EUROPEAN COMMUNITIES – REGIME FOR THE IMPORTATION OF BANANAS
Document: Request for Consultations by Panama
Date: 27 June 2007
Document codes: WT/DS364/1; G/L/822
Complainant: Panama
Respondent: EU
Dispute stage: Consultation
Agreements cited: Art. I:1, II, XIII:1, XIII:2, XXVIII  GATT 1994

EUROPEAN COMMUNITIES – REGIME FOR THE IMPORTATION OF BANANAS

Request for Consultations by Panama

 The following communication, dated 22 June 2007, from the delegation of Panama to the
delegation of the European Communities and to th e Chairman of the Dispute Settlement Body, is
circulated in accordance with Article 4.4 of the DSU.

Because the Government of Panama remains c oncerned about the WTO-inconsistency of the
banana import regime of the European Communities ("EC") established under EC Council Regulation
(EC) No 1964/2005 ("Regulation 1964")
1, and the continuing absence of access relief under that
arrangement, it hereby requests that the EC cons ult on this matter pursuant to Article 4 of the
Understanding on Rules and Procedures Govern ing the Settlement of Disputes ("DSU") and
Article XXIII:1 of the General Agreement on Tariffs and Trade 1994 ("GATT 1994"), as the first step
required under the procedures of the Decision of 5 April 1966 on Procedures Under Article XXIII (the
"1966 Decision")2 and DSU Article 3.12.
I. BACKGROUND
 On 25 September 1997, the Panel and Appellate Body Reports in European Communities –
Regime for the Importation, Sale and Distribution of Bananas ("Bananas III ")3 were adopted by the
Dispute Settlement Body ("DSB"). 4 Those reports found the EC ba nana tariff-quota and tariff-quota

1 Council Regulation (EC) No 1964/2005 of 29 November 2005 on the tariff rates for bananas ,
OJL 316/1, 2 December 2005 (hereinaft er "Regulation 1964"). All referen ces herein to Regulation 1964 also
refer to its implementing regulations, which include, but are not limited to, Commission Regulation (EC)
No 2014/2005, 9 December 2005, OJL 324/3; Commission Regulation (EC) No 2015/2005, 10 December 2005,
OJL 324/5; Commission Regul ation (EC) No 2149/ 2005, 24 December 2005, OJL 342/19; Commission
Regulation (EC) No 219/2006, 9 February 2006, OJL 38/22; Commission Regulation (EC) No 325/2006,
23 February 2006, OJL 54/8; Commission Regulation (EC) No 566/2006, 6 April 2006, OJL 99/6; Commission
Regulation (EC) No 966/2006, 29 June 2006, OJL 176/21; Commission Regulation (EC) No 1261/2006,
23 August 2006, OJL 230/3; Commissi on Regulation (EC) No 1789/2006 , 5 December 2006, OJL 339/3;
Commission Regulation (EC) No 34/2007, 16 January 2007, OJL 10/9; and Commission Regulation (EC)
No 47/2007, 19 January 2007, OJL 14/4.
2 GATT, Decision of 5 April 1966 on Procedures Under Article XXIII, BISD 14S/18.
3 Panel Report, European Communities – Regime for the Importation, Sale and Distribution of
Bananas – Complaints by Ecu ador, Guatemala and Honduras , Mexico, and the United States , WT/DS27/R,
adopted 25 September 1997, as modified by the Appellate Body Report, WT/DS27/AB/R (hereafter " Bananas
III-Panel Report "); Appellate Body Report, European Communities – Regime for the Importation, Sale and
Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997 (hereafter " Bananas III-Appellate Body
Report").
4Action by the Dispute Settlement Body, European Communities – Regime for the Importation, Sale
and Distribution of Bananas, WT/DS27/12, 10 October 1997.

