EUROPEAN COMMUNITIES – REGIME FOR THE IMPORTATION, SALE AND DISTRIBUTION OF BANANAS
Document: Recourse to Article 21.5 of the DSU by the United States Report of the Panel
Date: 19 May 2008
Document codes: WT/DS27/RW/USA
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 the United States

Report of the Panel

I. INTRODUCTION
1.1 On 29 June 2007, the United States requested the establishment of a panel pursuant to
Article 21.5 of the Understanding on Rules and Pr ocedures Governing the Settlement of Disputes
(DSU) concerning the alleged inc onsistency with the WTO agreements of measures adopted by the
European Communities to comply with the rulings and recommendations of the Dispute Settlement
Body (DSB) in the dispute EC – Bananas III and subsequent related rulings. 1 The request made by
the United States followed a request made by Ecuado r, on 23 February 2007, for the establishment of
a panel pursuant to Article 21.5 of the DSU also concerning the alleged in consistency of measures
adopted by the European Communities to comply with the rulings and recommendations of the DSB
in the EC – Bananas III dispute and subsequent related rulings.2
1.2 On 6 July 2007, in a communication addressed to the compliance panel requested by Ecuador,
the European Communities asked for a modification of the timetable in those proceedings, in order to
take into account the timetable of the proceedings of the compliance panel that had been requested by
the United States. The European Communities asked that the deadline for its first written submission
to the compliance panel requested by Ecuador be postponed until after the United States had filed its
own first written submission in the compliance pane l proceedings initiated by the United States. The
European Communities cited its concern that, we re the United States to file its first written
submission after the European Communities had file d 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". 3 When asked by the compliance pane l requested by Ecuador to comment on
the European Communities' request, in a commu nication dated 9 July 2007, Ecuador strongly
objected to any delay in the proceedings. In Ecua dor's view, the timetable in the proceedings was
"already much more protracted than the 90 days ca lled 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".4 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. 5 Also on
9 July 2007, the United States sent a communicati on to the compliance panel requested by Ecuador,
providing comments for the Panel's consideration on the European Communities' request. The United
States noted that the European Communities had recei ved 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 did "not appear to have identified an y 'very serious due process problems' that would
arise if the current timetable were maintained in the present proceeding". 6 On 10 July 2007, the
compliance panel requested by Ecuador notified the parties in those proceedings that it did "not find it
necessary, at this point, to amend the timetable ... fixed on 29 June". The compliance panel requested
by Ecuador informed the parties in those proceed ings that it would "follow closely developments
relating to the US request for the establishment of an Article 21.5 panel regarding the EC's
compliance in the EC – Bananas III case [and in] the eventuality of a DSB decision to establish such

1 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007.
2 EC – Bananas III (Article 21.5 – Ecuador II) , Request for the Establishment of a Panel
(WT/DS27/80) 26 February 2007.
3 Communication by the European Communities to the Panel, dated 6 July 2007. See Panel Report on
EC – Bananas III (Article 21.5 – Ecuador II), para. 1.8.
4 Communication by Ecuador to the Panel, dated 9 July 2007. See Panel Report on EC – Bananas III
(Article 21.5 – Ecuador II), para. 1.8.
5 Ibid.
6 Communication by the United States to the Panel, dated 9 July 2007. See Panel Report on EC –
Bananas III (Article 21.5 – Ecuador II), para. 1.8.

an Article 21.5 panel, [it would] promptly consult wi th the parties in order to decide whether the new
developments should affect the timetable in the current proceedings."
7
1.3 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/DS27/83.8 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."
9
1.4 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. 10 On 13 August 2007, the
Director-General composed the Panel as follows:
 Chairperson: Mr Christian Häberli

 Members: Mr Kym Anderson
 Mr Yuqing Zhang 11

1.5 Belize, Brazil, Cameroon, Colombia, Côte d'Ivoire, Dominica, the Dominican Republic,
Ecuador, Jamaica, Japan, Mexico, Nicaragua, Panama, Saint Lucia, Saint Vincent and the Grenadines,
and Suriname reserved their third-party rights to participate in the Panel's proceedings.
12 A t t h e
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 th e parties and the third parties; (ii) the right to
receive copies of the Parties' first written submissi ons and rebuttals, as well as copies of the questions
posed by the Panel to the parties and to the other th ird parties and copies of pa rties' 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, although the parties w ould be under no obligation to respond to those
questions.
1.6 On 15 August 2007, the Panel addressed a communication to the parties (the United States
and the European Communities), submitting draft Wo rking Procedures and the timetable that the
Panel proposed to follow in these proceedings and in viting them to an organizational meeting in order
to receive the views of the parties.
13 On the same date, the compliance panel requested by Ecuador
also invited the parties to those proceedings (Ecu ador and the European Communities) to a separate
meeting to discuss the possibility of harmonizing the timetable in those proceedings with that of the
Panel requested by the United States. The complia nce panel requested by Ecuador also consulted

7 Communication by Panel to the parties, dated 10 July 2007.
8 EC – Bananas III (Article 21.5 – US) , Constitution of the Panel (WT/DS27/84/Rev.1),
5 September 2007, para. 1.
9 Ibid., para. 2.
10 Ibid., para. 3.
11 Ibid., para. 4. Members of the Panel are the same as those who were appointed on 15 June 2007 by
the Director-General to the complia nce panel requested by Ecuador. See EC – Bananas III (Article 21.5 –
Ecuador II), Constitution of the Panel (WT/DS27/82), 18 June 2007, para. 4.
12 EC – Bananas III (Article 21.5 – US) , Constitution of the Panel (WT/DS27/84/Rev.1),
5 September 2007, para. 5.
13 Communication by the Panel to the United States and the European Communities, dated 15 August
2007.

Ecuador and the European Communities on the possib ility of introducing adjustments to the Working
Procedures that had been approved for those proceedings.14
1.7 The organizational meeting was held with the parties (the United States and the European
Communities) on 20 August 2007. On the same date, the compliance panel requested by Ecuador
held a separate meeting with the parties to those proceedings (Ecuador and the European
Communities). On 22 August 2007, the Panel notified the parties (the United States and the European
Communities) and the third parties of the adopted Working Procedures and timetable.15
1.8 On 23 August 2007, the compliance panel requested by Ecuador notified the parties to those
proceedings (Ecuador and the European Communiti es) that, after consideration of the comments
received from both parties, the timetable originally established remained unchanged. The compliance
panel requested by Ecuador also notified the parties of the amendments incorporated into the Working
Procedures, in order to allow for the possibility of holding panel meetings in joint sessions of both the
proceedings requested by Ecuador and those requested by the United States and to allow the panels to
copy their communications to the parties in both cases.16
1.9 In accordance with the timetable approved by the Panel, the United States filed its first
written submission on 3 September 2007 and the European Communities on 14 September 2007. The
United States filed its rebuttal on 27 September 2007 and the European Communities on
10 October 2007. The Panel received third party su bmissions from Colombia and Japan, a joint third
party submission from Belize, Cameroon, Côte d'Ivoire, Dominica, the Dominican Republic, Jamaica,
Saint Lucia, Saint Vincent and the Grenadines and Suriname and another join t third party submission
from Nicaragua and Panama.
1.10 On occasion of the meeting of the compliance pa nel requested by Ecuador with the parties
and third parties on 18 September 2007, the European Communities asked in it s oral statement for a
modification of the timetable of those proceedings. At the end of that meeting the compliance panel
requested by Ecuador communicated to the parties th at it had looked into the matter and decided that,
notwithstanding that panel's initial intention to e ither harmonize the timetable of those proceedings
with that of the Panel requested by the United States 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
compliance panel requested by Ecuador was aware that the approved timetable implied a considerable
burden of work, peaking at particular moments for the parties, as well as for the panel and the
Secretariat.
17
1.11 The Panel met with the parties and third pa rties on 6 and 7 November 2007. The meeting
with the parties and third parties was held as an open hearing, allowing for the presence of interested
public in the same room as the parties and third pa rties. This decision was adopted by the Panel in
response to a request from both parties, and in light of the circumstances of the case. Noting that
WTO Members have not reached definitive agreem ent regarding the possibility of opening WTO
panel meetings to the public, the Panel emphasized that its decision in this case was not intended to
set a precedent for future cases a nd proceedings. As two third par ties expressed concern about the
presence of the public during the meeting and their pr eference to make their statements in a closed
session, the Panel allowed for such session to take place during the course of the meeting for the
purpose of hearing the statements of these two third parties.

14 Communication by the Panel to Ecuador and the European Communities, dated 15 August 2007.
15 Communication by the Panel to the United States and the European Communities, dated
22 August 2007.
16 Communication by the Panel to Ecuador and the European Communities, dated 23 August 2007.
17 See Panel Report on EC – Bananas III (Article 21.5 – Ecuador II), para. 1.16.

1.12 On 21 November 2007, parties and third parties submitted replies to questions posed by the
Panel. On 26 November 2007, the United States and the European Communities submitted comments
on the replies to questions.
1.13 The compliance panel requested by Ecuador submitted its interim report to the parties in those
proceedings on 27 November 2007. Issuance of the interim report in that case had been originally
scheduled for 23 November, but was delayed in or der to ensure that replies to questions and
comments on replies in the proceedings requested by the United States had been received by this
Panel, before the interim report in the proceedings requested by Ecuador was issued. The compliance
panel requested by Ecuador issued its final report to the parties in those proceedings on 10 December
2007. The final report was circulated to Members on ...
18
1.14 The Panel issued the descriptive sections of the draft report to the parties to the compliance
dispute initiated by the United States on 11 January 2008. On the same date, the Panel issued the
relevant sections with their respective arguments to each of the third parties. On 16 January 2008, the
Panel received comments from the United States regard ing the descriptive sections of the draft report,
as well as from Brazil and Japan regarding the relevant sections with their own respective arguments.
On the same date, the European Communities and Mexico stated that they had no comments.
1.15 The Panel submitted its interim report to the pa rties on 6 February 2008. On 14 February
2008, the Panel received written requests for review of precise aspects of the interim report from the
United States and the European Communities. The Panel held a meeting with both parties on
25 February 2008 to receive their arguments and co mments regarding the requests of review of the
interim report. On 26 February 2008, the parties submitted written versions of the statements they
had made at the 25 February 2008 meeting with the Panel. The Panel issued its final report to the
parties on 29 February 2008.
II. FACTUAL ASPECTS
A. BACKGROUND
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
(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.
2. Basic chronology
2.2 At its meeting on 25 September 1997, the DS B 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.
19 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 Trade in Services (GATS) and the Agreement

18 See Panel Report on EC – Bananas III (Article 21.5 – Ecuador II), para. 1.19.
19 EC – Bananas III, Appellate Body Report and Panel Reports, Action by the Dispute Settlement Body
(WT/DS27/12), 10 October 1997.

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 request ed 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 1999.20
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. 21 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. 22 The report issued by th e compliance Panel requested
by Ecuador was adopted by the DSB on 6 May 1999.
2.5 On 14 January 1999, the United States requested authorization from the DSB to suspend the
application to the European Communities, and its member States, of tariff concessions and related
obligations under the GATT 1994, covering trade in an amount of US$520 million. 23 On 29 January
1999, the European Communities objected to the level of suspension proposed by the United States
and requested that the matter of whether the level of suspension proposed was equivalent to the level
of nullification or impairment of benefits suffe red by the United States be submitted to arbitration. 24
On 18 February 1999, the United States therefore requested authorization from the DSB to suspend
concessions to the European Communities and its memb er States consistent with the decision to be
issued by the arbitrators. 25 On 6 April 1999, the arbitrators dete rmined that the level of nullification
or impairment suffered by the United States in the EC – Bananas III dispute was US$191.4 million
per year and decided that a suspension by the Un ited States of the application to the European
Communities and its member States of tariff c oncessions and related ob ligations under the GATT
1994 covering trade for that maximum amount per year would be consistent w ith Article 22.4 of the
DSU.26 On 9 April 1999, the United States request ed that the DSB aut horize it to suspend
concessions to the European Communities and its member States in an amount up to $191.4 million
per year.27
2.6 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

20 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.
21 EC – Bananas III (Article 21.5 – Ecuador), (WT/DS27/41), 18 December 1998.
22 EC – Bananas III (Article 21.5 – Ecuador) , Constitution of the Panel, Note by the Secretariat
(WT/DS27/44), 18 January 1999.
23 EC – Bananas III , Recourse by the United States to Article 22.2 of the DSU (WT/DS27/43),
14 January 1999.
24 EC – Bananas III , Request by the European Communities for Arbitration under Article 22.6 of the
DSU (WT/DS27/46), 3 February 1999.
25 EC – Bananas III , Recourse by the United States to Article 22.7 of the DSU (WT/DS27/47),
18 February 1999.
26 EC – Bananas III, Decision by the Arbitrators (WT/DS27/ARB), 9 April 1999.
27 EC – Bananas III, Recourse by the United States to Article 22.7 of the DSU (WT/DS27/49), 9 April
1999.

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.
28
2.7 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)."
29
2.8 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. 30 I n i t s
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."
31
2.9 Through a communication dated 3 July 2001 and addressed to the DSB, Ecuador referred to
the Understanding reached with the European Communities on 30 April 2001. 32 I n i t s
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."
33
2.10 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

28 European Communities' first written submission paras. 4-6.
29 EC – Bananas III, Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001.
30 EC – Bananas III, Communication from the United States (WT/DS27/59), 2 July 2001.
31 Ibid.
32 EC – Bananas III , Understanding on Bananas between Ecuador and the EC (WT/DS27/60), 9 July
2001.
33 Ibid.

Article 36.3, Annex V and its Protocols of the ACP-EC Partnership Agreement, 34
without being required to extend the same preferential treatment to like products of
any other member".35
2.11 While in principle this waiver wa s to be valid until 31 December 2007 36, 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).37
2.12 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."38
2.13 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 2001.39 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)."40
2.14 In 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". 41 The European Comm unities stated that it
had implemented on schedule the second phase of the Understandings on Bananas 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 European Communities' banana import
regime would become a tariff-only regime. This would take place by 1 January 2006 at the latest,
following the negotiations under Article XXVIII, wh ich 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 fu ture DSB meetings". Ecuador added that the
bilateral understanding signed with the European Communities on 30 April 2001:

34 (footnote original) Any reference to the Partnership Agreement 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.
35 Ministerial Conference, European Communities, The ACP – EC Partnership Agreement, Decision of
14 November 2001 (WT/MIN(01)/15), 14 November 2001.
36 Ibid., p. 2, para. 1.
37 Ibid., p. 3, para. 3bis.
38 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.
39 EC – Bananas III, Status Report by the European Comm unities, Addendum (WT/DS27/51/Add.25),
21 January 2002.
40 Ibid.
41 Dispute Settlement Body, Minutes of Meeting held in the Centre William Rappard on 1 February

"[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.
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."
42
2.15 At the same DSB meeting, the United States stated that it was:
"[P]leased to note that the EC had increased the quota for Latin American banana
exporting countries by 100,000 tonnes effective from 1 January 2002. The United
States had, therefore, terminated the suspension of concessions in effect since 1999.
The United States would continue to work closely with the EC and other Members to
address any issues that might arise as th e EC moved to a tariff-based system for
bananas and implemented the terms of the bilateral Understanding on Bananas."
43
2.16 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 was ready to enter into Article XXIV and
Article XXVIII GATT 1994 procedures, including tari ff negotiations 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 the European Communities on
1 May 2004.
44
2.17 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.45

42 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.
43 Ibid., para. 8.
44 Article XXIV:6 Negotiations, Enlargement of the European Union: Communication from the
European Communities (G/SECRET/20), 30 January 2004.
45 Article XXVIII:5 Negotiations, Schedule CXL – European Communities (G/SECRET/22), 2 August
2004.

2.18 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.46 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)."47
2.19 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.
48 The Arbitrator's award was circulated on 1 August 2005. 49 The Arbitrator
concluded that:
"[T]he European Communities' envisaged rebinding 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."50
2.20 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.
51
2.21 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. 52 The Arbitrator's award was circulated on 27 October 2005. 53 T h e
Arbitrator concluded that:

46 Article XXVIII:5 Negotiations, Schedule CXL – European Communities (G/SECRET/22/Add.1),
1 February 2005.
47 Ibid.
48 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.
49 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.
50 Award of the Arbitrator, EC – The ACP-EC Partnership Agreement, para. 94.
51 See Award of the Arbitrator, EC – The ACP-EC Partnership Agreement II, para. 7.
52 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.

"[T]he European Communities' proposed rectification, 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."
54
2.22 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.
55
2.23 On 28 March 2007, the United States Trade Re presentative (USTR) addressed a letter to the
European Communities Commissioner for Trade. In this letter, the United States Trade
Representative referred to discussions between both parties relating to the European Communities'
new banana import regime. The USTR proposed that "our discussions to that point would fulfil any
consultation requirement and the EU would not object to a US request for the establishment of a Panel
at the first DSB meeting at which a US request is considered". In his reply to the USTR dated
4 April 2007, the European Communities Commissioner for Trade stated that the "EU would be ready
not to object to a US request for the establishment of a panel in July".56
B. PRODUCT DESCRIPTION
2.24 The European Communities classifies bananas under the following tariff lines 57: 0803 00 11
for Fresh- Plantains; 0803 00 19 for Fresh- Other (bananas); 0803 00 90 for Dried (bananas,
including plantains). 58 The Panel notes, however that, in some documents, including in its WTO
Schedules LXXX and CXL, the European Communities refers to fresh bananas under tariff item 0803
00 12.59
2.25 Parties and a number of third parties have emphasized the importance of bananas production
and trade for many WTO Members, especially developing and least developed country Members. 60

53 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.
54 Award of the Arbitrator, EC – The ACP-EC Partnership Agreement II, para. 127.
55 Article XXIV:6 Negotiations, Enlargement of the European Union: Communication from the
European Communities (G/SECRET/26), 28 September 2006.
56 United States' second written submission, para. 4. See also, European Communities' second written
submission, para. 6.
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 Ibid.
59 Schedules LXXX European Communities, Legal Instruments Embodying the Results of the Uruguay
Round of Multilateral Trade Negotiations Done at Marrakech on 15 April 1994, Vol. 19, page 16241.
60 See, for example, United States' first written s ubmission, para. 2; European Communities' first
written submission, para. 2. See also joint third party written submission by Belize, Cameroon, Côte d'Ivoire,
Dominica, the Dominican Republic, Ja maica, St. Lucia, St. Vincent and the Grenadines, and Suriname (ACP
Countries' third party written submission), paras. 3, 9 and 21-27; joint third party written submission by

The Food and Agriculture Organization of the Unit ed Nations (FAO) considers bananas to be the
world's most exported fruit in terms of volume and se cond in terms of value. According to the FAO,
bananas represent a substantial source of income and employment for several tropical countries. 61
Figures relating to the European Communities' bananas market, including domestic bananas
production, consumption and imports , as well as on the United States ' domestic bananas production,
are discussed below.62
C. EUROPEAN COMMUNITIES' LEGAL FRAMEWORK FOR BANANAS IMPORTS
1. European Communities' bananas import regime
2.26 The European Communities' Council Regulati on (EEC) No. 404/93 of 13 February 1993 63
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 European Communities. Council
Regulation (EEC) No. 404/93 accorded different treatment to bananas depending on their origin. It
divided the system into community bananas, whic h 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; 64 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 impor ted from non-ACP third countries. 65 Council Regulation (EEC)
No. 404/93 established a quota of 854,000 mt for Community bananas 66 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. 67 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. 68 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. 69 Imports
from both the non-ACP third country bananas and non-traditional ACP countries were subject to
import licences granted in the following proportions: (a) 66.5 per cent to operators established in
third country and non traditional ACP bananas; (b ) 30 per cent to operators established in the
European Communities or traditional ACP bananas; a nd, (c) 3.5 per cent to operators established in
the European Communities that marketed bananas other than community and traditional ACP bananas

Nicaragua and Panama, paras. 3, 9 and 21-27; written version of Cameroon's oral statement at the Panel's
substantive meeting with the parties and third parties, pa ras. 3-6; written version of the Dominican Republic's
oral statement at the Panel's substantive meeting with th e parties and third parties, pp. 1-2; written version of
Jamaica's oral statement at the Panel's substantive meeting with the parties and third parties, para. 9; written
version of Nicaragua and Panama's joint oral statement at the Panel's substantive meeting with the parties and
third parties, paras. 8 and 20-21; wr itten version of St. Lucia's oral statem ent at the Panel's substantive meeting
with the parties and third parties, para. 5; written vers ion of St. Vincent and the Grenadines' oral statement at
the Panel's substantive meeting with the parties and third parties, para. 1.
61 Available at: http://www.fao.org/DOCREP/006/Y4343E/y4343e06.htm (as of 6 November 2007).
62 See paras. 2.47 to 2.63 below.
63 Council Regulation (EEC) No. 404/93 of 13 February 1993 on the common organization of the
market in bananas, Official Journal of the European Community L 047, 25 February 1993, pp. 0001-0011. See
also Exhibit US-1.
64 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.
65 Council Regulation (EEC) No. 404/93 of 13 February 1993, Article 15.
66 Ibid., Article 12.
67 Ibid., Article 18.1.
68 Ibid., Article 18.1.
69 Ibid., Article 18.2.

from 1992.
70 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 European Parliament and
the Council on the operation of the Regulation. Th e report had to contain among other things "an
analysis of the development of Community, third- country and ACP banana marketing 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 December 2001 on the operation
of this Regulation and make a ppropriate proposals concerning ne w arrangements to apply after
31 December 2002."71
2.27 Commission Regulation (EEC) No. 1442/93 of 10 June 1993 72 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
testifying the status as traditional ACP bananas. 73 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 three operator categories; (ii) allocation of licences
according to three activity functions; (iii) export certificate requirements for imports from Costa Rica,
Colombia and Nicaragua; and (iv) a two-r ound quarterly procedure to administer licence
applications."
74
2.28 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, 75 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.
2.29 Commission Regulation (EC) No. 478/95 of 1 March 1995 76 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-specific 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;

70 Council Regulation (EEC) No. 404/93 of 13 February 1993, Articles 17 and 19.1.
71 Ibid., Article 32.
72 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 of the European
Community L142, 12 June 1993, pp. 0006-0015.
73 Panel Report on EC – Bananas III, para. 3.18.
74 Ibid., para. 3.20.
75 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 of the European Community L 349,
31 December 1994, pp. 0105-0200.
76 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 of the European Community L 049,
4 March 1995, pp. 0013-0017.

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.
2.30 Council Regulation (EEC) No. 404/93 and its sub sequent EC rules were reviewed in the EC –
Bananas III case. The Panel and Appellate Body Report found that certain aspects of these
regulations were inconsistent with Articles I:1, III:4, X:3 and XIII:1 of the GATT 1994, Article 1.2 of
the Licensing Agreement and Articles II and XVII of the GATS.77
2.31 Council Regulation (EC) No. 1637/98 of 20 Ju ly 1998 amended Counc il Regulation (EEC)
No. 404/93.78 Council Regulation (EC) No. 1637/98 maintained the tariff quota for imports of third
countries and non-traditional ACP bananas at 2.2 million mt. 79 The in-quota tariff imports from third
country bananas were subject to a duty of 75 ECU/mt, while imports from non-traditional ACP
countries were free of duty. 80 As a result of the European Communities' enlargement in 1995, an
additional tariff quota of 353,000 mt was opened for imports of th ird countries and non-traditional
ACP bananas. Under this quota, imports of bananas from third countries were subject to 75 ECU/mt,
while imports of non-traditional ACP bananas were free of duty. 81 No import duty was charged on
banana imports from traditional ACP origin. 82 All bananas imports to the European Communities
were subject to import licences.83 Regulation 1637/98 also established that, if there was no reasonable
possibility of securing the agreement of all WTO Member s 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 bana nas and for third country bananas. 84 The out-of-quota tariff
for non-traditional ACP bananas was reduced by ECU200. 85 Council Regulation (EC) No. 1637/98
also abolished the operator categories.
2.32 Commission Regulation (EC) No. 2362/98 of 28 October 1998 86 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. 87 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.
2.33 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

77 Panel Report on EC – Bananas III, para. 9.1, as modified by the Appellate Body Report on EC –
Bananas III, paras. 255-256.
78 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 Community L210/28,
28 July 1998.
79 Ibid., Article 18.1.
80 Ibid., Article 18.1.
81 Ibid., Article 18.2.
82 Ibid., Article 18.3.
83 Ibid., Article 17.
84 Ibid., Article 18.4.
85 Ibid., Article 18.5.
86 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 Community L 293/32, 31 October 1998.
87 Ibid., Article 2.1.

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.
88
2.34 Council Regulation (EC) No. 216/2001 of 29 January 2001 89 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.90 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). 91 All of these tariff
quotas were opened for imports of products originating in all third countries. ACP bananas under and
outside the tariff quotas were subject to a tariff preference of €300/mt. 92 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
custom duty of €75/mt, while imports under the ta riff quota C were subject to a duty of €300/mt. 93
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.94
2.35 Council Regulation (EC) No. 2587/2001 of 19 December 2001 95 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. 96 A tariff preference of €300/mt was established for imports
originating in ACP countries.97
2. European Communities' current bananas import regime
2.36 For the purpose of this dispute, the current re gime for imports of bananas to the European
Communities is that established in Council Re gulation (EC) No. 1964/2005 of 24 November 2005. 98
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). 99 Regulation 1964/2005 also estab lished a tariff quota for bananas
originating in ACP countries pursuant to the Eu ropean Communities' commitments under the ACP-
EC Partnership Agreement, al so known as the Cotonou Agreement. 100 The trade preferences granted

88 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 7.1.
89 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 Community L31/2,
2 February 2001.
90 Ibid., Article 18.1.
91 Ibid.
92 Ibid., Article 18.4.
93 Ibid., Article 18.2 and 18.3.
94 Ibid., Article 19.1.
95 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
Community L345/13, 29 December 2001.
96 Ibid., Article 18.1, 18.2, 18.3.
97 Ibid., Article 18.4.
98 Exhibit US-1.
99 Exhibit US-1, Council Regulation (EC) No. 1964/2005, Article 1.1.
100 Ibid., Article 1.2. See also ibid., para (6).

to ACP countries by the European Communities under the Cotonou Agreement were scheduled to
expire at the end of 2007.101
2.37 Under the Cotonou Agreement, the Europ ean Communities has engaged to allow the
importation of products "originating from Cotonou be neficiary developing countries free of custom
duties and charges having equivalent effect or, at least at preferential terms, until December 31,
2007."102 The European Communities has accorded th at ACP origin bananas enter the European
Communities' market at 775,000 tons per year. A ll bananas imported beyond this amount are subject
to the €176/mt MFN tariff rate.103 The European Communities has stated that the Cotonou Agreement
is applied in a non-discriminatory way and its pote ntial signatories are not limited to any geographic
area.104 According to information provided by the European Communities, the Cotonou Agreement in
its Article 94, paragraph 1 states that any "indepe ndent State whose struct ural characteristics and
economic and social situation are comparable" to those of the already participating developing
countries can accede to the Cotonou Agreement.105
2.38 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 (EC) No. 980/2005 of 27 June 2005.106
2.39 Implementing regulations have been adopted by the European Communities subsequent to
Regulation 1964/2005. According to both parties 107, these regulations include: Commission
Regulation (EC) No. 2014/2005 of 9 December 2005 108; Commission Regulation (EC)
No. 2015/2005 of 9 December 2005109; Commission Regulation (EC) No. 2149/2005 of 23 December
2005110; Commission Regulation (EC) No. 219/2006 of 8 February 2006 111; Commission Regulation
(EC) No. 325/2006 of 23 February 2006 112; Commission Regulation (EC) No. 566/2006 of 6 April

101 European Communities' first written submission, para. 25. See also, European Communities'
response to question 28, para. 55. But see paragraphs 6.5 to 6.18below.
102 European Communities' first written submission, para. 4.
103 Ibid., para. 4.
104 Ibid., footnote 4.
105 European Communities' response to question 70, para. 105.
106 Council Regulation (EC) No. 980/2005 of 27 June 2005. 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 66, para. 98.
107 United States' first written submission, footnote 32; United States' response to question 38, para. 71;
and European Communities' response to question 73, para. 122.
108 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, Official Journal of the European Union L 324/5, 10 December 2005.
109 Commission Regulation (EC) No. 2015/2005 of 9 December 2005, on imports during January and
February 2006 of bananas originating in ACP countries under the tariff quota opened by Council Regulation
(EC) No 1964/2005 on the tariff rates for bananas, Official Journal of the European Union L 324/5,
10 December 2005.
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, Official Journal of the European Union L 342/19, 24 December 2005.
111 Commission 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, Official Journal of the European Union L 38/22,
9 February 2006.
112 Commission Regulation (EC) No. 325/2006 of 23 February 2006, fixing the reduction coefficient to
be applied to applications for import licences for bana nas originating in the ACP countries for the period
1 March to 31 December 2006, Official Journal of the European Union L 54/8, 24 February 2006.

2006
113; Commission Regulation (EC) No. 966/2006 of 29 June 2006 114; Commission Regulation
(EC) No. 1261/2006 of 23 August 2006 115; Commission Regulation (EC) No. 1789/2006 of
5 December 2006, on imports of bananas from ACP countries for the period 1 January to
31 December 2007
116; Commission Regulation (EC) No. 34/2007 of 16 January 2007 117; and
Commission Regulation (EC) No. 47/2007 of 19 January 2007118.
2.40 In addition to these regulations, Commission Regulation (EC) No. 1549/2006 of 17 October
2006119 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.
120 This annex refers to the "WTO Tariff quotas to be opened by the competent
Community authorities – qualifications for these quot as 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. 121 The general rules concerning
duties laid down in this regulation provide that when autonomous rates of duty are lower than
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).122

113 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 co untries for the period 1 March to 31 December 2006, ,
Official Journal of the European Union L 99/6, 7 April 2006.
114 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, Official Journal of the
European Union L 176/21, 30 June 2006.
115 Commission Regulation (EC) No. 1261/2006 of 23 August 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, Official Journal of the
European Union L 230/3, 24 August 2006.
116 Commission Regulation (EC) No. 1789/2006 of 5 December 2006, on imports of bananas from
ACP countries for the period 1 Januar y to 31 December 2007, Official Jour nal of the European Union L 339/3,
6 December 2006.
117 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, Official Journal of the European Union L 10/9, 17 January 2007.
118 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, Official Journal of the European Union
L14/4, 20 January 2007.
119 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 October 2006.
120 Ibid., page 87.
121 Ibid., page 853.
122 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 June 2007.

2.41 The following table summarizes the 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

▪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

€680

▪Quota B
ACP

Third Country

453 000

zero duty

€75

€300 tariff preference

€680

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.

3. Impact of the different European Communiti es enlargements in its bananas import
regime
2.42 During the period between 1993 to 2007, the membership of the European Communities has
been enlarged three times. This has changed the market and regulatory conditions for the import of
bananas to the European Communities.
2.43 In 1995, with the accession of Austria, Finla nd and Sweden to the European Communities, an
autonomous tariff quota of 353,000 mt was opened to MFN bananas.123
2.44 In 2004, with the accession of ten new member States to the European Communities, an
autonomous tariff quota of 300,000 mt with an in-q uota tariff of €75/mt was opened for the period
1 May 2004 until 31 December 2004. 124 For the year 2005, this autonomous tariff quota was

123 United States' response to question 2.
124 United States' and European Communities' responses to question 2.

increased to 460,000 mt. According to the United Stat es, prior to the enlargement most of the ten
acceding countries charged zero-duty with unlimited access to MFN bananas.125
2.45 In 2007, Romania and Bulgaria became members of the European Communities. Before the
accession, Romanian banana imports were subject to an ad valorem tariff of 16 per cent, while
Bulgaria applied a tariff of 11.2 per cent. In 200 5, Romania and Bulgaria imported 143,000 mt and
55,000 mt bananas respectively. After the accession, bananas exports to both countries are subject to
the €176/mt MFN tariff.
2.46 As stated by the United States, the European Communities has not provided Article XXIV or
XXVIII compensation to MFN suppliers for any of these accessions.
126
D. EUROPEAN COMMUNITIES' BANANAS MARKET
1. European Communities' bananas production
2.47 The European Communities' domestic banana pr oduction comes from Greece (Crete), Spain
(Canary Islands), Cyprus, Portugal (continental Po rtugal, Madeira, and the Azores) and France
(overseas territories of Martinique and Guadeloupe). In 2006, the European Communities' domestic
banana production amounted to 641,754 mt. 127 According to information provided by the European
Communities, domestic production for 2007 is expected to have been lower than the previous year,
since banana plantations were damaged by the passage of Hurricane Dean through the territories of
Martinique and Guadeloupe in August 2007.128
2.48 There are no exports of bananas from the European Communities, as all production is
destined for domestic consumption.129
2. European Communities' bananas consumption
2.49 The European Communities does not have data on consumption volumes for each of its
member States. Once bananas have legally been imported into the European Communities' common
market, they may freely circulate within the terr itory of the European Communities. The data
collected refers only to banana imports. 130 However, the following table shows the total domestic
sales of bananas in the European Communities.

125 United States' response to question 2.
126 Ibid.
127 Exhibit EC-7, Table 14.
128 European Communities' response to question 64, para. 89.
129 Ibid., para. 91.
130 Information provided by the United States shows that the consumption of bananas in the EC-25 for
2005 was of 4.3 millions mt. However, the European Communities considers that this information is not
accurate since the data provided by the United States re fers to imports made by each of the member States
which does not mean that the bananas are consumed in that country. See Exhibit US-7 and European

Total Sales of Bananas in the EU (mt)
(figures provided by the European Communities in Exhibit EC-7 Table 15)

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%
of which 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 European Co mmunities in 1999 there is a difference between the figures
provided by the European Communities and those provided by Ecuador. Ecuador's response to question 115 shows that the
amount of MFN bananas exported to the European Communitie s in 1999 was of 3,208,943 mt. This would represent an
increase in the share of total for MFN countries of 74 per cen t and an increase in the EU total amount of sales for 1999 to
4,330,952 mt.
Source: Figures provided by the European Communities in Exhibit EC-7 Table 15. 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
2.50 The European Communities is the world's biggest export market for bananas, followed by the
United States. The majority of bananas exporte d to the European Communities are from MFN or
so-called "Dollar Zone" origin and to a smaller am ount from ACP origin. Throughout this report, the
term MFN bananas is used to indicate bananas or iginating in WTO Members that are not signatories
of the Cotonou Agreement. MFN banana suppliers are WTO those Members that are not signatories
of the Cotonou Agreement.
2.51 In 2006, the total amount of MFN banana imports in the European Communities amounted to
3.2 million mt. The main exporting MFN countries in that year were: Ecuador, Colombia, Costa
Rica, Panama, Brazil, Guatemala, Peru, Honduras, Venezuela, and Mexico.131 For that same year, the
total amount of ACP banana imports to the European Communities was of 891.218 mt. These
imports came from ACP countries such as: Came roon, Côte d'Ivoire, the Dominican Republic,
Belize, Suriname, Saint Lucia, Jamaica, Ghana, Saint Vincent and the Grenadines, and Dominica.132
2.52 With respect to imports under the European Communities' EBA preference scheme, the
European Communities stated that the scheme does not have an im pact on the imports of bananas
from least-developed countries (LDCs) since all LD Cs that are exporting bananas to the European
Communities are also Cotonou beneficiary countri es, with the exception of Yemen and Bangladesh,
but they have no banana exports towards the EC. 133 The European Communities additionally stated
that since 1999 only four LDCs (Rwanda, Uganda, Somalia and Cape Verde) have exported bananas
to the European Communities and in very limited quantities.134

131 Exhibit EC-7, Table 14 and Table 16.
132 Ibid.
133 European Communities' first written submission, footnote 3.
134 European Communities' response to question 62, para. 83.

4. European Communities' banana imports under Council Regulation 1964/2005
2.53 Since 1 January 2006, the European Commun ities has been applying, under Regulation
1964/2005, a tariff of €176/mt to all bananas of MFN origin and to ACP origin bananas in excess of
the 775,000 mt duty free quota.135
2.54 Regulation 1964/2005 increased the ACP duty fr ee quota from 750,000 mt to 775,000 mt.
According to the European Commun ities, this increase was based on average ACP exports to the EC-
10 prior to the accession of new member States. However, the United States has responded that ACP
imports into the ten acceding countries from 2001 to 2003 amounted only to 15,413 mt.
136
2.55 According to information provided by the European Communities, in 2006 the tariff of
€176/mt was applied to 3,409,897 mt bananas. Fr om this amount, 3,293,678 mt corresponded to
Latin American origin bananas and 116,219 mt co rresponded to out-of-quota ACP origin bananas. 137
In 2006, the share of total imports subject to the tariff of €176/mt was of 81.5 per cent of the total
imports of bananas.
138 The remaining 18.5 per cent of the total import of bananas corresponded to
zero duty ACP imports under the 775,000 mt quota.
2.56 In 2006, the European Communities' tariff re venue for the importation of bananas amounted
to €600,141,907, from which €579,687,363 was levied on Latin American origin bananas, while
€20,454,544 was levied on out-of-quota ACP origin bananas.139
2.57 The United States argues that the €176/mt tariff imposed on bananas of MFN origin under
Regulation 1964/2005, which would be equivalent to $4.33/box, or to 33 per cent ad valorem, is 135
per cent higher than the €75/mt tariff rate previously imposed on MFN bananas. 140 According to the
European Communities, this statement ignores the cost for the acquisition of import licenses under the
old system; the effect of the out-of-quota tariff of €680/mt; the significant increase of MFN imports
to the European Communities; th e increase in the prices paid by tr ading companies to MFN banana
farmers; and the new market access allowed to MFN countries that had no, or very little, access to the
European Communities market under the old system.141
2.58 The European Communities considers that, based on market data and statistics comparing the
situation in the banana market before and af ter 1 January 2006, Regulation 1964/2005 has had a
positive effect for the world trade of bananas. 142 According to the Europ ean Communities, there has
been a significant increase in the volume of ba nanas imported into the European Communities from

135 European Communities' response to question 60. See also, United States' first written submission,
para. 25.
136 United States' first written submission, footnote 33. Also, see Exhibit US-7.
137 European Communities' response to question 60.
138 Ibid.
139 Exhibit EC-5, Table 10.
140 United States' first written submission, para. 24.
141 See European Communities' response to question 69, para. 104.
142 European Communities' first written submission, para. 7. Although the European Communities
adds that "the individual export performance of a particular country is influenced by various factors and cannot
be taken as a proxy for the market access afforded by the European Communities to the relevant group of
countries." European Communities' first written submission, para. 17. In response to a question from the Panel,
Colombia states that the European Communities "analysis of trade flows reflect a flaw understanding of
causality." Colombia adds that an increase in the total quantities of banana imports to the European
Communities cannot be exclusively explained by the bananas import regime implemented through Council
Regulation (EC) 1964/2005 and disregard any other supply and demand elements involved in this business. As
an example, Colombia mentions the appreciation of the Euro with respect to the US dollar, which would have
increased "the real disposable income of Europeans to purchase foreign products". Colombia's response to
question 113.

all groups of developing exporting countries (both MFN and ACP). In 2006, the total volume of
bananas imported into the European Communities from MFN countries was approximately
3.28 million mt, which was the highest volume of imports registered since 1999.
143 According to the
European Communities, this represents an increa se of 10.7 per cent from 2005 to 2006, which is
above the total growth of the market of banan as in the European Communities (10.3 per cent from
2005 to 2006).144
2.59 The European Communities also claims that developing countries like Guatemala and Peru,
which had no or very little exports of bananas in to the European Communities have now started to
increase their exports to the Communities. 145 Moreover, countries such as Bolivia, Sri Lanka and
Thailand have started to export bananas to the European Communities market.146
2.60 The European Communities additionally argues th at Regulation 1964/2005 has had a positive
effect on the price paid to banana producers. According to data provided by the European
Communities, FOB prices in US dollars paid to Ecuadorian and Colombian bananas in 2006 were
higher than the price paid in 2004 and 2005.
147 The European Communities states that:
"[T]he average annual FOB prices in Ecuador (based on information published by the
Central Bank of Ecuador) were US$217 pe r ton in 2004, US$224 per ton in 2005,
US$239 per ton in 2006 and US$232 per ton for the first six months of 2007.
Likewise, the average annual FOB prices in Colombia were US$285 per ton in 2005,
US$306 per ton in 2006 and US$321 per ton for the first six months of 2007".
148
Ecuador and Colombia have both contested these figures. Ecuador states that the statistics presented
by the European Communities "are not disaggregated by markets to assess the real scope of the EC's
affirmations."149 In turn, Colombia states that, according to Eurostat, the CIF prices for bananas of
Colombian origin were on average €658/mt in 2005 and €611/mt in 2006.150

5. United States' banana production
2.61 United States bananas are produced in Hawaii a nd Puerto Rico. Information provided by the
United States shows that its domestic production in Hawaii in 2006 was 10,000 mt, while the bananas
produced in Puerto Rico in 2006 amounted to 21,900 mt.151
2.62 Information provided by Côte d'Ivoire indicat es that in 2005 there were 190 farms dedicated
to the production of bananas in Hawaii that produced 9,500 mt bananas in that year. 152 Côte d'Ivoire

143 European Communities' first written submission, para. 9.
144 Ibid. Third parties, such as Ecuador, Nicaragua and Panama, disagree with these assertions.
According to them, for the period between 1999 to 2006, the EC imports from ACP countries increased 30 per
cent, while MFN imports remained generally the same. See Ecuador's response to question 115 and Nicaragua
and Panama's response to question 108 and 115, Exhibit P/N-3.
145 European Communities' first written submission, pa ra. 13, Exhibit ACP-5. However, Ecuador said
in its response to question 155 that, while MFN exporters like Brazil and Peru recorded a significant increase in
exports in 2006, in that same year other countries lik e Venezuela, Mexico and Honduras suffered a similarly
important loss in their sales to the European Communities market. See Ecuador's response to question 155.
146 European Communities' first written submission, para. 14.
147 Ibid., para. 11.
148 Ibid.
149 Ecuador's response to question 114.
150 Colombia's response to question 114.
151 Exhibit US-13. However, the European Communities claimed that there are some inconsistencies in
the figures contained in this exhibit. See European Co mmunities' response to question 61 and the United States
comments to this response, page 14, para. 26.

also states that during the past three years betw een 3 and 20 tonnes of bananas produced in Hawaii
have been exported to the European Communities.153
2.63 The United States is a net banana importer. The United States represents the second world's
largest export market for bananas, after the Euro pean Communities. Most bananas exported to the
United States are from Latin American origin.154
E. PANEL AND APPELLATE BODY FINDINGS IN PREVIOUS PROCEEDINGS
1. Measures subject to the original proceedings
2.64 The original panel and Appellate Body proceed ings concerned the European Communities'
common market organization for bananas, as established through Council Regulation (EEC) No.
404/93 (Regulation 404/93), introduced on 1 July 1993, and implemented, supplemented and
amended through subsequent Euro pean Communities' legislation, regulations and administrative
measures.
155
2. Panel and Appellate Body main findings 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.
156
(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.157
(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

152 Written version of Côte d'Ivoire's oral statement at the Panel's substantive meeting with the parties
and third parties, para. 3 and Annex.
153 Ibid, para. 3.
154 Joint written submission by ACP Members (Belize, Cameroon, Côte d'Ivoire, Dominica, the
Dominican Republic, Jamaica, Saint Lucia, Saint Vincent and the Grenadines, and Suriname), para. 24.
155 Panel Report on EC – Bananas III (Ecuador), paras. 3.1 and 3.4.
156 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.
157 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.

