestion of the first complian ce panel requested by Ecuador, it would seem an 
unwarranted diminution of Ecuador's rights under the covered agreements, in particular Article 21.5 
of the DSU, to now prevent Ecuador from challenging the conformity of that measure with the covered agreements. 
7.257  Given the unconditional language of Article 21.5 of the DSU, mere allegation by a Member 
that its measure taken to comply exists or is cons istent with the covered agreements clearly cannot be 
sufficient to establish eo ipso the existence of such measure taken to comply or its conformity with the 
covered agreements, especially when another Member , in this case the complainant, disagrees with 
that. 
                                                     
 
565 See European Communities' first written submission, para. 80. 
566 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.157. 
567 Ecuador's second written submission, para. 68. 
568 See Ibid., para. 40. WT/DS27/RW2/ECU 
Page 168  
 
  7.258  As a matter of principle, the existence of a measure taken to comply or the compliance of a 
measure with the covered agreements is not a matter of self-declaration by the Member taking the measure in question.  If that were the case, WTO dispute settlement, the role of adjudicators and the 
rights of Members under the covered agreements, in pa rticular the DSU, would in such a situation be 
reduced to redundancy. 
7.259  As to the relevance of the absence of an app eal by Ecuador, the Panel reads the DSU and in 
particular Article 21.5 as not excluding a compliance dispute subsequent to a panel report adopted by 
the DSB merely because the panel report in ques tion included suggestions pursuant to Article 19.1 
and the respondent is now alleging that it  has implemented one of those suggestions. 
7.260  There is nothing in the DSU preventing a compliance dispute following a non-appealed panel 
report adopted by the DSB.  Indeed, compliance procedures have been conducted under Article 21.5 
of the DSU on several occasions, even though in the original proceedings the DSB adopted the panel's 
report without any appeal by the complainant.
569 
7.261  Further, the absence of an appeal by the comp lainant against a panel report with suggestions 
adopted by the DSB cannot mean eo ipso acceptance by the complainant of the measures that the 
respondent takes in order to comply.  A measure taken by the respondent allegedly to implement a 
suggestion made under Article 19.1 is necessarily sub sequent to the adoption by the DSB of the report 
of the panel in question and, if there has been an appeal, of the report of the Appellate Body, 
including of the suggestions set out therein.  A ccordingly, when the DSB adopts the suggestions, the 
complainant cannot assess – but at best may expect  – the adoption of such implementing measures by 
the respondent and their consistenc y with the covered agreements. 
7.262  Once the respondent has taken the measure a llegedly to implement a suggestion under 
Article 19.1, to the extent that the complainant contests the existence of such measures or their 
conformity with the covered agreements, existence and conformity with the covered agreements may 
be verified, if requested by the complainant, by a compliance panel pursuant to Article 21.5. 
(iii) Conclusion 
7.263  As noted earlier, to the extent that the Eur opean Communities argues that it has implemented 
a suggestion pursuant to Article 19.1 of the DSU, this Panel is not prevented from conducting, under 
Article 21.5 of the DSU, the assessment requested by Ecuador in this dispute.  Also, the Panel finds that the arguments of the European Communities  on res iudicata are not convincing as objections to 
the compliance proceeding requested by Ecuador under Article 21.5 against the measure that the 
European Communities alleges it has taken to impl ement a suggestion of the first compliance panel 
requested by Ecuador. 
7.264  In the light of the foregoing, the Panel reject s the European Communities' first preliminary 
objection in the context of Article XIII of the GATT 1994. 
7.265  The Panel notes that, in addressing the European  Communities' first preliminary objection, 
the Panel does not need to assess whether the Euro pean Communities has effectively implemented 
any of the suggestions of the first compliance pane l requested by Ecuador.  Therefore, the Panel does 
not need to address, in the context of the European  Communities' first preliminary objection, whether 
the EC has fulfilled the two parts of the second sugg estion of that compliance panel, in particular 
                                                     
 
569 See Panel Report on US – DRAMS (Article 21.5 – Korea) ;  Panel Report on Australia – Automotive 
Leather II (Article 21.5 – US) ;  Panel and Appellate Body Reports on Mexico – Corn Syrup (US – Article 21.5) ;  
and Panel and Appellate Body Reports on US – Softwood Lumber VI (Article 21.5 – Canada) .  WT/DS27/RW2/ECU 
 Page 169 
 
 
  whether the term "suitable waiver" refers to a waiv er from only Article I or also from Article XIII of 
the GATT 1994. 
3. Ecuador's claims under paragraphs 1 and 2 of Article XIII of the GATT 1994 
7.266  As mentioned earlier, in the context of Ecuador's claims under Article XIII of the 
GATT 1994, the Panel intends to start its analys is with addressing the European Communities' 
systemic arguments concerning the interrelation of Articles I and XIII of the GATT 1994 and the 
latter's applicability to the EC banana import regime, as well as Ecuador's response to those 
arguments.  If the European Communities' arguments in that context were rejected, the Panel would 
address Ecuador's substantive claim under both paragraphs  1 and 2 of Article XIII.  In the alternative, 
there would be no need to assess Ecuador's subs tantive claim under Article XIII:1 and 2 of the 
GATT 1994. 
(a) The interrelation of Articles I and XIII of th e GATT 1994 and the latter's applicability to the 
EC banana import regime 
(i) Parties' main arguments 
The European Communities' arguments  
7.267  In this context, the European Communities h as argued that Article XIII of the GATT 1994 is 
not applicable to the measure challenged by Ecuador  because that measure would fall within the scope 
of Article I of the GATT 1994 because of the "differe nt purpose and different field of application [of 
those two provisions of the GATT 1994]."570 
7.268  The European Communities does not  contest that in principle, Article I:1 of the GATT 1994 
might apply to the European Communities' current banana import regime.  Also, the 
European Communities does not call into question that  Article XIII of the GATT 1994 is in principle 
applicable to tariff quotas.  Rather, the European Communities argues that "[t]he crucial issue facing 
the Panel is the way in which paragraphs 1 and 2 of GATT Article XIII apply to tariff quotas, in 
accordance with paragraph 5 "571 (emphasis added): 
"'[O]rdinary meaning' of [Article XIII:5] ... is of limited direct help in the present 
context. The statement in paragraph 5 that the provisions of GATT Article XIII 
('apply to any tariff quota') does not give any guidance as to how they apply, which is 
the issue facing the Panel."572 
7.269  The European Communities does not contest that its current banana import regime includes a 
tariff quota.  Indeed, Article 1.2 of Council Re gulation (EC) No. 1964/2005 of 29 November 2005 
provides that: 
"Each year from 1 January, starting from 1 January 2006, an autonomous tariff quota  
of 775000 tonnes net weight subject to a zero-duty rate shall be opened for imports of 
bananas (CN code 08030019) originating in ACP countries ."573 (emphasis added) 
                                                      
570 European Communities' first written submission, para. 94. 
571 European Communities' second written submission, para. 49. 
572 Ibid., para. 53. 
573 Council Regulation (EC) No 1964/2005 of 29 November 2005 on the tariff rates for bananas, 
OJ L/316 , 2 February 2005, pp. 1-2, Article 1.2.  WT/DS27/RW2/ECU 
Page 170  
 
  Further, as mentioned earlier, the  European Communities has argued that its current banana import 
regime implements the second sugges tion of the first compliance panel
574, namely that 
"the European Communities could choose to implem ent a tariff-only system for bananas, with a tariff 
quota for ACP bananas  covered by a suitable waiver."575 (emphasis added)  
7.270  While noting that "in creating a zero-rate tariff quota for those bananas the 
European Communities conferred to the ACP countries a benefit, since those imports would otherwise 
have been subject to duty"576, the European Communities argues that: 
"Ecuador's (and the other MFN countries') exports are not subject to any tariff-quota, 
quota or other quantitative restriction of an y type or form.  Ecuador's exports are 
subject to a simple and ordinary tariff.  And it is clear that GATT Article XIII does 
not apply to tariffs.  Textually, this is made  clear from the title of GATT Article XIII.  
Contextually, it is made clear by the fact th at if GATT Article XIII was to also cover 
ordinary tariffs, then there would be no more meaning or reason of existence for 
GATT Article I, paragraph 1."577 
7.271  In particular, the European Communities argues that "GATT Article XIII is concerned with 
quantitative measures and, with the sole exception of  the reference in paragraph 5 to tariff quotas, has 
nothing to say about tariffs"578: 
"[T]he texts of the provisions of Article I,  paragraph 1 and Article XIII, paragraph 1 
of the GATT have a very important differen ce.  GATT Article I, paragraph 1 obliges 
each Member to extend to all Members the ex act same advantage that it grants to one 
single Member.  In contrast, GATT Article XIII, paragraph 1 obliges each Member 
not to impose a restriction on a single Member, unless it imposes the same restriction 
on all other Members.  In other words, GATT Article I obliges Member A to treat Member B at least as 'well' as it treats any other Member.  In contrast, GATT Article XIII obliges Member A not to treat Member B 'worse' than the way it 
treats all other Members. 
This important textual diffe rence is underlined by the titles of the two Articles.  
The title of GATT Article I is 'General  Most Favoured Nation Treatment'.  
In contrast, the title of GATT Article XIII is 'Non-discriminatory Administration of Quantitative Restrictions'.  These different  titles confirm that the intention of the 
drafters of the GATT was to make clear that each Article has the different purpose and different field of application identif ied in the preceding paragraph of this 
submission."
579 
7.272  Further, while the European Communities con cedes that both Articles I and XIII of the 
GATT 1994 deal with non-discrimination, th e European Communities argues that "GATT 
Article XIII ... is intended to deal with discrimina tion in quantitative limitati ons and is not aimed at 
tariff discrimination."580  In particular, according to the European Communities: 
"The text of GATT Article XIII repeatedly refers to quantitative issues.  The heading 
speaks of 'Non-discriminatory administration of Quantitative Restrictions'.  
                                                      
574 See European Communities' first written submission, para. 80. 
575 Panel Report on EC – Bananas III (Article 21.5 – Ecuador) , para. 6.157. 
576 European Communities' second written submission, para. 51. 
577 European Communities' first written submission, para. 104. 
578 European Communities' second written submission, para. 50. 
579 European Communities' first written submission, paras. 93-94. 
580 European Communities' second written submission, para. 62.  WT/DS27/RW2/ECU 
 Page 171 
 
 
  Paragraph 1 refers exclusively to 'prohi bitions and restrictions'.  Paragraph 2 
addresses how 'import restrictions' are to be  distributed, and talks about the 'shares' 
which Members might obtain.  It provides for the allocation of quotas, and for the use of licences.  Paragraph 3 has more to say about licences and quota allocation.  
Quota allocation is also the subject of paragraph 4."
581 
7.273  The European Communities adds that: 
"Bearing in mind this total concentration on quantitative issues it hardly seems likely 
that a single phrase in paragraph 5 was intende d to transform the Article into one that 
could also be targeted at tariff discrimination.   Nor is there anything in the wording of 
this paragraph that would encourage such a c onclusion.  It says that the 'provisions of 
this Article shall apply to any tariff quota instituted or maintained' by a Member.  
This text suggests that it is the tariff quot a itself, and not its relationship with other 
import arrangements, at which the applica tion of GATT Article XIII is directed."582 
7.274  The European Communities also argues that: 
"The 'tariff only' nature of the [European  Communities'] new [banana] import regime 
cannot be disputed.  The fact that there is a limit on the quantity of ACP bananas that 
can be imported free of duty does not change this fact.  The GATT itself recognises that tariff quotas are tariff measures and not ordinary quotas.  This is seen from the fact that GATT Article XIII, paragraph 5 expressly provides that the rules of GATT Article XIII 'shall also apply' to tari ff quotas.  If tariff quotas were quantitative 
restrictions, then there would be no need fo r GATT Article XIII, paragraph 5 at all.  
Moreover, the fact that tariff quotas are tariff measures and not quotas has also been 
expressly recognised in the context of the bananas dispute:  the Arbitrator confirmed that 'tariff quota commitments constitute, in the WTO context, a variant of a tariff concession rather than a non-tariff measure per se.'
583  This point is also confirmed in 
the report of this Panel, where it is stated  that the European Communities could adopt 
a 'tariff only system with a tariff quota for ACP bananas'.584"585 
7.275  Further, the European Communities contends that "the existence and operation of the 
Cotonou Preference in the form of a limit on the qua ntities of ACP bananas that can be imported into 
the European Communities free of duty does not cause any nullification or impairment of any benefit 
accruing to Ecuador, in the meaning of GATT Article XXIII and Article 3.8 of the DSU"586: 
"[W]hen the European Communities introduced its new, tariff only system on 
January 1, 2006, it imposed a limit on the quantities of ACP bananas that could take 
advantage of the Cotonou Preference.  This was precisely aimed at protecting Ecuador's and the other MFN countries' inte rests and ensuring that  the total market 
access that MFN suppliers enjoyed up to  January 1, 2006 would be maintained, 
as required by the Doha waiver.  Therefore, the quantitative limit imposed on the 
                                                     
 
581 European Communities' second written submission, para. 62. 
582 Ibid., para. 63. 
583 (footnote original ) See the First Arbitration Award, at para graph 60.  The Arbitrator found that the 
economic effect of the particular tariff quotas applied at that time by the European Communities was comparable to a quota regime (non-tar iff measure), because virt ually all imports were being effected through 
these quotas. 
584 (footnote original ) See the report of the Panel, at paragraph 6.157. 
585 European Communities' first written submission, para. 24. 
586 Ibid., para. 89. WT/DS27/RW2/ECU 
Page 172  
 
  Cotonou Preference protects the interests of MFN suppliers' including Ecuador and 
does not harm them."
587 
7.276  The European Communities also argues that: 
"[T]his analysis of GATT Article XIII does not take away the utility of the reference 
to tariff quotas in paragraph 5.  Its provi sions can be applied straightforwardly to 
those aspects of tariff quotas that involve qua ntitative restrictions.  If tariff quotas are 
assigned to a number of countries (such as under the arrangements that were examined in EC – Bananas III ), paragraph 1 will require that the restriction placed on 
the tariff quota given to Member A is similar to that applied to the tariff quotas given to other Members."
588 
7.277  In response to Ecuador's references to earlier findings in the EC – Bananas III  dispute, the 
European Communities argues that those are not relevant in these proceedings: 
"Ecuador's references to the Bananas III  jurisprudence, in paragraph 42 of its second 
written submission, are simply wrong.  As already mentioned, the Appellate Body analysed an import regime that was the e quivalent of a 'quota regime', because all 
imports were made pursuant to tariff  quotas.  Moreover, each tariff quota was 
administered in a different way.  The Appellate Body concluded that a 'quota regime' with these characteristics was not compatible  with GATT Article XIII.  However, the 
system analysed by the Appellate Body in Bananas III  in 1997 has nothing to do with 
the current import regime of the European  Communities.  Therefore, the Appellate 
Body's assessment of the 1997 regime does not have any relevance for this Panel's 
assessment of the European Communities' current import regime."
589 
7.278  The European Communities contends also that: 
"The import regime analysed by the Article 21.5 Panel was a 'quota regime' (just like 
the one analysed by the Appellate Body in 1997), which has nothing to do with the current import regime of the European Co mmunities.  Moreover, the measure found 
by the Article 21.5 Panel to violate GATT Article XIII has nothing to do with the 
current import regime of the European Communities, which is tariff only and where imports from MFN countries are not subject  to any quantitative restrictions.  
Therefore, paragraph 6.29 of the Article 21.5 Panel report has no relevance for the 
current Panel procedures."
590 
7.279  The European Communities adds that in 2005,  "the [second] Arbitrator had noted the 
disagreement between the Europ ean Communities and Ecuador and had not concluded whether the 
Cotonou Preference would need a waiver from GATT Article XIII.591"592 
7.280  The European Communities argues also  that the earlier findings in the EC –- Bananas III  
dispute would support the European Communities' ar guments in regard to Article XIII of the 
GATT 1994 in these proceedings: 
                                                      
587 European Communities' first written submission, para. 88. 
588 European Communities' second written submission, para. 65 
589 Ibid., para. 33. 
590 Ibid., para. 34. 
591 (footnote original ) See the Second Arbitration Award, at paragraphs 34 and 36. 
592 European Communities' first written submission, para. 82.  See also European Communities' second 
written submission, para. 32.  WT/DS27/RW2/ECU 
 Page 173 
 
 
  "[I]n EC-Bananas III  ..., the Appellate Body found that the European Communities 
was indeed involved in a 'discriminatory administration of quantitative restrictions' in violation of GATT Article XIII, paragraph 1, because (i) all imports of bananas were effected through the allocation of tariff quotas,
593 (ii) each group of suppliers 
was allocated a tariff quota with different terms, (iii) some groups of countries were 
allocated country specific tariff quotas,  while some MFN countries were only 
allocated the general 'Other' tariff quota.  With these facts in mind, the 
Appellate Body found that the restriction imposed on those countries through the allocation of the 'Other' quota was not 'sim ilar' to the restriction imposed on the 
products of the countries to which c ountry-specific quotas were allocated.
594  
This finding of the Appellate Body show s that GATT Article XIII, paragraph 1 
covers only situations where a Member app lies tariff quotas with different terms to 
different groups of countries in a market  where all import are made under tariff 
quotas.  Consequently, GATT Article XIII, pa ragraph 1 does not apply to a tariff only 
import regime where there are no different tariff quotas allocated to different groups 
of countries, such as the current import regime of the European Communities."595 
Ecuador's arguments  
7.281  As regards the EC arguments on the interrela tion of Articles I and XIII of the GATT 1994 and 
the latter's applicability to the EC banana import regime, Ecuador argues that: 
"The EC ... ignores the findings of Bananas III  with regard to Article XIII.  
The Appellate Body explicitly rejected th e EC argument, initially upheld by the 
Panel, that the waiver of Article I imp licitly waived Article XIII to the extent 
necessary to apply quantitative limits on imports from ACP countries at the preferential duty rate.
596  The Appellate Body sustained the Panel finding that 
'Articles I:1 and XIII apply to the relevant EC regulations, irrespective if there is one 
or more "separate regimes" for the importation of bananas.'597  W h e n  t h e  E C  
attempted to preserve a tariff quota reserved  exclusively for bananas of ACP origin, 
the first Article 21.5 Panel in Bananas III again found that the EC measure was inconsistent with the EC's obligations under Article XIII.
598"599 
7.282  Ecuador adds that "[t]hough the EC system has eliminated the country allocations that 
previously existed as between non-ACP countries, the discrimination remains as between ACP and 
non-ACP bananas."600  Ecuador argues that "[t]he Appe llate Body in Bananas III vigorously 
condemned this discrimination"601, and quotes the following paragraphs: 
                                                      
593 (footnote original ) As already mentioned, only 0.3% of to tal imports were effected out-of-tariff-
quota. 
594 (footnote original ) See the Appellate Body report in EC – Regime for the importation, sale and 
distribution of bananas , at paragraph 161. 
595 European Communities' first written submission, para. 105. 
596 (footnote original ) Appellate Body Report, European Communities – Regime for the Importation, 
Sale and Distribution of Bananas , WT/DS27/AB/R 9 Sept. 1997, at paras. 183-188. 
597 (footnote original ) Id., at para. 191. 
598 (footnote original ) Panel Report, European Communities – Regime for the Importation, Sale and 
Distribution of Bananas – Recourse to Article 21.5 by Ecuador , WT/DS27/RW/ECU, 12 Apr. 1999, at 
para. 6.29. 
599 Ecuador's second written submission, para. 42. 
600 Ecuador's first written submission, para. 31. 
601 Ibid., para. 31. WT/DS27/RW2/ECU 
Page 174  
 
  "The issue here is not whether the Europ ean Communities is correct in stating that 
two separate import regimes exist for bananas, but whether the existence of two, or more, separate EC import re gimes is of any relevance for the application of the 
non-discrimination provisions of th e GATT 1994 and the other Annex 1A 
agreements. The essence of the non-discrimina tion obligations is that like products 
should be treated equally, irrespective of thei r origin.  As no participant disputes that 
all bananas are like products, the non- discrimination provisions apply to all imports 
of bananas, irrespective of whether and how a Member categorizes or subdivides these imports for administrative or other reasons.  If, by choosing a different legal basis for imposing import restrictions, or by applying different tariff rates, a Member 
could avoid the application of the non-discrim ination provisions to the imports of like 
products from different Members, the object and purpose of the non-discrimination provisions would be defeated. It would be very easy for a Member to circumvent the non-discrimination provisions of th e GATT 1994 and the other Annex 1A 
agreements, if these provisions apply only within  regulatory regimes established by 
that Member. 
Non-discrimination obligations apply to a ll imports of like products, except when 
these obligations are specifically waived or are otherwise not applicable as a result of 
the operation of specific provisions of the GATT 1994, such as Article XXIV.
602  
In the present case, the non-discrimination obligations of the GATT 1994, specifically Articles I:1 and XIII
603, apply fully to all imported bananas irrespective of 
their origin, except to the extent th at these obligations are waived by the 
Lomé Waiver.  We, therefore, uphold the findings of the Panel604 that the non-
discrimination provisions of the GATT 1994, specifically, Articles I:1 and XIII, apply 
to the relevant EC regulations, irrespective if there is one or more 'separate regimes' for the importation of bananas."
605 
7.283  As to the European Communities' argum ents on nullification and impairment, 
Ecuador contends that: 
"The violation of Article XIII is the denial  of Ecuador's right to participate in the 
zero-duty quota.  It is obvious that, if allo wed to participate in that quota, Ecuador 
could reasonably expect to benefit substa ntially, based on its efficiency and large 
share of world trade in bananas.  The issu e is not whether the quota results in less 
harm than an unrestricted preference for ACP countries, but rather the harm that 
Ecuador suffers by reason of being excluded from the favorable quota."606 
7.284  Ecuador adds that: 
"If [it] established a quota, for example in  a safeguard action, and provided that only 
products originating in the southern hemi sphere would be admitted under the quota, 
the countries of Europe would swiftly compla in that they were denied access contrary 
to Article XIII.  The fact that such c ountries were excluded from the quota would not 
mean that those countries are not restricted, but rather that those countries were even 
                                                      
