EUROPEAN COMMUNITIES – REGIME FOR THE IMPORTATION, SALE AND DISTRIBUTION OF BANANAS
Document: Recourse to Article 21.5 of the DSU by Ecuador Request for the Establishment of a Panel
Date: 26 February 2007
Document codes: WT/DS27/80
Complainant: Ecuador, Guatemala, Honduras, Mexico, U.S.
Respondent: EU
Third parties: Belize, Cameroon, Canada, Colombia, Costa Rica, Dominica, Dominican, Ghana, Grenada, India, Jamaica, Japan, Mauritius, Nicaragua, Panama, Philippines, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Suriname, Venezuela, Côte d’Ivoire, Brazil, Madagascar
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. I, II, III, X, XI, XIII  GATT 1994Art. 1, 3  Import LicensingArt. II, XVI, XVII  Services (GATS)Art. 2  Trade-Related Investment Measures (TRIMs)Art. 19  Agriculture

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

 The following communication, dated 23 February 2007, from the delegation of Ecuador to the
Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.5 of the DSU.

 Upon the instructions of my authorities, I he reby convey the request of the Government of
Ecuador for the establishment of a panel under Article 21.5 of the Understanding on Rules and
Procedures Governing the Settlement of Disputes ("DSU") with respect to European Communities –
Regime for the Importation, Sale, and Distribution of Bananas (DS27).

Background

 On 25 September 1997, the Dispute Settlement Body ("DSB") adopted the Panel and
Appellate Body Reports of ("Bananas III")1. The Panel Report, as modified by the Appellate Body and
adopted by the DSB, found the tariff, tariff-rate quota, and licensing measures of the European
Communities (EC) to be in violation, inter alia, of GATT Articles I, III, and XIII, and GATS
Articles II and XVII, and recommended that the EC be requested to bring its banana regime into
conformity with EC's obligations under the WTO.
2

 Among the EC measures found not to comply with the EC's obligations were the EC's tariff-
rate quota regimes on banana imports, which excl uded bananas of Ecuadorian (and other) origin
completely from the most favorable tariff-rate quot a, and which allocated shares of quotas in a way
incompatible with the requirements of Article XIII, paragraph 2.

 The measures also included measures for granting and allocating licenses for the importation,
distribution and other banana-related activities. Those measures were found to infringe EC
obligations under Article I of the GATT, and Ar ticle II and XVII of the GATS, because the EC
measures discriminated against bananas, services and service suppliers of some WTO members
relative to the treatment that the EC accorded to the bananas, services and service suppliers of the EC
and of other WTO members.

1 Panel Report , , WT/DS27/R, adopted 25 September 1997, modified by the Appellate Body Report, WT/DS27/AB/R.
2 Panel Report, Bananas III, para. 9.1; Appellate Body Report, , WT/DS27/AB/R, adopted 25 September 1997, para. 255.

 On 1 January 1999, in accordance with earlier EC announcements, the EC put into effect a
revised regime pertaining to bananas. The EC clai med that its modified regime brought the EC into
conformity with the EC's WTO obligations. On 18 December 1998, Ecuador requested the DSB to
establish a panel, with the same composition as prev iously, under Article 21.5 of the DSU to examine
the conformity of the measures taken by the EC w ith the EC's obligations under certain WTO rules.
On 14 January 1999, the United States sought aut hority under Article 22.6 of the DSU to suspend
concession against the EC for its failure to conf orm with the rulings and recommendations of the
DSB.

 The Article 21.5 Panel found that the EC's modified regime violated GATT Articles I
and XIII, and GATS Articles II and XVII.
 3 In particular, the Article 21.5 panel found that:

The EC's 857,700 mt tariff quota disfavored Ecuadorian bananas in violation of
GATT Article XIII:1, and failed to represent a distribution of trade that would have
prevailed in the absence of restrictions in violation of GATT Article XIII:2.
The EC's quota-licensing treatment accorded more favorable treatment to EC and
ACP services and service suppliers than to services and service suppliers of Ecuador
and other countries, in breach of GATS Articles II and XVII.4
The EC's allocation of the tariff-rate quota for MFN suppliers did not conform with
GATT Article XIII:2 in that it was based on an unrepresentative period and did not
accord Ecuador (or other substantial s uppliers) shares consistent with the
requirements of Article XIII:2.
The EC's duty-free treatment for ACP countries was not covered by the EC's then
existing Article I waiver insofar as it a llowed duty free entry over the required
minimum, and the EC was to that extent in violation of GATT Article I.5
 As in Bananas III, the Article 21.5 Panel recommended that the DSB request the EC to bring
its regime for bananas into conformity with its obligations under the GATT 1994 and the GATS. 6
These rulings and recommendations were adopted by the DSB.

 In April 2001, the EC reached two "Understa ndings on Bananas," one with the United States
7
and the other with Ecuador. 8 On 2 July 2001, the EC notifie d the Understandings to the WTO,
characterizing both as covering "the implemen tation by the EC of the conclusions and
recommendations adopted by the DSB in the dispute 'Regime for the Importation, Sale and

3 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
(hereafter " Bananas – DSU Article 21.5 (Ecuador) "), para. 7.1; The Arbitrat ors decision came to a similar
conclusion. Decision by the Arbitrators, – 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. 5.33, 5.80.
4 Bananas – DSU Article 21.5 (Ecuador) , paras. 6.160, 6.163; Bananas – DSU Article 22.6 (US) ,
paras. 5.96, 5.97.
5 Id., para. 6.161.
6 Id., para. 7.2.
7 –
Understanding on Bananas between the European Communities and the United States , WT/DS27/59, 2 July
2001 ("EC-US Understanding").
8 –
Understanding on Bananas between the European Communities and Ecuador, WT/DS27/60, 9 July 2001 ("EC-
Ecuador Understanding").