Communities to act inconsistently with th e requirements of Article XIII of the GATT
1994.
158
(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.159
(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 requirements of Article III:4 of the GATT 1994.160
(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 requirements of Article I:1 of the GATT 1994.
161
(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, including those related to operator category
rules.162
(h) The application of operator category 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 1994.163
(i) The use of activity functions in connecti on with the allocation of licences allowing
the importation of third-country and non-tr aditional ACP bananas at in-quota tariff
rates was not inconsistent with the requirements of Article III:4 of the GATT 1994.164
(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

158 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.
159 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.
160 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.
161 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.
162 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.
163 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.
164 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.

application of such rules to traditional ACP imports, was inconsistent with the
requirements of Article I:1 of the GATT 1994.165
(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 1994.166
(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 1994.167
(m) The issuance of hurricane licences exclus ively to European Communities producers
and producer organizations or operators including or directly representing them was
inconsistent with the requirements of Article III:4 of the GATT 1994.168
(n) The issuance of hurricane licences exclus ively to traditional ACP producers and
producer organizations or operators including or directly representing them was
inconsistent with the requirements of Article I:1 of the GATT 1994.
169
(o) The issuance of hurricane licences exclusively to ACP and European Communities
producers and producer organizations or ope rators including or directly representing
them was inconsistent with the requirement s of Article 1.3 of the Import Licensing
Agreement.170
(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.171
(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

165 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.
166 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.
167 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.
168 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.
169 Panel Report on EC – Bananas III (Guatemala and Honduras), paras. 7.256 and 7.399.
170 Panel Report on EC – Bananas III (Guatemala and Honduras) , 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.
171 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.

Articles II and XVII of the General Agreement on Trade in Services (hereinafter
"GATS").
172
(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
Complainants' origin and was therefore inconsistent with the requirements of
Article XVII of the GATS.173
(s) The exemption of Category B operators of European Communities origin from the
requirement to match European Communities 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 requirements of Article XVII of the GATS.
174
(t) The exemption of Category B operators of ACP origin from the requirement to match
European Communities import licences with Bananas Framework Agreement export
certificates created less favourable conditions of competition for like service suppliers
of Complainants' origin and was therefor e inconsistent with the requirements of
Article II of the GATS.175
(u) The allocation of hurricane licences exclusivel y to operators who include or directly
represent European Communities producers created less favourable conditions of
competition for like service suppliers of Complainants' origin and was therefore
inconsistent with the requirements of Article XVII of the GATS.
176
(v) The allocation of hurricane licences exclusivel y to operators who include or directly
represent ACP producers created less favourable conditions of competition for like
service suppliers of Complainants' origin and was therefore inconsistent with the
requirements of Article II of the GATS.
177
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 Agreement and Articles II and XVII of the GATS.

172 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.
173 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.
174 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.
175 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.
176 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.
177 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.

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;178
(b) Uphold the Panel's finding 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 bana nas to the European Communities was
inconsistent with Article XIII:1 of the GATT 1994;179
(c) Uphold the Panel's finding that the tariff quota reallocation rules of the Bananas
Framework Agreement were in consistent with Article XIII:1 of the GATT 1994, and
to modify the Panel's finding by concludi ng that the Bananas Framework Agreement
tariff quota reallocation rules were also inconsistent with the chapeau of
Article XIII:2 of the GATT 1994;180
(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;181
(e) Uphold the Panel's conclusions that the European Communities activity function rules
and the Bananas Framework Agreement export certificate requirement were
inconsistent with Article I:1 of the GATT 1994;182
(f) Uphold the Panel's finding that the Europ ean Communities practice with respect to
hurricane licences was inconsistent with Article III:4 of the GATT 1994;183
(g) Uphold the Panel's conclusions that the a llocation to Category B operators of 30 per
cent of the licences allowing the importa tion of third-country and non-traditional
ACP bananas at in-quota tariff rates was inc onsistent with Articles II and XVII of the
GATS;184
(h) Uphold the Panel's conclusions that the allo cation 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 rat es was inconsistent with Article XVII of
the GATS; and,185
(i) Uphold the Panel's conclusions that the Eu ropean Communities practice with respect
to hurricane licences was inconsistent with Articles II and XVII of the GATS.186

178 Appellate Body Report on EC – Bananas III, para. 158.
179 Ibid., para. 162.
180 Ibid., para. 163.
181 Ibid., para. 188.
182 Ibid., paras. 206-207.
183 Ibid., para. 214.
184 Ibid., para. 244.
185 Ibid., para. 246.
186 Ibid., para. 248.

3. Panel findings in the first compliance proceedings
2.68 The compliance panel requested in December 1998 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 chapeau 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.
187
(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
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.
188
(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.
189
(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 requirement 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.
190
(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.
191
(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,

187 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 6.29.
188 Ibid., para. 6.50.
189 Ibid., para. 6.65.
190 Ibid., para. 6.69.
191 Ibid., para. 6.78.

the violation of Article I:1 of the GATT 1994 , as alleged by Ecuador, was covered by
the Lomé waiver.192
(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.193
(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.194
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 country-specific allocations to Ecuador, as well as to the
other substantial suppliers, were not consistent with the requirements of
Article XIII:2 of the GATT 1994.195
(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.
196
(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 1994, as alleged by
Ecuador in respect of preferences for n on-traditional ACP imports , were covered by
the Lomé waiver.
197
(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.
198
(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

192 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 6.80.
193 Ibid., para. 6.134.
194 Ibid., para. 6.149.
195 Ibid., para. 6.160.
196 Ibid., para. 6.161.
197 Ibid., para. 6.162.
198 Ibid., para. 6.163.

competition than to like European Commun ities service suppliers in violation of
Article XVII of the GATS.
199
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:
"First, the European Communities could choo se to implement a tariff-only system for
bananas, without a tariff quota. This coul d include a tariff preference (at zero or
another preferential rate) for ACP bananas. If so, a waiver for the tariff preference
may be necessary unless the need for a waiv er is obviated, for example, by the
creation of a free-trade area consistent w ith Article XXIV of GATT. This option
would avoid the need to seek agreement on tariff quota shares.
Second, 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.
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.
200
In this context, some action may be required soon in respect of the Lomé waiver since
it expires on 29 February 2000."201
4. Award of the Arbitrators in the proceedings requested by the European Communities
under Article 22.6 of the DSU
2.71 On 6 April 1999, in the proceedings request ed by the European Communities under Article
22.6 of the DSU, the Arbitrators concluded that th e level of nullification or impairment suffered by
the United States in the EC – Bananas III matter was US$191.4 million per year. Accordingly, the
Arbitrators decided that the susp ension by the United States of th e application to the European
Communities and its member States of tariff c oncessions and re lated obligations under GATT 1994
covering trade in a maximum amount of US$191.4 million per year would be consistent with

199 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), para. 6.163.
200 (original footnote) 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).
201 Panel Report on EC – Bananas III (Article 21.5 – Ecuador), paras. 6.156-6.158.

Article 22.4 of the DSU. 202 In the same report, the Arbitrators determined that the reservation of a
quantity of 857,700 mt for traditional ACP imports under the European Communities' revised bananas
import regime was inconsistent w ith paragraphs 1 and 2 of Artic le XIII of the GATT 1994. The
Arbitrators also found that, under the revised regime, service suppliers of the United States were being
granted discriminatory treatment in violation of Articles II and XVII of the GATS. The Arbitrators
therefore concluded that there was a continuation of nullification or impairme nt of benefits for the
United States under the revised regime.203
5. Panel findings in the second compliance proceedings requested by Ecuador
2.72 The compliance panel requested in February 2 007 by Ecuador made the main substantive
findings that are found in Annex D of this report.
F. MEASURES CHALLENGED BY THE UNITED STATES IN THIS DISPUTE
2.73 The measure challenged by the United States through this recourse to Article 21.5 of the DSU
is the European Communities' current banana import regime implemented through the European
Communities' Council Regulation (EC) No. 1964/2005, which establishes a zero-duty tariff rate quota
available only to bananas originating in ACP count ries in an amount up to 775,000 mt. Bananas of
other origins have no access to this 775,000 ton tari ff rate quota and instead are subject to a duty of
€176/mt.
204
2.74 These measures are contained in the Europ ean Communities' Council Regulation (EEC)
No. 404/93 of 13 February 1993, as amende d by Council Regulation (EC) No. 216/2001 of
29 January 2001; in Council Regulation (EC) No. 1964/2005 of 29 November 2005; and, in any
amendments, implementing measures, and other related measures.205
III. PARTIES' REQUESTS FOR FINDINGS AND RECOMMENDATIONS
3.1 The United States requests that the Panel find that 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, the United States requests that the
Panel find that the EC measures are inconsistent w ith the following obligations contained in the WTO
agreements:
(a) Article I of the GATT 1994, because the Eur opean Communities applies a zero tariff
rate to imports of bananas originating in ACP countries in a quantity up to
775,000 mt, but does not accord the same duty -free treatment to imports of bananas
originating in all other WTO Members; and,
(b) Article XIII of the GATT 1994, including Article XIII:1 and XIII:2, because the
European Communities reserves the 775,000 mt zero-duty tariff quota for imports of
bananas originating in ACP countries and pr ovides no access to this preferential tariff
quota to imports of bananas originating in non-ACP substantia l or non-substantial
supplying countries.

202 EC – Bananas III, Decision by the Arbitrators (WT/DS27/ARB), 9 April 1999.
203 Ibid., paras. 5.96 to 5.98.
204 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.
205 Ibid., pp. 2-3.

3.2 The European Communities raises three preliminary issues. First, the European Communities
argues that the Panel must assess "whether th e United States has 'standing' to commence these
proceedings".
206
3.3 As a second preliminary issue, the European Communities argues that the United States
should not be allowed to challenge the European Communities' current import regime for bananas,
including the preference for ACP countries. The European Communities contends that the
Understanding on Bananas, signed by the United Stat es and the European Communities in April 2001
(Bananas Understanding)207, is a mutually agreed solution to the banana dispute. 208
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 "an international
agreement between the United States and the European Communities and, therefore, its terms must be
taken into consideration in order to determine the rights and obligations of the parties towards each
other under the GATT and the DSU".209 The European Communities further adds that
"[E]ven if it were to be assumed that th e provisions of the [Bananas] Understanding
itself cannot be taken into consideration in determining the rights and obligations of
the parties to this dispute, the application of the principle of good faith on the facts of
this case would bar the United States from challenging the Cotonou Preference."210
3.4 As a third preliminary issue, the European Communities argues that the United States'
complaints should be rejected, as they fall outside of the scope of Article 21.5 of the DSU. In the
European Communities' view, its current bananas im port regime is not "a measure taken to comply"
with the recommendations and rulings of the DSB.
211
3.5 In its first submission, the European Communiti es had raised an additional preliminary issue,
that the United States' complaint should be rejected by the Panel "outright on the grounds that the
United States did not submit a request for consulta tions before requesting the establishment of the
Panel".212 This objection was later withdrawn by the European Communities.213
3.6 The European Communities has not made any sp ecific arguments to rebut the United States'
claim that the preference granted to bananas of ACP origin would be inconsistent with Article I of the
GATT 1994. 214 The European Communities argues, however , that this preference is covered by a
waiver from Article I:1 of the GATT 1994, the Doha Waiver. 215 According to the European

207 See Understanding on Bananas between the European Communities and the United States of 11
April 2001, in EC – Bananas III , Notification of Mutually Agreed Solution (WT/DS27/58), 2 July 2001; and
EC – Bananas III, Communication from the United States (WT/DS27/59), 2 July 2001.
208 European Communities' first written submission, paras. 39-42. See also European Communities'
second written submission, paras. 8-9.
209 European Communities' second written submission, para. 9. See also European Communities' first
written submission, paras. 43-44, and final written version of the European Communities' opening oral
statement at the substantive meeting of the Panel with the parties and third parties, paras. 1-4.
210 European Communities' second written submission, para. 9.
211 See European Communities' first written submission, paras. 46-52. See also European
Communities' second written submission, paras. 40-52.
212 See European Communities' first written submission, para. 38. See also, ibid., paras. 33-38.
213 European Communities' second written submission, paras. 4-7. See also, United States' second
written submission, paras. 4-20.
214 European Communities' response to panel question No. 89, para. 163. See also, United States'
second written submission, para. 66; and written version of United States' opening statement during substantive
meeting with the parties and third parties, para. 27.
215 Ministerial Conference, Europe an Communities, The ACP – EC Partnership Agreement, Decision
of 14 November 2001 (WT/MIN(01)/15), 14 November 2001.

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. 216 T h e
European Communities also argues that its current bananas import regime cannot be considered as the
"new EC tariff regime" in the terms of the language contained in the Doha Waiver.217
3.7 The European Communities asks the Panel to reject the United States' claim under
Article XIII of the GATT 1994. The European Communities argues that "the conditions for the
application of GATT Article XIII are not satisfied ", because "banana imports from Latin American
and other MFN suppliers are not subject to any quantitative restriction [but] simply subject to a
tariff"
218 The European Communities also argues that the United States' claim falls outside of the
scope of Article XIII of the GATT 1994, which "does not cover cases of tariff discrimination".219
3.8 Finally, the European Communities argues that, if the Panel were to conclude "that the United
States has standing and that the Cotonou Preference does not comply with the GATT" 220, the Panel
should nevertheless find that:
"[T]he existence of the Cotonou Preferen ce between the end of 2005 and the end of
2007 does not cause any 'nullification or impairment' of any benefit accruing to the
United States."221
IV. ARGUMENTS OF THE PARTIES
4.1 The arguments presented by the parties in thei r written submissions and oral statements are
reflected below.222
A. UNITED STATES
1. First written submission of the United States
(a) Introduction
4.2 The United States is before this Panel to addr ess the continued inconsistency of the European
Communities' (EC) import regime for bananas with its WTO obligations. Regrettably, this Panel
proceeding is the tenth GATT/WTO proceeding since 1992. After almost ten years from the adoption
by the DSB of its recommendations and rulings in (EC – Bananas III), and many opportunities for reform
afforded to the European Comm unities by the United States and other affected Members, the
European Communities has yet to implement the DSB's recommendations and rulings with a WTO
compliant import regime for bananas. Repeated efforts at negotiating a WTO-consistent and mutually
acceptable solution with the European Communities have been unsuccessful. The United States has
reluctantly concluded that recourse to WT O dispute settlement under Article 21.5 of the

216 European Communities' first written submission, para. 54. See also European Communities' second
written submission, para. 56.
217 European Communities' first written submission, para. 55.
218 Ibid., para. 64.
219 Ibid., para. 65.
220 Ibid, para. 74.
221 European Communities' second written submission, para. 103. See also written version of
European Communities' opening statement during substantive meeting with the parties and third parties,
para. 30
222 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.

Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU) is warranted.
The United States hopes that this will be the last proceeding necessary to secure compliance by the
European Communities with its WTO obligations in this dispute.
4.3 On 1 January 2006, the European Communities implemented a new regime for importation of
bananas through Council Regulation (EC) No. 1964/200 5 (Regulation 1964). This latest regime
continues to discriminate in favour of imports of bananas originating in African, Caribbean and
Pacific (ACP) countries and against imports of ba nanas from other countries. It establishes a duty-
free tariff rate quota that is available exclusivel y to ACP bananas in amounts up to 775,000 mt.
Bananas from all other countries – for example, fro m developing countries in Latin America heavily
dependent on the banana trade – have no access to th is duty-free tariff rate quota. Bananas from such
countries are subject, instead, to a duty of €176/mt. Even this tariff level is uncertain, as the European
Communities has failed to re-bind its banana tariff rate.
4.4 The United States considers that these tariff and tariff rate quota measures fail to bring the
European Communities into compliance with the EC – Bananas III recommendations and rulings and
its WTO obligations in the following respects:
(a) The preferential duty-free tariff rate quota applicable to bananas of ACP origin is not
being accorded immediately and unconditionall y to bananas originating in all other
WTO Members in breach of Article I:1 of the General Agreement on Tariffs and
Trade 1994 (GATT 1994); and
(b) The tariff rate quota reserved exclusively for bananas of ACP origin fails to restrict
all banana imports in a similar manner in breach of Article XIII:1 of the GATT 1994
and does not aim at a distribution of tr ade in bananas approaching as closely as
possible the shares that would have been achieved absent restrictions in breach of
Article XIII:2 of the GATT 1994.
(b) Procedural history
4.5 The original WTO panel proceeding in this dispute ( EC – Bananas III ) was initiated more
than ten years ago – on 8 May 1996 – by Ecua dor, Guatemala, Honduras, Mexico, and the United
States. The panel in that proceeding found over a dozen breaches of the GATT 1994 and the General
Agreement on Trade in Services (GATS), which were overwhelmi ngly confirmed by the Appellate
Body. On 25 September 1997, the DSB adopted the original panel and Appellate Body reports and
recommended that the European Communities bring its banana import regime into conformity with its
obligations under those agreements. Pursuant to arbitration under Article 21.3 of the DSU, the
European Communities was given a "reasonable peri od of time" of more than 15 months (from 25
September 1997 to 1 January 1999) to implemen t the DSB's recommendations and rulings. The
European Communities did not, however, implement the EC – Bananas III recommendations and
rulings by the end of that "reasonable period of time".
4.6 Instead of bringing its banana import regime into compliance with its WTO obligations by
1 January 1999, the European Communities implem ented two regulations – Regulation (EC) No.
1637/98 and Regulation (EC) No. 2362/98 – that we re found, within a short time of their
implementation, to perpetuate a discriminatory tariff rate quota and license-based system in breach of
the GATT 1994 and the GATS. As the European Co mmunities had failed to redress the nullification
or impairment found by the WTO, the DSB aut horized the suspension of concessions or other
obligations equivalent to the leve l of the nullification or impairment. With respect to the United
States, the DSB authorized the suspension of concessions in the amount of US$191.4 million per year.

4.7 In November 1999, the European Communiti es announced a second attempt to reform its
banana regime, which was allegedly to comprise a "two-stage process, namely, after a transitional
period during which a tariff quota system would be applied with preferential access for ACP
countries, a flat tariff would be introduced." Th e transitional period was to end no later than 1
January 2006.
(i) Understanding on Bananas
4.8 In April 2001, after more than two years of non-compliance, the United States and the
European Communities reached an " Understanding on Bananas ", which established a phased series
of steps 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.
4.9 Under the terms of the EC-US Understanding, the European Communities was required to
implement a "tariff only" regime by "no later than 1 January 2006". In the "interim", the European
Communities would implement an import regime based on historical licensing which included a tariff
rate quota system. Because certain aspects of the in terim arrangement were no t in conformity with
the European Communities' WTO obligations, the EC-US Understanding required the United States
to "lift its reserve concerning the waiver of Article I of the GATT 1994 that the European
Communities has requested for preferential access to the European Communities of goods originating
in ACP states signatory to the Cotonou Agreemen t; and will actively work towards promoting the
acceptance of the EC request for a waiver of Ar ticle XIII of the GATT 1994" for the ACP tariff quota
on bananas. That provision was intended to fac ilitate the subsequent negotiation and adoption of
conditional waivers acceptable to the interested parties and the full WTO Membership.
(ii) GATT Article I waiver and arbitrations
4.10 Following the EC-US Understanding, the United States and other affected Members agreed to
negotiate the waiver terms necessar y to ensure an acceptable bana na arrangement throughout the life
of the Understanding. These terms were incorporated into the body of the Article I Waiver and its
Annex, which contains additional provisions applicable to bananas. As a general matter, the waiver
was set to expire on December 31, 2007 for products other than bananas.
4.11 With respect to bananas, the validity of the wa iver was made subject to a special arbitration
mechanism contained in the Annex. The Europ ean Communities, ACP countries and MFN suppliers
of bananas to the European Union were to enga ge in negotiations under Article XXVIII of the GATT
1994 with respect to the terms of the tariff only regi me to enter into force by 1 January 2006. The
Annex required that within 60 days of an a nnouncement by the European Communities of its
intentions on rebinding of the tariff on bananas, a ny interested party could request arbitration. The
mandate of the arbitrator was to determine "whe ther the envisaged rebinding of the EC tariff on
bananas would result in at least maintaining total market access for MFN banana suppliers, taking into
account" all of the "EC WTO market-access commitments relating to bananas". If a WTO arbitrator
were to find that the proposed re binding would not "result in at l east maintaining total market access
for MFN banana suppliers" the European Communities would have to "rectify the matter". Within 10
days of the notification of the arbitration awar d to the General Council, the European Communities
would have to enter into consultations with the inte rested parties that requested the arbitration. If
there was no mutually satisfactory solution, the same arbitrator would be asked to determine whether
the European Communities had rectified the matt er. If the European Communities had failed to
rectify the matter, the waiver would "cease to appl y to bananas upon entry into force of the new EC
tariff regime". That is, if there were two negativ e arbitrator determinations against the European
Communities, the waiver would terminate.

4.12 On 27 October 2004, the European Communities announced its intention to implement an
MFN tariff of €230/mt, a rate over three times higher than the €75/mt MFN rate applicable at the
time. The Commission formally notified that rate to the WTO on 1 February 2005, pursuant to the
Annex to the Article I Waiver.
4.13 Between 30 March and 1 April 2005, nine Latin American supplying countries initiated
arbitration pursuant to the terms of the Anne x, seeking a determination that the European
Communities' €230/mt rate would not "result in at least maintaining total market access for MFN
banana suppliers", taking into account "all EC WTO market access commitments", as required by the
waiver.
4.14 The first Arbitration Award ( AAI), issued on 1August 2005, carefully defined the European
Communities' market access commitment under the A nnex to require that any "envisaged rebinding"
must, at a minimum, preserve into the future "t he totality of [MFN] opportunities afforded by the
existing conditions of entry", both as between MF N and preferred suppliers, and MFN and domestic
EC producers. The Arbitrator determined that because the European Communities' proposed €230/mt
rate wrongly increased the ACP and Everything Bu t Arms margin of preference, creating the
opportunity for a positive ACP and EBA supply res ponse, and overstated the level of price-gap
protection for EC producers, the European Communities had not fulfilled its Annex commitments.
4.15 On 12 September 2005, the European Communities proposed a revised banana "tariff only"
rate of €187/mt for MFN suppliers, coupled with an enlarged ACP tariff rate quota of 775,000 mt
(reflecting a 25,000 mt increase in the then existing ACP tariff rate quota volume), at zero duty.
4.16 On 26 September 2005, pursuant to the proce dures set out in the Annex, the European
Communities requested a second arbitration to dete rmine whether the new proposed tariff and ACP
tariff rate quota "rectified the matter". The second Arbitration Award ( AAII), issued on 27 October
2005, determined that the European Communities' latest proposal "failed to rectify the matter".
4.17 Having twice failed to meet the condition of the wa iver that the new regime "result in at least
maintaining total market access for MFN banana s uppliers", taking into account "all EC WTO market
access commitments", the Article I waiver for banan as expired upon entry into force of the 1 January
2006 regime by operation of the terms of the Annex.
(iii) Article XIII Waiver
4.18 On 21 May 2001, pursuant to its acknowle dgment in the EC-US and EC-Ecuador
Understandings that "[a] waiver of Article XIII of the GATT 1994 [is] needed for the management of
quota C [the ACP quota]", the European Commun ities circulated among the MFN banana-supplying
Members a draft XIII waiver request, which explained that:
"[A]n additional protection should be mainta ined for imports of bananas originating
in the ACP countries, under the form of a limited tariff rate quota set aside for them,
for the duration of the interim period. This requires a waiver from the obligations
established under Article XIII GATT."
4.19 On 22 June 2001, the European Communities submitted to the WTO its request and draft
decision to waive GATT Article XIII obligations until 31 December 2005, "with respect to the EC's
separate quota of 750,000 tonnes for bananas of ACP origin". Because the European Communities
asked that its GATT Article I and GATT Article XIII waiver requests proceed in parallel, the GATT
Article XIII waiver request was approved wit hout amendment on 14 November 2001, the same day
the GATT Article I waiver was approved. In accord ance with paragraph 1 of the Article XIII Waiver,
the waiver was scheduled to terminate on 31 December 2005.

4.20 On 7 October 2005, as the termination date of the Article XIII Waiver approached, the
European Communities requested an extension "u ntil 31 December 2007 [for] the existing waiver
from paragraphs 1 and 2 of Article XIII of the GATT 1994, for a quantity of 775,000 mt of imports of
bananas originating in ACP countries". The Europ ean Communities' request for a waiver extension
was made in conjunction with a 12 September 2005 proposal to replace its "interim" tariff-quota
regime with a "tariff only" rate of €187/mt for MFN suppliers and an enlarged ACP tariff rate quota
of 775,000 mt (reflecting a 25,000 mt increase over the then existing ACP tariff rate quota volume).
WTO Members did not agree to the European Communities' proposed extension.
4.21 On 31 December 2005, the Article XIII Waiver expired in accordance with its terms.
4.22 Citing "divergences" of opinion on how to proceed with the wa iver request and a preference
for a "negotiated solution to the banana problem", the European Communities "suspended" its request
for an Article XIII waiver at the meeting of the Council for Trade in Goods held on 19 March 2007.
(c) The European Communities' revised measures
4.23 On 29 November 2005, without consultations with the EC – Bananas III complainants and
other MFN suppliers, the European Communities adopted Regulation 1964, which provides for the
current regime for the importation of bananas into the EC market. Regulation 1964 entered into force
on 1 January 2006.
4.24 Article 1 of Regulation 1964 establishes a dut y-free tariff rate quota that is available
exclusively to ACP bananas in amounts up to 775, 000 mt. Bananas from all other countries have no
access to this duty-free tariff-rate quota. Article 1 establishes that all other bananas are subject,
instead, to a duty of €176/mt. Article 2 of Re gulation 1964 provides th e necessary authority to
promulgate implementing rules. Numerous additio nal regulations governing the licensing features of
the tariff and ACP tariff rate quota measures have been enacted.
4.25 In accordance with these provisions, bananas of MFN origin enter the EC-27 market at a rate
of €176/mt (equating to US$4.33/box, or 33 per cen t ad valorem), or 135 per cent higher than the
€75/mt rate previously assessed on all MFN bana nas entering the European Communities from 1
January 1995 to 31 December 2005. Under the €176/ mt rate, bananas from the developing countries
of Latin America contributed €580 million, or approximately US$790 million, to the European
Communities' 2006 customs revenues.
4.26 ACP-origin bananas that are not otherwi se covered by the European Communities'
"Everything But Arms" initiative (EBA) enter the EC market duty-free for all volumes within the
775,000 mt ACP tariff rate quota (i.e., a margin of preference of €176/mt, or US$4.33/box). Imports
of ACP-origin bananas into the EC market in excess of 775,000 mt are dutiable at €176/mt. MFN-
origin bananas have no right to enter the zero-dut y ACP tariff rate quota and receive no other market
allocation.
(d) Legal arguments
4.27 The fact that this Panel has been established under Article 21. 5 of the DSU carries with it
certain consequences. Of most immediate relevance to the legal arguments of the parties is the
consequence that, as the Appellate Body has made clear, an Article 21.5 panel "conduct[s] its work
against the background of the original proceedings , and with full cognizance of the reasons provided
by the original panel. The original determin ation and original panel proceedings, as well as the
redetermination and the panel proceedings under Article 21.5, form part of a continuum of events." It
is well established that adopted panel and Appellate Body reports "are treated as a final resolution to a
dispute between the parties to that dispute".

4.28 As discussed in detail below, the European Communities' revised measures are in breach of
GATT Article I and GATT Article XIII.
(i) The European Communities' revised measures a re inconsistent with Article I of the
GATT 1994
4.29 GATT Article I:1 provides, in relevant part, that:
"With respect to customs duties and charges of any kind imposed on or in connection
with importation ... and with respect to a ll rules and formalities in connection with
importation ... any advantage, favour, pr ivilege 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."
4.30 To establish a violation of Article I:1, a Me mber must show: (i) an advantage, favour,
privilege or immunity, (ii) of the type covered by Article I, (iii) th at is not accorded immediately and
unconditionally to all "like products" of all WTO Memb ers. All three of these conditions are present
in the European Communities' current tariff arrangement.
4.31 First, the European Communities is providing an "advantage, fa vour, privilege or immunity"
to ACP Members by according ACP bananas duty-free access within the 775,000 mt tariff rate quota,
while subjecting all MFN bananas to a €176/mt duty. The duty-free treatment, amounting to a tariff
savings of US$4.33/box, is only available to bananas of ACP origin.
4.32 Second, the measure by which the European Co mmunities is granting the "advantage, favour,
privilege or immunity" to ACP Members is in rela tion to a "customs dut[y]" within the meaning of
Article I:1. Bananas of ACP origin up to an am ount of 775,000 mt receive a customs preference of
€176/mt over all other bananas, by entering duty-free.
4.33 Third, the European Communities is failing to accord the ACP tariff advantage "immediately
and unconditionally" to the "like product" of other WTO Members. Although MFN bananas and ACP
origin bananas are "like product" imports, MFN bana nas are being denied the same duty-free tariff
rate quota treatment as bananas of ACP origin.
4.34 Therefore, Regulation 1964 is in violation of GATT Article I:1.
Termination of GATT Article I Waiver

4.35 The fifth "whereas" clause of Regulation 1964 , asserts that in light of the two negative
arbitration determinations under the Annex to the Article I Waiver, the Commission has "further
modified its proposal in order to rectify the matter" . Although at this stage in these proceedings the
United States does not need to rebut the European Communities' legal arguments in its defence, an
assertion that the Article I Waiver is still in effect can be expected.
4.36 Whether the European Communities "rectified the matter" the third time around is irrelevant
with respect to the continued validity of the GATT Article I Waiver. Under the express terms of the
Annex, the European Communities had two opportuniti es to propose a regime that met the conditions
set out in the waiver. In 2005, pursuant to the Annex arbitration mechanism, two WTO arbitrators
determined that the two proposals made by the European Communities did not "result in at least
maintaining total market access for MFN suppliers". Therefore, as required by the fifth sentence in
tiret 5 of the Annex to the Article I Waiver, the waiv er "cease[d] to apply upon entry into force of the

new EC tariff regime". The "new EC tariff regime" is the measure that is the subject of these
proceedings, Regulation 1964, which entered into force on 1 January 2006.
(ii) The European Communities' revised measures ar e inconsistent with Article XIII of the
GATT 1994
4.37 GATT Article XIII provides, in relevant part, that:
"1. No prohibition or restriction shall be applied by any Member on the
importation of any product of the territory of any other Member or on the exportation
of any product destined for the territory of any other Member, 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.
2. In applying import restrictions to any product, Members shall aim at a
distribution of trade in such product appr oaching as closely as possible the shares
which the various Members might be expected to obtain in the absence of such
restrictions and to this end shall observe the following provisions:
…
(d) In cases in which a quota is allocated among supplying countries the Member
applying the restrictions may seek agreement with respect to the allocation of shares
in the quota with all other Members having a substantial interest in supplying the
product concerned. In cases in which this method is not reasonably practicable, the
Member concerned shall allot to Members ha ving a substantial interest in supplying
the product shares based upon the proporti ons, supplied by such Members during a
previous representative period, of the total quantity or value of imports of the product,
due account being taken of any special fact ors which may have affected or may be
affecting the trade in the product. No c onditions or formalities shall be imposed
which would prevent any Member from utiliz ing fully the share of any such total
quantity or value which has been allotted to it, subject to importation being made
within any prescribed period to which the quota may relate.

5. The provisions of this Article sha ll apply to any tariff quota instituted or
maintained by any Member, and, in so fa r as applicable, the principles of this
Article shall also extend to export restrictions."
4.38 Under the terms of the EC-US Understandi ng, the EC- Ecuador Understanding and the
Article I Waiver, the European Communities was supposed to introduce a tariff only regime for
bananas by 1 January 2006. Instead, the European Communities introduced a regime containing an
exclusive tariff rate quota for bananas of ACP origin. The EC – Bananas III panel, Appellate Body
and compliance panels found the European Communitie s' use of an exclusive ACP tariff rate quota
for bananas inconsistent with GATT Article XIII:1 and XIII:2. While the current regime may be a
simplified version of earlier ones, the nonconformity with GATT Article XIII remains.
4.39 There can be no doubt that Article XIII applies with respect to the current tariff rate quota
regime, just as it did with respect to the Europ ean Communities' prior bana na import regimes. In EC
– Bananas III (Article 21.5 – Ecuador), the panel explained:

"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."
4.40 Regulation 1964 establishes an exclusive duty-fr ee tariff rate quota for ACP countries in the
amount of 775,000 mt. Just as in EC – Bananas III (Article 21.5 – Ecuador) , this is a quantitative
limit on the availability of the duty-free rate to non-ACP bananas.
The European Communities' import regime for bananas is inconsistent with GATT
Article XIII:1
4.41 GATT Article XIII:1 sets forth the basic GAT T non-discrimination obligation governing the
application of import restrictions. As explained by the Panel in EC – Bananas III:
"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
Members is similarly restricted ... [A]s indicated by terms of Article XIII (and even
its title, 'Non-discriminatory Administrati on of Quantitative Restrictions'), the non-
discrimination obligation 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."
4.42 The Appellate Body added that the "essence " of GATT Article XIII, and therefore
Article XIII:1, "is that like products should be treat ed equally, irrespective of origin". It further
determined that "[a]s no participant disputes that all bananas are like products, the non-discrimination
provisions apply to all imports of bananas..."
4.43 In disregard of GATT Article XIII:1 and the EC – Bananas III findings, the European
Communities has chosen to maintain 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 the European Communities' banana regime, entering the EC
market duty-free up to a quantity of 775,000 mt. 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 preventi ng "like" imports from being "treated equally,
irrespective of origin" in violation of GATT Article XIII:1.
The European Communities' import regime for bananas is inconsistent with GATT
Article XIII:2
4.44 The chapeau to GATT Article XIII:2 requires, in relevant part, that:
"In applying import restrictions to any product, Members shall aim at a distribution of
trade in such product approaching as closel y as possible the shares which the various
Members might be expected to obtain in the absence of such restrictions ..."
4.45 As the EC – Bananas III panel found, "[i]f quantitative restrictions are used ... they are to be
used in the least trade-distorting manner possible" . The panel emphasized that, as required by the
chapeau, any tariff rate quota allocations must "minim ize the impact of a quota or tariff quota regime
on trade flows by attempting to approximate... the tr ade shares that would have occurred in the
absence of the regime".

4.46 The EC – Bananas III panel further explained that Article XIII:2(d) provides for the
possibility to allocate tariff rate quota shares to s upplying countries and the treatment that must be
given to Members with a "substantial interest" in supplying the product. The Member allocating
shares of a tariff rate quota may seek agreement wi th all Members having a substantial interest in
supplying the product, or, if that is not reasonabl y practicable, allot to Members having a substantial
interest in supplying the product based on criteria specified in Article XIII:2(d), second sentence. The
EC – Bananas III panel determined that if a Member allocates tariff rate quota shares to Members not
having a substantial interest in supplying the product, then shares must be allocated to all suppliers.
This is because "[o]therwise, imports from Members would not be similarly restricted as required by
Article XIII:1".
4.47 The European Communities' exclusive 775,000 mt ACP tariff rate quota fails to distribute any
share whatsoever to MFN suppliers, let alone a sh are they would have expected to obtain in the
absence of restrictions. This is so even though 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 market. Therefore, the ACP tariff rate quota established through Regulation 1964, like
prior ACP tariff rate quotas, is inconsistent with Article XIII:2.
4.48 The European Communities has no Article XIII waiv er currently in force – its last waiver
having expired on its own terms on 31 December 2005.
4.49 For the reasons stated above, the ACP tariff rate quota is in violation of GATT Article XIII:1
and XIII:2.
(e) Conclusion
4.50 For the foregoing reasons, the United States respectfully requests that the Panel find that:
(1) The European Communities' import regime for bananas implemented through
Regulation 1964 is inconsistent with Artic le I of the GATT 1994 because it applies a
zero tariff rate to imports of bananas orig inating in ACP countries in a quantity up to
775,000 mt but does not accord the same duty-free treatment to imports of bananas
originating in all other WTO Members;
(2) The European Communities' import regime for bananas implemented through
Regulation 1964 is inconsistent with Ar ticle XIII of the GATT 1994 – including
Article XIII:1 and XIII:2 – because it reser ves the 775,000 mt zero-duty tariff rate
quota for imports of bananas originating in ACP countries and provides no access to
this preferential tariff rate quota to impor ts of bananas originating in non-ACP
substantial or non-substantial supplying countries; and,
(3) The European Communities has failed to comply with the recommendations and
ruling of the DSB.
2. Second written submission of the United States
(a) The European Communities' preliminary objections should be rejected
(i) The United States was not required to request consultations with the EC
4.51 First, the United States was surprised that the European Communities raised lack of
consultations as a procedural objection given that the United States and the European Communities
had agreed, at the highest levels, that this obj ection would not be raised. The United States

understands that this objection may have been l odged without an understanding of the commitment
the European Communities had undert aken. Inasmuch as th e European Communiti es has raised this
objection, the United States responds as follows.
4.52 Formal consultations are not a prerequisite to the establishment of a panel under Article 21.5.
The Appellate Body's analysis in Mexico – Corn Syrup (Article 21.5 – US) amply supports the United
States' view. In Mexico – Corn Syrup (Article 21.5 – US) , the Appellate Body observed that while, as
a general matter, "consultations are a pre-requisite to panel proceedings", the requirement that parties
engage in consultations "is subject to certain lim itations". After reviewing the requirements of DSU
Articles 4.3, 4.7 and 6.2, the Appellate Body conclude d that "the lack of prior consultations is not a
defect that, by its very nature, deprives a panel of its authority to deal with and dispose of a matter".
While the Appellate Body did not decide whether this general rule was applicable to Article 21.5, it
stated that "even if the general obligations in th e DSU regarding prior consul tations were applicable"
to Article 21.5 proceedings, "non-compliance would not have the effect of depriving the panel of its
authority to deal with and dispose of the matter".
4.53 The only prerequisite explicitly set forth in Article 21.5 is that there be a "disagreement" as to
whether a Member has implemented the recomme ndations and rulings of the DSB. Such a
disagreement clearly exists in this case.
4.54 The European Communities suggests that th e phrase "through recourse to these dispute
settlement procedures" in Article 21.5 could not re fer to something "less than all" the procedures
contained in the DSU, including consultations. Th ere are several difficulties with the EC position.
First, nothing in the phrase "these dispute settle ment procedures" supports the proposition that that
phrase extends to every aspect of the DSU. Second, the phrase is different from the broader phrase
found in DSU Article 23: "the rules and procedures of this Understanding". This difference makes
clear that the European Communities is wrong to s uggest that Article 21.5 cannot refer to "less than
all" of the DSU. Third, the phrase is part of the larger phrase "such dispute shall be decided through
recourse to these dispute settlement procedures" (em phasis added). Consultations are not a means of
"deciding" a dispute. It is the panel procedures that serve the function of "deciding" – and thus it is
the panel procedures to which "these dispute settlement procedures" must refer.
4.55 To interpret Article 21.5 to require another round of consultations would only serve to delay
the resolution of disputes, in contradiction to DSU Article 21.1 which provides that prompt
compliance is "essential in order to ensure effect ive resolution of disputes to the benefit of all
Members".
4.56 Fifth, the United States notes that in an earlie r related proceeding, the European Communities
requested the establishment of Article 21.5 panel to determine that measures taken by the European
Communities were in conformity with its WTO oblig ations, without first seek ing consultations with
any of the original complaining parties.
4.57 Aside from the European Communities' flawed le gal theory, the Panel should not sustain the
European Communities' objection. First, as permitt ed by Article 4.3 of the DSU, the United States
and the European Communities had an agreement that formal consultations would not be necessary.
Second, the European Communities explicitly withdrew any procedural objection based on the lack of
a formal consultation request in its DSB statement at the 12 July 2007 meeting. Finally, even if it
were appropriate for the Panel to take the consid erations raised by the European Communities into
account, they should not lead to the conclusion th at the European Communities seeks. The DSU does
not guarantee a role for third parties in consultations. Throughout the long history of this dispute, the
European Communities has had plenty of opportunities to negotiate a solution. This dispute has been
the subject of countless discussions at the DSB, and third parties have been given every possible
opportunity to participate, above and beyond what is provided for in the DSU. It is hard to imagine

what formal consultations would have achieved that over ten years of litigation, discussions, and
negotiations have not been able to achieve.
4.58 The United States request that the Panel reject the European Communities' request to dismiss
for lack of consultations.
(ii) The EC-US Understanding on Bananas does not preclude this proceeding
4.59 The European Communities' objection that the EC-US Understanding bars this proceeding is
equally groundless. The lynchpin of the European Communities' argumentation appears to be the
assertion that the United States h as "accepted... the principle that the Cotonou Preference would
continue to exist until the end of 2007" and th erefore "the United States is now barred from
challenging" its existence.
4.60 Nothing in the EC-US Understanding says that the United States was agreeing to a reduction
in its rights to challenge the WTO-consistency of any EC measure. The European Communities
points to the paragraph in the EC-US Understandi ng providing that the United States would lift its
reserve concerning the Article I waiver. This provi sion did not itself change the legal situation with
respect to the European Communities' tariff pref erences. The United States' willingness to lift its
reserve regarding the waiver did not itself make the European Communities' tariff preferences WTO-
consistent, nor did it insulate those tariff pref erences from challenge under the DSU. Nothing in
Articles IX:3 and IX:4 of the WTO Agreement suggests that a Member's willingness to support a
waiver request has independent legal consequen ces. If the European Communities' position were
adopted by this Panel, it is hard to see how any Member would ever agree to support an EC waiver
request in the future, when the legal consequence of such a commitment would be that it – but not
other Members who had not yet agreed to support the waiver – were barred from challenging the
measure for which the waiver had been requested.
4.61 As contemplated by the EC-US Understanding, the United States did support the adoption of
the waiver, and the waiver was ultimately approved at Doha. Article 3 bis of the waiver states that
"[w]ith respect to banana s, the additional provisions in the Annex shall apply." These additional
provisions, set out conditions which the new EC regi me on bananas would have to meet. The United
States believes that the Article I waiver ceased to apply with respect to bananas on 1 January 2006.
4.62 Though not necessary, the United States wishes to make some additional comments. First,
the United States disagrees with the European Communities' contention that the EC-US
Understanding represented a "mutually agreed solution" as that term is used in the DSU. A fair
reading of the EC-US Understanding can lead to on ly one conclusion: that it would have been
impossible in June of 2001 to say that the dispute had been "solved". It is clear from its text that the
EC-US Understanding was a document that identified th e "means" to resolve the dispute, but that no
solution acceptable to both parties had yet been put in place on the date of the EC-US Understanding
and that the Understanding was not itself the end of th e dispute. Indeed, the final step to consummate
the "solution" would not be taken until almost five years after the date of the Understanding.
4.63 Second, in a communication to the DSB on 26 June 2001, after the unilateral notification of
the EC-US Understanding as a "mutually agreed solu tion" by the European Communities, the United
States corrected the record by expl aining that the Understanding was not
 a mutually agreed solution
notified pursuant to DSU Article 3.6. At the Fe bruary 2002 DSB meeting, the United States again
made clear that there were still compliance steps to be taken by the European Communities, namely
the introduction of a WTO-consistent "tariff only" regime by 1 January 2006.
4.64 Third, the United States disagrees with the Eur opean Communities' assertion that, pursuant to
Article 31(3)(c) of the Vienna Convention on the Law of Treaties (Vienna Convention), the EC-US

Understanding must be taken into consideration to determine the pa rties' rights and obligations under
the GATT 1994 and the DSU. Nothing in Article 31(3)(c) of the Vienna Convention supports the
European Communities' assertion that the EC-US U nderstanding acts as a procedural defence for the
European Communities. Article 31(3)(c) of th e Vienna Convention deals with interpretation
 of the
covered agreements. The European Communitie s is not arguing that the EC-US Understanding
indicates a particular interpretation of any te rm in any covered agreement; the European
Communities appears to be arguing that the Unde rstanding has altered the covered agreements.
Article 31(3)(c) does not deal with this issue.
4.65 Article 31(3)(c) of the Vienna Convention provides for the taking into account, in the
interpretation of a treaty, "any relevant rules of in ternational 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 "taken into account" in the interpretation of the WTO Agreements
"are those which are applicable in the relations between the WTO Members", not those applicable
only to the disputing parties. Since the EC-US U nderstanding is a bilateral agreement, it cannot be
considered part of any "applicable rules of law" that could inform the pane l's interpretation of the
covered agreements.
4.66 Article 1.1 of the DSU provides that the DSU a pplies to the "covered agreements" listed in
Appendix 1 to the DSU. The EC-US Understanding is not a "covered agreement". Accordingly, the
DSU cannot be used to settle a dispute as to the me aning or effect of the EC-US Understanding, and
the DSU cannot enforce the Understanding by bloc king a party to the Understanding from recourse to
the DSU.
(iii) The United States' complaint falls within the scope of Article 21.5
4.67 The European Communities' objection that the European Communities' 1 January 2006
banana measures are not "measures taken to comply" ignores the plain text of the EC-US
Understanding, EC Regulation 1964, and the long history of this dispute, and should therefore be
rejected.
4.68 The European Communities first argues that it took its " final 'measure taken to comply'" with
the EC-US Understanding in January 2002, "when the EC introduced a new tariff-based quota regime
with the characteristics agreed in Annex II of th e Understanding" and the United States' "right to
suspend concessions terminated" (emphasis added).
4.69 The EC-US Understanding contemplated a series of steps that would culminate with the
introduction of a "tariff only" regime by 1 January 2006. As required by the terms of the
Understanding, the United States terminated its increased duties upon the European Communities'
implementation of the steps provided for in Annex II. This only means that the two interim phases
contemplated in the paragraph C of the Understa nding were completed. The final step was not
scheduled to happen until four years later. To ar gue that the European Communities did not need to
take that final step with respect to the EC-U S Understanding would read paragraph B out of the
Understanding.
4.70 The European Communities also argues that the United States never challenged the measures
taken by the European Communities in 2002 that it considers to be the "measures taken to comply"
with the recommendations and rulings of the DS B. As explained above, it was not until the
introduction of the new EC regime for bananas on 1 January 2006 that the European Communities
took the final, and unfortunately flawed, step required by the Understanding. Ever since, the issue of
non-compliance has been the subject of discussions at the DSB, culminating with Ecuador's and the
United States' requests under Article 21.5.