602 (footnote original ) Panel on Newsprint , adopted 20 November 1984, BISD 31S/114. 
603 (footnote original ) We do not agree with the Panel's findings that Article X:3(a) of the GATT 1994 
and Article 1.3 of the Licensing Agreement  preclude the imposition of different import licensing systems on like 
products when imported from different Members.  S ee our Findings and Conclusions, paras. (l) and (m). 
604 (footnote original ) Panel Reports, paras. 7.82 and 7.167. 
605 Appellate Body Report on EC – Bananas III , paras. 190-191. 
606 Ecuador's second written submission, para. 45.  WT/DS27/RW2/ECU 
 Page 175 
 
 
  more restricted contrary to Article XIII than if they had been allotted some small 
share of the quota, but rather would mean that they were completely restricted. 
The same is true of a tariff quota.  Ecuador and other MFN suppliers are completely 
restricted by the EC's tariff quota, in th e sense that the MFN suppliers have no access 
to the duty-free quota.  A zero share of the preferential quota is a worse violation of 
Article XIII than a disproportionately small share."607 
(ii) Panel's analysis 
Relevance of Article XIII of the GATT 1994 to tariff quotas in agriculture  
7.285  At the outset, the Panel notes that Article X III was originally drafted in the GATT 1947 to 
address the administration of quantitative restrictio ns, in particular country quotas and any other 
quotas.  As a result of the Uruguay Round of Multila teral Trade Negotiations, quantitative restrictions 
in agriculture were to be abolis hed and tariffied.  As the panel on Turkey – Textiles stated in the 
context of Articles XI and XIII of the GATT 1994: 
"The prohibition on the use of quantitative restrictions forms one of the cornerstones 
of the GATT system.  A basic principle of the GATT system is that tariffs are the 
preferred and acceptable form of protection.  Tariffs, to be reduced through reciprocal 
concessions, ought to be applied in a non-di scriminatory manner independent of the 
origin of the goods (the 'most-favoured-na tion' (MFN) clause).  ...  The prohibition 
against quantitative restrictions is a re flection that tariffs are GATT's border 
protection 'of choice'.  Quantitative restrictions impose absolute limits on imports, while tariffs do not.  In contrast to MF N tariffs which permit the most efficient 
competitor to supply imports, quantitative rest rictions usually have a trade distorting 
effect, their allocation can be problema tic and their administration may not be 
transparent. 
Notwithstanding this broad prohibition against quantitative restrictions, GATT 
contracting parties over many years failed to respect completely this obligation.  
From early in the GATT, in sectors such as agriculture, quantitative restrictions were 
maintained and even increased to the extent that the need to rest rict their use became 
central to the Uruguay Round negotiations.  …  Certain contracting parties were even of the view that quantitative restrictions had gradually been tolerated and accepted as negotiable and that Article XI could not be  and had never been considered to be, a 
provision prohibiting such restrictions irrespec tive of the circumstances specific to each 
case.  This argument was, however, rejected in an adopted panel report EEC – 
Imports from Hong Kong .
608 
Participants in the Uruguay Round recognized  the overall detrimental effects of non-
tariff border restrictions (whether applied to  imports or exports) and the need to 
favour more transparent price-based, i.e. ta riff-based, measures;  to this end they 
devised mechanisms to phase-out quantitati ve restrictions in ... agriculture ... .  
                                                      
607 Ecuador's second written submission, paras. 47-48. 
608 (footnote original ) Panel Report on EEC – Quantitative Restrictions Against Imports of Certain 
Products from Hong Kong,  adopted on 12 July 1983, BISD 30S/129, (" EEC – Imports from Hong Kong "). WT/DS27/RW2/ECU 
Page 176  
 
  This recognition is reflected in ... th e Agreement on Agriculture where quantitative 
restrictions were eliminated
609 ..."610  (emphasis added) 
7.286  Notwithstanding tariffication, the text of Article  XIII of the GATT 1947, including its title, 
"Non-discriminatory Administration of Quantitative R estrictions", has not been modified in the 
Uruguay Round.  The Panel reads that title as bei ng relevant to maintaining a close link with 
Article XI of the GATT 1994, entitled "General Elimin ation of Quantitative Restrictions".  The panel 
on Turkey – Textiles  stated that: 
"The wording of Articles XI and XIII is clear.  Article XI provides that as a general 
rule (we note the wording of the title of Article XI:  " General Elimination  of 
Quantitative Restrictions"), WTO Members shall not use quantitative restrictions 
against imports or exports. 
... Article XIII provides that if and when quantitative restrictions are allowed by the 
GATT/WTO, they must, in addition, be imposed on a non-discriminatory basis."
611 
7.287  Following tariffication, Article XIII of the GA TT 1994 remains relevant for the agricultural 
sector.  As the Appellate Body stated earlier in this dispute, "[i]f the negotiators had intended to permit 
Members to act inconsisten tly with Article XIII of the GATT 1994 [by virtue of the provisions of the 
Agreement on Agriculture], they would have said so explicitly."612  In particular, Article XIII of the 
GATT 1994 is relevant to one of the few remain ing permissible practices of with a quantitative 
dimension in agriculture:  tariff quotas.  In this context, this Panel notes that the original panel 
requested by Ecuador in this dispute found, similarly to the panel on Turkey – Textiles , that: 
"The wording of Article XIII is clear.  If quantitative restrictions are used (as an 
exception to the general ban on their use in Artic le XI), they are to be used in the least 
trade-distorting manner possible."613 
7.288  The original panel requested by Ec uador in this dispute added that: 
"In this case, we are concerned with tariff quotas, which are permitted under GATT 
rules, and not quantitative restrictions per se.  However, Article XIII:5 makes it clear, 
and the parties agree, that Article XIII app lies to the administration of tariff quotas.  
...  In interpreting the terms of Article XIII,  it is important to keep their context in 
mind.  Article XIII is basically a provision relating to the administration of restrictions authorized as exceptions to one of the most basic GATT provisions – the general ban on quotas and other non-tari ff restrictions contained in Article XI."
614 
                                                      
609 (footnote original ) Under the Agreement on Agriculture, notw ithstanding the fact that contracting 
parties, for over 48 years, had been relying a great deal on import restrictions and other non-tariff measures, the use of quantitative restrictions and ot her non-tariff measures was prohibited  and Members had to proceed to a 
"tariffication" exercise to transform quantitati ve restrictions into tariff based measures. 
610 Panel Report on Turkey – Textiles , paras. 9.63-9.65. 
611 Ibid., paras. 9.61-9.62. 
612 Appellate Body Report on EC – Bananas III , para. 157.  See also Panel Report on US – Line Pipe, 
para. 7.40. 
613 Panel Report on EC – Bananas III (Ecuador) , para. 7.68. 
614 Ibid., para. 7.68.  WT/DS27/RW2/ECU 
 Page 177 
 
 
  Analysis of Article XIII:5 of the GATT 1994  
7.289  The analysis of the Europ ean Communities' arguments concerning the interrelation of 
Articles I and XIII of the GATT 1994, and the appli cability of the latter to the EC banana import 
regime necessarily involves Article XIII:5 of th e GATT 1994, which provides that "[t]he provisions 
of this Article shall apply to any tariff quota institu ted or maintained by any contracting party [WTO 
Member], and, in so far as app licable, the principles of this Ar ticle shall also extend to export 
restrictions."  As mentioned earlier, the European Communities does not contest that, in principle, by 
virtue of Article XIII:5, Article XIII is applicable to tariff quotas.615 
7.290  First, the Panel looks at the language of Artic le XIII:5 of the GATT 1994.  The words "any" 
(both before the terms "tariff quota" and "contracti ng party") and "shall" in Article XIII:5 underscore 
the absolute and categorical nature of the application of "the provisions of ... Article [XIII]" to tariff 
quotas.  The Panel notes also that Article XIII:5 uses the term " any tariff quota  instituted or 
maintained by any [Member]" in the singular.  The Pa nel reads this to mean that Article XIII of the 
GATT 1994 is also applicable to one single tariff quota, and that this is so irr espective of whether that 
single tariff quota is part of an import regime with mo re tariff quotas or is part of an import regime 
that comprises only one tariff quota. 
7.291  In an import regime containing a tariff quota w ith a preferential in-quota duty (whether or not 
a zero duty) for some Members, and a higher out-of-quota MFN duty, the in- and out-of-quota duties are two facets of the same preferential tariff quot a.  As the first compliance panel requested by 
Ecuador in this dispute stated, "a tariff quota is a quantitative limit on the availability of a specific 
tariff rate".
616  Citing that statement, the panel on US – Line Pipe established that "[it] see[s] no reason 
to disagree with the United States that a tariff quota i nvolves the '[a]pplication of a higher tariff rate to 
imported goods after a specified quantity of the ite m has entered the country at a lower prevailing 
rate'."617 (footnote omitted) 
7.292  Neither of the parties contest that the Eur opean Communities has, under its current banana 
import regime introduced on 1 January 2006, a prefer ential zero-duty tariff quota of 775,000 mt per 
annum reserved for ACP countries, combined with an MFN applied duty of 176 €/mt.  The tariff 
quota represents a quantitative limit on the pref erence to ACP countries because any ACP banana 
imports to the European Communities exceeding that  quantitative limit are subject to the out-of-quota 
MFN duty. 
7.293  Thus, the European Communities' current banana  import regime is a tariff-quota-based import 
regime, and the in- and out-of-quota duties are inherent  parts of that regime.  Accordingly, and in the 
light of Article XIII:5 of the GATT 1994, in princi ple, Article XIII of the GATT 1994 applies to all 
aspects of a preferential tariff quota, including the out-of-quota duty. 
Interrelation of Articles I and XIII of the GATT 1994  
7.294  The European Communities argues that the a pplicability of Article I of the GATT 1994 to 
tariff discrimination prevents the applicabilit y of Article XIII of the GATT 1994 to the 
European Communities' curre nt banana import regime.618 
                                                      
615 See European Communities' second written submission, para. 49. 
616 Panel Report on EC – Bananas III  (Article 21.5 – Ecuador) , para. 6.20;  and Decision by the 
Arbitrators on EC - Bananas III (US) (Article 22.6 – EC) , para. 5.9. 
617 Panel Report on US – Line Pipe , para. 7.18. 
618 See European Communities' second written submission, para. 62. WT/DS27/RW2/ECU 
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  7.295  Article I of the GATT 1994 is entitled "Gen eral Most-Favoured-Nation Treatment".  
Paragraph 1 of Article I stipulates that: 
"With respect to customs duties and charges of any kind imposed on or in connection 
with importation or exportation or imposed on the international transfer of payments 
for imports or exports, and with respect to the method of levying such duties and 
charges, and with respect to all rules a nd formalities in connection with importation 
and exportation, and with respect to all matte rs referred to in pa ragraphs 2 and 4 of 
Article III, any advantage, favour, privilege or immunity granted by any contracting 
party [WTO Member] to any product origina ting in or destined for any other country 
shall be accorded immediately and unconditi onally to the like product originating in 
or destined for the territories of all other contracting parties [WTO Members]." 
7.296  The Panel notes that Members' measures must comply with all relevant provisions of the 
covered agreements.  In regard to the applicabilit y of Article XIII of the GATT 1994 in the specific 
context of agriculture, as mentioned above, the A ppellate Body found earlier in this dispute that 
"[i]f the negotiators had intended to permit Member s to act inconsistently with Article XIII of the 
GATT 1994 [by virtue of the provisions of the Agre ement on Agriculture], they would have said so 
explicitly."
619 
7.297  Also, as the European Communities argues, Article I of the GATT 1994 covers tariff 
discrimination.620  As a result, Article I does not a ddress the quantitative element of the 
European Communities' current ba nana import regime, which is c overed by Article XIII of the 
GATT 1994.  As elaborated further below621, the European Communities' current banana import 
regime contains an important quantitative element, a nd even if that element is applicable directly to 
the ACP countries, it results in a restriction for Ec uador within the meaning of Article XIII:1 of the 
GATT 1994. 
7.298  As regards a partial overlap between tw o provisions in the covered agreements, 
Article XIII:2(d) of the GATT 1994 and Article 5. 2 of the Safeguards Agreement, the panel on 
US - Line Pipe  stated that: 
"As noted by the panel in Turkey – Textiles , 'the principle of effective interpretation 
or 'l'effet utile' or in Latin ut res magis valeat quam pereat  reflects the general rule of 
interpretation which requires that a treaty be interpreted to give meaning and effect to 
all the terms of the treaty.  For instance one provision should not be given an interpretation that will result in nullifying th e effect of another provision of the same 
treaty.'
622  An interpretation of Article XIII that  applies that provision in the context 
of safeguard measures does not, in our vi ew, nullify any of the provisions of the 
Safeguards Agreement.  All of the provis ions of the Safeguards Agreement remain 
fully applicable.  Although there may be some duplication between Article XIII:2(d) 
and Article 5.2 of the Safeguards Agreem ent, duplication is not the same as 
nullification."623 
                                                      
619 Appellate Body Report on EC – Bananas III ,  para. 157.  See also Panel Report on US – Line Pipe , 
para. 7.40. 
620 See European Communities' second written submission, para. 64. 
621 See paras. 7.333 to 7.337 below. 
622 (footnote original ) Turkey – Textiles  at footnote 327. 
623 Panel Report on US – Line Pipe , para. 7.45.  WT/DS27/RW2/ECU 
 Page 179 
 
 
  7.299  Applying the same approach to the interrela tion of Articles I and XIII of the GATT 1994, 
this Panel notes that, even if there was some ove rlap between those two Articles, giving effect to 
Article XIII would not nullify the effect of Article I. 
7.300  The Panel also notes that in EC – Bananas III  the European Communities argued, in regard 
to the Lomé Waiver, that: 
"[W]here aspects of a measure have been  found to be covered by the waiver for 
purposes of Article I, they should not be found to violate another GATT provision imposing MFN-like obligations similar to those that have been waived..."
624 
7.301  The original panel requested by Ecuador in EC – Bananas III  found, – a finding later reversed 
by the Appellate Body625 – that the Lomé Waiver from Article I:1 of the GATT 1994 would extend to 
Article XIII:1 of the GATT 1994.626  In this context, that panel also  looked into the "close relationship 
between Articles I and XIII:1".627 
7.302  The Appellate Body explicitly rejected the orig inal panel's conclusion that the Lomé Waiver 
from Article I:1 would automatically ex tend to Article XIII:1 of the GATT 1994.628  In that context, 
the Appellate Body noted that "[t]he Panel based its conclusion on the need to give 'real effect'629 to the 
Lomé Waiver and on th e 'close relationship'630 between Articles I:1 and XIII:1"631;  however, the 
Appellate Body stated that, "a lthough Articles I and XIII of the GA TT 1994 are both non-discrimination 
provisions, their relationship is not such that a waiver from the obligations under Article I implies a 
waiver from the obligations under Article XIII. "632 (emphasis added) 
7.303  The Appellate Body did not ela borate further on the relationship between Articles I and XIII of 
the GATT 1994.  Nevertheless, the rejection by the Appellate Body of the panel's finding on the scope 
of the Lomé Waiver indicates that Articles I a nd XIII of the GATT 1994 do not have the same scope, 
and that an inconsistency with Arti cle XIII is possible irrespective of an inconsistency with Article I. 
7.304  Finally, the Panel notes that on two earlier occasions in the EC – Bananas III dispute the 
European Communities made an objection to the ap plicability of Article XIII of the GATT 1994 to 
the then 857,700 mt duty-free tariff quota for ACP bananas633 similar to the objection the 
European Communities has made in  these proceedings regarding the 775,000 mt duty-free tariff quota 
for ACP bananas.  Both the first compliance panel requested by Ecuador and the arbitrator in the 
                                                      
624 Panel Report on EC – Bananas III (Ecuador) , para. 7.104. 
625 See Appellate Body Report on EC – Bananas III , para. 188. 
626 See Panel Report on EC – Bananas III (Ecuador) , para. 7.110. 
627 The original panel on EC- Bananas III  stated that "both [Articles I and  XIII:1] prohibit 
discriminatory treatment.  Article I requires MFN treatme nt in respect of 'rules and formalities in connection 
with importation', a phrase that has been interpreted broadly in past GATT practice, such that it can appropriately be held to cover rules related to tariff qu ota allocations.  Such rules are clearly rules applied in 
connection with importation.  Indeed, they are critical to the determination of the amount of duty to be imposed.  
To describe the relationship somewhat differently, Article I establishes a general principle requiring non-discriminatory treatment in respect of, inter alia, rules and formalities in connection with importation.  
Article XIII:1 is an application of that principle in a specific situation, i.e., the administration of quantitative 
restrictions and tariff quotas.  In that sense, the scope  of Article XIII:1 is identical  with that of Article I." 
(footnote omitted)  Panel Report on EC – Bananas III (Ecuador) , para. 7.107. 
628 See Appellate Body Report on EC – Bananas III , para. 188. 
629 (footnote original ) Panel Reports, para. 7.106. 
630 (footnote original ) Ibid., para. 7.107. 
631 Appellate Body Report on EC – Bananas III , para. 182. 
632 Ibid., para. 183. 
633 Panel Report on EC – Bananas III  (Article 21.5 – Ecuador) , paras. 4.26-4.27, 6.19-6.20;  and 
Decision by the Arbitrators on EC – Bananas III (US) (Article 22.6 – EC) , paras. 5.8-5.9. WT/DS27/RW2/ECU 
Page 180  
 
  proceedings requested by the European Communiti es pursuant to Article 22.6 of the DSU rejected 
that objection: 
"Article XIII:5 provides that the provisions of Article XIII apply to 'tariff quotas'.  
The European Communities es sentially argues that the amount of 857,700 tonnes for 
traditional imports from ACP States constitutes an upper limit on a tariff preference 
and is not a tariff quota subject to Article X III.  However, by definition, a tariff quota 
is a quantitative limit on the availability of  a specific tariff rate.  Thus, Article XIII 
applies to the 857,700 tonne limit."
634 
In the context of the European Communities' objection to the applicability of Article XIII in regard to 
the European Communities' preferential duty-free tariff quota for ACP countries, the main difference 
between the European Communities' former and curr ent preferential tariff quota for ACP countries is 
the level of the quantitative limit:  it is curren tly 775,000 mt instead of 857,000 mt.  From the 
viewpoint of the applicability of Article XIII, that  quantitative difference is irrelevant as it does not 
eliminate the quantitative element of the Europ ean Communities' measure.  As stated by the 
compliance panel requested by Ecuador and the ar bitrator in the proceedings requested by the 
European Communities pursuant to Article 22.6 of th e DSU, it is the very quantitative limit that 
establishes the applicability of Article XIII of  the GATT 1994 to the European Communities' 
preferential tariff quota for ACP countries, not the sp ecific level of the quantitative limit, nor whether 
MFN countries are also subject to a tariff quota or only an MFN tariff.635  The Panel therefore rejects 
the argument made by the European Communities that  "the fact that the ACP countries enjoy a trade 
preference and the fact that there is a 'cap' impo sed on the quantities of ACP bananas that can benefit 
from this preference may be relevant for purposes of GATT Article I, but are completely irrelevant for 
the application of GATT Article XIII."636 
7.305  In the light of the foregoing, the Panel is justified in addressing the consistency of the 
European Communities' current banana import re gime with Article XIII of the GATT 1994.  
Accordingly, the Panel will now turn to the substa ntive claims of Ecuador under Article XIII:1 and 2 
of the GATT 1994. 
(b) Ecuador's claim under Article XIII:1 of the GATT 1994 
(i) Parties' main arguments 
Ecuador's arguments  
7.306  Ecuador argues that: 
"The EC measures are inconsistent with Ar ticle XIII:1 in that  Ecuadorian (and other 
non-ACP) bananas cannot be c onsidered 'similarly restricted' in comparison to ACP 
bananas, when Ecuadorian (and other non- ACP) bananas are si mply excluded from 
access to the duty free tariff quota.637"638 
                                                      
634 Panel Report on EC – Bananas III   (Article 21.5 – Ecuador) , para. 6.20;  and Decision by the 
Arbitrators on EC – Bananas III (US) (Article 22.6 – EC) , para. 5.9. 
635 See Panel Report on EC – Bananas III   (Article 21.5 – Ecuador) , para. 6.20;  and Decision by the 
Arbitrators on EC – Bananas III (US) (Article 22.6 – EC) , para. 5.9. 
636 European Communities' first written submission, para. 102. 
637 (footnote original ) Panel Report at para. 7.69;  Appellate Body Report at para. 160. 
638 Ecuador's first written submission, para. 29.  WT/DS27/RW2/ECU 
 Page 181 
 
 
  7.307  According to Ecuador, 
"[S]uch a tariff quota is a patent violation of Article XIII:1 of the GATT 1994, in that 
Ecuador (and other MFN suppliers) are rest ricted from any duty free access to the EC 
market, while ACP bananas are not similarly restricted."639 
7.308  Ecuador also argues that, as a result of the ACP tariff quota, it suffers a restriction in the sense 
of Article XIII:1 of the GATT 1994, namely "[t]he products that are not quantitatively restricted are 
those that are within the quota, while the restri cted products are those that are denied access."640  
Ecuador adds that "the EC is wrong to argue that Ecuador's bananas are subject only to tariff 
restrictions641, when in fact Ecuador's bananas are subject to a zero duty quota on entry of bananas."642 
The European Communities' arguments  
7.309  In the view of the European Co mmunities, there is no inconsiste ncy with Article XIII:1 of the 
GATT 1994.  According to the European Communities: 
"[T]he text of GATT Article XIII, paragraph 1 makes clear that a Member can 
successfully claim that another Member's measures violate the provisions of GATT Article XIII, only if its [sic!] can show that: 
(i) the allegedly offending Member imposes a prohibition or restriction on 
products originating from the complaining Member and, in principle, there is a nullification and impairment of a benefit accruing to the complaining Member; 
(ii) the allegedly offending Member does not impose a similar 
prohibition or restriction on the like products originating from all 
other countries."
643 
7.310  Applying the first part of that test to  its current banana  import regime, the 
European Communities contends that: 
"Given that Ecuador's imports are not subject to any quantitative restriction, the first 
condition for the application of GATT Article  XIII, paragraph 1, identified in the 
preceding paragraphs, is not satisfied."644 
7.311  The European Communities reach es a similar conclusion on the second part of the above test: 
"At the same time, the second condition fo r the application of GATT Article XIII, 
paragraph 1, identified above, cannot be sa tisfied:  since imports from Ecuador are 
not subject to any quantitative restriction,  there is no basis that would allow an 
examination of whether 'similar quantitative restrictions' are also imposed on all other 
Members."645 
7.312  In particular, in the European Communitie s' view, there is no inconsistency with 
Article XIII:1 because: 
                                                      
