EUROPEAN COMMUNITIES – REGIME FOR THE IMPORTATION, SALE AND DISTRIBUTION OF BANANAS
Document: Recourse to Article 21.5 of the DSU by Ecuador Request for Consultations
Date: 20 November 2006
Document codes: WT/DS27/65
Complainant: Ecuador, Guatemala, Honduras, Mexico, U.S.
Respondent: EU
Third parties: Belize, Cameroon, Canada, Colombia, Costa Rica, Dominica, Dominican, Ghana, Grenada, India, Jamaica, Japan, Mauritius, Nicaragua, Panama, Philippines, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Suriname, Venezuela, Côte d’Ivoire, Brazil, Madagascar
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. I, II, III, X, XI, XIII  GATT 1994Art. 1, 3  Import LicensingArt. II, XVI, XVII  Services (GATS)Art. 2  Trade-Related Investment Measures (TRIMs)Art. 19  Agriculture

EUROPEAN COMMUNITIES – REGIME FOR THE IMPORTATION,
SALE AND DISTRIBUTION OF BANANAS

Recourse to Article 21.5 of the DSU by Ecuador

Request for Consultations

 The following communication, dated 16 Nove mber 2006, from the delegation of Ecuador to
the delegation of the European Communities and to the Chairman of the Dispute Settlement Body, is
circulated in accordance with Article 21.5 of the DSU.

 The Government of Ecuador considers that measures taken by the European Communities
(EC) to comply with the recommendations and rulings of ("Bananas III")
1 are inconsistent with the obligations
of the EC under Articles I, II and XIII of the General Agreement on Tariffs and Trade 1994 (GATT
1994). The measures are contained in EC Counc il Regulation No. 1964/2005 ("Regulation 1964") 2
and its associated implementing regulations. Without prejudice to Ecuador's position that
consultations are not required to have recourse to Article 21.5 in these circumstances, Ecuador
requests prompt consultations with the EC pursuan t to Article 4 of the Understanding on Rules and
Procedures Governing the Settlement of Disputes (DSU) and Article XXIII of the GATT regarding
the compliance of these EC measures with Articles I, II and XIII of the GATT 1994.

Background

 On 25 September 1997, the Dispute Settlement Body ("DSB") adopted the recommendations
and rulings of Bananas III, which found the EC's tariff, tariff quota, and licensing measures to be in
violation of GATT Articles I, III, and XIII, and GATS Articles II and XVII.
3 On 1 January 1999 the
EC implemented a banana regime, which the EC clai med to remedy the regime that had been found
inconsistent with its WTO obligations. On 18 D ecember 1998, Ecuador requested a DSU Article 21.5
review of the modified regime, on grounds that it did not conform with EC obligations under the
WTO Agreements. Shortly thereafter, on 14 Janua ry 1999, the United States sought authority under
DSU Article 22.6 to suspend concession against the EC for its failure to conform with the rulings and
recommendations of the DSB. In separate, but c onsistent findings, the Article 21.5 Panel and the
Article 22.6 Arbitrator found that the EC's modifi ed regime violated GATT Articles I and XIII, and

1 Panel Report , , WT/DS27/R, adopted 25 September 1997, modified by the Appellate Body Report, WT/DS27/AB/R.
2 Council of the European Union, Council Regulation (EC) No. 1964/2005 of 29 November 2005 on the
tariff rate for bananas, OJL 316/1, 2 December 2005.
3 Bananas III, Panel Report, para. 9.1; Appellate Body Report, , WT/DS27/AB/R, adopted 25 September 1997, para. 255.

GATS Articles II and XVII, and failed to comp ly with the recommendations and rulings of
Bananas III.
 4

 In April 2001, the EC reached two "Understa ndings on Bananas", one with the United States
5
and the other with Ecuador. 6 On 2 July 2001, the EC notifie d the Understandings to the WTO,
characterizing both as covering "the implemen tation by the EC of the conclusions and
recommendations adopted by the DSB in the dispute 'Regime for the Importation, Sale and
Distribution of Bananas' ".
7

 The Understandings provided for the EC to implement a multi-stage/multi-year new regime
for banana to comply with Bananas III . The final stage of that framework required the EC to
introduce "a 'Tariff-Only regime for imports of bananas' no later than 1 January 2006".
8

 The Understandings further re quired that Ecuador and the United States "lift their reserves
concerning the waiver of Article I of the GATT" needed for the EC's preferential tariffs for ACP
products and "actively work towards promoting the acceptance of an EC request for a waiver of
Article XIII of the GATT 1994" needed for the ACP tariff quota on bananas.
9 Pursuant to these
provisions, suitable GATT Article I and GATT Article XIII waiver conditions applicable to bananas
were negotiated and granted at the Doha Ministerial in November 2001.