4.71 The fifth clause in the preamble to EC Regul ation 1964 itself states that the measures are
being taken in an effort to rectify the matter whic h the two Article I waiver Annex arbitrations found
inconsistent with that Annex. The Article I waiver and Annex are inextricably linked to the
Understandings, which are in turn inextricably lin ked to the recommendations and rulings of the DSB
in EC – Bananas III.
4.72 The status of the European Communities' measu res is further confirmed by numerous EC
statements made from 1999 through 2006. In particular, EC statements made after 2002, when the
European Communities argues, for purposes of this proceeding, that it implemented its "measure
taken to comply", confirm that the European Communities itself did not believe it had taken a
"measure taken to comply" at that time.
(b) The European Communities' arguments about "standing" and nullification or impairment have
been rejected before and should be rejected once again
(i) The United States has standing to challenge the EC's banana regime
4.73 In EC – Bananas III , as here, the European Communiti es argued that, because the United
States "ha[d] never exported a single banana to the European Community", it "could not possibly
suffer any trade damage". According to the Europ ean Communities, this lack of trade effect or
damage meant that the United States could not, as a threshold matter, challenge the European
Communities' measures under the GATT. The Appella te Body upheld the panel's finding that the
United States "had standing" to bring claims under the GATT 1994 against the European
Communities' banana measures.
4.74 In reaching its conclusion, the Appellate Body made the general observations that "a Member
has broad discretion in deciding whether to brin g a case against another Member under the DSU" and
that Members are "expected to be largely self-regul ating in deciding whether any such action would
be 'fruitful'" within the meaning of DSU Article 3. 7. The Appellate Body also observed that: "the
United States is a producer of bananas, and a poten tial export interest by the United States cannot be
excluded"; and "[t]he internal market of the Un ited States for bananas could be affected by the EC
banana regime, in particular, by the effects of that regime on world supplies and world prices of
bananas". Quoting from the panel report, the Appella te Body also stated that "with the increased
interdependence of the global economy... Members ha ve a greater stake in enforcing WTO rules than
in the past since any deviation from the negotiated balance of rights and obligations is more likely to
affect them, directly or indirectly".
4.75 In light of this guidance, the stake the United States holds in making sure that the European
Communities complies with its WTO obligations, and th e fact that the United States continues to be a
producer of bananas, it is clear that the Unite d States may challenge the European Communities'
banana measures in this compliance proceeding.
(ii) The United States is not required to demonstr ate nullification or impairment of benefits to
advance claims of an EC breach of GATT Articles I and XIII
4.76 To prevail on its claims of an EC breach of GATT Articles I and XIII, the United States is not
required to demonstrate that the European Communi ties' banana measures nullify or impair benefits
accruing to it.
4.77
Article 3.7 of the DSU specifies three potential means by which a dispute can be resolved: a
mutually agreed solution consistent with the cove red agreements; withdrawal of WTO-inconsistent
measures; or, as a "last resort", suspension of concessions. Neither of the first two requires
calculation of the level of nullification or impair ment suffered by the complaining Member. The

second of these makes clear that withdrawal of a WT O inconsistency is a preferred outcome, without
regard to the impact of the inconsistency on the complaining Member. It is only when a WTO
challenge has reached arbitration under DSU Article 22 that the level of nullification or impairment
suffered by the complaining party becomes relevant.
4.78 The European Communities made a similar argu ment to the original panel and Appellate
Body, but its argument was rejected. In determ ining that the United States did in fact suffer
nullification or impairment of benefits at the ha nds of the European Communities' banana measures,
the Appellate Body made clear that a showing of trade effects is unnecessary for purposes of
demonstrating that there has been a breach of a provision of the GATT, quoting from the GATT panel
in US – Superfund. The US – Superfund GATT panel decided that it was unnecessary to examine the
parties' submissions regarding trade effects in or der to determine that benefits accruing to the
complaining Member had been nullified or impaired , linking its decision to the breach of the legal
provision, Article III:2, alone. The same reasoning should apply here. The Panel should dismiss the
European Communities' arguments.
(c) The European Communities' Article I waiver h as expired, and it therefore maintains its
banana measures in breach of GATT Article I
4.79 The European Communities does not contest that its banana regime is in breach of GATT
Article I, but argues that the Article I Waiver is still in effect. The European Communities' arguments
ignore the plain text of the waiver and its Annex. Pursuant to the terms of the Annex, following two
negative arbitration determinations, the waiver "cease[d] to apply to bananas upon entry into force of
the new EC tariff regime".
4.80 An analysis of the European Communities' Artic le I Waiver begins with the chapeau of the
Annex, which states that, "[i]n the case of banan as, the waiver will also apply until 31 December
2007, subject to the following , which is without prejudice to the rights and obligations under
Article XXVIII". The continuation of the waiv er until 31 December 2007, is therefore entirely
dependent on the European Communiti es' fulfilment of the several conditions laid out in the body of
the Annex.
4.81 Tirets one and two of the Annex define the st eps to be taken by the European Communities
prior to arbitration. These tirets further require the European Communities, during that consultation
period, to demonstrate that MFN "WTO market-access commitments relating to bananas" will be
protected. Tirets three through five establish a centrepiece of the Annex – the special arbitration
controls under which the EC waiver automatically lapses in the event it implements a tariff regime
after two negative arbitration reviews.
4.82 Tiret four sets forth the terms of the first arb itration proceeding, including a 90-day review
timetable and a mandate to determine "whether th e envisaged rebinding of the EC tariff on bananas
would result in at least maintaining total market access for MFN banana suppliers, taking into account
... all EC WTO market-access commitments relating to bananas". Tiret four underscores the
imperative of multilateral review a nd approval before implementation of an EC "tariff only" regime.
Latin American banana suppliers initiated arbitration in 2005. Th e Arbitrator concluded that the
European Communities' "envisaged rebinding" of €230/mt would not fulfil the European
Communities' MFN market access commitment.
4.83 Tiret five describes how the European Commun ities must "rectify the matter" following a
negative determination in the first arbitration. The ordinary meaning of the word "rectify" is "to put
or set right" or "to remedy (a bad or faulty condition or state of things)". The term "matter" in this
case refers to the European Communities' failure to satisfy the mandated standard of tiret four. The
second and third sentences of tiret five lay out th e first of two avenues by which the European

Communities can set right, or remedy, its faile d "envisaged rebinding". First, the European
Communities must consult with the interested pa rties within 10 days to determine whether a
"mutually satisfactory solution" can be found. Sec ond, in the absence of a mutually agreed solution,
within 30 days of a new arbitration request, the sa me arbitrator will be asked to determine if the
European Communities has "rectified" the matter. The fifth sentence of tiret five specifies the
automatic consequence of a second, negative arbitration determination against the EC: "[i]f 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 ". The mandatory consequence, the e xpiration of the waiver, takes effect " upon
entry into force of the new EC tariff regime", meaning that the waiver terminates automatically upon
entry into force of the new EC regime, not at some later point in time.
4.84 The Annex clearly sets out a mechanism whereb y once an arbitrator found twice that the
European Communities had presented a tariff proposal th at did not meet the conditions of the Annex,
the waiver would automatically expire once the new EC tariff regime went into effect. The European
Communities argues that "the new EC tariff regime" could only refer to the re gime that was found to
be inconsistent with the conditions of the Annex by the arbitrator and that as long as it introduced a
different regime and that regime "did indeed" main tain the total market acc ess of the MFN suppliers,
the waiver would apply until the end of 2007. The text of the Annex does not support that
interpretation.
4.85 Recital 11 to the Article I waiver provides context supporting the above reading of the Annex.
Recital 11 states: "any re-binding of the EC tariff on bananas under the relevant GATT
Article XXVIII procedures should result in at least maintainin g total market access for MFN banana
suppliers and their willingness to accept a multilateral control on the implementation of this
commitment". The reference to " multilateral control" refers to the Annex arbitration procedures and
argues against any EC interpretation that would allow the waiver to continue in effect in the face of
the two negative arbitral determinations and a subsequent unilateral determination of "compliance" by
the European Communities. The Eu ropean Communities' interpretation, which would allow it, at the
end of the day, to apply any regime it chose, cannot be reconciled with the intent of the drafters to
impose multilateral controls over the banana regime.
4.86 While the text of the Annex is clear, supplem entary means of interpretation, however,
confirm that the waiver expired upon implementa tion of the European Communities' new banana
measures. The waiver history demonstrate that the parties negotiated the special procedures
embodied in the Annex with the purpose of preven ting the European Communities from installing an
unacceptable banana tariff as of 2006. The origin al EC draft of the Annex failed to state a
consequence for EC choices after negative arbitrati on rulings. Members insisted that the language of
the fifth and sixth sentences of tiret five be inserted into the Annex. Absent this, the waiver would not
have been approved.
4.87 For all these reasons, the European Communities' Article I waiver expired on 1 January 2006,
upon the implementation of the new EC banana me asures. In the absence of this waiver, the
European Communities' banana measures are maintained in violation of GATT Article I.
(d) The European Communities maintains its excl usive tariff rate quota for ACP bananas in
violation of GATT Article XIII
(i) The European Communities' tariff rate quota is a quantitative restriction within the meaning
of Article XIII
4.88 First, the European Communiti es argues that the measures contained in EC Regulation 1964
are not subject to the requirements of GATT Artic le XIII because the ACP tariff quota is not a
"quantitative restriction", but rather a "cap" on a tariff preference. The European Communities goes

so far as to declare that it "subjects all banana imports to a single tariff of 176 euro per ton. There are
no other tariffs and there are no quantitative restrictions imposed on the importation of bananas".
4.89 The European Communities' description of its m easure defies reality. In the sixth whereas
clause EC Regulation 1964 states that "a tariff ra te quota for bananas originating in ACP countries
should also be opened". In addition, Article 1. 2 states that "an autonomous tariff quota of 775,000
tonnes per net weight subject to a zero-duty rate sh all be opened for imports of bananas ... originating
in ACP countries".
4.90 There is nothing new in the European Commun ities' attempt to cast its discriminatory ACP
tariff rate quota as a "cap" on a tariff preference. The Arbitrators in EC – Bananas III (US)
(Article 22.6 – EC) rejected this exact same argument nearly eight years ago, concluding that "in our
view, the 857,700 tonne limit on traditional ACP impor ts is a tariff quota and therefore Article XIII
applies to it". The same conclusion applies he re. The European Communities' 775,000 mt limit on
duty-free access for ACP bananas is also a tariff quota within the meaning of Article XIII and subject
to the non-discrimination requirements of Article XIII.
(ii) Article XIII applies even where the entire EC banana market is not controlled by quotas
4.91 The European Communities argues that Article XIII only applies to "different tariff quotas ...
imposed to different groups of countries" but not where "MFN Members are not subject to any
quantitative restriction". The Eur opean Communities offers no support for this proposition. That is
because both the text of Article XIII as well as numer ous panel or Appellate Body reports that have
examined the application of Article XIII dictate th e opposite result – that Article XIII does in fact
apply to the European Communities' ACP-exclusive tariff rate quota.
4.92 The Arbitrator in EC – Bananas III (US) (Article 22.6 – EC) confirmed that the European
Communities' exclusive ACP quota is by definition a tariff rate quota, since it "is a quantitative limit
on the availability of a specific tariff rate". Because all tariff rate quotas are subject to the
requirements of GATT Article XIII by virtue of Article XIII:5, the requirements of Article XIII apply
to the European Communities' ACP duty-free tariff quota.
4.93 The EC – Bananas III Panel Report affirmed that Article XIII:1's non-discrimination principle
requires that like products of all Members must be similarly restricted: "a Member may not limit the
quantity of imports from some Members but not fro m others ... A Member may not restrict imports
from some Members using one means and restrict them from another using another means".
4.94 Article XIII's non-discrimination requirements therefore govern any tariff quota or other
quantitative restriction that is applied to imports entering a Member's territory. This is the case
whether or not the entire EC market for bananas is regulated by tariff quotas.
4.95 To interpret Article XIII's application otherw ise would ignore the guidance of the Appellate
Body in EC – Bananas III , in which it concluded that "the essence of the non-discrimination
obligations [of GATT Articles I and XIII] is that like products should be treated equally, irrespective
of their origin". The Appellate Body stated that:
"If, by choosing a different legal basis for imposing import restrictions, or by
applying different tariff rates, a Memb er could avoid the application of non-
discrimination provisions to the imports of like products from different Members, the
object and purpose of the non-discrimination pr ovisions 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."

4.96 Thus, Article XIII prohibits the European Communities from establishing a duty-free tariff
rate quota for some Members, but not others, and fro m denying equal treatment to banana imports of
all origins. This interpretation of Article X III prevents Members from circumventing their basic
GATT non-discrimination obligations, a nd is equally as applicable in this instance as it was ten years
ago. Just as it did in the original EC – Bananas III proceeding, the European Communities again
attempts to elude Article XIII coverage by arguing th at the separation of its market into two separate
regimes – one covered by a tariff, the other by a tariff quota – absolves it of its non-discrimination
obligations. As then, the European Communities' arguments should be rejected.
4.97 In essence, the European Communities seeks to "eviscerate" its non-discrimination
obligations by interpreting Artic le XIII such that it would permit the European Communities
unfettered discretion to carve-out a portion of its market for preferential access without any
multilateral controls over how that carve-out was de termined and without an y consideration of how
the carve-out affects access into the same market for other "like" products. The European
Communities' interpretation turns Article XIII on its head by distorting a restriction on discriminatory
measures into a carte blanche for discriminatory measures, as long as a Member's entire market is not
subject to a quantitative restriction.
4.98 The European Communities' own prior statements also call into question its arguments. The
European Communities' 2001 request for a waiver from Article XIII:1 and XIII:2 stated that its ACP-
exclusive tariff quota " requires a waiver from the obligations est ablished under Article XIII GATT".
In October 2005, the European Communities sought to extend that very same Article XIII waiver for
its new proposed regime that consisted of the same ACP tariff quota reserve (increased to 775,000
mt), in combination with a €187/mt MFN tariff. That proposed regime, which the European
Communities said needed an Article XIII waiver , was structured exactly like the European
Communities' current banana measures, with ACP bananas subject to a tariff quota and MFN bananas
subject to a tariff and no quota.
(iii) The European Communities maintains its AC P tariff rate quota in breach of GATT
Article XIII
4.99 It is clear that the European Communities' ACP-exclusive tariff quota is subject to the
requirements of GATT Article XIII. It is also undisputed that the European Communities' waiver
from its obligations under Article X III expired on 31 December 2005. Thus, as demonstrated in the
United States' first written submission, because the European Communities uses a tariff rate quota on
ACP imports and an entirely different means to r estrict MFN imports, the European Communities is
preventing "like" imports from being "treated e qually, irrespective of origin" in breach of GATT
Article XIII:1.
4.100 Moreover, because the European Communities fails to distribute any share whatsoever of its
ACP tariff quota to MFN suppliers, let alone a shar e they would have expected to obtain in the
absence of restrictions, it maintains its tariff quota in breach of GATT Article XIII:2. In particular,
Article XIII:2(d) required the European Commun ities, once it opted to impose a tariff quota on
banana imports entering its market, to ensure, on failure to reach agreement on quota shares among
suppliers, that it "allot[ed] to Members having a subs tantial interest in supplying the product shares
based upon the proportions, supplied by such Memb ers during a previous representative period".
Only having done so could the European Communi ties avoid discriminating against the imports of
non-ACP banana suppliers. It failed to do so. In stead, the European Communities chose to allot no
share whatsoever to non-ACP suppliers with a substa ntial interest and no share to non-ACP suppliers
with no substantial interest. Thus, the Europ ean Communities breaches its obligations under GATT
Article XIII:2 because it failed to "similarly prohibit or restrict" those non-ACP bananas.

(e) Conclusion
4.101 For the foregoing reasons, the United States respectfully requests that the Panel find that:
(1) The European Communities' import regime for bananas implemented through
Regulation 1964 is inconsistent with Artic le I of the GATT 1994 because it applies a
zero tariff rate to imports of bananas orig inating in ACP countries in a quantity up to
775,000 mt, but does not accord the same duty-free treatment to imports of bananas
originating in all other WTO Members; and
(2) The European Communities' import regime for bananas implemented through
Regulation 1964 is inconsistent with Article XIII of GATT 1994 – including
Article XIII:1 and XIII:2 – because its r eserves the 775,000 metric ton zero-duty
tariff rate quota for imports of bananas or iginating in ACP countries and provides no
access to this preferential tariff rate quota to imports of bananas originating in non-
ACP substantial or non-substantial supplying countries.
3. Oral statement of the United States
4.102 In its written submissions, the United States has established that the regime for the
importation of bananas implemented by the European Communities on 1 January 2006, is in breach of
GATT Articles I and XIII. The European Communities has raised a number of mostly procedural
arguments in its own written submissions. The United States does not believe it is necessary to
address all those arguments in this oral statement. In this statement, the United States will begin with
a threshold point, namely that the bananas import regime implemented by the European Communities
on 1 January 2006 is a "measure taken to comply with the recommendations and rulings" of the
Dispute Settlement Body (DSB) and is therefore prope rly before this Panel under Article 21.5 of the
Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). Next, the
United States will summarize its arguments demonstrati ng that this regime is inconsistent with GATT
1994 Articles I and XIII. Finally, the United States will address two of the procedural arguments that
have been raised by the European Communities in its written submissions.
(a) The European Communities' bananas import regime is a measure taken to comply
4.103 On 1 January 2006, the European Communitie s implemented a revised regime for the
importation of bananas through Council Regula tion (EC) No. 1964 of 2005. Article 1 of
Regulation 1964 contains two elemen ts. Paragraph 1 establishes that from 1 January 2006, the most-
favoured-nation, or MFN, tariff rate for bananas will be set at €176/mt. Paragraph 2 creates an
exception to this MFN rate by establishing a duty-free tariff rate quota of up to 775,000 mt per year
available exclusively to bananas originating in the African, Caribbean and Pacific countries or ACP
countries. MFN-origin bananas have no right to enter under the zero-duty ACP tariff rate quota.
4.104 In its written submissions, the European Comm unities argues that the current import regime
for bananas is not a "measure taken to comply" and therefore the United States' complaint falls
outside the scope of DSU Article 21.5. It is clear that an implementing Member's designation of a
measure as one taken to comply, or not, is not determ inative. The procedural history of this dispute
clearly demonstrates that the regime for bananas implemented on 1 January 2006 is the latest in a long
line of failed measures taken by the European Communities as a result of the recommendations and
rulings of the DSB in EC – Bananas III . The European Communities' arguments are without merit
and should be rejected by the Panel.
4.105 On 25 September 1997, the DSB adopted the panel and Appellate Body reports in EC –
Bananas III and recommended that the European Commun ities bring its measures into compliance.

The European Communities stated that it could not do so immediately, and an arbitrator acting under
Article 21.3 of the DSU determined that the Euro pean Communities would have fifteen months and
one week to bring itself into compliance – that is until 1 January 1999. By that date, the European
Communities implemented two regula tions, consisting of a discrimi natory tariff rate quota and a
license-based system. These two regulations were then found in breach of the GATT 1994 and the
GATS by a compliance panel established at the request of Ecuador and by an arbitrator reviewing a
US request for authorization to suspend concessions . The DSB adopted the report of the Article 21.5
panel on 6 May 1999, again recommending that the European Communities bring itself into
compliance. The DSB authorized the United States to suspend concessions on 19 April 1999.
4.106 In November of 1999, in its status re port regarding implementation of the DSB's
recommendations concerning its banana import re gime, the EC representative announced a new
compliance proposal. This proposal would include a "two-stage process" involving a transitional
period with a preferential tariff rate quota system fo r ACP countries, followed by a flat tariff. At the
meeting, many concerns were raised about the lack of details of the proposal and the perpetuation of
discrimination between Latin American and ACP suppliers.
4.107 After two years of continued non-complian ce, in April 2001 the European Communities
reached the Understanding on Bananas with the United States, and a very similar one with Ecuador.
Although the United States disagree with the lega l consequences that th e European Communities
ascribes to the Understanding – and will deal with tho se later in this statement – it does not argue that
the Panel should completely disregard the Understa nding. Indeed, the Understanding is an important
fact in the procedural history of this dispute, as it set out the roadmap through which the United States
and Ecuador expected that the bananas dispute would be finally resolved. It is interesting that while
the European Communities argues that the Unde rstanding precludes the United States from bringing
this claim at all using arguments not based on the text of the Understanding or any well-founded legal
basis, it would ignore the plain meaning of the text.
4.108 The Understanding laid out a series of steps, over multiple years, through which the European
Communities would bring itself into compliance. Paragraph A of the Understanding serves as the
introduction for the steps that follow which "identified the means by which the long-standing dispute
over the EC's banana import regime [could] be resolved".
4.109 Paragraph B states that the European Comm unities "will introduce a Tariff Only regime for
imports of bananas no later than 1 January 2006". Note that although chronologically this would have
been the last step to be taken, it is the first step outlined in the Understanding. The European
Communities' argument that this paragraph is just a "simple reference" to secondary legislation
"which reflected the political decision of the Eu ropean Communities to change its banana import
regime" before the signing of th e Understanding is an attempted post hoc rationale inconsistent with
the plain text of the Understanding. It ignores the fact that this was a central element in the "means by
which the long-standing dispute over the EC's bana na import regime can be resolved", and cannot
change the fact that there would be a continuum of actions to be taken, culminating with this step.
This would have been the final action to be taken in bringing the EC regime into compliance.
4.110 Paragraph C begins with "in the interim". That is, before taking the final step set out in
paragraph B, there were a series of other steps that needed to be taken. Pa ragraph C, in conjunction
with Annex I, goes on to detail the interim licen sing regime the European Communities would use
between 1 July 2001, and 31 December 2005. These steps were "interim" because they still
discriminated between WTO Members, as evidenced inter alia by the fact that the European
Communities recognized that it would need waivers of Articles I and XIII of the GATT 1994.

4.111 Paragraph D then deals with steps the United St ates would take, in response to the successful
completion of interim steps by the European Comm unities, with respect to the US suspension of
concessions against EC exports.
4.112 Paragraph E provides that the United States would lift its reserve concerning the waiver of the
European Communities' WTO obligations under GATT 1994 Article I for ACP-origin bananas. In
addition, the United States would work toward s promoting the acceptance by the WTO membership
of the request for the Article X III waiver that would be needed for the management of quota C until
31 December 2005.
4.113 It should be clear that, per the terms of the U nderstanding, the measures taken to comply with
the DSB recommendations included a series of interim steps and a final step on 1 January 2006 – that
is, the introduction of a tariff only regime. The interim regime between 1 July 2001 and
31 December 2005, was a measure taken to comply, and the regime that the European Communities
introduced on 1 January 2006, which it claims to be a tariff-only regime, is also a "measure taken to
comply".
4.114 The European Communities argues that the fact th at the United States agreed to terminate its
application of the authorized suspension of c oncessions and related obligations upon the completion
of Phase II "confirms" that the implementation of that import regime was the agreed "measure taken
to comply". As already explained, the Understanding sets out a series of steps. Two significant steps
were to be achieved by 1 July 2001 and 1 January 2002. As incentive to en sure that the European
Communities took those steps, the United States agreed to first provisionally suspend its imposition of
increased duties and then terminate the imposition of increased duties that the DSB had authorized the
United States to apply. This only proves that both the United States and the European Communities
complied with what is set out in paragraphs C and D of the Understanding. Up to that point, there had
yet to be full compliance by the European Commun ities. Per the terms of the Understanding, there
was an additional step to be taken.
4.115 The European Communities also ar gues that a regime that was to enter into force six years
after the relevant DSB rulings could not be a "mea sure taken to comply". This argument must be
soundly rejected. It would have been much we lcomed if the European Communities had brought
itself into compliance immediately upon adoption of the DSB's recommendations and rulings in 1997
or at the end of the reasonable period of time – that is, 1 January 1999. Instead, the European
Communities chose to perpetuate a discriminatory sy stem of tariff rate quotas. The United States,
Ecuador, and the other original complaining parti es recognized the importance that trade in bananas
has for many of the ACP countries and were willing to recognize that an abrupt fix to the bananas
problem could have a negative impact. That is why the United States, other original complaining
parties, and other MFN banana s uppliers were willing to allow fo r a lengthy transitional period of
adjustment to a new, tariff-only regime by 1 Janua ry 2006. This forbearance , by the United States
and the Latin American banana suppliers, has unfortunately been repaid by the European
Communities with continued discrimination and non-compliance.
4.116 Finally, the United States notes that in th e related proceeding brought by Ecuador, the
European Communities argues that the 1 January 2 006 regime implements one of the suggestions
made by the panel in the Ecuador 21.5 report. In that proceeding, the Eu ropean Communities argues
that therefore the measure cannot be challenged. The United States believes those arguments are
completely unfounded. For purposes of this proceeding, however, the Panel should take the European
Communities' argument that its current bananas re gime implements a suggestion by the compliance
panel in
EC – Bananas III as a concession by the European Co mmunities that the measure taken by
the European Communities on 1 January 2006 is di rectly linked to the DSB's recommendations and
rulings. For all the foregoing reasons, the Panel should conclude that the European Communities'
current bananas import regime is a "measure taken to comply".

(b) The European Communities' regime is in breach of GATT 1994 Articles XIII and I
4.117 The European Communities' main argumentation h as been procedural. This is not surprising
as most of the European Communities' substantiv e arguments are the same, unsuccessful arguments it
has made in the prior proceedings in this dispute. The United States will now briefly demonstrate that
the tariff rate quota regime implemented by th e European Communities on 1 January 2006 is in
breach of GATT Articles XIII and I.
(i) The European Communities' regime is in breach of GATT 1994 Article XIII
4.118 We begin with Article XIII of the GATT 1994. Article XIII:5 provides that Article XIII
applies to "tariff quotas". The European Communities claims that Article XIII does not apply in this
instance because MFN suppliers are "simply subject to a tariff" and, therefore, there is no quantitative
restriction imposed on them. The European Communities made the same argument in the first
Article 21.5 proceeding brought by Ecuador and in th e Article 22.6 proceeding with the United States
with respect to the then 857,700 mt tariff rate quot a for ACP origin bananas. The panel and arbitrator
each rejected the European Communities' argument , explaining that "a tariff quota is a quantitative
limit on the availability of a speci fic tariff rate" and therefore, Ar ticle XIII applied to the 857,700 mt
limit. The 775,000 mt limit on the duty-free rate r eserved for ACP countries is likewise a tariff rate
quota subject to Article XIII. The United States notes that there is no support in the text of
Article XIII or in any WTO dispute settlement report that the Member making the claim has to be the
one subject to the tariff rate quota, as the European Communities suggests.
4.119 As explained by the EC – Bananas III panel, Article XIII:1 establishes that no import
restrictions can be applied to one Member's products unless the importation of like products from
other Members is similarly restricted. The panel also explained that "a Member may not restrict
imports from some Members using one means and rest rict them from another using another means".
The Appellate Body confirmed that the "essence" of Article XIII "is that like products should be
treated equally, irrespective of origin".
4.120 Using the reasoning of the panel and the Appellate Body in EC – Bananas III , the panels in
the prior compliance proceedings determined that the traditional ACP suppliers – which were non-
substantial suppliers – were subject to different restrictions than other non-substantial suppliers.
Therefore, the two groups were not "similarly restricted" as required by Article XIII:1.
4.121 Although the European Communities' 1 January 2006 regime is simpler than the regime
subject to the prior compliance proceedings, the same result obtains. Only ACP suppliers benefit
from access to the 775,000 mt in-quota quantity, while other non-substantial suppliers (and substantial
suppliers) are excluded from the in-quota quantity and subject instead to the over-quota MFN tariff.
Once again, the European Communities is choosing to divide its importation regime in breach of
Article XIII:1 in a way that prevents like imports from being treated equally.
4.122 Article XIII:2 further requires that if quantitativ e restrictions are used, the Member imposing
the restriction must "aim at a distribution of tr ade... approaching as clo sely as possible the shares
which the various Members might be expected to obt ain in the absence of such restrictions". The EC
– Bananas III panel explained that tariff rate quota alloca tions must "minimize the impact of a... tariff
rate quota regime on trade flows by attempting to approximate... the trade shares that would have
occurred in the absence of the regime".
4.123 Article XIII:2(d) provides rules on the allocation of quota shares among Members supplying
the product. First, the Member allocating a quota or tariff rate quota must try to reach agreement with
the Members having a substantial interest. If that fails, the allocating Member must allocate shares to
supplying Members having a substantial interest b ased on criteria specified in Article XIII:2(d),

second sentence. Furthermore, the EC – Bananas III panel determined that if a Member allocates
tariff rate quota shares to Members not having a substantial interest in supplying the product, then
shares must be allocated to all suppliers not having a substantial interest. Otherwise, "imports from
Members would not be similarly restricted as required by Article XIII:1".
4.124 In the instant case, the European Communities has failed to distribute any share whatsoever
to non-ACP countries, whether substantial or non-substa ntial suppliers. This despite the fact that the
excluded MFN suppliers are principal or substa ntial suppliers of bananas to the European
Communities. Therefore, the ACP tariff rate quota is not allocated in a way that approximates the
trade shares that would have occurred in the ab sence of the tariff rate quota and is therefore
inconsistent with Article XIII:2.
4.125 It is undisputed that the Article XIII waiv er which the European Communities sought and
obtained for the administration of its previous tari ff rate quota regime expired on December 31, 2005.
The date of expiration of that waiver was to coinci de with the expected move to a tariff only regime
on 1 January 2006 – a regime which if properly impl emented, would not have required a waiver from
Article XIII.
4.126 The European Communities argues that this is a case about tariff discrimination under GATT
Article I:1 and suggests that it is not possible to br ing an Article XIII claim simply because a "tariff
preference is subject to a 'cap'". It is precisely b ecause of that "cap" that this case is not just about
different rates of duty, and Article I, but also about discriminatory tariff rate quotas, and Article XIII.
As already noted, a "cap", or quantitative limit on the availability of a specific tariff rate, is a tariff
rate quota. The United States notes that in EC – Bananas III , the Appellate Body found that the
European Communities was in breach of its obligations under both GATT Articles I and XIII, and that
the Lomé waiver only covered the breach of Article I. There is no support for the proposition that a
measure cannot be subject to multiple discip lines within the GATT 1994 and within the WTO
Agreement itself.
(ii) The European Communities' regime is in breach of Article I, and the Article I waiver has
ceased to apply
4.127 It has been established, and the European Co mmunities does not dispute, that the zero duty
tariff accorded exclusively to ACP banana suppliers is in breach of Article I:1. The European
Communities' defence is entirely based on its asserti on that the Article I waiver agreed by WTO
Members at the Doha Ministerial has not expired with respect to bananas. The United States has
demonstrated in its written submissions that the text of the Annex on bananas to the Article I waiver
can only support an interpretation that the waiver ex pired when the new EC bananas regime went into
effect, after arbitrators found twice that the Eu ropean Communities had pr esented a tariff proposal
that did not meet the conditions of the Annex.
4.128 Article 3bis of the waiver makes clear that the provisions of the Annex apply with respect to
bananas. The chapeau to the Anne x then makes clear that with resp ect to bananas, the waiver will
apply until 31 December 2007, subject to the conditions and procedures that are set out in the Annex.
4.129 Tiret one requires the initiation of Article XXVIII negotiations with respect to the rebinding
of the EC tariff on bananas with enough time to finali ze the process before the entry into force of the
tariff only regime. Tiret two requires that inte rested parties be informed of the European
Communities' intentions regarding the rebinding and sets out other conditions for the negotiations.
4.130 Tirets three through five set out the arbitr ation mechanism which is the focus of US
discussions. Tiret three provided that interested parties could invoke the arbitration mechanism
within 60 days of the announcement regarding the pr oposed rebinding. Tiret four sets forth the terms

of the first arbitration proceeding, with a mandate to determine "whether the envisaged rebinding of
the EC tariff on bananas would result in at least maintaining total market access for MFN banana
suppliers, taking into account ... all EC WTO mark et-access commitments relating to bananas". The
Arbitrator in the first arbitration concluded that the European Communities' "envisaged rebinding" of
€230/mt would not fulfill the European Communities' MFN market access commitment.
4.131 Following a negative determination in the first arbitration, the European Communities had to
"rectify the matter". According to tiret five, th e European Communities could do so in two ways.
The European Communities could reach a "mutually satisfactory solution" with the parties that
requested the arbitration. Failing that, the third sentence of tiret five provided for a second arbitration,
where the same arbitrator would be asked to determine whether the European Communities had
"rectified" the matter.
4.132 The fifth sentence of tiret five specified the automatic consequence of a second, negative
arbitration determination against the European Communities. It states that: "[i]f 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". The phrase "[i]f the EC has failed to r ectify the matter", can only refer back to the
determination required to be made by the arbitrat or pursuant to the third sentence. The fourth
sentence then simply required th at this second award be notified to the General Council. The fifth
sentence provides the consequence arising from such a notified arbitration award where the arbitrator
found that the EC failed to rectify the matter – the waiver ceases to apply " upon entry into force of the
new EC tariff regime". There is no need for that fi fth sentence to have to refer back to the Arbitrator,
as the European Communities argues. The European Communities' interpretation would read the role
of the arbitrators out of the Annex.
4.133 In addition, the European Communities argues that "the new EC tariff regime" could only
refer to the regime that was found to be inconsistent with the conditions of the Annex by the arbitrator
and that as long as it introduced a different regime and that regime "did indeed" maintain the total
market access of the MFN suppliers , the waiver would apply until the end of 2007. The text of the
Annex does not support that interpretation. Furthe rmore, the context of the waiver and the Annex
with respect to bananas does not support such an interpretation either. The arbitration procedures
contained in the Annex were in tended to provide multilateral cont rol over the rebinding of the EC
tariff. The Annex subjected such rebinding to th e condition of "at least maintaining total market
access for MFN banana suppliers". The MFN supplie rs were willing to accept an arbitral decision on
this, and even willing to allow the European Communities two opportunities to present a proposal that
met the condition. It would be absurd that after setting out such procedures, the MFN suppliers would
then be required to accept the unilateral determin ation of the European Communities that whatever
regime it put into place would meet the c onditions of the Annex and entitle the European
Communities to keep the protection of the waiver for the new regime
4.134 For these reasons, the Article I waiver expired with respect to bananas as of 1 January 2006.
(c) The Panel should reject the European Commun ities' preliminary objections regarding the
Understanding and nullification or impairment
4.135 The United States has set out in detail in its rebuttal submission the reasons the Panel should
reject the European Communities' preliminary objec tions. It would now like to address further two
issues raised by the EC.

(i) The EC-US Understanding was not a "mutually agreed solution" and even if it were it would
not preclude this proceeding
4.136 We begin with the Understanding. The United States acknowledges that the Understanding is
an important document in the long history of this dispute. It sets out what the United States and the
European Communities, back in 2001, considered to be means to resolve the bananas dispute. As part
of the procedural history of this dispute, it provi des evidence that there wa s a continuum of actions
that the European Communities would take to br ing itself into compliance, culminating in the
adoption, it was hoped, of a tariff only regime on 1 January 2006. Nonetheless, as a matter of fact and
law, the Understanding does not have the legal effect that the European Communities argues.
4.137 First, the European Communiti es argues that the United States is barred from pursuing this
proceeding because by accepting the Understanding, th e United States has accepted that the Article I
waiver would continue to exist until the end of 200 7. Of course, the European Communities does not
and cannot point to where in the Understanding the United States supposedly agreed to this, as the
Understanding does not contain any statement to that effect. As it committed to do in the
Understanding, the United States lifted its reserve to the Article I waiver, and that waiver was
eventually granted. The waiver is due to termin ate for products other than bananas on 31 December
2007. Nonetheless, the waiver also contains the Annex that sets out the arbitration mechanism,
providing for the possibility of the waiver being term inated for bananas prior to December 31, 2007.
The conditions for the termination of the waiver with respect to bananas were met with the
introduction of the new EC regime for bananas on 1 January 2006.
4.138 Second, the European Commun ities argues that the Understa nding is a "mutually agreed
solution" and that as a result the United States is ba rred from bringing this proceeding. As explained
in written submissions, the United States did not and does not consider that the Understanding was a
"mutually agreed solution" for purposes of Arti cle 3.6. The United States made this clear
immediately after the European Communities unilate rally notified the Understanding to the DSB as a
"mutually agreed solution" in June of 2001. It would have been impossible in 2001 to say that the
dispute was "solved". As the United States ma de clear to the European Communities and all
Members in 2001, the Understanding identified "the means by which the long-standing dispute... 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".
4.139 Even if the Understanding were a "mutually agr eed solution", nothing in the DSU permits the
legal consequence that the European Commun ities proposes. The DSU provides three limited
consequences for "mutually agreed solutions". Artic le 3.6 requires that mutually agreed solutions be
notified to the DSB and the relevant Councils an d Committees. Article 12.7 provides that the
existence of a mutually satisfactory solution reach ed prior to the conclusion of a panel proceeding
affects the form and content of the panel's report. And Article 22.8 provides that the suspension of
concessions or other obligations shall only be applied until, inter alia, a mutually satisfactory solution
is reached. The fact that the legal consequences of a "mutually agreed solution" are spelled out in
these three provisions is significant because it stands in stark contrast to the lack of any provision that
assigns the legal consequences that the European Communities would now attribute to such solutions.
4.140 In particular, there is no basis in Article 22.8 of the DSU, elsewhere in the DSU, or elsewhere
in the covered agreements for the EC argument th at parties to a "mutually agreed solution" are
precluded from having recourse to Article 21.5 proceed ings. As noted in the United States' second
written submission, the European Communities took this very same position in the
India – Autos
proceeding. There, the Europ ean Communities argued that "[e]ven if the [1997 Agreement] had
settled the matter in dispute ..., that would still no t preclude the European Communities from bringing
this dispute".

