Document: WT/DS27/RW2/ECU Page A-1 ANNEX A Contents Page Annex A-1 Request for the Establis hment of a Panel (WT/DS27/80) A-2 Annex A-2 Working procedures for th e Panel, dated 29 June 2007 A-7 Annex A-3 Revised working procedures fo r the Panel, dated 23 August 2007 A-10
Date: 29 June 2007
Document codes: WT/DS27/RW2/ECU; WT/DS27/80
Complainant: Ecuador, Guatemala, Honduras, Mexico, U.S.
Respondent: EU
Third parties: Belize, Cameroon, Canada, Colombia, Costa Rica, Dominica, Dominican, Ghana, Grenada, India, Jamaica, Japan, Mauritius, Nicaragua, Panama, Philippines, Saint Lucia, Saint Vincent and the Grenadines, Senegal, Suriname, Venezuela, Côte d’Ivoire, Brazil, Madagascar
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. I, II, III, X, XI, XIII  GATT 1994Art. 1, 3  Import LicensingArt. II, XVI, XVII  Services (GATS)Art. 2  Trade-Related Investment Measures (TRIMs)Art. 19  Agriculture

ANNEX A

Contents Page
Annex A-1 Request for the Establis hment of a Panel () A-2
Annex A-2 Working procedures for th e Panel, dated 29 June 2007 A-7
Annex A-3 Revised working procedures fo r the Panel, dated 23 August 2007 A-10

ANNEX A-1

REQUEST FOR THE ESTABLISHMENT OF A PANEL

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

Recourse to Article 21.5 of the DSU by Ecuador

Request for the Establishment of a Panel

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

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

Background

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

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

1 Panel Report , European Communities – Regime for the Importation, Sale and Distribution of
Bananas, WT/DS27/R, adopted 25 September 1997, modified by the Appellate Body Report, WT/DS27/AB/R.
2 Panel Report, Bananas III, para. 9.1; Appellate Body Report, European Communities – Regime for the
Importation, Sale and Distribution of Bananas, WT/DS27/AB/R, adopted 25 September 1997, para. 255.

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

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

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

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

3 Panel Report, European Communities – Regime for the Importation, Sale, and Distribution of
Bananas – Recourse to Article 21.5 of the DSU by Ecuador , WT/DS27/RW/ECU, adopted 6 May 1999
(hereafter " Bananas – DSU Article 21.5 (Ecuador) "), para. 7.1; The Arbitrat ors decision came to a similar
conclusion. Decision by the Arbitrators, European Communities – Regime for the Importation, Sale and
Distribution of Bananas – Recourse to Arbitration by the European Communities Under Article 22.6 of the
DSU, WT/DS27/ARB, 9 April 1999 (hereafter "Bananas – DSU Article 22.6 (US)"), paras. 5.33, 5.80.
4 Bananas – DSU Article 21.5 (Ecuador) , paras. 6.160, 6.163; Bananas – DSU Article 22.6 (US) ,
paras. 5.96, 5.97.
5 Id., para. 6.161.
6 Id., para. 7.2.

 In April 2001, the EC reached two "Understa ndings on Bananas," one with the United States
7
and the other with Ecuador. 8 On 2 July 2001, the EC notifie d the Understandings to the WTO,
characterizing both as covering "the implemen tation by the EC of the conclusions and
recommendations adopted by the DSB in the dispute 'Regime for the Importation, Sale and
Distribution of Bananas.'"
9 Ecuador (as well as the United Stat es) communicated to the DSB that the
Understandings were not a mutually satisfactory se ttlement under Article 3.6 of the DSU, but rather
constituted agreement on a phased series of steps, in cluding a "transitory" regime that would require
the EC to take various steps supported by the co llective action of the WTO membership, until the EC
implemented the final definitive Tariff Only regime. 10 The United States made a similar
communication.

 The Understandings required that the EC impl ement a tariff-only regime effective 1 January
2006, and that it takes interim or "transitory" meas ures in the meantime. Essentially, the EC would
adjust its measures in two initial "phases", in a way that would ease the trade problems for Ecuador
and others, even though these initial phases did not invol ve full conformity with the EC's obligations.
The Understandings required that Ecuador and the United States "lift their reserves concerning the
waiver of Article I of the GATT" for the EC's preferential tariffs for ACP products and "actively work
towards promoting the acceptance of an EC request for a waiver of Article XIII of the GATT 1994"
for the ACP tariff quota on bananas so as to allow for a temporary period preferences inconsistent
with Articles I and XIII of the GATT. 11 These provisions were intended to and did help the EC to
obtain waivers from its WTO obligations sufficient to temporarily and cond itionally permit measures
that would otherwise violate Articles I and XIII of the GATT but which were provided for in the
measures to be taken in Phase I and Phase II. At th e end of Phase II, the EC was to establish a Tariff
Only system that would not require further waivers to conform with EC obligations.

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

 The Article I Waiver included an annex on bana nas requiring that the EC's tariff-only regime
"result in at least maintaining total market access for MFN banana suppliers," taking into account "all
EC WTO market-access commitments relating to bananas."
13 In the event of disagreement over

7 European Communities – Regime for the Importation, Sale and Distribution of Bananas –
Understanding on Bananas between the European Communities and the United States , WT/DS27/59, 2 July
2001 ("EC-US Understanding").
8 European Communities – Regime for the Importation, Sale and Distribution of Bananas –
Understanding on Bananas between the European Communities and Ecuador, WT/DS27/60, 9 July 2001 ("EC-
Ecuador Understanding").
9 Notification of Mutually Agreed Solution, European Communities – Regime for the Importation,
Sale and Distribution of Bananas, WT/DS27/58, 2 July 2001.
10 WT/DS27/60, 3 July 2001.
12 See Award of the Arbitrator, European Communities – The ACP-EC Partnership Agreement –
Recourse to Arbitration Pursuant to the Decision of 14 November 2001 , WT/L/616, 1 August 2005, paras. 1
and 2.
13 European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15, 14 November
2001, Annex, tiret 4.

whether the proposed regime met the conditions of th e Annex, the Annex provided for arbitration in
accordance with the terms of the Anne x. If the EC were found by the Arbitrator twice to have failed
to satisfy the terms of the Annex standard for the tariff-only regime, the waiver of Article I expired
with respect to bananas.

 In 2005, the EC twice proposed a final MFN ra te of duty, which Ecua dor and other countries
challenged under the Annex dispute settlement procedures as not meeting the standard of the Article I
waiver. In each arbitration, the arbitrators found that the EC's banana proposal s failed the standard of
the Annex. As a result the Waiver of GATT Article I with respect to the EC's imports of bananas
terminated for the EC on 1 January 2006.
14

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

The Measures of the EC that are subject to this Challenge

 The challenged EC measures are containe d in EC Council Regulation No. 1964/2005
("Regulation 1964") 16 and its associated implementing regulations, including the EC's autonomous
tariff provisions. These measures include:

• A tariff-rate quota, with a current volume of 775,000 mt, exclusively reserved for
bananas of ACP origin. ACP bananas with in the quota enter duty-free, quantities
above the TRQ paying a current duty of 176 €/mt. The 775,000 mt ACP tariff quota
volume is subject to import licenses and allocation. Ecuador does not get any share
of this tariff rate quota or related measur es, let alone receive the share required under
Article XIII.

• An EC tariff, currently at 176 €/mt to EC imports of bananas, that applies to all
bananas of Ecuadorian origin and to all other bananas except those benefiting from
access to the zero-duty TRQ.

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

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

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

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

14 Award of the Arbitrator, European Communities – The ACP-EC Partnership Agreement – Recourse
to Arbitration Pursuant to the Decision of 14 November 2001 , WT/L/616, 1 August 2005, para. 94; Award of
the Arbitrator, European Communities – The ACP-EC Partnership Agreement – Second Recourse to Arbitration
Pursuant to the Decision of 14 November 2001, WT/L/625, 27 October 2005, para. 127.
15 European Communities – Transitional Regime for the EC Autonomous Tariff Rate Quotas on
Imports of Bananas, WT/MIN(01)/16, 14 November 2001, para. 1.
16 Council of the European Union, Council Regulation (EC) No. 1964/2005 of 29 November 2005 on
the tariff rate for bananas, OJL 316/1, 2 December 2005.

• Article XIII:1 and 2 of the GATT, in that th e EC continues to provide a tariff rate
quota system reserved exclusively for bananas of ACP origin, while Ecuador is
denied any share of the preferential quota, let alone the share to which it is entitled
under Article XIII.

REQUEST FOR THE ESTABLISHMENT OF A PANEL

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

 As there continues to be a disagreemen t between Ecuador and the EC over the WTO-
consistency of the EC banana measures taken to comply with Bananas III and Bananas-DSU
Article 21.5 (Ecuador) and subsequent related rulings, Ecuador respectfully requests that this matter
be referred to a Panel, if possible the original panel, in accordance with Article 21.5 of the DSU.

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

17 European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse
to Article 21.5 of the DSU by Ecuador, WT/DS27/65/Rev.1, 29 November 2006.

ANNEX A-2

WORKING PROCEDURES FOR THE PANEL
DATED 29 JUNE 2007

1. In its proceedings the Panel shall follow the relevant provisions of the Dispute Settlement
Understanding (DSU). In addition, the following Working Procedures shall apply.
2. The Panel will provide the Parties
1 and Third Parties 2 with a timetable for its proceedings.
The timetable may be modified by the Panel as appropriate, after having consulted the Parties.
3. The Panel shall meet in closed session. The Par ties, and interested Third Parties, shall be
present at the meetings only when invited by the Panel to appear before it.
4. The deliberations of the Panel and the documents submitted to it shall be kept confidential.
Nothing in the DSU, nor in these Working Pro cedures, precludes a Party or a Third Party from
disclosing statements of its own positions to the public. Members shall treat as confidential
information submitted by another Member to the Panel which that Member has designated as
confidential. As provided in Article 18.2 of the DS U, where a Party submits a confidential version of
its written submissions to the Panel, it shall al so, upon request of the other Party, provide a
non-confidential summary of the information contained in its submissions that could be disclosed to
the public. Non-confidential summaries shall be normally submitted no later than one week after the
written submission is presented to the Panel, unless a different deadline is granted by the Panel upon a
showing of good cause.
5. Before the substantive meeting of the Panel with the Parties, and in accordance with the
timetable approved by the Panel, the Parties shall transmit to the Panel written submissions and
subsequently written rebuttals in which they presen t the facts of the case, their arguments and their
counter-arguments, respectively. Third Parties may transmit to the Panel written submissions after the
rebuttals of the Parties have been submitted, and in accordance with the timetable approved by the
Panel.
6. All Third Parties shall be invited in writing to present their views during the substantive meeting
of the Panel with the Parties and the Third Parties. Third Parties may be present during the entirety of
that meeting.
7. At its substantive meeting with the Parties, the Panel shall ask Ecuador to present its case
first. Subsequently, and still at the same meeti ng, the European Communities will be asked to present
its arguments. At the same meeting, Third Parti es will be asked to present their views thereafter.
Parties will then be allowed an opportunity for fi nal statements, with Ecuador presenting its statement
first.
8. The Panel may at any time put questions to the Parties and to the Third Parties and ask them
for explanations either in the course of the substan tive meeting or afterwards in writing. Replies to
questions shall be submitted in writing by the dates specified by the Panel after consultation with the
Parties. In addition, the Parties shall be permitted to ask questions to each other and to Third Parties.

1 Throughout this document, the term "Party" refers to either Ecuador or European Communities, as
appropriate. The term "Parties" refers to both Ecuador and European Communities.
2 Throughout the document, the term "Third Parties" refers to Belize, Brazil, Cameroon, Colombia,
Côte d'Ivoire, Dominica, the Dominican Republic, Ghana, Jamaica, Japan, Madagascar, Nicaragua, Panama,
St. Lucia, St. Vincent & the Grenadines, Suriname and the United States.

Third Parties may ask oral questions to the Parti es during the course of the substantive meeting, but
Parties are under no obligation to respond to those questions.
9. Each Party shall make available to the Panel and to the other Party a written version of its oral
statements, preferably at the end of the meeting wi th the Panel, and in any event no later than the
working day following the presentation. Any Third Party that wishes to present its views shall
similarly make available to the Panel and to the Pa rties and other Third Parties a written version of its
oral statements, preferably at the end of the meeti ng with the Panel, and in any event no later than the
working day following the presentation. Parties and Third Parties shall provide the Panel and other
participants at the respective session with a provision al written version of their oral statements before
these statements are made.
10. In the interests of full transparency, oral pr esentations shall be made in the presence of the
Parties. Moreover, each Party's written submissions, including replies to questions put by the Panel,
shall be made available to the other Party. Thir d Parties shall receive copies of the Parties' first
written submissions and rebuttals as well as copies of the questions posed by the Panel to the Parties
and to the other Third Parties and copies of Parties' and Third Parties' responses to such questions.
Parties shall submit all factual evidence to the Pane l as early as possible and no later than during the
substantive meeting, except with respect to evid ence necessary for the answering of questions.
Exceptions will be granted by the Panel upon a showi ng of good cause. In such cases, the other Party
shall be accorded a period of time for commenting, as appropriate.
11. Within seven (7) calendar days following the submission of a written submission or
presentation of an oral statement to the Panel, th e Parties should provide the Panel with an executive
summary of the submission or statement. These executive summaries will be used by the Panel only
for the purpose of drafting a concise factual and arguments section of the Panel Report so as to
facilitate timely translation and circulation of the Panel report to the Members. They shall not serve
in any way as a substitute for the submissions of the parties. Each summary to be provided by each
Party shall not exceed ten (10) pages in length. Th ird Parties are invited to also submit an executive
summary seven (7) calendar days after delivering their written submission or oral statement. Third
Parties' executive summaries shall not exceed three (3) pages in length. The Panel may, in light of
further developments, allow the Parties and Third Parties to submit longer summaries.
12. To facilitate the maintenance of the record of the dispute, and to maximize the clarity of
submissions, in particular the refe rences to exhibits submitted by Pa rties, Parties shall sequentially
number their exhibits throughout the course of the dispute. For example, exhibits submitted by
Ecuador should be numbered ECU-1, ECU-2, etc. If the last exhibit in connection with the first
submission was numbered ECU-5, the first exhibit of the next submission thus should be numbered
ECU-6. Exhibits submitted by the European Communities should be numbered EC-1, EC-2, etc.
13. The Parties and Third Parties to this proceeding have the right to determine the composition
of their own delegations. Delega tions may include as representatives of the government concerned,
private counsel and advisers. The Parties and Thir d Parties shall have responsibility for all members
of their delegation and shall ensure that all member s of their delegation, as well as any other advisers
consulted by a Party or Third Party, act in acco rdance with the rules of the DSU and the Working
Procedures of this Panel, particularly in regard to the confidentiality of the proceedings. Parties shall
provide a list of the participants of their delegation to the Secretary of the Panel and to each other no
later than 5.00 pm, local Geneva time, the working day before any meeting with the Panel.
14. The Panel reserves the right to earmark its co mmunications to enable the identification of
possible breaches of confidentiality, especially the Panel's interim report and its final report before the
latter's circulation to all Members.

15. Any request for a preliminary ruling (including rulings on jurisdictional issues) to be made by
the Panel shall be submitted no later than in a Pa rty's first written submission. If Ecuador requests
any such ruling, the European Co mmunities shall submit its response to such a request in its first
written submission. If the European Communities re quests any such ruling, Ecuador shall submit its
response to such a request in its rebuttal submissi on. Exceptions to this procedure will be granted
upon a showing of good cause. The Panel shall info rm the Parties promptly of any preliminary
rulings it might make in the course of the proceedi ngs. In addition, the Panel may also choose to
inform third parties of such preliminary rulings, if it deems it relevant.
16. The following procedures regarding service of documents shall apply:
(a) Each Party shall serve its submissions directly on the other Party. Each Party shall, in
addition, serve its first written submissi on, rebuttals, and its responses to the
questions by the Panel and by the other Party on Third Parties. Each Third Party shall
serve its submissions on the Parties and othe r Third Parties. Each Party and Third
Party shall confirm in writing, at the time it provides the submission to the
Secretariat, that copies have been served as required.
(b) The Parties and Third Parties shall provid e their written submissions to the Panel,
through the Secretariat, by 5. 00 p.m., local Geneva time, on the deadlines established
by the Panel.
(c) Parties and Third Parties shall provide the Secretariat with written copies of their oral
statements on the first working day following the date of the presentation.
(d) The Parties and Third Parties shall provide the Secretariat with two (2) paper copies
of all their submissions as well as an "electronic" copy on a CD-ROM, diskette or as
an e-mail attachment, in a format compatible with the Secretariat's software. Paper
copies shall be delivered to the Disput e Settlement Registrar, ***** (Room 2150).
Electronic copies should be sent by e-mail to ***** at Dsregistry@wto.org
; ***** at
*****@wto.org; ***** at *****@wto.org ; -***** at *****@wto.org ; and *****
at *****@wto.org.
(e) The Panel will provide Parties with an electronic version of the descriptive sections of
its draft report, the interim report and the final report, as well as of other documents,
as appropriate. When the Panel transmits to the Parties or Third Parties both paper
and electronic versions of a document, the paper version shall constitute the official
version for the purposes of the record of the dispute.
17. These Working Procedures may be modified by the Panel as appropriate, after having
consulted the Parties.