639 Ecuador's second written submission, para. 37. 
640 Ibid., para. 46. 
641 (footnote original ) First Written Submission of the EC, at para. 104. 
642 Ecuador's second written submission, para. 49. 
643 European Communities' first written submission, para. 96. 
644 Ibid., para. 98. 
645 Ibid., para. 99. WT/DS27/RW2/ECU 
Page 182  
 
  "[T]he Members on whose imports the quantitative restriction is imposed are the ACP 
countries.  The MFN countries, including Ecuador, are the 'all third countries', whose position should be taken as a basis in or der to determine whether the ACP countries 
are treated 'worse' than them.  However,  the MFN countries are not subject to any 
tariff quota, or other quantitative restriction.   As a consequence, there is nothing on 
which the comparison can be based."
646 
7.313  According to the European Communities: 
"[E]ven assuming arguendo  that there is a quantitative restriction imposed on the 
ACP countries, Ecuador cannot successfully  challenge it, because this quantitative 
restriction imposed on the ACP countries does not result in any nullification or 
impairment of any benefit accruing to Ecuador.  Quite to the contrary, this 'cap' to the 
preference afforded to the ACP countries pr otects the interests of Ecuador and the 
other MFN countries, because it limits the quantities of ACP bananas that can be 
imported into the European Communities at zero duty."647 
7.314  Further, referring to the report of the Appellate Body in EC – Bananas III , the 
European Communities argues that: 
"GATT Article XIII, paragraph 1 covers only situations where a Member applies 
tariff quotas with different terms to differen t groups of countries in a market where all 
import are made under tariff quotas.  Conse quently, GATT Article XIII, paragraph 1 
does not apply to a tariff only import regime where there are no different tariff quotas allocated to different groups of countries,  such as the current import regime of the 
European Communities."
648 
7.315  The European Communities adds that: 
"GATT Article XIII, paragraph 1 does not oblige the European Communities to 
extend to all Members (including Ecuador and the other MFN suppliers) the tariff 
preference granted to the ACP countries.  GATT Article XIII, paragraph 1 simply 
obliges the European Communities not to  impose a quantitative restriction on 
Ecuador, unless a similar quantitative rest riction was imposed on all other WTO 
Members."649 
7.316  The European Communities maintains that: 
"[T]the fact that the ACP countries enjoy a trade preference and the fact that there is a 
'cap' imposed on the quantities of ACP bana nas that can benefit from this preference 
may be relevant for purposes of GATT Article I, but are completely irrelevant for the 
application of GATT Article XIII.  The important textual differences of the two Articles, discussed above, show that, un like GATT Article I, paragraph 1, the 
provisions of GATT Article XIII, para graph 1 do not impose on a Member the 
obligation to extend to all other Member s a tariff preference granted to some 
Members only.  Quite to the contrary, GATT Article XIII, paragraph 1 obliges each 
                                                     
 
646 European Communities' first written submission, para. 100. 
647 Ibid., para. 101. 
648 Ibid., para. 105. 
649 Ibid., para. 103.  WT/DS27/RW2/ECU 
 Page 183 
 
 
  Member simply not to impose a quantitative restriction on another Member, unless it 
imposes a similar quantitative restriction on all Members."650 
7.317  According to the European Communities, "[t]he difference in the texts of these two provisions 
shows that there are certain types of measures that  may violate GATT Article I, paragraph 1, without 
violating GATT Article XIII, paragraph 1."651 
7.318  In response to Ecuador's arguments, the Europ ean Communities argues that "[it] does not see 
how it can be that products within a quota  are those that are ' not quantitatively restricted '."652  
The European Communities adds that: 
"The GATT distinction between obligati ons regarding tariffs and obligations 
regarding quantitative measures can be mainta ined only if a tariff quota relates to a 
positive quantity or value of goods.  It ca nnot have unlimited or zero scope.  Thus, 
a 'tariff of 10% with an unlimited-quantity ta riff quota at 5%' is simply a 5% tariff.  
Likewise, a 'tariff of 10% with a zero-quantity tariff quota at 5%' is simply a 10% tariff."
653 
7.319  The European Communities also states that: 
"[I]f Ecuador's arguments were to be accep ted they would lead to GATT Article XIII, 
paragraph 1 effectively duplicating GATT Artic le I, paragraph 1.  Take a simple 
scenario of tariff discrimination, where imports from Member A are granted a 5% tariff, whereas a higher tariff is imposed on im ports from Member B.  The situation is 
precisely the one that GATT Article I, paragr aph 1 is intended to address.  However, 
according to Ecuador, one can invent noti onal tariff quotas in order to bring the 
situation within the scope of GATT Article X III.  On this logic the situation could be 
presented as one where Member A had an unlimited-quantity tariff quota at 5%, whereas Member B had a zero-quantity tariff quota at 5%.  Consequently the two sets 
of imports would not be similarly restricted and there would be a breach of GATT Article XIII, paragraph 1.  Thus, a situa tion of straightforward tariff discrimination 
could be artificially presented as one involving notional tariff quotas which would fall 
within the ambit of GATT Article XIII."
654 
7.320  The European Communities adds that: 
"[I]f paragraph 1 of GATT Article XIII is a pplied unthinkingly to the situation of the 
Cotonou Preference[, o]ne odd result would be that WTO Members would be required to confer benefits on non-WTO Memb ers.  This would come about because 
paragraph 1 would be taken to say that a tariff quota could be conferred on one WTO 
Member only if similar tariff quotas had b een conferred on 'all other countries' and 
not just on WTO Members.  If this interp retation were accepted, what was intended 
as a protection for WTO Members (i.e., that they would not have restrictions imposed upon them unless similar restrictions were  placed on other countries) would be 
converted into a benefit for non-WTO Members."
655 
                                                      
650 European Communities' first written submission, para. 102. 
651 Ibid., para. 95. 
652 European Communities' second written submission, para. 55. 
653 Ibid., para. 58. 
654 Ibid., para. 57. 
655 Ibid., para. 52. WT/DS27/RW2/ECU 
Page 184  
 
  (ii) Panel's analysis 
The relevant language of Article X III:1 of the GATT 1994 for this dispute
 
7.321  According to Article XIII:1 of the GATT 1994: 
"No prohibition or restriction shall be a pplied by any contracting party on the 
importation of any product of the territory of any other contracting party or on the 
exportation of any product destined for the territory of any other contracting party, 
unless the importation of the like product of all third countries or the exportation of the like product to all third countries is similarly prohibited or restricted." 
7.322  Replacing the terms "any contracting party", "a ny other contracting party" and "all third 
countries" with the relevant WTO Members involve d in this dispute, the Panel understands that 
Ecuador's claim under Article XIII:1 invokes that provision in the following way: 
"No prohibition or restriction shall be app lied by [the European Communities] on the 
importation of any product of the territory  of [Ecuador] ... unless the importation of 
the like product of [the beneficiaries of th e ACP tariff quota] ... is similarly prohibited 
or restricted." 
7.323  The Panel does not find anything in Article X III of the GATT 1994 or more generally in the 
WTO agreements to support the European Communities'  argument that in this dispute "[t]he MFN 
countries, including Ecuador, are the 'all third count ries', whose position should be taken as a basis in 
order to determine whether the ACP coun tries are treated 'worse' than them."
656  This dispute is about 
Ecuador's claim that the European Communities treats Ecuador 'worse' than the ACP countries.  In the 
context of that claim by Ecuador, the only possible reading of Article XIII:1 is the one provided by 
the Panel in the preceding paragraph. 
7.324  The Panel does not agree with the European Co mmunities that "[i]f this interpretation were 
accepted, what was intended as a protection for WTO Members (i.e., that they would not have restrictions imposed upon them unless similar rest rictions were placed on other countries) would be 
converted into a benefit for non-WTO Members."
657  In fact, the Panel agrees with the 
European Communities that the main purpose of Article XIII:1 of the GATT 1994 is that 
"WTO Members ... [sh]ould not have restrictions im posed upon them unless similar restrictions were 
placed on other countries".  In this dispute, Ecuador, a WTO Member, claims that it should be protected under Article XIII:1 of the GATT 1994.  If,  accordingly, the term "any other contracting 
party" in Article XIII:1 is replaced with "Ecuador",  and the term "any contracting party" is replaced 
with "the European Communities" (which the Eu ropean Communities does not seem to contest), the 
term "all third countries" may indeed refer to the AC P countries.  In that context, the term "all third 
countries" does not necessarily exclude WTO Memb ers other than the European Communities and 
Ecuador.  Also, even if "all third countries" should be interpreted as referring also to non-Members of 
the WTO, an issue this Panel does not address, th e Panel's above interpretation of the terms of 
Article XIII:1 does not imply that Article XIII:1 woul d suddenly be turned into a provision protecting 
non-Members. 
Analysis of the applicability of Article XIII:1 of the GATT 1994
 
7.325  In the light of that interpretation of the releva nt terms of Article XIII:1, the Panel needs to 
address three issues: 
                                                      
656 European Communities' first written submission, para. 100. 
657 European Communities' second written submission, para. 52.  WT/DS27/RW2/ECU 
 Page 185 
 
 
  (a) Whether all bananas are like products; 
(b) Whether any prohibition or restriction is applied by the European Communities on 
the importation of bananas of th e territory of Ecuador;  and, 
(c) Whether the importation of the like product of the beneficiaries of the ACP tariff 
quota is similarly prohibited or restricted. 
Whether all bananas are like products 
7.326  The Panel has already concluded that the releva nt products in this dispute, fresh bananas 
(corresponding to tariff item 0803 00 12 or 0803 00 19) originating in ACP countries, are like 
products to those fresh bananas originating in othe r WTO Members, in terms of Article I of the GATT 
1994.658  Based on the same considerations, the Panel ma y also consider them to be like products in 
terms of Article XIII of the GATT 1994. 
7.327  Accordingly, for the purpose of considerati on of Ecuador's claim under Article XIII of the 
GATT 1994, the Panel confirms that all fresh banana s are like products, irrespective of their origin, 
i.e., independently of whether they are produced in ACP or MFN countries, or whether they are subject to the MFN out-of-quota tariff, the preferen tial in-quota tariff under the ACP tariff quota or to 
any further preferential import regime of the European Communities. 
Whether any prohibition or restriction is applied by the European Communities on 
the importation of bananas of the territory of Ecuador 
7.328  Article XIII:1 of the GATT 1994, entitled "Non-discriminatory Administration of 
Quantitative Restrictions", can apply in this dispute only if there is a "prohibition or restriction" within the meaning of Article XIII:1 on th e importation of bananas from Ecuador to the 
European Communities.  This is the second issue the Panel will address under Article XIII:1, noting 
that, for the purposes of the analysis, finding either  a restriction or a prohibition would be sufficient 
for the Panel to move to the third elem ent of its analysis under Article XIII:1. 
7.329  As regards the existence of any "restriction" , the Panel notes that, while panels and the 
Appellate Body have not looked into the meani ng of the term "restriction" specifically under 
Article XIII of the GATT 1994, traditionally, they have interpreted that term broadly in the context of 
Article XI of the GATT 1994.
659 
7.330  Also, in the context of Article XI and othe r non-discrimination provisions of the GATT 1994, 
it has been found that GATT disciplines on the use of restrictions are not meant to protect 
"trade flows", but rather the "competitive opport unities of imported products".  As the panel on 
Argentina – Hides and Leather stated in the context of Article XI of the GATT 1994: 
"[A]s to whether [the challenged measure ] makes effective a restriction, it should be 
recalled that Article XI:1, like Articles I, II and III of the GATT 1994, protects 
competitive opportunities of imported products, not trade flows.660"661 
                                                      
658 See paras. 7.154 to 7.157 above. 
659 See Panel Report on India – Quantitative Restrictions , paras. 5.129-5.130.  See also Panel Report on 
Turkey – Textiles , para. 9.64;  Panel Report on India – Autos , paras. 7.320 and 7.322;  and Panel Report on 
Argentina – Hides and Leather , para. 11.17. 
660 (footnote original ) See the Appellate Body Reports on Japan – Taxes on Alcoholic Beverages 
(hereafter " Japan – Alcoholic Beverages II "), adopted on 1 November 1996, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS27/RW2/ECU 
Page 186  
 
  7.331  In the light of the above-mentioned close link between Articles XI and XIII of the 
GATT 1994, the Panel considers that this broad in terpretation of the word "restriction" under 
Article XI is relevant also for Article XIII. 
7.332  Given that broad interpretation of the term "restriction", the Panel sees the 
European Communities' preferential ACP tariff quota as a restriction for Ecua dor within the meaning 
of Article XIII:1 of the GATT 1994.  As the Eu ropean Communities recognizes, its banana import 
regime confers a benefit, although a quantitativel y limited one, to ACP countries, and Ecuador, like 
other MFN banana suppliers, cannot have acc ess to that quantitatively limited benefit.
662  Any benefit 
accorded to fresh bananas of only some Members pr esumably affects the competitive opportunities of 
like bananas imported from other Members, incl uding from Ecuador, to the European Communities 
market.  By its very nature, such a benefit reserved for some Members generally represents a 
disadvantage for other Members. 
7.333  The European Communities argues that Article X III only deals with quantitative restrictions 
and quantitative discrimination, and not tariff restricti ons or discrimination.  In this context, the Panel 
notes that the word "quantitative" means "[p]ossessing  quantity, magnitude, or sp atial extent";  "[t]hat 
is, or may be, considered with respect to the quan tity or quantities involved;  estimated or estimable 
by quantity."663 
7.334  On its face, the quantity of bananas that Ecua dor can export to the European Communities is 
not restricted by the European Communities' curr ent banana import regime:  Ecuador can export as 
many bananas to the European Communities as it wi shes.  However, Ecuador can export bananas to 
the European Communities only at the MFN out-of- quota tariff.  Therefore, the quantities Ecuador 
can export to the European Communities are certainly  affected by the fact that, up to the quantitative 
limit set by the tariff quota, the ACP count ries are entitled to export bananas to the 
European Communities at a zero in-quota duty.  As stated by the first compliance panel requested by Ecuador in this dispute, "[a]s to the EC's sugges tion that Ecuador has no interest in the collective 
allocation to traditional ACP suppliers, we note that the price and even the volume of Ecuador's 
exports could be affected by the pri ce and volume of traditional ACP exports. "
664 (emphasis added) 
7.335  Further, as mentioned earlier, under the tariff quot a, the benefit accorded to ACP countries is 
determined in a quantitative manner:  up to the qua ntitative limit specified by the tariff quota, ACP 
countries can export bananas to the European Co mmunities under the preferential in-quota duty;  
beyond the quantitative limit, ACP banana exports to  the European Communities are also subject to 
the out-of-quota duty. 
7.336  As mentioned above, both the first compliance pa nel requested by Ecuador and the arbitrator 
in the proceedings requested by the European Communities pursuant to Article 22.6 of the DSU 
established that it is the very quantitative limit that establishes the applicability of Article XIII to the 
European Communities' preferential tariff quota for ACP countries665, not the specific level of the 
quantitative limit, nor whether MFN countries are also  subject to a tariff quota or only to an MFN 
tariff. 
                                                                                                                                                                     
WT/DS11/AB/R, at p.16;  Korea – Taxes on Alcoholic Beverages , adopted on 17 February 1999, 
WT/DS75/AB/R, WT/DS84/AB/R, at paras. 119-120 and 127. 
661 Panel Report on Argentina – Hides and Leather , para. 11.20. 
662 See European Communities' second written submission, para. 51;  and European Communities' first 
written submission, para. 104. 
663 The New Shorter Oxford  English Dictionary , L. Brown (ed.) (Clarendon Press, 1993), Vol. II, 
p. 2439. 
664 Panel Report on EC – Bananas III (Article 21.5  – Ecuador) , para. 6.22. 
665 See Panel Report on EC – Bananas III (Article 21.5  – Ecuador) , para. 6.20;  and Decision by the 
Arbitrators on EC - Bananas III (US) (Article 22.6 – EC) , para. 5.9.  WT/DS27/RW2/ECU 
 Page 187 
 
 
  7.337  Having established, for the above-mentioned reas ons, that Ecuador's banana imports to the 
European Communities are restrict ed within the meaning of Article XIII:1 of the GATT 1994 by the 
European Communities' preferential tariff quota fo r ACP countries, the Panel also rejects the 
European Communities' argument that: 
"[E]ven assuming arguendo  that there is a quantitative restriction imposed on the 
ACP countries, Ecuador cannot successfully  challenge it, because this quantitative 
restriction imposed on the ACP countries does not result in any nullification or impairment of any benefit accruing to Ecuador.  Quite to the contrary, this 'cap' to the 
preference afforded to the ACP countries pr otects the interests of Ecuador and the 
other MFN countries, because it limits the quantities of ACP bananas that can be 
imported into the European Communities at zero duty."
666 
7.338  Having established and identified a restriction w ithin the meaning of Article XIII:1 of the 
GATT 1994 on Ecuador's banana imports  to the European Communities, the Panel turns to the third 
and last aspect of its analysis under Article XIII:1:   whether banana imports from ACP countries to 
the European Communities are similarly restricted. 
Whether the importation of bananas from ACP countries is similarly restricted 
7.339  As mentioned earlier, similar to the MFN countries, the ACP countries may export bananas to 
the European Communities at the MFN out-of-quota ta riff.  However, as the European Communities 
itself recognizes667, ACP countries can also export bananas under the lower in-quota duty, which is 
not available to MFN countries at all.  The in-quota duty is zero, while the out-of-quota duty is 176 €/mt.  Since MFN countries cannot have access to  that preferential tariff quota reserved for ACP 
countries, on its face, the importation into the Eu ropean Communities of bananas from ACP countries 
is not similarly restricted as banana imports from Ecuador. 
7.340  The Panel notes in this context that , according to Exhibit EC-17, total 
European Communities' banana imports from the ACP countries amounted to 891,218 mt in 2006, 
and to a proportional 439,328 mt during the first half  of 2007.  In other words, since the introduction 
of the European Communities' preferential ACP tariff quota, most European Communities banana 
imports from the ACP countries have taken place unde r the beneficial zero in-quota duty of 775,000 
mt per annum.  Consequently, as indicated in Exhi bit EC-14, the European Communities has collected 
€20,454,544 of tariff revenues on the 891,218 mt of total ACP banana imports in 2006, while it 
collected €579,687,363 of tariff revenues on the 3,293,679 mt total MFN imports in the same year.  Thus, in the first year of the applicati on of its current banana import regime, the 
European Communities has collected about 28 times more tariff revenues on its  MFN banana imports 
for almost four times the amount of imports than fo r its total banana imports from ACP countries.  In 
other words, in 2006, on average, the European  Communities has subjected each quantitative unit of 
MFN banana import to about seven times more dut y than each equal quantitative unit of ACP banana 
import.  These figures illustrate the way in which the European Communities' current banana import 
regime restricts MFN banana imports, including imports from Ecuador, within the meaning of 
Article XIII:1 of the GATT 1994;  at the same time, it is quite clear that ACP bananas are not similarly restricted. 
7.341  This Panel also notes that the original panel requ ested by Ecuador in this dispute stated that: 
"Article XIII:1 establishes the basic principle that no import restriction shall be 
applied to one Member's products unless th e importation of like products from other 
                                                     
 
666 European Communities' first written submission, para. 101. 
667 See European Communities' second written submission, para. 46. WT/DS27/RW2/ECU 
Page 188  
 
  Members is similarly restricted. Thus, a Member may not limit the quantity of 
imports from some Members but not from others. But as indicated by the terms of Article XIII (and even its title, 'Non-discr iminatory Administration of Quantitative 
Restrictions'), the non-discrimination ob ligation extends further. The imported 
products at issue must be 'similarly' restricted. A Member may not restrict imports 
from some Members using one means and restrict them from another Member using 
another means."
668 
7.342  In its ruling in EC – Bananas III , the Appellate Body upheld the relevant findings of that 
original panel in the context of Article XIII:1, by stating that: 
"When th[e] principle of non-discrimination is applied to the allocation of tariff quota 
shares to Members not having a substantial interest, it is clear that a Member cannot, 
whether by agreement or by assignment, allocate tariff quota shares to some Members not having a substantial interest while not  allocating shares to other Members who 
likewise do not have a substantial interest.  To do so is clearly inconsistent with the 
requirement in Article XIII:1 that a Memb er cannot restrict the importation of any 
product from another Member unless the importation of the like product from all third 
countries is 'similarly' restricted. 
Therefore, ... we conclude that the Panel f ound correctly that the allocation of tariff 
quota shares, whether by agreement or by assignment, to some, but not to other, Members not having a substantial interest in supplying bananas to the European Communities is inconsistent with the requirements of Article XIII:1 of the 
GATT 1994. 
The [tariff quota] reallocation rules [of the BFA] allow the exclusion of 
banana-supplying countries, other than BFA countries, from sharing in the unused portions of a tariff quota share.  Thus, imports from BFA countries and imports from other Members are not 'similarly' restricted.  We conclude, therefore, that the Panel 
found correctly that the tariff quota realloca tion rules of the BFA are inconsistent 
with the requirements of Article XIII:1 of the GATT 1994."
669 
7.343  Based on the reasoning of the original panel and the Appellate Body in this dispute, both the 
first compliance panel requested by Ecuador and the arbitrator in the proceedings requested by the 
European Communities pursuant to Article 22. 6 of the DSU established inconsistency with 
Article XIII:1 of the GATT 1994, by stating that: 
"[S]ome non-substantial supp liers, namely the ACP suppliers, could benefit from 
access to the 'other' category of the MF N tariff quota once the 857,700 tonne tariff 
quota was exhausted.  On the other ha nd, non-substantial suppliers from third 
countries have no access to the 857,700 tonne tariff quota once the 'other' category of 
the MFN tariff quota is exhausted.  Individual Members in these two groups – 
traditional ACP suppliers and the other non- substantial suppliers – are accordingly 
not similarly restricted.  This disparate treatme nt is inconsistent w ith the provisions of 
Article XIII:1, which require that '[n]o … r estriction shall be applied by any Member 
on the importation of any product of the te rritory of any other Member … unless the 
                                                      