4.141 Third, the United States disagrees with the Eu ropean Communities' assertion that, pursuant to
the customary rules of interpretation reflected in Article 31(3)(c) of the Vienna Convention on the
Law of Treaties (Vienna Convention), the Understanding must be take n into consideration to
determine the parties' rights and obligations under the GATT 1994 and the DSU.
4.142 Nothing in the customary rules of interpretati on of public international law, as reflected in
Article 31(3)(c) of the Vienna C onvention, supports the European Communities' assertion that the
Understanding acts as a procedural defence 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; the European Communities appears to be arguing that the Understanding has altered the
covered agreements. Article 31(3)(c) does not deal with this issue. The United States refers the Panel
to a discussion of this issue in its second written submission.
4.143 There is one significant aspect to the Eur opean Communities' claims regarding the
Understanding to note. Since the European Comm unities in this proceeding claims to view the
Understanding as a mutually agreed solution to the dispute, the European Communities itself then is
acknowledging that the steps in the Understanding are relevant to responding to the DSB's
recommendations and rulings in the dispute. Accordingl y, the EC claims with respect to the nature of
the Understanding contradict its claim that its new regime is not a "measure taken to comply" with
those recommendations and rulings.
(ii) The Panel must reject the European Commun ities' arguments regar ding nullification or
impairment
4.144 Finally, the Panel must reject the EC arguments that in order to resolve this dispute the Panel
must determine whether the United States has standing and what is the level of nullification or
impairment suffered by the United States. Both these issues were settled by the Appellate Body in EC
– Bananas III.
4.145 The Appellate Body upheld the panel's finding that the United States had a right to bring the
claims under the GATT 1994 against the European Communities' bananas regime. The Appellate
Body explained that Members have broad discretion in bringing claims. In addition to noting the
potential export interest of the United States and the potential impact on the US market for bananas of
the European Communities' regime, it quoted from th e panel that "with the increased interdependence
of the global economy ... Members have a greater stak e in enforcing WTO rules than in the past since
any deviation from the negotiated balance of rights and obligations is more likely to affect them".
4.146 In EC – Bananas III , the Appellate Body also determined that a showing of trade effects is
unnecessary for purposes of demonstrating that there has been a breach of a GATT provision. The
Appellate Body based its reasoning on the US – Superfund GATT panel report. This reasoning should
likewise apply here.
4.147 By focusing on nullification or impairment, th e European Communities' argument seems to
presume that the ultimate outcome of dispute se ttlement is the suspension of concessions by the
complaining Member in order to achieve complia nce by the responding Member. There are, of
course, two other preferred outcomes set out in Artic le 3.7 of the DSU: a mutually agreed solution
consistent with the covered agreem ents and withdrawal of WTO-incons istent measures. In addition,
there is resort to compensation. Indeed, Artic le 3.7 of the DSU characterizes suspension of
concessions as a "last resort".
4.148 In that regard, the United States found troublin g the European Communities' assertion in its
rebuttal submission that a finding by this Panel of WTO-inconsistency would prolong the dispute and

would likely lead to the suspension of concessions by the United States. The United States disagrees.
Rather, once this Panel finds the European Communities' current regime to be WTO-inconsistent, and
the WTO adopts the report, the United States expect s the European Communities to fully respect its
WTO obligations and to reach a mutually agreed so lution consistent with the covered agreements or
withdraw its current bananas regime.
4. Closing statement of the United States
4.149 The United States wishes to note that it regret s very much some of the comments made by
certain ACP speakers, and endorsed by other ACP speak ers, that attack the integrity and motivations
of the United States in bringing this proceeding.
4.150 The United States disagrees profoundly with th ose comments and statements. The United
States was a party to the original Bananas III proceeding. It therefore has full rights to ensure that the
European Communities complies with the recommendations and rulings of the DSB.
4.151 The Chairman recalled at the beginning of this panel meeting that the GATT recently
celebrated its 60
th anniversary. A bedrock principle of the GATT, and now the WTO agreements, is
non-discrimination.
4.152 This is a dispute about this very principle of non-discrimination. The regime implemented by
the European Communities on 1 January 2006, con tinues the long-standing discrimination against
non-ACP banana suppliers that was found WTO-inconsistent over a decade ago, and more going back
to the earlier GATT cases.
4.153 One of the speakers this morni ng stated trade should not be used to the detriment of the
poorest countries. The United States agrees with that, and believes that the regime implemented by
the European Communities on 1 January 2006, does precisely that by picking winners and losers
among similarly situated Members of the WTO.
4.154 None other than EC Trade Commissioner Ma ndelson recently wrote that the European
Communities' "current arrangements discriminate in favour of some developing countries – the ...
ACP[] – and against others, often equally needy. " He added: "That is not right morally nor
compatible with international trade rules."223 The United States agrees.
B. EUROPEAN COMMUNITIES
1. First written submission of the European Communities
(a) Preliminary objections
(i) The United States did not request consultations
4.155 A complaining party is not entitled to request the establishment of a panel unless it has first
submitted a request for consultations. If no request for c onsultations has been made, the defending
party may raise a preliminary objection before the panel (given that, pursuan t to the DSU, a panel
request is not subjected to scrutiny by the DSB) a nd the panel is obliged to sustain the objection and
dismiss the case outright. This Panel should find th at the well established importance of the request
for consultations for the proper operation of the WT O dispute settlement system, recognized not only
in the text of the DSU but also in the text of th e GATT, means that a complaining party must submit a

223 Peter Mandelson & Louis Michel, "This is not a poker game", The Guardian, 31 October 2007.

request for consultations before the submission of a request for the establishment of a panel pursuant
to Article 21.5 of the DSU.
4.156 The United States never submitted a request for consultations before submitting its request for
the establishment of this Panel. The European Co mmunities hereby raises a preliminary objection and
requests the Panel to dismiss the United States' complaint outright on the grounds that the United
States did not submit a request for consultations before requesting the establishment of the Panel.
(ii) The United States is barred from challenging the Cotonou Preference
4.157 The Understanding between the United States a nd the European Communities and the Letters
exchanged between them confirm that the parties had reached a mutually agreed solution to their
dispute. The Understanding (i) describes in great detail the characteristics of the two banana import
regimes that the European Communities should impl ement by 1 July 2001 and by 1 January 2002
respectively and (ii) expressly provides that the United States' retaliation measures will be initially
suspended and then terminated upon the implemen tation by the European Communities of the second
import regime on 1 January 2002. The Letters provide even further detail on the allocation of the
licences to certain operators and the mutual right s and obligations of the United States and the
European Communities if various events occur. Import antly, the Letters confirm that this is indeed a
mutually agreed solution. In light of the conten t of the Understanding and the Letters and the rights
and obligations mutually accepted by both parties, the European Communities respectfully submits
that the Understanding is indeed a "mutually agr eed solution" to the banana dispute between the
United States and the European Communities. In any event, even if it is assumed arguendo that the
Understanding is not a "mutually agreed solution" , it is a bilateral agreement between the United
States and the European Communities and forms part of the "applicable rules of law" governing the
relations between them. Its terms mu st be taken into consideration in order to determine the parties'
mutual rights and obligations under the GATT and the DSU.
4.158 Through the Understanding, the United States accepted the principle that the European
Communities would offer a trade preference to ba nanas coming from the ACP countries until the end
of 2007. Given that the United States has accep ted in the Understanding the principle that the
Cotonou Preference would continue to exist until the end of 2007, the United States is now barred
from challenging the existence of the Cotonou Pr eference in the period between the end of 2005 and
the end of 2007, irrespective of the reasons that the United States may claim in its complaint.
(iii) The complaint of the United States falls outside the scope of Article 21.5 of the DSU
4.159 Article 21.5 proceedings can be used onl y to challenge the legality of the " measures taken to
comply" with the recommendations and rulings of the DSB and not " any" measure taken by the
defending party, even if that measure relates to products that have been the subject of dispute
resolution procedures in the past. A complaining pa rty that wishes to challenge such measures must
follow the procedures outlined in Article 6 of the DSU.
4.160 The dispute between the United States and the European Communities, which had culminated
with the Appellate Body's report in 1997 and the United States' retaliation measures, ended when the
parties reached their "mutually agreed solution" in 2001 and signed the Understanding and exchanged
the Letters attached as an Exhibit to this submis sion. In compliance with the mutually agreed
solution, the European Communities introduced on 1 January 2002 the final "measure taken to
comply" with the 1997 Appellate Body report. This was the tariff-quota based import regime with the
characteristics agreed in Annex II of the Understanding. This was the "measure taken to comply" that
was agreed with the United States. The United States' retaliation rights terminated upon the European
Communities' implementation of this tariff-quota b ased regime and the United States never requested
from the DSB the right to reinstate those rights with relation to that import regime.

4.161 Therefore, the current European Communities' ba nana import regime is not a "measure taken
to comply" with the 1997 rulings and recommendati ons. If the United States does indeed consider
that the current banana import regime violat es the GATT, it should commence new proceedings on
the basis of Article 6 of the DSU. The Panel s hould find that the United States has erroneously
brought this complaint under the procedures of Articl e 21.5 of the DSU and reject the complaint in its
entirety.
(b) GATT Article I: The Doha Waiver covers the Cotonou Preference until the end of 2007
4.162 The correct interpretation of the Doha Waiver is that it would expire only upon the entry into
force of a European Communities' banana import re gime that would not satisfy the standard of
"maintaining total market access for MFN countries". Therefore, the continued application of the
Doha Waiver until the end of 2007 depends on wh ether the European Communities' import regime
actually maintains total market access for MFN suppliers and not on the number of arbitrations lost
for the European Communities before the new import regime was ever introduced.
4.163 The text of the Doha Waiver provides that the waiver would cease to cover the Cotonou
Preference if the European Communities " failed to rectify the matter ". This means that the Doha
Waiver would continue to apply to the end of 2007 , if the European Communities' new import regime
indeed maintained total market access for MFN supp liers. Moreover, the Doha Waiver provides that
"this waiver shall cease to apply to bananas upon entry into force of the new EC tariff regime ". The
phrase "the new EC tariff regime " refers 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 Europ ean Communities implemented the 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 total market access of the MFN suppliers, then the Doha Waiver would
continue to apply until the end of 2007. The European Communities has fully satisfied the condition
for the continued application of the Doha Waiver.
4.164 The current import regime maintains total market access for MFN suppliers. First
, it has been
established that the volume of total imports of bananas from MFN countries has increased
significantly since the introduction of the European Communities' new import regime. Its growth
exceeds the growth of the aggregate banana mark et in the European Communities, as well as the
growth of the imports of ACP bananas.
4.165 Second, "maintaining total market access for MFN suppliers" does not mean guaranteeing a
particular level of trade to any individual MFN coun try. Consequently, the f act that the volume of
exports of some countries may have decreased in recent years does not mean that the total market
access for the group to which these countries belong h as not been maintained. The reduction in the
exports of certain countries is the result of a nu mber of factors (e.g., weather conditions, natural
disasters, local administrative measures affecting the decisions of banana trading companies, etc.) that
have nothing to do with the import regime of the European Communities.
4.166 Third, the average FOB prices paid to banana pr oducers in 2006 and 2007 are much higher
than those paid in 2005 and 2004.
(c) There is no violation of GATT Article XIII
4.167 The Cotonou Preference does not violate GATT Article XIII. First , banana imports from
Latin American and other MFN suppliers are not subj ect to any quantitative restriction. Therefore,
the conditions for the application of GATT Article XIII are not satisfied, i.e., there is no quantitative
restriction imposed on one WTO Member that it is not imposed on all other countries.

4.168 Second, GATT Article XIII cannot be used as a substitute for GATT Article I:1 wherever a
tariff quota exists. GATT Article XIII does not obli ge the European Communities to extend to Latin
American countries the tariff preference it grants to the ACP countries simply because this tariff
preference is subject to a "cap". Article XIII does not cover cases of tariff discrimination: this is the
role of GATT Article I:1.
4.169 Third, the facts in the current proceedings are not the same as those that faced the Panel and
Appellate Body in 1997. It is noteworthy that th e United States does not make any attempt to explain
what are the restrictions on imports from MFN exporters that are not similar to those it says are
affecting imports from ACP countries.
4.170 Fourth
, the United States' invocation of Article XIII:2 suffers from similar defects. It fails to
provide any explanation of how the extension of Ar ticle XIII to tariff quotas is to apply in the case of
paragraph 2. Moreover, the European Communities' regime for bananas that is the subject of the
present proceedings is significantly different from that examined in the original dispute. In the
present case the MFN Members are not subject to an y quantitative restriction. As there are no
"restrictions" applicable to their exports, there are no restrictions on their exports that can be
compared with those, if they can be called such, that are applied to ACP exports.
(d) Absence of nullification or impairment of a benefit accruing to the United States
4.171 The existence between the end of 2005 and the end of 2007 of the Cotonou Preference has not
caused the United States a nullification or impairment of any benefit accruing to it. There can be only
one notion of "nullificatio n or impairment" for purposes of the DSU and, therefore, this term has the
same meaning both in the context of Article 3.8 of the DSU and of Article 22 of the DSU. The
European Communities draws support for this co nclusion from the decision of the Arbitrators
(pursuant to Article 22.6 of the DSU) in US – 1916 Act (EC), paragraph 5.50.
4.172 Moreover, the Arbitrators' decision in the EC – Bananas III arbitration in 1999 confirms that
the Panel must use different standards to determin e (a) whether the alleged violation of a WTO rule
sufficiently "touches" upon the interests of the co mplaining party so as to justify the complaining
party's "standing" to commence dispute settlement proceedings, and (b) whether the complaining
party suffers a "nullification or impairment". Moreove r, it confirms that the standard that needs to be
satisfied for a finding of "nullification or impairment" should be based on facts and is more difficult to
satisfy than the standard that needs to be satisfied for a finding of "standing" to bring a complaint.
The Panel needs to examine what is the nullificati on or impairment suffered by the United States in
order to comply with its obligations under Articles 3.2, 3.3 and 11 of the DSU. The Panel can offer
legal certainty to the parties and help them avoid future disputes, for example, under Article 22 of the
DSU only if it resolves in the present proceedings th e question of whether there is nullification or
impairment of a benefit accruing to the United St ates for which the European Communities can face
suspension of concessions.
4.173 The Cotonou Preference does not deprive the Un ited States from any opportunity to export
bananas towards the market of the European Communities. The United States cannot claim a
nullification or impairment neither on the basis of any potential effect on the trade in bananas between
the United States and third countries, nor on the basis of any potential effect on "US content
incorporated in Latin American bananas". In the EC – Bananas III case, the United States'
nullification or impairment was based on violations of the GATS. This is confirmed both in the report
of the Appellate Body in 1997 and in the decision of the Arbitrators in 1999.
4.174 None of the bases on which the nullification or im pairment of the United States' benefits was
found in 1997 and 1999 exists today. In th e current proceedings, the United States has not
 brought
any claim under the GATS and bases its complaint excl usively the GATT. The current import regime

does not give rise to any "inextricably interwove n" relation between the GATT and the GATS (which
the Appellate Body had found to be the case in 1997 ). The Panel should c onfirm the conclusions it
had reached as Arbitrators in 1999 and find that, ev en if the Cotonou Preference were to violate the
GATT, such violation does not cause any nullificati on or impairment of a benefit accruing to the
United States for which the European Communities can face suspension of concessions.
2. Second written submission of the European Communities
(a) Preliminary objections
(i) The United States did not request consultations
4.175 In light of the agreement to dispense with consultations in this case, which was reached
between the European Communities and the United St ates prior to the United States' request for the
establishment of the Panel, the European Commun ities withdraws the objection raised in its first
written submission.
(ii) The Understanding bars the United States from challenging the Cotonou Preference
4.176 The United States argues that it never accepted a reduction of its rights to challenge the
Cotonou Preference pursuant to the DSU and that the Understanding does not include an express
statement of the United States according to whic h it renounces the right to challenge the Cotonou
Preference at a later time. The European Comm unities considers that such an express statement by
the United States in the Understanding is not n ecessary in light of the other provisions of the
Understanding and the context within which it was signed. The United States does not dispute the
fact that the Understanding provides that the Unite d States would help the European Communities to
obtain the "waiver requested". The United States also does not dispute the fact that the duration of the
"waiver requested" by the European Commun ities was until the end of 2007. The logical
consequence of the United States' accepting to sup port the grant of a waiver with duration until the
end of 2007 is that the United States also accepted th at the Cotonou Preference (which the request for
the waiver referred to) would continue to exis t until the end of 2007. The Understanding does not
include any language that might indicate that the Un ited States' acceptance of the Cotonou Preference
until the end of 2007 was subject to any conditions relating to the characteristics of the Cotonou
Preference. The only characteristic of the Cotonou Preference that was accepted by the parties was
that banana imports from ACP countries would be assured " more favourable treatment than that
granted to third countries benefiting from the mo st favoured nation clause for the same products ".
Moreover, the deal between the parties would have been completely one-sided and unbalanced if the
United States were allowed first to reap all the benefits of the Understanding and then were allowed to
avoid complying with its obligations towards the European Communities.
4.177 The United States argues that its agreement to the grant of the "waiver requested" by the
European Communities " did not itself change the legal situa tion with respect to the EC's tariff
preferences". The European Communities has not argue d that the Understanding has changed the
"legal situation" of the Cotonou Preference, but th at, irrespective of the "legal situation" of the
Cotonou Preference, the United States has accepted its existence until the end of 2007 and is therefore
is now barred from challenging it. The United Stat es also argues that the European Communities'
interpretation could lead to a situation where WT O Members would be very hesitant to accept the
grant of waivers in the future. However, the United States has done more than simply voting in
favour of the Cotonou Preference waiver: it has ente red into an international agreement accepting its
existence until the end of 2007 and has received specific consideration for doing so. This
differentiates the United States from virtually all ot her WTO Members present in Doha. It is actually
the United States' arguments that, if accepted, w ould create important "systemic" problems for the
WTO legal order. Granting to WTO Members the right to renege on the agreements with which they

reach mutually agreed solutions to their disputes would seriously compromise the effectiveness of
these mutually agreed solutions and would foster th e "contentious" character of the dispute resolution
system.
4.178 The United States argues that the Understanding is not a legally binding agreement that can
be taken into consideration by th e Panel in determining the partie s' rights and obligations under the
GATT and the DSU. The position taken by the Un ited States in this part of its second written
submission is in full contradiction with the position it takes in the next section of its submission. The
United States also argues that the Understanding was not a mutually agreed solution because it was
merely a " document that identified the 'means' to resolve the dispute and set out a path forward, but
that no solution acceptable to both parties had yet been put in place on the date of the EC-US
Understanding and that the Understanding was not itself the end of the dispute ". The European
Communities cannot see why such a document should not qualify as a mutually agreed solution for
purposes of the DSU. A "mutually agreed solution" can be nothing else than a document that sets the
terms of the solution mutually agreed between the pa rties. A "mutually agreed solution" will describe
the actions that the parties have undertaken to pe rform (or refrain from) in the future. The United
States also attempts to argue that the side lette rs exchanged between the parties shortly after the
signing of the Understanding do not mean what they expressly say, i.e., that the Understanding was a
"mutually agreed solution". The European Comm unities considers that the points raised by the
United States in this paragraph actually support th e interpretation of the European Communities: both
conditions mentioned by the United States for the pa rties' adherence to the Understanding have been
satisfied. Therefore, the United States does not ha ve any excuse not to adhere to the Understanding
and comply with its terms. Moreover, the e xpress reference to the Understanding as a mutually
agreed solution in the side letters confirms the lega l effect that the parties intended to give to the
Understanding from the very beginning.
4.179 The United States accepts that the Understanding is an international agreement between the
United States and the European Communities, bu t argues that its terms cannot be taken into
consideration in determining the rights and obligat ions of the parties under the WTO rules. The
United States asserts that the Understanding has no relevance for these proceedings because it is not a
"covered agreement" listed in A ppendix 1 to the DSU. The European Communities notes that there
are many bilateral agreements between WTO Memb ers which are not listed in Appendix 1, but are
given legal effect and are taken into account by the WTO dispute settlement system. A good example
is the bilateral agreement of the parties in this case with which they have agr eed to dispense with the
DSU's requirement to hold consultations. This agre ement is not listed in Appendix 1 to the DSU, but
the United States considers it binding upon the parties. It would be odd to find that the bilateral
agreement to dispense with consultations is covered by the DSU and is binding for the parties, but that
the Understanding is not, although the parties' undertakings in the Understanding are so important for
the determination of their rights and obligations under the GATT and the DSU.
4.180 The United States attempts to draw some support from the report of the panel in EC –
Approval and Marketing of Biotech Products , which, according to the Un ited States, "rejected the
notion that the rules of international law could be th ose applicable only to the disputing parties". The
European Communities considers that the United Stat es' reading of the panel report is not accurate.
The European Communities notes that paragraph 7.71 and paragraph 7.72 of the panel's report in EC
– Approval and Marketing of Biotech Products
 states that, in determining the rights and obligations of
the parties to a dispute under the GATT and the DS U, it is possible for a panel to take into
consideration the terms of any intern ational agreement to which all parties to the dispute participate.
Therefore, the assertion that the United States a ttempts to base on the report of the panel in EC –
Approval and Marketing of Biotech Products is not correct. The United States also tries to draw some
support for its position from the report of the panel in India – Autos and the views expressed by the
European Communities in that case. The European Communities invites the United States to read the
report of the panel in paragraph 7. 113 and paragraph 7.115 which confirm that the panel considered it

possible that a mutually agreed solution coul d bar a party from commencing dispute settlement
proceedings.
4.181 The European Communities also considers that the principle of good faith, which runs
through the entire DSU and defines the outer limits of the application of all rights recognized by the
DSU to WTO Members, bars the United States from challenging the Cotonou Preference. The United
States has already drawn the benefits from the U nderstanding and was from the very beginning aware
of the legal status of the Understanding and of the obligations it undertook with it. Moreover, the
European Communities has fully complied with its obligations under the Understanding in good faith
and relying on the expectation that the United States would also comply with its own obligations. The
application of the principle of good faith on these facts requires the United States to perform its part
of the deal and refrain from challenging the existence of the Cotonou Preference until the end of 2007.
(iii) The United States' complaint falls outside the scope of Article 21.5 of the DSU
4.182 The Understanding does not contain any e xpress provision imposing the obligation to
implement a tariff only regime on the European Comm unities. Paragraph B makes a simple reference
to a provision of the European Communities' secondary legislati on, which reflected the political
decision of the European Communities to change its banana import regime. This political decision
had already been taken before the signing of the Understanding. The United States wrongly asserts
that the parties agreed in the Understanding that the tariff only regime would be a part of the "measure
taken to comply".
4.183 It was agreed in the Understanding that the Un ited States' right to retaliate would terminate
upon the European Communities' implementation of the tariff-quota-based regime described in
paragraph C-2 of the Understanding. A complaining party's right to retalia te terminates upon the
implementation by the defending party of the appropria te "measure taken to comply". Therefore, the
fact that the United States accepted to have their retaliation rights terminated upon such
implementation confirms that the implementation of that import regime was the agreed "measure
taken to comply".
4.184 Article 21.5 establishes a link between the "measures taken to comply" and the
recommendations and rulings of the DSB and the determination of the scope of the "measures taken to
comply" should involve an examination of the reco mmendations and rulings contained in the original
report adopted by the DSB. The findings and reco mmendations of the Appellate Body report in the
EC – Bananas III case do not oblige the European Communities to move into a tariff only regime in
order to bring itself into compliance with the covere d agreements. If one looks at the general trend of
modernisation and liberalisation of the European Communities' common agricultural policy, one may
conclude that the tariff-only banana import regime would have been introduced even in the absence of
any dispute resolution proceedings in the banana sector.
4.185 The United States argues that the Preamble of Re gulation 1964/2005 refers to the arbitrations
held in 2005 and it must be considered as a measu re taken to comply with the recommendations and
rulings adopted by the DSB in 1997. The European Communities notes that the arbitrations were part
of the waiver granted by the WTO to the Co tonou Agreement, which was signed three years after the
adoption of the DSB's recommendations and rulings. It is difficult to see how a Regulation adopted to
conform to the terms of a waiver relating to an in ternational agreement reached in 2000 can be said to
be a "measure taken to comply" with a DSB ruling adopt ed in 1997. In addition, the subject matter of
the 2005 arbitrations has no relation to the 199 7 DSB recommendations and rulings. The two
procedures can be said to have conflicting subject matters. Moreover, the arbitration arrangement
supports the proposition that the tariff-quota-based import regime that was in place between 1 January
2002 and 31 December 2005 was the "measure taken to comply" with the DSB recommendations and
rulings of 1997. The aim of the arbitrations wa s to "maintain the total market access of the MFN

suppliers" at its 2002 to 2005 leve l. This strongly suggests that the level of MFN market access
between 2002 and 2005 was satisfactory for the MFN suppliers and that whatever market access
problems the MFN suppliers had in 1997 were correct ed by 2002-2005. This supports the conclusion
that the import regime implemented by the Eur opean Communities between 2002 and 2005 was the
"measure taken to comply" with the DSB recommendations and rulings of 1997.
4.186 The United States relies on various statements mostly found in press releases issued by the
European Communities in the past. The European Communities would like to note that none of these
statements refer to the tariff-only system introduc ed in 2006 as a "measure taken to comply".
Moreover, the European Communities considers that such press statements cannot contain
authoritative interpretations of complex legal issues. Their content cannot be used to replace proper
legal analysis under the DSU. The same is true for the invitation to public consultation annexed in the
second written submission of the United States. On e of the documents relied upon by the United
States actually supports the European Communities' position and confirms that the "measure taken to
comply" that was agreed with the United States was the tariff-quota-based system implemented by the
European Communities until the end of 2005 and that the European Communities' political decision to
change its banana import regime preceded the Understanding and was not part of the agreement with
the United States.
(b) The Cotonou Preference does not violate the GATT
(i) The Doha Waiver covers the Cotonou Preference until the end of 2007
4.187 The text of the Doha Waiver provides that the "standard" is to "maintain total market access
for MFN suppliers". This means that whether the new import regime actually has maintained total
market access has an important legal significance. This is confirmed by the Doha Waiver providing
that the waiver shall cease to apply "if the EC has failed to rectify the matter" and not " if the
Arbitrator considers that the EC has failed to rectify the matter". It is uncontested that the current
import regime more than maintains the total market access of the MFN suppliers and, therefore, this
condition for the termination of the Doha Waiver ha s not been satisfied. The waiver would terminate
upon the entry into force of a "new EC tariff regi me" that would fail to maintain the total market
access of the MFN suppliers. If the regime that the Arbitrators had analysed and found not to satisfy
that standard was introduced there would be a stro ng presumption that this regime is the "new EC
tariff regime" that fails to maintain the total ma rket access of the MFN suppliers. If the new import
regime was different it would not be possible to characterise it as the "new EC tariff regime" that fails
to maintain the total market access. Given that the current import re gime is different from the regime
analysed by the Arbitrators and satisfies the sta ndard of the Doha Waiver this condition for the
termination of the Doha Waiver has not been satisfi ed. If the continued existence of the waiver was
solely linked to the perceptions of the Arbitrator s prior to the introduction of the regime, then the
Doha Waiver would continue to apply even if the new import regime was not the regime presented to
the Arbitrators, or was a regime eventually pr oven not to maintain the market access of the MFN
suppliers. It is not very likely that the drafters of the Doha Waiver would have set up a mechanism
that produces such absurd results.
4.188 The Recital relied upon by the United States states that the new import regime would
maintain total market access and not that the Arbitrators would consider that the new import regime
would satisfy that standard. Therefore, the Recital c onfirms that the "test" that had to be satisfied was
whether the new import regime actually
 satisfies the standard and not whether the Arbitrators
considered that this would be the case in the future. The reference to "multilateral control on the
implementation of this commitment" does not support the United States' position. The "commitment"
that had to be "implemented" was that the new im port regime should maintain the total market access
of the MFN suppliers. The European Communities accep ted that if it failed to satisfy the standard the

Doha Waiver would terminate. This is not a consequence that Article XXVIII normally imposes and
this is the "multilateral control over the implementation of the commitment" referred to in the Recital.
4.189 The negotiating history of the Doha Waiver supports the European Communities' position.
An earlier draft provided that the waiver would be terminated automatically within two months from
the notification of the arbitration award to the Ge neral Council. This provision was not included in
the final version of the Doha Waiver. This shows th at the parties agreed that the termination of the
waiver would not be linked to the outcome of th e arbitration awards, but on whether the European
Communities would actually "rectify the matter".
(ii) There is no violation of GATT Article XIII
4.190 There is extensive GATT and WTO practice show ing that Members do not regard exclusion
from a tariff quota as a matter governed by Artic le XIII. Under the Generalized System of
Preferences (GSP), first adopted as a policy by UNCTAD II in 1968, the waivers were from
Article I:1 only, and they explicitly authorized th e use of tariff quotas. There was no reference to
Article XIII. It was the evident understanding of the parties that the favourable treatment for
developing countries in the form of tariff quotas required a waiver of Article I:1 but not of
Article XIII. A general waiver from the provision s of Article I for GSP schemes was adopted in
1971. The decision did not mention tariff quotas specifically, but they were common in the most
significant of the national schemes submitted to th e GATT Secretariat. The GSP schemes of WTO
Members are now authorized by the Enabling Clau se. The operative words of this document say
"Notwithstanding the provisions of Article I of the General Agreement, contracting parties may
accord differential and more favourable treatment to developing countries". There is no provision in
the text that specifically authorizes the use of tariff quotas but several GATT members had used them
and that fact was generally known. The 1979 decision was adopted against this background, and tariff
quotas continued to be used in the schemes applied after this date. As reported to the WTO, the
present United States GSP scheme contains provision for the use of tariff quotas. As decisions of the
CONTRACTING PARTIES, those instruments, su ch as the Enabling Clause, that remained
operational in 1994 formed part of GATT 1994 ( under Annex 1A of the WTO Agreement). In
accordance with GATT and WTO practice they were adopt ed by consensus. This shows that there is
"subsequent practice" which is "c oncordant", "common" and consistent, which has involved taking a
particular stance on the interpretation of the GATT a nd which confirms that Members assume that the
grant of a tariff quota for the benefit of certain c ountries to the exclusion of other Members would be
an infringement of Article I, but not of other GATT obligations, such as Article XIII.
4.191 The objective of Article XIII:2 is to achieve pa rticular quantitative distributions of trade.
When these rules are applied to tariff quotas a corresponding distribution can be achieved by
allocating specific quantities of the tariff quota. The notion that such a distribution could be achieved
by setting different tariff levels for the va rious exporting countries is economic nonsense.
Consequently it is not plausible that the drafters of Article XIII would have envisaged using paragraph
2 to achieve such a goal. Moreover, the US' in terpretation would lead to non-Members of the WTO
being accorded rights under the GATT. Such an out come is contrary to the object and purpose of
GATT. In EC – Bananas III , the panel's proposition does not imply that paragraph 5 of Article XIII
has the effect of extending the obligations of that Article into situations of tariff discrimination and
thereby of overthrowing the basic distinction betw een tariffs and quantitative measures. Nor was the
panel in EC – Bananas III concerned with such a situation since the tariff quotas that it was
examining extended to all of the Members that were affected by the dispute. The statements of the
Appellate Body in EC – Bananas III referred to both Articles I and XIII.

(c) Absence of "nullification or impairment"
4.192 The United States asserts that the European Communities " confuses the function of dispute
settlement proceedings under DSU Article 6 and 21.5 with arbitration proceedings under DSU
Article 22", but does not deny that the notion of "nullification or impairment" is the same under both
Article 3.8 and Article 22 of the DSU, or that th e "nullification or impairment" of Article 3.8 is
different from the "interest" that must be present in order to justify "standing". Therefore, these two
principles are uncontested in this case.
4.193 The United States does not deny the facts esta blishing that the Cotonou Preference does not
cause it any "nullification or impairment", but simply requests the Panel to repeat its findings of 1997.
However, the facts of the current proceedings are comp letely different. At that time, the basic if not
the only source of nullification or impairment for the United States was the license allocation system
of the European Communities, which was found to be in violation of the GATS. In contrast, no
nullification or impairment was found to stem from the measures violating the GATT. Therefore, the
relevant findings of this Panel in the 1990s are completely irrelevant for the current proceedings
where there is no violation of the GATS. Moreove r, the United States invites the Panel to avoid
examining the facts establishing that the Unite d States does not suffer any "nullification or
impairment" in these proceedings. Accepting this suggestion of the United States would raise
important systemic issues. First, this would r esult in an unnecessary prolonga tion of the dispute and
would continue to shed legal uncertainty in the parties' trade relationships. The requirements of
Articles 3.3 and 11 of the DSU give the Panel suffici ent guidance as to the course of action that it
should follow in this case. Second, accepting the Un ited States' suggestion would create confusion as
to the facts that a defending party should bring to the attention of a panel in order to rebut the
presumption of Article 3.8 of the DSU.
3. Oral statement of the European Communities
(a) Preliminary issues
4.194 This case raises a number of interesting points on the interpretation of the DSU. The first
point, which was discussed in paragraphs 8 to 39 of the European Communities' second written
submission, is the legal effect of agreements to which all parties to a dispute participate and with
which all parties to the dispute undertake certain rights and obligations within the context of the DSU
and the GATT. The European Communities considers that the Panel should take into consideration
the terms of these agreements in determining the ri ghts and obligations of the parties towards each
other. It is not contested today that the Panel should enforce the agreement between the parties to
dispense with formal consultations prior to reques ting the establishment of the Panel. Equally, the
Panel must also enforce the agreement between the parties that allows the European Communities to
follow a certain course of action in exchange for the United States' receiving specific consideration.
4.195 This agreement is the Understanding, with which the United States accepted that the
European Communities would continue to offer the Cotonou Preference to the ACP countries until the
end of 2007. The United States cannot now renege on its obligations and challenge the existence of
the Cotonou Preference until the end of 2007, becau se the United States has already received specific
consideration for entering into the Understandi ng and was aware of the legal nature of the
Understanding from the very beginning. This is a result which is dictated (i) by the DSU itself, in
Articles 3.6 and 3.10, (ii) by the general principl es of customary international law, as codified in
Article 31(3)(c) of the Vienna Convention and (iii) by the principle of good faith, which exists both
under international law and under WTO law.
4.196 The United States and certain third parties ha ve expressed their disagreement with these
principles. The European Communities consider s that accepting their position would create very

significant obstacles for trade negotiations, because it would create uncertainty as to the legal effects
of the agreements reached between WTO Members. For example, what would be the legal value of
agreements reached following negotiations such as the ongoing banana negotiations between the
European Communities and its principal banana suppliers? If signing such an agreement does not
offer the legal certainty that the dispute is closed once and for all why would the European
Communities, or any other WTO Member, agree to offer trade concessions in exchange for its
counterparts' signature?
4.197 What the complainants are asking the Panel to do is to remove from the WTO system the
legal certainty covering agreements signed betw een WTO Members. But the whole WTO system is
based on agreements between its members. The European Communities respectfully submits that
accepting the complainants' arguments will bring prejudice to the very essence of the system that the
Panel and the European Communities are here to defend.
4.198 The second point raised by these proceedings, whic h was discussed in paragraphs 40 to 52 of
the second written submission of the European Commun ities, relates to the notion of "measures taken
to comply" with the recommendations and rulings of the DSB. Following a negative panel or
Appellate Body report, a defending party may take a number of initiatives that may affect the product
market that was the subject of the dispute. Th e mere fact that these policy initiatives relate to a
product market that has been the subject of a disput e in the past does not suffi ce to characterize all of
these policy initiatives as "measures ta ken to comply" with the recommendations and rulings of the
DSB.
4.199 In this case, the European Communities h as shown that there is nothing in the
recommendations and rulings of the DSB adopted in 1997 following the United States' complaint,
which obliged the European Communities to introdu ce a tariff-only banana import regime such as the
current one. Moreover, the United States accepts that the Understanding sets out the "means" by
which the banana dispute was resolved. The Eur opean Communities has shown that the decision for
the introduction of the tariff-only import regime was a policy decision taken years before the
negotiation of the Understanding between the Eu ropean Communities and the United States.
Therefore, it cannot be argued that the United States and the European Commun ities ever agreed that
the introduction of a tariff-only import regime woul d be a "measure taken to comply". Most
importantly, it is undisputed that the United States accepted to terminate its retaliation rights upon the
European Communities' implementation of a different banana import regime than the current one.
Finally, the importance assigned by the Doha Waiv er to the maintenance under the current import
regime of the market access enjoyed by the MFN suppliers under the 2002-2005 regime further
supports the conclusion that the 2002-2005 import regime was indeed the "measure taken to comply".
All these facts taken together establish that, as far as the United States is concerned, the current
banana import regime of the European Communitie s is not a "measure taken to comply" with the
1997 recommendations and rulings of the DSB in the case brought by the United States.
4.200 There is also a third point raised in this case. The United States and certain third parties
supporting them have included in their submissions excerpts from various statements made by various
bodies of the European Communities in different c ontexts and circumstances in the past. This
practice of the complainants probably shows that they have reached their limits in coming up with
credible legal arguments against the European Comm unities and have resorted to the tactic of "look
what you have said in the past" which is used in hi gh school debating. It is also rather odd for the
complainants to refuse to recognize the binding natu re of international agreements signed by both
parties to this dispute, but at the same time plead for the binding nature of statements included in press
releases or in pleadings submitted to unrelated cases or even to cases heard outside the DSU.
4.201
However, this otherwise amusing practice of th e complainants, if accepted, may give rise to
significant problems for the future credibility and op eration of the DSU. The credibility of the DSU

can only be preserved if panels and the Appellate Body base their findi ngs on a solid analysis of the
law and the facts and not on an anal ysis of unrelated statements made by the parties in a completely
different context. For this reason, the Europ ean Communities respectfully requests the Panel to
disregard the relevant assertions of the United States and the Third Parties supporting them.
(b) The United States' claims under Article I
4.202 The European Communities considers that it has be en established in this case that the banana
import regime introduced on 1 January 2006 more than maintains the total ma rket access that the
MFN banana suppliers enjoyed until that day. The United States did not deny this reality in its written
submissions.
4.203 The European Communities considers that the provisions of the Doha Waiver should be
interpreted in accordance with the principle of good faith. An interpretation of the Doha Waiver that
would sever completely the link between the continua tion of the waiver until the end of 2007 and the
fact that the MFN suppliers have maintained their total market access would, in the view of the United
States, not be in accordance with the principles of good faith.
4.204 Some third parties have asked the Panel to ignore the reality of the market as evidenced by the
performance of the market during the last two years and, instead, base its findings on assumptions and
estimates of how things might develop in the futu re. The European Commun ities considers that the
Panel does not need to resort to assumptions and pred ictions about the future. The Panel has before it
sufficient market evidence to reach a conclusion as to whether the market access enjoyed by the MFN
suppliers under the old regime, that is betw een 1 January 2002 and 31 December 2005 has been
maintained during the period which is relevant for the Doha Waiver, that is between 1 January 2006
and the end of 2007.
4.205 Some other third parties have suggested that they would have not approved the Doha Waiver,
unless it is to be given their interpretation. This is an assertion that works both ways and could also
be used by the European Communities. As eviden ced by the negotiating history of the Doha Waiver,
the European Communities would have not and did not make the existence of the Cotonou Preference,
which is so crucial for so many ACP countries, dependent on the conclusions reached by the arbitrator
about future events and based on assumptions. The European Communities might have accepted such
a link if the arbitration was to examine the verifiable market situation ex post . But not where the
arbitration was based on predictions about the uncertain future.
4.206 Certain third parties have also argued that the European Communities is using a "volumes-
based-analysis", as opposed to focusing on whethe r the MFN suppliers have maintained their
"competitive opportunities". This argument is not correct. The European Communities has stated
throughout these proceedings that it does not consid er that "maintaining market access" should be
interpreted as a guarantee of any particular volume of trade to any group of countries or to any
specific country. This is why the fact that an individual country may expor t fewer bananas into the
European Communities after 2006 does not necessarily mean that this country's market access
opportunities have not been maintained. However, it would not be logical to assume that a country
may be deprived of its competitive opportunities and market access, but still be able to increase the
quantity of its exports towards the European Communities. A decrease in exports does not
necessarily mean that market access has been denied. But an increase in exports can only take place if
market access has been maintained. This is why the European Communities considers that the export
performance of the MFN countries is evidence that th e Panel should take into consideration in order
to establish that their market access has been maintained.