ANNEX A-3

REVISED WORKING PROCEDURES FOR THE PANEL
DATED 23 AUGUST 2007

1. In its proceedings the Panel shall follow the relevant provisions of the Dispute Settlement
Understanding (DSU). In addition, the following Working Procedures shall apply.
2. The Panel will provide the Parties
1 and Third Parties 2 with a timetable for its proceedings.
The timetable may be modified by the Panel as appropriate, after having consulted the Parties.
3. The Panel shall meet in closed session. The Par ties, and interested Third Parties, shall be
present at the meetings only when invited by the Panel to appear before it.
4. The deliberations of the Panel and the documents submitted to it shall be kept confidential.
Nothing in the DSU, nor in these Working Pro cedures, precludes a Party or a Third Party from
disclosing statements of its own positions to the public. Members shall treat as confidential
information submitted by another Member to the Panel which that Member has designated as
confidential. As provided in Article 18.2 of the DS U, where a Party submits a confidential version of
its written submissions to the Panel, it shall al so, upon request of the other Party, provide a
non-confidential summary of the information contained in its submissions that could be disclosed to
the public. Non-confidential summaries shall be normally submitted no later than one week after the
written submission is presented to the Panel, unless a different deadline is granted by the Panel upon a
showing of good cause.
5. Before the substantive meeting of the Panel with the Parties, and in accordance with the
timetable approved by the Panel, the Parties shall transmit to the Panel written submissions and
subsequently written rebuttals in which they presen t the facts of the case, their arguments and their
counter-arguments, respectively. Third Parties may transmit to the Panel written submissions after the
rebuttals of the Parties have been submitted, and in accordance with the timetable approved by the
Panel.
6. All Third Parties shall be invited in writing to present their views during the substantive meeting
of the Panel with the Parties and the Third Parties. Third Parties may be present during the entirety of
that meeting.
7. At its substantive meeting with the Parties, the Panel shall ask Ecuador to present its case
first. Subsequently, and still at the same meeti ng, the European Communities will be asked to present
its arguments. At the same meeting, Third Parti es will be asked to present their views thereafter.
Parties will then be allowed an opportunity for fi nal statements, with Ecuador presenting its statement
first.
8. The Panel may decide to hold meetings with th e Parties jointly with the Panel in the case of
European Communities – Regime for the Importation, Sale and Distribution of Bananas (Recourse to
Article 21.5 of the DSU by the United States) . In that case, the order in which Members will be asked
to make their statements will be decided by the Panel.

1 Throughout this document, the term "Party" refers to either Ecuador or European Communities, as
appropriate. The term "Parties" refers to both Ecuador and European Communities.
2 Throughout the document, the term "Third Parties" refers to Belize, Brazil, Cameroon, Colombia,
Côte d'Ivoire, Dominica, the Dominican Republic, Ghana, Jamaica, Japan, Madagascar, Nicaragua, Panama, St.
Lucia, St. Vincent & the Grenadines, Suriname and the United States.

9. The Panel may at any time put questions to the Parties and to the Third Parties and ask them
for explanations either in the course of the substan tive meeting or afterwards in writing. Replies to
questions shall be submitted in writing by the dates specified by the Panel after consultation with the
Parties. In addition, the Parties shall be permitted to ask questions to each other and to Third Parties.
Third Parties may ask oral questions to the Parti es during the course of the substantive meeting, but
Parties are under no obligation to respond to those questions.
10. Each Party shall make available to the Panel and to the other Party a written version of its oral
statements, preferably at the end of the meeting wi th the Panel, and in any event no later than the
working day following the presentation. Any Third Party that wishes to present its views shall
similarly make available to the Panel and to the Pa rties and other Third Parties a written version of its
oral statements, preferably at the end of the meeti ng with the Panel, and in any event no later than the
working day following the presentation. Parties and Third Parties shall provide the Panel and other
participants at the respective session with a provision al written version of their oral statements before
these statements are made.
11. In the interests of full transparency, oral pr esentations shall be made in the presence of the
Parties. Moreover, each Party's written submissions, including replies to questions put by the Panel,
shall be made available to the other Party. Thir d Parties shall receive copies of the Parties' first
written submissions and rebuttals as well as copies of the questions posed by the Panel to the Parties
and to the other Third Parties and copies of Parties' and Third Parties' responses to such questions.
Parties shall submit all factual evidence to the Pane l as early as possible and no later than during the
substantive meeting, except with respect to evid ence necessary for the answering of questions.
Exceptions will be granted by the Panel upon a showi ng of good cause. In such cases, the other Party
shall be accorded a period of time for commenting, as appropriate.
12. Within seven (7) calendar days following the submission of a written submission or
presentation of an oral statement to the Panel, th e Parties should provide the Panel with an executive
summary of the submission or statement. These executive summaries will be used by the Panel only
for the purpose of drafting a concise factual and arguments section of the Panel Report so as to
facilitate timely translation and circulation of the Panel report to the Members. They shall not serve
in any way as a substitute for the submissions of the parties. Each summary to be provided by each
Party shall not exceed ten (10) pages in length. Th ird Parties are invited to also submit an executive
summary seven (7) calendar days after delivering their written submission or oral statement. Third
Parties' executive summaries shall not exceed three (3) pages in length. The Panel may, in light of
further developments, allow the Parties and Third Parties to submit longer summaries.
13. To facilitate the maintenance of the record of the dispute, and to maximize the clarity of
submissions, in particular the refe rences to exhibits submitted by Pa rties, Parties shall sequentially
number their exhibits throughout the course of the dispute. For example, exhibits submitted by
Ecuador should be numbered ECU-1, ECU-2, etc. If the last exhibit in connection with the first
submission was numbered ECU-5, the first exhibit of the next submission thus should be numbered
ECU-6. Exhibits submitted by the European Communities should be numbered EC-1, EC-2, etc.
14. The Parties and Third Parties to this proceeding have the right to determine the composition
of their own delegations. Delega tions may include as representatives of the government concerned,
private counsel and advisers. The Parties and Thir d Parties shall have responsibility for all members
of their delegation and shall ensure that all member s of their delegation, as well as any other advisers
consulted by a Party or Third Party, act in acco rdance with the rules of the DSU and the Working
Procedures of this Panel, particularly in regard to the confidentiality of the proceedings. Parties shall
provide a list of the participants of their delegation to the Secretary of the Panel and to each other no
later than 5.00 pm, local Geneva time, the working day before any meeting with the Panel.

15. The Panel reserves the right to earmark its co mmunications to enable the identification of
possible breaches of confidentiality, especially the Panel's interim report and its final report before the
latter's circulation to all Members.
16. Any request for a preliminary ruling (including rulings on jurisdictional issues) to be made by
the Panel shall be submitted no later than in a Pa rty's first written submission. If Ecuador requests
any such ruling, the European Co mmunities shall submit its response to such a request in its first
written submission. If the European Communities re quests any such ruling, Ecuador shall submit its
response to such a request in its rebuttal submissi on. Exceptions to this procedure will be granted
upon a showing of good cause. The Panel shall info rm the Parties promptly of any preliminary
rulings it might make in the course of the proceedi ngs. In addition, the Panel may also choose to
inform third parties of such preliminary rulings, if it deems it relevan
t.
17. The following procedures regarding service of documents shall apply:
(a) Each Party shall serve its submissions directly on the other Party. Each Party shall, in
addition, serve its first written submissi on, rebuttals, and its responses to the
questions by the Panel and by the other Party on Third Parties. Each Third Party shall
serve its submissions on the Parties and othe r Third Parties. Each Party and Third
Party shall confirm in writing, at the time it provides the submission to the
Secretariat, that copies have been served as required.
(b) In the light of the particular circumstances of this case, the Panel may decide to copy,
as appropriate, the complainant in the case of European Communities – Regime for
the Importation, Sale and Distribution of Bananas (Recourse to Article 21.5 of the
DSU by the United States) on communications directed to the Parties.
(c) The Parties and Third Parties shall provid e their written submissions to the Panel,
through the Secretariat, by 5. 00 p.m., local Geneva time, on the deadlines established
by the Panel.
(d) Parties and Third Parties shall provide the Secretariat with written copies of their oral
statements on the first working day following the date of the presentation.
(e) The Parties and Third Parties shall provide the Secretariat with two (2) paper copies
of all their submissions as well as an "electronic" copy on a CD-ROM, diskette or as
an e-mail attachment, in a format compatible with the Secretariat's software. Paper
copies shall be delivered to the Disput e Settlement Registrar, ***** (Room 2150).
Electronic copies should be sent by e-mail to ***** at DSregistry@wto.org

at *****@wto.org ; ***** at *****@wto.org ; ***** at ***** @wto.org ; and
***** at *****@wto.org.
(f) The Panel will provide Parties with an electronic version of the descriptive sections of
its draft report, the interim report and the final report, as well as of other documents,
as appropriate. When the Panel transmits to the Parties or Third Parties both paper
and electronic versions of a document, the paper version shall constitute the official
version for the purposes of the record of the dispute.
18. These Working Procedures may be modified by the Panel as appropriate, after having
consulted the Parties.

ANNEX B

Contents Page
Annex B-1 Notification of a Mutually Agreed Solution (WT/DS27/58) B-2
Annex B-2 Communication from the United States (WT/DS27/59) B-10
Annex B-3 Understanding on Ba nanas between Ecuador and the EC (WT/DS27/60) B-14
Annex B-4 The ACP-EC Partnerhsip Ag reement, Decision of 14 November 2001
(WT/MIN(01)/15)
B-20
Annex B-5 Transitional Regime for the EC Autonomous Tariff Rate Quotas on
Imports of Bananas, Decision of 14 November 2001 (WT/MIN(01)/16)
B-24

ANNEX B-1

NOTIFICATION OF A MUTUALLY AGREED SOLUTION

2 July 2001
 (01-3276)
 Original: English

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

Notification of Mutually Agreed Solution

 The following communication, dated 22 June 2001, from the Permanent Delegation of the
European Commission to the Chairman of the Dis pute Settlement Body, is circulated pursuant to
Article 3.6 of the DSU.

 The European Communities (EC) wish to notify the Dispute Settlement Body (DSB) that they
have reached, with the United States of America 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).

 Please find attached the text of the Understandings reached between the EC and the United
States and between the EC and Ecuador, resp ectively on 11 April 2001 and 30 April 2001, which
constitute a mutually agreed solution to the bananas dispute.

 I would be grateful if you could circulate a copy of this letter with its enclosures to the WTO
Members.

Enclosure 1: Understanding on Bananas between the EC and the United States of 11 April 2001

A. The European Commission and the United St ates have identified the means by which the
long-standing dispute over the EC’s banana import regime can be resolved.

B. In accordance with Article 16(1) of Regul ation No. (EC) 404/93 (as amended by Regulation
No. (EC) 216/2001), the European Communities (E C) will introduce a Tariff Only regime for
imports of bananas no later than 1 January 2006.

C. In the interim, the EC will implement an impor t regime on the basis of historical licensing as
follows :

 1. Effective 1 July 2001, the EC will im plement an import regime on the basis of
historical licensing as set out in Annex 1.

 2. Effective as soon as possible thereafter, subject to Council and European Parliament
approval and to adoption of the Article XIII waiver referred to in paragraph E, the EC
will implement an import regime on the basis of historical licensing as set out in
Annex 2. The Commission will seek to obtain the implementation of such an import
regime as soon as possible.

D. With respect to the United States' imposition of increased duties applied to certain EC
products as of 19 April 1999 covering trade in an amount of US$191.4 million per year (the
"increased duties"):

 1. Upon implementation of the import re gime described in paragraph C(1), the
United States will provisionally suspend its imposition of the increased duties.

 2. Upon implementation of the import re gime described in paragraph C(2), the
United States will terminate its imposition of the increased duties.

 3. The United States may reimpose the increased duties if the import regime described
in paragraph C(2) does not enter into force by 1 January 2002.

E. The United States will lift its reserve concer ning the waiver of Article I of the GATT 1994
that the EC has requested for preferential access to the EC of goods originating in ACP states
signatory to the Cotonou Agreement; and will actively work towards promoting the
acceptance of an EC request for a waiver of Article XIII of the GATT 1994 needed for the
management of quota C under the import regi me described in paragraph C(2) until
31 December 2005.

F. The EC and the United States have informed Ecuador and will cooperate in seeking the
agreement of all parties.

Annex I

Phase I

1. A bound tariff-rate quota (TRQ) designated as quota "A" will be set at 2,200,000 tonnes. An
autonomous TRQ designated as quota "B" will be set at 353,000 tonnes. These TRQs will be
managed as one, with the total quota being 2, 553,000 tonnes. There is no expectation of
allocation of shares of either of these TRQs among country suppliers, and the Commission
will not seek to convene a meeting to that effect of the principal supplying countries except
upon the joint request of all such countries. The tariff applied to bananas imported in the "A"
and "B" quotas shall not exceed 75 euro/tonne.

2. A TRQ designated as quota "C" will be set at 850,000 tonnes.

3. Import licenses for 83% of the "A" and "B" TRQs will be distributed to "traditional" operators
based on each qualified "traditional" operato r's 1994-96 average annual final reference
volume ("reference volume") for the "A/B" quotas. Qualified "traditional" operators will be
identified on the basis of the distribution of licenses that occurred under Regulation 404,
Article 19.1(a) and Regulation 1442, Article 3.1(a) for "Category A subfunction (a)".
Importers will not need to produce new evidence.

4. Licenses for TRQ "C" are intended to be distri buted broadly in accordance with the principles
to be utilized in managing of licenses for TRQ's "A" and "B" and on the basis of imports of
ACP-origin bananas. The European Commissi on and the United States will consult again
within 4 weeks with a view to finalizing the licensing principles for TRQ "C".

5. Within each TRQ, licenses may be used to import bananas from any source. Licenses to
import bananas into TRQ "C" cannot be used to import bananas into TRQs "A" or "B", and
vice versa.

6. A "non-traditional" operator category will be cr eated with respect to 17% of the quantity of
the "A and B" TRQs. Non-traditional operato rs cannot become traditional operators in
subsequent periods. Management of non-trad itional imports will be done by simultaneous
examination.

7. The licensing regime will be administered in good faith and on a non-discriminatory basis.

8. The Commission will provide the United St ates as soon as possible the verified statistics
confirming the implementation of this phase, taking into account the protection of business
confidential information.

Annex II

Phase II

1. During Phase II, the provisions applying to Phase I will continue, excep t as provided in this
Annex.

2. In Phase II, TRQ "B" will be 453,000 tonnes (an increase of 100,000 tonnes). The total for
the "A" and "B" TRQs will be 2,653,000 tonnes.

3. The TRQ "C" will be 750,000 tonnes and w ill be reserved for bananas of ACP origin.

4. The share of import licenses to "traditional" operators for the "A" and "B" TRQs will be
allocated in accordance with th e procedure in Annex I. Import licenses will be distributed
based on each qualified "traditional" opera tor's 1994-96 refere nce volume through
31 December 2003. Thereafter, the share of im port licenses to "traditional" operators for the
"A" and "B" TRQs will be allocated based only on usage of licenses issued under Phase II of
this Understanding, through credible documentation.

5. The Commission will provide the United St ates as soon as possible the verified statistics
confirming the implementation of this phase, taking into account the protection of business
confidential information.

Enclosure 2: Understanding on Bananas between the EC and Ecuador of 30 April 2001

A. The European Commission and Ecuador ha ve identified the means by which the long-
standing dispute over the EC’s banana import regime can be resolved.

B. In accordance with Article 16(1) of Regul ation No. (EC) 404/93 (as amended by Regulation
No. (EC) 216/2001), the European Communities (E C) will introduce a Tariff Only regime for
imports of bananas no later than 1 January 2006. GATT Art XXVIII negotiations shall be
initiated in good time to that effect, recogni zing Ecuador as the principal supplier in these
negotiations.

C. In the interim, the EC will implement an impor t regime on the basis of historical licensing as
follows :

 1. Effective 1 July 2001, the EC will im plement an import regime on the basis of
historical licensing as set out in Annex 1.

 2. Effective as soon as possible thereafter, subject to Council and European Parliament
approval and to adoption of the Article XIII wa iver referred to in paragraph F, the EC
will implement an import regime on the basis of historical licensing as set out in
Annex 2. The Commission will seek to obtain the implementation of such an import
regime as soon as possible.

D. Ecuador takes note that the European Commi ssion will examine the trade in organic bananas
and report accordingly by 31 December 2004.

E. Upon implementation of the import regime d escribed in paragraph C, Ecuador's right to
suspend concessions or other obligations of a level not exceeding US$201.6 million per year
vis-à-vis the EC will be terminated.

F. Ecuador will lift its reserve concerning the wa iver of Article I of the GATT 1994 that the EC
has requested for preferential access to the EC of goods originating in ACP states signatory to
the Cotonou Agreement; and will actively work towards promoting the acceptance of an EC
request for a waiver of Article XIII of the GATT 1994 needed for the management of quota C
under the import regime described in paragraph C(2) until 31 December 2005.

G. The EC and Ecuador consider that this U nderstanding constitutes a mutually agreed solution
to the banana dispute.

Annex I

Phase I

1. A bound tariff-rate quota (TRQ) designated as quota "A" will be set at 2,200,000 tonnes. An
autonomous TRQ designated as quota "B" will be set at 353,000 tonnes. These TRQs will be
managed as one, with the total quota being 2, 553,000 tonnes. There is no expectation of
allocation of shares of either of these TRQs among country suppliers, and the Commission
will not seek to convene a meeting to that effect of the principal supplying countries except
upon the joint request of all such countries. The tariff applied to bananas imported in the "A"
and "B" quotas shall not exceed 75 euro/tonne.

2. A TRQ designated as quota "C" will be set at 850,000 tonnes.

3. Import licenses for 83% of the "A" and "B" TRQs will be distributed to "traditional" operators
based on each qualified "traditional" operato r’s 1994-96 average final reference volume
("reference volume") for the "A/B" quotas. Qualif ied "traditional" operators will be identified
on the basis of the distribution of licenses that occurred under Regulation 404, Article 19.1(a)
and Regulation 1442, Article 3.1(a) for "Cate gory A subfunction (a)". Importers will not need
to produce new evidence.