668 Panel Report on EC – Bananas III (Ecuador) , para. 7.69. 
669 Appellate Body Report on EC – Bananas III , paras. 161-163.  WT/DS27/RW2/ECU 
 Page 189 
 
 
  importation of the like product of all thir d countries … is similarly prohibited or 
restricted'."670 
7.344  In the proceedings before this Panel, the European Communities argues that its current 
banana import regime is different from the previ ous ones addressed by the Appellate Body and the 
previous panels in this dispute, primarily becau se the European Communities' current banana import 
regime allegedly has only one preferential tariff.  As the European Communities argues: 
"[The report of the] Appellate Body [in EC – Bananas III ] shows that 
GATT Article XIII, paragraph 1 covers only situations where a Member applies tariff 
quotas with different terms to different gr oups of countries in a market where all 
import are made under tariff quotas.  Conse quently, GATT Article XIII, paragraph 1 
does not apply to a tariff only import regime where there are no different tariff quotas 
allocated to different groups of countries,  such as the current import regime of the 
European Communities."671 
7.345  In the original dispute the Appellate Body no ted that, in regard to the earlier EC measures 
before the original panel and the Appellate Body: 
"It ha[d] been argued by the European Co mmunities that there are two separate EC 
import regimes for bananas, the preferentia l regime for traditional ACP bananas and 
the erga omnes  regime for all other imports of ba nanas.  Submissions made by the 
European Communities raise the question whet her this is of any relevance for the 
application of the non-discrimination pr ovisions of the GATT 1994 and the other 
Annex 1A agreements.  The European Comm unities argues, in particular, that the 
non-discrimination obligations of Articles I:1, X:3(a) and XIII of the GATT 1994 and 
Article 1.3 of the Licensing Agreement , apply only within  each of these separate 
regimes.  The Panel found that the European Communities has only one import 
regime for purposes of applying the non-discrimination provisions of the GATT 1994 and Article 1.3 of the Licensing Agreement ."
672 
7.346  As indicated by Ecuador in these proceedings673, in response to that argument by the 
European Communities, the Appellate Body established that: 
"The issue here is not whether the European  Communities is correct in stating that two 
separate import regimes exist for bananas, but whether the existence of two, or more, 
separate EC import regimes is of any relevance for the application of the non-discrimination provisions of the GATT 1994 and the other Annex 1A agreements.  
The essence of the non-discrimination obliga tions is that like products should be 
treated equally, irrespective of their origin.  As no participant disputes that all bananas are like products, the non-discrimina tion provisions apply to all imports of 
bananas, irrespective of whether and how a Member categorizes or subdivides these imports for administrative or other reasons.  If, by choosing a different legal basis for 
imposing import restrictions, or by applying  different tariff rates, a Member could 
avoid the application of the non-discrimination provisions to the imports of like products from different Members, the object and purpose of the non-discrimination provisions would be defeated. It would be very easy for a Member to circumvent the 
                                                     
 
670 Panel Report on EC – Bananas III (Article 21.5  – Ecuador) , para. 6.26;  and Decision by the 
Arbitrators on EC - Bananas III (US) (Article 22.6 – EC) , para. 5.14. 
671 European Communities' first written submission, para. 105. 
672 Appellate Body Report on EC – Bananas III , para. 189. 
673 See Ecuador's first written submission, para. 31. WT/DS27/RW2/ECU 
Page 190  
 
  non-discrimination provisions of th e GATT 1994 and the other Annex 1A 
agreements, if these provisions apply only within regulatory regimes established by 
that Member."
674 
Accordingly, the Appellate Body "uph[e]l d the findings of the [original] Panel675 that the non-
discrimination provisions of the GATT 1994, specifically , Articles I:1 and XIII, apply to the relevant 
EC regulations, irrespective if there is one or more 'separate regimes' for the importation of 
bananas."676 
7.347  As the original panel requested by Ecuador  also noted, "to accept that a Member could 
establish quota regimes by different legal instrument s and argue that they are not as a consequence 
subject to Article XIII would be, as argued by the Complainants, to eviscerate the non-discrimination 
provisions of Article XIII."677 
7.348  Under the European Communities' current bana na import regime, there might be no tariff 
quota applicable to the MFN countries, and the ACP tariff quota might be the only preferential tariff quota.  However, that would not reduce the releva nce of the statement by the Appellate Body that 
"[t]he issue here is not whether the European Commun ities is correct in stating that two separate import 
regimes exist for bananas, but whethe r the existence of two, or more, separate EC import regimes is of 
any relevance for the application of the non-discrimination provisions of the GATT 1994 and the other 
Annex 1A agreements".  As long as the European Communities has a preferential tariff quota reserved 
for some Members and a higher MFN out-of-quota duty for all other Members, that statement remains 
relevant.  Further, the alleged absence of more than one tariff quota reserved for some WTO Members 
under the European Communities' current banana im port regime makes the following statement by the 
Appellate Body even more relevant in these proceedings: 
"If, by choosing a different legal basis for imposing import restrictions, or by 
applying different tariff rates, a Member  could avoid the application of the non-
discrimination provisions to the imports of like products from different Members, the object and purpose of the non-discrimination provisions would be defeated. It would 
be very easy for a Member to circumvent the non-discrimination provisions of the 
GATT 1994 and the other Annex 1A agreem ents, if these provisions apply only 
within regulatory regimes established by that Member."
678 
7.349  In the light of the foregoing, despite the Eur opean Communities' arguments on the specificity 
of its current banana im port regime and the preferential ACP ta riff quota under such regime, the Panel 
reiterates that ACP banana imports to the Europ ean Communities are not similarly restricted as are 
like banana imports from Ecuador. 
7.350  Having found that the current EC banana import regime shows all three elements set out in 
Article XIII:1, the Panel concludes that the Eur opean Communities' current banana import regime, 
in particular its preferential tariff quota reserved for ACP countries, is inconsistent with Article XIII:1 
of the GATT 1994. 
                                                      
674 Appellate Body Report on EC – Bananas III , para. 190. 
675 (footnote original ) Panel Reports, paras. 7.82 and 7.167. 
676 Appellate Body Report on EC – Bananas III , para. 191. 
677 Panel Report on EC – Bananas III (Ecuador) , para. 7.79. 
678 Appellate Body Report on EC – Bananas III , para. 190.  WT/DS27/RW2/ECU 
 Page 191 
 
 
  (c) Ecuador's claim under Article XIII:2 of the GATT 1994 
(i) Parties' main arguments 
Ecuador's arguments  
7.351  Ecuador maintains that: 
"The EC measures are also inconsistent  with Article XIII:2.  The Panel in Bananas III 
noted the general rule that, if Members appl y quotas to a product, then, in the terms of 
the chapeau to Article XIII:2, 'Members sha ll aim at a distribution of trade in such 
product approaching as closely as possible the shares which the various Members 
might be expected to obtain in the absence of such restrictions.'679"680 
7.352  Ecuador adds that "[t]hough the EC system has eliminated the country allocations that 
previously existed as between non-ACP countries, the discrimination remains as between ACP and 
non-ACP bananas"681, and "[t]he Appellate Body in Bananas III  vigorously condemned this 
discrimination."682 
7.353  In Ecuador's view there is also an inconsis tency with Article XIII:2(d) of the GATT 1994 
because: 
"The allocation of the duty free quota exclusively to ACP countries bears no relation 
to trading patterns in the world or EC market s.  As can be seen in the charts annexed 
as Exhibits ECU-2 and ECU-3, Ecuador is a preeminent exporter of bananas to the 
world market.  Further, Ecuador and sever al other countries that are excluded from 
the zero duty quota, are substantial suppliers to the EC, while ACP countries, many of 
whom are minor suppliers at best, are allowed to ship duty free under the tariff 
quota."683 
7.354  In respect of the report of the panel on US – Line Pipe , mentioned in these proceedings by the 
European Communities, Ecuador argues that: 
"In [the US – Line Pipe ] case, the United States created an unusual tariff quota 
system, in that each country in the world wa s allowed to ship an identical quantity of 
line pipe steel to the United States at a low rate of duty, while other steel imports 
were subject to stiff new safeguard tariffs.   The Panel found that such a system did 
not respect the distribution of trade in low duty steel that would be expected in the 
absence of restrictions, in that the system favored small over large exporters by allocating identical shares to countries with  different shares of the world and US 
markets.
684"685 
                                                      
679 (footnote original ) Panel Report at para. 7.68. 
680 Ecuador's first written submission, para. 30. 
681 Ibid., para. 31. 
682 Ibid. 
683 Ibid., para. 32. 
684 (footnote original ) US – Line Pipe , at paras. 7.53, 7.54 and 7.55. 
685 Ecuador's first written submission, para. 51. WT/DS27/RW2/ECU 
Page 192  
 
  The European Communities' arguments
 
7.355  The European Communities contends that "[ its] current import regime... does not violate 
GATT Article XIII, paragraph 2."686  In the European Communities' view, 
"The ... limited ... scope of ... Article [XIII]  is seen in the way that the four sub-
paragraphs of GATT Article XIII, paragra ph 2 are entirely focused on the scope and 
internal distribution of the quota.  They disregard any trade that falls outside the quota 
(or tariff quota)".687 
7.356  According to the European Communities, "[t]he text ' In applying import restrictions ' shows 
that paragraph 2 (like paragraph 1) is solely c oncerned with quantitative restrictions, and does not 
regulate the relationship between quantitative restricti ons and other measures, notably simple tariffs, 
that a Member may be applying."688 
7.357  The European Communities adds that:  
"The context provides support for this interp retation.  Mention has already been made 
of the inferences to be drawn from the title of GATT Article XIII.  The same, limited, 
scope of the Article is seen in the wa y that the four sub- paragraphs of GATT 
Article XIII, paragraph 2 are entirely focused  on the scope and internal distribution of 
the quota.  They disregard an y trade that falls outside the quota (or tariff quota): sub-
paragraph (a) refers to fixing and noti fying the total amount of the quota; sub-
paragraphs (b) and (c) concern the use of import licences; and sub-paragraph (d) 
concerns the allocation of quotas by agreement or on the basis of previous import levels."
689 
7.358  Finally, according to th e European Communities, 
"Given that GATT Article XIII, paragraph 2 is directed at the administration of 
quantitative restrictions and tariff quotas, it does not extend to the 
European Communities' banana import regime in so far as that concerns Ecuador and 
the other MFN countries, because their expor ts are not subject to any non-tariff 
restrictions or tariff quotas. 
The European Communities draws support fo r this interpretation from the panel's 
report in US – Line Pipe.  In that case, the United States had imposed a safeguard measure in the form of a tariff quota.  The panel invoked GATT Article XIII, paragraph 2 only as regards the internal di vision of the tariff quota and the setting of 
the total amount of imports permitted at a lower tariff rate.
690"691 
                                                      
686 European Communities' first written submission, para. 106. 
687 Ibid., para. 108. 
688 Ibid., para. 107. 
689 Ibid., para. 108. 
690 (footnote original ) Panel Report, US – Line Pipe , paras. 7.54 and 7.58. 
691 European Communities' first written submission, paras. 109-110.  WT/DS27/RW2/ECU 
 Page 193 
 
 
  (ii) Panel's analysis 
7.359  Ecuador has invoked both the chapeau and subparagraph (d) of Article XIII:2 of the 
GATT 1994.692 
Chapeau of Article XIII:2 of the GATT 1994  
7.360  Article XIII:2 of the GATT 1994 stipulates in its chapeau  that: 
"In applying import restrictions to any pr oduct, contracting parties [WTO Members] 
shall aim at a distribution of trade in su ch product approaching as closely as possible 
the shares which the various contracting parties [WTO Members] might be expected to obtain in the absence of such restrictions and to this end shall observe the 
following provisions..." 
7.361  The original panel requested by Ecuador in th is dispute confirmed that language by stating 
that "the object and purpose of Article XIII:2 is to minimize the impact of a quota or tariff quota regime on trade flows by attempting to approximate  under such measures the trade shares that would 
have occurred in the absence of the regime."
693 
7.362  The Panel notes that Cameroon argues in its statem ent at the substantive meeting of the Panel 
with the parties and third parties that: 
"It is a well known fact that ACP banana producers are less competitive than MFN 
banana producers.  Compared to the la tter, ACP producers have higher production 
costs.  For historical and geographical reasons, they do not enjoy the same economies of scale as the MFN producers.  As a result, ACP producers can only compete with MFN producers in markets where they enjoy preferential access."
694 
7.363  In response to the Panel's request to provide  evidence for its assertions, Cameroon adduces 
evidence to its statement and confir med the latter by concluding that: 
"As a result of the more limited yields and the higher costs, the banana producers in 
the ACP countries are less co mpetitive than the banana pr oducers in MFN countries.  
The less competitive position of ACP banana producers has also been noted by the 
President of Chiquita Europe in an in terview in 2007 which was annexed to Côte 
d'Ivoire's Oral Statement695.  The lack of competitiveness is also demonstrated by the 
fact that the ACP countries from the Caribbean  are unable to export to the US market 
which is geographically much closer than the EC market."696 
7.364  In response to a question by the Panel relating to Cameroon's above-cited statement, the other 
main beneficiaries of the European Communities' banana import regime, i.e. the other ACP third 
parties (Belize, Côte d'Ivoire, Dominica, the Dominican Republic, Ghana, Jamaica, Madagascar, 
                                                      
692 See Request for the Establishment of a Panel by Ecuador, EC – Bananas III (Article 21.5 – Ecuador 
II), 26 February 2007, WT/DS27/80, p. 4;  an d Ecuador's first written submission, para. 27. 
693 Panel Report on EC – Bananas III (Ecuador) , para. 7.68. 
694 Final written version of Cameroon's oral statement at the Panel's substantive meeting with the 
parties and third parties, paragraph 31.  See para. 5.48 above. 
695 (footnote original ) See also the Italtrend Report on "Etat des lieux et compétitivité des plantations 
de bananas en Côte d'Ivoire" and the Horus Report on "La banane africaine dans l'Union européenne", which are attached as an Annex to this Reply. 
696 Cameroon's response to question No. 86. WT/DS27/RW2/ECU 
Page 194  
 
  Saint Lucia, Saint Vincent and the Grenadines, and Suriname), "confirm that that they agree with 
these specific assertions [by Cameroon]".
697 
7.365  Finally, in response to a question by the Pane l relating to Cameroon's above-cited statement, 
the European Communities itself st ates that "[it] believes that the facts described by Cameroon are 
manifestly accurate and correct ."698  (emphasis added)  The Euro pean Communities also argues in 
that context that: 
"However, if these elements could have a certa in relevance within an analysis of the 
WTO compatibility of a regime providing for quantitative restrictions, they are certainly irrelevant in the context of an analysis of a tariff-only regime under Article XIII of the GATT 1994. 
In fact, for the reasons explained in the answer to Question 73, above, Article XIII 
applies to quantitative restrictions and not any kind of trade restriction."
699 
7.366  Having established that the European Communitie s' current banana import regime subjects 
Ecuador to a restriction within the meaning of Ar ticle XIII:1 of the GATT 1994, the Panel rejects this 
last argument by the European Communities.  C onsequently, the Panel also considers that the 
statement by Cameroon that "ACP producers can only compete with MFN producers in markets 
where they enjoy preferential access"700, explicitly confirmed by both the other ACP third parties and 
by the European Communities, constitutes a rec ognition by the European Communities and the ACP 
third parties that the preferential ACP tariff quot a regime under the European Communities' current 
banana import regime is a preferen tial regime that is indispensable  for the very existence of ACP 
banana imports to the European Communities.  It is not necessary to further assess this apparent lack 
of competitiveness of ACP countries.  The above affirmations by the European Communities and the 
ACP third parties suffice to find that, given that MFN countries are excluded from the European Communities' preferential ACP tariff quota,  by definition, the ACP preference cannot and 
does not "aim at a distribution of trade in [ban anas] approaching as closely as possible the shares 
which the various [Members, including both ACP and MFN countries] might be expected to obtain in 
the absence of such restrictions."  Thus , the Panel also finds that on its face the 
European Communities' current bana na import regime, including its pr eferential ACP tariff quota, is 
inconsistent with the chapeau of Article XIII:2 of the GATT 1994. 
7.367  The Panel notes that the European Communities ar gues in the context of Article XIII:2 that: 
"Given that GATT Article XIII, paragraph 2 is directed at the administration of 
quantitative restrictions and tariff quotas, it does not extend to the 
European Communities' banana import regime in so far as that concerns Ecuador and 
the other MFN countries, because their expor ts are not subject to any non-tariff 
restrictions or tariff quotas. 
                                                     
 
697 The response of Belize, Côte d'Ivoire, Domi nica, the Dominican Republic, Ghana, Jamaica, 
Madagascar, Saint Lucia, Saint Vincent and the Grenadines, and Suriname to question 86.  But see the statement in the study by the Centre for International Economics, provided by Nicaragua and Panama, that "from 2008 
onwards Latin American access will dec line sharply, and under some scenar ios, by 2010, ACP/EBA exports to 
the EU could exceed those of Latin America."  Centre for International Economics, "The detrimental effects of a 
€176 per tonne ACP banana tariff preference on MFN suppliers" (August 2007), in Exhibit N-2 and P-2. 
698 European Communities' response to question 86. 
699 Ibid. 
700 Final written version of Cameroon's oral statement at the Panel's substantive meeting with the 
parties and third parties, paragraph 31.  WT/DS27/RW2/ECU 
 Page 195 
 
 
  The European Communities draws support fo r this interpretation from the panel's 
report in US – Line Pipe.  In that case, the United States had imposed a safeguard measure in the form of a tariff quota.  The panel invoked GATT Article XIII, paragraph 2 only as regards the internal di vision of the tariff quota and the setting of 
the total amount of imports permitted at a lower tariff rate.
701"702 
7.368  The Panel recalls that, in line with the Appellate Body's statement in EC – Bananas III703, 
it has already rejected the Europ ean Communities arguments that Article XIII would apply only to 
separate parts of the European Communities' current banana import regime.704 
7.369  Despite the arguments of the European Communitie s, this Panel reads the ruling of the panel 
on US – Line Pipe  as confirming this Panel's approach to Article XIII:2 in the current proceedings.  
As a matter of fact, the safeguard measure reviewed by the panel on US – Line Pipe involved  identical 
tariff quotas for various countries.705  The panel on US – Line Pipe  stated that: 
"Without setting forth an exhaustive definition of tariff quotas, we consider that an 
accurate definition must include measures which place a quantitative limit on the application, or availability, of a lower tari ff rate (and a higher tariff rate applicable 
once that quantitative limit has been ex ceeded), irrespective of whether that 
quantitative limit is (a) 'overall', (b) 'ove rall' and further allocated among exporting 
countries, or (c) country-specific, with no 'ove rall' limit.  ...  [T]he 'specified quantity', 
or 'quantitative limit', referred to in the definitions advanced by the United States, 
could be overall, overall and further allo cated among exporting countries, or simply 
country-specific.  On this basis, we concl ude that the line pipe measure at issue is a 
tariff quota, since there are country-speci fic limits (9000 short tons) placed on the 
application, or availability, of the lower tariff rate, and it is these country-specific 
limits that determine whether or not lin e pipe from specific countries enters the 
United States at the lower or higher rate of duty."
706 
7.370  The panel on US – Line Pipe found that the US safeguard measure which was not based on 
historical trade patterns, and did not reflect an intent of approaching the shares that the Members 
could have been expected to obtain in the ab sence of the measure, was inconsistent with the chapeau  
of Article XIII:2: 
"There is nothing in the record before the Panel to suggest that  the line pipe measure 
was based in any way on historical trade patterns in line pipe, or that the 
United States otherwise 'aim[ed] at a distribution of trade … approaching as closely 
as possible the shares which the various Memb ers might be expected to obtain in the 
absence of' the line pipe measure.   Instead, as noted by Korea, 'the in-quota import 
volume originating from Korea, the largest supplier historically to the US market, 
was reduced to the same level as the smallest  – or even then non-existent – suppliers 
to the US market (9,000 short tons)'.  For this reason, we find that the line pipe 
measure is inconsistent with the gen eral rule contained in the chapeau of 
Article XIII:2. "707  (emphasis added) (footnote omitted) 
                                                      
701 (footnote original ) Panel Report, US – Line Pipe , paras. 7.54 and  7.58. 
702 European Communities' first written submission, paras. 109-110. 
703 See Appellate Body Report on EC – Bananas III , para. 190. 
704 See paras. 7.339 to 7.349 above. 
705 See Panel Report on US – Line Pipe , para. 7.23. 
706 Ibid. 
707 Ibid., para. 7.55. WT/DS27/RW2/ECU 
Page 196  
 