(c) The United States' claims under Article XIII
4.207 Turning to the discussion of Article XIII of the GATT, the point that the European
Communities has made is that the anti-discriminati on rules of Article XIII are aimed at quantitative
discrimination, while tariff discrimination is the exclusive preserve of Article I. Offering a tariff
preference to some countries subject to a quantitative "cap" may be an issue that needs to be analysed
under Article I, but not under Article XIII.
4.208 In support of its claim, the European Co mmunities has invoked the consistent GATT and
WTO practice of granting waivers from Article I to cove r this type of tariff quotas. This practice is
concordant, common and consistent and, therefore it falls within the notion of "state practice" referred
to in Article 31(3)(b) of the Vienna Convention. It can also be said that, as formal decisions of the
GATT and now the WTO, these waiver decisions approximate to the "subsequent agreements"
referred to in Article 31(3)(a) of the Vienna Conve ntion. Moreover, some of the waiver decisions
made under GATT 1947 have a special status in WTO law since they form part of "GATT 1994".
This is defined in the Uruguay Round Agreements as consisting of the General Agreement plus
various other instruments, including "decisions on waivers granted under Article XXV of GATT 1947
and still in force on the date of entry into force of the WTO Agreement". The relevant waivers were
defined by the General Council in 1995.
224 The waivers referred to by the European Communities
include several that are on this list.
4.209 Certain third parties have argued that they ar e not aware of this consistent GATT and WTO
practice. In response, the European Communities would like to provide the Panel with several
examples.
4.210 First, there is the 1948 waiver from Article I:1 th at was granted to the United States in respect
of the Trust Territories of the Pacific. 225 There was no separate waiver from Article XIII. However,
the working party report on which the waiver was based explained that it would be applied to the
sugar quotas which were operated by the US. 226 The waiver became part of GATT 1994. In 1996 the
United States obtained an extension of the waiver for what were now the "former Trust Territories".227
The United States has reported on the operation of th is waiver, stating that, while enjoying duty-free
status, "Watches and watch movements, and cert ain fishery products are subject to quantity
limitations".228 Do the United States and the Third Pa rty supporting them consider that these
preferences violate the GATT?
4.211 Second, there is the 1952 waiver from Article I: 1 that was granted to Italy in respect of
preferences for Libyan products. There was no sep arate waiver from Article XIII. However, the
waiver authorized Italy "to grant the special, tr eatment as set out in the Annex" and the Annex
contained a table listing products, annual tariff quotas, and legal rates of duty.229
4.212 Third, there is the 1960 waiver from Article I:1 granted to France "to the extent necessary to
permit the Government of France to apply the above-mentioned tariff quotas to goods originating in
any part of the territory of the Kingdom of Morocco". 230 The waiver became part of GATT 1994. In

224 WT/L/3, 1995.
225 Decision of 8 September 1948, BISD II/9.
226 Report of Working Party, GATT/CP.2/36, 1948.
227 Decision of 14 October 1996, WT/L/183.
228 Report of the Government of the United States under the Decision of 14 October 1996, WT/L/667.
229 Decision of 9 October 1952, BISD I/14; Draft L/43, SR.7/5.
230 Decision of 19 November 1960, BISD 9S/39.

2000 the WTO General Council extended its applica tion, repeating the reference to tariff quotas. 231
Nobody ever thought that there was a need for an Article XIII waiver.
4.213 Fourth, there is the 1966 waiver granted to Aust ralia, which explicitly authorized the use of
tariff quotas.232 This waiver has become part of GATT 1994. Again nobody thought that there was a
need for an Article XIII waiver.
4.214 Fifth, there is the 1973 waiver granted to New Z ealand, which explicitly authorised the use of
"tariff-free quotas" to handicraft products from South Pacific Islands.233
4.215 Sixth, there is the 1985 waiver from Article I:1 granted to the United States regarding duty-
free treatment for imports from Caribbean count ries as part of the Caribbean Basin Economic
Recovery Act (CBERA).234 In the case of sugar, the waiver overlapped with a system of quotas. The
effect was that certain countries accorded sugar qu otas were benefiting from zero tariff rates while
other countries with such quotas continued to be subj ect to the normal tariff rate. The waiver became
part of GATT 1994. Again nobody thought that there was a need for an Article XIII waiver.
4.216 Seventh, there is the 1994 waiver regarding Eu ropean Communities' transitional measures to
take account of the external economic impact of German unification.235 It waived Article I:1 only, but
nevertheless referred to duty-free treatment "within the limits of the maximum quantities and values
foreseen in the relevant agreements of the former German Democratic Republic". In other words, it
explicitly envisaged the use of tariff quotas.
4.217 Eighth, there is the 2000 waiver from Article I:1 granted to the European Communities to
allow duty-free or preferential treatment to products from western Balkan countries. 236 The scheme
included tariff quotas on several products. A furthe r waiver for preferences for these countries was
given in 2006.237
4.218 The European Communities considers that this consistent practice establishes the common
understanding on the part of GATT contracting parties and WTO Members that exclusion from a
tariff quota does not constitute an infringement of Article XIII. The Eur opean Communities also
considers that its current banana import regime is very similar to the import regimes covered by these
waivers. As already explained in the written subm issions of the European Communities, its current
banana import regime is very different to the one that was in place between 2002 and 2005 and for
which a specific waiver from the application of Article XIII was granted.
(d) The United States does not suffer any "nullification or impairment"
4.219 The present case raises one more interesting point . It is probably the only case ever heard in
this room where the contested measure does not aff ect at all the complaining party. Indeed, the
existence or non-existence of the Cotonou Preferen ce will not bring any change to the "benefits
accruing" to the United States under the GATT. Th e European Communities has provided sufficient
evidence establishing this fact. Interestingly, the United States has not provided in its written
submissions any legal or factual arguments contesti ng this market reality. Instead, the United States
and certain third parties invite the Panel simply not to proceed with a detailed analysis of whether the
United States suffers any "nullification or impairment".

231 Decision of 17 July 2000, WT/L/361.
232 European Communities' second written submission, para. 76.
233 Decision of 13 November 1973, BISD 20S/29.
234 Decision of 15 February 1985, BISD 33S/97.
235 Decision of 9 December 1994, L/7605.
236 Decision of 8 December 2000, WT/L/380.
237 Decision of 28 July 2006, WT/L/654.

4.220 What the United States and these third parties ask the Panel to do is basically to delete
Article 3.8 from the DSU. Accepting their position would mean that a panel should never bother with
an analysis of whether the complaining party indeed suffers any "nullification or impairment". This
analysis would be left for later, most usually within the context of an Article 22.6 arbitration.
4.221 The European Communities considers that this is the wrong solution. Articles 3.8, 3.3 and 11
of the DSU require the Panel to perform a detailed analysis of whether the complaining party indeed
suffers any "nullification or impairment". And this analysis cannot use different criteria than those
that would be used in the context of an Article 22.6 arbitration, because the notion of "nullification
and impairment" is the same under both Articles 3.8 and 22 of the DSU.
4.222 Moreover, the two proceedings are not indepe ndent from each other. As shown in the
example cited in the first written submission of th e European Communities, Article 22.6 arbitrators
generally consider that they are bound to find some level of "nullification or impairment" where the
panel has already found that the breach causes " nullification or impairment" in the original
proceedings. However, in the present case it has been established that the Cotonou Preference does
not cause any nullification or impairment to the Unite d States. If the Panel accepts the arguments of
the United States and certain third parties and finds that there is "by default" a nullification or
impairment, it will put the future arbitrators in a very awkward position.
4.223 For these reasons, the European Communities resp ectfully requests the Panel to repeat the
findings it had reached in 1999 as Arbitrator in th e Article 22.6 arbitration on the United States'
retaliation measures against the European Commun ities in this case and conclude that the Cotonou
Preference does not cause the nullification or impairme nt of any benefit accruing to the United States
under the GATT.
4.224 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 that the Cotonou Preference can be
maintained until its normal contractual expiration at the end of 2007.
4. Closing statement of the European Communities
4.225 In this closing statement the European Co mmunities will make some brief comments on
certain of the points raised by the United Stat es and the third parties supporting them during the
substantive meeting. To facilitate the presenta tion of the issues the European Communities will
follow the structure already used in its written submissions.
4.226 The first point relates to the impact of the U nderstanding on the rights and obligations of the
United States and the European Communities in this case. The United States stated yesterday that the
European Communities has not adequately expl ained how the United States accepted in the
Understanding that the Cotonou Preference's duratio n would be until the end of 2007. The European
Communities would like to refer to paragraphs 10 to 13 of the second written submission of the
European Communities. The United States accepted through the Understanding to help the European
Communities obtain the "waiver requested" at that tim e for the Cotonou Agreement. It is undisputed
that the duration of the trade preferences in th e Cotonou Agreement and the Cotonou Preference for
bananas was until the end of 2007. It is also undis puted that the "waiver requested" by the European
Communities at that time also had a duration until the end of 2007. Therefore, it is difficult to see
how the United States could argue that, when it si gned the Understanding, it did not acknowledge and
accept that the Cotonou Preference's duration was until the end of 2007. Moreover, the
Understanding does not provide that this waiver w ould have any particular conditions, nor were any
such conditions discussed between the United Stat es and the European Communities prior to the
conclusion of the Understanding.

4.227 As the ACP countries pointed out this morning, the United States obtained the benefits it
pursued with the Understanding: mainly an incr ease of the MFN tariff quota and of the number of
licences allocated to certain US-based banana trading companies. The European Communities
complied with its obligations under the Understanding and expected the United States to do the same.
The case before the Panel shows that the Unite d States does not consider itself bound by the
agreement it signed. As it is sai d in French, the United States " veut le beurre et l'argent du beurre ".
This is contrary to the long standing rule of "pacta sunt servanda".
4.228 The second point is also related to the Understanding. The United States stated yesterday that
even if the Understanding is indeed considered to be a "mutually agreed solution" for purposes of
Article 3.6 and even if the United States had accep ted that the Cotonou Preference would have a
duration until the end of 2007, then still the United States would have the right to request the
termination of the Cotonou Preference before the end of 2007, because ther e is no provision in the
DSU that would grant to "mutually agreed soluti ons" that legal power. The European Communities
does not agree with this interpretation of the Unite d States. If accepted, it would remove all legal
certainty from "mutually agreed solutions" and would in essence delete their existence from the DSU.
4.229 Our third point relates to the notion of a "measu re taken to comply". The United States and
the Third Parties supporting them asserted in the s ubstantive meeting that the current banana import
regime of the European Communities is a measur e taken to comply with the 1997 recommendations
and rulings of the DSB in the case brought by the United States. The European Communities
disagrees. The United States repeated yesterday w ith a lot of conviction that the "means" through
which that dispute would be resolved were agreed with the European Communities in the
Understanding. The introduction of the tariff-onl y import regime was decided by the European
Communities at least 2 years before the signing of the Understanding. This fact, together with the
other points raised by the European Communities in its written submissions and its oral statement
yesterday, confirms that, as far as the United States and the proceedings that it has initiated against the
banana import regime of the European Communities are concerned, the current banana import regime
is not a measure taken to comply. It must also be noted that the current banana import regime is
radically different in design and effect from the 2002-2005 system, which the United States yesterday
admitted was a "measure taken to comply". This fu rther confirms that the current import regime does
not constitute a measure taken to comply with th e 1997 recommendations and rulings of the DSB in
the case brought by the United States.
4.230 Our fourth point relates to the United States' interpretation of the Doha Waiver. The
European Communities considers that the text of th e Doha Waiver supports its own interpretation of
the conditions that could bring the early terminati on of the waiver. The European Communities also
considers that a proper interpretation of the terms of the Doha Waiver cannot be based solely on the
"dictionary meaning" of words. Under the current import regime the MFN suppliers have managed to
increase the quantities of their exports towards the European Communities more than the ACP
countries and indeed above the growth of the tota l banana market in the European Communities.
Moreover, new countries have managed to enter th e European banana market. This is evidence
establishing that the European Communities has complied with its obligations under the Doha
Waiver.
4.231 Our fifth point relates to the interpretation of Article XIII of the GATT. The European
Communities believes that the debate of these two days has helped to clarify the proper interpretation
of Article XIII and its application on tariff quotas. It also believes that finding that an import regime,
with the characteristics of the new European Communities' banana import regime, breaches
Article XIII would be against the concordant, common and consistent practice under the GATT and
the WTO and would create significant problems for many WTO Members and not simply for the
European Communities.

4.232 Finally, there is the point on "nullification or impairment". The United States and the third
parties supporting them have asked the Panel to si mply assume automatically that there is always
"nullification or impairment" once a GATT violati on is established, without offering the defending
party the opportunity to rebut this presumption. However, eliminating the possibility of defending
parties to rebut the presumption of "nullification or impairment" after a violation of the GATT is
established, requires the amendment or deletion of Artic le 3.8 of the DSU. This is not an issue that
may be decided in the context of a dispute settle ment proceeding. For as long as the WTO Members
have not decided to amend the DSU and remove Arti cle 3.8, the defending party's right to rebut this
presumption must be enforced in dispute settlement pr oceedings like those being held today. And the
European Communities has shown that the Cotono u Preference, a trade preference supporting the
development efforts of vulnerable developing countries, does not cause and cannot cause the United
States any "nullification or impairment" of any benefit accruing to it under the GATT. Therefore, the
European Communities has rebutted the presumption of "nullification or impairment" in accordance
with Article 3.8 of the DSU.
V. ARGUMENTS OF THE THIRD PARTIES
A. B
ELIZE, CAMEROON, CÔTE D 'IVOIRE, DOMINICA, DOMINICAN REPUBLIC, JAMAICA,
SAINT LUCIA, SAINT VINCENT AND THE GRENADINES, AND SURINAME
1. Written submission of the ACP third parties
5.1 In their written submission, Belize, Cameroon, Côte d'Ivoire, Dominica, Dominican Republic,
Jamaica, Saint Lucia, Saint Vincent and the Grenad ines, and Suriname, referred to as "the ACP third
parties", respectfully request the Panel to reject as inadmissible and unfounded the United States'
claims against the new EC banana import regime which entered into force on 1 January 2006.
5.2 By way of introduction, the ACP third parties qu estion the United States' interests in bringing
a compliance panel targeting the new EC banana im port regime as the United States is not a banana
exporter and its trade is in no way affected by this new regime. Through this claim, the United States
is attacking the preference on bananas granted by the European Communities to the ACP countries.
In so doing, the United States disregards the deve lopment goal pursued by that preference and has
chosen to become the advocate of a few larg e US-controlled multinational companies having
substantial interests in bananas in the MFN countries. To achieve this goal, the United States is trying
to build an artificial case on the basis of formalistic arguments wh ich purposely ignore the fact that
the new regime against which its complaint is direct ed has actually more than maintained total market
access for MFN banana suppliers. The United States also purposely disregards the delicate balance
which this new regime seeks to achieve between the interests of the MFN and the ACP suppliers.
(a) The United States cannot challenge the new EC banana import regime pursuant to
Article 21.5 of the DSU
5.3 First, the ACP third parties submit that the Un ited States' claim should be dismissed because
the United States failed to request consultations pr ior to requesting the establishment of the Panel
while it is a prerequisite to all dispute settlement proceedings pursuant to the DSU. The Panel should
not give effect to an agreement reached between the parties to dispense with consultations. Indeed,
consultations play an important due process role not only with respect to the parties but also to the
third parties, who are explicitly granted the right to request to join consultations pursuant to
Article 4.11 of the DSU if they have a substantial tr ade interest in consultations being held. The ACP
third parties have a specific interest in the present case given that they are the beneficiaries of the
preference which is challenged by the United States and will therefore be directly affected by the
findings of the Panel. The lack of consultations is therefore particularly detrimental to the ACP.

5.4 Second, the United States cannot have recourse to Article 21.5 proceedings to challenge the
new EC banana import regime as a compliance issue of the Bananas III case due to the fact that the
mutually agreed solution between the United States and the European Communities in the form of an
"Understanding on Bananas" has resolved that disp ute and therefore constitutes a bar to Article 21.5
proceedings. In addition, the Unde rstanding is a binding internationa l agreement. Its parties in good
faith cannot put its terms into question thereafter. Consequently, the existenc e of the Understanding
constitutes a bar to Article 21.5 proceedings. If the United States considers that the new EC banana
import regime is inconsistent with the WTO obl igations, it should start new dispute settlement
proceedings.
5.5 Third, the new EC banana import regime is not a "measure taken to comply" with the
recommendations and rulings of the DSB in the original Bananas III dispute within the meaning of
Article 21.5. Indeed, the measure being challenged in this case is not clearly connected to the Panel
and Appellate Body reports in the original case, both in time and with respect to the subject-matter.
There are two main reasons why it is not clearly conn ected with respect to the subject-matter. First,
the new EC banana import regime which is challenged is a completely new regime for the importation
of bananas: being a tariff-only regime it has nothing to do with the quota regime examined in the
original Bananas III dispute. Second, the new regime is not a measure taken to comply with the DSB
recommendations and rulings but to implement the commitments undertaken by the European
Communities under the Doha Waiver and the Unders tandings on Bananas with the United States and
Ecuador. These legal instruments came into existence after the original Bananas III dispute and they
have modified the balance of rights and obligations for the WTO Members. The legality of the new
EC banana import regime can therefore only be examined in new dispute settlement proceedings
taking into account these new legal instruments.
(b) There is no violation of GATT Article I because the Doha Waiver still applies
5.6 The United States' argument that the Doha Waiver is no longer valid is based on the view that
the existence of two arbitration awards concluding that the EC rebinding proposals were not such as
to maintain total market access to MFN suppliers has automatically led to the waiver ceasing to apply
upon entry into force of the new EC tariff regime. The proposed interpretation is purely procedural
and formalistic, and it fails to ta ke account of the object and purpose of the Doha Waiver and the
factual situation in the present case.
5.7 The purpose of the Doha Waiver is to allo w the implementation of the Cotonou Agreement
and, in particular, the preferentia l tariff treatment granted by th e European Communities to products
originating in the ACP countries until 31 December 2007. The Annex to the Doha Waiver expressly
indicates that with respect to bananas, the waiver will apply until 31 December 2007. Only if the
European Communities fails to implement a new bana na import regime which at least maintains total
market access for MFN suppliers, will the waiver cease to apply prior to 31 December 2007.
5.8 This is not the case. The new EC banana import regime which entered into force on
1 January 2006 maintains and even improves the market access for MFN suppliers. Indeed, all
available market data indisputably demonstrate that the competitive position of MFN bananas on the
EC market has improved both in terms of volume and price since the introduction of the new EC
banana import regime. The import volume of MFN bananas significantly increased in 2006 and this
has been reinforced in 2007. The abolition of th e quota licensing system has resulted in cost savings
which more than compensate for the perceived in crease in import duty arising from the introduction
of the new flat tariff of €176 per ton. In addition, the new regime has opened the EC market for new
entrants, and higher prices have been paid to pr oducers in the MFN countries even though wholesale
prices in the European Communities remained stable or even decreased.

5.9 As a result, the new EC regime has indisputably not just maintained but indeed improved total
market access for MFN suppliers. It is thus not po ssible to cogently argue that the waiver has ceased
to apply on purely procedural grounds as submitted by the US.
5.10 In addition, it must be taken into considerati on that the ACP third parties were not allowed to
fully participate in the arbitration proceedings. This significantly reduced their opportunities to
defend their positions. The fact that in the firs t arbitration the Arbitrator ignored crucial ACP
arguments had an unfortunate effect on the way th e issues were addressed in the second arbitration
and hence may have had a decisive impact on its fi nal 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 banana import regime effectively improves total MFN market access.
(c) There is no violation of GATT Article XIII
5.11 The United States argues that the new EC bana na import regime violates GATT Article XIII
because the ACP countries are granted a prefer ential tariff quota which the MFN countries cannot
benefit from. This argument must be discarded.
5.12 There cannot be any violation of GATT Article XIII:1 and Article XIII:2 since the new EC
banana import regime does not contain any prohibition or quantitative restriction within the meaning
of GATT Article XIII:1. A fortiori, no such measure is imposed on MFN suppliers.
5.13 What the United States is challenging is not th e limitation placed on the quantity of duty-free
bananas imported from the ACP countries but the preferential duty which is granted to these
countries. The absence of restrictions on MFN suppliers distinguishes the present case from the
Bananas III case. As this issue is a tariff issue only, it is not the object of GATT Article XIII but of
GATT Article I.
5.14 The United States makes much of the alleged acknowledgment by the European Communities
of the need for an article XIII waiver. This ar gument is misguided as the European Communities has
demonstrated, for instance through the implementati on of the "Everything But Arms", that it does not
consider such a waiver necessary where the restric tion is on the tariff preference. The United States
actually also applies limits to some of its GSP concessions.
5.15 In addition, the fact that th e European Communities applied for an Article XIII waiver should
not be taken as showing that they believe that one wa s actually needed. It is evident from a reading of
the two awards of the arbitrator that the European Communities' application for an Article XIII waiver
was made purely for procedural reasons. Had the application not been made, the Arbitrator would
have been unable to take account of the tariff rate quota in his second award without stepping outside
the narrow remit he had been given and adjudicating on the question of whether preferential tariff rate
quotas require Article XIII waivers.
5.16 In addition, the cap on the quantity of bananas which can be imported duty-free from the ACP
countries to the European Communities has been in troduced in order to address the MFN concerns
with respect to an unlimited preferential access granted to the ACP countries.
5.17 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.

B. BELIZE
1. Oral statement of Belize
5.18 I want to add Belize's voice in full support of the statement made by the Ministers of
Cameroon and Suriname who spoke on behalf of the ACP third parties. I want to also support the
statements made by the Ministers for St. Lucia and for St Vincent. Belize also associates itself with
the presentations made by the European Communities in its oral and written submissions in this case.
5.19 Allow me to add the following. The United St ates, as indeed MFN countries, fully supported
the waiver granted for the European Communities to provide preferential tariff treatment to ACP
countries as required by the Cotonou Agreement. Especially relevant to this case is Protocol 5 on
Bananas, also known as the Second Banana Protocol , in which the European Communities undertakes
to "take measures aimed at ensuring the continued viability of th eir banana export industries and the
continuing outlet for their bananas on the Community market". How else could this commitment be
fulfilled other than the granting of a trade prefer ence? And as current market trends eloquently
demonstrate, the preference would need to be at least its current level.
5.20 The statistics already show that MFN countri es are now enjoying better market access than
they did in the past.
5.21 Belize also wants to express its grave disappoint ment. One cannot help but be dismayed to
witness the United States – whose people through history have been known to fight injustice –
initiating this case against the smallest and most vulnerable economies of the world.
5.22 It is regrettable, because the United States is not seeking to export bananas to the European
Communities. In the previous US challenge they were protecting the interests of their service
suppliers who they felt were su ffering discrimination in the allocation of licenses. Belize regretted
that attack but at least could understand it. But now the issue of licences for the import of MFN
bananas within a tariff quota has disappeared. No violation of GATS has even been alleged in this
case and still the United States is attacking the Eu ropean Communities' efforts through its banana
regime to meet its commitments to vulnerable ACP suppliers.
5.23 The Chairman yesterday asked whether Panama, Nicaragua and the United States believe that
the European Communities as a net importer of bana nas have standing to bring a similar case. The
Chairman questioned whether a threshold was necessar y for a member of the WTO to participate in
dispute settlement proceedings. There is such a prov ision as regards third party participation – which
is having a substantial trade interest. Surely it woul d be anomalous to apply a lesser test to a country
wishing to be a complainant.
5.24 Belize has never been a complainant in any WTO dispute settlement proceeding principally
because it does not have the resources to pursue its tr ade interests through such direct and costly
means. It has, however, participated as a third pa rty in cases which significantly impact the livelihood
of thousands of its people. How could it explain to its citizens that the way the dispute settlement
system works is that rich and powerful countries can initiate dispute settlement proceedings in cases
where their interests are not directly affected, whilst it may only participate as third parties only where
it has a major trading interest.
5.25 This delegation must stress that a US victory in this Panel will not hurt the European
Communities. No, the direct impact will be the damage to economies of ACP third parties, where
employment and livelihoods would suffer yet anot her blow, as they always have, after every
amendment to the European market regime for ba nanas to attempt to appease the United States and
other complainants.

5.26 How else should Belize interpret the complainant's motive, other than a conscious attempt to
champion the cause of multinational companies over the interest of poor people in the ACP countries?
This is all the more dismaying when in other contexts the United States has made clear that it
recognizes the need for targeted preferences to address the needs of vulnerable countries.
5.27 The United States obtained what it wanted from their Understanding with the European
Communities. Part of the ACP quota was transferred to the MFN quota which, together with other
detailed changes in the regime, increased the num ber of licenses allocated to US related service
suppliers. This was at the cost of the ACP. No w, having extracted their pound of flesh, they want
another pound. Belize trusts that the panelists will prove to be Daniels come to judgment.
C. C
AMEROON
1. Oral statement of Cameroon
(a) This dispute is of primary importance for the ACP countries
5.28 Cameroon wishes to underline the primary importan ce of this dispute for the ACP countries.
The latter are the beneficiaries of the European Communities' preference granted within the
framework of the Cotonou Agreement. This preference applies to a number of products originating in
the ACP countries, including bananas. It is this preference for bananas which the United States is
challenging today. Consequently, it is clear that th e decision to be taken by this Panel will have a
direct impact on the ACP countries. If the Pane l were to agree with the United States, the
consequences for the ACP countries would be disastrous.
5.29 As the Panel is aware, the banana sector is essential for the ACP countries and its continuity
depends on maintaining preferential access to the Community's market.
5.30 Indeed, the banana sector is essential for AC P countries' social and economic development
and it helps to protect the environment. Banan as account for a large share of the ACP countries'
agricultural exports. Hundreds of thousands of jobs have been created thanks to this sector. The
introduction of regular shipping lines for the transp ort of bananas each week has made a significant
contribution towards opening up the economies of th ese countries. The existence of these regular
shipping lines has allowed the ACP countries to export other goods to Europe and, in return, to import
goods essential for development and the daily lives of their populations. The banana sector therefore
plays a key role in the fight against poverty and destitution.
5.31 Preferential access to the Europ ean Communities' market is essen tial to ensure the vitality of
the banana sector in the ACP countries. It is in fact well known that the ACP banana producers are
less competitive than the MFN producers. In co mparison with the latter, the ACP producers have
higher production costs. For geographical and hi storical reasons, they do not have the same
economies of scale as the MFN producers. Furthe rmore, the ACP producers can only compete with
them in markets to which they have preferential a ccess. Proof of this is that even the Caribbean
ACP countries, which are situated on the doorstep of the United States, are unable to compete with
MFN producers on the North American market. Th e absence of preferential access and higher cost
structures prevent ACP producers from entering th e United States market. As the European
Communities constitute the only major banana market to offer preferential access, the ACP countries
are entirely dependent on it.
5.32 It is easy to see what is at stake for the ACP countries in this dispute. If preferential access to
the Communities' market for ACP bananas should be further eroded, or even disappear, this would
have disastrous consequences for countries where bananas are the principal economic resource.

(b) United States trade is not affected by the Community's new regime for the importation of
bananas
5.33 Cameroon wishes to draw the Panel's attention to the absence of any harm to United States
trade caused by the contested Community regime for the importation of bananas.
5.34 It is surprising that the United States has embarked upon this action in the present case against
the new Community's regime for the importation of bananas when its trade is in no way affected by
this new import regime. Indeed, the United Stat es has not been deprived of any opportunities to
export bananas because of this regime as it does not produce more than a tiny fraction of its
consumption of bananas and only has token exports of bananas to the European Communities.
(c) The United States is attacking a preference granted to developing countries even though it is
not suffering any negative consequences fro m it and it had accepted the principle of the
preference
5.35 Thirdly, it is a matter of concern and even of dismay for ACP countries to note that one of the
richest countries on the planet, namely the United Stat es, does not hesitate to attack an import regime
because it grants preferential access to developing countries even though the United States is not
suffering any negative consequences because of this import regime, as previously emphasized.
5.36 It should be recalled that on a number of occasions the United States has accepted the
principle that it was justified to give a preferen ce for ACP bananas. First of all, it accepted this
principle in the Memorandum of Understandi ng on Bananas concluded with the European
Communities in April 2001. At Doha, the United States also supported the European Communities'
request for a waiver from Article 1 of the GATT to cover the ACP preference.
5.37 More generally, the legitimacy of the preference as a development tool has been recognized at
the World Trade Organization. It is hardly necessary to recall, in this regard, the preamble to the
Agreement Establishing the World Trade Organizati on, which provides that the parties to this
Agreement have recognized "that there is a need for positive efforts desi gned to ensure that
developing countries, and especially the least devel oped among them, secure a share in the growth in
international trade commensurate with the needs of their economic development". In fact, many
WTO Members, including the United States itself, u se preferential tariffs to encourage development
objectives. Thus, the MFN countries benefit from improved preferential access in sectors where they
are not the dominant producers under the European Co mmunities' Generalized System of Preferences
(GSP). The Cotonou Agreement, and in particular, the regime for the importation of bananas, were
and should be considered in this spirit, that is to say with the aim of providing trade opportunities for
the weaker actors in the market such as the ACP banana producers. The Doha decision granting a
waiver for the implementation of the Cotonou Ag reement recognized this, underlining the following
in its preambular paragraphs: "the [Cotonou] Agre ement is aimed at improving the standard of living
and economic development of the ACP States, including the least developed among them".
(d) The United States cannot question a preference which it accepted in the Memorandum of
Understanding
5.38 Fourthly, Cameroon would like to underline the fact that the United States cannot question a
preference when it has accepted it in the Memorandum of Understanding signed with the European
Communities.
5.39 The United States attacks this new EC regime fo r the importation of bana nas, established and
implemented in accordance with the agreement concluded between the United States and the
European Communities in April 2001. In this agreement, in order to resolve the initial Bananas III

case, each of the parties accepted a certain numbe r of concessions. Thus, the United States accepted
that it would support the request to maintain the Doha Waiver until 31 December 2007 and would
terminate its suspension of concessions and, in return, the European Communities undertook to
introduce a tariff-only regime as of 1 January 2006 at the latest and to increase the tariff quota for the
MFN bananas in transitional stages. Thus, the B tariff quota open to MFN producers was increased
by 100,000 tonnes, from 353,000 t onnes to 453,000 tonnes. This increase was carried out at the
expense of the ACP countries, w hose tariff rate quota was reduced by an equivalent amount, from
850,000 tonnes to 750,000 tonnes. Moreover, the ACP quota, which was originally restricted to
traditional ACP suppliers, now had to be shared w ith non-traditional suppliers, bearing in mind that
imports from non-traditional ACP suppliers had previously been included under the MFN quota. This
had the effect of increasing the quota available to MFN countries by a further 100,000 tonnes, also at
the expense of the ACP countries.
5.40 The European Communities and the ACP countries, as beneficiaries of the preferential access,
have therefore had to pay a high price in order to ma intain the Doha Waiver until the end of this year.
Because of this, a certain number of banana pr oducers and exporters in the ACP countries have
disappeared following these changes, which have seen the preferential access eroded.
5.41 The United States operators have benefited from the concessions granted and implemented by
the European Communities in conformity with the Memorandum of U nderstanding on bananas
concluded with the United States and have taken ad vantage of it. The United States cannot today
question the tariff preference envisaged in this agre ement when it has benefited from the agreement.
The United States current action, which challenges th e preference, is thus abusive and illegitimate.
Furthermore, it is illegal, in the sense that the Un ited States expressly accepted the preference in this
agreement binding the parties.
(e) The United States cannot challenge the Community import regime for bananas pursuant to
Article 21.5 of the DSU
5.42 Cameroon would like to stress a fifth reason, wh ich will be developed in more detail by the
Distinguished Minister of Agriculture of Suriname , Mr Raghoebarsing, in his oral statement. It
concerns the inadmissibility of the action initiated by the United States.
5.43 First of all, the failure to request consultati ons and the absence of consultations constitute a
cause of inadmissibility as these are a prerequisite prior to any request for establishment of a panel.
5.44 Then, raising this matter under Article 21.5, th e United States deliberately ignores the scope
of the Memorandum of Understa nding concluded with the European Communities, a Memorandum
that brought the initial dispute to an end and, acco rdingly, prevents any recourse to a Panel set up
Article 21.5.
5.45 Finally, the measure contested, that is to say the new Community regime for the importation
of bananas, is not a measure taken in order to co mply with the recommendations and decisions of the
DSB pursuant to Article 21.5. Accordingly, the United States cannot use these grounds to claim
recourse to a Panel constituted pursuant to Article 21.5.
(f) The United States completely ignores the way the market has developed
5.46 Lastly, Cameroon would like to underline the fact that the United States fails to take into
account the way the market has developed. It has ignored the fact that the new Community banana
import regime it is challenging has not only maintained but even significantly improved market access
for MFN bananas.

5.47 In its written submissions, the United States ignor es, or feigns to ignore the delicate balance
that the new Community regime for the importation of bananas has attempted to establish between the
legitimate interests of both the ACP and MFN countri es, that is to say a tariff-only system that
maintains total market access for MFN bananas whil e at the same time offering viable preferential
access to ACP producers. Indeed, the United States remains silent regarding the fact that the
European Communities' new import regime for bananas has not only maintained but also significantly
improved market access for MFN bananas, going beyond the European Communities' commitments
in the Doha Waiver.
5.48 Indeed, the statistics available show that since the introduction of the new Community regime
for the importation of bananas the competitive position of MFN bananas on the Community market
has improved both in terms of export volume and the prices paid to MFN producers.
5.49 Firstly, the application of the new tariff regime has led to a substantial and continuing upward
trend in imports from the MFN countries. Imports from MFN countries rose by 325,270 tonnes in
2006 compared with 2005. And they rose by a further 201,435 tonnes during the first eight months of
2007 compared to the same period in 2006, and by 366,389 tonnes compared to the same period in
2005. This increase in 2007 thus shows not only th at the increase in the volume of bananas imported
from MFN countries continued but that it even accelerated.
5.50 This rapid increase in 2006, which acceler ated in 2007, shows that the European
Communities has amply met the objective of mainta ining market access for MFN suppliers and even
improved it. In other words, these market data s how that the flat tariff of €176 per tonne in the
current banana import regime is too low and that the MFN market access could have been maintained
by imposing a higher tariff rate than that currently imposed by the EC.
5.51 It is interesting to note from a detailed an alysis of the statistics that most of the
MFN suppliers have decreased their exports to the United States while increasing them to the
European Communities.
5.52 Secondly, the wholesale prices of MFN banan as remained the same or even decreased
following the introduction of the new regime, thus showing that the introduction of €176 per tonne
duty, without any volume restriction, has not had th e effect of deteriorating the conditions for access
to the Community market for MFN suppliers. Moreover, the price fluctuations over the year are fairly
similar to those for previous years, showing that the new tariff has not upset price trends in the
market.
5.53 It is interesting to note that the main beneficiaries of the new Community regime are the small
producers in the MFN exporting countries, who have repeatedly expressed their satisfaction at the
new opportunities afforded by the new regime. Fo r the first time, they no longer depend on a few
intermediaries which control import licences. The opening of the market to new importers and the
increased competition among buyers for the bananas av ailable have also made it possible for local
producers to charge higher prices.
5.54 Finally, the liberalization brought about by th e abolition of the import licensing system has
created new opportunities for MFN exporters. For in stance, Guatemala, Peru and Brazil, which in
recent years had only been supplying small quan tities increased their exports to the European
Communities sharply following the entry into force of the new regime.
5.55 The above market data can only lead to one conclusion: the new EC import regime has
significantly improved MFN access to the EC market thanks to the elimination of the tariff quota and,
hence, the quota rent. How could one otherwise ex plain that the introduction of an allegedly higher
import duty has resulted in increased import volumes while wholesale prices have remained stable

and the prices paid to local bana na producers have increased? Obvious ly, the apparent tariff increase
resulting from the replacement of the €75 per tonne duty applicable to a limited quota by an €176 per
tonne duty on unlimited volumes has been more than absorbed by the cost savings resulting from the
abolition of the licensing system.
5.56 The substantive conditions for maintaining in force the Doha Waiver covering the
ACP preference concerning bananas until 31 December 2007 have consequently been met.
(g) Conclusion
5.57 To conclude the United States is seeking, th rough its action, to bring into question the
European Communities' preference granted to the ACP countries in accordance with the
Memorandum of Understanding which they concluded with the United States and the Doha Waiver.
5.58 As Cameroon has shown, this action is first of all abusive inasmuch as the United States did
not hesitate to present the problem brought before the Panel as a question of conformity with the
initial Bananas III dispute, which it is not.
5.59 This action by the United States, one of the rich est countries in the world, is also disputable
inasmuch as it does not hesitate to bring into question the preference granted by the European
Communities to the ACP countries a preference which has development aims, even though the United
States itself does not suffer any harm as a result of that preference. It is clear that there is a certain
illegitimacy in the United States' action and the ACP countries would like to underline this.
5.60 This action is also abusive to the extent th at the United States does not acknowledge that the
European Communities have rectified their proposal following the arbitration in November 2005, by
lowering the tariff rate.
5.61 Finally, the United States is attacking the new Community regime for the importation of
bananas on the basis of purely formalistic arguments and completely ignores the way the market has
developed, which shows the beneficial effect that the new regime has had and continues to have for
MFN countries.
5.62 In 2006 alone, imports of MFN bananas increased by over 10 per cent. Many new and
smaller producers are no longer hampered by a licensing system that was the monopoly of a few large
companies and were therefore able to enter the Co mmunity market, thereby diversifying its sources of
supply. Moreover, they have seen their income increase as the prices paid to the MFN producers are
higher. European consumers have also benefited from the new regime. Prices have remained stable,
or even decreased, making bananas the cheapest fruit available to European consumers. All this
shows that the European Communities fully met th eir obligations when th ey introduced the new
import regime for bananas in 2006 inasmuch as the new regime has more than maintained market
access for MFN banana suppliers. The United States case should therefore be dismissed.
D. C
ÔTE D'IVOIRE
1. Oral statement of Côte d'Ivoire
5.63 Côte d'Ivoire enjoys friendly relations with the United States, as with the rest of the
community of nations, as well as many forms of cooperation that are mutually beneficial but even
more so for Côte d'Ivoire. Côte d'Ivoire intends to intensify and consolidat e its cooperation with the
United States in order to benefit still further from its economic and commercial strength and its status
as an exemplary democracy.

5.64 However, in the EC – Bananas III dispute, on behalf of Côte d'Ivoire and a number of other
countries concerned by this case, I would like to question the legitimacy of the involvement and
interest of the United States in this dispute.
5.65 Does the United States have a substantial economic interest? The answer is clearly no. In
2005, the United States reported production 238 of barely 9,500 tonnes of bananas in the State of
Hawaii and over the past three years had exported between 3 and 20 tonnes to the European Union.
5.66 The banana trees to be seen here and there on American territory are simply ornamental plants
and are in no way intended to produce bananas.
5.67 Obviously, the United States' motive is to protect the interests of its companies engaged in the
industry or, at least, to protect the interests of a multinational known to the actors in the international
banana trade.
5.68 This motive is not recent as, in a letter date d May 2001 addressed to Mr Pascal Lamy, then
European Commissioner for Trade, Mr Robert Zoe llick was concerned, above all, to check whether
the new regime for distributing import licences would satisfy the operators concerned.239
5.69 Echoing this concern, thus expressed by the American Trade Representative, a statement from
the company Chiquita welcomed the new regime for distributing import licences.240 This provides the
basis for an answer to the two questions which ask ed yesterday by the Chairman, namely "why there
was a delay between signing the Agreement of April 2001 and its notification?" and "regarding the
nature of the USA's interest in this matter?"
5.70 Had the European Communities disregarded a legal text that was so important that the United
States, even though it has not suffered damage, finds it necessary to champion its defence? In other
words, in attacking the basis of the validity of the waiver from which the ACP countries benefit, the
United States is presenting itself as the standard bearer of the law.
5.71 How to explain therefore that the United States, which is anxious to help African countries on
the road to growth and development, introduced the mechanisms under the African Growth and
Opportunity Act (AGOA) from 2000 without requesting a waiver from the WTO at the time of their
adoption, which might have been the subject of a dispute?
5.72 Indeed, in February 2005, the United States di d formally request a waiver from the WTO, a
request which was not granted. However, this pref erential treatment decided on by the United States
without the agreement of the WTO continues to be applied.
5.73 Therefore, why is the United States applying this system of double standards?
5.74 In fact, the United States is prioritizing the interests of Latin American countries whereas it
has been shown, in statistics from the USDA, that some of these countries were having difficulty in
entering the American market, even with zero tariffs.

238 USDA Agricultural Statistics 2005, attached, http://www.usda.gov/nass/pubs/agstats.htm
239 Annex 3 in the first submission of the European Communities.
240 See attached (http://phx.corporate-ir.net/phoeni x.zhtml?c=119836&p=irol-newsArticle_print&ID=
165631&highlight=).

5.75 One therefore questions the under-performan ce of these Latin American countries on the
United States market
241, even their failure, while at the same time they are developing their market
share in the EU, paying the customs duty which is being criticized.
5.76 Indeed, the multinationals control the major shar e of the American market so it does not offer
any opportunities for independent Latin American producers. On the other hand, the European
market is still profitable for these MFN producers. There are two different concepts of trade here
which clash. On the one hand, a laissez-faire attitude which benefits a few, i.e. the American market,
and on the other, a market structured to benef it as many as possible, without distorting competition,
i.e., the European market.
5.77 Observing the market ultimately remains the only viable way of validating the customs duty
applied by the European Communities. The 2005 arbitrations showed the difficulty of agreeing
international statistics or economic models. It is surely not by chance that the term " guidelines" was
used in the Attachment to Annex 5 to the GATT Agreement on Agriculture in the context of the
delicate process of "tariff agreements". Today, monitoring the European market shows that a duty of
€176 does not allow the past equilibrium to be maintained. Since 1 January 2006 and up to the end of
August this year, i.e. in 20 months, half a dozen MFN countries will have put an additional
520,000 tonnes on the European market, while the ACP countries are labouring to maintain past levels
of exports to the European Union.
5.78 To be even more precise, it can be noted on th e basis of the most recent Eurostat statistics 242,
that in 2007, there was an increase of almost 25 per cent in imports from MFN countries. Over the
first eight months of 2006, these countries exported 165,000 tonnes more than over the same period in
2005. In 2007, over the same period, the figure was 201,000 tonnes more than in 2006, i.e., an
increase of 366,000 tonnes in two years. So who is fooled when it is stated that the new European
import regime for bananas does not allow MFN pr oducers continued access to the European Union's
market? Côte d'Ivoire notes that the ACP countries have only seen an increase of 92 tonnes, that is
right 92, in their exports compared with last year , and this was before the impact of the climate
disasters which affected certain ACP countries was felt.
5.79 Côte d'Ivoire hereby solemnly reaffirms th at the level of duty that the ACP countries,
Members of the World Trade Organization, were denied the right to challenge during the 2005
arbitration, this duty of €176, is too low to maintain market access for ACP bananas.
5.80 The ACP country banana producers are going to be slowly squeezed out of the European
market if this situation endures or will be brutally cut out if the situation is made worse as a result of
the current negotiations, which aim to reduce still fu rther the customs tariff. The attacks from this
organized competition mean that the precarious balan ce in this economic sector is condemned. This
situation will not even benefit consumers, as bananas are still the cheap est fruit available to
consumers. Is this not in fact an anomaly? As for the Latin American producers, if the Community
customs tariff is lowered still further they will be th e first to lose out, selling to the highest bidder in a
market which is oversupplied and controlled by a few big groups.
5.81 Finally, can it be concluded from the foregoing th at, as far as trade in bananas is concerned,
the United States is hostile towards the ACP countries? Surely not! Does it want to prevent them
from trading with the European Union and thus upset their trade-based development? I refuse to
reach such an extremely grave conclusion although one is tempted to do so even if it is clearly outside
the competence of this Panel.