licensing measures that were then in effect to be in violation of GATT Articles I, III, XIII:1, and
XIII:2, and GATS Articles II and XVII.
5
 On 1 January 1999, the EC implemented "modifi ed" banana tariff, tariff-quota, and licensing
measures, which it claimed brought its bana na regime into conformity with the Bananas III rulings.
On 18 December 1998, the matter was referred by Ec uador to the original Panel under Article 21.5 of
the DSU. 6 On 14 January 1999, the United States sought authority under DSU Article 22.2 to
suspend concessions against the EC for its continuing failure to comply.7
 In separate, but consistent rulings, the Artic le 21.5 Panel and Article 22.6 Arbitrators found
the EC's modified banana tariff-quota and licen sing regime to be out of compliance with Bananas III
and inconsistent with GATT Articles I, XIII:1, and XIII:2, as well as GATS Articles II and XVII.8
 In April 2001, to comply with the rulings of Bananas III , the Article 21.5 Panel, and the
Article 22.6 Arbitrators, the EC reached two se ttlement agreements - one with the United States 9 and
the other with Ecuador. 10 The two agreements, each called the " Understanding on Bananas ,"
contained substantially similar provisions. Both re quired the EC to take a phased series of steps over
several years, beginning with "interim" tariff-quotas, to be followed by an EC "tariff-only" regime for
imports of bananas no later than 1 January 2006.
 Because elements of the Understandings were inconsistent with GATT Articles I and XIII,
the agreements required that Ecuador and the Unite d States "lift their reserves concerning the waiver
of Article I of the GATT 1994" for the EC's preferen tial tariffs for ACP products and "actively work
towards promoting the acceptance of an EC request for a waiver of Article XIII of the GATT 1994"
for the ACP tariff quota on bananas.11 Those provisions were intended to, and did, help the EC obtain
temporary, conditional waivers from its WTO compliance obligations sufficient to permit the
application of certain measures under the Understandings in violation of GATT Articles I and XIII.
The conditional banana waivers were negotiate d and granted at the Doha Ministerial in
November 2001.
 The GATT Article XIII waiver, which cove red the EC's separate ACP tariff quota of
750,000 mt, was granted for a "transitional" pe riod of four years and terminated on
31 December 2005.
12

6European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to
Article 21.5 of the DSU by Ecuador, WT/DS27/41, 18 December 1998.
7European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse by
the United States to Article 22.2 of the DSU, WT/DS27/43, 14 January 1999.
8Panel 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 (hereafter
"Bananas-DSU Article 21.5 (Ecuador) "), paras. 6.50, 6.160, 6.161, 6.163; 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
(hereafter "Bananas-DSU Article 22.6 (US)"), paras. 5.96, 5.97.
9European Communities – Regime for the Importation, Sale and Distribution of Bananas – Understanding
on Bananas between the European Communities and the United States , WT/DS27/59, 2 July 2001 (hereafter "EC-
US Understanding").
10European 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
(hereafter "EC-Ecuador Understanding").
12European Communities – Transitional Regime for the EC Autonomous Tariff Rate Quotas on Imports
of Bananas, WT/MIN(01)/16, 14 November 2001.

 The waiver of Article I authorized the EC to maintain tariff preferences for two years after
1 January 2006 subject to the special additional c onditions set forth in an "Annex" to the waiver. 13
The banana Annex specifically required that the EC's future "tariff-only" regime "result in at least
maintaining total market access for MFN banana suppliers," taking into account "all EC WTO
market-access commitments relating to bananas." 14 To enforce that requirement, the Annex provided
for special arbitration procedures to be invoked in advance of "tariff-only". The Annex guaranteed
that in the event of two arbitration rulings agains t the EC, the Article I waiver as to bananas would
automatically "cease to apply" upon implementation of the EC's "tariff-only" regime. The Annex also
required that the EC conclude its GATT Article XX VIII negotiations "before the entry into force of
the new EC tariff-only regime on 1 January 2006."
 On 31 January 2005, the EC announced a proposed MFN tariff-only rate of 230 €/mt. 15
Following a request for Arbitration by Panama and other Latin American supplying countries, the
Arbitrator on 1 August 2005 found that the 230 €/mt rate failed the Annex standard.16
 On 12 September 2005, the EC announced a re vised "tariff-only" proposal, under which MFN
suppliers would be subject to a tariff of 187 €/mt , and ACP suppliers would be subject to a zero-duty
tariff quota of 775,000 mt. 17 On 27 October 2005, following an EC request for renewed Arbitration,
the Arbitrator issued its second ruling against the EC, finding the EC's revised proposal "failed to
rectify the matter."
18
 As required by the Waiver Annex, the second negative Arbitration ruling caused the EC's
waiver of GATT Article I to terminate upon entry into force of the EC's "tariff-only" regime as of
1 January 2006.
 The EC's "tariff-only" Article XXVIII negotiati ons have not been concluded with Panama,
which is a principal supplier in this matter, 19 or with any of the other eligible MFN supplying
countries.
II. THE EC MEASURES COVERED BY THIS REQUEST
 On 29 November 2005, the EC approved a ne w banana "tariff-only" regime under the
authority of Regulation 1964.20 On 1 January 2006, that new regime took effect.