4. Licenses for TRQ "C" are intended to be distri buted broadly in accordance with the principles
to be utilized in managing of licenses for TRQ’ s "A" and "B" and on the basis of imports of
ACP-origin bananas.

5. Within each TRQ, licenses may be used to import bananas from any source. Licenses to
import bananas into TRQ "C" cannot be used to import bananas into TRQs "A" and "B", and
vice versa.

6. A "non-traditional" operator category will be cr eated with respect to 17% of the quantity of
the "A and B" TRQs. Non-traditional operato rs cannot become traditional operators in
subsequent periods.

7. Management of non-traditi onal operators will be done by simultaneous examination,
respecting the following conditions:

 (a) the activity period to consider for registration shall be 2 years;

 (b) the minimum annual customs value of imports into the EU to qualify shall be
1.2 million € ;

 (c) traditional importers in Quota C may only qualify as non-traditional importers in
Quota A/B when they prove that they im ported bananas from third countries other
than ACP in the relevant period;

 (d) in application for licenses, the maxi mum requested quantities for each non-traditional
operator shall be not higher than 12.5% of the quantity reserved for non-traditional
operators;

 (e) a security of 150€/t shall be required;

 (f) a non-traditional operator shall be required to be responsible for shipping bananas to
the EU;

 (g) simultaneous examination shall be conducted in a pro-rata basis;

 (h) dissuasive penalties shall apply in the ev ent that a traditional operator be found to be
controlling a non-traditional operator within the same Quota;

 (i) transmissibility of licenses between non-traditional operators will be permitted.

8. The licensing regime will be administered in good faith and on a non-discriminatory basis.

Annex II

Phase II

1. During Phase II, the provisions applying to Phase I will continue, excep t as provided in this
Annex.

2. In Phase II, TRQ "B" will be 453,000 tonnes (an increase of 100,000 tonnes). The total for
the "A" and "B" TRQs will be 2,653,000 tonnes.

3. The TRQ "C" will be 750,000 tonnes and w ill be reserved for bananas of ACP origin.

4. The share of import licenses to "traditional" operators for the "A" and "B" TRQs will be
allocated in accordance with th e procedure in Annex I. Import licenses will be distributed
based on each qualified "traditional" opera tor's 1994-96 refere nce volume through
31 December 2003. Thereafter, the share of im port licenses to "traditional" operators for the
"A" and "B" TRQs will be allocated based only on usage of licenses issued under Phase II of
this Understanding, through credible documentation.

5. The Commission will provide regularly the ve rified statistics on the importation of bananas
from Ecuador.

ANNEX B-2

COMMUNICATION FROM THE UNITED STATES

2 July 2001
 (01-3275)
 Original: English

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

Communication from the United States

 The following communication, dated 26 June 2001, from the Permanent Mission of the
United States to the Chairman of the Dispute Settlem ent Body, is circulated at the request of that
delegation.

 For the information of all Members, please find attached the text of the Understanding
reached between the European Communities (EC) and the United States on 11 April 2001.

 We have received and reviewed the EC's separat e notification of 22 June 2001, to the Dispute
Settlement Body (DSB) of our Understanding on bana nas. As we have explained to the EC during
bilateral discussions last week and indicated at m eetings of the DSB, the Understanding identifies 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 taken by all parties, it would also be
premature to take this item off the DSB agenda.

 The United States very much looks forward to the prospect of a resolution to this
long-standing dispute, and we will of course conti nue to be pleased to consult with the Commission
and other interested parties as the EC proceeds w ith implementing its regulations in accordance with
the Understanding.

Understanding on Bananas

A. The European Commission and the United St ates have identified the means by which the
long-standing dispute over the EC’s banana import regime can be resolved.

B. In accordance with Article 16(1) of Regul ation No. (EC) 404/93 (as amended by Regulation
No. (EC) 216/2001), the European Communities (E C) will introduce a Tariff Only regime for
imports of bananas no later than 1 January 2006.

C. In the interim, the EC will implement an impor t regime on the basis of historical licensing as
follows :

 1. Effective 1 July 2001, the EC will im plement an import regime on the basis of
historical licensing as set out in Annex 1.

 2. Effective as soon as possible thereafter, subject to Council and European Parliament
approval and to adoption of the Article XIII waiver referred to in paragraph E, the EC
will implement an import regime on the basis of historical licensing as set out in
Annex 2. The Commission will seek to obtain the implementation of such an import
regime as soon as possible.

D. With respect to the United States' imposition of increased duties applied to certain EC
products as of 19 April 1999 covering trade in an amount of US$191.4 million per year (the
"increased duties"):

 1. Upon implementation of the import re gime described in paragraph C(1), the
United States will provisionally suspend its imposition of the increased duties.

 2. Upon implementation of the import re gime described in paragraph C(2), the
United States will terminate its imposition of the increased duties.

 3. The United States may reimpose the increased duties if the import regime described
in paragraph C(2) does not enter into force by 1 January 2002.

E. The United States will lift its reserve concer ning the waiver of Article I of the GATT 1994
that the EC has requested for preferential access to the EC of goods originating in ACP states
signatory to the Cotonou Agreement; and will actively work towards promoting the
acceptance of an EC request for a waiver of Article XIII of the GATT 1994 needed for the
management of quota C under the import regi me described in paragraph C(2) until
31 December 2005.

F. The EC and the United States have informed Ecuador and will cooperate in seeking the
agreement of all parties.

Annex I

Phase I

1. A bound tariff-rate quota (TRQ) designated as quota "A" will be set at 2,200,000 tonnes. An
autonomous TRQ designated as quota "B" will be set at 353,000 tonnes. These TRQs will be
managed as one, with the total quota being 2, 553,000 tonnes. There is no expectation of
allocation of shares of either of these TRQs among country suppliers, and the Commission
will not seek to convene a meeting to that effect of the principal supplying countries except
upon the joint request of all such countries. The tariff applied to bananas imported in the "A"
and "B" quotas shall not exceed 75 euro/tonne.

2. A TRQ designated as quota "C" will be set at 850,000 tonnes.

3. Import licenses for 83% of the "A" and "B" TRQs will be distributed to "traditional" operators
based on each qualified "traditional" operato r's 1994-96 average annual final reference
volume ("reference volume") for the "A/B" quotas. Qualified "traditional" operators will be
identified on the basis of the distribution of licenses that occurred under Regulation 404,
Article 19.1(a) and Regulation 1442, Article 3.1(a) for "Category A subfunction (a)".
Importers will not need to produce new evidence.

4. Licenses for TRQ "C" are intended to be distri buted broadly in accordance with the principles
to be utilized in managing of licenses for TRQ's "A" and "B" and on the basis of imports of
ACP-origin bananas. The European Commissi on and the United States will consult again
within 4 weeks with a view to finalizing the licensing principles for TRQ "C".

5. Within each TRQ, licenses may be used to import bananas from any source. Licenses to
import bananas into TRQ "C" cannot be used to import bananas into TRQs "A" or "B", and
vice versa.

6. A "non-traditional" operator category will be cr eated with respect to 17% of the quantity of
the "A and B" TRQs. Non-traditional operato rs cannot become traditional operators in
subsequent periods. Management of non-trad itional imports will be done by simultaneous
examination.

7. The licensing regime will be administered in good faith and on a non-discriminatory basis.

8. The Commission will provide the United St ates as soon as possible the verified statistics
confirming the implementation of this phase, taking into account the protection of business
confidential information.

Annex II

Phase II

1. During Phase II, the provisions applying to Phase I will continue, excep t as provided in this
Annex.

2. In Phase II, TRQ "B" will be 453,000 tonnes (an increase of 100,000 tonnes). The total for
the "A" and "B" TRQs will be 2,653,000 tonnes.

3. The TRQ "C" will be 750,000 tonnes and w ill be reserved for bananas of ACP origin.

4. The share of import licenses to "traditional" operators for the "A" and "B" TRQs will be
allocated in accordance with th e procedure in Annex I. Import licenses will be distributed
based on each qualified "traditional" opera tor's 1994-96 refere nce volume through
31 December 2003. Thereafter, the share of im port licenses to "traditional" operators for the
"A" and "B" TRQs will be allocated based only on usage of licenses issued under Phase II of
this Understanding, through credible documentation.

5. The Commission will provide the United St ates as soon as possible the verified statistics
confirming the implementation of this phase, taking into account the protection of business
confidential information.

ANNEX B-3

UNDERSTANDING ON BANANAS
BETWEEN ECUADOR AND THE EC

9 July 2001
 (01-3398)
 Original: English

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

Understanding on Bananas between Ecuador and the EC

 The following communication, dated 3 July 2001, from the Permanent Mission of Ecuador to
the Chairman of the Dispute Settlement Body, is circulated at the request of that delegation.

 For the information of all WTO members, please find attached the text of the Understanding
on Bananas reached by Ecuador and the European Communities on 30 April 2001.

After a careful analysis on how best to presen t this Understanding to the membership of the
Organization, having reviewed the separate notifica tion made unilaterally by the EC on 22 June 2001
(WT/DS27/58), and bearing in mind the subsequent discussions maintained with the EC after the
Understanding was reached, Ecuador considers it ne cessary to put forward the following comments
for the Members' consideration.

1. The Understanding identifies 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. As Ecuador has expressed during th e last two meetings of the DSB, it will
remain vigilant that these phases and elements be fully implemented and executed.

2. Once the EC has amended its banana im port regime - which was found to be WTO
inconsistent by the original panel that revi ewed the case as a result of Ecuador's recourse to
Article 21.5 of the DSU (WT/DS27/RW/ECU) - Ecuador notes that the Understanding
reached 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.

3. Since the new EC banana import regime which is currently in force still requires that several
steps be taken in the context of the DSB and other WTO bodies, it would be premature to take

this item off the DSB agenda which considers th is issue at every regular meeting pursuant to
Article 21.6 of the DSU.

In light of the above and although Ecuador sees the Understanding as an agreed solution
which can contribute to an overall, definite and uni versally accepted solution, it must be made clear
that the provisions of Article 3.6 of the DSU are not applicable in this case.

We request that you please circulate a copy of this letter with its attachment to all WTO
Members and request that the Secretariat provide a copy of these documents to the Council of Trade
in Goods.

Understanding on Bananas

A. The European Commission and Ecuador ha ve identified the means by which the long-
standing dispute over the EC’s banana import regime can be resolved.

B. In accordance with Article 16(1) of Regul ation No. (EC) 404\93 (as amended by Regulation
No. (EC) 216\2001), the European Communities (EC) will introduce a Tariff Only regime for imports
of bananas no later than 1 January 2006. GATT Art XXVIII negotiations sh all be initiated in good
time to that effect, recognizing Ecuador as the principal supplier in these negotiations.

C. In the interim, the EC will implement an impor t regime on the basis of historical licensing as
follows :

1. Effective 1 July 2001, the EC will impl ement an import regime on the basis of
historical licensing as set out in Annex 1.

2. Effective as soon as possible thereafter, subj ect to Council and European Parliament
approval and to adoption of the Article XIII wa iver referred to in paragraph F, the EC
will implement an import regime on the basis of historical licensing as set out in
Annex 2. The Commission will seek to obtain the implementation of such an import
regime as soon as possible.

D. Ecuador takes note that the European Commi ssion will examine the trade in organic bananas
and report accordingly by 31 December 2004.

E. Upon implementation of the import regime de scribed in paragraph C, Ecuador’s right to
suspend concessions or other obligations of a leve l not exceeding US$201.6 million per year vis-à-vis
the EC will be terminated.

F. Ecuador will lift its reserve concerning the wa iver of Article I of the GATT 1994 that the EC
has requested for preferential access to the EC of goods originating in ACP States signatory to the
Cotonou Agreement; and will actively work towards pr omoting the acceptance of an EC request for a
waiver of Article XIII of the GATT 1994 needed for the management of quota C under the import
regime described in paragraph C(2) until 31 December 2005.

G. The EC and Ecuador consider that this U nderstanding constitutes a mutually agreed solution
to the banana dispute.

Annex I

Phase I

1. A bound tariff-rate quota (TRQ) designated as quota "A" will be set at 2,200,000 tonnes. An
autonomous TRQ designated as quota "B" will be set at 353,000 tonnes. These TRQs will be
managed as one, with the total quota being 2,553,000 tonnes. There is no expectation of allocation of
shares of either of these TRQs among country suppliers, and the Commission will not seek to convene
a meeting to that effect of the principal supplying countries except upon the joint request of all such
countries. The tariff applied to bananas importe d in the "A" and "B" quotas shall not exceed
75 euro/tonne.

2. A TRQ designated as quota “C” will be set at 850,000 tonnes.

3. Import licenses for 83% of the "A" and "B" TRQs will be distributed to "traditional" operators
based on each qualified "traditional" operator’s 19 94-96 average final reference volume ("reference
volume") for the “A/B” quotas. Qualified “traditional” operators will be identified on the basis of the
distribution of licenses that occurred under Regula tion 404, Article 19.1(a) and Regulation 1442,
Article 3.1(a) for “Category A subfunction (a)”. Importers will not need to produce new evidence.

4. Licenses for TRQ “C” are intended to be distri buted broadly in accordance with the principles
to be utilized in managing of licenses for TRQs "A " and "B" and on the basis of imports of ACP-
origin bananas.

5. Within each TRQ, licenses may be used to import bananas from any source. Licenses to
import bananas into TRQ "C" cannot be used to import bananas into TRQs "A" and "B", and vice
versa.

6. A "non-traditional" operator category will be cr eated with respect to 17% of the quantity of
the “A and B” TRQs. Non-traditional operators ca nnot become traditional operators in subsequent
periods.

7. Management of non-traditi onal operators will be done by simultaneous examination,
respecting the following conditions:

 (a) the activity period to consider for registration shall be 2 years;

 (b) the minimum annual customs value of imports into the EU to qualify shall be
1.2 million € ;

(c) traditional importers in Quota C may on ly qualify as non-traditional importers in
Quota A/B when they prove that they im ported bananas from third countries other
than ACP in the relevant period;

(d) in application for licenses, the maxi mum requested quantities for each non-traditional
operator shall be not higher than 12.5% of the quantity reserved for non-traditional
operators;

 (e) a security of 150€/t shall be required;

(f) a non-traditional operator shall be required to be responsible for shipping bananas to
the EU;

 (g) simultaneous examination shall be conducted in a pro-rata basis;

(h) dissuasive penalties shall apply in the even t that a traditional operator be found to be
controlling a non-traditional operator within the same Quota;

 (i) transmissibility of licenses between non-traditional operators will be permitted.

8. The licensing regime will be administered in good faith and on a non-discriminatory basis.

Annex II

Phase II

1. During Phase II, the provisions applying to Phase I will continue, excep t as provided in this
Annex.

2. In Phase II, TRQ "B" will be 453,000 tonnes (a n increase of 100,000 tonnes). The total for the
"A" and "B" TRQs will be 2,653,000 tonnes.

3. The TRQ "C" will be 750,000 tonnes and w ill be reserved for bananas of ACP origin.

4. The share of import licenses to "traditional" operators for the "A" and "B" TRQs will be
allocated in accordance wi th the procedure in Annex I. Import licenses will be distributed based on
each qualified "traditional" operator’s 1994-96 re ference volume through December 31, 2003.
Thereafter, the share of import licenses to "traditi onal" operators for the "A" and "B" TRQs will be
allocated based only on usage of licenses issued under Phase II of this Understanding, through
credible documentation.

5. The Commission will provide regularly the ve rified statistics on the importation of bananas
from Ecuador.

ANNEX B-4

THE ACP-EC PARTNERSHIP AGREEMENT
DECISION OF 14 NOVEMBER 2001

WT/MIN(01)/15
14 November 2001
 (01-5786)
MINISTERIAL CONFERENCE
Fourth Session
Doha, 9 - 14 November 2001

EUROPEAN COMMUNITIES – THE ACP-EC PARTNERSHIP AGREEMENT

Decision of 14 November 2001

 The Ministerial Conference,

 Having regard to paragraphs 1 and 3 of Article IX of the Marrakech Agreement Establishing
the World Trade Organisation (the "WTO Agreemen t"), the Guiding Principles to be followed in
considering applications for waivers adopted on 1 November 1956 (BISD 5S/25), the Understanding
in Respect to Waivers of Obligations under th e General Agreement on Tariffs and Trade 1994,
paragraph 3 of Article IX of the WTO Agreem ent, and Decision-Making Procedures under Articles
IX and XII of the WTO Agreement agreed by the General Council (WT/L/93);

 Taking note of the request of the European Communiti es (EC) and of the Governments of the
ACP States which are also WTO members (hereinaft er also the “Parties to the Agreement”) for a
waiver from the obligations of the European Co mmunities under paragraph 1 of Article I of the
General Agreement with respect to the granting of preferential tariff treatment for products originating
in ACP States as required by Article 36.3, Annex V and its Protocols of the ACP-EC Partnership
Agreement (hereinafter also referred to as “the Agreement”)
1;

 Considering that, in the field of trade, the provisions of the ACP-EC Partnership Agreement
requires preferential tariff treatment by the EC of exports of products originating in the ACP States;

 Considering that the Agreement is aimed at impr oving the standard of living and economic
development of the ACP States, including the least developed among them;

 Considering also that the preferential tariff treatment for products originating in ACP States
as required by Article 36.3, Annex V and its Protoc ols of the Agreement is designed to promote the
expansion of trade and economic development of beneficiaries in a manner consistent with the

1 As contained in documents G/C/W/187, G/C/W/204, G/C/W/254 and G/C/W/269).

objectives of the WTO and with the trade, financia l and development needs of the beneficiaries and
not to raise undue barriers or to create undue difficulties for the trade of other members;

 Considering that the Agreement establishes a preparatory period extending until 31 December
2007, by the end of which new trading arrangements shall be concluded between the Parties to the
Agreement;

 Considering that the trade provisions of the Agreement have been applied since 1 March 2000
on the basis of transitional measures adopted by the ACP-EC joint institutions;

 Noting the assurances given by the Parties to the Agreement that they will, upon request,
promptly enter into consultations with any interest ed member with respect to any difficulty or matter
that may arise as a result of the implementation of the preferential tariff treatment for products
originating in ACP States as required by Article 36.3, Annex V and its Protocols of the Agreement;

 Noting that the tariff applied to bananas importe d in the "A" and "B" quotas shall not exceed
75 €/tonne until the entry into force of the new EC tariff-only regime.