241 See Annex on USDA Statistics, end of August 2007.
242 Eurostat end of August 2007.

E. DOMINICAN REPUBLIC
1. Oral statement of the Dominican Republic
5.82 The Dominican Republic feels more than ever th e need to stress how essential this case is for
it, and in particular for the survival of the thousands of banana producers and growers that are fighting
hard for the survival of the sector. It is incr easingly aware of how difficult it is for poor and
vulnerable island countries like the Dominican Republic to maintain and develop infant agricultural
sectors, such as the banana sector, when year after y ear it is faced with natural disasters, for example
the hurricanes and tropical storms that regularly ravage its islands.
5.83 At this very moment the Dominican Republic is having to face the devastation left by the
passage of Tropical Storm Noel, which among other th ings has caused floods, death, infrastructural
damage, and destruction of a large portion of the country's agricultural production, seriously
damaging banana production. Once again, the Do minican Republic has witn essed the vulnerability
and fragility of the Dominican economy and of the banana sector, which depends entirely on the
preferential access granted by the European Un ion to the ACP countries, and which provides
sustenance to thousands of Dominican families th at are currently suffering from the damage caused
by Noel.
5.84 It is unfortunate that the passage of Tropical Storm Noel through the Dominican Republic
coincides with this Panel. Unfortunate because as the Dominican Republic confronts this tragic event,
it is obliged to participate in a process in which it feels that it stands to lose most in case of an
unfavourable ruling. This Panel was requested by a developed country, whose right to do so the
Dominican Republic does not question; but its purpo se is to eliminate tariff preferences that have
been granted to a group of poor countries, the ACP countries, whose banana production has developed
thanks to those very preferences granted by the EU under the Cotonou Agreement, without which the
sector could neither compete nor indeed survive.
5.85 This situation is a source of considerable surprise and concern, particularly since these
preferences area not directly causing the United States any adverse trade effects. On the other hand,
any panel recommendation in favour of the United States would cause irrepa rable damage to the
Dominican Republic and the other ACP countries.
5.86 Nor does the Dominican Republic understand what the United States is trying to gain by its
recourse to Article 21.5 of the WTO DSU for a lleged lack of compliance by the European
Communities with the Banana III Panel Recommendati ons. This dispute was settled in April 2001
through the Understanding on Bananas between the United States and the European Communities, a
mutually agreed solution involving commitments th at have been met in full by the European
Communities.
5.87 At the same time, the figures show that the European Communities has not only maintained
access to its market for MFN exporters, but that th at access has in fact substantially improved since
the implementation of the new ba nana importation regime. For ex ample, during 2006 and 2007 thus
far, there has been a sustainable growth in the volume of MFN exports, showing that the new regime
is consistent with the EU's WTO commitments.
5.88 Finally, like other ACP delegations, the Domini can Republic considers that these complaints
should be rejected, and hopes that the Panel will ta ke account of its arguments to ensure that the
system of preferential access is not undermined, as this would be to the detriment of the ACP
countries which are highly dependent on those preferences.

F. J
AMAICA
1. Oral statement of Jamaica
5.89 In many ways this case conveys a strong feeling of deja vu for Jamaica, as bananas have had
the dubious honour of featuring in far too many DSB proceedings. ACP banana exporters in
particular, have borne the brunt of the negative ruli ngs that have been made against the EC banana
import regime.
5.90 On this occasion, however, there is a poignant diffe rence in the nature of one of the principal
elements surrounding this case. Indeed, Jamaica is unabl e to reconcile itself to the fact that the United
States, the pre-eminent leader in the industrialized world, is seeking to challenge the new EC banana
import regime that is meant to contribute to th e sustainable economic growth and development of
Jamaica and its sister developing States in the ACP. This is indeed a historic occasion, the first where
a developed country has filed a complaint based pur ely on the preferential terms of access provided
by the European Communities to vulnerable, deve loping ACP countries, which account for less than
20 per cent of the EU market.
5.91 Jamaica recognizes the right of any Member to have recourse to dispute settlement
proceedings in pursuit of its genuine national interest s. The rules of the DSU must be observed by all
Members and the way in which they are interpreted must be such that due process is available to all –
even ACP countries with their very limited resources.
5.92 Jamaica strongly objects to the clear manipulation of DSU procedures in this case. It will not
restate what has already been said by other ACP th ird parties in their statements - on the need for
consultations before having recourse to Article 21.5 proceedings and the improper nature of the
recourse to such proceedings in the present circum stances – but would underscore the importance of
the matters before the Panel, in light of the system ic issues raised and the implications thereof, which
go beyond the present proceedings. Jamaica is also duly reminded of the interests of certain major
multinational corporations which dominate the market.
5.93 One of the significant issues befo re this panel – with implications far beyond the immediate
proceedings - which Jamaica feels compelled to address, is the argument relating to GATT
Article XIII that has been advanced by the Unite d States. It raises an important systemic issue,
namely, whether the limitation or cap placed on a preferential tariff granted to some WTO Members,
requires an Article XIII waiver, as well as a further Article I waiver.
5.94 Under the new EC Banana regime which provid es for unlimited MFN supplies at a flat tariff,
the limits placed on ACP duty-free access were clearly designed not to benefit but rather to constrain
the ACP, and have been demonstrated to provide considerable benefit to the MFN countries. They
have been introduced by the European Communitie s specifically to address MFN suppliers' concerns
with regard to the prospect of an unlimited duty-free tariff access for ACP countries. How can the
limits placed on ACP preferential access covered by Article I of the GATT be considered as a
restriction on the MFN banana exports to the EC? The cap of 775, 000 tons is simply a limit placed on
the tariff preference granted to ACP countries in the context of an MFN regime providing for
unlimited access at the basic flat tariff.
5.95 What is being argued is that a Member that h as an Article I waiver and is hence entitled to
grant an unlimited tariff preference, is in breach of Article XIII if it limits that preference. It is clear
from Bananas III that if that member limits both MFN and preferential suppliers by TRQs, this can
give rise to a violation of Article XIII if the sharing of the market between MFN and preferential
suppliers does not conform to the normal pattern of trade. That was the situation during the first and
second phases of the implementation of the EC/US Understanding, which was why the European

Communities needed an Article XIII waiver. Bu t since 1 January 2006, MFN access has been
unlimited. Only ACP preferential access has been li mited and the TRQ that imposes that limitation is
not shared between individual ACP suppliers. So th ere is no question of the TRQ being applied in a
way that distorts the normal pattern of trade as betw een the individual preferential suppliers. There is
also no distortion in the pattern of trade between ACP and MFN supplies beyond that which arises
from the granting of the tariff preference.
5.96 It has also been clearly demonstrated through out these proceedings that the new EC Banana
Regime has not only maintained, but has actually improved total market access for MFN exporters.
The trade statistics for 2006 and the first eight (8) months of 2007 are undeniable; MFN banana
exporters have never before experienced such an en abling environment for the sale and distribution of
their produce in the European market. Indeed, they have repeatedly acknow ledged this at various
levels and in different fora. In the face of this , what considerations could give rise to the United
States invoking dispute settlement proceedings against a regime which is obvious ly beneficial to all
interested Parties and is in full conformity with WTO rules?
5.97 For many countries, particularly the small pr oducers in the Caribbean, bananas have been
extremely important to agricultural and overall economic development. In Jamaica's case, bananas fall
within its top five (5) export items and in 200 6 accounted for US$13.4 million in export revenue.
Jamaica is therefore deeply distressed and disappoint ed that the United States, contrary to its support
for special and differential treatment for developing countries in the WTO, should now bring an
action that would seek to nullify the benefit of such treatment, in the context of the EC banana import
regime.
5.98 The case before us has many parallels to the bibli cal story of David and Goliath. Like David,
the vulnerable ACP banana expor ting economies are called upon to defend a fundamental element of
their existence against the vastly superior r esources of the United States, in the challenging
environment of the WTO dispute settlement process. Jamaica is satisfied th at in these proceedings,
ACP third parties and EC partners have delivered compelling arguments regarding the inadmissible
basis for the United States' challenge to the new EC banana import regime. Jamaica therefore urges
the Panel, to adopt a position that will demonstrat e that developing countries can continue to have
confidence in a process that upholds equity and transparency.
G. S
AINT LUCIA
1. Oral statement of Saint Lucia
5.99 The initiation of WTO dispute settlement pro ceedings challenging the preferential access
given to vulnerable ACP countries, must cause so me concern as to whether the US Government
simply engages in the pursuance of what it perceives to be its interests, at any cost, with no thought
given to the consequences of its action, especially on those with whom it claims, "there is a
commonness of interest and purpose".
5.100 Sadly, even while sympathetic words were being uttered by these officials at the highest level,
action that would result in the erosion of production stability and the capacity to export Saint Lucian
bananas, were being pursued. Bananas are the lifeblood of Saint Lucia's small economy, providing its
most important export, a key source of employment and facilitates the regular arrival of ships that
bring essential supplies as well as transporting Saint Lucia's bananas to Europe.
5.101 When the European Communities first establis hed a common regime for bananas in 1993, it
had as one of its key objectives, the integration of traditional ACP banana suppliers to specific EC
countries into the single European market. The re gime that was established in 1993 was based on a
TRQ for MFN suppliers and specific TRQs for each of the traditional ACP suppliers. Saint Lucia's

TRQ was set at 127,000 tonnes, the level of its trad itional trade. TRQs create quota rent and, at the
time of the conclusion of the Uruguay Round, th e MFN banana suppliers obtained, through the
bananas framework agreement, speci fic shares of the MFN quota, so that they could share in that
quota rent. But the banana regime and the framewo rk agreement were not acceptable to Ecuador and
Panama, two banana supplying countries who join ed the WTO after the framework agreement was
concluded. Banana importing companies who were established in the European Communities but had
headquarters in the United States, were upset by the transfer to the supplying countries, of some of the
quota rent from which they had been benefiting as holders of licences based on their historic
performance. The United States th erefore joined forces with the discontented MFN suppliers and
brought the case now known as Bananas III.
5.102 As a result of losing Bananas III, the European Communities made a number of changes to its
bananas regime, the most important of which, from the perspective of St Lucia, was that it abandoned
the individual TRQs for individual ACP supplyi ng countries and opened instead a TRQ for all the
traditional ACP suppliers together. The Eu ropean Communities was also forced by Bananas III to
give up the allocation of parts of the MFN TRQ to members of the bananas framework agreement.
However, the changes were not sufficient to satis fy the United States and Ecuador, and Ecuador won
a compliance panel that ruled that the European Co mmunities' new regime was still not in conformity
with its WTO obligations.
5.103 The United States had already decided that the European Communities was not in conformity
and introduced sanctions against the European Commun ities. All remember the crisis that this caused
in the WTO. The European Communities challenged the level of the sanctions and the arbitrators
decided that the European Communities was still not in conformity and also the level of the sanctions
the United States could apply. Under pressure from these sanctions, the European Communities was
forced to exact a price from the ACP in concl uding agreements with the United States and with
Ecuador.
5.104 The main purpose and effect of the agreemen t with the United States, which served as a
model for the subsequent agreement with Ecuador, was to increase the number of licences allocated to
importers linked to two US multinational companies. This was achieved by reducing the quantity of
licences reserved for newcomers and transferring 100,000 tonnes of quota from the ACP to the MFN
TRQ. Licences are the key to quota rent, so the ef fect of the agreement was to transfer additional
sums of money to the companies concerned until 1 January 2006, when, under the agreements, the
European Communities was to replace the TRQ system with a flat tariff.
5.105 The level of the flat tariff has never been seen as a matter in which the United States have any
legitimate interest. The MFN countries succeeded in negotiating a safeguard on the level of the flat
tariff in return for their acceptan ce of the waivers needed to implement the banana regime in the way
that was envisaged in the Agreem ents with the United States and Ecuador. This included a provision
allowing any interested party – meaning by this a country that exported bananas to the European
Communities – to demand arbitration on whether the envisaged level of the tariff would at least
maintain total MFN access. The United States had no ri ght to take part in that arbitration and did not
do so. The question the arbitrator was to determin e was whether the envisaged tariff would at least
maintain MFN access. It should be noted, that a tariff that met that test, would not necessarily be
damaging to the ACP, as it could be one that also maintained ACP access and this is certainly the goal
Saint Lucia expected the European Communities to aim at when it set the level of the flat tariff.
5.106 In the end, the European Communities failed to persuade the arbitrator that either of the tariffs
it proposed, in two successive arbitrations, woul d maintain total MFN access. The European
Communities therefore introduced a tariff of €176/to nne, somewhat lower than the €187/tonne that it
had proposed in the second arbitration. With that tariff, MFN imports rose by about 10 per cent in
2006, and they have continued to rise in 2007.

5.107 I cannot believe that if the arbitrator had b een able to foresee this, he would have ruled
against the second, or even perhaps the first of the European Communities' proposals. Had he
accepted either of these proposals, the present case would never have arisen. But some would say that
this is just the consequence of the rules based system . The job of an advocate is to defend his client's
case, and the mark of an excellent advocate is that he can make the weaker case seem to be the
stronger. The judge or arbitrator can only judge on the basis of the arguments he or she hears. It's a
fair game. But the people who stood to lose the most in this game were not allowed to play in it. The
farmers of Saint Lucia cannot come to Geneva to de fend their livelihoods. They have to rely on their
representatives, and, in the case of the arbitration, even their representatives were not allowed to take
part, other than through their contribution to a short joint statement made on behalf of the ACP as a
whole. The case was lost essentially on two points. Fi rst, the arbitrator paid no attention to what the
ACP said in the first arbitration about the err oneous way the European Communities had measured
the external price. And then, when in its sec ond proposal the European Communities corrected the
mistake it had made over the extern al price, it was too late. Second, the arbitrator did not recognize
the importance of the quota rent, nor see that the quota rent within the ACP quota could be different
from that within the MFN quota. So he attach ed undue importance to the difference between the
€75/tonne in quota tariff and the ACP preferential rate of zero, and neglected the protection afforded
by the out-of-quota tariff of €680/tonne, which was the source of the quota rent.
5.108 The result of these various changes that the Eu ropean Communities has been forced to make
in its banana regime has been disastrous for Saint Lucia. Compared with its traditional quantity, as set
out in the initial regime of 127,000 tonnes, the amount Saint Lucia exported to the European
Communities last year was only 37,000 tonnes. It will be far lower this year, as a result of an
exceptionally violent hurricane. Hurricanes are, however something Saint Lucia expects to suffer
from time to time. Saint Lucia recognizes that it has had to accept the changes the European
Communities has been forced to make as a result of the various cases referred to above. What Saint
Lucia never expected was the current case brought by the United States. When the elephants fight, the
grass gets trampled. Saint Lucia has been suffering and con tinues to suffer from the results of this
elephant fight between the European Communities a nd the United States. In this case the preference
provided to vulnerable ACP countries are not merely collateral damage but unbelievably the principal
complaint of the United States against the EC.
5.109 For the very first time, the United States, a developed country, is doing something that, to the
best of Saint Lucia's knowledge no other devel oped country has ever done and is challenging a
preference given by another developed country. Th ey are doing this not in order to defend US
exports, but in the interests of multinational comp anies who, as the United States accept, are not in
any way discriminated against by the current EC regi me. If they were subject to discrimination, no
doubt, the United States would have brought a case under the GATS.
5.110 Of course, the companies concerned, in their capacity as importers, have to pay the tariff. But
economic theory predicts that the cost of the ta riff will ultimately be passed on to the EC consumers
and to a lesser extent on MFN suppliers. What these companies have lost is the quota rent. But this is
not the result of the particular level of tariff that is being applied. It is the inevitable result of the
switch from a TRQ system to a flat tariff. This is something that was specifically provided for in the
agreement the United States signed with the European Communities.
5.111 Saint Lucia recognizes that these same compan ies have investments in MFN countries and
thus may share in the objective of the MFN countries. This ambition appears to be, to move from an
80 per cent share of the EC import market to 100 pe r cent. Even if this may be the ambition of the
multinational companies, it is not one that the Un ited States can take up, because, under the rules of
the WTO, tariff concessions are granted by impor ting members to exporting members. It is not
granted to Members in whose territory multinati onals, who have export or production businesses in
other member countries are registered.

5.112 Therefore, Saint Lucia is deeply shocked that the United States is claiming that the European
Communities is in breach of Article I of the GATT and hence challenging the preference granted by
the European Communities. Saint Lucia strongly s upports the arguments that have been advanced
both by the European Communities and by Came roon which demonstrate that the European
Communities has amply satisfied the substantive cond ition of the waiver, that its tariff regime should
at least maintain total MFN access and hence that the waiver granted at Doha still exists.
5.113 Even more shocking and surprising is th e United States' claim that the European
Communities is in breach of Article XIII. In making this claim, the United States has apparently been
prepared not only to espouse the interests of the mu ltinational banana companies, but also to employ
their legal arguments, even where these conflict with those that the US Government holds in other
contexts. What the United States is claiming in this case, is that even if the European Communities
does have an Article I waiver, it is still in conf lict with its WTO obligations, because it limits the
preference it grants to the preferential suppliers.
5.114 In other words, any WTO Member that has an Article I waiver that permits it to grant an
unlimited preference, is in breach of its WTO obligati ons, if it does less than it is entitled and subjects
that preference to a limit. If the United States be lieves this, then on what basis does it set limits to
some of its GSP concessions, whose WTO legitim acy rests only on the Enabling Clause? If any
WTO Member really believes this, why did WTO Members unanimously adopt paragraph 42 of the
Fourth WTO Ministerial Conference, which included the sentence "We commit ourselves to the
objective of duty free and quota free market access for products originating in the least developed
countries".
5.115 The objective of duty free access had already been adopted at the First WTO Ministerial
Conference. The Fourth Conference plainly intended to offer more. But the only waiver that
underpins special preferential access for the least de veloped countries is the Enabling Clause and this
only covers Article I.
5.116 So if the arguments the United States has advan ced before this panel are correct, the addition
of "and quota free" was a cruel joke that purported to offe r the least developed countries more than
what they were offered at the first Ministerial Conf erence, but in fact meant the same thing. Saint
Lucia believes that the cruel joke began at Sea ttle, the WTO Ministerial that the United States
themselves chaired. Because it was there that the word s that were later adopted at Doha were first
envisaged – at the suggestion of no lesser authority than the then Director-General of the WTO.
5.117 Of course, Saint Lucia is not suggesting that th e United States participated in a cruel joke.
They genuinely did not think that tariff quotas require Article XIII waivers in this context. And they
still do not think this. Contrary to what the United States' spokesperson told this meeting yesterday –
speaking off the cuff – the United States in their very latest request for an extension of their Pacific
waiver made in May this year, requested only a waiver from Article I, although several of the
preferences concerned are given within tariff quotas.
243
5.118 It is just about understandable how a lawyer, who specialises in bananas and who hence may
read the banana cases outside the broader context, could misread the Bananas III report and the report
of the Article 21.5 Panel later introduced by Ecuado r, and believe that they were intended to mean
that preferences cannot be granted on a limited volume without an Article XIII waiver. Highly
experienced Saint Lucian lawyers on reading these reports, have remarked that they were not intended
to say more than, that all Member s whose access to a particular mark et is governed by TRQs must be
treated equally. Nor should a layman see them as suggesting that any difference in tariff treatment

243 G/C/W/570/Rev.1.

constitutes a restriction. But to be charitable, it may be granted that a high-priced banana lawyer
could be tempted to be misled.
5.119 The United States itself by the actions it takes in other contexts, shows that it is confident that
differences in tariff treatment require only an Article I waiver, whether the preference concerned is
granted on a limited or an unlimited basis. It is th erefore hard to understand why it believes that the
rules should be different when it comes to bananas.
5.120 As the European Communities and the Cameroon have demonstrated, the United States have
brought this case on the basis of the wrong article of the DSU. Furthermore the United States has, in
collusion with the European Communities, breached the proper procedure for bringing it, by failing to
ask for consultations, and hence infringed the rights of third parties. These points alone would justify
the Panel in dismissing it. But the substantive arguments they have used are also fallacious, and, in the
case of Article XIII, contrary to the policies the United States itself follows in other contexts.
5.121 Saint Lucia trusts that the Panel will have no di fficulty in dismissing the case in its entirety.
While the multilateral banana trading companies and major producers may continue to lobby for
complete dismantling of the EU banana import regime , the resulting dislocation and destabilisation of
the communities and economies of small and vulnerable island States like Saint Lucia and the other
Windward Islands, who are close neighbours of the United States, cannot be in the best interest of the
United States.
H. S
AINT VINCENT AND THE GRENADINES
1. Oral statement of Saint Vincent and the Grenadines
5.122 The situation of Saint Vincent and the Gren adines and the other Windward islands closely
parallels that of Saint Lucia. Like Saint Lucia and the Commonwealth of Dominica, Saint Vincent is
a traditional supplier of bananas to the EC mark et and its dependence on bananas goes well beyond
the income derived from exports of bananas, vita l though this is. The trade in bananas and the
shipping link that arises from it is the mainspring of Saint Vincent and the Grenadines development.
5.123 The successive changes in the EC banana regime , and particularly the application of the
EC/US Understanding on bananas has cost us dearly. Following Bananas III Saint Vincent and the
Grenadines lost the security of the system of count ry specific tariff quotas, which of course exposed it
to greater competition from other ACP banana pr oducers. That competition became much more
intense when the ACP quota was cut, in effect by 200,000 tonnes, as a result of the application of the
initial stages of the EC/US understanding. Finall y the change in the provisions for access for the
MFN suppliers from a TRQ with a prohibitive out-o f-quota tariff of €680/tonne to a flat tariff of
€176/tonne made for a much more uncertain market situation. Saint Vincent and the Grenadines is
bewildered that the MFN claim that its preference increased as a result. Saint Vincent, would have
been happy to have seen the MFN tariff quota with an in quota rate of €75/ tonne continue, provided
that MFN access at that rate had been limited to the TRQ with out-of-quota imports continuing to
attract the full bound rate (€680/tonne). This woul d have provided Saint Vincent and the Grenadines
with the security that would ensure that its mod est imports would be able to find a place on the EC
market.
5.124 Saint Vincent and the Grenadines was surprised and dismayed to find that the MFN were not
content when the flat tariff that they had been clamouring for over the years was finally applied at the
rate of €176/tonne and even more so when Ecuador decided to take panel proceedings, even though it
was already apparent that the new regime had permitted the MFN, taken as a whole, to export
increasing quantities of bananas to the EC market. But the present case taken by the United States is
even more bewildering. Saint Vincent and th e Grenadines cannot understand why the United States

would want to take a case at all. In the past, their concern was that they felt that the share of the TRQ
licences allocated to their banana companies w as too small. These companies obtained additional
quantities of licences during the first two phases of the EC/US Understanding and no doubt derived
significant additional revenue as a result, because the licences were the key to the quota rent. But,
with the application of the flat tariff, MFN imports are not limited, the licence issue is now behind us.
Instead the United States is now challenging the very existence of the preference that the European
Communities grants us which permits us to trade internationally.
5.125 Saint Vincent and the Grenadines cannot understand why the United States would want to do
this or how do they justify setting aside their Understanding with the European Communities after
their companies have gained significantly from the faithful application by the European Communities
of phases 1 and 2 of that Understanding, the very phases to which, as can be seen from the letter from
Mr Zoellick, the United States attached prime impor tance? And why do they argue that, when it
comes to bananas, a WTO Member may not apply a limit to a preference without a waiver from
Article XIII of the GATT when they limit some of the preferences they themselves grant on some
other products under the Generalized System of Pr eferences, even though the enabling clause that
legitimises the GSP only provides a derogation from Article I? How unreasonable and selective and
self-serving in its reasoning can a Member be?
5.126 The European Communities and the United States decided between themselves that there was
no need for consultations before this case could be la unched. If this is allowed to stand, it will mean
that rights as third countries to know the reason fo r the action will have been violated. The United
States feels able to bring the case under Article 21.5, although the main material point they raise is
about the interpretation of special conditions of the Article I waiver granted at Doha, conditions that
did not exist when the United States took the prev ious case. They argue that MFN access has not
been maintained when it has been increased. And they ask the Panel to make a ruling on Article XIII
with regard to the preferential TRQ that the Eu ropean Communities accords to the ACP that would
conflict with the way they apply other preferential TRQs themselves. They should not prevail.
I. S
URINAME
1. Oral statement of Suriname
5.127 The United States is seeking to present this case as a compliance case which would address
the "continued inconsistency of the EC import regime for bananas with its WTO obligations". This is,
Suriname believes, incorrect and has important legal consequences. First of all, the Bananas III
dispute has been settled through the Understandi ng on Bananas concluded between the European
Communities and the United States. Secondly, th e new EC banana import regime which the United
States is challenging is not a "measure taken to co mply" with the recommendations and rulings of the
DSB, within the meaning of Article 21.5 of the DS U. As a result, and for both reasons, the United
States is precluded from bringing this case under Article 21.5 of the DSU.
(a) Preliminary issue: the United States failed to request consultations
5.128 As a preliminary issue, Suriname would like to express its strong concerns that no
consultations were requested and held in this case wh ile consultations are a prerequisite to a request
for establishment of a Panel not only in the framework of de novo panel proceedings but also in the
framework of compliance proceedings.
5.129 Suriname understands from the written submissions of both parties that the absence of
consultations would be based on a bilateral agreem ent reached between the parties to dispense with
consultations. As explained in de tail in the ACP third party written submission, Suriname believes
that the obligation to request and hold consultations cannot be waived bilaterally by the parties to a

WTO dispute through a bilateral agreement. This would be contrary to the terms of the DSU which
does not provide for such a possibility. This would also be inconsistent with the object and purpose of
Article 4 of the DSU. Indeed, the consultation phase has been introduced as a necessary preliminary
step before requesting the establishment of a panel because these consultations can be a way to try to
find a mutually acceptable solution which is the prefe rred alternative in order to settle disputes, as
expressed by Article 3.7 of DSU, and for due pro cess reasons, i.e. since during such consultations
parties and third parties are given notice of the complainant's concerns before any possible Panel
phase. The consultation phase appears thus essential not only for the parties but also for the third
parties.
5.130 This is particularly important in this case wher e the ACP are in fact more than third parties
since they are the beneficiaries of the preference which is challenged by the United States and will
therefore be directly affected by the findings of the Panel in the present case.
5.131 In addition, by depriving the ACP third parties from having the possibility to join
consultations since no such consultations were held, the United States manifestly breaches the
requirement of Article 4.10 of the DSU according to which "[d]uring cons ultations Members should
give special attention to the particular problems and interests of developing country Members." It is
unacceptable that in the first dispute settlement cas e ever brought by a developed country against a
preference given to developing countries by anot her developed country, the United States deprives
those developing countries which will be severel y harmed in case the United States' challenge
succeeds, from their right to participate in prior consultations.
5.132 We therefore respectfully request the Panel to declare the present proceeding brought by the
United States inadmissible on the sole ground that it failed to request consultations in accordance with
the requirements laid down in the DSU.
(b) The Bananas III dispute has been settled through the Understanding on Bananas
5.133 The United States cannot have recourse to a compliance Panel to challenge the new EC
banana import regime since the Bananas III dispute has been settled through the Understanding on
Bananas reached by the European Communities and the United States.
5.134 On 11 April 2001, the United States and the European Communities concluded an
Understanding on Bananas to solve their dispute over the European Communities' banana import
regime. The Understanding on Bananas constitutes a mutually agreed solution, as demonstrated by its
content as well as by the confirmations contained in the Letters exchanged between the parties on 29
May 2001 and 30 May 2001. Indeed, it is clear fro m its content that the Understanding on Bananas
was reached to resolve the dispute as it lists the various actions or steps which must be undertaken by
both parties and which constitute the elements of the solution. The fact that it constitutes a mutually
agreed solution has been confirmed by the US Tr ade Representative Zoellick in his Letter of 29 May
2001 where he stated that the Understanding constitu ted the "mutually agreed solution to our dispute
in the WTO as notified to the WTO Dispute Settlement Body."
5.135 The first important legal effect of this Understanding being concluded is that it is not
admissible to challenge the consistency of subseque nt measures pursuant to Article 21.5 of the DSU.
Article 21.5 of the DSU provides for a mechanism for dispute resolution "where there is disagreement
as to the existence or consistency with a covered agreement of measures taken to comply with the
recommendations and rulings." In this case where ther e is a mutually agreed solution, there cannot be
any disagreement in the sense of Article 21.5 of the DSU.

5.136 The fact that a mutually agreed solution puts an end to the dispute for which it has been
agreed flows not only from the content of the mutua lly agreed solution but also from the DSU and in
particular Article 3.7 of the DSU.
5.137 Other elements further support the fact that the agreed solution existing between the European
Communities and the United States prevents the United States from referring the issue of the WTO
consistency of the new EC banana import regime under Article 21.5 proceedings: first, the fact that
the DSB took the Bananas III case off its agenda as an issue whic h has been resolv ed in accordance
with Article 21.6 of the DSU, after the Understand ing was agreed; and second, the fact that the
United States terminated its suspension of concessi ons in accordance with Article 22.8 of the DSU,
confirming that it considered that the dispute had been resolved through the mutually agreed solution.
5.138 The United States cannot simply ignore the above. The original Bananas III case has been
resolved by means of the Understanding. The f act that the Understanding has resolved the case is
clear from the text of the Understanding itself, the confirmation letters exchanged between the parties
thereafter and from the fact that the DSB took this issue off its agenda and that the United States
terminated its suspension of concessions. Once a di spute has been resolved, such as in the present
case, by an Understanding constituting a mutually agreed solution, any further regulatory
development cannot be considered as measures ta ken to comply with DSB recommendations. New
disputes concerning the same sector or products shou ld therefore be addressed in the framework of
new dispute settlement proceedings instead of compliance proceedings.
5.139 It does not appear relevant to us to determin e whether the Understandi ng is or not a "covered
agreement" pursuant to Article 1 of the DSU since the issue in the present case is not to determine
whether the measures being challenged are consiste nt with the Understanding on Bananas, but about
the legal effects which such an Understanding has in procedural terms in subsequent proceedings.
5.140 The arguments drawn by the United States from the India – Autos dispute are misconceived.
Indeed, the Panel in that proceeding was only request ed to rule on the question whether a party to a
mutually agreed solution could initiate new disput e settlement proceedings covering the same matter
as was covered by a mutually agreed solution. Th e argument raised by the ACP third parties is
different, namely that once a mutually agreed soluti on has been agreed, parties to this agreed solution
are prevented from having recourse to Article 21.5 proceedings. In other words, the ACP third parties
do not argue that the existence of a mutually ag reed solution would prevent the United States from
starting new dispute settlement proceedings. Howe ver, it constitutes a bar to the initiation of
compliance proceedings.
5.141 In the light of the foregoing, this Panel must examine the legal effects of the Understanding
on Bananas and in particular its procedural consequences. It is submitted that the fact that the original
dispute has been settled through the Understa nding on Bananas constituting a mutually agreed
solution prevents the United States from challe nging the new EC banana import regime in the
framework of compliance proceedings.
5.142 The second legal effect
 of the Understanding on Bananas is that being an international
agreement, it is legally binding upon the parties. The binding nature of this Understanding is
confirmed by the fact that each party implemented its content.
5.143 Being an agreement upon the parties, both parties have to comply with its terms in good faith
and cannot put its terms into question thereafter. This obligation to implement international
agreements in good faith constitutes a bar on the US' ability to challenge now under Article 21.5 of
the DSU the legality of the Cotonou preference.

5.144 If the United States were now allowed to call into question the Understanding, this would
manifestly contradict the Understa nding which is a binding international agreement. In addition, it
would also be totally unfair since it has already reaped the benefits from that agreement.
(c) The new EC banana import regime is not a measure taken to comply with the
recommendations and rulings in the original Banana III dispute
5.145 There is a further reason why the United States should not be allowed to bring this case before
a compliance panel. Namely, the measures now bein g challenged are not "measures taken to comply"
with the recommendations and rulings of the original Panel within the meaning of Article 21.5 of the
DSU. As noted by the Appellate Body in EC – Bed Linen, "if a claim challenges a measure which is
not a ‘measure taken to comply', that claim cannot properly be raised in Article 21.5 proceedings"
(para. 78).
5.146 From the existing case-law, it appears that, in order to be considered as being "measures taken
to comply", the challenged measures must be cl early connected to the panel and Appellate Body
report of the original case, both in time and in respect of the subject-matter. This criterion is clearly
not satisfied in the present case.
5.147 Regarding the time-frame, it seems difficult to c onsider that more than eight years between
the recommendations and rulings of the DSB in th e original case and the adoption of the measures
being challenged show a clear connection.
5.148 As regards the subject-matter, there also appears to be no clear connection for at least two
reasons. First, the regime which is challenged is a tariff-only regime which has nothing to do with the
quota regime which was examined by the pane l and the Appellate Body in the original Bananas III
dispute. Second, the legal background against whic h the new EC banana import regime needs to be
examined has changed radically. Indeed, with th e adoption of the Understanding on Bananas and the
Doha Waiver, new rights and obligations have ar isen for WTO members. The Understanding on
Bananas has been agreed by the European Communities and the United States to solve their original
Banana dispute. It contains a certain number of rights and obligations that both parties must
implement in good faith. The Doha Waiver is a decision which has been taken by all WTO Members
to grant a waiver of the GATT Article I requirement of non-discrimination in order to enable the
European Communities to implement the Cotonou preference.
5.149 Since these two new legal instruments contain new rights and obligations, they must
necessarily be taken into account to decide on th e WTO compatibility of the new EC banana import
regime. Actually, the new EC banana import regime has been adopted to implement the commitments
undertaken in these instruments. The measur es being challenged by the United States cannot
therefore be regarded as measures taken to comp ly with the recommendations and rulings in the
original dispute. The legality of the new EC bana na import regime can therefore only be examined in
new dispute settlement proceedings taking into account these new legal instruments.
5.150 This was actually suggested by the Arbitrator in the first Arbitration, noting that disputes may
arise specifically from the Doha Waiver and its im plementation. To the extent that the dispute
challenges measures which have been adopted pur suant to the Doha Waiver and other legal
instruments which came into existence only after an earlier dispute, such measures cannot be regarded
as being measures taken to comply with recommendati ons and rulings of the DSB adopted in the pre-
existing earlier dispute.

J. B
RAZIL
1. Oral statement of Brazil
5.151 In its statement, Brazil focused on the two pr eliminary objections made by the European
Communities, namely the binding nature of the Understanding signed by both Parties in 2001 and
whether the European Communities' current import regi me is a "measure taken to comply" within the
meaning of Article 21.5 of the DSU.
(a) The Understanding
5.152 The European Communities claims that by having signed the Understanding in 2001 the
United States would have agreed on a number of is sues that today would prevent it from resorting to
an Article 21.5 proceeding. First, the Europ ean Communities affirms that by having signed the
Understanding, the United States would have accepted until the end of 2007 the banana import regime
irrespective of the legal situation of some of its elements. 244 Second, the European Communities
claims that the United States in that same Unde rstanding would have presumably renounced its right
under Article 21.5 of the DSU to challenge the mutually satisfactory solution.
5.153 In Brazil's opinion, both conclusions are errone ous. On the first point, it notes that in
affirming that the United States would have concurred with a regime regardless of its legal situation,
the European Communities is imprudently sugg esting that Members can agree on a solution
irrespective of its consistency with the covered agreements.
5.154 Article 3.2 of the DSU reflects the Member s' recognition that the dispute settlement
mechanism serves to preserve the rights and obligations of Members under the covered agreements.
Thus, a mutually agreed solution should not add or diminish Members' rights and obligations.
5.155 Moreover, while recognizing that a solution mutua lly acceptable to the parties to a dispute is
clearly preferable to dispute resolution procedures, Article 3.7 also provides that such a solution has to
be consistent with the covered agreements. The fact that the DSU favours negotiated 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.
5.156 In no provision does the DSU grant Members certa inty as to the "lawfulness" of a measure
taken to comply just because such measure derives from a mutually satisfactory solution. To the
contrary, Article 21.5 sets forth the Members' right to resort to a panel where there is disagreement as
to the consistency with covered agreements of the measures taken to comply.
5.157 Whether or not this solution is the one referred to by Article 3.6, any solution intended to
implement DSB recommendations and rulings, by virtue of Article 21.5, is subject to analysis by a
panel.245
5.158 In fact, the Appellate Body has stated that:
"Article 21 sets out a number of mechanisms to ensure collective oversight of [a]
Member's implementation. … [W]ithin Article 21 as a whole, the declarations of the
implementing Member form an integral part of the surveillance of implementation,

244 See European Communities' second written submission, para. 14.
245 See Appellate Body Reports in US – FSC (Article 21.5 – EC II) , para. 60; US – Softwood
Lumber IV(Article 21.5 – Canada) , para. 70; EC – Bed Linen (Article 21.5 – India) , para. 79; and Canada –
Aircraft (Article 21.5 – Brazil), para. 36.

but they do not stand alone. Rather, th ey are complemented by, and subject to,
multilateral review within the WTO".246
5.159 In Brazil's view, the Panel should not endorse the European Communities' argument. If
accepted, it would significantly undermine the effec tiveness of Article 21.5, because parties to an
agreed solution would be authorized to rewrite their multilateral commitments. Any measure based on
an agreed solution would automati cally escape the test of consistency with the covered agreements.
Thereby it would give Members a blanket waiver to override their obligations, with serious
implications on the predictability and security of the multilateral trading system.
5.160 On the second issue, the European Communiti es states that the provisions of the
Understanding and the context within which it was si gned would permit to infer that the United States
renounced its rights to challenge so me elements of the Understanding. 247 To Brazil's knowledge,
there is nothing in that bilateral Understanding that allows for such a conclusion. Nor is there a
provision 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.
5.161 In light of the Understanding and consideri ng that Article 21.5 contains no clause on the
preclusion of the rights established therein, the United States should not be presumed to have tacitly
renounced its rights to seek multilateral review of the measures taken by the European Communities.
(b) Whether the European Communities' 2006 import regime is a "measure taken to comply"
5.162 Considering the European Communities' second preliminary claim, related to the nature of the
European Communities' banana import regime, the United States asserts that what the European
Communities tries to characterize as an "autonomous political decision"
248 - i.e. the tariff only regime
– is in fact the "measure taken to comply" for the purposes of the current proceedings.
5.163 According to the United States, the Europ ean Communities would have committed in the
Understanding of 2001 to take "a series of steps that would culminate with the introduction of a tariff
only regime by January 1, 2006" 249, the tariff-quota regime implemen ted in 2002 being one of those
steps. From the United States' perspective, such a tariff-quota system would constitute an interim and
transitional phase towards the tariff-only regime. The single-tariff-based system would be the
ultimate point of such a series and effectively took place five years after the Understanding was
signed.
5.164 On the other hand, the European Communities cl aims that the United States' complaint does
not fall within the scope of Article 21.5. In the European Communities' view, Council Regulation
1964/2005, which establishes the present banana im port regime, would not be a measure taken to
comply for the purposes of Article 21.5. The "final measure taken to comply" 250 agreed with the
United States back in 2001, the European Comm unities purports, would be the tariff-quota-based
system implemented by the Communities from 2002 to the end of 2005. 251 Consequently, the
European Communities would have implemented in 2002 the recommendations and rulings adopted
by the DSB in 1997, and, therefore, the United States would be prevented from challenging the
ongoing regime, unless it resorted to a de novo panel.252

246 See Appellate Body Report in US – Softwood Lumber IV (Article 21.5 – Canada), at para. 70.
247 See European Communities' second written submission, para. 11.
248 See ibid., para. 51.
249 See United States' second written submission, para. 46 (emphasis added).
250 See European Communities' first written submission, para. 49.
251 See European Communities' second written submission, para. 50.
252 See European Communities' first written submission, para. 51.