13 European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15,
14 November 2001, Annex; see also Award of the Arbitrator, European Communities – The ACP-EC
Partnership Agreement – Recourse to Arbitration Pursuant to the Decision of 14 November 2001 , WT/L/616, 1
August 2005, para. 64.
14European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15,
14 November 2001, Annex, tirets 2, 4.
15Article XXVIII:5 Negotiations: Schedule CXL – European Communities – Addendum,
G/SECRET/22/Add.1, 1 February 2005.
16Award of the Arbitrator, European Communities – The ACP-EC Partnership Agreement – Recourse
to Arbitration Pursuant to the Decision of 14 November 2001, WT/L/616, 1 August 2005, para. 94.
17"Commission presents revised banana tariff proposal," EC Press Release , IP/05/1127,
12 September 2005.
18 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, para.127.
19Regulation 1964 Whereas clause 3, which identifies Panama as having a principal supplying interest
in the context of the EC’s withdrawal of its bananas concessions under Article XXVIII.
20Council Regulation (EC) No 1964/2005 of 29 November 2005 on the tariff rates for bananas ,
OJL 316/1, 2 December 2005.

 The measures under Regulation 1964 and its associated implementing regulations accord
significantly differentiated access treatment to ACP and MFN bananas, and create new restrictions on
MFN access, as follows:
• Bananas from Panama and other MFN origins are subject to an "autonomous" tariff of
176 €/mt, while ACP bananas enter duty-free within the 775,000 mt quota (i.e ., at a
176 €/mt margin of preference over MFN supp liers) and at the 176 €/mt rate for all
over-quota volumes.
• The "autonomous" MFN tariff of 176 €/mt is more than double the EC's previously
applicable rate of 75 €/mt (which is bound in the EC's Uruguay Round Schedule and,
from 1 January 1995 to 31 December 2005, was the only rate under which all MFN
bananas entered).
• ACP bananas are accorded an enlarged, "autonomous" annual zero-duty tariff-quota
reserve of 775,000 mt subject to import licensing rules.
21 Panama gets no share of this
tariff-quota and related measures, and recei ves no other quota allocation under the
current arrangement.
 Panama seeks to consult with the EC regard ing the WTO-consistency of the above measures,
particularly with regard to:
• the consistency with GATT Article I:1 of the different tariff treatment applicable to ACP
and MFN banana-supplying countries;
• the consistency with GATT Articles II and XXVIII of the "autonomous" 176 €/mt tariff
now applicable to MFN bananas and certain other bananas not benefiting from the tariff
rate quota; and
• the consistency with GATT Article XIII:1 a nd XIII:2 of the tariff rate quota reserved
exclusively for bananas of ACP origin.
 This consultation request is without prejudi ce to Ecuador's pending DSU Article 21.5 action
to determine whether the above measures, taken to comply with Bananas III,22 are consistent with the
EC's compliance obligations, or to Panama's third-party rights in that proceeding.
 Panama's single most important agricultural crop is bananas. Bananas represent
approximately 16% of its agricultural output and 58% of its total agricultural exports. Nearly all of
Panama's banana exports are shipped to the EC market. Panama's banana sector is one of the
country's most important sources of employment, especially in the poorest rural regions of the
country.
 Panama accordingly urges the EC to accept early consultations, and to work with Panama on
achieving a prompt and full resolution of this di sagreement, taking properly into account Panama's
developing-country interests as required by DS U Article 4.10, DSU Article 3.12, and the 1966
Decision.

21The 775,000 mt exclusive ACP re serve excludes bananas from ACP countries that are also
beneficiaries of the EC’s Everything But Arms ("EBA") legislation. EBA-origin bananas have been entitled to
unlimited duty-free/quota-free access since 1 January 2006.
22 European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse
to Article 21.5 of the DSU by Ecuador, Request for the Establishment of a Panel , WT/DS27/80,
26 February 2007. The Article 21.5 panel was established at the 20 March 2007 DSB meeting.

 I respectfully ask that you advise me of the po ssible dates in the next week or two when EC
representatives would be available to engage in consultations with my Government.