  Subparagraph (d) of Article XIII:2 of the GATT 1994
 
7.371  Ecuador has also invoked subparagraph (d) of Article XIII:2 of the GATT 1994.708  
That subparagraph provides that: 
"(d) In cases in which a quota is allocated among supplying countries the 
contracting party applying the restrictions  may seek agreement with respect to the 
allocation of shares in the quota with all ot her contracting parties having a substantial 
interest in supplying the product concerne d.  In cases in which this method is not 
reasonably practicable, the contracting part y concerned shall allot to contracting 
parties having a substantial interest in supplying the product shares based upon the 
proportions, supplied by such contracting parties during a previous representative 
period, of the total quantity or value of imports of the product, due account being 
taken of any special factors which may have affected or may be affecting the trade in 
the product.  No conditions or formalities shall be imposed which would prevent any 
contracting party from utilizing fully the sh are of any such total quantity or value 
which has been allotted to it, subject to im portation being made within any prescribed 
period to which the quota may relate." 
7.372  As stated by the original panel requ ested by Ecuador in this dispute, 
"Article XIII's general requ irement of non-discrimination is modified in one respect 
by Article XIII:2(d), which provides for th e possibility to allocate tariff quota shares 
to supplying countries.  Any such country specific allocation must, however, 'aim at a distribution of trade ... approaching as cl osely as possible the shares which Members 
might be expected to obtain in the absen ce of such restrictions' (chapeau of 
Article XIII:2(d)). 
Article XIII:2(d) further specifies the treatment that, in case of country-specific 
allocation of tariff quota shares, must be give n to Members with 'a substantial interest 
in supplying the product concerned'.  For those Members, the Member proposing to 
impose restrictions may seek agreement with them as provided in Article XIII:2(d), 
first sentence.  If that is not reasonably practicable, then it must allot shares in the quota (or tariff quota) to them on the basis of the criteria specified in Article XIII:2(d), second sentence."
709 
7.373  That same original panel addressed the question whether, under Article XIII:2(d), 
"country-specific shares can also be allocated to Me mbers that do not have a substantial interest in 
supplying the product and, if so, what th e method of allocation would have to be."710  The panel noted 
that: 
"As to the first point, we note that the first sentence of Article XIII:2(d) refers to 
allocation of a quota 'among supplying countries'.  This could be read to imply that an 
allocation may also be made to Members th at do not have a substantial interest in 
supplying the product.  If this interpre tation is accepted, any such allocation must, 
however, meet the requirements of Article X III:1 and the general rule in the chapeau 
to Article XIII:2(d).  Therefore, if a Member wishes to allocate shares of a tariff quota to some suppliers without a substantial inter est, then such shares must be allocated to 
all such suppliers.  Otherwise, imports  from Members would not be similarly 
                                                     
 
708 See Ecuador's first written submission, para. 27. 
709 Panel Report on EC – Bananas III (Ecuador) , paras. 7.70-7.71. 
710 Ibid., para. 7.73.  WT/DS27/RW2/ECU 
 Page 197 
 
 
  restricted as required by Article XIII:1.711  As to the second point, in such a case it 
would be required to use the same method as was used to allocate the 
country-specific shares to the Members havi ng a substantial interest in supplying the 
product, because otherwise the requirements of Article XIII:1 would also not be 
met."712 
7.374  On appeal, the Appellate Body stated that: 
"Article XIII:2(d) provides specific rule s for the allocation of tariff quotas among 
supplying countries, but these rules pertain only to the allocation of tariff quota shares 
to Members 'having a substantial interest  in supplying the product concerned'.  
Article XIII:2(d) does not provide any specific rules for the allocation of tariff quota 
shares to Members not having a substantial interest.  Nevertheless, allocation to 
Members not having a substantial interest must  be subject to the basic principle of 
non-discrimination.  When this principle of non-discrimination is applied to the allocation of tariff quota shares to Members not having a substantial interest, it is 
clear that a Member cannot, whether by agreem ent or by assignment, allocate tariff 
quota shares to some Members not having a substantial interest while not allocating shares to other Members who likewise do not have a substantial interest.   To do so is 
clearly inconsistent with the requirement  in Article XIII:1 that a Member cannot 
restrict the importation of any product from another Member unless the importation of the like product from all third countries is 'similarly' restricted."
713 
(emphasis added) 
7.375  The Panel notes that all MFN countries are excluded from the European Communities' 
preferential ACP tariff quota, and the group of MFN countries includes both substantial and non-
substantial suppliers of bananas to the European  Communities.  Ecuador has argued that, "Ecuador 
and several other countries that are excluded from the zero duty quota, are substantial suppliers to the 
European Communities, while ACP countries, many of  whom are minor suppliers at best, are allowed 
to ship duty free under the tariff quota."714  The European Communities h as not denied the existence 
of this situation. 
7.376  Also, according to Exhibits EC-17 and EC-18, for each year since 1999 Ecuador has had the 
highest share of European Communities banana im ports among all banana suppliers, including ACP 
and MFN suppliers.  Accordingly, Ecuador has a s ubstantial interest in supplying bananas to the 
European Communities under Article XIII:2(d) of the GATT 1994.  
7.377  In the light of the way in which Article XIII:2( d) has been interpreted by the original panel 
and the Appellate Body in this dispute, a preferen tial tariff quota that is granted exclusively to some 
Members and not to others, including a substantial su pplier, may not result in a distribution of trade in 
bananas that would approach as closely as possibl e the shares which the various Members might be 
expected to obtain in the absence of such restricti ons.  Further, the same preferential tariff quota does 
not comply with the second sentence of Article XIII:2(d) that: 
"In cases in which [agreement with respect to the allocation of shares in the quota 
with all other contracting parties having a s ubstantial interest in supplying the product 
concerned] is not reasonably practicable, the contracting party concerned shall allot to 
                                                      
711 (footnote original ) See Panel Report on "EEC Restrictions on Imports of Apples from Chile", adopted 
on 10 November 1980, BISD 27S/98, 114, 116, paras. 4.11, 4.21. 
712 Panel Report on EC – Bananas III (Ecuador) , para. 7.73. 
713 Appellate Body Report on EC – Bananas III , para. 161. 
714 Ecuador's first written submission, para. 32. WT/DS27/RW2/ECU 
Page 198  
 
  contracting parties having a substantial inte rest in supplying the product shares based 
upon the proportions, supplied by such c ontracting parties during a previous 
representative period, of the total quantity or value of imports of the product, due 
account being taken of any special factors which may have affected or may be affecting the trade in the product." 
7.378  Accordingly, the Panel finds that the Europ ean Communities' current banana import regime, 
including its preferential ACP tariff quota, is incons istent not only with Article XIII:1 and with the 
chapeau of Article XIII:2, but also with subpa ragraph (d) of Article XIII:2 of the GATT 1994. 
(d) No applicable waiver 
7.379  As the Appellate Body stated in the contex t of Article XIII earlier in this dispute: 
"Non-discrimination obligations apply to all imports of like pro ducts, except when 
these obligations are specifically waived or are otherwise not applicable as a result of the operation of specific provisions of  the GATT 1994, such as Article XXIV.
715  In the 
present case, the non-discrimination obligat ions of the GATT 1994, specifically 
Articles I:1 and XIII716, apply fully to all imported bananas irrespective of their origin, 
except to the extent that these obligations are waived ..."717 
7.380  As Ecuador argues in these proceedings, the waiv er from Article XIII:1 and 2 adopted by the 
Ministerial Conference in Doha718 "expired by its own terms on December 31, 2005.719"720  In the light 
of the language of that waiver, and noting that the European Communities does not argue that that waiver is still in force, the Panel finds that th ere is no waiver from Article XIII:1 and 2 of the 
GATT 1994 that could apply to the European Commun ities' current banana import regime, introduced 
on 1 January 2006.  Thus, there is no waiver th at could exonerate the inconsistencies of the 
European Communities' current bana na import regime with paragraphs  1 and 2 of Article XIII of the 
GATT 1994. 
7.381  Also, for the reasons set out by the Appellate Body earlier in this dispute
721, even if the Doha 
Article I waiver applied to bananas beyond the e nd of 2005, which the Panel has already found not to 
be the case722, the coverage of that waiver from Article I could not be automatically extended to 
Article XIII. 
4. General conclusion 
7.382  For the reasons explained above, the Panel conc ludes that the European  Communities' current 
banana import regime, in particular its pref erential tariff quota reserved for ACP countries, is 
inconsistent with Article XIII:1 and Article XIII:2(d) of the GATT 1994.  The Panel also concludes 
                                                      
715 (footnote original ) Panel on Newsprint , adopted 20 November 1984, BISD 31S/114. 
716 (footnote original ) We do not agree with the Panel's findings that Article X:3(a) of the GATT 1994 
and Article 1.3 of the Licensing Agreement  preclude the imposition of different import licensing systems on like 
products when imported from different Members.  S ee our Findings and Conclusions, paras. (l) and (m). 
717 Appellate Body Report on EC – Bananas III , para. 191. 
718 See Ministerial Conference, European Communities, Transitional Regime for the EC Autonomous 
Tariff Rate Quotas on Imports of Bananas, Decision of 14 November 2001, (WT/MIN(01)/16), 
14 November 2001. 
719 (footnote original ) European Communities – Trans itional Regime For The EC – Autonomous Tariff 
Rate Quotas On Imports Of Bananas , WT/MIN(01)/16, 14 November 2001, para. 7. 
720 Ecuador's first written submission, para. 28. 
721 See Appellate Body Report on EC – Bananas III , para. 188. 
722 See para. 7.200 above.  WT/DS27/RW2/ECU 
 Page 199 
 
 
  that there is no waiver that could exonerate the inconsistencies of the European Communities' current 
banana import regime with paragraphs 1 and 2 of Article XIII of the GATT 1994. 
E. ECUADOR 'S CLAIM UNDER ARTICLE II OF THE GATT  1994 
1. Ecuador's claim 
7.383  Ecuador argues that the European Communities'  measure, consisting of  "a tariff-rate quota 
with a single duty rate applicable to bananas not benefiting from the zero duty tariff-rate quota"723, 
"applied to all bananas originating in Ecuador or other MFN countries"724, constitutes a breach of the 
European Communities' tariff binding on bananas725.  More specifically, Ecuador states that "the EC 
applied duty of €176/mt must be he ld inconsistent with EC obligat ions under Article II of the GATT 
and the EC's schedule of concessions"726 and, in particular with Article II:1(a) and (b) of the GATT 
1994727. 
7.384  In Ecuador's view: 
"The EC tariff on bananas (HTS 0803.00 .12) remains bound in the EC GATT 
schedule of concessions (Schedule CXL of the EC – 15) at a level of €75/mt, subject to the annexed Agreement on Bananas, which elaborates the tariff rate quota regime.  
Article II of the GATT forbids impositi on of duties in excess of bound rates in a 
schedule."
728 
7.385  Ecuador adds that: 
"With respect to bananas, the EC's sc hedule consistent with the modalities for 
agricultural products established in the Uruguay Round, has two elements, a bound 
tariff quota intended to at least maintain  pre-Uruguay Round access for bananas; and 
a bound upper rate for bananas above  the level of the tariff quota ... 
The 75 Ecu/mt concession for 2.2 million mt was not made subject to the continued 
existence of the Annex [to the European Communities' Schedule] or the BFA [the Bananas Framework Agreement].  Paragr aph 9 of the BFA provides that 'this 
agreement' (the BFA) applies until the end of 2002, but it does not provide that the 
EC's GATT tariff quota concession expires at any time.  The duty and quantity of the 
tariff concession does not depend on the othe r terms and conditions as set out in the 
annex, but rather is laid out in the schedul e itself.  Expiration of the agreement would 
thus not eliminate the tariff quota concession, which is not subject to the continued effect of the BFA."
729 
7.386  Ecuador concludes that the European Communitie s' measure, consisting of  "a tariff rate quota 
with a single duty rate applicable to bananas not benefiting from the zero duty tariff-rate quota",730 
applied to "all bananas originati ng in Ecuador or other MFN countries"731 constitutes a breach of the 
                                                      
723 Ecuador's first written submission, para. 33. 
724 Ecuador's second written submission, para. 52. 
725 Ecuador's first written submission, para. 33. 
726 Ibid., para. 34. 
727 Ecuador's response to panel question No. 44. 
728 Ecuador's first written submission, para. 33. 
729 Ecuador's second written submission, paras. 53 and 58. 
730 Ecuador's first written submission, para. 33. 
731 Ecuador's second written submission, para. 52. WT/DS27/RW2/ECU 
Page 200  
 
  European Communities' tariff binding on bananas.
732  More specifically, Ecuador advances the claim 
that the European Communities' duty of €176/mt is in consistent with Article II:1(a) and (b) of the 
GATT 1994.733 
2. The European Communities' response 
7.387  The European Communities responds that Ecua dor's claims under Article II of the GATT 
1994 are "completely unfounded"734 because: 
"[T]he bound tariff for bananas in the 'GATT schedule of concessions' of the 
European Communities is €680 per ton and the tariff applied since January 1, 2006 is 
€176 per ton".735 
7.388  The European Communities states that: 
"The European Communities' tariff commitm ents were initially included in Schedule 
LXXX, which was incorporated into the le gal instruments embodying the results of 
the Uruguay Round, executed on April 15, 1994.  On December 15, 1994, the European Communities announced its intention to withdraw Schedule LXXX as of January 1, 1995, in order to prepare new schedules reflecting the accession of 
Austria, Finland and Sweden into the European Communities ... 
The European Communities submitted to  the WTO the new Schedule CXL on 
March 14, 1996.  However, still today, ther e are certain WTO Members that have not 
yet lifted all objections necessary for the certification of Schedule CXL in accordance with the GATT Procedures for Modification and Rectification of Schedules of Tariff 
Concessions. 
The European Communities announced its in tention to withdraw Schedule CXL on 
January 19, 2004, in order to prepare ne w schedules reflecting the accession of ten 
new member states to the European Comm unities on May 1, 2004...  The relevant 
negotiations conducted pursua nt to GATT Article XXIV  and GATT Article XXVIII 
are still pending.  As a result, the European Communities has not yet submitted a new 
schedule."
736 
7.389  According to the European Communities: 
"Both Schedule CXL and Schedule LXXX cont ain the same tariff concessions with 
regard to bananas.  In Part I, Secti on I A, under tariff item number 080300 12, it is 
provided that the bound rate of duty for bana nas is €680 per ton.  This is the only 
bound tariff rate for bananas that currently exists in the Schedules of the European 
Communities."737 
7.390  The European Communities states that: 
"Both Schedules [Schedules LXXX and CX L] included an additional concession in 
the form of a tariff quota for 2.2 million tons of bananas to be imported at a tariff rate 
                                                      
732 Ecuador's first written submission, para. 33. 
733 Ecuador's response to panel question No. 44. 
734 European Communities' first written submission, para. 112. 
735 Ibid. 
736 Ibid., paras. 5-7 (footnote omitted). 
737 Ibid., para. 8.  WT/DS27/RW2/ECU 
 Page 201 
 
 
  of €75 per ton.  However, the Schedul es expressly provided that this additional 
concession applied 'as indicated in  the Annex' to Part I, Section I B of the Schedules. 
The Annex, which is an integral part of the Schedules, provides that this tariff quota 
would be operational as of October 1, 1994 and that it would expire on December 31, 
2002.  Therefore, on December 31, 2002, th is concession expired in accordance with 
its terms and as of January 1, 2003, the onl y bound rate for bananas in the Schedules 
of concessions of the European Communities is €680 per ton".738 
7.391  The European Communities adds that: 
"[E]ven if that concession [the tariff quota fo r 2.2 million tons of bananas at a tariff 
rate of €75/mt] had not expired at the end of 2002, it is clear that it was lawfully 
terminated on January 1, 2006, when the European Communities in troduced the tariff 
only import regime. 
First [because] the tariff rate of €75 was not a simple and uncond itional 'bound tariff 
rate'... [but, a]s with any tariff quota in the WTO system, the tariff rate of €75 was 'attached' to the quota of 2.2 million t ons and its existenc e depended upon the 
existence of that quota.  The abolition of the quota would inevitably bring along the 
abolition of the corresponding tariff ... 
Second [because the EC] was obliged to introduce a tariff only regime (and 
consequently abolish the tariff quota for the 2.2 million tons of bananas) on 
January 1, 2006, in order to comply with th e suggestions of the Panel [in the original 
EC – Bananas III  case] and the conditions of th e Understandings and the Doha 
waiver".
739 
3. Article II:1 of the GATT 1994 
7.392  Under Article II:1(a) and (b) of the GATT 1994: 
"(a) Each contracting party [Member] sha ll accord to the commerce of the other 
contracting parties [Members] treatment no less favourable than that provided for in 
the appropriate Part of the appropriate  Schedule annexed to this Agreement. 
(b) The products described in Part I of the Schedule relating to any contracting 
party [Member], which are the products of  territories of other contracting parties 
[Members], shall, on their importation into th e territory to which the Schedule relates, 
and subject to the terms, conditions or qualif ications set forth in that Schedule, be 
exempt from ordinary customs duties in excess of those set forth and provided 
therein.  Such products shall also be exempt from all other duties or charges of any 
kind imposed on or in connection with the importation in excess of those imposed on the date of this Agreement or those directly and mandatorily required to be imposed thereafter by legislation in force in the importing territory on that date." 
                                                     
 
738 European Communities' first written submission, paras. 113-114.  See also, Ibid., para. 9.  See also, 
European Communities' second written submission, para. 68. 
739 European Communities' first written submission, paras. 122-124. WT/DS27/RW2/ECU 
Page 202  
 
  4. Panel's analysis 
7.393  Regarding Ecuador's claim under Article II:1(a) and (b) of the GATT 1994, this Panel is faced 
with two questions.  In the context of Article II:1( a), the issue is whether the European Communities 
is according to the commerce of Ecuador or other MFN countries a treatment that is less favourable than that provided for in the Eur opean Communities' Schedule.  In the context of Article II:1(b) of the 
GATT 1994, the issue is instead whether bananas orig inated in Ecuador or other MFN countries are 
being subject to import duties in excess of those th at are provided for in the relevant part of the 
European Communities' Schedule.  The term MFN count ries is generally used by the parties to refer 
to WTO Members that are not signatories to the Co tonou Agreement.  In turn, MFN bananas are the 
bananas originating in those countries.
740 
7.394  In its report on Argentina – Textiles and Apparel , the Appellate Body elaborated upon the 
meaning and scope of Article II:1 of the GATT 1994: 
"The terms of Article II:1(a) require that a Member 'accord to the commerce of the 
other Members treatment no less favourable than  that provided for' in that Member's 
Schedule ...  Article II:1(b), first sentence, st ates, in part:  'The products described in 
Part I of the Schedule ... shall, on their im portation into the territory to which the 
Schedule relates, ... be exempt from ordina ry customs duties in excess of those set 
forth and provided therein.'  Paragraph (a) of Article II:1 contains a general 
prohibition against according treatment less favourable to imports than that provided for in a Member's Schedule.  Paragraph (b ) prohibits a specific kind of practice that 
will always be inconsistent w ith paragraph (a): that is, the application of ordinary 
customs duties in excess of those provided for in the Schedule."
741 
7.395  As for the relationship between  subparagraphs (a) and (b) of Article II:1 of the GATT 1994, 
in the same report, the Appellate Body stated that: 
"In accordance with the general rules of treat y interpretation set out in Article 31 of 
the Vienna Convention , Article II:1(b), first sentence, must be read in its context and 
in light of the object and purpose of the GATT 1994.  Article II:1(a) is part of the 
context of Article II:1(b); it requires that  a Member must accord to the commerce of 
the other Members 'treatment no less favourable than that provided for' in its Schedule.  It is evident to us that the application of customs duties in excess of  those 
provided for in a Member's Schedule, in consistent with the first sentence of 
Article II:1(b), constitutes 'less favourab le' treatment under the provisions of 
Article II:1(a) …"
742 
7.396  In the same report, the Appellate Body further added: 
"Because the language of Article II:1(b), firs t sentence, is more specific and germane 
to the case at hand, our interpretative anal ysis begins with, and focuses on, that 
provision."743 
7.397  Following the approach indicated by the Appella te Body, the Panel will begin its analysis 
regarding Ecuador's claim against the European  Communities' duty of €176/mt for bananas from 
MFN countries with the first sentence of Article II:1( b) of the GATT 1994.  In this regard, the Panel 
                                                      
740 See para.2.49 above. 
741 Appellate Body Report on Argentina – Textiles and Apparel , para. 45. 
742 Ibid., para. 47. 
743 Ibid. , para. 45.  WT/DS27/RW2/ECU 
 Page 203 
 
 
  needs to ascertain:  (a) the tr eatment granted to bananas imported from MFN countries under the 
challenged measure;  (b) the treatment provided fo r bananas from WTO Members under Part I of the 
the European Communities' Schedule;  and (c) whether the challenged measure results in the 
imposition on bananas from MFN countries of ordinary customs duties in excess of those set forth and 
provided in Part I of the European Communities' Sche dule.  Only then will the Panel turn, if needed, 
to the issue of whether the duty of €176/mt for ba nanas accords to the commerce of Ecuador or other 
WTO Members a less favourable tr eatment than that provided for in the European Communities' 
Schedule.744 
(a) Treatment accorded by the European Communities to bananas from MFN countries 
7.398  The basic facts pertaining to the treatment acco rded by the European Communities to imports 
of bananas from MFN countries ar e not contested between the parti es.  Under the terms of Council 
Regulation (EC) No. 1964/2005 of 29 November 2005, since 1 January 2006, the tariff applied by the 
European Communities to MFN imports of bananas has been set at €176/mt.745 
7.399  In turn, under the terms of Regulation 1964/ 2005, and in accordance with the European 
Communities' commitments under the ACP-EC Part nership Agreement, also known as the Cotonou 
Agreement, the EC also allows duty-free access into its market to an annual quota of 775,000 mt 
bananas of ACP origin.746  In addition, the European Commun ities allows duty-free access into its 
market to bananas originating from least develope d countries, under a scheme of generalized tariff 
preferences, the so-called "Everything But Arms" (EBA) arrangement.747 
7.400  No allowance is made by the European Comm unities for the maintenance of any tariff quota 
allowing the importation of bananas from MFN count ries at rates below the €176/mt tariff duty. 
(b) Treatment provided for bananas from WTO Members under the European Communities' 
Schedule 
(i) Description of the relevant language in the European Communities' Schedule 
7.401  The Panel will now turn to the issue of the treatment provided for bananas from WTO 
Members under the European Communities' Schedule.748  For the purpose of this dispute, the relevant 
treatment is the one accorded in the European Communities' Schedule to bananas (corresponding to 
tariff item 0803 00 19). 
7.402  As noted in the factual section of this report, for all practical purposes, with respect to tariff 
heading 0803, Part I, Section I.A (Tariffs) of the European Communities' Schedule LXXX and 
Schedule CXL have identical provisions.749  Under the terms of this section, the tariff rate for bananas 
(corresponding to tariff item 0803 00 19) is bound at €680/mt.750 
                                                      