 Noting that the implementation of the preferential tariff treatment for bananas may be affected
as a result of GATT Article XXVIII negotiations;

 Noting the assurances from the Parties to the Agre ement that any re-binding of the EC tariff
on bananas under the relevant GATT Article XXVIII pr ocedures should result in at least maintaining
total market access for MFN banana suppliers a nd their willingness to accept a multilateral control on
the implementation of this commitment.

 Considering that, in light of the foregoing, the ex ceptional circumstances justifying a waiver
from paragraph 1 of Article I of the General Agreement exist;

 Decides as follows:

1. Subject to the terms and conditions set out he reunder, Article I, para graph 1 of the General
Agreement shall be waived, until 31 December 2007, to the extent necessary to permit the
European Communities to provide preferential tariff treatment for products originating in
ACP States as required by Article 36.3, Annex V and its Protocols of the ACP-EC Partnership
Agreement,
2 without being required to extend the same preferential treatment to like products
of any other member.

2. The Parties to the Agreement sha ll promptly notify the General Council of any changes in the
preferential tariff treatment to products originating in ACP States as required by the relevant
provisions of the Agreement covered by this waiver.

3. The Parties to the Agreement will, upon request , promptly enter into consultations with any
interested member with respect to any difficu lty or matter that may arise as a result of the
implementation of the preferential tariff treatment for products originating in ACP States as
required by Article 36.3, Annex V and its Pr otocols of the Agreement; where a member
considers that any benefit accruing to it under the General Agreement may be or is being
impaired unduly as a result of such implementa tion, such consultations shall examine the
possibility of action for a satisfactory adjustment of the matter.

2 Any reference to the Partnership Agreement in th is Decision shall also in clude the period during
which the trade provisions of this Agreement are applie d on the basis of transitional measures adopted by the
ACP-EC joint institutions.

3bis With respect to bananas, the additional provisions in the Annex shall apply.

4. Any member which considers that the preferential tariff treatment for products originating in
ACP States as required by Article 36.3, Annex V and its Protocols of the Agreement is being
applied inconsistently with this waiver or that any benefit accruing to it under the General
Agreement may be or is being impaired undul y as a result of the implementation of the
preferential tariff treatment for products originating in ACP States as required by Article 36.3,
Annex V and its Protocols of the Agreemen t and that consultations have proved
unsatisfactory, may bring the ma tter before the General Council , which will examine it
promptly and will formulate any recommendations that they judge appropriate.

5. The Parties to the Agreement will submit to the General Council an annual report on the
implementation of the preferential tariff treatment for products originating in ACP States as
required by Article 36.3, Annex V and its Protocols of the Agreement.

6. This waiver shall not preclude the right of affected members to have recourse to
Articles XXII and XXIII of the General Agreement.

ANNEX

 The waiver would apply for ACP produc ts under the Cotonou Agreement until
31 December 2007. In the case of bananas, th e waiver will also apply until 31 December 2007,
subject to the following, which is without prejudice to rights and obligations under Article XXVIII.

- The parties to the Cotonou Agreement will in itiate consultations with Members exporting to
the EU on a MFN basis (interested parties) early enough to finalize the process of
consultations under the procedures hereby establishe d at least three months before the entry
into force of the new EC tariff only regime.

- No later than 10 days after the conclusion of Article XXVIII negotiations, interested parties
will be informed of the EC intentions concerni ng the rebinding of the EC tariff on bananas.
In the course of such consultations, the EC will provide information on the methodology used
for such rebinding. In this regard, all EC WTO market-access commitments relating to
bananas should be taken into account.

- Within 60 days of such an announcement, any such interested party may request arbitration.

- The arbitrator shall be appointed within 10 days, following the request subject to agreement
between the two parties, failing which the arbitrator shall be appointed by the Director-
General of the WTO, following consultations wi th the parties, within 30 days of the
arbitration request. The mandate of the arbitrator shall be to determine, within 90 days of his
appointment, whether the envisaged rebinding of the EC tariff on bananas would result in at
least maintaining total market access for MF N banana suppliers, ta king into account the
above-mentioned EC commitments.

- If the arbitrator determines that the rebinding would not result in at least maintaining total
market access for MFN suppliers, the EC shall rectify the matter. Within 10 days of the
notification of the arbitration award to th e General Council, the EC will enter into
consultations with those interested parties that requested the arbitration. In the absence of a
mutually satisfactory solution, the same arbitrat or will be asked to determine, within 30 days
of the new arbitration request, whether the EC has rectified the matter. The second arbitration
award will be notified to the General Council. If 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
Article XXVIII negotiations and the arbitration procedures shall be concluded before the
entry into force of the new EC tariff only regime on 1 January 2006.

ANNEX B-5

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
 (01-5787)
MINISTERIAL CONFERENCE
Fourth Session
Doha, 9 – 14 November 2001

EUROPEAN COMMUNITIES – TRANSITIONAL REGIME FOR THE EC
AUTONOMOUS TARIFF RATE QUOTAS ON IMPORTS OF BANANAS

Decision of 14 November 2001

The Ministerial Conference,

Having regard to the Guiding Principles to be followed in considering applications for
waivers adopted on 1 November 1956, the Understa nding in Respect of Waivers of Obligations under
the General Agreement on Tariffs and Trade 1994, and paragraphs 3 and 4 of Article IX of the
Marrakesh Agreement Establishing the World Trade Organization (hereinafter "WTO Agreement");

Taking note of the request of the European Comm unities for a waiver from its obligations
under paragraphs 1 and 2 of Article XIII of the GATT 1994 with respect to bananas;

Taking note of the understandings reached by the EC , Ecuador and the United States that
identify the means by which the longstanding dispute over the EC’s banana regime can be resolved, in
particular their provision for a temporary global quota allocation for ACP banana supplying countries
under specified conditions;

Taking into account the exceptional circumstances surr ounding the resolution of the bananas
dispute and the interests of many WTO Members in the EC banana regime;

Recognizing the need to afford sufficient protecti on to the ACP banana supplying countries,
including the most vulnerable, during a limited transition period, to enable them to prepare for a tariff-
only regime;

Noting assurances given by the EC that it will, upon request, promptly enter into consultations
with any interested member with respect to any diff iculty or matter that may arise as a result of the
implementation of the tariff rate quota for bananas originating in ACP States;

Considering that, in light of the foregoing, the ex ceptional circumstances justifying a waiver
from paragraphs 1 and 2 of Article XIII of the GATT 1994 with respect to bananas exist;

Decides as follows:

1. With respect to the EC’s imports of bananas, as of 1 January 2002, and until
31 December 2005, paragraphs 1 and 2 of Article XIII of the GATT 1994 are waived with
respect to the EC’s separate tariff quota of 750,000 tonnes for bananas of ACP origin.

2. The EC will, upon request, promptly enter into consultations with any interested member with
respect to any difficulty or matter that may arise as a result of the implementation of the
separate tariff rate quota for bananas originati ng in ACP States covered by this waiver; where
a Member considers that any benefit accruing to it under the GATT 1994 may be or is being
impaired unduly as a result of such implementa tion, such consultations shall examine the
possibility of action for a satisfactory adjustment of the matter.

3. Any Member which considers that the separat e tariff rate quota for bananas originating in
ACP States covered by this waiver is being applie d inconsistently with this waiver or that any
benefit accruing to it under the GATT 1994 may be or is being impaired unduly as a result of
the implementation of the separate tariff rate quota for bananas originating in ACP States
covered by this waiver and that consultati ons have proved unsatisfactory, may bring the
matter before the General Council, which will examine it promptly and will formulate any
recommendations that they judge appropriate.

4. This waiver shall not preclude the right of affected members to have recourse to Articles XXII
and XXIII of the GATT 1994.

ANNEX C

Contents Page
Annex C-1 Article XXIV:6 Negotiations, Enlargement of the European Union,
Communication from the European Communities (G/SECRET/20),
30 January 2004
C-2
Annex C-2 Article XXIV:6 Negotiations, Enlargement of the European Union,
Communication from the European Communities (G/SECRET/26),
28 September 2006
C-4

ANNEX C-1

ARTICLE XXIV.6 NEGOTIATIONS
ENLARGEMENT OF THE EUROPEAN UNION
COMMUNICATION FROM THE EUROPEAN COMMUNITIES

No. _________________

30 January 2004
 (04-0350)

 Original: English

ARTICLE XXIV:6 NEGOTIATIONS

Enlargement of the European Union

Communication from the European Communities

 The following communication, dated 19 January 2 004, is being circulated at the request of the
Delegation of the European Communities.

Notification
by the European Communities to
the World Trade Organization and its Members
concerning decisions to enter into a customs union, resulting from the

Enlargement of the European Union

by the accession of

 The Czech Republic, the Republic of Estonia, the Republic of Cyprus, the Republic of
Latvia, the Republic of Lithuania, the Republic of Hungary, the Republic of Malta, the Republic of
Poland, the Republic of Slovenia and the Slovak Republic;

 Pursuant to the Understanding on the Interpretation of Article XXIV GATT 1994,
paragraph 4, incorporating the Guidelines adopted on 10 November 1980 (BISD 27S/26-28),
paragraph 1 (the "Guidelines").

 Following, inter alia, the decision of 14 April 2003 of the Council of the European Union on
the admission to the European Union of the Czech Re public, the Republic of Estonia, the Republic of
Cyprus, the Republic of Latvia, the Republic of Lit huania, the Republic of Hungary, the Republic of
Malta, the Republic of Poland, the Republic of Slovenia and the Slovak Republic and pending the
finalisation of ratification procedures, the Europ ean Communities have the honour to notify the WTO
and its Members that these states have decided to become members of the European Union on

1 May 2004. The Treaty of Accession is published in the Official Journal of the European Union
L 236 of 23 September 2003. A version subject to a legal disclaimer is published at:
http://europa.eu.int/comm/enlargement/negotiations/treaty_of_accession_2003/index.htm.

 Accordingly, the European Communities hereby notifies, within the framework of procedures
laid down in Article XXIV GATT 1994, and in partic ular paragraph 6 thereof, the withdrawal on
1 May 2004 of the commitments in Schedule XC II Czech Republic, Schedule CXLIV Republic of
Estonia, Schedule CVII Republic of Cyprus, Sc hedule CXLIII Republic of Latvia, Schedule CL
Republic of Lithuania, Schedule LXXI Republic of Hungary, Schedule CXVII Republic of Malta,
Schedule LXV Republic of Poland, Schedul e XCVI Republic of Slovenia, Schedule XCIII Slovak
Republic and Schedule CXL
1 of the European Communities of 15.

 The European Communities is ready to enter into Artic le XXIV and XXVIII GATT 1994
procedures including tariff negotia tions or consultations to address compensatory adjustments
provided for under Article XXIV.6 GATT 1994.

 The data
2 necessary for the purposes of applying Article XXIV.6 GATT 1994, as provided for
in the Guidelines, paragraph 2, first and second sentences, is included in the Annex of this
notification. In accordance with the Guidelines, pa ragraph 2, third sentence, and paragraph 3, any
proposed modifications or compensatory adjustments will be circulated and communicated separately.

 The EC intends to communicate further data in the near future to members having negotiation
rights.

 Pending the completion of the Article XXI V and XXVIII GATT 1994 procedures and the
creation of a new schedule valid for the Europ ean Communities of 25, the commitments in the
European Communities Schedule CXL will be fully respected. The new members of the European
Union intend to align their Schedules with those of the European Communities on 1 May 2004.

 Pursuant to the Guidelines, paragraph 1, the European Communities transmits this notification
to the Secretariat, and requests the Secretariat to di stribute this notification to all other Members in a
secret document.

 The above-mentioned data are available in electronic form only on the WTO Members'
Homepage (http://members.wto.org), go to WTO Resources
, then Market Access Schedules on Goods
(login), and then to Other . Download the zipped database and open using MS Access, choose your
country to print the applicable data.

1 This schedule is a total of the tariff and ot her commitments of the European Communities of 15
circulated under cover of WTO document G/L/65/Rev.1 of 19 March 1996. It has subsequently been modified
by G/MA/TAR/RS/16 of 2 April 1997 (certified WT/Let/156), G/MA/TAR/RS/30 of 13 May 1997 (certified
WT/Let/178), G/L/65/Rev.1/Add.2 of 21 October 1997, G/MA/TAR/RS/47 of 10 February 1998 (certified
WT/Let/261), G/L/65/Rev.1/Add.2/Corr.1 of 10 February 1998, G/L/65/Rev.1/Add.3 of 23 November 1998,
G/L/65/Rev.1/Add.4 of 1 July 1999, and G/L/65/Rev.1/Add.5 of 22 February 2000.
2 Please see the bottom of the page for more information on how to obtain the data. The data are
available in English only.

ANNEX C-2

ARTICLE XXIV.6 NEGOTIATIONS
ENLARGEMENT OF THE EUROPEAN UNION
COMMUNICATION FROM THE EUROPEAN COMMUNITIES

No. _________________

28 September 2006
 (06-4638)
 Original: English

ARTICLE XXIV:6 NEGOTIATIONS

Enlargement of the European Union

Communication from the European Communities

 The following communication, dated 27 September 2006, has been received from the
delegation of the European Communities.

Notification
by the European Communities to
the World Trade Organization and its Members
concerning decisions to enter into a customs union, resulting from the

Enlargement of the European Union

by the accession of

the Republic of Bulgaria and Romania;

 Pursuant to the Understanding on the Interpretation of Article XXIV GATT 1994,
paragraph 4, incorporating the Guidelines adopted on 10 November 1980 (BISD 27S/26-28),
paragraph 1 (the “Guidelines”).

 Following, inter alia, the decision of 25 April 2005 of the Council of the European Union on
the admission to the European Union of the Republic of Bulgaria and Romania and pending the
finalisation of ratification procedures, leading to the entry into force of the Treaty of Accession, the
European Communities have the ho nour to notify the WTO and its Members that these states have

decided to become members of the European Un ion on 1 January 2007. The Treaty of Accession is
published in the Official Journal of the European Union L 157 of 21 June 2005.1

 Accordingly, the European Communities hereby notifies, within the framework of procedures
laid down in Article XXIV GATT 1994, and in particular paragraph 6 thereof, the modification of the
Schedule of the European Communities in order to cover these new members of the European Union.

 The new members of the European Union will be subject to the Schedules of the European
Communities on 1 January 2007. Consequently, the commitments in Schedule CXXXIX of the
Republic of Bulgaria and Schedule LXIX of Romania are withdrawn on 1 January 2007.

 The data necessary for the purposes of applying Article XXIV.6 GATT 1994, as provided for
in the Guidelines, paragraph 2, first and second sentences, is included in the Annex of this
notification.
2 In accordance with the Guidelines, paragra ph 2, third sentence, and paragraph 3, any
proposed modifications or compensatory adjustments will be circulated and communicated separately.

 The European Communities is ready to enter into Artic le XXIV and XXVIII GATT 1994
procedures including tariff negotia tions or consultations to address compensatory adjustments
provided for under Article XXIV.6 GATT 1994.

 The European Communities requests the Secr etariat to inscribe an item concerning these
notifications on the agenda of the next Council meet ing, subject to the rules on inclusion of items on
the agenda, so that the Council may take any appropriate actions in this respect.

 Pursuant to the Guidelines, paragraph 1, the European Communities transmits this notification
to the Secretariat, and requests the Secretariat to di stribute this notification to all other Members in a
secret document.

Annex
: Data for applying Article XXIV.62.

ANNEX D

RESPONSES BY THE PARTIES AND THIRD PARTIES TO QUESTIONS
POSED BY THE PANEL AFTER THE SUBSTANTIVE MEETING OF THE PANEL

Contents Page
Annex D-1 Responses by Ecuador to questions posed by the Panel D-2
Annex D-2 Responses by the European Co mmunities to questions posed by the
Panel
D-38
Annex D-3 Responses by Belize, Cameroon, Côte d'Ivoire, Dominica, Dominican
Republic, Ghana, Jamaica, Madagascar, Saint Lucia, Saint Vincent and
the Grenadines, and Suriname to questions posed by the Panel
D-75
Annex D-4 Responses by Brazil to questions posed by the Panel D-82
Annnx D-5 Responses by Colombia to questions posed by the Panel D-84
Annex D-6 Response by Japan to the question posed by the Panel D-87
Annex D-7 Responses by Nicaragua and Panama to questions posed by the Panel D-88
Annex D-8 Responses by the United States to questions posed by the Panel D-107
Annex D-9 Comments by Ecuador to the responses of the European Communities
and third parties
D-111
Annex D-10 Comments by the European Communities to the responses of Ecuador
and third parties
D-116

ANNEX D-1

RESPONSES BY ECUADOR TO QUESTIONS POSED BY THE PANEL

QUESTIONS ADDRESSED TO PARTIES

1. (Both Parties) In paragraph 39 of its th ird party submission, Colombia concludes that
"the tariff level that would result 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." Can the Parties
provide a reasoned answer as to whether they agree with the argument raised by Colombia.

