WORLD TRADE  
ORGANIZATION  WT/GC/90 
18 May 2005 
 (05-2014) 
General Council 
26-27 May 2005 Item 8 Original:   English 
 
  
JUSTIFICATION FOR HONDURAS’ SUBSTANTIAL SUPPLYING 
INTEREST CLAIM 
 
  The following communication, dated 17 May 2005, is being circulated at the request of the 
Delegation of Honduras.  
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1. The Legal Standard under GATT Article XXVIII 
1. Honduras’ substantial-supplier claim in connecti on with the EC’s proposed modification of its 
banana tariff (H.S. 0803.00.19) is supported by: 
(a) Paragraph 7 of GATT Ad. Article  XXVIII:1, 
(b) WTO precedent, and 
(c) The Understanding on the Interpretation of Article XXVIII of the GATT 1994.  
2. Paragraph 7 of Ad Article  XXVIII:1 makes clear the following: 
(a) There is no precise definition of substantial suppl ying interest.  The definition varies 
depending on the structure of the market a nd the particular facts and circumstances 
associated with the supplying country; and 
(b) A substantial supplying interest incl udes those Members “which have, or in the 
absence of discriminatory quantitative restric tions affecting their exports, could 
reasonably be expected to have a signifi cant share in the market [at issue] .” 
3. Although GATT practice has used as a guideline a “10 per cent ” share of the market for 
determining what constitutes a s ubstantial share, the panel in European Communities – Regime for the 
Importation, Sale and Distribution of Bananas explicitly rejected using the “10 per cent rule” as a 
minimum threshold. 
(a) The Panel recognized that “a determination of substantial interest might well vary 
somewhat based on the structure of the market.” 
(b) It cited paragraph 1 of th e Understanding on the Interpre tation of Article XXVIII as 
an example of considerations that could influence the recognition of a substantial 
supplier whose market share may “vary somewhat” from 10 per cent.  WT/GC/90 
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 4. Paragraph 1 of the Understanding on the Interp retation of Article XXVIII recognizes that in 
determining what constitutes a substantial share, speci al consideration should be given to the needs of 
small developing countries (like Honduras) that are h eavily reliant on exports of the product subject to 
the tariff increase.  This special consideration is n ecessary to help ensure a proper “redistribution” of 
Article XXVIII rights in favour of those small- and medium-size developing countries that are 
economically affected by the tariff modification.      
2. Honduras’ substantial supplying interest 
5. A GATT panel already has stipulated that Ho nduras, together with Ecuador, Costa Rica, 
Colombia and Panama, were major suppliers  of MFN bananas to the EC market prior to the EC’s 
discriminatory 1993 regime. ( EEC-Import Regime for Bananas , DS38/R, para. 10.)  A WTO panel 
subsequently stipulated that these same countries, again including Honduras, were leading suppliers  
of MFN bananas to the EC market in 1994. ( EC- Bananas,  WT/DS27/R, para. 3.3.) 
The EC greatly compounded banana access discrimination as of 1993 
 
6. Prior to 1993, although six EC Member states applied discriminatory banana access quotas or 
bans, six other countries applied only tariffs or duty-free access to MFN banana suppliers, which 
enabled Honduras to achieve a substan tial presence in the pre-1993 EC market. 
7. From 1993 - 1998, banana imports we re subject to a single discriminatory EC banana market.  
That regime included, among other measures, discr iminatory quotas for ACP supplying countries and 
discriminatory MFN quotas pursuant to the Banana  Framework Agreement.  The WTO found this 
arrangement to be inconsistent  with multiple WTO provisions. 
8. In 1999, new EC-wide discriminatory MFN and ACP quota allocations were installed, which 
the WTO again found to be WTO-inconsistent.  
Honduras’ banana exports to th e EC, but for discrimination  
 
9. Honduras’ export data show that prior to th e imposition of that EC-wide discriminatory 
regime in 1993, Honduras’ 1989-1991 market share was nearly 10 per cent of the EC banana import 
market.  In 1989, its share exceeded 10 per cent. 
(a) As shown below, Honduras’ market share was calculated for each of the three years 
(1989, 1990 and 1991) by dividing Honduras’ exports of bananas to the  EC-15 in 
mts by total EC-15 imports of bananas in mts less imports from ACP countries  
(i.e., less non-MFN trade).  EC-15 volumes are used because this was the EC-
market that existed during the 2000-2002 thr ee-year base period used by the EC in 
its Article XXVIII notification.  Expor ts to the EC-15 are therefore most 
representative of the level of exports th at Honduras could reasonably have been 
expected to achieve in that three year period absent discriminatory quotas.  
 
1989
 1990  1991  
210,064    = 10.29% 
2,041,289 174,298    = 7.37% 
2,362,735 181,391 =6.87% 
2,639,812 
 
10. The simple average of 10.3 per cent, 7.4 per cent, and 6.9 per cent results in a three-year 
average market share of 8.2 per cent. 
  WT/GC/90 
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 11. Honduras’ share is less today, solely because of the EC’s discriminatory common 
organization of the market.  
Small developing-country considerations 
 
12. As emphasized by the Panel in the EC-Banana ruling, a market share percentage that varies 
somewhat  from the 10 per cent guideline ( i.e., Honduras’ 1989-1991 share) must equally be 
considered substantial where the exporting Member is  a small developing country, heavily reliant on 
exports of the product at issue ( i.e., bananas) and the market modifying its tariff ( i.e., the EC). 
13. Honduras precisely fits that profile. 
(a) It has a GDP of only $704.1 
(b) Bananas are one of our country’s most important  commodities.  In recent years, the 
banana sector has  generated over 11, 000 jobs and over $200 million annually in 
export revenue. 
(c) Even with discriminatory quantitative rest rictions, 20 per cent of the country’s 
bananas are exported to the EC. 
14. Were the EC allowed to disregard Honduras’ substantial-supplier rights, it would doubly 
penalize Honduras for years of EC access discrimina tion, and economically reward the EC for that 
discrimination by enabling it to evade its Article XXVIII compensation obligations. 
 
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1 G/SCM/110/Add.2, of 11 May 2005.