744 cf. Panel Report on EC – Chicken Cuts (Brazil) , para. 7.65. 
745 See para. 2.40 above. 
746 See para. 2.40 above. 
747 Council Regulation (EC) No. 980/2005 of 27 June 2005.  See European Communities' response to 
panel question No. 53, paras. 109-112.  See para. 2.41 above. 
748 Part I, Sections I.A and I.B, of the EC Schedul e, as well as the Bananas Framework Agreement, use 
the terms ECU or ECU/mt.  As noted above, as a result of the introduction of the Euro (€), from 1 January 1999 
all references to ECU in these docum ents were replaced by the term Euro (€).  See para. 2.28 above. 
749 See para. 2.25 above. 
750 Ibid. WT/DS27/RW2/ECU 
Page 204  
 
  7.403  Likewise, Part I, Section I.B (Tariff quotas) of the European Communities' Schedule LXXX 
and Schedule CXL have identi cal provisions for bananas.
751  Under the terms of this section, the 
European Communities has committed  to granting a tariff quota for 2.2 million mt of bananas at a 
bound in-quota tariff rate of €75/ mt.  This tariff quota commitment is classified under the subsection 
entitled "Current Access Quotas" and is qualified by the following terms and conditions:  "As 
indicated in the Annex".752  The Annex referred to in both th e European Communities' Schedule 
LXXX and Schedule CXL is the so-called "Framewo rk Agreement on Bananas" (Bananas Framework 
Agreement or BFA).753 
7.404  The Bananas Framework Agreemen t contains various provisions pertaining to the operation 
of the tariff quota for bananas.  Inter alia , the provisions in the Bananas Framework Agreement 
confirm the quota quantity and the in-quota tariff ra te, allocate the quota between different countries 
and state that the "agreement will be incorporat ed into the Community's Uruguay Round Schedule" 
and that the "agreement shall apply until 31 December 2002".754 
(ii) The task before this Panel 
7.405  The treatment provided for bananas from WT O Members under the European Communities' 
Schedule must be determined by c onsidering the language contained in Part I, Sections I.A (Tariffs) 
and I.B (Tariff quotas) of the European Communitie s' Schedule, as well as in the Bananas Framework 
Agreement that is an annex to that Schedule.  The European Communities' Schedule LXXX was the 
result of negotiations during the Uruguay Round of  Multilateral Trade Negotiations.  It was annexed 
to the Marrakesh Protocol.755  In turn, the European Communitie s' Schedule CXL was submitted to 
the WTO in March 1996.756  As of 1 May 2004, Schedule CXL was withdrawn by the European 
Communities, in the light of the European Comm unities' process of enlargement to 25 member 
States.757  As noted, the language with respect to  bananas contained in both the European 
Communities' Schedule LXXX and Schedule CXL is identical.758 
7.406  After the European Communities withdrew its Schedule CXL as of 1 May 2004, no new 
Schedule of Concessions has yet been submitted and certified (for the current European Communities 
of 25 member States) as of the date of this repor t, as the relevant negotiati ons under Article XXIV and 
Article XXVIII of the GATT 1994 are still pending.759  In a communication dated 15 July 2004, the 
European Communities informed the WTO Members of its intention to modify concessions on item 
0803 00 19 (bananas) included in Schedule CXL.760  Two new member States subsequently acceded 
to the European Communities on 1 January 2007761 and, as of the date of this report, the European 
Communities is still in the process of concluding th e relevant negotiations under Article XXIV and 
Article XXVIII.762 
7.407  The language contained in the European Commun ities' Schedules and described above in its 
relevant parts is not contested between the parties.   Indeed, in spite of the pending negotiations under 
Article XXIV and Article XXVIII of the GATT 1994, th e parties agreed that the Panel should base its 
                                                      
751 See para. 2.26 above. 
752 Ibid. 
753 See para. 2.27 above. 
754 Ibid. 
755 See para. 2.23 above. 
756 See para. 2.24 above. 
757 See paras. 2.14 and 2.29 above. 
758 See European Communities' response to panel question No. 24, paras. 79-81. 
759 Ibid. 
760 See para. 2.15 above. 
761 See para. 2.20 above. 
762 See para. 2.29 above.  WT/DS27/RW2/ECU 
 Page 205 
 
 
  decision on the identical text of the European Communities' Schedule LXXX and Schedule CXL.763  
The main area of contention between the parties is rather whether the European Communities is still 
bound to maintain a quota of 2.2 million mt of bananas at a bound tariff rate of €75/mt.  More specifically, the parties hold opposite views regard ing whether the European Communities' binding of 
the tariff quota was limited in time by the Bananas Framework Agreement.
764 
7.408  Accordingly, the main task before this Panel, regarding the issue of the treatment provided for 
bananas from WTO Members under the European Commun ities' Schedule, is to ascertain whether the 
European Communities' concession to maintain a quota of 2.2 million mt of bananas at a bound tariff 
rate of €75/mt is still valid after 31 December 20 02 or, on the contrary, whether this concession 
expired as of such date, under paragraph 9 of the Bananas Framework Agreement, leaving the 
€680/mt bound rate of duty as the only binding commitment for bananas under the European 
Communities' Schedule.  For this purpose, the Pa nel will interpret the terms contained in the 
European Communities' Schedule. 
(iii) General rules of interpretation 
7.409  As noted by the panel on EC – Chicken Cuts : 
"Article II:7 of the GATT 1994 provides that the schedules annexed to the 
GATT 1994 are made an integral part of the GATT 1994.  The Appellate Body in  EC – Computer Equipment  clarified that Article II:7 means that the concessions 
provided for in such schedules are part of the terms of the treaty, namely the GATT 
1994.
765  Article II:2 of the WTO Agreement pr ovides that the Agreements contained 
in the Annexes to the WTO Agreement, which includes the GATT 1994, are integral 
parts of the WTO Agreement.  Therefore, on the basis of Article II:7 of the GATT 
1994 and Article II:2 of the WTO Agreement, concessions contained in the EC Schedule are treaty terms of the GATT 1994 and the WTO Agreement."
766 
7.410  Given that the provisions contained in the European Communities' Schedules are to be 
considered integral parts of the GATT 1994 and the WT O Agreement, as treaty language they must be 
read "in accordance with customary rules of inte rpretation of public intern ational law".  Indeed, 
Article 3.2 of the DSU provides that: 
"The dispute settlement system of the WTO is a central element in providing security 
and predictability to the multilateral tradin g system.  The Members recognize that it 
serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements in accordance 
with customary rules of interpret ation of public international law . Recommendations 
and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements."  (emphasis added) 
7.411  Articles 31 and 32 of the Vienna Convention on  the Law of Treaties (Vienna Convention) 
codify "customary rules of interpretation of pub lic international law" within the meaning of 
                                                     
 
763 See Ecuador's and the European Communities' response to panel question No. 24. 
764 See, in particular, Ecuador's s econd written submission, paras. 53-67, European Communities' first 
written submission, paras. 113-121, and European Co mmunities' second written submission, paras. 68-90. 
765 (footnote original ) Appellate Body Report, EC – Computer Equipment , para. 84. 
766 Panel Report on EC – Chicken Cuts (Brazil) , para. 7.6. WT/DS27/RW2/ECU 
Page 206  
 
  Article 3.2 of the DSU.
767  These provisions comprise the legal framework within which any 
interpretative exercise of language contained in the WTO covered agreements must take place. 
7.412  Article 31 of the Vienna Convention provides that: 
"General rule of interpretation  
1. A treaty shall be interpreted in goo d faith in accordance with the ordinary 
meaning to be given to the terms of the trea ty in their context and in the light of its 
object and purpose. 
2. The context for the purpose of the inte rpretation of a treaty shall comprise, in 
addition to the text, including its preamble and annexes: 
(a) any agreement relating to the treaty which was made between all the parties 
in connection with the conclusion of the treaty; 
(b) any instrument which was made by one or more parties in connection with 
the conclusion of the treaty and accepted by the other parties as an instrument related 
to the treaty. 
3. There shall be taken into account, together with the context: 
(a) any subsequent agreement between the parties regarding the interpretation of 
the treaty or the application of its provisions; 
(b) any subsequent practice in the appli cation of the treaty which establishes the 
agreement of the parties regarding its interpretation; 
(c) any relevant rules of international la w applicable in the relations between the 
parties. 
4. A special meaning shall be given to a te rm if it is established that the parties 
so intended." 
7.413  In turn, Article 32 of the Vienna Convention provides that: 
"Supplementary means of interpretation  
Recourse may be had to supplementary me ans of interpretation, including the 
preparatory work of the treaty and the circumstances of its conclusion, in order to 
confirm the meaning resulting from the application of article 31, or to determine the meaning when the interpretation according to article 31: 
(a) leaves the meaning ambiguous or obscure; or (b) leads to a result which is manifestly absurd or unreasonable." 
7.414  As noted by the Appellate Body in its report on US – Shrimp : 
                                                     
 
767 See, inter alia , Appellate Body Report on US – Gasoline , p. 17;  Appellate Body Report on India – 
Patents (US) , para. 45;  and Appellate Body Report on US – Shrimp , para. 114.  WT/DS27/RW2/ECU 
 Page 207 
 
 
  "A treaty interpreter must begin with, a nd focus upon, the text of the particular 
provision to be interpreted.  It is in the wo rds constituting that provision, read in their 
context, that the object and purpose of the states parties to the treaty must first be 
sought.  Where the meaning imparted by the text itself is equivocal or inconclusive, 
or where confirmation of the correctness of the reading of the text itself is desired, 
light from the object and purpose of the tr eaty as a whole may usefully be sought."768 
7.415  In its report on US – Gasoline , the Appellate Body had also stated that: 
"One of the corollaries of the 'gener al rule of interpretation' in the Vienna Convention  
is that interpretation must give meaning and effect to all the terms of a treaty.  An 
interpreter is not free to adopt a reading that would result in reducing whole clauses 
or paragraphs of a treaty to redundancy or inutility."769 
7.416  As noted in its report by the panel on US – Section 301 Trade Act , the various elements 
provided for in Article 31 "are to be viewed as one holistic rule of inte rpretation rather than a 
sequence of separate tests to be applied in a hierarchical order"770.  Accordingly, the criteria contained 
in that provision are not to be applied in isolati on of each other.  In any event, we note that the 
purpose of treaty interpretation is "to ascertain the common  intentions of the parties".771 
(iv) Interpretation of the European Communiti es' Schedule as it refers to bananas 
Uncontested facts  
7.417  As noted above, there is no controversy between  the parties that, under Part I, Section I.A 
(Tariffs) of its Schedule, the European Communities'  tariff binding for bananas, other than plantains, 
is €680/mt.  Section I.B (Tariff quotas) of the Eur opean Communities' Schedule contains an additional 
concession for such bananas, namely, a 2.2 million mt quota at a €75/mt in-quota rate.  This additional 
concession is subject to the following qualification specified under the column of "terms and conditions":  "As indicated in the Annex".  The Annex referred to in the column of "terms and 
conditions" for bananas is the "Framework Agreement on Bananas" (Bananas Framework 
Agreement).  This Bananas Framework Agreement lays out the conditions for the operation of the 
tariff quota and, in paragraph 9, specifically pr ovides that:  "This agreement shall apply until 
31 December 2002." 
Ecuador's argument
 
7.418  We note Ecuador's argument that, while the Bananas Framework Agreement expired on 
31 December 2002772, the tariff quota of 2.2 million mt at a bound tariff rate of €75/mt is still in 
force773: 
"The 75 Ecu/mt concession for 2.2 million mt  was not made subject to the continued 
existence of the Annex or the BFA.  Paragraph 9 of the BFA provides that 'this agreement' (the BFA) applies until the end of 2002, but it does not provide that the EC's GATT tariff quota concession expires at any time.  The duty and quantity of the tariff concession does not depend on the othe r terms and conditions as set out in the 
                                                     
 
768 Appellate Body Report on US – Shrimp , para. 114. 
769 Appellate Body Report on US – Gasoline , p. 23. 
770 Panel Report on US – Section 301 Trade Act , para. 7.22. 
771 Appellate Body Report on EC – Computer Equipment , para. 84. 
772 Ecuador's response to Panel question No. 45. 
773 Ecuador's second written submission, paras. 53-6 0;  and Ecuador's response to Panel questions 
No. 25, No. 26, No. 27 and No. 45. WT/DS27/RW2/ECU 
Page 208  
 
  annex, but rather is laid out in the schedul e itself.  Expiration of the agreement would 
thus not eliminate the tariff quota concession, which is not subject to the continued effect of the BFA ..."
774 
The European Communities' response  
7.419  The European Communities responds to  this argument by stating that: 
"The Annex [to Part I, Section I.B of th e European Communities' Schedule], which is 
an integral part of the Schedules,775 provides that this tariff quota would be 
operational as of October 1, 1994 and that  it would expire on December 31, 2002.  
Therefore, on December 31, 2002, this c oncession expired in accordance with its 
terms and as of January 1, 2003, the only bound rate for bananas in the Schedules of 
concessions of the European Communities is €680 per ton."776 
Consideration of all relevant terms contai ned in the European Communities' Schedule  
7.420  The correct interpretation of the European Co mmunities' Schedule requires the consideration 
of all the relevant terms contained in Part I, Sec tions I.A and I.B, of that Schedule, as well as those 
contained in the Bananas Framework Agreement. 
7.421  As noted, Part I, Section I.A, of the Europ ean Communities' Schedule provides that the tariff 
rate for bananas (corresponding to tariff item 0803 00 12 or 0803 00 19) is bound at €680/mt.  In turn, 
Part I, Section I.B, of the European Commun ities' Schedule reflects the European Communities' 
concession for bananas to maintain a quota of 2.2 m illion mt at a bound tariff rate of €75/mt, subject 
to the terms and conditions "indicated in the Annex" (the Bananas Framework Agreement). 
7.422  Under Article II:1 (b) of the GATT 1994: 
"The products described in Part I of the Schedule relating to any [Member], which are 
the products of territories of other [Members], shall, on their importation into the territory to which the Schedule relates, and subject to the terms, conditions or 
qualifications set forth in that Schedule , be exempt from ordinary customs duties in 
excess of those set forth and provided therein."  (emphasis added). 
7.423  In other words, Article II:1 (b) of the GATT 1994 specifically allows WTO Members to 
subject the concessions contained in their schedules to the "terms, conditions or qualifications set 
forth in that Schedule". 
7.424  As specifically provided for under column 7 of Section I.B, Part I, of the European 
Communities' Schedule, the European Communities' concession regarding bananas, to maintain a 
quota of 2.2 million mt at a bound tariff rate of €75/mt, is subject to terms, conditions or qualifications 
defined in the following way: "As indicated in th e Annex".  This Annex is none other than the 
Bananas Framework Agreement. 
7.425  All elements of the European Communities' ta riff quota for bananas are described in the 
Bananas Framework Agreement, including not only th e quota quantity and the in-quota tariff rate but 
also details pertaining to the operation of the system , such as the allocation of country-specific quotas, 
                                                     
 
774 Ecuador's second written submission, para. 58. 
775 (footnote original ) See Article 10 of the Annex, which provides that it should be "incorporated into 
the Community's Uruguay Rounds Schedule". 
776 European Communities' first written submission, para. 114.  WT/DS27/RW2/ECU 
 Page 209 
 
 
  the management of the quotas and the duration of th e system.  As a matter of fact, certain provisions 
of the Bananas Framework Agreement, such as the allocation of country-specific quota shares, but not 
the Bananas Framework Agreement as a whole, we re found in the original proceedings to be 
inconsistent with the WTO agreements.777 
7.426  The European Communities' tariff quota concession for bananas must therefore be 
understood, under the "terms, conditions or qualifications" set forth in column 7 of Section I.B, Part I,  
of the European Communities' Schedule, to be subject  to what is indicated in the Bananas Framework 
Agreement.  In other words, the European Comm unities' tariff quota concession for bananas provided 
for in column 7 of Section I.B, Part I, of the European Communities' Schedule cannot be read in 
isolation from the terms in the Bananas Framework Agreement. 
7.427  Paragraph 9 of the Bananas Framework Agreement states that "[t]his agreement shall apply 
until 31 December 2002".  This provision is, for the reasons stated above, part of the "terms, 
conditions or qualifications" that apply to th e European Communities' tariff quota concession for 
bananas.  As provided in column 7 of Section I. B, Part I, of the EC Schedule, the European 
Communities' tariff quota concession for bananas is subject to what is indicated in the Bananas 
Framework Agreement.  Accordingly, the expi ration of the Bananas Framework Agreement on 
31 December 2002 would automatically imply expira tion of the European Communities' tariff quota 
concession under the terms of its Schedule.  The European Communities could subsequently, of 
course, renegotiate any new concession for bananas in  its Schedule, subject to the completion of the 
appropriate procedures, whether or not under Artic le XXIV of the GATT 1994 in the context of an 
enlargement of its member States. 
7.428  The Panel notes Ecuador's argument that "[t]he duty and quantity of the tariff concession does 
not depend on the other terms and conditions as set  out in the annex [the Bananas Framework 
Agreement], but rather is laid out in the schedule itself."778  The Panel reads this statement to mean 
that, in Ecuador's view, the quota quantity, as well as  the in-quota duty, applicable to the European 
Communities' tariff quota concession for bananas, are laid  out in Part I, Section I.B, of the European 
Communities' Schedule, although both are also mentione d in paragraphs 1 and 7, respectively, of the 
Bananas Framework Agreement.  The European Communities' Schedule as it refers to bananas, 
however, does not only comprise Part I, Sections I.A and I.B, but also, as we have noted above, the Bananas Framework Agreement. 
7.429  However, even if we agree that the quota quan tity, as well as the in-quota duty, applicable to 
the European Communities' tariff quota concession for bananas, are laid out in the European 
Communities' Schedule, it does not follow that:  "E xpiration of the agreement would... not eliminate 
the tariff quota concession, which is not subj ect to the continued effect of the BFA."
779  Indeed, the 
European Communities' concession to grant a tariff quot a for bananas is specifically subject to the 
"terms, conditions or qualifications" set forth in  the Bananas Framework Agreement.  These terms 
include the fact that the agreement would only a pply only until 31 December 2002.  As Ecuador itself 
admits780, there is nothing in the WTO Agreement th at would prevent a Member from qualifying a 
specific concession in its Schedule by subjecting it to a date of expiry.  As noted by the GATT panel 
on US – Sugar Waiver : 
"Although the granting of concessions c onditional upon the discretion of the 
concession-granting government may not be meaningful because of the obvious legal 
uncertainty thereby created, the Genera l Agreement does not oblige contracting 
                                                      
777 See paras. 2.65 to 2.67 above. 
778 Ecuador's second written submission, para. 58. 
779 Ibid. 
780 Ecuador's response to Panel question No. 99. WT/DS27/RW2/ECU 
Page 210  
 
  parties to make concessions and specifically allows them in Article II:1(b) to subject 
to conditions the concessions they decide to make."
781 
Consideration of the object and purpose of the WTO Agreements  
7.430  Under the general customary rule of interpretati on of public international law, as codified in 
Article 31 of the Vienna Convention, the Panel is di rected to interpret the te rms of a treaty in their 
context and in the light of the treaty's object and purpose. 
7.431  The object and purpose of the WTO Agreement can  be deduced from its preamble and from 
the preambles of the agreements that are annexe d to it.  The preamble of the WTO Agreement 
specifies that one of the purposes of the Agreement is to "expand... trade in goods and services".  It 
also states that Members should contribute to the above-mentioned expans ion "by entering into 
reciprocal and mutually advantageous arrangements di rected to the substantial reduction of tariffs and 
other barriers to trade." 
7.432  In this respect, in EC – Computer Equipment  the Appellate Body stated that: 
"[T]he security and predictability of 'the  reciprocal and mutually advantageous 
arrangements directed to the substantial reduc tion of tariffs and other trade barriers to 
trade' is an object and purpose of the WTO Agreement, generally, as well as of the 
GATT 1994."782 
7.433  This general object and purpose is consistent with the more specific object and purpose of 
Article II:1(a) and (b) of the GATT 1994.  Indeed, the requirement in these provisions that Members shall not accord to the products of other Members a "t reatment less favourable than that provided for" 
in their respective Schedules of Concessions, is comp atible with the objective of promoting security 
and predictability in international trade, through th e exchange of concessions that are contained in 
Schedules that are multilaterally approved and beco me binding on all WTO Members as integral parts 
of their commitments under the WTO agreements. 
7.434  In the light of the object and purpose of the WTO Agreement and the GATT 1994, 
concessions made by WTO Members should be interp reted so as to further the general objective of 
expanding trade in goods and services and reducing barriers to trade, through the negotiation of 
reciprocal and mutually advantageous arrangements.  At the same time, in order to promote security and predictability, such an interpretation is limite d by the specific terms, conditions and qualifications 
contained in the Members' respective Schedules of Concessions. 
7.435  Accordingly, a consideration of the terms of the European Communities' Schedule, which 
takes into account Part I, Sections I.A (Tariffs ) and I.B (Tariff quotas) and the Bananas Framework 
Agreement, is consistent with the object and purpose of the WTO Agreement, the GATT 1994 and, 
more specifically, of Article II:1(a) and (b) of the GATT. 
7.436  In conclusion, in light of the ordinary meani ng to be given to the terms of the European 
Communities' Schedule, taking into account Part I, S ections I.A (Tariffs) and I.B (Tariff quotas), and 
the Bananas Framework Agreement, in their context a nd in the light of the treaty's object and purpose, 
the European Communities' tariff quota concession fo r bananas was unequivocally intended to expire 
on 31 December 2002.  The alternative reading of  the Schedule suggested by Ecuador would reduce 
to inutility Paragraph 9 and, indeed, the whole Bana nas Framework Agreement.  It would amount to a 
partial reading of the European Communities' Sche dule, limited to columns 1 to 4 of Section I.B, 
                                                     