First, Ecuador maintains its position that the EC's Article I waiver for bana nas lapsed on 1 January
2006 with the implementation of Regulation 1964, el iminating the legal relevance of the waiver's
access standard (the "envisaged rebinding ... would r esult in at least maintaining total market access
for MFN banana suppliers ...") to which the Arbitrat or applied its price-gap analysis. Ecuador notes
that Colombia's third party submission and oral statement support the view that the waiver has lapsed.

Second, as a factual matter, Ecuador agrees with Co lombia's statement in paragraph 39 of its third
party submission that "the tariff level that would result 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."

As Colombia rightly mentioned, the Arbitrator, wh ile agreeing with the use of the price gap as an
appropriate methodology for the measurement of th e level of protection accorded to domestic or EC
growers from foreign competitors, also made it clear that the manner in which the EC had applied it
"[did] not take into account how the competitiv e relationship may change between imports from
different sources, i.e. MFN and preferential banana suppliers. …"
1

Ecuador agrees that to determine the compe titive relationship between MFN bananas and ACP
bananas using the price gap methodology, it is n ecessary to (i) determine the level of protection
accorded to EC ban vis-à-vis anas vis-à-vis MFN bananas (ii) determin e the level of protection
accorded to EC bananas vis-à-vis ACP bananas, and (iii) determine the competitive relationship
between MFN bananas and ACP bananas by compari ng the results of the calculations under (i) and
(ii). The result of that comparison is the maximum margin of preference between ACP bananas and
MFN bananas that would result in at least ma intaining conditions of competition between ACP
bananas and MFN bananas.

Following this methodology through, Colombia correc tly carried out the relevant calculations in the
light of the undisputed facts contained in the arbitrations' records – and which were either endorsed by
the Arbitrator or submitted by the EC itself. First, Colombia determined in the light of the relevant
reference period, the relevant internal price submitted by the EC and the relevant external price, that
the tariff level for MFN bananas vis-à-vis EC bananas was €97/tonne.
2 Second, Colombia did an
analogous calculation to determine th e tariff level that would mainta in the conditions of competition
between ACP bananas and EC bananas, and found that such a tariff was €86/tonne.3

1 Colombia's third party submission, para. 37. First Arbitration Award, 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. 69.
2 Colombia's third party submission, para. 36.
3 Id., para. 38.

The last step of Colombia's calculation was the comparison of (i) the tariff level that would result in at
least maintaining the conditions of competition betw een MFN bananas and EC bananas with (ii) that
that would result in at least maintaining the cond itions of competition between ACP bananas and EC
bananas ACP bananas.4 The result is the tariff difference of €11/tonne. Ecuador also submits that to
comply with the Article I Waiver's mandate, to envi sage a tariff rebinding that would result in at least
maintaining total market access for MFN banana suppliers, the appropriate MFN tariff could not
accord to ACP bananas a preference higher than €11/tonne. Accordingly, by establishing an unbound
tariff of €176/tonne, even if the EC had an additi onal opportunity to "rectify the matter", it has failed
to comply with such an standard.

2. (Both Parties) How has the EC been applying the MFN tariff of €176/mt to individual
imports? What volume and share of its imports have been subject to that tariff?

It is not contested that the EC applies its €176/mt tariff to all bananas of MFN origin, and to ACP
origin bananas in excess of the 775,000 mt AC P duty-free tariff quota. In 2006, the volume of
imports subject to the €176/mt tariff was 3,473,5 21 mt (of which 116,190 mt, or 3%, were ACP over-
quota imports). The volume subject to that rate constituted 82% of tota l EC-25 bana na imports,
according to the EC's data.
5

3. (Both Parties) In paragraph 15 of its first written submission, Ecuador states that,
subsequent to adopting Council Regulation No. 1964/2005, "the EC has issued implementing
regulations ancillary to [such regulation]." Can Parties identify all ancillary or implementing
regulations associated with Council Regulation No. 1964/2005 adopted by the EC since
November 2005, if any.

The implementing regulations associated with Coun cil Regulation No. 1964/2005 and adopted by the
EC since November 2005 include:

• Commission Regulation (EC) No. 2014/2005, OJ L 324/3, 10 December 2005;
• Commission Regulation (EC) No. 2015/2005, OJ L 324/5, 10 December 2005;
• Council Regulation (EC) No. 2149/2005, OJ L 342/19, 24 December 2005;
• Commission Regulation (EC) No. 219/2006, OJ L 38/22, 9 February 2006;
• Commission Regulation (EC) No. 325/2006, OJ L 54/8, 24 February 2006;
• Commission Regulation (EC) No. 566/2006, OJ L 99/6, 7 April 2006;
• Commission Regulation (EC) No. 966/2006, OJ L 176/21, 30 June 2006;
• Commission Regulation (EC) No. 1261/2006, OJ L 230/3, 24 August 2006;
• Commission Regulation (EC) No. 1789/2006, OJ L 339/3, 6 December 2006;
• Commission Regulation (EC) No. 34/2007, OJ L 10/9, 17 January 2007; and
• Commission Regulation (EC) No. 47/2007, OJ L 14/4, 20 January 2007.

4. (Both Parties) Is the import regime for bananas contained in EC Council Regulation
No. 1964/2005, to be considered "the new EC tariff regime", in the sense that the term is used in
the Doha Waiver? What is the exact date of en try into force of "the new EC tariff regime"?
Has the EC Council Regulation No. 1964/2005 been modified in any way since its entry into
force?

Yes. It is the new tariff regime introduced on 1 January 2006. The Council Regulation has not been
modified, but additional regulations were issued as described in response to question 4.

4 Id., para. 39.
5 See Exhibit ECU-6. Year-to-date 2007 import data, which appear to run only through June 2007, are
distorted by the effects of storm-related damage in Africa.

5. (Both Parties) Ecuador has advanced clai ms against the preferences granted by the EC
to ACP bananas under both Articles I and XIII of the GATT 1994. Do Parties see any
particular order in which these two claims should be considered in this dispute? Does Ecuador
consider its claim under Article XIII of the GATT 1994 a subsidiary or secondary claim to its
claim under Article I? If the preferences grante d by the EC to ACP bananas are inconsistent
with either Article I or Article XIII of the GATT 1994, on what grounds would Ecuador argue
that additional findings regarding the same preferences under the other provision, i.e.
Article XIII or Article I of the GATT, respectiv ely, would also be necessary to resolve the
matter at issue?

In paragraph 37 of their joint third party submissi on, Belize, Cameroon, Côte d'Ivoire, Dominica, the
Dominican Republic, Ghana, Jamaica, Madagascar, Saint Lucia, Saint Vincent and the Grenadines,
and Suriname state that: Ecuador does not believe th at it matters what order the Panel considers the
claims under Article I and Article XIII. Ecuador do es not consider the claim under Article XIII to be
subsidiary or secondary to Ecuador's claim under Article I.

If the panel deals first with Article XIII, a finding th at the EC measures violate Article XIII would not
preclude the EC from granting tariff preferences so long as there was no tariff quota from which
Ecuador was excluded or in which Ecuador was not given a fair allocation. If the Panel ruled in
favour of Ecuador under Article I, that would resolv e some of the dispute, but leave open the question
of the ability to use tariff quotas in contexts wh ere tariff discrimination is allowed without the
requirement for a waiver, for example in the case of free trade areas. Further, if the Panel finds in
favour of the EC under Article I, that still would l eave an issue what degree of preference is allowed
by the Doha Waiver and whether, as the EC contends, it can use tariff quotas in its system
notwithstanding the absence of a waiver of Article XIII.

Regardless, in Ecuador's view, the history of the banana dispute has demonstrated repeatedly that
anything not specifically and directly found to violate WTO rules (and some things that are) is likely
to emerge in the next EC banana regime, justified as not having been excluded by the Panel. Finally,
the Panel's rulings on both Articles are likely to be im portant to the effort to reach at last a durable
solution, consistent with WTO rules.

6. (Both Parties) In paragraph 37 of their jo int third party submission, Belize, Cameroon,
Côte d'Ivoire, Dominica, the Dominican Republic , Ghana, Jamaica, Madagascar, Saint Lucia,
Saint Vincent and the Grenadines, and Suriname state that:

"pursuant to the Understanding [on Bananas reached between the EC and
Ecuador on 30 April 2001], the banana dispute was taken off the agenda of the
DSB in accordance with Article 21.6 of the DSU. Indeed, at the DSB meeting
held on 1 February 2002 [footnote omitte d], the representative of the EC noted
that the EC had implemented the second phase of the Understanding on
Bananas which would be applicable unt il the time the EC's banana import
regime became a tariff-only regime i.e. at the latest by 1 January 2006, and that
the EC considered that this matter should therefore be withdrawn from the DSB
agenda. Ecuador agreed by stating that it ' also considered that this item should
no longer appear on the agenda of future DSB meeting.'"
Can Parties confirm that the issue of the implementation of the rulings and recommendations of
the DSB in the EC – Bananas III dispute was withdrawn from the DSB's agenda with the
consent of both the EC and Ecuador, in accordance with Article 21.6 of the DSU.

Yes. Ecuador agreed to the withdrawal of th e item from the DSB agenda, subject to an explicit
reservation of rights to bring a complaint under Artic le 21.5, as reflected in the following excerpt
from the minutes of the DSB meeting. There was no objection to this reservation of rights. It can
also be seen that Ecuador was clear that the U nderstanding involved staged obligations over several
additional years, and that Ecuador was reserving Article 21.5 rights precisely because of concern that
the terms might not be followed in subsequent ye ars. As the minutes of that meeting summarized
(WT/DSB/M/119):

During the dispute settlement process, Ec uador had demonstrated patience and
flexibility and had, in this spirit, signed a bilateral Understanding on Bananas with the
EC on 30 April 2001. This Understanding c onstituted a sound basis for the EC to
implement a transitional banana import regi me 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
element 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. Accord ingly, 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 concerning the measures app lied by the EC, the matter could be
referred to the original Panel pursuant to Article 21.5 of the DSU. Ecuador, like other
countries, also considered that this item should no longer appear on the agenda of
future DSB meetings.
There was no objection to this reservation, and similar reservations were expressed by others.

7. (Both Parties) In paragraph 4 of its statement during the substantive meeting with the
Panel, Brazil argues that "Article 3.7 of the DSU should be interpreted in its integrality, with
due account of all the provisions contained therei n, that is to say the preference for negotiated
solutions and the conformity with WTO agreements. Those two elements permit us to conclude
that compliance with the covered agreements has precedence over negotiated solutions and that
parties to an agreed solution are not authoriz ed by such instrument to circumvent their
obligations under the multilateral trading rules." Can the Parties provide a reasoned answer as
to whether they agree with this statement.

Ecuador agrees with Brazil. While the DSU en courages mutually agreed solutions, that
encouragement is subject to the requirement that al l solutions must be consistent with the covered
agreements.

8. (Both Parties) If the Panel was to exam ine whether the current EC regime for bananas
results "in at least maintaining total market ac cess for MFN banana suppliers", what should be
the appropriate criteria to consider? Would the relevant criteria be the same that were
considered by the Arbitrator in its Awards of August 2005 and October 2005?

Ecuador notes that the Panel has changed the sta ndard provided in the Doha Waiver from one in
which the Arbitrator was charged with determini ng whether a proposed rebinding "would result" in
meeting the standard of "maintaining total market access for MFN banana suppliers" to one in which
the "EC Regime … results" in meeting that standard. Therefore, unlike the standard of the waiver, the
Panel is asking not for a forward looking projecti on, but whether in the present tense the Regime,
whether or not viewed as a proposed rebinding, is resulting in "at least maintaining total market
access for MFN banana suppliers"

Even if the test is considered to be, at any give n moment, whether market access is being maintained,
Ecuador agrees with the Arbitrator that "market acce ss" cannot be equated with current trade levels or
current market shares. Ecuador believes that market access should continue to be measured according
to competitive opportunities afforded by the EC's trade measures, compared to the opportunities
provided by the measures in existence just prior to 1 January 2006. This means that the tariff only
duty would have to provide conditions of competition no less favourable for MFN suppliers than were
afforded by the 3.113 million mt tariff quota at €75 /mt preference and the zero duty tariff quota for
ACP bananas at a quantity of 750,000 mt.

9. (Both Parties) In paragraph 38 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that "[i]t will be recalle d that the waiver in any event expires 1 January
2008, but the MFN duty continues, and will be th e margin of preferen ce for any preferences
that the EC grants inconsistent with WTO rul es into the future, past 2007. It will be recalled
that the EC had made plain its intent to use no t only the 'Everything but Arms' initiative but
also WTO-conforming free trade agreements to ca rry on with preferences past 2007. Further,
even if the EC were to grant no future pref erences, the duty will restrict future banana
imports." Can Ecuador elaborate on these arguments, and can the EC provide a reasoned
answer as to whether it agrees.

First, with apologies, the first sentence of the qu otation should have said "c onsistent" rather than
"inconsistent" with WTO rules. The point of th e sentence was not to assume that the EC would
continue to grant preferences in a manner inconsiste nt with WTO rules. Second, as the next sentence
quoted in the question makes clear, there are ways c onsistent with WTO rules for the EC to continue
preferences. A major concern of Ecuador was and is that a high bound rate of duty on bananas would
be established, resulting in vastly diminished market access for Ecuadorian bananas if the EC
negotiated free trade agreements that conformed with WTO rules, especially with the more efficient
of the banana-producing ACP count ries. Ecuador and other MFN s uppliers in 2001 were willing to
allow the EC to continue otherwise illegal prefer ences under the cover of a waiver for an extended
period, provided that by 1 January 2006 the EC would establish a bound MFN duty that would still
allow MFN suppliers to at least maintain access, without the use of tariff quotas, even assuming that
the EC continued to grant tariff preferences for AC P countries, first under cover of the Doha Waiver
(assuming its conditions were met) and then under wh atever WTO-consistent means that the EC and
ACP countries might arrive at by 1 January 2008. Even if the EC did not continue such preferences,
the MFN duty rate would protect EC domestic banana production and would burden banana exports to
the EC.

Unfortunately, and to the detriment of Ecuador, the EC failed to comply with the waiver and
proceeded unilaterally with the measures that are before the Panel today.

10. (Both Parties) In paragraph 71 of its first written submission, the EC argues that the
phrase "the new EC tariff regime" can only refer to the tariff regime that was presented to the
Arbitrator and on which the Arbitrator made a pronouncement in its Award. Can Ecuador
provide a reasoned answer as to whether it agrees with this statement. Would the EC consider
its argument valid even if it was established that the TRQ to which the Banana Framework
Agreement (BFA) relates has not expired at the end of 2002? Does the EC refer to the applied
system and not the rebinding?

As Ecuador stated in paragraphs 28-30 of Ecuador's second submission, the EC's interpretation of the
waiver is wrong. The waiver does not refer to the "tariff regime presented to the Arbitrator", nor
would it make any sense to interpret the phrase that was used, "the new EC tariff regime" to mean the
regime that the Arbitrator had just found to fail to m eet the test of the waiver. It would be absurd to
think that WTO members created a waiver giving the EC two opportunities to satisfy on a timely basis
either the interested parties or a neutral Arbitrator, but then allowed the EC to keep the benefit if the

waiver for a further two years by the simple expedi ency of installing any tariff regime that the EC
might choose, so long as it was not identical to the one just found unacceptable by both the interested
parties and the Arbitrator.

11. (Both Parties) In paragraph 23 of its first written submission, the EC argues that "on
1 January 2006, the European Communities intr oduced a tariff only sy stem and the Cotonou
Preference took the form of a tariff quota fo r certain volumes of bananas coming from Cotonou
beneficiary developing countries". Can the EC provide a reasoned answer as to how can an
MFN tariff combined with a tariff-rate quota for ACP countries qualify as a "tariff-only
system". Can Ecuador provide a reasoned answ er as to whether it agrees with the EC's
statement in paragraph 23 and, if not, what would qualify, in its view, as a "tariff-only system".

Insofar as Ecuador is aware, there is no legal defi nition of a "tariff only" system. Ecuador considers
that the ordinary meaning of "tariff only" is a system has no quotas or tariff quotas. The context of
the Doha Waiver reinforces this conclusion, becau se the "tariff only" system is to be something
different from that which preceded it, which was a system with tariffs and tariff quotas. Therefore,
any preference that is granted is not quantitatively limited, unless, at a minimum, access to that tariff
quota is done in compliance with Article XIII, i.e. without excluding or granting an inadequate share
to MFN suppliers such as Ecuador.

The fact that the WTO members granted a waiver of Article XIII only through 31 December 2006
reinforces Ecuador's view, because (1) despite the EC's efforts to deny the plain rulings of the
Appellate Body and the Article 21.5 panel, it is obvious that all tariff quotas must comply with
Article XIII, which does not allow exclusion of MFN suppliers; and (2) it is impossible to think that
WTO members would grant a waiver of Article I to the EC if it included a reliance on a second
waiver of Article XIII that had not b een granted. The Appellate Body in Bananas III made clear that
a waiver of Article XIII cannot be implied from a waiver of Article I.

12. (Both Parties) In paragraph 26 of its first written submission, Ecuador argues that
"[t]he burden is on the EC if it wishes to claim that it still has a valid waiver with respect to
bananas, and that this waiver covers the EC meas ures at issue. [E]ven if the burden were on
Ecuador …" Could the Parties develop their lega l arguments as to which of them should bear
the burden of proving that the Doha Waiver is st ill valid and whether it covers the EC measure
at issue.