 The Article I Waiver included an annex on bana nas requiring that the EC's future tariff-only
regime "result in at least maintaining total mark et access for MFN banana suppliers", taking into
account "all EC WTO market-access co mmitments relating to bananas".
10 In the event of
disagreement over whether the proposed regime met the conditions of the Annex, the Annex provide
for arbitration. If the EC were found by the Arbitrat or twice to have failed to satisfy the terms of the
Annex standard, the waiver of Article I with respect to bananas expired.

 In 2005, two Arbitration Awards found that the EC's banana proposals failed the Annex
standard, causing the Waiver of GATT Article I on bananas to terminate upon implementation of the
EC's tariff-only regime on 1 January 2006.11

4 Panel Report, European Communities – Regime for the Importation, Sale, and Distribution of
Bananas – Recourse to Article 21.5 of the DSU by Ecuador , WT/DS27/RW/ECU, adopted 6 May 1999,
para. 7.1; Decision by the Arbitrators, – Recourse to Arbitration by the European Communities Under Article 22.6 of the
DSU, WT/DS27/ARB, 9 April 1999, paras. 5.33, 5.80.
5 –
Understanding on Bananas between the European Communities and the United States , WT/DS27/59, 2 July
2001 ("EC-US Understanding").
6 –
Understanding on Bananas between the European Communities and Ecuador , WT/DS27/60, 9 July 2001
("EC-Ecuador Understanding").
7 Notification of Mutually Agreed Solution, , WT/DS27/58, 2 July 2001.
8 See Award of the Arbitrator, European Communities – The ACP-EC Partnership Agreement –
Recourse to Arbitration Pursuant to the Decision of 14 November 2001 , WT/L/616, 1 August 2005, paras. 1
and 2.
10 European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15, 14 November
2001, Annex, tiret 4.
11 Award of the Arbitrator, European Communities – The ACP-EC Partnership Agreement – Recourse
to Arbitration Pursuant to the Decision of 14 November 2001 , WT/L/616, 1 August 2005, para. 94; Award of
the Arbitrator, European Communities – The ACP-EC Partnership Agreement – Second Recourse to Arbitration
Pursuant to the Decision of 14 November 2001, WT/L/625, 27 October 2005, para. 127.

 As of 31 December 2005, the EC's waiver of GATT Article XIII for its ACP banana quota of
750,000 mt also terminated.12

The EC's Current Banana Regime

 Regulation 1964 and its associated implemen ting regulations authorize significantly
differentiated MFN and ACP access treatment through the following measures:

• A tariff-quota volume of 775,000 mt is exclusively reserved for bananas of ACP
origin. ACP bananas within the quota enter duty-free ( i.e., at a 176 €/mt margin of
preference), with unlimited ACP over-quota access authorized at a tariff of 176 €/mt.
The 775,000 mt ACP tariff quota volume is subject to import licenses and allocation.

• An "autonomous" tariff of 176 €/mt (a rate more than double the previously-
applicable rate of 75 €/mt) applies to all other bananas.

 Without prejudice to whether consultations ar e required under DSU Article 21.5, or to any
other WTO rights, Ecuador requests consultations regarding the consistenc y of the EC's banana
regime with the EC's obligations under the WTO, in particular in the following respects:

• The consistency with GATT Article I of the different duties applied to ACP countries
and to other countries;

• The consistency with GATT Article XIII:1 and 2 of the tariff rate quota system
reserved exclusively for bananas of ACP origin; and

• The consistency with GATT Article II of the "autonomous" 176 €/mt tariff now
applied to all countries and bananas not benefiting from the tariff rate quota.

 Ecuador reserves its right to seek review of other aspects of the current regime under the
authority of Article 21.5.

 As the EC has itself acknowledge d, Ecuador is a developing country that is heavily dependent
on banana trade for export revenues, national inco me, and employment. Accordingly, Ecuador asks
the EC to consult without delay on the measures described above and to work with our government to
resolve this disagreement on the promptest possible basis.

Imports of Bananas, WT/MIN(01)/16, 14 November 2001, para. 1.