 
781 GATT Panel Report on US – Sugar Waiver , para. 5.8. 
782 Appellate Body Report on EC – Computer Equipment , para. 82.  WT/DS27/RW2/ECU 
 Page 211 
 
 
  Part I, of the European Communities' Schedule, i gnoring the language containe d in column 7 and in 
the Bananas Framework Agreement. 
Subsequent agreement between the parties  
Treatment of subsequent agreement between the parties 
7.437  The Panel has so far noted the terms of the European Communities' Schedule, taking into 
account Part I, Sections I.A (Tariffs) and I.B (T ariff quotas), and the Bananas Framework Agreement, 
in their context and in the light of the treaty' s object and purpose.  However, under the general 
customary rule of interpretation of public interna tional law, as codified in Article 31 of the Vienna 
Convention, the Panel is also directed to take into account, together with the context: 
"(a) any subsequent agreement between th e parties regarding the interpretation of 
the treaty or the application of its provisions; 
(b) any subsequent practice in the appli cation of the treaty which establishes the 
agreement of the parties regarding its interpretation; 
(c) any relevant rules of international la w applicable in the relations between the 
parties." 
7.438  In the light of this rule of interpretation, th e Panel must therefore determine whether there is 
any subsequent agreement between the parties, a ny subsequent practice in the application of the 
treaty, or any relevant rules of international law th at are relevant for the task of identifying what was 
the common intention of the WTO Members, re garding the European Communities' tariff quota 
concession for bananas.  The Panel has already noted  that, pursuant to Article II:7 of the GATT 1994, 
the Schedules of Concessions of WTO Members are an integral part of the GATT 1994 and, more 
generally, an integral part of the WTO Agreement.  Consequently, in the context of the interpretation 
of such Schedules, any subse quent agreement between the parties , regarding the European 
Communities' tariff quota concession for bananas, in the terms of Article 31 of the Vienna 
Convention, is to be understood as an y subsequent agreement between the WTO Members . 
Evidence of subsequent agreement between th e parties regarding the interpretation of 
the treaty or the application of its provisions 
7.439  Paragraph 9 of the Bananas Fr amework Agreement states that: 
"This agreement shall apply until 31 Decemb er 2002.  Full consultations with the 
Latin American suppliers that are GATT Memb ers should start no later than in year 
2001..."783 
7.440  On its face, the second sentence of paragraph 9 ca lls for consultations to take place, starting 
"no later than in year 2001", between the Europ ean Communities and the Latin American suppliers, 
presumably to negotiate the new terms and conditions  that the European Communities would apply to 
imports of bananas after 31 December 2002.  The te rms of the text do not prejudge the result of the 
consultations that would take place between th e European Communities and the Latin American 
suppliers.  At the same time, those same terms do not exclude the possibility that the concession on 
bananas could be extended as a result of the cons ultations.  Indeed, the European Communities has 
stated that, pursuant to the Bananas Framework Agreem ent, "the parties had agreed to negotiate a new 
                                                      
783 See also, European Communities' second written submission, para. 78. WT/DS27/RW2/ECU 
Page 212  
 
  banana import system as of 2001", thereby ensuri ng that, "before the expiration of this concession 
they would have the opportunity  to negotiate new concessions".
784 
7.441  On 14 November 2001, the WTO Ministerial Co nference meeting in Doha approved the 
ACP-EC Partnership Agreement waiver (Doha Waiver).785  In its preamble to the Doha Waiver, the 
WTO Members noted, among other things: 
"[T]hat the tariff applied to bananas im ported in the 'A' and 'B' quotas shall not 
exceed 75 €/tonne until the entry into force of the new EC tariff-only regime. 
[T]hat the implementation of the preferen tial tariff treatment for bananas may be 
affected as a result of GATT Article XXVIII negotiations; 
[T]he assurances from the Par ties to the Agreement that any re-binding of the EC 
tariff on bananas under the relevant GATT Article XXVIII procedures should result 
in at least maintaining total market access for MFN banana suppliers and their 
willingness to accept a multilateral control on the implementation of this commitment."
786 
7.442  In turn, the Bananas Annex to the Doha Waiver provides, inter alia , that: 
"The waiver would apply for ACP pr oducts under the Cotonou Agreement until 
31 December 2007.  In the case of banan as, the waiver will also apply until 31 
December 2007, subject to the following, which is without prejudice to rights and 
obligations under Article XXVIII . 
The parties to the Cotonou Agreement w ill initiate consultations with Members 
exporting to the EU on a MFN basis (interested parties) early enough to finalize the 
process of consultations under the procedures hereby established at least three months 
before the entry into force of the new EC tariff only regime. 
No later than 10 days after the conclusi on of Article XXVIII negotiations, interested 
parties will be informed of the EC inten tions concerning the rebinding of the EC tariff 
on bananas.  In the course of such cons ultations, the EC will provide information on 
the methodology used for such rebinding.  In this regard, all EC WTO market-access 
commitments relating to bananas should be taken into account. "787  (emphasis added) 
7.443  The Doha Waiver is an agreement reached between the same parties to the Bananas 
Framework Agreement788 (i.e., the WTO Members), it is subsequent to the Bananas Framework 
Agreement, and, like the Bananas Framework Agreement, it deals, inter alia , with the European 
Communities' WTO market-access commitments relating to bananas.  Similarly to what is provided 
for in paragraph 9 of the Bananas Framework Ag reement, under the Doha Waiver the European 
Communities is committed to engage in consultati ons with WTO Members exporting bananas to the 
European Communities on an MFN basis.  Given the se factors, the Doha Waiver, as it relates to the 
                                                      
784 European Communities' second written submission, para. 80. 
785 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision 
of 14 November 2001 (WT/MIN(01)/15), 14 November 2001. 
786 Ibid. 
787 Ibid. (Emphasis added). 
788 Although the Bananas Framework Agreement was originally negotiated in 1994 between the 
European Communities, Colombia, Costa Rica, Venezuela and Nicaragua (see Panel Report on EC – Bananas III 
(Ecuador) , para. 3.30), it was made an integral part of the WT O agreements, by virtue of its incorporation as an 
annex to the European Communities Schedule and thus became multilateral in nature.  WT/DS27/RW2/ECU 
 Page 213 
 
 
  European Communities' WTO market-access commitmen ts relating to bananas, is a "subsequent 
agreement between the parties" to the Banan as Framework Agreement (i.e., the WTO Members), 
regarding the application of the provisions of the WT O agreement as it pertains to such market access 
commitments.  In other words, in order to ascer tain the common intentions of the WTO Members, 
regarding the European Communities' WTO market  access commitments rela ting to bananas, we 
cannot ignore the agreement reached between the WTO Members through the Doha Waiver. 
The extension of the European Commun ities' tariff quota concession for bananas 
beyond the date of expiration in the Bananas Framework Agreement 
7.444  As noted above, the Doha Waiver recognizes the WTO Members' common intention that, 
until the entry into force of the new European Co mmunities' tariff-only regime, the in-quota tariff 
applied to bananas "shall not exceed 75€/mt", as we ll as the common intention that any rebinding of 
the European Communities' tariff on bananas under GATT Article XXVIII procedures "should result 
in at least maintaining total market access for MF N banana suppliers".  The Doha Waiver also 
provides that, in the case of bananas, the waiver would apply "without prejudice to rights and obligations under Article XXVIII", and that, in th e process of Article XXVIII negotiations for the 
purpose of the rebinding of the European Comm unities' tariff on bananas, "all EC WTO market-
access commitments relating to bananas should be taken into account".
789 
7.445  Under the terms of the Doha Waiver, the Eur opean Communities is comm itted to maintaining 
its concessions regarding bananas contained in Part I, Section I.A (Tariffs) and Section I.B (Tariff 
quotas) of the European Communities' Schedule, un til the entry into force of the new European 
Communities' tariff-only regime.790  Such a tariff-only regime would result from a rebinding of the 
European Communities' concession on bananas, subsequent to negotia tions under GATT Article 
XXVIII procedures.791 
7.446  In adopting the Doha Waiver, the WTO Memb ers agreed to extend the duration of the 
European Communities' tariff quota concession for bananas beyond 31 December 2002, the date of 
expiration envisaged in the Bananas Framework Agre ement.  As a result, the European Communities' 
tariff quota concession for bananas, as contained in Part I, Sections I.A (Tariffs) and I.B (Tariff 
quotas) of the European Communities' Schedule, w ould remain in force until the completion of the 
Article XXVIII negotiations for the purpose of the rebinding of the European Communities' tariff on bananas and the subsequent entry into force of a new European Communities' tariff regime.  While 
some aspects of the European Communities' tariff quota concession for bananas, as described in the 
Bananas Framework Agreement, ha d to be modified as a result of the recommendations and rulings 
adopted by the DSB in the EC – Bananas III  case, the basic aspects of such concession and, more 
specifically, the quota quantity and the in-quota tariff rate, as described in co lumn 4 of Section I.B, 
Part I, of the European Communities' Schedule, are not as such affected by these recommendations 
and rulings. 
7.447  The European Communities has confirmed that  Article XXVIII negotiations for the purpose 
of the rebinding of the European Communities' c oncession on bananas, as envisaged in the Doha 
Waiver, have not yet been concluded.
792  There is no provision in the WTO Agreement that would 
                                                      
789 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision 
of 14 November 2001 (WT/MIN(01)/15), 14 November 2001. 
790 Ibid. 
791 Ibid., preamble, recital 11, and Bananas Annex. 
792 See European Communities' first written submission,  paras. 6 and 7, European Communities' second 
written submission, para. 87, and European Communities' response to panel question No. 9, paras. 18-19, 
No. 24, para. 80, and No. 56, para. 117. WT/DS27/RW2/ECU 
Page 214  
 
  allow a Member to unilaterally modify the con cessions contained its Schedule, unless procedures for 
renegotiation of such Schedule are formally concluded. 
7.448  The Panel has noted the European Communities' statement that: 
"[E]ven if that concession [the tariff quota fo r 2.2 million tons of bananas at a tariff 
rate of €75/mt] had not expired at the end of 2002, it is clear that it was lawfully 
terminated on January 1, 2006, when the European Communities in troduced the tariff 
only import regime."
793 
7.449  The Panel reads this argument to mean that, in the European Communities' view, the entry 
into force of the "new EC import regime" for bananas would be enough to modify the European Communities' concession.  However, the final sentence of the fifth tiret of the Bananas Annex to the 
Doha Waiver expressly provides that: 
"The Article XXVIII negotiations and the ar bitration procedures shall be concluded 
before the entry into force of  the new EC tariff only regime  on 1 January 2006". 
(emphasis added) 
7.450  Furthermore, the chapeau of the Bananas Annex st ates that the waiver is "without prejudice to 
rights and obligations under Ar ticle XXVIII [of the GATT 1994]" 
7.451  Accordingly, the appropriate procedures must  be finalized, before the concession can be 
legitimately modified or withdrawn and replaced with a new one. 
7.452  The Panel additionally notes that Article XXVIII of the GATT 1994 (Modification of 
Schedules) deals with the renegotiation of concessi ons contained in the Schedule of a WTO Member 
that is annexed to the GATT 1994.  This provisi on allows Members to modify or withdraw a 
concession included in the appropriate Schedul e annexed to the GATT 1994, but only through 
negotiation and agreement with Members holding special rights.  Once these negotiations are concluded, the Member shall submit a draft reflec ting the modifications to be introduced to its 
schedule resulting from the Article XXVIII negotiati ons to the Director-General, who will in turn 
communicate such a draft to the Members.  The chan ges would then be certified, provided no relevant 
objection is raised by the Members.
794  No withdrawal or modification of the original European 
Communities' schedule has so far been certified. 
7.453  The European Communities argues that: 
"[T]he Panel should disregard Ecuador's claims under Article XXVIII of the GATT, 
because Ecuador did not include any Artic le XXVIII claims in its request for the 
establishment of the Panel and, therefore, an analysis of Article XXVIII issues is not 
within the Terms of Reference of this Panel."795 
7.454  The examination of a claim relating to a possible breach of GATT Article XXVIII of the 
GATT 1994 would be outside the terms of reference of  this Panel.  Nevertheless, in light of the 
specific matter before this Panel and because of th e numerous references made to Article XXVIII in 
the Doha Waiver, the Panel cannot totally disregard this provision.  The combined reading of Articles 
II and XXVIII of the GATT 1994 implies that, un til negotiations under the latter provision are 
                                                      
793 European Communities' first written submission, para. 122. 
794 Procedures for Modification and Rectification of Schedules of Tariff Concessions, Decision of 
26 March 1980 (L/4962). 
795 See European Communities' response to panel question No. 28, para. 93.  WT/DS27/RW2/ECU 
 Page 215 
 
 
  formally concluded, a Member continues to be bou nd by the concessions contained in its Schedule.  
This is so even though, as in this case, the concession was originally intended to expire on 
31 December 2002. 
Conclusion regarding the subsequent  agreement between the parties 
7.455  In light of the above, and more specifically, of the terms of the Doha Waiver, the common 
intention of the WTO Members, regarding the European Communities' tariff quota concession for 
bananas, cannot have been that the concessions fo r MFN banana suppliers contained in such tariff 
quota, contained in column 4 of Section 1.B, Part  I, of the European Communities' Schedule, would 
expire on 31 December 2002 upon expiration of the Bananas Framework Agreement.  Neither would 
it have been that, lacking completion of the relevant GATT Article XXVIII procedures, those market 
access opportunities for MFN banana suppliers would not be preserved. 
7.456  On the contrary, the common intention of the WT O Members, as reflected in the text of the 
Doha Waiver, is that all the European Commun ities' WTO market-access commitments relating to 
bananas would be taken into account for the purpose of the rebinding of the European Communities' 
tariff, in the context of the GATT Article XXVIII ne gotiations, so that the rebinding of the tariff on 
bananas would result in at least maintaining total ma rket access for MFN banana suppliers.  It is also 
the common intention of the WTO Members that, pending the completion of the Article XXVIII negotiations for the purpose of the rebinding of the European Communities' tariff on bananas, and the 
subsequent entry into force of a new Europ ean Communities' tariff regime, the European 
Communities' tariff quota concession for bananas, as contained in Part I, Sections I.A (Tariffs) and I.B (Tariff quotas) of the European Communities'  Schedule, would contin ue to constitute the 
European Communities' scheduled commitments regarding bananas. 
Consideration of supplementary means of interpretation
 
Treatment of supplementary means of interpretation 
7.457  Under the customary rules of interpretation of pub lic international law, as codified in Article 
32 of the Vienna Convention, the Panel may also have recourse to supplementary means of 
interpretation, including the preparatory work of the treaty and the circumstances of its conclusion.  In 
the present case it is useful to have recourse to such  supplementary means of interpretation in order to 
determine whether those instruments confirm th e meaning resulting from the application of the 
general rule of interpretation codified in Article 31 of the Vienna Convention. 
7.458  The Panel notes in this regard that parties have provided extensive arguments and factual 
information that may be relevant as supplementary means of interpretation in order to ascertain the 
common intention of WTO Members, regarding the European Communities' tariff quota concession 
for bananas.  The Panel accordingly considers th ese arguments and information advanced by the 
parties. 
Arguments provided by the parties 
7.459  Ecuador refers to a number of factors related to the context and history of the European 
Communities' tariff quota for bananas.  Ecuador ar gues, for example, that, in accordance with the 
modalities for the agricultural ma rket access negotiations that took place in the Uruguay Round, the 
tariff quota was "bound at a level intende d to preserve pre-Uruguay Round access".796 
                                                      
796 Ecuador's second written submission, paras. 53 and 59. WT/DS27/RW2/ECU 
Page 216  
 
  7.460  The European Communities responds that the Modalities Paper for the Uruguay Round 
agricultural market access negotiations was issued w ith the explicit qualification that it would "not be 
used as a basis for dispute settlement proceedi ngs" under the WTO Agreement.  The European 
Communities consequently asks the Panel to disregard Ecuador's arguments built on such 
document.
797 
7.461  Ecuador also argues that, "[h]ad the Parties intended to bind the tariff quota only for so long 
as the [Bananas Framework Agreement] applied... th ey would have specified the limited duration of 
the concession  [rather than of the agreement] in  the [Bananas Framework Agreement]."798  In 
Ecuador's view: 
"The duty and quantit y of the tariff concession does not  depend on the other terms 
and conditions as set out in the annex, but ra ther is laid out in the schedule itself.  
Expiration of the agreement would thus not eliminate the tariff quota concession, which is not subject to the continued effect of the BFA ... 
[I]t is scarcely likely that the negotiato rs of the [Bananas Framework Agreement] 
would [have considered] a satisfactory solution a system that, as of 2003, would leave 
all their banana exports to the EC subject  to an essentially prohibitive duty of 
€680/mt".
799 
7.462  In response to this argument, the European Communities notes that Ecuador has stated that: 
"It would de-stabilize the entire premise of the WTO tariff system if concessions were 
to be adjusted according to whether the c oncessions had the result contemplated at the 
time that the concession was granted."800 
7.463  The European Communities adds that "the par ties had agreed to negotiate a new banana 
import system as of 2001" (one year before the e xpiration of the European Communities' tariff quota 
concession, an anticipated in the Bananas Framewor k Agreement), thereby ensuring that "they would 
have an important quantity exported at a low tari ff" until the end of 2002 and that, "before the 
expiration of this concession th ey would have the opportunity  to negotiate new concessions".801 
7.464  Ecuador also argues that: 
"If the only EC binding after 2002 were at a level of €680/mt, there would have been 
no reference to Article XXVIII  negotiations [in the Doha Waiver]...  Plainly, the 
waiver called for Article XXVIII negotiations because of the possibility that the EC 
would seek to rebind its MFN duty at a le vel above the bound tariff rate quota of 
75Ecu/mt."802 
7.465  In Ecuador's view: 
"If €680/mt was the EC's only bound rate as of January 1, 2003, the EC would never 
even have issued an Article XXVIII notif ication [such as those filed in August 2004 
                                                      
797 European Communities' second written submission, paras. 70-72. 
798 Ecuador's second written submission, para. 58. 
799 Ibid., paras. 58-59. 
800 European Communities' second written submissi on, para. 79, quoting Ecuador's second written 
submission, para. 25. 
801 European Communities' second written submission, para. 80. 
802 Ecuador's second written submission, para. 61.  WT/DS27/RW2/ECU 
 Page 217 
 
 
  and February 2005]...  No Member would invoke Article XXVIII:5 procedures to 
lower its bound rate."803 
7.466  To this argument, the European Communities responds that "Ecuador's link between the 
initiation of negotiations under GATT Article XXVIII and the expiration of the tariff quota for the 
2.2 million tons is erroneous and di sregards the facts of this case".804  In the European Communities' 
view: 
"[The European Communities] was obliged to  initiate negotiations in accordance with 
GATT Article XXVIII both by the [Bananas] Understanding and by the Doha waiver... [and] the initiation of the GATT Article XXVIII negotiations by the [EC] does not amount to a supposedly de facto 'rebinding' of that tariff quota".
805 
7.467  The European Communities also argues that: 
"[T]his Panel does not need to proceed to a full legal analysis of the provisions of 
GATT Article XXVIII and, in particular, rule on whether the GATT Article XXVIII procedures must be followed only when a WTO Member intends to increase its bound rates, or also when it intends to lower its bindings."
806 
7.468  The European Communities further states that: 
"[G]iven the facts of this case, this Panel does not need to proceed to a full legal 
analysis of the provisions of GATT Article XXVIII and, in particular, rule on whether 
the GATT Article XXVIII procedures must be  followed only when a WTO Member 
intends to increase its bound rates, or also when it intends to lower its bindings.  
Without taking a position on this issue, the European Communities simply notes that 
the panel report in EEC-Newsprint may support the proposition that 'under long 
standing GATT practice, even purely formal changes in the tariff schedules of a contracting party which may not affect the GATT rights of other countries, such as the conversion of a specific to an ad valorem duty without an increase in the 
protective effect of the tariff rate in qu estion, have been considered to require 
renegotiations'.
807"808 
7.469  Ecuador notes that "[t]he first award of the Arbitrator in 2005 reflects the common 
understanding that tariff quota remained bound in Schedule CXL".809  In Ecuador's view: 
"[T]he EC, the Arbitrator, and the WTO me mbers as a whole have consistently and 
repeatedly treated the tariff quota bananas as bound past the expiration date of the 
[Bananas Framework Agreement].  Indeed, until the EC's submission of July 20 to 
this Panel, the EC has never argued to the contrary, never objected to any statement to 
the contrary, never contended that it would not need to go through Article XXVIII to bind a duty above 75 Ecu/mt... Neither has any other WTO Member, Panelist or 
Arbitrator taken the position that the EC now espouses.  This consensus, now 
                                                     