Ecuador has proven the violation of Article I. The EC has the burden, if it wishes, to argue that the
waiver relieves the EC from the oblig ation, and that the EC has satisfi ed the conditions of the waiver.
Numerous prior WTO dispute settlement decisions have established that the invocation of any
exception to a WTO obligation is the assertion of an affirmative defense, resu lting in the burden of
proof being placed on the party claiming that exception.
6 In European Communities – Conditions for
the Granting of Tariff Preferences to Developing Countries the Appellate Body explained that:

6 Appellate Body Report, United States – Measure Affecting Imports of Woven Wool Shirts and Blouses
from India, WT/DS33/AB/R, adopted 23 May 1997 (" US-Wool Shirts and Blouses (AB) "), pp. 15-16 and nn.21
and 22 (citing GATT Panel Report, Canada – Administration of the Foreign Investment Review Act , BISD
30S/140, adopted 7 February 1984, para. 5.20 (wherein it was found that since Article XX(d) is an exception to
GATT, it is up to Canada, as the party invoking the exception, to demonstrate that its measures comply with that
exception)); Appellate Body Report, Korea – Measures Affecting Imports of Fresh, Chilled and Frozen Beef ,
WT/DS161/AB/R,WT/DS169/AB/R, adopted 10 January 2001, para. 39 (wherein it was found that the party
invoking an exception to the General Agreement bears the burden of proof to "demonstrate a prima facie case
that the measure in question falls within one of the exceptions"); Appellate Body Report, European
Communities – Conditions for the Granting of Tariff Preferences to Developing Countries , WT/DS246/AB/R,
adopted 20 April 2004 (" EC – Tariff Preferences (AB) "), paras. 104-118 (wherein it was found that the EC, as

the burden of proof for an "exception" falls on ... the party "assert[ing] the affirmative
of a particular ... defence." From this allocation of the burden of proof, it is
normally for the respondent, first, to raise the defence and, second, to prove that
the challenged measure meets the requirements of the defence provision.
7
Here, Ecuador has demonstrated that the EC's differential treatment of ACP and MFN bananas
violates Article I:1 on its face, a proposition which the EC does not and cannot deny. In response, the
EC claims that the Doha Waiver remains in force and covers its Article I:1 violation. 8 As the party
invoking this defense or exception to compliance w ith Article I:1, the EC bears the burden of
demonstrating that its WTO-inconsistent measure meets every condition of the exception. The EC
has failed to do so, and indeed, though it was not Ecudors's burden, Ecuador has proved the contrary.

13. (Both Parties) In paragraph 43 of their respective third party submissions, Nicaragua
and Panama argue that the Latin American suppliers insisted on inserting, into the Bananas
Annex of the Doha Waiver, the sentence "If 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", which did
not appear in the original EC draft. Nicaragu a and Panama argue further that the insertion of
such sentence is an "explicit penalty for EC unilateralism following two arbitration losses",
without which the waiver would not have been approved. Can the Parties provide a reasoned
answer as to whether they agree with this statement.

Ecuador agrees that the waiver for bananas expired when the EC introduced its unilateral "tariff only"
system on 1 January 2006, without the agreement of Ecuador and other interested parties, and having
twice failed to satisfy the standard of the waiver as determined by the Arbitrator. The conditions of
the waiver established by the WTO members cannot be disregarded.

14. (Both Parties) Under the fifth tiret of the Bananas Annex of the Doha Waiver, can
Parties identify the specific conditions listed ther ein and explain how many of those would have
to be fulfilled for the waiver to cease to apply to bananas?

Under Tiret 5, the waiver would cease to apply unless each of the following conditions were met:
First, the EC would have to have proposed a rebinding that:

• the Arbitrator approved meeting the standard of the fourth tiret; or failing that,

• the EC rectified the matter in a mutually satisfactory solution, following consultations
with interested parties, or failing a mutual satisfactory solution,

• the Arbitrator in a second arbitration determined that that EC has rectified the matter.

the Member invoking the Enabling Clause as a defense to GATT Article I discrimination, had the burden of
establishing the facts necessary to establish the consistency of its measures under the Enabling Clause);
Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling and Betting
Services, WT/DS285/AB/R, adopted 20 April 2005 (" US-Gambling (AB)"), paras. 6.77-6.83; Appellate Body
Report, United States – Subsidies on Upland Cotton , WT/DS267/AB/R, adopted 21 March 2005, para. 644
(quoting US – Wool Shirts and Blouses(AB), p. 14). The Appellate Body found it important to reiterate this rule
of general applicability, even though the case before it wa s to be decided under a "special rule for proof of
export subsidies that applies in certain disputes under Articles 3, 8, 9, and 10 of the Agreement on Agriculture."
7 EC – Tariff Preferences (AB) , para. 104 (emphasis added) (quoting US – Wool Shirts and Blouses
(AB), p. 14).
8 See EC first written submission, paras. 67-77; EC second written submission, paras. 36-43.

Second, the Arbitration awards must have been i ssued and the Article XVIII negotiations have been
completed prior to the entry into force of the EC's tariff only regime on 1 January 2006.

Neither of these conditions was fulfilled. The EC did not satisfy the Arbitrator with either its initial
envisaged rebinding or its proposed rectification, nor did it reach agreement with interested parties.
Article XXVII negotiations were likewise not conclude d, in large part because of the EC failure to
propose a rebinding meeting the waiver criteria.

Under the fifth tiret of the waiver, the conditions that would have to be fulfilled for the waiver to lapse
are (i) the Second award of the Arbitrator (following th e EC's failure in the first award and the failure
to reach agreement) must determine that the EC "h as failed to rectify the matter" and (ii) the EC's
"new tariff regime" must enter into force. Both conditions have occurred.

15. (Both Parties) On what grounds does the EC argue that the phrase "suitable waiver" in
paragraph 6.158 of the report of the first EC – Bananas III compliance Panel should be
interpreted to mean a waiver from only Articl e I of the GATT 1994? On what grounds does
Ecuador argue that the same term should be interpreted as referring to a waiver to both
Articles I and XIII of the GATT 1994?

Ecuador considers that the "suitable waiver" in pa ragraph 6.158 includes both a waiver of Article I
and Article XIII for the reasons explained in paragraphs 40-44 of Ecuador's second submission.

The pertinent suggestions of the first Article 21.5 Panel were as follows:

6.156 First, the European Communities could choose to implement a tariff-only
system for bananas, without a tariff quota. This could 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 waiver is obviated, for example, by
the creation of a free-trade area consistent with Article XXIV of GATT. This option
would avoid the need to seek agreement on tariff quota shares.
6.157 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.
6.158 Third, the European Communities could maintain its current bound and
autonomous MFN tariff quotas, either without allocating any country-specific shares
or allocating such shares by agreement with a ll substantial suppliers consistently 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 tariff quota could al so be combined with a
tariff quota for ACP imports, whether trad itional 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 granted on several occasions by Members.
9 In
this context, some action may be required soon in respect of the Lomé waiver since it
expires on 29 February 2000. [Emphasis added]
It is difficult to see how even the EC could constr ue these paragraphs other than to show that the
Panel considered that a tariff quota restricted to ACP exports would always require a waiver of
Article XIII. Paragraph 6.156 shows that the panel considered that a tariff only system with a
preference for just ACP bananas but no tariff quota would require a waiver of Article I, unless the
preferences were done within some legal exception, such as a free trade agreement. Paragraph 6.157
then provides that the EC in effect could modify its system to include a tariff quota for ACP bananas,
covered by a suitable waiver. Paragraph 6.158 starts by saying that the EC could maintain its tariff
quotas if they were opened and either not allocated or allocated in accordance with Article XIII. The
highlighted portion of paragraph 6. 158 makes explicit on its face, especi ally in light of the foregoing,
that a waiver of Article XIII is required for a tariff quota preference limited to ACP countries.

The Panel never suggested that the EC did not need a waiver in a system that had a tariff quota in
which only ACP countries could participate in the zero duty quota. It is also most unlikely that the
Article 21.5 Panel would make such a suggestion, which also would have contradicted the original
findings of Bananas III, and have violated Article XIII.

16. (Both Parties) In paragraph 96 of its first written submission, the EC states that "the
text of GATT Article XIII, paragraph 1 makes cl ear that a Member can successfully claim that
another Member's measures violate the provisions of GATT Article XIII, only if its can show
that... the allegedly offending Member imposes a prohibition or restriction on products
originating from the complaining Member and, in principle, there is a nullification and
impairment of a benefit accruing to the complaining Member". Can the EC elaborate its
arguments in support of each of these propositions , i.e. that in order to make a successful claim
under Article XIII:1 of the GATT 1994, the comp laining Member must show: (a) that the
challenged measure must be a prohibition or restriction on products originating from the
complaining Member; and, (b) that there is a nullification and impairment of a benefit accruing
to the complaining Member. Can Ecuador provide a reasoned answer as to whether it agrees
with the arguments raised by the EC.

Ecuador disagrees with the EC's interpretation.

Article XIII.1 provides that "no prohibition or rest riction shall be applied" on a product of one WTO
member unless "importation of like product of all third countries is similarly prohibited or restricted."
As previously noted, the restriction of a tariff quota is created by the imposition of a higher duty on
over quota imports than is applied to in-quota imports.

The EC's tariff quota applies a €176/mt duty on all bananas of MFN origin. ACP bananas are not
similarly restricted, because they benefit from acce ss to the duty-free quota, from which bananas of
Ecuadorian origin are totally excluded. As was noted in Bananas III:

Article XIII:1 establishes the basic principle that no import restriction shall be applied
to one Member's products unless the impor tation of like products from other
Members is similarly restricted. Thus, a Member may not limit the quantity of
imports from some Members but not from others ... . A Member may not restrict

9 See WT/L/104 (United States – Caribbean Basin Economic Recovery Act); WT/L/183 (United States
– Former Trust Territory of the Pacific Islands); WT/L /184 (United States – And ean Trade Preferences Act);
WT/L/185 (Canada – CARICAN).

imports from some Members using one means and restrict them from another using
another means.10

There is likewise no requirement that Ecuador dem onstrate the level of nullification or impairment
caused by the EC's discriminatory tariff quota as a pr erequisite to challenging that measure in dispute
settlement.

Article 3.7 of the DSU specifies three possible reso lutions to a WTO dispute: a mutually agreed
solution consistent with the covere d agreements; a withdrawal of the WTO-inconsistent measures; or,
if all else fails, suspension of concessions. Neither a mutually agreed solution nor the withdrawal of
inconsistent measures hinges on the level of nullifi cation or impairment suffered by the complaining
Member. Only the third scenario, the suspensi on of concessions under DSU Article 22, requires a
determination regarding the level of nullification or impairment suffered by the complaining party.11

In any event, even if nullification or impairment had to be demonstrated, Ecuador has established that
the EC has nullified or impaired Ecuador's interests. In particular, the EC has denied Ecuador (and
other MFN suppliers) participation in the zero-duty quota as required by Article XIII.

17. (Both Parties) In paragraph 60 of its second written submission, the EC argued that
"[i]n effect, Ecuador is saying that the discrimi nation constitutes the 'restriction' [within the
context of Article XIII:2 of the GATT 1994]. Havi ng created this 'restrictio n' it then compares
it with that on ACP products and comes, not surprisingly , to the conclusion that there is
discrimination, which it assumes falls within par agraph 2 [of Article XIII]". (Emphasis added)
Can Ecuador provide a reasoned answer as to wh ether it agrees with this statement. Do the
words "not surprisingly" in the EC statement mean that, provided that the existence of the
restriction mentioned by the EC can be proven, the EC accepts that there would be a violation
of Article XIII:2?

Ecuador does not agree. The restriction in the EC's system, as in any tariff quota, is the higher duty
applied to over-quota imports – t hose not benefiting from the lower or zero duty applied to imports
within the tariff quota. If the over-quota duty were not considered a restriction, then Article XIII:5
would be a nullity, as the obligations of Article XIII are framed in terms of re strictions. Banana of
ACP origin are restricted less than bananas of Ec uadorian origin because the former can be entered
duty free within the tariff quota, while Ecuadorian bananas all are restricted by the high duty.

18. (Both Parties) In paragraph 51 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that its "exports are rest ricted by the high duty compared to those who
participate in the zero duty quota. The only difference between a straight quota and a tariff
quota in this regard is that exclusion from a straight quota means no access, while exclusion
from a tariff quota means access restricted by the higher duty that applies to imports not
benefiting from the tariff quota, which may be proh ibitive in effect." In paragraph 52 of the
same statement, Ecuador adds that "[i]t is true that unlimited preferences for ACP bananas
would be worse than the tariff quota only for ACP countries, but exclusion from the tariff quota
is more restrictive of Ecuador and other members than if they were allowed to participate in the
zero duty tariff quota as they are entitled under Article XIII." Can the EC provide a reasoned

10 Panel Report, European Communities – Regime for the Importation, Sale and Distribution of
Bananas – Complaints by Ecu ador, Guatemala and Honduras , Mexico, and the United States , WT/DS27/R,
adopted 25 September 1997, as modified by Appellate Body Report, WT/DS27/AB/R (" Bananas III (Panel)"),
para. 7.69 (emphasis added).
11 See Understanding on Rules and Procedures Gove rning the Settlement of Disputes ("DSU"),
Article 22.4.

answer as to whether it agrees with this statemen t. Can Ecuador clarify whether it is arguing
that any high duty would qualify as a "restrict ion" under Article XIII of the GATT 1994. If
yes, why? Can Ecuador also clarify on what grounds, and according to what criteria, would a
tariff be considered to be "prohibitive in effect ". In Ecuador's view, does the restriction result
from the in-quota tariff or the out-of-quota tariff?

Ecuador is not arguing that every high duty necessar ily qualifies as a restriction under Article XIII.
Article XIII:5 provides that the provisions of Artic le XIII apply to any tariff quota. A tariff quota
means a quota below which a lower duty applies than to over quota imports of the like product. As
noted, in a tariff quota, the restrictive element is the higher duty on over- quota imports. Ecuador
does not consider that the concept of a tariff quot a is limited to those tariff quotas whose over-quota
duty rate is so high as to be de facto prohibitive . That may be the most dramatic form of a tariff
quota, but in fact, if a higher duty is applied above a certain quantity than below that quantity, it is a
tariff quota even if – unlike the EC measures at issu e --the difference is slight and the over-quota duty
is not so high as to create a major commercial problem.

The restriction in the EC's system is the over-quo ta duty that restricts all bananas not allowed to
participate in the zero duty quota.

19. (Both Parties) In paragraph 57 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that "[i]t is a fact that the restriction in a tariff quota is achieved by
means of a tariff – the higher duty applied to products imported outside the quota than inside
the quota. That is not a problem because Articl e XIII specifically applies to any tariff quota,
and, unlike Article XI the reference to restrictio ns in Article XIII does not exclude taxes, duties
or other charges." Can Ecuador elaborate on this argument, and the EC provide a reasoned
answer as to whether it agrees with Ecuador's arguments in this context.

Article XI begins "No prohibitions or restrictions other than duties, taxes or other charges…" This
makes plain that the drafters thought that prohibitions or restrictions included duties, taxes or other
charges (otherwise there would be no need to ex clude them), but wanted to exclude them from
Article XI. By contrast, no such exclusion was pr ovided in Article XIII, which also uses the term
"restrictions" (but without the exclusion) and indeed the drafters explicitly said that the provisions of
Article XIII apply to "any tariff quota." Article XIII :5 would be a nullity if a tariff is not regarded as
a restriction for purposes of Article XIII as applied to tariff quotas.

20. (Both Parties) If, under Article II of the GATT 1994, the EC was bound to a €75/mt
tariff rate in-quota duty for 2.2 million metric to ns of bananas, in addition to the zero-duty
TRQ of 775,000 metric tons for ACP bananas, shou ld such a finding affect the manner in which
the Panel conducts its analysis under Article XIII?

In Ecuador's opinion, the EC plainly was and is bound by the a €75/mt tariff rate in-quota duty for
2.2 million metric tons of bananas, but it makes no difference whether the EC has one or multiple
tariff quotas; Article XIII applies if there is one tariff quota or more than one tariff quota. The EC has
never been able to explain in terms of Article X III what difference it would make whether the EC had
one or more tariff quotas.

21. (Both Parties) In paragraph 19 of its op ening statement during the substantive meeting
with the Panel, the EC argues that "[t]he compla inants attempt to draw some analogy with the
regimes analysed by this Panel in 1997 and 1999. Th is is not correct. Following the abolition of
the tariff-quota-based system in 2006, the curren t regime is so different to those of the 1990s
that no analogy can be drawn." Can the EC el aborate on this argument, and Ecuador provide
a reasoned answer as to whether it agrees with the same.

Ecuador reserves the right to comment on the EC's answer, but Ecuador notes that the current system,
like those examined in the late 1990 has a tariff quot a with the zero duty in quota rate reserved for
ACP origin bananas..

22. (Both Parties) In paragraph 10 of its stat ement during the substantive meeting with the
Panel, Brazil argues that "the EC abruptly jumps to the flawed conclusion that because the
Member has chosen to implement a suggestion by the panel such Member would always be in
compliance with its obligations under the covered agreements." In paragraph 11 of the same
statement, Brazil adds that "[i]n no provision does the DSU grant Members certainty as to the
'lawfulness' of a measure taken to comply just because such measure is intended to implement a
suggestion made by a panel. 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." Can the Partie s provide a reasoned answer as to whether they
agree with Brazil's argument.

Ecuador agrees with Brazil. The EC is wrong to cont end in this dispute that the EC's current illegal
regime was suggested by the Panel. However, if a Panel did suggested measu res that a Party thought
were inconsistent with WTO rules, there is nothing in the DSU that would bar a challenge to such
measures.

23. (Both Parties) The Understanding on Bana nas signed by the EC with Ecuador and the
US seems to include references, in both Phases I and II, to a bound tariff-rate quota, designated
as "quota 'A'", of 2.2 million metric tons with an in-quota tariff rate not exceeding €75/mt, that
would possibly extend beyond the end of 2002. Ca n Parties provide a reas oned answer as to
whether they agree with this reading of the Understanding. Can the EC explain how this can be
reconciled with its argument that the TRQ expired at the end of 2002, considering that the EC
has been arguing for the binding nature of the Understanding on Bananas and that it would
constitute a mutually agreed solution?