5.165 In Brazil's opinion, it is for the panel to assess whether or not the EC Council Regulation
1964/2005 is a measure taken to comply. The Appella te Body has cautioned that "characterizing an
act by a Member as a measure taken to comply when that Member maintains otherwise is not
something that should be done lightly by a panel"
253. Nonetheless, it has unequivocally stated that "it
is, ultimately, for an Article 21.5 panel – and not fo r the complainant or the respondent – to determine
which of the measures listed in the request for its establishment are ‘measures taken to comply'".254
(c) Final remarks
5.166 Brazil also made some comments on the topic of transparency and open hearings. Ever since
its beginning, this dispute has given rise to a number of important systemic issues, among them cross-
retaliation; the sequencing between Articles 21.5 a nd 22.6 of the DSU; and the original Panel's
decision to make use of its discretion set out in Article 19.1 to suggest ways of implementation.
5.167 Another issue of great systemic importance was presented to Members. As a result of a
bilateral agreement between the Parties, some third parties faced a situation in which two Members
were about to decide what the rights of other Me mbers should be, on a subject that should be dealt
with by the Membership as a whole within the DSU review process. Brazil recalled that it had made
its position clear in an earlier communication to the Panel
255, and, for this reason, it would not go into
the details of this topic.
5.168 As far as Brazil is concerned, however, transpar ency is not only a matter that concerned the
confidentiality of proceedings. While many Me mbers who advocate open hearings do not publicize
their documents, Brazil usually discloses all its dis pute related papers to th e general public, including
written and oral submissions. To a considerable degree, the disclosure of submissions promotes much
greater transparency than making hearings open to the public but keeping documentation confidential.
Transparency in WTO dispute settlement proceedings is an element of the delicate balance between
rights and obligations within the DSU, one on wh ich Members should negotiate collectively and in
the adequate forum.
(d) Conclusion
5.169 For the reasons explained above, the Panel should reject the European Communities'
preliminary objections and find that the United States is entitled to resort to Article 21.5 procedures.
K. 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 apply to bananas as of 1 January 2006, and the EC
was no longer entitled to "rectify the matter"
5.170 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

253 See Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), at para. 74.
254 See Appellate Body Report, EC – Bed Linen (Article 21.5 – India), at para. 78.
255 See Brazil's letter on the subject sent on 19 October 2007.

apply to bananas upon the entry into force of the new EC tariff regime, and the European
Communities has no additional legal opportunity to "rectify the matter".
5.171 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.
5.172 Thus, following the adverse finding in the Second 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 EC 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
5.173 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 there is a rebinding of the EC tariff on bananas; (ii)
whether any such rebound tariff would result in at least maintaining total market access for MFN
suppliers; and (iii) whether 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.
5.174 With respect to the first element, while the European Communities submits that the
introduction of "a different import regime than the on e 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
of law – that the second element contemplates a quantity- or volum e- based standard – and has not
even presented arguments to substantiate that conclusion of law.
The European Communities' quantity- or volumes-b ased analysis is contrary to the Tariff
Level Standard
5.175 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 Communities argues that the Tariff Level Standard contemplates a tariff
level that would result in at least maintaining the export volumes of MFN banana suppliers.
5.176 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 liberalization. The extent to which trade flows, or one Member
has a particular market share, has never been part of the WTO understanding of market access". Then

the European Communities added: "In the WTO the phrase "market access" is not to be understood as
a measurement of the volume of imports or of market share (between either MFN suppliers or
between MFN and other supplie rs)". Thus, the notion of volumes as the benchmark for purposes of
compliance with the Tariff Level Standard was thoroughly discussed and squarely rejected in the First
Arbitration.
5.177 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
5.178 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.
5.179 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.
5.180 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."
5.181 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.
5.182 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.
The Arbitrator found that it "does not consider that the European Communities' use of Sopisco News
data to estimate the internal price of bananas on the EC market was inappropriate."
5.183 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.
5.184 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 European 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.
5.185 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.
5.186 In the course of the First Arbitration, the Arbitrator 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.
5.187 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 for ACP bananas (€86/tonne), or €11/tonne.
5.188 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
5.189 Colombia recalls that the Appellate Body in EC – Poultry stated that: "In applying import
restrictions to any product, Members shall aim at a distribution of trade in such product approaching
as closely as possible the shares with the various Me mbers might be expected to obtain in the absence
of such restrictions".
5.190 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".
5.191 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 denies 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
5.192 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
5.193 The dispute on bananas is the longest dispute in the history of the GATT and the WTO.
Regrettably, this Panel proceeding is the elev enth since 1992 examining the EC banana import
regime. Fifteen years on, in 2007, that regime is still not in conformity with WTO law.

5.194 Bananas are a product of paramount importance for the Colombian economy. They are the
main source of employment in rural areas crucial fo r national security, and are also one of Colombia's
main export products
5.195 In its third-party written submission, Colombia establishes why the EC banana import regime
is inconsistent with Articles I and XIII of the GAT T. Rather than repeat those submissions, this
statement will focus on certain critical issues.
5.196 It is evident that the preferential tariff treatment granted to ACP bananas is inconsistent with
the MFN obligation in Article I:1 of the GATT. The 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 relating to bananas. The process of rebinding the
EC tariff contemplated a two-stage arbitration procedure and a waiver-termination provision.
5.197 The European Communities argues that the D oha Waiver "would cease to apply only if the
European Communities implemented the import regime analysed by the Arbitrator and found not to
satisfy the standard of the Doha Waiver. If the European Communities introduced a different regime
than the one analysed by the Arbitrator and that im port regime did indeed maintain the total market
access of the MFN suppliers, then the Doha Waiver would continue to apply until the end of 2007".
256
Colombia cannot agree with this interpretation.
5.198 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 powerful incentive for the parties to seek a negotiated
solution. An additional opportunity to rectify the matter would nullify this incentive to negotiate.
5.199 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, as they are claiming now, the purpose and rationale of the banana-specific
multilateral dispute settlement mechanism in the wa iver would be defeated. As the United States
submitted in yesterday's oral statement, such an in terpretation would "read the role of the Arbitrators
out of the Annex". 257 MFN suppliers would have never gr anted the Article I Doha Waiver for
bananas were this the case.
5.200 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.
5.201 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. Third, and of greatest concern to Colo mbia, the applied tariff of €176/ton does not meet the
tariff level standard of "at least maintaining total market access for MFN banana suppliers".
5.202 Colombia has provided detailed argument paragra phs 20 to 26 of its third-party written
submission for why compliance with the tariff level standard ought to be assessed in the same manner

256 European Communities' first written submission, para. 55.
257 United States' opening statement at the Panel's substantive meeting with the parties and third parties,
para. 32.

as the Arbitrator and therefore in terms of cond itions of competition between MFN bananas and both
EC and ACP bananas.
5.203 In this statement, Colombia simply high lights 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". The European Communities
confirmed this view yesterday, stating that the tari ff level standard should "not … be interpreted as a
guarantee of any particular volume of trade" and should be based on "competitive opportunities" not a
"volumes-based-analysis".258
5.204 The European Communities' repeated rejection of a volumes-based-analysis accords with 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
opportunity 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.
5.205 A test based on conditions of competition rather than actual trade flows is consistent with a
long line of GATT and WTO jurisprudence and reflect s the practical 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.
5.206 In light of the above, it was with alarm that Colombia noted that the European Communities
is now contradicting itself and attempting to reintroduce a linkage between trade volumes and
competitive opportunities. In the hearing yesterday, the European Communiti es expressed that "it
would not be logical to assume that a country may be deprived of its competitive opportunities and
market access, but still be able to increase th e quantity of its exports towards the European
Communities". To reinforce this statement they al so expressed that "an increase in exports can only
take place if market access has been maintained". 259 In Colombia's view the economic reasoning of
the European Communities is over-simplified and wrong. International trade flows are explained by a
number of factors related to suppl y and demand. It is possible to explain, for instance, why an
increase in a tariff rate could be associated with a statistic that shows an export increase. Does this
mean that the increased tariff ra te maintained competitive opportuniti es? Obviously not. The self-
serving nature of the European Communities' change d position is highlighted by its view that the
relevance of trade volumes can only work against MFN banana suppliers as "[ a] decrease in exports
does not necessarily mean that market access has been denied".260
5.207 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.
5.208 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:

258 European Communities' opening statement at the Panel's substantive meeting with the parties and
third parties, para. 13.
259 Ibid.
260 Ibid.

• The period 2002-2004 as the appropriate reference period;
• The Sopisco-based weighted average internal price of €702/ton in the EC-25;
• The Eurostat weighted average external price of €605/ton for MFN bananas in the
EC-25; and
• The Eurostat weighted average external price of €616/ton for ACP bananas in the
EC-25.

5.209 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. A tariff-level of €97/ton does not even take
into account the conditions of competition betw een MFN bananas and ACP bananas which are
elaborated upon in Colombia's written submission.
5.210 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.
5.211 For all the above reasons, Colombia submits that the Article I Doha Waiver cannot justify the
preferences granted by the European Communities.
5.212 Colombia has provided argumentation in its written submission for why the preferential tariff-
rate quota accorded to ACP bananas is inconsistent with Article XIII:1 and XIII:2 of the GATT.
Rather than elaborate upon those arguments, Colombia wishes to use the time available to address the
European Communities' argument that selected pr ior waiver decisions constitute "subsequent
practice" and "subsequent agreements" within the meaning of Article 31 of the Vienna Convention on
the Law of Treaties that, in essence, allow for an in terpretation that an Article I waiver covers an
Article XIII violation.
5.213 "Subsequent practice" within the meaning of Article 31(3)(b) needs to be "concordant" and
"common". Colombia notes the comments of the United States yesterday that it has, on at least three
occasions, requested waivers of both Article I and Article XIII of the GATT. These examples
illustrate that the practice is not concordant and co mmon but inconsistent. Furthermore, the extent to
which the practice of a few Members can be relevant to the interpretation of a multilateral treaty such
as the GATT is highly controversial.
5.214 A "subsequent agreement" within the meaning of Article 31(3)(a) must be distinguished from
"subsequent practice" in Article 31(3)(b). The Eu ropean Communities fails to make that distinction
by elevating inconsistent practice regarding wa ivers to a status approximating an "agreement"
regarding the interpretation of Ar ticles I and XIII of the GATT. "Subsequent agreements" within the
meaning of Article 31(3)(a) are extremely rare in pr actice. In the context of the WTO, the type of
agreement contemplated is specifically regulate d by Article IX:2 of the WTO Agreement on
authoritative interpretations. The European Comm unities' liberal interpretation would render the
disciplines of Article IX:2 of the WTO Agreement largely meaningless.
5.215 In light of the foregoing, Colombia respectfully requests the Panel to find that the measures at
issue are inconsistent with Articles I and XIII of the GATT.
L. E
CUADOR
1. Oral statement of Ecuador
5.216 As the Panel is well aware, Ecuador is the co mplaining Party in its own challenge to the
European Communities' measures. In the other proceeding, Ecuador has challenged the conformity of

the European Communities' measures with Article I and Article XIII, as well as with obligations not
at issue in the US complaint.
5.217 Having had the opportunity to explain its position in the other proceeding and also to respond
to most of the defences that the European Comm unities has presented in this proceeding, Ecuador
will not repeat all of those points again here.
5.218 Ecuador has also taken due note of the submissions of third countries, including those of the
ACP. Ecuador is itself a developing country and in fact has a lower per capita GDP than many of the
ACP beneficiary countries. Ecuador does not object to assistance that the European Communities, a
Community of many of the world's wealthiest c ountries, wishes to accord to the ACP countries.
However, Ecuador strongly objects to the European Communities granting this assistance in violation
of the European Communities' WTO obligations and at the expense of Ecuador and other developing
countries. The European Communities tries to im pugn the good faith of those who challenge its
measures, but the reality is that if the Europ ean Communities had honoured first its GATT and then
its WTO obligations in good faith, there would be no challenge here. After losing every single
challenge to its regime since 1993, it is time fo r the European Communities to stop blaming those
who challenge the European Communities' banana measures and to start complying with its WTO
obligations. EC assistance to the ACPs cannot be built on discrimination against other developing
country suppliers.
5.219 On the legal issues, Ecuador agrees with the United States, but would like to add a few
observations.
5.220 First, Ecuador observes that the European Co mmunities argues in this challenge that its
measures were not taken to comply with the DSB recommendations and rulings in Bananas III.
Ecuador obviously agrees with the United States that th at defence has no merit, as it is apparent that
the EC measures represent the failed final step of the European Communities to comply with its WTO
obligations in accordance with the Understandings on Ba nanas. No one will ever again enter into an
agreement calling for phased compliance with WTO oblig ations if this panel finds that implementing
the first phase automatically terminates the right to invoke Article 21.5 if there is a failure to carry out
subsequent phases.
5.221 Ecuador must also point out the hypocrisy of the European Communities claiming in this
proceeding that its measures were not taken to comply with Bananas III after the European
Communities, in trying to defend against Ecuador 's challenge, argued quite the opposite that its
measures were justified because they were suggested by the Bananas III Panel. Both defences are
wrong.
5.222 Second, the European Communities argues that th e United States' claims should be dismissed
on grounds that under the EC-US Understanding, the Un ited States is barred from challenging the EC
preferences until 2008. The European Communities argues that it has such immunity from challenge
by the United States, regardless of the legality of those EC preferences and regardless of the European
Communities failure to comply with the waiver or any other condition of the Understanding. The
European Communities made a similar argument agai nst Ecuador's claims. This EC defence is
without factual or legal foundation. First, in its Understanding with the European Communities, the
United States, like Ecuador, made no commitment to give the European Communities "carte blanche"
on preferences. The EC-US Understanding provid es for the same multi-stage, multi year phased
commitments as the Ecuador Understanding. Whil e the European Communities was carrying out
those commitments, there was no challenge. Howeve r, the European Communities ceased to comply
with the Understanding. Whether a WTO panel ever could or should enforce a bilateral commitment
not to challenge the conformity of a measure with WTO obligations, the Understanding is not such a
commitment and is no basis for granting the European Communities the immunity from challenge that

the European Communities asserts in this dispute. The European Communities' efforts to escape
substantive scrutiny of the consistency of its regime with WTO rules must therefore be rejected.
5.223 Turning to the merits, Ecuador supports the United States' claims under both Article I and
Article XIII. The EC tariff preferences for ACP bana nas lost the protection of the Doha Waiver of
Article I on January 2006, when the European Comm unities unilaterally imposed the so-called "tariff-
only" regime of its choosing, after twice failing to propose a system satisfactory to the Arbitrator
under the waiver. As in the Ecuador-EC proceedi ng, this Panel should reject the European
Communities' effort to rewrite the waiver to cover the European Communities' illegal behaviour.
5.224 Finally, the European Communities also viol ates its obligations under Article XIII of the
GATT by imposing a tariff quota under which only AC P bananas are allowed entry under the duty-
free quota, while all other bananas are relegated to the high duty treatment. The EC defence is
sophistry, effectively asking the panel to hold that although article XIII says expressly that it applies
to any tariff quota, that really means any tari ff quota except one that excludes countries outright from
participating in the low duty tariff quota. It is ab surd to think that Article XIII bans an inadequate
share of a low duty quota, but permits denial of any share at all. Th e European Communities
professes to find a consistent practice in its favour based entirely on the absence of challenges to some
tariff quota measures under Article XIII. However, it is not a legal defence to the EC measures in this
dispute whether or not there are or have been othe r tariff quotas that might be similarly inconsistent
with Article XIII. Certainly there can be no claim of consistent practice given the clear rulings of the
Appellate Body and the Panel in Bananas III that the tariff quota for ACP bananas is subject to
Article XIII. Finally, by seeking and obtaining a waiver of Article XIII for its tariff quota for ACP
bananas, the European Communities itself and th e WTO Members as a whole further recognized that
the EC tariff quota restricted to ACP countries is contrary to Article XIII. It is only because that
waiver of Article XIII expired and no renewal was granted that the European Communities now
argues to rewrite the provisions of Article XIII a nd to ignore the recommendations and rulings of the
DSB in Bananas III. The Panel should reject these EC arguments.
M. J
APAN
1. Written submission of Japan
(a) The Understanding does not preclude the United States from challenging the European
Communities' tariff only regime even if the Understanding is a "mutually agreed solution"
5.225 The European Communities argues that the Un ited States' challenge to the European
Communities' banana import regime at issue (the "European Communities' 2006 regime") should be
dismissed entirely because bringing such a challenge is precluded by the Understanding, a "mutually
agreed solution" between the pa rties. Indeed, the panel in India – Autos indicates that "[mutually]
agreed solutions are intended to reflect a settlement of the dispute in question, which both parties
expect will bring a final conclusion to the relevant proceedings" 261, and Japan agrees with this
observation. However, in the present case, even assuming that the Understanding is a "mutually
agreed solution", it does not affect the United Stat es' right to challenge the European Communities'
2006 regime.
5.226 As Article 3.5 of the DSU provides, "[a]ll so lutions to matters formally raised under the
consultation and dispute settlement provisions of the covered agreemen ts … shall be consistent with
those agreements." Therefore, if the Understandi ng is a "mutually agreed solution", the arrangements
agreed between the parties in the Understanding, including the European Communities' 2006 regime,
also need to be consistent with relevant WT O rules. The European Communities' 2006 regime

explicitly grants a preference to bananas importe d from the ACP countries over those imported from
non-ACP countries, and thus, the implementation of the measure would plainly violate Article I:1 of
the GATT without a valid waiver from the European Communities' obligation under the provision. In
fact, the Understanding expressly refers to the GATT Ar ticle I waiver in Paragraph E. Therefore, in
order for the European Communities to claim that it is implementing the tariff preference as the
measure to which the United States accepted in th e Understanding, it is indispensable for the
European Communities to maintain a valid waiver from its obligation under the GATT. The United
States now challenges the European Communiti es' 2006 regime, asserting that the European
Communities' necessary waiver is no longer valid. T hus, even if the Understanding is a "mutually
agreed solution", the United States is not barred from referring the matter to a panel proceeding.
(b) The complaint of the United States is considered to fall under the scope of Article 21.5 of the
DSU
5.227 The European Communities argues that the United States' complaint falls outside the scope of
Article 21.5 of the DSU. The European Commun ities' 2006 regime is, however, considered to be
within the scope of this 21.5 proceeding in light of the Appellate Body's findings in previous cases.
For example, the Appellate Body in US – Softwood Lumber IV (Article 21.5 – Canada) addresses that,
a 21.5 panel's mandate should include "some measures with a particularly close relationship to the
declared 'measure taken to comply', and to the recommendations and rulings of the DSB" and
indicates that, in order to find such a "close relati onship", a 21.5 panel may need to examine not only
"the timing, nature, and effects of the various me asures," but also "the factual and legal background
against which a declared 'measure taken to comply' is adopted."262
5.228 The European Communities' 2006 regime was impl emented subsequent to the adoption of the
recommendations and rulings of the DSB in EC – Bananas III and, it is explicitly identified in the
Understanding, Paragraph B, as a measure "by which the long-standing dispute over the EC's banana
import regime can be resolved". 263 It also grants a preferential treatment to the imports of bananas
from the ACP countries. In light of these, the ar gument that the European Communities' 2006 regime
does not have a relationship with the r ecommendations and rulings of the DSB in EC – Bananas III
dispute seems hardly convincing.
(c) Issues relating to nullification or impairment of a benefit accruing to the United States
(i) The United States has "standing" to challenge the European Communities' 2006 regime
5.229 The Appellate Body in EC – Bananas III describes that, taking into account of Article XXIII
of the GATT and Article 3.7 of the DSU, a party h as "broad discretion in deciding whether to bring a
case against another Member under the DSU", and "is expected to be largely self-regulating in
deciding whether any such action would be 'fruitful'." 264 Thus, the right of a party to pursue the
claims under the DSU will be justified when the complaining party considers that there is a
"nullification or impairment of a benefit" accruing to it, and that, in good faith, its initiation of the
proceeding will be "fruitful". In this dispute, the United States claims that the European Communities'
2006 regime is inconsistent with GATT Articles, which constitutes prima facie nullification or
impairment of a benefit unde r Article 3.8 of the DSU. Moreover, the Appellate Body in the original
proceeding found that the United States was allo wed to raise its claim against the European
Communities. Since there is no change in the fact s pointed out by the Appellate Body as reasons for
the United States to have had standing in the origin al proceeding, it is reasonable to assume that the
United States is justified to challenge the European Communities' banana import regime.

262 US – Softwood Lumber IV (Article 21.5 – Canada), para. 77 (emphasis added).
263 The Understanding, Paragraph A.
264 EC – Bananas III, para. 135. See also Mexico – Corn Syrup (Article 21.5 – US), para. 73.

(ii) Whether there is any nullification or impairment of a benefit accruing to the United States
The United States is not required to affirmativel y demonstrate that there is a "nullification or

impairment of a benefit" in advancing its claim on GATT Articles
5.230 Article 3.8 of the DSU provides that a benefit accruing to a Member is presumed to be
"nullified or impaired" when a violation of the measure of another Member is demonstrated.
Therefore, as the United States asserts, the complainant is not required to affirmatively provide
evidence regarding the nullification or impairment of a benefit accruing to it, in advancing its claim
under particular WTO provisions, in addition to evid ence of the disputed measure's violation of those
provisions.
Whether there is no "nullification or impairment of a benefit" for the purpose of Article 3.8
when the "level of nullification or impairment of a benefit" for the purpose of Article 22 is
"zero"
5.231 As a rebuttal to the presumption of "nullification or impairment of a benefit" under Article 3.8
of the DSU, the European Communities asserts that there is no nullification or impairment of a benefit
accruing to the United States because the "level of nullification or impairment" suffered by the United
States to justify the suspension of concessions unde r Article 22.6 of the DSU is "zero". Japan
considers that the fact that the level of nullificati on or impairment of a benefit is found to be zero in
an arbitration proceeding does not necessarily mean th at there is no "nullification or impairment of a
benefit" at all for the purpose of Article 3.8.
5.232 The WTO jurisprudence indicates that the concept of "nullification or impairment of a
benefit" is not limited to trade losses of the co mplaining party but also include broader interests
accruing under the WTO rules.265
5.233 However, the "level of nullification or impair ment of a benefit" in the context of the
authorization of suspension of concessions or other obligations is rather determined based on trade
effects. Indeed, the Arbitrators in EC – Bananas III (US) (Article 22.6 – EC) have indicated that
"[t]he review of the level of the nullification or impairment by Arbitrators from the objective
benchmark foreseen by Article 22 of the DSU, is a sep arate process that is independent from the
finding of infringements of WTO rules by a panel or the Appellate Body." 266 Further, the Arbitrators
rejected to include the lost exports of the United States in goods or services between the United States
and third countries in calculating nullification or im pairment, in order to avoid "double-counting" of
nullification or impairment in terms of trade effects. 267 Moreover, the Arbitrators in US – Offset Act
(Byrd Amendment) (EC) (Article 22.6 – US) recalls that past arbitrators under Article 22.6, including
the Arbitrators in Bananas – III (US) (Article 22.6 – EC) , "have deemed [a] benefit [nullified or
impaired] to correspond to the trade directly affected by the maintenance of the illegal measure."268
5.234 Thus, in the Article 22.6 arbitration proceedings , whether the proposed level of suspension is
equivalent to the "level of nullification or impairment of a benefit" is usually monetarily quantified in
terms of trade effects based on the objective elements presented by the parties.

265 US – Superfund, para. 5.1.9
266 EC – Bananas III (US) (Article 22.6 – EC), para. 6.10 (emphasis added).
267 Ibid., paras. 6.15-6.19.
268 US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), para. 3.55.

Whether this Panel should find in the course of its proceeding that the "level of nullification
or impairment of a benefit" for the purpose of Article 22 is zero or not
5.235 Despite the European Communities' requests, Ja pan is of the view that this Panel should
refrain from finding that the European Commun ities' measure does not cause any nullification or
impairment of a benefit accruing to the United States for which the [EC] can face suspension of
concessions in this proceeding.
5.236 According to the DSU, the " level of nullification or impairment of a benefit" is generally
examined under a 22.6 arbitration procedure. Also, the Arbitrators in previous cases have
characterized the Article 22.6 arbitration proceedin g as a "separate process that is independent from
the finding of infringements of WTO rules by a panel or the Appellate Body." 269 In addition, with
respect to the procedural aspect in the present proceeding, particularly at this point where the Second
Written Submissions have been submitted by both parti es, the parties are not considered to have been
provided ample opportunities to present arguments as to whether "nullification or impairment of a
benefit", based on which the European Commun ities can face the suspension of concessions, is
"zero".
2. Oral statement of Japan
5.237 This compliance dispute has raised a number of perhaps procedural, but important and
systemic issues that matter to Japan . Since Japan has already put forward its arguments in detail in its
third party submission, it will limit its statement to the brief observation on three points.
(a) Does the EC-US Understanding bar the United States from challenging the Cotonu
Preference?
5.238 First, the European Communiti es argues that the United States is precluded from challenging
the current European Communities' banana regime because it accepted in the Understanding that the
Cotonou Preference would continue until the end of 2007 as a part of a mutual agreed solution270.
5.239 Japan agrees with the observation of the panel in India – Autos that "[i]t is certainly
reasonable to assume … that [mutually] agreed solu tions are intended to reflect a settlement of the
dispute in questions, which both parties expect will bring a final conclusion to the relevant
proceedings"271. Japan notes, in this respect, that Article 3.7 of the DSU declares that "[t]he aim of the
dispute settlement mechanism is to secure a positive solution to a dispute." The ordinary meaning of
the word "positive" includes, among others, "with no possibility of doubt; definite", "certain" and "not
speculative or theoretical". Article 3.7 further states th at a mutually agreed solution that is consistent
with the covered agreements is clearly a "preferre d" mean to achieve this goal. Given the DSU's
emphasis on the security and predictability in the multilateral trading system and the prompt
settlement of disputes as reflected in Articles 3.2 an d 3.3, Japan considers that any mutually agreed
solution that would lead to a positive or final resolu tion of disputes should have an effect of ending
these particular disputes. In this respect, Japan would agree with the observation by the Appellate
Body that "[a]t some point, disputes must be viewed as definitively settled by the WTO dispute
settlement system."272
5.240 However, as observed by the panel in India – Autos, the contents of mutually agreed solutions
may differ significantly from case to case, "which may also make it difficult to draw general

269 EC – Bananas III (US) (Article 22.6 – EC), para. 6.10.
270 European Communities' second written submission, paras. 9, 36-37.
272 Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 98 (emphasis original).

conclusions as to the relevance of such solution to subsequent proceedings other than on a case by
case basis."
273 The European Communities recognizes in its Second Written Submission that a
mutually agreed solution tends to be "a document th at sets the term of the solution mutually agreed
between the parties" and often "will describe the acti ons that the parties have undertaken to perform
… in the future." 274 Obviously, the final settlement of a di spute would require proper implementation
of the agreed future actions, but there is a possi bility of disagreement between the parties as to the
WTO consistency of actions allegedly taken under the mutually agreed solution. Therefore, in Japan's
view, at least where "there is disagreement as to the existence or consistency with a covered
agreement of measure taken to comply" such dispute can be resolved through recourse to the DSU.
5.241 Japan finds support in Article 3.6 of the DSU which provides for a possible multilateral
review of the notified mutually agreed solution for its proposition that such solution may not always
resolve the disputes definitely. Japan also consider s that Article 3.5 of the DSU which prescribes
that "all solutions … shall be consistent with [the ] covered agreement" indicates that any solution to
the matter, including a mutually agreed solution, cannot modify the rights and obligations under the
covered agreement.
(b) Is the current EC banana regime the "measure taken to comply"?
5.242 Second, the European Communities argues that th e measure taken to comply in this case was
"the tariff-quota based import regime with the characteristics agreed in Annex II of the
Understanding"275 and the current regime cannot be the "measure taken to comply" because nothing in
the Understanding or the DSB recommendations a dopted in 1997 obliged the European Communities
to introduce a tariff only regime. 276 The European Communities appear s to have the view that the
"measure taken to comply" is limited to the one th at it is obliged to take under the Understanding or
specifically mandated by the DSB.
5.243 However, it is well established by the Appellate Body that the compliance panel's mandate is
not confined to the review of self-declared "mea sure taken to comply" but may also include the
measures "with a particular close relationship to th e declared ‘measure taken to comply', and to the
recommendations and rulings of the DSB". 277 To determine "whether there are [such] sufficiently
close link", the panel is required to examine "the timing, nature, and effects of the various measures".
5.244 Japan understands that there is no disagreement between the parties as to whether "the tariff-
quota based import regime with the characteristic ag reed in Annex II of the Understanding" is the
measure taken to comply in this dispute. The qu estion before the panel is, therefore, whether the
current EC regime has "a particular close relations hip" to this declared "measure taken to comply"
which it has replaced and the DSB recommendati ons and rulings adopted in 1997 so as to be
susceptible to the review by this compliance panel.
5.245 In this respect, Japan notes that the Appellate Body in US – Softwood Lumber IV (Article 21.5
– Canada) examined a number of elements to determ ine whether there were such "close link"
between the declared measure taken to comply an d the other measure at i ssue in that case. Such
elements include: common features or components shared by the various measures at issue and how
such common components relate to the DSB recomme ndations; subject matter of measures at issue,

274 European Communities' second written submission, para. 23.
275 European Communities' first written submission, para.49; European Communities' second written
submission, para. 41.
276 European Communities' second written submission, paras.43 and 45; European Communities'
opening statement at the Panel's substantive meeting with the parties and third parties, para. 6.
277 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 77.

such as their product coverage, administrative agenci es involved, affected interested parties, legal
relations among the measures; timing of the measures and whether the DSB recommendations were
considered in adopting the measures; and whether the measure at issue has direct effect on the
declared measure taken to comply.
278 Japan considers that these asp ects are also relevant in the
present case.
5.246 As referenced to by the European Communities in its second written submission 279, the
Appellate Body also explained that the determina tion of the scope of the "measure taken to comply"
requires the examination of "the recommendations and rulings of the DSB in the original
proceedings", "what they (i.e. the recommendations and rulings) required of" the defending party, and
the specific steps taken by [that party]. 280 Japan considers that it may be useful to examine what are
actually required in the original DSB recommendations and how and whether such requirements relate
to, or were addressed by, the current banana regi me in order to establish the existence or non-
existence of "express link" between them.
5.247 In this regard, Japan recalls that while the European Communities noted in its second written
submission that the current regime entered into force 6 years after the relevant DSB rulings 281, in its
oral statement the European Comm unities also stated that "the d ecision for introduction of the tariff-
only import regime was a policy decision taken years before the negotiation of the Understanding" 282.
Japan wonders whether there is any correspondence in timing between this policy decision and the
adoption of the various DSB recommendations and rulings in this dispute.283
(c) Does any nullification or impairment of benefits exist for the United States in this dispute?
5.248 Third, the European Communiti es argues that there is no nullification or impairment of
benefits accruing to the United States.284 The European Communities appears to base this argument at
least partly on the findings of the arbitrator under Article 22.6 of the DSU in this dispute.285
5.249 Japan considers that the existence of nullification or impairment can be reviewed by the panel
subject to the proper allocation of the burden of pr oof. However, Japan agrees with the United States'
view that "the European Communities confuses th e function of dispute settlement proceedings under
DSU Articles 6 and 21.5 with arbitration proceedings under DSU Article 22." 286 As approvingly
quoted by the Appellate Body in EC - Bananas III, the GATT panel in US – Superfund concluded that
"[a] change in the competitive relationship … mu st consequently be regarded ipso facto as a
nullification or impairment of benefits" and that a demonstration of "no or insignificant effects" of
violating measure does not prove sufficiently the existence of nullification or impairment.287

278 Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), paras. 80-86.
279 European Communities' second written submission, para. 45.
280 Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 –
Argentina), para. 142.
281 European Communities' second written submission, para. 43.
282 European Communities' opening statement at the Panel's substantive meeting with the parties and
283 Council Regulation(EC) No 216/2001, which is referred to in paragraph B of the Understanding,
states in preamble (1) that "… to ta ke account of the conclusions of the specific group set up under the dispute
settlement system of the World Trade Organization (WTO)."
284 European Communities' first written submission, paras. 70-83; European Communities' second
written submission, para. 96.
285 WT/DS27/ARB.
286 United States' second written submission, para. 59.
287 GATT Panel Report, US – Superfund, para 5.1.9, quoted in Appellate Body Report in EC – Bananas
III, paras. 252-253.

5.250 In contrast, the role of arbitrator under Artic le 22.6 is not to determine the existence of
nullification or impairment, but is to estimate, or quantify, the level of suspension considered to be
equivalent to the level of nullification or impairment, as repeatedly stated by the previous
arbitrators.
288 In order to determine the level of nullif ication or impairment, the Arbitrator in US –
1916 Act (EC) (Article 22.6 – US) explained that "we need to rely, as much as possible, on credible,
factual, and verifiable information" and " cannot base any such estimate on speculation". 289 It further
cautioned against the calculation approach "that are ‘too remote', ‘too speculative', or ‘not
meaningfully quantified'".
290 Based on this "prudent approach" 291, the arbitrator declined to include a
"chilling effect" of the measure at issue because it cannot "be meaningfully quantified for the
purposes of determining the level of nullification or impairment". 292 Furthermore, the arbitrator
agreed that the settlement awards entered between private parties under the 1916 Act can be included
in the level of nullification or impairment, but only to the extent that disclosure of such settlement
awards can be obtained; however such disclosur e would be often difficult to obtain due to
confidentiality requirements.293 Thus because the level of nullification or impairment established by
the arbitrator is only limited to the quantum that can be calculated using "credible, factual, or
verifiable information" available, the Article 22. 6 arbitrator's finding that the nullification or
impairment at certain point in time is "zero" may mean that there is no "credible, factual, or verifiable
information" available to quantify the level of nullification or impairment, regardless of its existence.
5.251 Finally, the Appellate Body in the original pr oceeding in this dispute found that two points
are "relevant to the question whether the Eur opean Communities has rebutted the presumption of
nullification or impairment". There two points are: (i) "the United States is a producer of banana and
that a potential export interest by the United States ca nnot be excluded; and (ii) the internal market of
the United States for bananas could be affected by th e EC bananas regime and by its effects on world
supplies and world prices of bananas". 294 In this regard, Japan recalls that the Appellate Body
concluded in several disputes that "an adopted Appellate Body report must be treated as a final
resolution to a dispute between the parties to that dispute". 295 Japan considers that if these factual
points are still relevant today, they are equally applicable to the present dispute.
N. MEXICO
1. Oral statement of Mexico
(a) Importance of the preliminary claims
5.252 Mexico was among the complaining parties in the original Bananas III case, and although it
has not so far requested authorization to susp end benefits or initiated proceedings before a
"compliance panel" pursuant to Article 21.5 of the DSU, Mexico does not rule out the possibility of
exercising its rights under the DSU. Mexico has none theless been active, along with other Members,
in seeking a negotiated settlement with the European Communities (EC) in this long standing dispute,
and will continue working to that end.
5.253 Since Mexico does not rule out any possible means of resolving this dispute, the comments,
recommendations and conclusions of this Panel on the preliminary claims brought by the European

288 See, e.g. US – 1916 Act (EC) (Article 22.6 – US), paras. 4.5-4.9.
289 Ibid, para. 5.54.
290 Ibid, para. 5.57.
291 Ibid, para. 5.57.
292 Ibid, para. 5.69.
293 Ibid., paras. 6.7-6.13.
294 Appellate Body Report, EC – Bananas III, para. 251.
295 Appellate Body Report, EC – Bed Linen (Article 21.5 – India) , para. 91. See also Appellate Body
Report, US – Shrimp (Article 21.5 – Malaysia), para. 97.

Communities, which will undoubtedly be of equal if not of greater importance to Mexico than any
findings of the Panel regarding the substantive claims in this dispute, will be especially relevant, as
they will give Mexico a much clearer idea of the opt ions and strategies that it needs to adopt in order
to compel the European Communities to fulfil its obligations.
5.254 For instance, any findings by this Panel pertaining to issues on which the parties in dispute
have taken contradictory positions, such as those belo w, will be critical to the exercise of Mexico's
rights:
• The absence, or existence and identification, of "measures taken to comply with the
recommendations and rulings", adopted by the European Communities in order to
comply with the Bananas III Panel report, in accordance with the DSU;

• the moment as of which the European Communities' measures may "validly" be
contested in the light of the Ministerial Decision of 14 November 2001, and so forth.

(b) Issues of systemic interest
5.255 Although Mexico has a systemic interest in a number of issues discussed in this dispute, it
considers it appropriate to give a brief opinion on one of the above points, which relates to the need to
demonstrate whether or not there is impairment and nullification for the purposes of bringing an
Article 21.5 claim, as interpreted from the European Communities' arguments.
5.256 Mexico considers that the precedents established by the Bananas III Panel should be
sufficient to set aside the European Communities' arguments (see para. 252 of the Bananas III Panel
report, for example). It must nonetheless expr ess concern with the European Communities'
arguments, as they impose "legal standing" requirements where there are none.
5.257 There is no provision in the DSU requiring that th ere be nullification and impairment as a pre
requisite for initiating proceedings. Article 3.8 to which the European Communities so frequently
refers speaks of matters that have nothing to do w ith a Member being able to initiate proceedings
under the DSU, and even less with a panel being pr ecluded from ruling on the measures at issue on
the presumption that there is no nullification and impa irment. The provisions of Article 3.8 cannot be
interpreted as a "legal standing" requirement, a nd Mexico fails to see how the burden of proof
requirements or the presumption of nullification or im pairment referred to in that Article can mean
what the European Communities now contends.
5.258 Mexico has a problem with its reading of the European Communities argument, for it tends to
simplify recourse to the dispute settlement mechanism to securing the right to suspend concessions or
other obligations, which would appear to imply that if such is not the purpose of the party initiating a
dispute under the DSU, the party's claim should be rejected. The European Communities seems to
forget that the principal aim of the dispute settleme nt mechanism is to "secu re a positive solution to a
dispute" and that in the absence of a mutually ag reed solution, "the first objective of the dispute
settlement mechanism is usually to secure the withdrawal of the measures concerned if these are
found to be inconsistent with the provisions of an y of the covered agreemen ts" (Article 3.7 of the
DSU).
5.259 Notwithstanding the above, even if the Panel we re to confirm that there was no nullification
and impairment and it was therefore impossible to quantify the financial impact of a suspension of
benefits, this does not mean that the European Communities is released from the obligation to bring
its measures into conformity with a panel's r ecommendations or that a panel is precluded from
suggesting a way in which "the Member conc erned could implement the recommendations"
(Article 19.1 of the DSU). It should be recalled that "neither compensation nor the suspension of

concessions or other obligations is preferred to full implementation of a recommendation to bring a
measure into conformity with the covered agreements" (Article 22.1 of the DSU).
5.260 In connection with this dispute, the Europ ean Communities contends that since the United
States suffers no "nullification and impairment", "it is probably the only case ever heard in this room
where the contested measure does not affect at all th e complaining party" (EC – Oral Statement, para.
26). However, it seems to us that this is not the first time that something of this sort has happened and
will probably not be the last; therefore the possibil ity should not be ruled out. In this connection,
Mexico would point out that in this dispute th e European Communities brought an Article 21.5 claim
in the past (undoubtedly without any consultations being held either) without, as far as Mexico can
judge, itself suffering any "nullification and impairme nt" quantifiable to any degree higher than zero,
and that this did not prevent a panel from be ing convened (WT/DS27/RW/EEC). To uphold the
European Communities' argument would close th e door to any respondent Member initiated
Article 21.5 proceedings.
5.261 One last point worthy of mention is the provision in Article 22.5 of the DSU that the "[t]he
DSB shall not authorize suspension of concessions or other obligations if a covered agreement
prohibits such suspension". The negotiators appear to have left the door open for disputes to be
initiated under the DSU irrespective of a possible prohibition of suspension of concessions or other
obligations.
5.262 Contrary to the foregoing, if the European Communities' line of reasoning is followed and
applied to the above paragraph, the proper readi ng would be that Members would be precluded from
bringing before panels claims relating to Agreem ents prohibiting the suspension of concessions or
other obligations, given that since concessions or obligations cannot be suspended, the notions of
nullification and impairment would be meaningle ss if they could not lead to suspension of
concessions or other obligations. In other words, there would be no point in quantifying the level of
nullification and impairment as there would be no suspension of concessions or other obligations.
Mexico believes that if the negotiators of the DSU had been thinking along those lines they would
have made it clear in Article 22.5 and would not have left th e door open to disputes in which
concessions and other obligations could not be suspended, irrespective of nullification or impairment.
(c) Comments on the substantive claims
5.263 As regards the analysis of the measures at i ssue that is incumbent upon this Panel, Mexico
considers that most of the analysis was already conducted by the Bananas III Panel, the work done by
the Arbitrators in Bananas III (US) (Article 22.6 – EC) , and the two arbitral awards deriving from the
Annex to the Ministerial Declaration of 14 Novemb er 2001. Accordingly, it should not be difficult
for this Panel to reach the relevant conclusions.
5.264 As regards the substantive claims (i.e. viola tions of Articles I and XIII:1 and XIII:2 of the
GATT 1994), Mexico concurs with those third parties which, together with the United States, have
taken positions consistent with the above precedents and wh ich contend that the European
Communities' regime for the importation of ba nanas violates Article I of the GATT 1994 in
establishing duty-free treatment for ACP imports in quantities up to 775,000 tonnes, which the
European Communities does not grant the othe r WTO Members, and is in breach of GATT
Article XIII in reserving the 775,000 tonnes free of duty for bananas originating in ACP countries
while excluding the other WTO Members from this preferential tariff quota.
5.265 As a third party to these proceedi ngs and a party to the original
Bananas III proceedings,
Mexico considers that this dispute has not been settled, and that it will in any event be very interesting
to know whether the European Communities has actually taken any action to comply with its
obligations, or whether the European Communities h as failed to take the opportunity of bringing its

measures into conformity by adopting compliance measures, in which case there would be no need to
establish an Article 21.5 panel and authorization to suspend benefits could be requested without delay.
(d) Conclusion
5.266 Mexico respectfully request that this Panel set aside the European Communities' preliminary
objections and, specifically, those arguments whic h impose legal standing requirements for initiating
dispute settlement proceedings, and that the Panel find that the measures at issue are inconsistent with
Article I of the GATT 1994 and in particular, give n the expiry of the extension granted to the
European Communities by the Ministerial Conference in paragraph 1 of the Decision of 14 November
2001, that the measures complained of are inconsis tent with the text of Article XIII of the GATT
1994.
O. NICARAGUA AND PANAMA
1. Combined written submission of Nicaragua and Panama
(a) Introduction
5.267 Panama and Nicaragua have been denied the security of lasting, compliant access to the EC
banana market for a great many years. By reve rting once again to non-co mpliance, the European
Communities has continued to deny that access, and h as made the intolerable burden of this dispute
that much larger for the developing-country banana suppliers of Latin America and the WTO system
itself. In the proceeding now before the Panel, th e violations of GATT Articles I and XIII at issue are
unmistakably similar to those already reviewed in the past. While the European Communities has
tried to cloud those straight-forward violations with a host of "preliminary objections" and other
extraneous claims, its non-compliant measures are t oo obvious to obscure. Like the United States,
Panama and Nicaragua consider that the meas ures introduced by the European Communities on
1 January 2006 are fully reviewable under Article 21.5, and constitute prima facie violations of GATT
Article I:1, and Articles XIII:1 and 2.
(b) The European Communities' preliminary objections have no basis in law or fact
5.268 With its first objection – that the United States is barred from contesting any ACP treatment
from "the period between the end of 2005 and th e end of 2007" – the European Communities has
stitched together five individua lly indefensible allegations: (i) that the United States
"unconditionally" accepted whatever "more favourable treatment" the European Communities wanted
to accord ACP suppliers from 2006 through 2007; (ii) that the "unconditional acceptance" established
by the Understanding formed part of a "mutually agreed solution" in the sense of DSU Article 3.6;
(iii) that a mutually agreed solution under DS U Article 3.6 precludes the United States from seeking
recourse to Article 21.5; (iv) that, even if the Understanding was not a "mutually agreed solution," it
was an international agreement that must be ta ken into account in determining the United States'
rights under the DSU; and (v) that the "princip le of good faith" in any case precludes the US
complaint.
5.269 The European Communities' first allegation relies on a flawed factual premise to try to read
into the Understanding a renunciation of future DSU ri ghts not otherwise specified in its text. At the
time the Understanding was reached in April 2001, no interested MFN Member, the United States
included, was willing to accept waiver authority for whatever "more favourable" ACP banana
treatment the European Communities wished to acco rd. The only real "characteristic" understood by
all interested Members in April 2001 was that absent acceptable, narrowly-drawn banana conditions,
which would still have to be negotiated, the European Communities' waiver would not be approved.