 
803 Ecuador's second written submission, para. 62. 
804 European Communities' second written submission, para. 85. 
805 Ibid., para. 86. 
806 Ibid., para. 88. 
807 (footnote original ) See the Report of the GATT Panel on Newsprint , dated October 17, 1984 and 
adopted on November 20, 1984, at paragraph 50. 
808 European Communities' second written submission, para. 88. 
809 Ecuador's second written submission, para. 65. WT/DS27/RW2/ECU 
Page 218  
 
  breached by the EC, is not surprising, b ecause it is consistent with the language, 
context and history of the concession."
810 
7.470  To this argument the European  Communities responds that it: 
"[C]onsiders that the description of its im port regime... and the conclusions of the 
[Arbitration] Awards on the effects of its import regime on the total market access of 
MFN suppliers are not correct."811 
7.471  The European Communities adds that: 
"[T]he descriptions contained in the Ar bitration Awards do not have any relevance 
for the present procedure...  First, because the Arbitration was not held within the 
context of the DSU...  Second, because the subject matter of the Arbitration was to 
determine whether the new import regime of the [European Communities] would 
maintain total market access for MFN suppliers and not to determine what were the 
concessions bound in Schedule CXL [and t]here fore, any relevant statements in the 
Arbitration Awards should be treated as simple dicta ..."812 
Modalities for Uruguay Round agricultural market access negotiations  
7.472  The Panel turns to the issue of the so-called "Modalities Paper"813, which was used during the 
Uruguay Round negotiations to schedule commitments under the future Agreement on Agriculture .  
The preamble to the Modalities Paper provides the following: 
"The revised text is being re-issued on the understanding of participants in the 
Uruguay Round that these negotiating modalities shall not be used as a basis for dispute settlement proceedings under the [WTO] Agreement."
814 
7.473  As noted by the panel in EC – Export Subsidies on Sugar : 
"[T]he so-called Modalities Paper is not a covered agreement and thus cannot provide 
for WTO rights and obligations to Members.  Nonetheless, it could be relevant when 
interpreting the Agreement on Agriculture,  including Members' Schedules."815 
7.474  In the present case, the Modalities Paper, while havi ng no legal standing of its own in terms 
of affecting WTO Members' rights and obligations , can be useful as a supplementary means of 
interpretation, in order to ascertain the common in tention of WTO Members, regarding the European 
Communities' tariff quota concession for bananas. 
7.475  Indeed, as a result of the agricultural market  access negotiations that took place in the 
Uruguay Round, Members undertook the commitment to  maintain and increase current market access 
opportunities as part of the so-called "tariffication" process, "on terms at least equivalent to those 
                                                      
810 Ecuador's second written submission, para. 66. 
811 European Communities' second written submission, para. 89. 
812 Ibid., para. 90. 
813 Negotiating Group on Market Access, Modalities for the Establishment of Specific Binding 
Commitments, Note by the Chairman of the Market Access Group (MTN.GNG/MA/W/24), 20 December 1993. 
814 Ibid., p. 1. 
815 Panel Report on EC – Export Subsidies on Sugar (Brazil) , para. 7.350.  See also, Appellate Body 
Report on EC – Export Subsidies on Sugar , para. 199.  WT/DS27/RW2/ECU 
 Page 219 
 
 
  existing" at the time816.  The maintenance of current market access opportunities was achieved, inter 
alia, through the concession of tariff quotas at rates th at were lower than the respective tariff binding. 
7.476  In this regard, we note Ecuador's argument that: 
"The tariff quota[s], in accordance with the modalities for the agricultural market 
access negotiations, were bound at a level intended to preserve pre-Uruguay Round 
access."817 
7.477  Ecuador additionally notes that: 
"[A] time limited tariff quota concession woul d have been grossly inconsistent with 
the Uruguay Round modalities, because it would leave the EC with the WTO right to apply an essentially prohibitive duty on a ll bananas.  As noted, the Uruguay round 
modalities called for binding tariff quotas in an  amount and at a duty level sufficient 
to permit access at least equivalent to that existing in the base period".
818 
7.478  This argument in itself is not enough to provide  a definitive orientation regarding the common 
intention of the WTO Members, as it pertains to  the European Communities' WTO market-access 
commitments relating to bananas.  Nevertheless, the modalities agreed for the establishment of binding 
commitments during the agricultural market acce ss negotiations that took place in the Uruguay 
Round, reflected in the Modalities Paper, confirm th e conclusion reached by the Panel regarding the 
common intention of WTO Members:  that the European Communities' tariff quota concession for 
bananas would remain in force, in its substa nce, pending any later rebinding of the European 
Communities' tariff on bananas. 
Expectations of the parties when nego tiating the Bananas Framework Agreement  
7.479  The Panel turns to Ecuador's argument that it is  unlikely that the negotiators of the Bananas 
Framework Agreement would have agreed to a sy stem that, as of 2003, would have left banana 
exports to the European Communities being subject to a duty of €680/mt and that, if the parties to the 
Bananas Framework Agreement ha d intended to bind the tariff quota only for so long as such 
agreement applied, they would have specified the li mited duration of the concession in the text of the 
Bananas Framework Agreement. 
7.480  This argument is not particularly helpful for the following two reasons. 
7.481  First, under the customary rules of interpretation of  public international law, as codified in the 
Vienna Convention, when attempting to ascertain the common intentions of the parties we must 
initially turn to the terms of the treaty, and not to th e subjective intentions of one of the parties.  Much 
less may we engage in an exercise to determine whet her it is likely or unlikely that the negotiators of 
the Bananas Framework Agreement would have  agreed to a time-limited concession. 
7.482  Second, we have already found that, although the date of expiration envisaged in the Bananas 
Framework Agreement for the European Communities'  tariff quota concession for bananas, as listed 
in the EC Schedule, was modified by a subseque nt agreement between the WTO Members contained 
                                                      
816 Negotiating Group on Market Access, Modalities for the Establishment of Specific Binding 
Commitments, Note by the Chairman of the Market Access Group (MTN.GNG/MA/W/24), 20 December 1993, 
paras. 4 and 6, and Annex 3, para. 11. 
817 Ecuador's second written submission, para. 53. 
818 Ibid., para. 59. WT/DS27/RW2/ECU 
Page 220  
 
  in the Doha Waiver, the Bananas Framework Agreem ent did originally provide that this concession 
would expire on 31 December 2002. 
Negotiations under Article XXVIII of the GATT 1994
 
7.483  As regards Ecuador's argument relating to Ar ticle XXVIII of the GATT 1994, the Panel has 
already noted the relevance of this provision for the present case.819 
7.484  The procedures contemplated in the Bananas A nnex to the Doha Waiver establish a link with 
the negotiations under Article XXVIII of the GA TT 1994.  Indeed, the European Communities has 
issued notifications and initiated negotia tions under Article XXVIII of the GATT 1994, inter alia  on 
July 2004 and January 2005820, for the purpose of rebinding its concession on bananas. 
7.485  As Ecuador notes, the process of negotiations under Article XXVIII of the GATT 1994 would 
become irrelevant if, from 1 January 2003, the Eu ropean Communities' only binding for bananas were 
€680/mt.  Indeed, if this were the European Commun ities' only commitment, the application of a tariff 
of €230/mt, of €187/mt or of €176/mt would all be consistent with a binding at that tariff level and 
would not require the conclusion of negotiations under Article XXVIII.  Indeed, if such were the case, 
the European Communities would hava  been free to reduce its binding on bananas to any level below 
€680/mt.  Furthermore, the inclusion of provisions in the Doha Waiver intended to safeguard the 
rights of MFN suppliers under Article XXVIII would have been unnecessary, as these suppliers would 
not have been entitled to compensation.  Negotia tions under Article XXVIII would instead become 
necessary before moving the tariff quota on bananas into a tariff-only system. 
7.486  The European Communities' argument that it onl y initiated negotiations under Article XXVIII 
because it was required to do so under both the Bana nas Understanding it signed with Ecuador on 
April 2001 and the Doha Waiver does not disprove  such a conclusion.  On the contrary, the 
requirement contained in both the Bananas Unders tanding signed between the European Communities 
and Ecuador on April 2001 and the Bananas Annex to the Doha Waiver is further evidence of the 
common intention of the WTO Members, including the European Communities, that negotiations 
under Article XXVIII were necessary for the purpose of rebinding the European Communities' tariff 
on bananas. 
7.487  The Panel notes the European Communities' argument, referring to the GATT panel Report 
on EEC – Newsprint , that procedures under Article XXVIII may be followed even when a WTO 
Member is not intending to increase its bound rates.821  The current situation is, however, different 
from that analysed by the GATT panel in EEC – Newsprint .  None of the parties argues that the 
proposed modification of the European Communities' concession on bananas amounts to a "purely 
formal change in the tariff schedules of" the Eu ropean Communities, which would "not affect the 
GATT rights of other [Members]" nor that it is "[t]he conversion of a specific to an ad valorem duty". 
7.488  In conclusion, this argument in itself is also  not enough to provide a definitive orientation 
regarding the common intention of the WTO Members,  as it pertains to the European Communities' 
WTO market-access commitments rela ting to bananas.  Nevertheless,  the negotiations undertaken by 
the European Communities under Article XXVIII of the GATT 1994 for the purpose of rebinding its 
tariff on bananas, and the additional fact that th ese negotiations were required in both the Bananas 
Understanding signed between the European Comm unities and Ecuador on April 2001 and the 
Bananas Annex to the Doha Waiver, confirm the conclusion reached by the Panel regarding the 
common intention of WTO Members. 
                                                      
819 See paras. 7.444 to 7.456 above. 
820 See paras. 2.15 and 2.16 above. 
821 European Communities' second written submission, para. 88.  WT/DS27/RW2/ECU 
 Page 221 
 
 
  Statements in the Arbitrator Award issued pursuant to the Bananas Annex  
7.489  As noted by Ecuador, the first Arbitrator's aw ard issued pursuant to the procedures in the 
Bananas Annex to the Doha Waiver contains several  statements regarding the European Communities' 
WTO market-access commitments relating to bananas: 
"Schedule CXL of the EC-15 records co mmitments by the Eu ropean Communities 
detailing a 2.2 million metric ton tariff quot a with a bound in-quota tariff of €75 per 
metric ton and a final bound out-of-quo ta tariff of €680 per metric ton... 
In summary, the existing EC banana import system consists of tariff quotas totalling 
3.113 million metric tons open to all supp liers, and a tariff quota of 750,000 metric 
tons at zero duty open exclusively to pr eferential suppliers.  MFN suppliers are 
subject to a bound in-quota tariff of €75 per metric ton, whereas all in-quota banana 
imports from preferential suppliers enter the European Communities at zero duty."822 
7.490  The Panel notes the European Communities' ar gument that the description of its import 
regime made by the Arbitrator is incorrect and has no relevance for the present proceedings.823 
7.491  In any event, and even if the statements made by the Arbitrator, with respect to the European 
Communities' WTO market-access commitments relating to bananas, were to be regarded as "simple 
dicta ", as suggested by the European  Communities, they would not di sprove the conclusion reached 
by the Panel regarding the question at issue,  i.e., the common intention of WTO Members. 
(v) General conclusion regarding the European Co mmunities' Schedule as it refers to bananas 
7.492  In conclusion, for the reasons stated above, th e Panel finds that, although under its original 
terms the tariff quota concession for bananas, as liste d in the European Communities' Schedule, was 
intended to expire on 31 December 2002, the subseque nt agreement between the parties resulted in an 
extension of this concession.  Pending the comple tion of Article XXVIII negotiations for the purpose 
of rebinding of the European Communities' concession on bananas, the European Communities 
remains bound by this concession, as contained in Part  I, Sections I.A (Tariffs) and I.B (Tariff quotas) 
of the European Communities' Schedule. 
(c) Is the €176/mt tariff on bananas in excess of th at provided in the European Communities' 
Schedule? 
7.493  The Panel has already determined the treat ment granted to bananas imported from MFN 
countries (i.e., non-ACP WTO Members) under the ch allenged measure, as well as the treatment 
provided for bananas under the terms of Part I of th e European Communities' Schedule.  Accordingly, 
it must now determine whether the tariff imposed  by the European Communities on bananas from 
MFN countries results in the imposition of ordinary customs duties in excess of those set forth and 
provided in Part I of the European Communities' Schedule. 
7.494  The Panel has noted that, under terms of Regul ation 1964/2005, since 1 January 2006, the 
tariff generally applied by the European Communitie s to MFN imports of bananas is set at €176/mt.824  
At the same time, the Panel has also noted th at under Part I of its Schedule, the European 
                                                      
822 European Communities, The ACP – EC Partnership Ag reement, Recourse to Arbitration Pursuant to 
the Decision of 14 November 2001, Award of the Arbitrator (WT/L/616), 1 August 2005, paras. 13 and 18. 
823 See European Communities' second written submission, paras. 89-90.  See also, paras. 7.470 to 
7.471 above. 
824 See para. 2.40 above. WT/DS27/RW2/ECU 
Page 222  
 
  Communities' commitment with regard  to bananas consists in a tariff binding of €680/mt as well as in 
a tariff quota for 2.2 million mt at a bound in-quota tariff rate of €75/mt.  No allowance is made by the 
European Communities for the main tenance of a tariff quota for the importation of bananas from 
MFN countries at rates below the €176/mt tariff duty. 
7.495  Therefore, the imposition of the tariff genera lly applied by the European Communities to 
MFN imports of bananas, set at €176/mt, under th e terms of Council Regulation (EC) No. 1964/2005 
of 29 November 2005, without consideration of the tariff quota for 2.2 million mt bound at an in-
quota tariff rate of €75/mt, must be considered to be an ordinary customs duty in excess of that set forth and provided in Part I of the European Communities' Schedule. 
(d) Conclusions regarding Ecuador's claims unde r Article II:1(a) and (b) of the GATT 1994 
7.496  Ecuador raised claims agains t the European Communities' duty of €176/mt for bananas under 
Article II:1(a) and (b) of the GATT 1994.  The Pa nel has already noted that it would follow the 
approach indicated by the Appella te Body in its report on Argentina – Textiles and Apparel , and begin 
its analysis with consideration of the first sentence of Article II:1 (b) of the GATT 1994. 
(i) Conclusion regarding the first sentence of Article II:1(b) of the GATT 1994 
7.497  The Panel has already noted that, under the fi rst sentence of Article II:1(b) of the GATT 
1994: 
"The products described in Part I of the Schedule relating to any contracting party 
[Member], which are the products of te rritories of other contracting parties 
[Members], shall, on their importation into th e territory to which the Schedule relates, 
and subject to the terms, conditions or qualif ications set forth in that Schedule, be 
exempt from ordinary customs duties in excess of those set forth and provided 
therein..." 
7.498  Inasmuch as the tariff applied by the European  Communities to MFN imports of bananas, set 
at €176/mt, without consideration of the tariff quota for 2.2 million mt bound at an in-quota tariff rate 
of €75/mt, is an ordinary customs duty in excess of that set forth and provided for in Part I of the 
European Communities' Schedule, it is to be consider ed inconsistent with the first sentence of Article 
II:1(b) of the GATT 1994. 
(ii) Conclusion regarding Article II:1(a) of the GATT 1994 
7.499  The Panel has noted that, under Article II:1(a) of the GATT 1994: 
"Each contracting party [Member] sha ll accord to the commerce of the other 
contracting parties [Members] treatment no less favourable than that provided for in 
the appropriate Part of the appropriate  Schedule annexed to this Agreement." 
7.500  The Panel has found that the tariff applied by the European Communities to MFN imports of 
bananas, set at €176/mt, without consideration of the tariff quota for 2.2 million mt bound at an in-
quota tariff rate of €75/mt, is an ordinary customs duty in excess of that set forth and provided for in Part I of the European Communities' Schedule, and is therefore to be considered inconsistent with the 
first sentence of Article II:1(b) of the GATT 1994. 
7.501  The Panel recalls the words of the Appellate Body in its report on Argentina – Textiles and 
Apparel :  WT/DS27/RW2/ECU 
 Page 223 
 
 
  "It is evident to us that the application of customs duties in excess of  those provided 
for in a Member's Schedule, inconsistent with the first sentence of Article II:1(b), 
constitutes 'less favourable' treatment under the provisions of Article II:1(a) …"825 
7.502  Notwithstanding the above, the Panel does not believe that, having found that the tariff 
applied by the European Communities to MFN imports  of bananas is inconsistent with the first 
sentence of Article II:1(b) of the GATT 1994, an a dditional finding regarding the same measure under 
Article II:1(a) of the GATT 1994 would be necessary to resolve the matter at issue. 
7.503  Accordingly, under the guidance of the principle of judicial economy, the Panel considers it 
unnecessary for the resolution of this dispute to addr ess Ecuador's claim that the tariff applied by the 
European Communities to MFN imports of bananas is  inconsistent with Article II:1(a) of the GATT 
1994.  Therefore, the Panel refrains from making any findings with respect to this particular claim 
5. General conclusion 
7.504  For the reasons indicated in this section, the Pane l finds that the tariff applied by the European 
Communities to MFN imports of bananas, set at €176/ mt, without consideration of the tariff quota for 
2.2 million mt bound at an in-quota tariff rate of €7 5/mt, is an ordinary customs duty in excess of that 
set forth and provided for in Part I of the European  Communities' Schedule, and results in a treatment 
for the commerce of bananas from MFN countries (i.e., non-ACP WTO Members) that is less favourable than that provided for in Part I of th e of the European Communities' Schedule.  The Panel 
therefore finds that this tariff is inconsistent w ith the first sentence of Article II:1(b) of the GATT 
1994. 
F. F
INAL REMARKS  
7.505  In the factual section of this Report, the Panel not ed that the complainant in this dispute is a 
developing country Member.  However, as noted a bove, Ecuador did not invoke any provisions on 
special and differential treatment for developing coun try Members.  Nor did the Panel find that these 
provisions were particularly relevant for the resolu tion of the specific matter that was brought before 
this Panel. 
7.506  In this same proceedings, a significant numbe r of developing and least developed country 
Members also stated their respective substantial interest in the matter before this Panel. 
7.507  Indeed, the Panel is aware of the economic and social effects of the European Communities' 
measures at issue in this case, particularly for ACP and Latin American ba nana exporting countries.  
In recognizing this, as in previous panel proceed ings, the Panel decided to grant third parties 
participatory rights which were subs tantially broader than those norma lly afforded to them under the 
DSU.826  This was done in the light of the particular circumstances of the present case, and without the 
intention of setting any type of precedent. 
7.508  In any event, the Panel wishes to recall the words of the original panel in the EC – Bananas 
III dispute: 
"The procedures under the DSU serve to ensure the settlement of disputes among 
WTO Members in accordance with WTO obliga tions, not to add to or diminish these 
obligations.  Accordingly, our terms of re ference are to assist the DSB in reaching 
                                                      
825 Appellate Body Report on Argentina – Textiles and Apparel , para. 47. 
826 cf. Panel Report on EC – Bananas III (Ecuador) , para. 8.2. WT/DS27/RW2/ECU 
Page 224  
 
  conclusions with regard to the legal cons istency with WTO rules of the EC's common 
market organization for bananas. ... 
From a substantive perspective, the fu ndamental principles of the WTO and WTO 
rules are designed to foster the development of countries, not impede it.  Having heard the arguments of a large number of Members interested in this case and having 
worked through a complex set of clai ms under several WTO agreements, we 
conclude that the system is flexible en ough to allow, through WTO-consistent trade 
and non-trade measures, appropriate po licy responses in the wide variety of 
circumstances across countries, including countries that are currently heavily 
dependent on the production and commercialization of bananas."
827 
VIII.  CONCLUSIONS AND RECOMMENDATIONS 
8.1 In light of the findings above, the Panel rejects the preliminary issue raised by the 
European Communities that Ecuador is prevente d from challenging the European Communities' 
current import regime for bananas, including th e preference for ACP countries, because of the 
Understanding on Bananas, signed by  both Members in April 2001. 
8.2 Accordingly, and after having examined the subs tantive claims raised by Ecuador as well as 
the defences invoked by the European Co mmunities, the Panel concludes that: 
(a) The preference granted by the European Co mmunities to an annual duty-free tariff 
quota of 775,000 mt of imported bananas orig inating in ACP countries constitutes an 
advantage for this category of bananas,  which is not accorded to like bananas 
originating in non-ACP WTO Members, and is therefore inconsistent with Article I:1 
of GATT 1994; 
(b) With the expiration of the Doha Waiver fro m 1 January 2006 as it applied to bananas, 
there is no evidence that, during the period that  is relevant for this Panel's findings, 
that is, from the time of the establishment of  the Panel until the date of this Report, 
any waiver from Article I:1 of GATT 1994 h as been in force to cover the preference 
granted by the European Communities to the duty-free tariff quota of imported 
bananas originating in ACP countries; 
(c) The European Communities' current bana na import regime, in particular its 
preferential tariff quota reserved for ACP countries, is inconsistent with Article XIII:1, with the chapeau of Article XIII:2, and with Article XIII:2(d) of the 
GATT 1994; 
(d) The tariff applied by the European Commun ities to MFN imports of bananas, set at 
€176/mt, without consideration of the tariff quota for 2.2 million mt bound at an in-quota tariff rate of €75/mt, is an ordinary customs duty in excess of that set forth and provided for in Part I of the European Comm unities' Schedule.  This tariff is therefore 
inconsistent with the first sentence of  Article II:1(b) of the GATT 1994; and, 
(e) It is unnecessary, for the resolution of this dispute, to make a separate finding on 
Ecuador's claim under Article II:1(a) of the GATT 1994. 
8.3 In consequence, the Panel concludes that, thr ough its current regime for the importation of 
bananas, established in Council Regulation (EC) No. 1964/2005 of 29 November 2005, including the 
                                                     
 
827 Panel Report on EC – Bananas III (Ecuador) , paras. 8.1 and 8.3.  WT/DS27/RW2/ECU 
 Page 225 
 
 
  duty-free tariff quota for bananas originating in AC P countries and the MFN tariff currently set at 
€176/mt, the European Communities has failed to im plement the recommendations and rulings of the 
DSB. 
8.4 Under Article 3.8 of the DSU, in cases where there is infringement of obligations assumed 
under a covered agreement, the action is considered prima facie to cons titute a case of nullification or 
impairment of benefits under th at agreement.  The European Co mmunities has failed to rebut this 
presumption.  Accordingly, we conclude that to  the extent that the European Communities has 
maintained measures inconsistent with different provisions of the GATT 1994, it continues to nullify 
or impair benefits accruing to Ecuador under that Agreement. 
8.5 The Panel recommends that the Dispute Settleme nt Body request the European Communities 
to bring the inconsistent measures into conf ormity with its obligations under the GATT 1994. 
 
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