Ecuador considers that, regardless of the Understanding, the EC tariff was and remains bound (subject
to adjustment in Article XXIV:6 negotiations that have yet to be concluded to account for the
enlargement of the EC and the extension of the pr eference regime). The understanding in this sense
was not a new commitment but a confirmation.

24. (Both Parties) Irrespective of their differences in the interpretation of the Framework
Agreement on Bananas (BFA), can the Parties identify the document that constitutes the legally
binding schedules of the European Communities fo r bananas at the date of the establishment of
this Panel on 20 March 2007, indicating its WTO document symbol if any, and specify any
changes to that document that might have taken place in regard to bananas.

Schedule CXL is contained in documents G/L/65/Re v.1 and G/L/65/Rev.1/Add.3, and also should be
taken into account documents G/SECRET/20; G/SECRET/22; G/SECRET/26.

25. (Both Parties) Paragraph 9 of the Framew ork Agreement on Bananas (BFA) annexed to
the EC Schedules provides that "[t]his agreement shall apply until 31 December 2002"
(Emphasis added). Could it be concluded fr om this language that only the Framework
Agreement on Bananas annexed to the EC Sc hedules expired on 31 December 2002, but not
Section I B of the EC Schedules, where the tariff rate quota (TRQ) is also indicated? Please
provide a reasoned response.

Yes. This interpretation is not only possible, but is compelled by the record. Ecuador's position is
explained in paragraphs 53-60 of Ecuador's second submission a nd in paragraphs 59 to 67 of
Ecuador's oral statement, and in response to question 45.

26. (Both Parties) Should the expressions "agreed system" used in paragraph 8 of the
Framework Agreement on Bananas (BFA) annexed to the EC Schedules, "the agreement" used
in paragraph 9, and "this agreement" used in paragraphs 9, 10 and 11, be considered to be
equivalent?

The term "the agreement" must be presumed to me an the same thing each time it is used, but the use
of the term "agreed system" in the context of paragraph 8 is not especially clear, but could refer to
those aspects that refer to the operation of the TR Q system. The Agreement has provisions such as
the commitment of parties not to seek adoption of the report and the commitments to consult which
are not terms and conditions of a WTO schedule of concession and would not fit within the concept of
a tariff quota system.

27. (Both Parties) Should paragraph 9 of th e Framework Agreement on Bananas (BFA) be
interpreted as a stand-alone provision or by taki ng into account other parts and sections of the
EC's Schedule, as well as the intentions of the parties in all subsequent procedures?

Ecuador thinks that the ordinary meaning of th e language establishes that the concession did not
terminate upon termination of the BFA, but it is always proper to look at context, object and purpose
and where there is ambiguity, other interpretive aids.

28. (Both Parties) In paragraph 69 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that "[t]ariff quota conces sions can be withdrawn, but the withdrawing
member must follow Article XXVIII procedures which the Doha Waiver required and the
European Communities failed to do." Can Ecua dor clarify in what specific way the EC has
"failed" to follow Article XXVIII procedures and wh at would be the legal consequences of such
failure. Can the EC provide a reasoned answer as to whether it agrees with Ecuador's assertion
that it has failed to follow Article XXVIII procedures.

Article XXVIII establishes a process by which a WTO member can withdraw a concession. This
process involves announcing an intention to withdraw , and negotiating with pr incipal and substantial
suppliers and a host of procedural requirements. Substantively, if agreement is not reached on
compensation, the withdrawing party ultimately may proceed, interested party but principal and
substantial suppliers than have re taliation rights. In the case of bananas, the objective of "at least
maintaining" should have resulted in a duty ra te for bananas that would not have involved
compensation or retaliation in other products, at least in the main. But Article XXVIII does allow any
member simply to start applying a duty in violati on of is bindings without following procedural and
substantive requirements.

QUESTIONS ADDRESSED TO ECUADOR

29. (Ecuador) Can Ecuador expand on the factual information provided in Chart 1 of its
first written submission by providing annual da ta (and their sources) for each year from 1999
(where "EC" refers from 1999 to 2003 to EC15 a nd from 2004 to 2006 to EC25, but, if possible,
also show separately EC15 from 2004 to 2006; and for the first half of 2007 for EC27) for the
following:

 (a) Volume, FOB value and average unit val ue (in Euros/mt and USD/mt) of banana
exports from Ecuador to the EC, and to the rest of the world;

VOLUME OF EXPORTS FROM ECUADOR BY COUNTRY OF DESTINATION
1999 to First Semester 2007
(thousand metric tonnes)

YEARS
(1)
TOTAL EXPORTS
(C=A+B)
(2)
EXPORTS TO THE EC
(A)
EXPORTS TO OTHER
MARKETS (B)
1999 (UE-15) 3,782.58 695.00 3,087.58
2000 (UE-15) 3,993.38 674.00 3,319.38
2001 (UE-15) 3,752.97 705.00 3,047.97
2002 (UE-15) 3,875.92 829.00 3,046.92
2003 (UE-15) 4,212.36 800.00 3,412.36
2004 (UE-25) 4,370.43 993.00 3,377.43
2005 (UE-25) 4,331.30 1,059.00 3,272.30
2006 (UE-25) 4,402.39 1,026.00 3,376.39
2007 (*) (UE-27) 2,423.36 635.45 1,787.91
Sources: (1) Asociación de Exportadores de Banano del Ecuador (AEBE / Declaración en Aduanas (bills of
ladings)
 (2) Eurostat.
 (*) First Semester.

VOLUME OF EXPORTS FROM ECUADOR TO THE EC
2004 – 2006
(thousand metric tonnes)

YEARS
(1)
TOTAL EXPORTS
C=A+B
(2)
EXPORTS TO THE EC 15
(A)
(2)
EXPORTS TO THE EC 10
(B)
2004 992,502.00 797,045.00 195,457.00
2005 1,059,269.00 885,975.00 173,294.00
2006 1,026,447.00 960,897.00 65,550.00
Sources: (1 ) Asociación de Exportadores de Banano del Ecuador (AEBE)/ Declarac ión en Aduanas (bills
of ladings).
 (2) Eurostat.

FOB VALUE OF ECUADORIAN EXPORTS
1999 to First Semester 2007

thousands USD thousands EUROS

TOTAL
(C=A+B) EC (A) OTHER
MARKETS (B)
AVERAGE
EXCHANGE
RATE 1USD=1€
(1)
TOTAL
(D=E+F) EC (E)
OTHER
MARKETS
(F)
1999 811,363.41 149,077.50 662,285.91 0.9875 801,221.37 147,214.03 654,007.34
2000 902,703.55 152,357.70 750,345.85 1.0667 962,913.88 162,519.96 800,393.92
2001 928,860.08 174,487.50 754,372.58 1.1226 1,042,738.32 195,879.67 846,858.65
2002 965,685.47 206,545.35 759,140.12 0.9541 921,360.51 197,064.92 724,295.59
2003 1,088,895.06 206,800.00 882,095.06 0.8007 871,878.27 165,584.76 706,293.51
2004 1,067,259.01 242,490.60 824,768.41 0.7337 783,047.93 177,915.35 605,132.58
2005 1,079,143.40 263,849.85 815,293.55 0.8450 911,876.17 222,953.12 688,923.05
2006 1,159,809.65 270,299.70 889,509.95 0.7607 882,267.20 205,616.98 676,650.22
2007 (*) 641,241.97 167,758.80 473,483.17 0.7426 (**) 476,186.29 124,577.68 351,608.60
(1) Sources: AEBE
(*)First Semester
(**) Exchange rate June 2007

FOB VALUE OF EXPORTS FROM ECUADOR TO THE EC
2004 – 2006

 Thousand USD Thousand euros
Year
TOTAL
(C=A+B) EC-15 (A) EC-10 (B) TOTAL
(D=E+F) EC-15 (E) EC-10 (F)
2004 242,490.60 194,637.17 47,853.43 177,915.35 142,805.29 35,110.06
2005 263,849.85 220,739.43 43,110.42 222,953.12 186,524.81 36,428.31
2006 270,299.70 209,980.19 60,319.51 205,616.98 159,731.93 45,885.05
Source: AEBE / Banco Central del Ecuador / Eurostat

FOB VALUE/ mt OF EXPORTS (1)
1999 – First Semester 2007
In USD/€

YEARS USD EUROS
1999 214.50 211.82
2000 226.05 241.13
2001 247.50 277.84
2002 249.15 237.71
2003 258.50 206.98
2004 244.20 179.17
2005 249.15 210.53
2006 263.45 200.41
2007 (*) 264.00 196.05
 (*) First Semester
 (1) FOB Value established by Inter-ministeria l Agreements Ministeriode Agricultura
and Ministerio de Comercio Exterior.
 Source: AEBE / Banco Central del Ecuador.

 (b) Share (percentage) of banana exports from Ecuador going to the EC, in volume
and value terms;

ECUADOR'S SHARE IN TOTAL IMPORTS BY THE EC 15
thousand metric tonnes and percentage

YEAR TOTAL IMPORTS
BY EC-15
IMPORTS FROM
ECUADOR SHARE (%)
2004 3,403.39 797.04 23.42%
2005 3,322.87 885.97 26.66%
2006 4,085.82 960.89 23.51%
 Source: Eurostat

ECUADOR'S SHARE IN TOTAL IMPORTS BY THE EC 10
thousand metric tonnes and percentage

YEAR TOTAL IMPORTS
BY EC-10
IMPORTS FROM
ECUADOR SHARE (%)
2004 455.61 195.45 42.90%
2005 400.13 173.29 43.31%
2006 109.89 65.55 59.41%
 Source: Eurostat

SHARE AND ANNUAL VARIATION OF SALES TO THE EC VIS A VIS
TOTAL EXPORTS BY ECUADOR
1999 -2006
thousand FOB USD and percentage

YEARS TOTAL
(USD)
TOTAL EC
(USD) SHARE (%)
ANNUAL
VARIATION
(%)
1999 811,363.41 149,077.50 18.37%
2000 902,703.55 152,357.70 16.88% 2.20%
2001 928,860.08 174,487.50 18.79% 14.52%
2002 965,685.47 206,545.35 21.39% 18.37%
2003 1,088,895.06 206,800.00 18.99% 0.12%
2004 1,067,259.01 242,490.60 22.72% 17.26%
2005 1,079,143.40 263,849.85 24.45% 8.81%
2006 1,159,809.65 270,299.70 23.31% 2.44%
 Source: AEBE / Banco Central del Ecuador

SHARE AND ANNUAL VARIATION OF SALES TO THE EC 15
VIS A VIS TOTAL EXPORTS
2004-2006
thousand FOB USD and percentage

YEAR TOTAL
USD
TOTAL
EC 15 (USD) SHARE (%) ANNUAL
VARIATION (%)
2004 1,067,259.01 194,638.39 18.24%
2005 1,079,143.40 213,266.17 19.76% 9.57%
2006 1,159,809.65 253,148.31 21.83% 18.70%
Source: AEBE / Banco Central del Ecuador

SHARE AND ANNUAL VARIATION OF SALES TO THE EC 10
VIS A VIS TOTAL EXPORTS
2004-2006
thousand FOB USD and percentage

YEAR TOTAL
USD
TOTAL
EC-10 (USD) SHARE (%) ANNUAL
VARIATION (%)
2004 1,067,259.01 47,728.89 4.47%
2005 1,079,143.40 43,175.20 4.00% -9.54%
2006 1,159,809.65 17,269.15 1.49% -60.00%
Source: AEBE /Banco Central del Ecuador

 (c) Share (percentage) of total volume of banana exports by Ecuador going to the
EC divided by the EC's share of global banana imports; and

SHARE (PERCENTAGE) OF BANANA EXPORTS FROM ECUADOR
1999 – 2006
thousand metric tonnes

YEARS TOTAL IMPORTS EC
(1000 MT)
IMPORTS FROM
ECUADOR (1000 MT) SHARE (%)
1999 3,201.00 695.00 21.71
2000 3,288.00 674.00 20.50
2001 3,205.00 705.00 22.00
2002 3,282.00 829.00 25.26
2003 3,366.00 800.00 23.77
2004 3,859.00 993.00 25.73
2005 3,723.00 1,059.00 28.44
2006 4,196.00 1,026.00 24.45
Source: Eurostat

SHARE (PERCENTAGE) OF BANANA EXPORTS FROM ECUADOR IN EC IMPORTS
2004 – 2006
thousand metric tonnes

YEARS
TOTAL
IMPORTS EC
(1000 MT)
IMPORTS EC-15 SHARE (%) IMPORTS EC-10 SHARE (%)
2004 3,859.00 797.04 20.65% 195.45 5.06%
2005 3,723.00 885.97 23.80% 173.29 4.65%
2006 4,196.00 960.89 22.90% 65.55 1.56%
Source: Eurostat

Imports by the EC are calculated including imports from the dollar zone and ACP countries. It does not
include imports from the EC's outer and peripheric regions (Canaries, Martinique, Guadaloupe, Madeira,
Cyrus and Greece).

 (d) Amount of duties paid to the EC fo r the importation of bananas from Ecuador
for each of the years specified above.

Amount of duties paid to the EC
1999 to First Semester 2007
thousand mt and thousand euros

YEARS
VOLUME
IMPORTED BY THE
EC FROM
ECUADOR
DUTIES PAID
(EUROS)
1999 695.00 52,125
2000 674.00 50,550
2001 705.00 52,875
2002 829.00 62,175
2003 800.00 60,000
2004 993.00 74,475
2005 1,059.00 79,425
2006 1,026.00 180,576
2007 (*) 635.45 111,839
 (*) First Semester
 Source: Eurostat / AEBE

Amount of duties paid to the EC
2004 – 2006
thousand euros

YEARS DUTIES PAID EC-15
(EUROS)
DUTIES PAID EC-10
(EUROS)
2004 59,778.38 14,696.63
2005 66,448.13 12,976.88
2006 169,117.87 11,458.13
 Source: Eurostat / AEBE

30. (Ecuador) Chart II in Exhibit ECU-3 refers to "Imports of Bananas by the EU–27" for
the years 2005-2007. In regard to this chart, could Ecuador:

 (a) Explain how it calculated the figure s for 2005-2006, i.e. before the enlargement
of the EU to 27 member States;

EUROSTAT data has been taking into account, wh ich corresponds to imports made by the EC
(updated May 2007).

 (b) Clarify whether the figures for 2007 are estimates and, if so, explain the
calculations involved; and,

Statistical data in Exhibit ECU-3 are provisional. Figures from 2007 correspond to the first quarter
and the average that appears in column No 5 corresponds to the first quarter of years 2005 and 2006.

Data starting in column No 7 refers to the market share of each of the supplying countries within the
total imports by the EC in 2007. By dividing Ecuador's imports from January to March 2007
(339.328 tonnes) to total de imports made fro m the dollar zone and ACP countries (1.189.756
tonnes), the result of 28.5% is obtained.

 (c) State whether the figures for 2007 need any rectification, in the light of any
relevant subsequent events since the submission of Ecuador's first written
submission.

As it was already said, data for 2007 are provisional. Below is attached data for the first semester
2007 taken from Eurostat, which are also provisional but show a broader picture.

VOLUME OF IMPORTS OF BANANAS FROM ECUADOR
COMPARATIVE CHART FIRST SEMESTER 2006-2007
thousand metric tonnes/percentage

COUNTRY 2006
VOLUME
ECUADOR'S
SHARE IN THE
EC MARKET
2007
VOLUME
ECUADOR'S
SHARE IN THE
EC MARKET
COMPARATIVE
VARIATION
SEMESTERS
2007/2006
Ecuador 720,270 32.05% 635,459 26.50% -11.77%
Source: Eurostat

31. (Ecuador) In paragraph 46 of its first written submission, the EC mentions that
"although the group of MFN countries (to whic h Ecuador belongs) has seen a spectacular
increase in the volumes exported into the European Communities since 1 January 2006,
Ecuador has experienced a slight reduction in its own exports: its 2006 volumes were
approximately 3.6% below its 2005 volumes." In paragraph 7 of its opening statement during
the substantive meeting with the Panel, the EC goes on to argue that "[t]he group of MFN
banana suppliers had never exported so many bananas into the European Communities as it did
in 2006." Can Ecuador provide a reasoned answer as to whether it agrees with these
statements. If so, what are the reasons to expl ain the decrease in EC imports of bananas from
Ecuador, accompanied by an apparent increase in the EC imports of other MFN bananas?

Ecuador believes that the assertion of the EC that other MFN countries, except Ecuador have
experienced a "spectacular increase of exports to the EC" since January 2006 is not true. First,
traditional MFN exporters, which are the largest e xporters to the EU, generally experienced an
increase which in the best of cases bordered 10% comp ared with 2005, and this in no way constitutes
a spectacular growth, as stated by the EC. It c ould be argued that an im portant exception was Costa
Rica, whose exports grew 32% approximately in 2006 compared to 2005. However, 2005 is not an
adequate benchmark for that country, because in 2005 Costa Rican exports fell almost 26% to
623,687 mt due to climate problems. Therefore, wh at happened in 2006 (824,5 90 mt of exports) was
only a recovery of Costa Rica's normal export volumes, which even so did not reach 2004 levels
(842,629 mt).

In second place, although other less bigger MFN exporters like Brazil and Peru recorded a significant
increase in exports in 2006, at the same time, other countries like Venezuela, Mexico and Honduras
suffered a similarly important loss in their sales to the EC.