5.270 Contrary to the European Communities' s econd allegation, the Understanding was not a
"mutually agreed solution," but rather only a "m eans" to such a solutio n. The text of the
Understanding, US statements at the DSB, EC statements in dispute settlement, and the letter
exchange between Ambassador Zoellick and then-C ommissioner Lamy confirm this interpretation.
Clearly, a well-documented unilateral view of one signatory (the United States), at odds with the
unilateral view of another signatory (the EC) pr ecludes a mutuality of agreement over whether the
Understanding was a solution. If there is no mutuality of agreement, there is no mutually agreed
solution. Even if an Article 3. 6 agreement had been reached, it woul d still not constitute a "solution"
to the dispute in the sense of DSU Articles 3.5 a nd 3.7 unless the agreement was "consistent with the
covered agreements." The European Communities' banana measures are not WTO-consistent and
therefore are not a "mutually agreed solution" to the Bananas dispute.
5.271 The European Communities' third allegation fails because the Understanding is neither a
renunciation of rights nor a mutually agreed soluti on. Even if the Understanding were a mutually
agreed solution, the DSU has no rule disallowing pa rties to a "mutually agreed solution" from seeking
recourse to Article 21.5. As for the European Communities' fourth allegation – the alleged
jurisdictional "bar" – not a single rule in the DS U nor provision in the Understanding substantiates
such a bar. There can hardly be a "legal effect" as between the Understanding and the DSU if there is
not even a specific DSU rule, much less a specific b ilateral provision that invokes that rule, to which
that legal effect can be ascribed. The European Communities' fifth and last assertion – that "the
principle of good faith, which runs through the enti re DSU," requires the United States "to refrain"
from disavowing "the existence of the Cotonou Pref erences until the end of 2007" – is one that works
against the European Communities' "preliminary objection," not the US complaint.
5.272 In its second "preliminary objection," the Europ ean Communities erroneously claims that the
"tariff only" provision of the Understanding was not a "measure taken to comply" in the sense of
Article 21.5 The European Communities concedes in its submissions in the Ecuador proceeding that
Regulation 1964 was intended to implement the "second" compliance suggestion of the Bananas III
Article 21.5 panel and, thus, falls within the jurisdiction of Article 21.5. Moreover, paragraph B of
the Understanding unambiguously frames "Tariff On ly" as a mandate. The tariff only provisions of
the "secondary legislation" cited in paragraph B (Regulation 404, as amended by Regulation 216)
simply confirm that tariff only was intended for the purpose of bringing the European Communities
into compliance with Bananas III. Never once between 1999 through the end of 2005 did the
European Communities suggest that tariff only was not a requirement of the Understanding.
5.273 Prior cases have established that measures having a "particularly close" or "inextricably
linked" relationship to the DSB ruling at issue are deemed to be "measures taken to comply." The
factual and legal circumstances leading up to Re gulation 1964 establish an explicit, unbroken
European Communities effort since 1999 to comply with Bananas III by way of a "flat-tariff" regime
to be installed no later than January 2006.
(c) The European Communities' ACP tariff preferen ce is inconsistent with GATT Article I:1 and
is not covered by its Article I waiver
5.274 The European Communities does not contest th e underlying violation of GATT Article I:1,
but argues instead that the GATT Article I waiver excuses its current tariff discrimination. The
European Communities mistakenly alleges continue d coverage under the waiver, on the grounds that
its regime: is " different ... than the one analysed by the Arbitrator;" is still entitled to be assessed
under the original Annex requirement that an "e nvisaged rebinding ... would result in at least
maintaining total market access for MFN banana suppliers, taking into account ... all EC WTO market
access commitments;" and fulfils the European Co mmunities' own volume-based assessment of that
Annex standard.

5.275 Prior WTO findings have made clear that wh en a Member invokes an exception to a WTO
obligation, it is asserting an affirmative defence a nd bears the burden of proving that exception. As
the Member invoking the affirmative waiver defence, the EC, not the United States, bears the burden
of demonstrating that its WTO-inconsistent tariff arrangement meets every condition of that waiver
defence. The European Communities has not met its burden.
5.276 The European Communities acknowledged that if the Arbitrator issued a second negative
determination, the waiver would automatically la pse upon implementation of its new regime. It now
walks away from that view, arguing that the Annex a llows it to install any regime of its choosing, so
long as the regime differs from the ones invalidated in Arbitration. The submissions of the United
States, Panama and Nicaragua have shown in careful detail that this new EC reading would require
the Panel to ignore the ordinary meaning and narrow conditionality of tiret five, the waiver's mandate
that any rebinding be subject to the arbitrati on "controls" under the Annex, and the waiver's
negotiating history. Moreover, the European Communities has sought to introduce undue confusion
by asserting that its regime fulfils the waiver standard. As confirmed by an analysis by the Centre for
International Economics, the European Communities' assertion is incorrect.
(d) The European Communities' AC P tariff quota is inconsistent with GATT Article XIII:1
and XIII:2
5.277 The European Communities seeks to defend its ACP-exclusive tariff-rate quota by proposing
a "Vienna Convention" analysis of Article XIII under which its exclusive ACP tariff quota would be
allowed to escape the strict obligations of Article XIII and be addressed only by GATT Article I. This
defence has already been rejected in prior Bananas III proceedings, has no textual support, and has
untenable implications for Article XIII if it were ever adopted.
5.278 The text of Article XIII:1 requires that when a Member chooses to restrict, or limit, imports of
a product from one Member, it shall, in a similar or like manner, restrict or limit imports from all
other Members who import the same product. The equally clear text of paragraph 5 of Article XIII
extends the requirements of Article XIII:1 (and XIII:2) to tariff quotas. As the European
Communities is quantitatively "restricting" imports of ACP bananas under a tariff quota within the
meaning of Article XIII:1 and XIII:5, and is failin g to "similarly restrict" MFN-origin bananas, a
violation of Article XIII:1 has been established.
5.279 Further, pursuant to the chapeau of Article X III:2, any application of a tariff quota must
approximate "shares" that "might be expected ... in the absence of restrictions." Here, the European
Communities has allotted a tariff quota to ACP non-subs tantial suppliers, but has failed to distribute
any share to MFN suppliers. Insofar as Panama, Nicaragua, and all other MFN suppliers are excluded
from the European Communities' tariff quota, the European Communities' exclusive tariff quota
cannot be said to reflect shares that would otherwise be present in an unrestricted market, in breach of
Article XIII:2.
5.280 The parties' subsequent practice implies agreemen t on the fact that any tariff quota is subject
to the non-discrimination obligations of Article XIII. The European Communities' argument that
"extensive GATT and WTO practice" supports the opposite view is premised on its
mischaracterization of the Enabling Clause and a th irty-year-old waiver obtained by certain South
Pacific islands.
(e) The United States is not required to demonstrate nullification or impairment
5.281 The European Communities closes with the conten tion that even if its tariff and tariff-quota
measures are out of compliance with Bananas III, the Panel should find that those measures have not
caused nullification or impairment of US benefits. The Appellate Body in Bananas III already

rejected an earlier identical suggestion made by th e EC. The United States is a producer of bananas,
with annual volumes of nearly 32,000 metric tons, mo re than in some of the ACP countries. The
European Communities effectively acknowledged a US export interest by proposing a withdrawal of
concessions on US bananas in the Foreign Sales Corporation dispute. Moreover, because imports
displaced by the European Communities' discrimina tion could be diverted into the US market, the
United States has a legitimate trading interest in ensuring that the European Communities'
discrimination does not disrupt its internal market, global supplies, or market pricing.
5.282 Through this argument, the European Communities appears to be improperly trying to convert
this compliance proceeding into a DSU Article 22 arbitration, in which the level of nullification or
impairment would be examined. Article 3.7 specifies, in hierarchical order, three potential means by
which a dispute can be resolved: a mutually agreed solution consistent with the covered agreements;
a withdrawal of the WTO-inconsistent measures; or, as a "last resort", a suspension of concessions.
When, and if, a dispute reaches the "last resort" phase where the precise level of nullification and
impairment must be determined, that level is to be determined by a specialized proceeding developed
for that very purpose, i.e., arbitration under DSU Article 22.
(f) Conclusion
5.283 Panama and Nicaragua respectfully urge the Panel to find, on the promptest and clearest
possible basis, that the European Communities' tariff preference for ACP suppliers is inconsistent
with GATT Article I:1, and that its 775,000 mt AC P reserve is separately inconsistent with GATT
Article XIII:1 and 2.
2. Combined oral statement by Nicaragua and Panama
(a) Nicaragua's role in this dispute
5.284 The European Communities argues that through par ticipation in world trade, the developing
countries can achieve "their emancipation from the dependence on devel opment financing and
international donations". The development aims of the WTO system are not being served, however,
by an EC policy that inflicts huge costs on one set of developing countries (Latin American suppliers)
for the benefit of subsidized EC producers and a select group of other developing countries (ACP
suppliers).
5.285 For the past 15 years, Nicaragua has helped l ead the fight for fair banana access into the
European Communities for the most basic economic reason: to promote growth and relieve poverty
among its people. Bananas are one of its majo r agricultural crops, employing thousands of
Nicaraguans within the country and another 30,000 on banana farms throughout the region. Its GNI is
less than $1,000 per capita. Nearly all of the Eur opean Communities' preferred ACP suppliers have
GNIs well above this.
5.286 Even after repeated losses in Bananas I, Bananas II¸ multiple Bananas III proceedings, and
two Arbitrations, the European Communities still elected in 2006 to erect an illegal 135 per cent
increase in its bound €75 tariff, combined with an exclusive duty-free ACP tariff quota – an
insurmountable burden for Nicaragua's industry. Nicaragua has not accepted defeat because it
believes in the principle that Members must foster development in all countries, not just some. As EC
Commissioner Mandelson himself observed, the Eur opean Communities' preferences "discriminate
against some developing countries ... often equa lly needy ... [which] is not right morally nor
compatible with international trade rules."

(b) Panama's role in this dispute
5.287 Panama has participated in the dispute sin ce its WTO accession in 1997. Like Nicaragua,
Panama depends on banana exports for economic and social stability, and is one of two "principal
supplying" banana interests to the EC.
5.288 Although the European Communities has argued that the purpose of its current arrangement is
to "balance" the developing-country interests i nvolved, the European Communities' large banana
subsidies have governed the design of the Europ ean Communities' common banana regime since its
origin in 1993. To stabilize internal prices, ensure EC grower profits, and promote subsidy
predictability, the European Communities has imposed strict restrictions on Latin American access,
regardless of MFN trading rights. Panama and th e other developing countries of Latin America are
now contributing nearly $1 billion into EC customs unde r a €176 tariff, primarily to help sustain this
subsidized EC production.
5.289 Like the alleged purpose of its regime, the purpose of the Doha waiver is nothing as the
European Communities describes it. Given the European Communities' non-compliance in the
banana dispute, Panama and other Latin Ameri can countries opposed the European Communities'
waiver request for nearly two years until the Eu ropean Communities inscrib ed a clear commitment
into the Annex that vested control over its 2006 regime in a WTO Arbitrator. For the European
Communities to argue that Panama lifted its waiver reserve in exchange for EC unilateralism would
write Panama's entire two-year reserve and negotiating efforts out of existence.
(c) The WTO inconsistencies
5.290 At the heart of this case rest two basic violations: the application of a €176 duty on MFN
bananas and a zero duty on ACP bananas, in viola tion of GATT Article I; and the application of a
775,000 metric ton tariff quota exclusively to ACP suppliers in violation of GATT Article XIII.
(i) The European Communities' failed objections
5.291 The European Communities' "mutually agreed solution" objection begins by presuming a US
commitment under the Understanding to forego all ri ghts as to any "Cotonou Preference". Had the
United States committed to accept any tariff prefer ence as of 2006, it would have agreed in the
Understanding to much more than simply a "lift[ed] ... reserve," which did nothing but signal its
willingness to negotiate, alongside MFN suppliers, the necessary Article I banana conditions.
5.292 The European Communities claims next that the Understanding is a "mutually agreed
solution" under DSU Article 3.6. A "mutually ag reed solution", by its very words, requires two
things: a solution and a mutual agreement that th ere is a solution. Here there was neither. The
Understanding, on its face, was not an immediate so lution; it was only a "means" to what the parties
hoped would be an ultimate solution. By failing to implement the last required step, a compliant
tariff-only regime, the European Communities chose to prevent the Understanding from maturing into
a positive solution. Equally absent here was any mutuality of agreement that a DSU Article 3.6
solution had been reached. When the European Communities unilaterally notified the Understanding
as a mutually agreed solution, the United States expressly rejected that EC attempt.
5.293 The European Communities' next objection – that Regulation 1964 is not a "measure taken to
comply" with Bananas III, removing it from Article 21.5 coverage – strains logic to its breaking
point. It makes no sense for the European Commun ities to have conceded in Ecuador's proceeding
that Regulation 1964 is a "measure taken to comply," while arguing here that the very same regulation
is not a "measure taken to comply." If the Europ ean Communities was correct that its compliance
obligations ended only eight months into the Unde rstanding, not only its 2006 tariff requirement, but

also its 2002-2005 tariff, volume, and licensing re quirements would become a nullity. There is
nothing in the text of the Understanding, nor in the DSU itself, that would eradicate the European
Communities' tariff-only obligation simply because the United States, to help induce compliance,
agreed to terminate the imposition of retaliation in early 2002, while re taining the underlying
authority for those measures.
5.294 As an alternative to claiming Article 21.5 in admissibility, the European Communities argues
that the case should fail because the United States will allegedly be found to have "zero" nullification
or impairment under Article 22. The European Communities tried this "no nullification or
impairment" argument, and a related " no standing" argument, once before in Bananas III , and was
already told it was wrong on both counts. Indeed, the European Communities itself, a net importer of
bananas, requested an Article 21.5 panel on bananas in 1999.
(ii) The European Communities' breach of GATT Article I
5.295 The European Communities makes no attempt to deny that its discriminatory tariff is
intrinsically inconsistent with Article I. What it tr ies to argue, instead, is that even with the waiver's
strict arbitration controls, and the two negative Arbitration rulings, the European Communities was
allowed to install virtually any regime it wanted to as of 2006. If this is what the Annex meant, no
Latin American supplier would have bothered estab lishing a prospective, expe dited review procedure
with an automatically lapsed waiver if the Arbitrator determined that the European Communities "has
failed to rectify the matter."
5.296 In any case, the applicable waiv er standard was "whether the envisaged rebinding would
result in ... at least maintaining total market acce ss for MFN suppliers, taking into account ... all EC
WTO market access commitments relating to bananas." As confirmed by the Arbitrator, the opening
words, "envisaged" and "would," required a prospective analysis. A prospective analysis is not
possible today, nearly two years after the regime took effect. Furthermore, even if that standard were
still operative, it would require several elements: (i) a "rebinding;" (ii) a fulfilment of the European
Communities' Article XXVIII commitments attaching to that rebinding; (iii) a fulfilment of the
European Communities' Article XXIV commitments that still attach to several of its prior
enlargements; and (iv) a demonstration that total MFN conditions of competition fulfil the Arbitrator's
price-gap results, adjusted to take into account the 135% increase in ACP and EBA preferences as of
2006. None of these elements is satisfied by th e European Communities' current measures. The
European Communities has lost its waiver for ba nanas, making its tariff discrimination illegal under
Article I.
(iii) The European Communities' breach of GATT Article XIII
5.297 Contrary to the European Communities' assertions, there is nothing permissive in the non-
discrimination provisions of GATT Article XIII. Th e words employed in paragraphs 1, 2, and 5 –
"no," "shall," "all," "similarly," and "any" – are abso lute in character, requiring the similar-treatment
rule of paragraph 1 and the equitable-share rules of paragraph 2 to apply to all tariff quotas, not just
some. A tariff quota reserved exclusively for non- substantial ACP suppliers, under which no bananas
from Panama and Nicaragua are allowed entry, does not fulfil these terms.
5.298 The European Communities argues that becau se the challenging Member's trade is not
covered by the ACP tariff quota, this measure s hould be considered a sepa rate regime, and that
because the tariff quota "caps" ACP tariff-quota "ben efits," it is a measure regulated solely by
Article I. These are the European Communities' old Bananas III Article XIII defences, which have
already been rejected as textually unsupportable and da ngerous to the principles of Article XIII. It is
no defence to cite various waivers going back to 1 948 for the alleged principle that exclusive tariff
quotas are only regulated by Article I. Bananas III was the first case in which a broad challenge to

tariff quotas was made. Relevant "s ubsequent practice" can therefor e only be gauged from that point
forward. The United States has cited three post-Bananas III examples of waivers for tariff-quotas that
referenced both Articles I and XIII. This authentic "subsequent prac tice" is further supported by the
European Communities' own practices following Bananas III, including its prior acknowledgements
that an exclusive ACP tariff quota under "tariff only" would need to be covered by a waiver not just of
Article I, but of Article XIII as well. With the termination of its prior Article XIII waiver as of
December 31, 2005, the European Communities' reserved tariff quota for ACP suppliers has become a
patent violation of Article XIII.
5.299 To help put an end to the European Comm unities' decade-long non-compliance, and finally
enable the "effective resolution" of this dispute consistent with the objectives of the DSU, Panama
and Nicaragua urge that the United States' case be upheld on both claims.
VI. INTERIM REVIEW
6.1 On 6 February 2008, the Panel issued its interim report to the parties. On 14 February 2008,
the Panel received written requests for review of precise aspects of the interim report from the
United States and the European Communities. The Panel subsequently received additional
communications on 15 and 21 February 2008 from th e United States and on 20 and 21 February 2008
from the European Communities. Th e Panel held a meeting with bot h parties on 25 February 2008 to
receive their arguments and comments regarding the requests of review of the interim report. On
26 February 2008, the parties submitted written versi ons of the statements they had made at the
25 February 2008 meeting with the Panel. The Pa nel issued its final report to the parties on
29 February 2008.
6.2 The Panel has modified aspects of its report in light of the comments from the parties where it
considered that appropriate, as explained below. The Panel has also made some minor editorial
adjustments to the text and footnotes, as explained below. References to paragraph numbers and
footnotes in this Section refer to those in the interim report, except as otherwise noted.
A. P
RODUCT DESCRIPTION
6.3 The United States requested the Panel to dele te paragraphs 2.24 and 2.25 of the interim
report, which contained a description of the product at issue in the current proceedings (bananas). 296
The United States argued that it has been unable to identify the source of information contained in
these paragraphs based on the parties' submissions in this dispute. The United States further noted
that the footnotes to these paragraphs do not identify any of the submissions as the source.
6.4 In the light of the United States' request , the Panel has introduced some changes to
paragraphs 2.24 and 2.25 of the interim report. The Panel has, however, decided to maintain sections
of those paragraphs with the appropriate indication of their source. The Panel has also maintained the
section in those paragraphs that refers to the importance that bananas production and trade has for
many WTO Members, especially developing a nd least-developed country Members, which was
emphasized by the parties and by a number of third parties.
B. EUROPEAN COMMUNITIES' COUNCIL REGULATION (EC) NO. 1528/2007 OF 20 DECEMBER
2007
6.5 The European Communities requested the Panel to introduce in paragraph 2.36 of the interim
report, a reference to the European Communities' Council Regulation (EC) No. 1528/2007 adopted on

296 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 1.

20 December 2007. In the European Communities' vi ew, without such reference, the Panel's factual
description of "the current regime for imports of bananas to the European Communities" for the
purposes of the current proceedings is incomplete.
297 The European Communities requested the Panel
to further note that, with the adoption of this ne w Regulation, "the tariff quota for the 775,000 tons of
bananas [opened for imports of bananas origina ting in ACP countries] does not exist any more". 298
According to the European Communities:
"As a result [of the changes made th rough Regulation 1528/2007,] Regulation
1964/2005, which is the Regulation setting fo rth the European Communities' banana
import regime, now provides simply that all imports of bananas into the
European Communities are subject to a single tariff of €176 per tonne."
299
6.6 The European Communities added that:
"[T]he subject matter of these proceedings was precisely the tariff quota [for
775,000 mt of bananas originating in ACP c ountries]... [T]he terms of reference of
the Panel included solely an examination of whether this tariff rate quota was
compatible with Articles I and XIII of the GATT. This tariff rate quota does not exist
anymore.
The United States' Request for the Estab lishment of the Panel also listed the
'measures through which the European Communities maintains its current import
regime': Regulation 404/93 and Regulati on 1964/2005. The relevant provision of
Regulation 1964/2005 was de leted and ... Regulation 404/93 was repealed on
December 31, 2007. Therefore, the measur es that were the subject matter of these
proceedings do not exist anymore."
300
6.7 In the European Communities' view, there are a number of legal grounds supporting the
conclusion that the Panel is under an:
"[O]bligation to take into c onsideration the undisputable fact that the measure that
was the subject of these proceedings does not exist any more and to reflect fully this
fact in its Final Report ...
[T]his obligation stems from the Panel's dut y to make an objective assessment of the
facts, as provided for in Article 11 of the DSU and to secure a positive solution to the
dispute, as provided for in Articles 3.4 and 3.7 of the DSU".
301
6.8 The European Communiti es also requested the Panel to m odify the language of paragraph
2.41 of the interim report accordingly.
6.9 In response, the United States argued that the European Communities was seeking "to
introduce new facts to the record that would alter the description of the measure that was the subject
of this proceeding".302 In the United States' view:

297 European Communities' letter to the Panel dated 14 February 2008 (request for review of precise
aspects of the Interim Report), para. 1.
298 Ibid.
299 Written version of the European Communities' opening statement during the interim review meeting
with the parties, para. 2.
300 Ibid., paras. 3-4.
301 Ibid., paras. 7-8.

"Contrary to what the European Communiti es argues in its comments, the description
in paragraph 2.36 of the EC's bananas regi me 'for purposes of this dispute' is not
incomplete. The measure that was challenge d by the United States and is the subject
of this proceeding is the EC's banan as import regime implemented through EC
Council Regulation No. 1964/2005 as it existe d at the time that this Panel was
established – that is, with a zero-duty tariff rate quota available only to ACP origin
bananas. This is the measure that is within the Panel's terms of reference, and indeed
the measure upon which the Panel has b ased its findings... Council Regulation
1528/2007 did not exist at the time the Panel wa s established or even at the time that
the Panel held its substantive meeting with the Parties on November 6 and 7, 2007. It
is therefore incorrect to suggest that such an amendment is relevant for purposes of
this dispute."303
6.10 The United States added that "the EC's attempt to introduce this material at this stage of the
proceeding is contrary to both the DSU and the Working Procedures for the Panel ..."304
6.11 In accordance with the terms of reference approved by the DSB on 12 July 2007, this Panel is
limited to examining the matter referred to the DSB by the United States in document WT/DS27/83,
and to make such findings as will assist the DSB in making the recommendations or in giving the
rulings provided for in the agreements cite d by the United States in the same document.
305 T h e
measure challenged by the United States through this recourse to Article 21.5 of the DSU is the
European Communities' "current import regime for bananas" implem ented through Council
Regulation (EC) No. 1964/2005 and Council Re gulation (EEC) 404/93 of 13 February 1993, as
amended by Regulation (EC) 216/2001 of 29 January 2001. 306 In its request for the establishment of
the Panel, the United States also identified, as part of the "measures through which the EC maintains
its current import regime for bananas" "any amen dments, implementing meas ures, and other related
measures".307 As noted by the Appellate Body in its report on Chile – Price Band System:
"If the terms of reference in a dispute ar e broad enough to include amendments to a
measure – as they are in this case – and if it is necessary to consider an amendment in
order to secure a positive solution to the disput e – as it is here – then it is appropriate
to consider the measure as amended in coming to a decision in a dispute."308
6.12 In the same report, the Appellate Body also noted that:
"[G]enerally speaking, the demands of due process are such that a complaining party
should not have to adjust its pleadings th roughout dispute settlement proceedings in
order to deal with a disputed measure as a 'moving target'."309
6.13 According to the European Communities, Regulation No. 1528/2007 was adopted by the
European Communities' Council on 20 December 2007 and entered into force on 31 December 2007,
when it was published in the Official Journal of the European Union.310

302 Written version of the United States' opening statement during the interim review meeting with the
parties, para. 5.
303 Ibid., paras. 6-7.
304 Ibid., para. 8.
305 EC – Bananas III (Article 21.5 – US) , Constitution of the Panel (WT/DS27/84/Rev.1),
5 September 2007, para. 2.
306 EC – Bananas III (Article 21.5 – US) , Request for the Establishment of a Panel (WT/DS27/83)
2 July 2007, p. 2.
307 Ibid., p. 3.
308 Appellate Body Report on Chile – Price Band System, para. 144.
309 Ibid.

6.14 On 16 January 2008, the European Communities stated in writing that it had no comments on
the descriptive (factual and argument) sections of the Panel's draft report that had been circulated to
the parties on 11 January 2008. These descrip tive sections included paragraphs 2.43 and 2.48,
equivalent to paragraphs 2.36 and 2.41 of the inte rim report. Subsequently, in its interim review
request of 14 February 2008, the European Commu nities informed the Panel of the introduction of
amendments to its banana import regime, made through Regulation No. 1528/2007. The
European Communities submitted a copy of Regulati on No. 1528/2007 to the Panel for the first time
during the interim review meeting of the Panel with the parties on 25 February 2008.
6.15 According to the Working Procedures adopted by the Panel in the current proceedings:
"Parties shall submit all factual evidence to the Panel as early as possible and no later
than during the substantive meeting, except with respect to evidence necessary for the
answering of questions. Exceptions will be granted by the Panel upon a showing of
good cause. In such cases, the other Party shall be accorded a period of time for
commenting, as appropriate."
311
6.16 The Appellate Body has explicitly held that th e interim review stage is not the appropriate
time to introduce new evidence:
"The interim review stage is not an appropriate time to introduce new evidence. We
recall that Article 15 of the DSU governs the interim review. Article 15 permits
parties, during that stage of the proceed ings, to submit comments on the draft report
issued by the panel, and to make requests 'for the panel to review precise aspects of
the interim report'. At that time, the panel process is all but completed; it is only—in
the words of Article 15—'precise aspects' of the report that must be verified during
the interim review. And this, in our view , cannot properly include an assessment of
new and unanswered evidence ..."
312
6.17 As noted above, in the current case, the Europ ean Communities did not introduce evidence of
the new Regulation with its written request for re viewing precise aspects of the interim report made
on 14 February 2008, but only at the interim review meeting of the Panel held on 25 February 2008.
6.18 For the reasons stated above, the Panel c onsiders that the evidence submitted by the
European Communities regarding the adoption of EC Regulation No. 1528/2007 is inadmissible at
this late stage in the process. Accordingly, th e Panel has not modified the language contained in
paragraphs 2.36 and 2.41 of the interim report.
C. AWARD OF THE ARBITRATORS IN THE PROCEEDINGS REQUESTED BY THE
EUROPEAN COMMUNITIES UNDER ARTICLE 22.6 OF THE DSU
6.19 The United States requested the Panel to modify pa ragraph 2.71 of the interim report, in order
to include a reference to the findings contained in paragraphs 5.96-5.98 of the Decision by the
Arbitrators in the Article 22.6 proceeding in the EC – Bananas III dispute, regarding the WTO
consistency of the earlier EC bananas import regime.313

310 During the interim review meeting, and in res ponse to a question from the Panel, the European
Communities stated that the official proposal for Regulation No. 1528/2007 was presented by the European
Commission on 13 November 2007.
311 Working Procedures adopted by the Panel, dated 22 August 2007, see Annex A-2.
312 Appellate Body Report on EC – Sardines, para. 301 (footnotes omitted).
313 United States' letter to the Panel dated 14 February 2008 (request by the United States for review of
precise aspects of the Interim Report), para. 2.

6.20 In response to the United States' request, the European Communities argued that it does "not
see the relevance for the current proceedings of the findings of the 1999 Article 22.6 Arbitrators on
the WTO consistency of the measures that the European Communities had in place at that time".
314
6.21 In the European Communities' view:
"First, the subject matter of that Arbitration was to determine the level of nullification
or impairment suffered by the United States at that time. Any statements included in
the Arbitration Award on the compatibility of those measures with the WTO rules can
only be considered as simple dicta that have no legal effects. Second, the measures in
place at that time were completely different from the measure that constituted the
subject matter of the current proceedings. A nd, third, incorporating into this Report
the Arbitrator's findings on the old measures' WTO compatibility, but refusing to
incorporate the Arbitrators' findings on nullification and impairment in the paragraphs
of the Report that follow paragraph 8.5 would seriously compromise the consistency
of the Panel's reasoning in this Report."
315
6.22 The Panel has modified paragraph 2.71 of the inte rim report in order to include a reference to
the findings contained in the Decision by the Ar bitrators in the Article 22.6 proceeding in the EC –
Bananas III dispute, regarding the WTO consistency of the earlier EC bananas import regime.
D. DESCRIPTION OF THE MEASURES CHALLENGED BY THE UNITED STATES
6.23 Both parties requested the Panel to modify pa ragraph 7.3 of the interim report in order to
better reflect the description of the challenged measur es as contained in the Unit ed States' request for
the establishment of the Panel. 316 The Panel has modified paragraph 7.3 of the interim report
accordingly.
E. TERMS AND MAIN ELEMENTS OF THE BANANAS UNDERSTANDING
6.24 The United States requested the Panel to modi fy paragraph 7.100 of the interim report in
order to clarify the meaning of the last sentence in that paragraph. 317 The Panel has modified
paragraph 7.100 of the interim report accordingly.
F. ADOPTION OF THE BANANAS UNDERSTANDING SUBS EQUENT TO RECOMMENDATIONS AND
SUGGESTIONS BY THE DSB
1. Related first compliance proceeding brought by Ecuador
6.25 The United States requested the Panel to modify paragraph 7.122 of the interim report, to
either delete the reference to the report of the pa nel in the first compliance panel brought by Ecuador
or, alternatively, clarify that the suggestions in th at report were "made in the related first compliance
proceeding brought by Ecuador". 318 The United States also requested the Panel to modify footnote
419 to paragraph 7.122 of the interim report, in or der to delete the reference to the minutes of the
meeting at which the DSB adopted the report of the first compliance panel requested by Ecuador. The

314 Written version of the European Communities' opening statement during the interim review meeting
with the parties, para. 15.
315 Ibid.
316 Ibid., para. 3, and European Communities' letter to the Panel dated 14 February 2008 (request for
review of precise aspects of the Interim Report), para. 2.
317 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 4.
318 Ibid., para. 6.

United States also requested the Panel to add a refe rence in the footnote to the minutes of the meeting
at which the DSB authorized the United States to suspend the application of concessions to the
European Communities.
319
6.26 In response, the European Communities argued that it:
"[D]oes not consider that a reference to the DSB meeting authorizing the
United States' retaliation measures should be added to [footnote 419 to
paragraph 7.122 of the interim report]."320
6.27 The Panel has modified paragraph 7.122 and footnote 419 of the interim report. The language
in paragraph 7.122 now clarifies that the suggesti ons were "made in the related first compliance
proceeding brought by Ecuador". A reference was added in the footnote to the minutes of the meeting
at which the DSB authorized the United St ates to suspend the application to the
European Communities and its member States of tariff concessions and re lated obligations under
GATT 1994, consistent with the decision of the Arbitrators contained in document WT/DS27/ARB.
2. Further adjustment of language
6.28 For the same reasons explained in the previous section, the United States requested the Panel
to modify paragraphs 7.127 and 7.128 of the interim report, to replace the expression "and
suggestions" with the expression "and the related suggestions".321 The Panel has modified paragraphs
7.127 and 7.128 of the interim report accordingly.
G. BANANAS UNDERSTANDING: ARGUMENTS BY THE EUROPEAN COMMUNITIES CONCERNING
GOOD FAITH
6.29 The United States requested the Panel to modify paragraph 7.162 of the interim report, in
order to avoid any confusion regarding the Panel's reasoning. 322 The Panel has modified paragraph
7.162 of the interim report accordingly.
H. PRELIMINARY OBJECTION OF THE EUROPEAN COMMUNITIES CONCERNING WHETHER THE
COMPLAINT BY THE UNITED STATES FALLS WITHIN THE SCOPE OF ARTICLE 21.5 OF THE DSU
1. Arguments made by Japan
6.30 The United States requested the Panel to modify paragraphs 7.285 and 7.313 of the interim
report. The United States declared that it agreed with Japan's conclusion that the
European Communities' arguments to support its c ontention that the measures at issue in this
proceeding were not "measures taken to comply " were "hardly convincing". However, the
United States added that this did not imply an e ndorsement of the particular argumentation used by
Japan.323 The Panel has modified paragraphs 7.285, 7.286, 7.313 and 7.314 of the interim report
accordingly. The Panel has also added a foot note to paragraph 7.286, referring to the present
discussion in the interim review section.

319 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 5.
320 Written version of the European Communities' opening statement during the interim review meeting
with the parties, para. 16.
321 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 7.
322 Ibid., para. 8.
323 Ibid., para. 9.

2. Whether the current bananas import regim e is closely related to the original
recommendations and rulings adopted by the DSB in 1997
6.31 The United States requested the Panel to delete the second sentence in paragraph 7.334 of the
interim report, concerning the repeal of EC Re gulation 404/1993, as amended. The United States
argued that this information was not put into evid ence by either party, it concerns an alleged
modification of the measures at issue occurred after the date of establishment of this Panel and so
would not be within the terms of reference of the Pa nel and, even if correct, it is not clear what has
replaced EC Regulation 404/1993, and why this statement is necessary for the Panel's analysis.324
6.32 In response, the European Communities rejected th e deletion of the reference to the repeal of
Regulation 404/93. In the European Communities' view:
"Given the extensive reliance of the Pane l on the allegedly close connection between
Regulation 404/93 and the challenged measur e, we cannot see how this reference
could be deleted without seriously compro mising the reasoning of the Panel in the
relevant parts of its Report."325
6.33 Under Article 13 of the DSU the Panel has a broad right to seek information and may take
into account evidence even if not provided by any of the parties. In the present case, however, the
Panel considers that noting the exact date of the repeal of Regulation 404/1993, and identifying the
instrument repealing such Regulation, is not st rictly necessary for its analysis. The Panel has
modified the second sentence of paragraph 7.334 of the interim report accordingly.
3. Whether the current bananas import regim e constitutes a measure taken by the
European Communities in the direction of, or for the purpose of achieving, compliance
(a) Termination of US suspension of concessions
6.34 The United States requested the Panel to modify paragraphs 7.400, 7.402, 7.404 and 7.430 of
the interim report, to replace the expressions "termi nates retaliation", "termination of US retaliation"
and "terminated its retaliation", with the expressi ons "terminates the imposition of increased duties",
"termination of US imposition of increased duties" and "terminated its imposition of increased
duties".326 The Panel has modified paragraphs 7.400, 7. 402, 7.404 and 7.430 of the interim report.
The expression used in the minutes of the DSB m eeting held on 1 February 2002 is that the
United States had "terminated the suspension of concessions". Accordingly, the expressions
"terminates retaliation", "termination of US retalia tion" and "terminated its retaliation" have been
replaced with the expressions "terminates the su spension of concessions", "termination of US
suspension of concessions" and "terminated its suspension of concessions".
(b) Clarification of language
6.35 The United States requested the Panel to delete paragraph 7.477 of the interim report, which
addresses the relevance of any time-limit on the possi bility of bringing compliance complaints. In the
United States' view, the discussion in paragraph 7.477 "does not appear to be necessary to the Panel's

324 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 10.
325 Written version of the European Communities' opening statement during the interim review meeting
with the parties, para. 6.
326 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 11.

reasoning in this section and ma y potentially be confusing".
327 The Panel has modified the language
in paragraph 7.477 of the interim report in order to clarify its meaning.
(c) Licensing system
6.36 The United States requested the Panel to delete the last sentence of paragraph 7.501 of the
interim report. In the United Stat es' view, this sentence "does not app ear to be factually correct as far
as stating that the current [EC bananas import regime] does not involve a licensing system".328
6.37 In response to the United States' request, the European Communities argues that:
"[T]he United States suggested deletion would... be misleading. The correct
statement, and what we believe the Panel meant, is: 'Conversely, the current EC
bananas import regime does not involve a licensing system for MFN countries'."329
6.38 In light of the parties' comments, the Panel has modified the language in paragraphs 7.501 and
7.502 of the interim report in order to clarify their meaning. The Panel has, however, used the
expression "for MFN bananas", rather than "for MFN countries".
I. THE RELEVANT LANGUAGE OF ARTICLE XIII:1 OF THE GATT 1994 FOR THIS DISPUTE
6.39 The United States requested the Panel to modi fy the language in paragraph 7.671 of the
interim report, in order to clarify that, in its s ubmissions, the United States "did not argue that the
MFN bananas were treated 'worse' than ACP bana nas ... [but rather] argued that MFN bananas and
ACP bananas were not treated 'equa lly' or 'similarly restricted'."330 The Panel has modified paragraph
7.671 of the interim report accordingly.
J. THE UNITED STATES' CLAIM UNDER ARTICLE XIII:2 OF THE GATT 1994: PANEL'S ANALYSIS
6.40 The United States requested the Panel to corr ect the references made in footnote 1168 to
paragraph 7.704 of the interim report.331 The Panel has corrected footnote 1168 to paragraph 7.704 of
the interim report accordingly.
K. GENERAL CONCLUSIONS
1. Panel's Conclusions
6.41 The European Communities request ed the Panel to amend the la nguage in paragraphs 8.3(a)
and 8.3(c) of the interim report. In the European Communities' view, the statements made in those
paragraphs are not correct. First, because "the preferential tariff quota [granted by the
European Communities to bananas originating in AC P countries] does not exist any more". Second,
because the language in paragraph 8.3(c):
"[C]reates the impression that the Panel has found that there are more aspects of the
'European Communities' current import regi me' that are inconsistent with GATT

327 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 12.
328 Ibid., para. 13.
329 Written version of the European Communities' opening statement during the interim review meeting
with the parties, para. 17 (emphasis in original).
330 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 14.
331 Ibid., para. 15.

Article XIII, other than the preferential tariff quota. This is not correct. The terms of
reference of the Panel allowed it to examine only the compatibility with GATT
Article XIII of the preferential tariff quota granted to the ACP countries."
332
6.42 The Panel has decided to maintain the language in paragraphs 8.3(a) and 8.3(c) of the interim
report. As noted above 333, the Panel considers that the evidence submitted at this late stage by the
European Communities regarding the adoption of am endments to the EC bananas import regime is
inadmissible. Furthermore, the Panel does not consider that the language contained in paragraph
8.3(c) of the interim report creates any impression that the Panel is making findings regarding aspects
of the EC bananas import regime other than the preferential tariff quota reserved for ACP bananas.
2. Implementation of recommendations and rulings of the DSB
6.43 The European Communities request ed the Panel to amend the language in paragraph 8.4 of
the interim report. In the European Communities' view, the language in this paragraph:
"[C]reates the impression that there are mo re elements of the European Communities'
'current regime for the importation of banana s' [other than the preferential tariff quota
reserved for ACP bananas] that have fallen within the terms of reference of the Panel,
other than the preferential tariff quota. In particular, it creates the impression that an
examination of the 'MFN tariff currently set at €176/mt' was within the terms of
reference of the Panel. This is not correct ..."
334
6.44 The Panel has modified paragraph 8.4 of the interim report accordingly.
L. NULLIFICATION OR IMPAIRMENT OF BENEFITS
6.45 The United States requested the Panel to delete th e last part of paragraph 8.11 of the interim
report. In the United States' view:
"[T]he explanation contained in the text that we request be deleted is not relevant in
the context of this proceeding. Furtherm ore, the first part of paragraph 8.11 is
sufficient to make the general point that a determination of the existence of
nullification or impairment arising from a breach of an obligation is different from
that of a determination of the level for purposes of Article 22".
335
6.46 The Panel has modified paragraph 8.11 of the interim report accordingly.
M. RECOMMENDATION
6.47 Albeit for different reasons, both parties requested the Panel to delete paragraph 8.13 of the
interim report.

332 European Communities' letter to the Panel dated 14 February 2008 (request for review of precise
aspects of the Interim Report), para. 3.
333 See para. 6.18 above.
334 European Communities' letter to the Panel dated 14 February 2008 (request for review of precise
aspects of the Interim Report), para. 4.
335 United States' letter to the Panel dated 14 February 2008 (request for review of precise aspects of
the Interim Report), para. 16.