WRITTEN QUESTION P-4069/98

by Yvonne Sandberg-Fries (PSE) to the Commission

(4 January 1999)

Subject: Consequences of trade dispute between the USA and the European Union

The World Trade Organization had already recommended the European Union last year to revise its rules on banana imports in the light of its commitments under GATT, the licensing agreement and GATS. The present trade dispute has resulted in unforeseen consequences which extend far beyond the actual point at issue, i.e. the import, distribution and marketing of bananas.

The situation has created great uncertainty among the firms threatened with US trade sanctions. In Sweden, for example, wooden toys are threatened with 100 % penalty tariffs. Many firms throughout the Union are already being forced to revise the terms on which they sell to the US market. Some companies, particularly in Sweden, have already given their workers notice of redundancy as an emergency measure. The companies concerned are not just the big exporters to the USA but also their suppliers.

What are the Commission's views regarding the implications for those products which may be affected by the trade dispute with the USA and what measures will it take to prevent those products being affected?

Answer given by Sir Leon Brittan on behalf of the Commission

(27 January 1999)

The Community implemented the recommendations of the World trade organisation (WTO) dispute settlement body of 25 September 1997 in the bananas case by taking the necessary measures to bring the Community banana regime into conformity with WTO rules. On 20 July 1998, the Council adopted Regulation (EC) 1637/98 amending Regulation (EEC) 404/93 on the common organisation of the market in bananas(1). On 28 October 1998, the Commission adopted Regulation (EC) 2362/98 laying down detailed rules for the implementation of Council Regulation (EEC) 404/93 regarding imports of bananas into the Community(2). These measures were taken well within the reasonable period of time for implementation, which expired on 1 January 1999.

The United States has taken the position that the above measures fail to conform to WTO rules. The Community has replied that in cases where disagreement exists regarding the conformity with WTO rules of measures taken to implement recommendations of the dispute settlement body, Article 21.5 of the WTO dispute settlement understanding obliges members to resolve such disagreement through recourse to a WTO panel procedure. The United States has, however, refused to submit this disagreement to a ruling in accordance with WTO procedures. Instead, it insists on the right to unilaterally determine that the Community implementing measures fail to conform.

The Commission agrees that this is a very serious situation, not only because of the negative economic effects of unilateral American sanctions on European exports and employment, but also because such unilateral sanctions would do serious damage to the WTO system of dispute settlement. The Commission is making all possible efforts within WTO rules to avoid unilateral American sanctions. The Community has already requested the establishment of a panel to examine the conformity of the Community implementing measures with WTO rules. It has also launched dispute settlement action against the United States section 301 legislation, which is the domestic legal basis for the American threatened sanctions. The Commission will also take the position in Geneva that the WTO dispute settlement body cannot authorise the United States to suspend concessions as long as no panel or appellate body report has been adopted condemning the Community implementing measures.

At this stage, the Commission's efforts are geared towards preventing any unilateral sanctions from entering into force, and to reaching a definitive and authoritative ruling in the WTO on the conformity of the recent Community regime with WTO rules.

(1) OJ L 210, 28.7.1998.

(2) OJ L 293, 31.10.1998.