Distribution of Bananas.'"9 Ecuador (as well as the United States) communicated to the DSB that the
Understandings were not a mutually satisfactory se ttlement under Article 3.6 of the DSU, but rather
constituted agreement on a phased series of steps, in cluding a "transitory" regime that would require
the EC to take various steps supported by the co llective action of the WTO membership, until the EC
implemented the final definitive Tariff Only regime. 10 The United States made a similar
communication.

 The Understandings required that the EC impl ement a tariff-only regime effective 1 January
2006, and that it takes interim or "transitory" meas ures in the meantime. Essentially, the EC would
adjust its measures in two initial "phases", in a way that would ease the trade problems for Ecuador
and others, even though these initial phases did not invol ve full conformity with the EC's obligations.
The Understandings required that Ecuador and the United States "lift their reserves concerning the
waiver of Article I of the GATT" for the EC's preferential 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 so as to allow for a temporary period preferences inconsistent
with Articles I and XIII of the GATT.
11 These provisions were intended to and did help the EC to
obtain waivers from its WTO obligations sufficient to temporarily and cond itionally permit measures
that would otherwise violate Articles I and XIII of the GATT but which were provided for in the
measures to be taken in Phase I and Phase II. At th e end of Phase II, the EC was to establish a Tariff
Only system that would not require further waivers to conform with EC obligations.

 Pursuant to these provisions, suitable GATT Article I and GATT Article XIII waiver
conditions applicable to banan as were negotiated and the waivers were granted at the Doha
Ministerial in November 2001. The final stage of the Understandings required the EC to introduce "a
'Tariff-Only regime for imports of bananas' no late r than 1 January 2006. The waiver of Article I
would allow the EC to maintain tariff preferences for two years after 1 January 2006, provided that a
suitable MFN duty on bananas had been established by January 1 2006 in accordance with the
conditions of the waiver and the provisions of Article XXVIII of the GATT and other WTO
obligations."12 The waiver of Article XIII expired on 31 December 2005, because at that point no
more tariff-rate quotas were supposed to be employed.

 The Article I Waiver included an annex on bana nas requiring that the EC's 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."
13 In the event of disagreement over
whether the proposed regime met the conditions of th e Annex, the Annex provided for arbitration in
accordance with the terms of the Anne x. If the EC were found by the Arbitrator twice to have failed
to satisfy the terms of the Annex standard for the tariff-only regime, the waiver of Article I expired
with respect to bananas.

 In 2005, the EC twice proposed a final MFN ra te of duty, which Ecua dor and other countries
challenged under the Annex dispute settlement procedures as not meeting the standard of the Article I
waiver. In each arbitration, the arbitrators found that the EC's banana proposal s failed the standard of

9 Notification of Mutually Agreed Solution, , WT/DS27/58, 2 July 2001.
10 WT/DS27/60, 3 July 2001.
12 See 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, paras. 1
and 2.
13 European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15, 14 November
2001, Annex, tiret 4.

the Annex. As a result the Waiver of GATT Article I with respect to the EC's imports of bananas
terminated for the EC on 1 January 2006.
14

 As of 31 December 2005, the EC's waiver of GATT Article XIII for its ACP banana quota of
750,000 mt also expired.
15

The Measures of the EC that are subject to this Challenge

 The challenged EC measures are containe d in EC Council Regulation No. 1964/2005
("Regulation 1964") 16 and its associated implementing regulations, including the EC's 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. ACP bananas with in 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 measur es, 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 and to all other bananas except those benefiting from
access to the zero-duty TRQ.

 These measures are not justified under the Unde rstandings or any agreed settlement, and are
not covered by any waiver of EC obligations.

 Ecuador considers that the EC measures are inc onsistent with the following obligations of the
WTO Agreements:

• Article I of the GATT 1994, in that the EC applies different and more favorable
duties to bananas originating in ACP countries than the EC applies to bananas
originating in Ecuador and most or all other WTO members.

• Article II of the GATT in that the EC app lies a tariff (currently 176€ /mt) on import
of bananas originating in Ecuador (and ot her WTO member countries) that is above
the EC bound rate of duty under Article II, which is 75€/mt.

• Article XIII:1 and 2 of the GATT, in that th e EC continues to provide a tariff rate
quota system 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.

14 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. 94; 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.
15 European Communities – Transitional Regime for the EC Autonomous Tariff Rate Quotas on
Imports of Bananas, WT/MIN(01)/16, 14 November 2001, para. 1.
16 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.

REQUEST FOR THE ESTABLISHMENT OF A PANEL

 On 28 November 2006, Ecuador requested c onsultations on the foregoing matter under DSU
Article 4 and Article XXII of the GATT. 17 Consultations were held on 14 December 2006, but failed
to resolve the disagreement between the parties.

 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 matter
be referred to a Panel, if possible the original panel, in accordance with Article 21.5 of the DSU.

Ecuador further asks pursuant to DSU Article 6.1, fn. 5, that a special meeting of the DSB be
convened within 15 days for the purpose of consid ering Ecuador's request for the establishment of a
panel.