In third place, Ecuador believes that it is essential to consider the issue within the framework of a
broader analysis that allows visualizing the evol ution of MFN, ACP and Ecuadorian exports to the

EC 15 and the EC 10 (EC 25), from 1999 to 2006. In this broad framework it can be seen that MFN
exports between 1999 and 2006 for the EC25 in gene ral remained stable and recorded a slight
increase in 2006, contrary to the declaration of the EC (3,208,943 mt in 1999 compared to
3,293,638 mt in 2006). In turn, Ecuadorian exports during the same period generally remained stable
and recorded a fall in 2006 (1,074,407 mt in 1999 compared to 1,027,209 mt in 2006). On the
contrary, it is notorious that ACP exports regist ered a sustained increase in the same period of
688,217 mt in 1999 to 891,190 mt. The growth of ACP is steeper in 2006 after the increase of the
tariff protection received from the EC against MFN suppliers, as a result of the tariff increase from
€75/mt to €176/mt. See attached comparative table for more details at Exhibit ECU-9

This proves that there is no "spectacular growth of MFN exports to the EC since 2006". The assertion
of the EC that MFN suppliers had never exported so many bananas to the EC as in 2006 is also
untrue. APC imports into the EC-25 in 2006 we re 30% higher than their constructed EC-25 import
level in 1999. It is the ACP bana na suppliers, not the MFN suppliers , that have seen a "spectacular
increase" in banana shipments to the EC.

On the other hand, Ecuador stresses that the fall of its exports in 2006 is a direct consequence of the
introduction of the MFN tariff of €176/mt by the EC. Indeed, the increase of approximately 2.34 times
in the MFN tariff (from €75/t to €176/t) generate d negative economic impacts on MFN suppliers, the
real and full dimension of which will only be a ppreciated in the medium term. It not only made
Ecuadorian and MFN exports more expensive, there are other measures that should be analysed:

The EC reduced by more than half the ACP out of quota tariff from €380/t to €176/t, it increased to
more than double the MFN tariff -from €75/t to €176/t , it established an exclusive ACP 0 tariff quota,
which went from 750,000 mt to 775.000 mt. These meas ures caused a substantial improvement in the
conditions of competition and a significant increase in preferences for ACP suppliers against MFN
suppliers.

The findings of the Arbitrator regarding this issue fully coincide with the above statements: "In this
case, the tariff equivalent proposed by the EC would result in an increase of the margin of preference
currently enjoyed by ACP suppliers thanks to the €75 /t tariff applied to imports within quota, to place
it at €230/t, which would significantly increase the margin of preference they enjoy against MFN
banana suppliers prior to the rebinding . In view that the use of the price gap methodology means
that the rebinding will have impartial effects on total imports , any advantage achieved by
preferential supplies in the EC market as a result of this added advantage would happen at the
expense of MFN banana suppliers.
12

Therefore, we can state that there is a huge incr ease in the margin of preference of ACP bananas
produced as a direct consequence of the introduction of the €176/t discriminatory MFN tariff.

ACP countries currently also benefit from a reduction of their out of quota tariff from €380/t to €176/t
(a 2.2 times reduction). This reduction gives ACP suppliers huge incentives to cross subsidized over
quota ACP exports (profitable in quota sales lead to profitable cross subsidized over quota sales).

12 WT/L/616, 1 August 2005, European Communities - ACP-EC Association Agreement Recourse to
Arbitration pursuant to the Decision of 14 November 2001, Arbitral award, paragraph 69.

Banana Imports EU25
(1999=100%)
90
95
100
105
110
115
120
125
130
135
1999 2000 2001 2002 2003 2004 2005 2006
%
MFN imports
ACP Imports
Ecuador
it
Banana Imports into the EU25 (tons)

MFN
imports
ACP
Imports
Ecuador
imports
1999 3,208,943 688,217 1,074,407
2000 3,118,517 771,502 1,041,713
2001 3,014,628 748,216 1,042,540
2002 3,070,810 739,530 1,087,452
2003 3,140,260 798,801 1,081,666
2004 3,077,783 782,962 993,825
2005 2,963,764 763,672 1,062,735
2006 3,293,638 891,190 1,027,209
Source: Eurostat – Extracted Sept 26, 2007 (EU15 CN8 level/EU 10 '99-'03 HS4 level, '04-'06 CN8 level)

32. (Ecuador) In paragraph 50 of its first written submission, the EC argues that:

"there is ample evidence that Ecuador's banana industry is facing a number of
difficulties that have nothing to do with the new import regime of the European
Communities. These difficulties include:
(i) Adverse climatic conditions negatively affecting the 2006 production:
the drought at the end of 2005 was followed by heavy rain at the
beginning of 2006.
(ii) According to Aprobanec, the Asso ciation of banana growers in Quevedo,
Ecuador's banana production was significantly damaged by the eruption
of the volcano Tungurahua on 16 August 2006. The volcano caused
significant damage to approximately 35% of the banana plantations in
the Los Rios province, which produces about 30% of all Ecuadorian
bananas.
(iii) Ecuador introduced certain administrative measures that encouraged
traders operating in the European Communities' market to source
bananas from other countries. For example, a letter sent by the
Association of German Fruit Importers to Mr. Rizzo, Minister of
Agriculture in Ecuador on 15 Augu st 2006, expresses the discontent of
the German traders with an Ecuadorian decree providing that the fruit
should be inspected only at the plantation and not at the port. This
administrative measure incited German traders to source bananas from
other MFN countries, neighbouring Ec uador. Another administrative
measure with a similar effect on European traders was adopted in
August 2006: it imposed a minimum price of $3.25 per box and obliged
exporters to pay producers via the Central Bank." (Footnotes omitted)
Can Ecuador provide a reasoned answer as to whether it agrees with these assertions.

(i) These assertions are wrong because total Ecua dorian banana exports to all destinations
increased from 4,331,300 mt in 2005 to 4,402,390 in 2006 (an increase of 71,090 mt).
However, exports to the EC fell from 1,059,000 in 2005 to 1,026,000 in 2006. This clearly
shows that in 2006 Ecuadorian exports continue d growing and that there was a diversion of
trade originally directed to the EC market to other destinations as a direct consequence of the
increase of the MFN tariff from €75/t to €176/t. The notable increase of ACP protection and
margin of preference in 2006 means that these c ountries sharply increased their exports to the

Community market, in detriment of some MFN suppliers and particularly Ecuador, which had
to sell to other markets.

(ii) According to official reports of the Minist ry of Agriculture and Livestock of Ecuador, the
effects of the two eruptions were approximately 108,000 mt of bananas that the country failed
to export. If the eruptions had not taken place, the increase in the total volume of Ecuadorian
exports to all destinations in 2006 (which r eached an additional 71,090 mt compared to 2005)
would have been even greater.

(iii) The administrative measures me ntioned by the EC, as has been demonstrated, never affected
the growth of total Ecuadorian exports in 2006. The price of USD 3.25 per box of bananas is
a referential price that should have been paid by Ecuadorian exporters to all destinations and
not only to the EC, and as we have seen exports to all destinations rather grew in 2006 in spite
of these problems, unlike exports to the EC as a direct consequence of the increase of the
tariff to €176/t.

33. (Ecuador) Please provide information on wh ether Ecuador's banana exports to the EC
benefit from any preferential systems and, if yes, please describe those sy stems, indicating the
relevant dates, and focusing your response on the period 1999 to 2007.

Ecuador's banana exports to the EC never benefited from any preferential systems granted by the
European Communities. This includes the period 1999 to 2007.

34. (Ecuador) How did the actual conditions for the export of bananas change following the
various enlargements of the EC in the period 1999 and 2007?

In 1995, when Austria, Finland, and Sweden joined the EC, the EC "autonomously" enlarged its MFN
tariff quota by 353,000 mt, thereby increasing its MFN tariff-quota volume to 2.553 million mt.
13 The
EC has yet to alter its schedule of concessions to reflect this accession or otherwise provide
Article XXIV:6 compensation to the MFN suppliers.

The enlargement of the EC to 25 members also meant for Ecuador and MFN suppliers (mostly in
Latin America) a huge loss in access levels, because before the enlargement the region exported from
560,000 to 570,000 mt of bananas pe r annum to the 10 countries that joined the EC (according to
EUROSTAT figures) and once they became members of the EC25, the EC arbitrarily established an
enlargement quota of only 460,000 mt per annum as compensation for Latin America.

More than 58.2% of this tonnage corresponded to Ecuador, and the rest to other Latin American
countries. The presence of ACP bananas in this market was negligible.

This means that the EC drastically reduced pr evious exports by Latin American countries in
110,000 mt, inflicting losses estimated in millions of dollars which the EC has failed to compensate.

The enlargement of the EU also meant a signifi cant improvement of ACP preferences, because ACP
countries went from having very small marginal export s to the EC prior to May 1, 2004 (according to
EUROSTAT figures), to having access to a quota of 460, 000 mt with 0 tariff, while Latin American
was reduced in approximately 110.000 mt in e xports and had to pay €75/t, while before the
enlargement it benefited in general from a free mark et, because most countries used an applied tariff
equivalent to 0 to bananas.

13 See Council Regulation (EC) No. 1637/98, OJ L 210/28, 28 July 1998, Article 1.

On the other hand, also according to EUROSTAT fi gures, Ecuador had average annual exports to the
EC10 of 314,713 mt during the period 2000-20 02. These exports fell to 195,450 mt in 2004,
173,290 mt in 2005 and 65,550 in 2006, when the 176 €/t tariff entered into force.

In consequence, the enlargement of the EC with the accession of 10 new members meant huge losses
in terms of volumes and net re venues for Ecuador, which have not been compensated, as explained
below.

Correcting for the errors in the EC calculations, Ecuador arrived at a figure of €374,442,049.30 as the
compensation due arising from the modification of the schedules of the EC-10 countries. The
following chart presents the results of these two corrections to the EC's calculations:

08030019 Bananas, fresh (excl. Plantains

Summary by acceding country

Countries Volumes
(tonnes)1 Value (€)4 Duties with
NMS rate (€)
Bound duty
rate NMS
Duties with
EU15 rate
Bond duty rate
EU15 rate
Credits/
Debits
Cyprus 945.50 666,707.80 1,137,211.37 30% + 570 C£ 642,936.67 680€/t 494,274.70
Czech Republic 122486.4146 58,296,676.28 0.00 0.00 83,290,761.93 680€/t -83,290,761.93
Estonia 13,374.43 6,481,863.16 1,296,372.63 0.20 9,094,610.36 680€/t -7.798,237.73
Hungary2 75,607.96 24,626,015.00 4,925,203.00 0.20 51,413,412.80 680€/t -46,488,209.80
Lithuania 24,168.09 10,917,025.12 545,851.26 0.05 16,434,302.76 680€/t -15,888,451.51
Latvia 20,391.43 9682751.578 4,841,375.79 0.50 13,866,175.66 680€/t -9,024,799.87
Malta 7,512.40 3,233,909.43 29,092,352.76 40% + 1500 Ln 5,108,429.85 680€/t 23,983,922.92
Poland3 256,956.53 111,829,147.00 57,032,864.97 0.51 174,730,439.24 680€/t -171,743,858.63
Slovenia 37,177.48 16,831,546.80 336,630.94 0.02 25,280,683.34 680€/t -24,944,052.40
Slovakia 58,443.93 26,287,659.54 0.00 0.00 39,741,875.05 680€/t -39,741,875.05
Total 617,064.16 99,207,862.72 1.48 419,603,627.67 -374,442,049.30

 1 Except for Hungary and Poland, th ese figures are the future trade prospects calculated in accordance
with para. 6 of the Understanding on the Interpretation of Article XXVIII of the GATT 1994
 2 Hungary has a TRQ of 17 079 + (in-quota rate same as out-of-quota rate)
 3 Poland has a TRQ of 33 000 + (in-quota rate – 20%)
 4 For Hungary and Poland, the figures represent the tota l value; for the others, they represent the value
of the future trade prospects on the basis of the unit value during the representative period.

In this regard, the information that the EC has provided indicates that for the period 2000-2002,
Ecuador's share in the total value of imports into the EC-10 was 58.2%. Assuming that Ecuador's
share in such imports during the period 2001-2003 rema ined at the same level, the total compensation
due to Ecuador would be 58.2% of €374,442,049.30 per annum, or €217,925,273 per annum.

It is easily deduced that the compensation owed by the EC to Ecuador for its enlargement as a
consequence of the accession of 10 new members is by no means compensated with the introduction
of the €176/t tariff, applicable since 1 January 20 06 to the 10 countries that joined the EC, as the
European Communities would have us believe.

In January 2007, when Romania and Bulgaria acceded to the EC prior to accession, Romania
imported 143,000 mt of Latin American bananas, subject to a tariff of 16%; 14 Bulgaria imported
55,000 mt in 2005, subject to a tariff of 11.2%. 15 Following accession, both countries became subject
to an "autonomous" €176/mt tariff. No scheduling changes or compensation adjustments have been
made.

35. (Ecuador) In paragraph 6 of its oral statement during the substantive meeting with the
Panel, Ecuador mentions that "[l]ast year, the European Communities' tariff on bananas
required the payment of additional tariffs for Ecuador in the order of €103 million more than
the previous year as a result of the European Communities' unilateral 'tariff only' scheme."
For clarification, can Ecuador describe the meth odology for this calculation, and provide the
amounts paid from 1999 to 2006. Can Ecuador also clarify whether it is arguing that
€103 million is the additional amount paid in 2006 as compared to the duties paid during the
prior year (2005) before the EC banana regime of 1 January 2006 entered into force.

The additional tariffs for Ecuador amounting to 103 million Euros were derived by taking the
difference between total duties actually paid by Ec uador in 2006 under the current €176/mt rate and
the duties Ecuador would have paid that same y ear had the rate been €75/mt (as it was from 1995 to
2005). The methodology for this calculation is as follows: [Total duties paid by Ecuador to the EC in
2006] – [Total volume of EC imports of bananas fro m Ecuador in 2006 (in mt) x €75/mt]. The actual
calculation is as follows: €180,788,696 – [1,027,209 mt x €75/mt] = €180,788,696 – €77,040,675 =
€103,748,021

Based on 1999-2006 trade data total duties paid to the EC for imports of bananas from Ecuador
between 1999 and 2006 were:

 – 1999 – €52,259,175;
 – 2000 – €51,816,960;
 – 2001 – €52,880,355;
 – 2002 – €62,059,943;
 – 2003 – € 59,974,208;
 – 2004 – €70,847,381;
 – 2005 – €79,705,148; and
 – 2006 – €180,788,696

36. (Ecuador) In paragraph 10 of its closing statement during the substantive meeting with
the Panel, the EC argues that "[t]he fundame ntal GATT distinction between tariff and non-
tariff measures is an important element of this case. Tariff measures are subject to Articles I
and II, and non-tariff measures are governed by Articles XI and XIII. The European
Communities is unaware of any instance in which a single measure has been found to be in
breach of both Article I and Article XIII." Can Ecuador provide a reasoned answer as to
whether it agrees with this statement.

14 U.N. Comtrade Database: Romania banana imports 2002-2005, Exhibit ECU-10.
15 U.N. Comtrade Database: Bulgaria banana imports 2002-2005, Exhibit ECU-10.

The compliance panel in Bananas III (Article 21.5 – Ecuador) concluded the ACP tariff-quotas were
being maintained in breach of both Article I and Article XIII of the GATT.
16

In any event, As previously noted, there is no provision of the WTO that prevents a single measure
from violating more than one provision of the WTO a nd there is no reason to try to imply such a rule.
The EC has no textual or contextual basis for arguing that a tariff quota may not simultaneously
violate Article I and Article XIII.

37. (Ecuador) Can Ecuador confirm that it signed an Understanding on Bananas with the
EC on 30 April 2001, the text of which is reproduced in documents WT/DS27/58 and
WT/DS27/60. If so, did the legal and factual assumptions based upon which Ecuador signed
such understanding on 30 April 2001 change by June 2001 when the Understanding was notified
to the DSB?

Ecuador signed the Understanding on Bananas with the EC on 30 April 2001. Ecuador was, and is,
quite certain regarding what it agreed to under the Understanding – a transitional regime comprised of
several phased steps to be taken by the EC to ultimat ely bring about a resolution to the dispute, not an
immediate end to the dispute. Both the text of the Understanding and Ecuador's communication
confirm this interpretation.

What changed, from Ecuador's point of view, and what prompted Ecuador's July 2001 communication
to the DSB, was the EC's portrayal of the Unde rstanding to the DSB in June 2001 – as a mutually
satisfactory solution within the meaning of DSU Article 3.6 and an end to the Bananas dispute.
17
Ecuador did not, and to this day does not, share the EC's interpretation.

Immediately after the EC's communication, Ecuado r clarified that the Understanding identified a
"means by which a long-standing dispute can be resolved," 18 comprised of "the execution of two
phases" and "the implementation of several key feat ures, which demands the collective action of the
WTO membership." Ecuador viewed the EC's appr oach to the Understanding (as a mutually agreed
solution within the meaning of Article 3.6) as denying the transitional nature of the Understanding.

Ecuador's concerns have been borne out by the EC's actions since 2001. The EC failed to satisfy the
terms of the Understanding, th e waiver Annex, as well as it s obligations under the covered
agreements.

38. (Ecuador) Paragraph G of the Banana U nderstanding provides that "[t]he EC and
Ecuador consider that this Understanding constitu tes a mutually agreed solution to the banana
dispute." Why did Ecuador then state in its notification of the Understanding to the DSB
(document WT/DS27/60) that "although Ecuador sees the Understanding as an agreed solution
which can contribute to an overall, 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"? Please
provide a reasoned response.

Ecuador, especially because of the EC purported notifica tion, came to realize that the EC might try to
use the Understanding as means to restrict WTO control and Ecuador's rights under WTO dispute
settlement rights. Ecuador wished to make clear to the EC and WTO members generally, despite

16 See EC – Bananas III (Article 21.5 – Ecuador), paras. 6.160 and 6.161.
17 See Notification of Mutually Agreed Solution, European Communities – Regime for the Importation,
Sale and Distribution of Bananas, WT/DS27/58, 2 July 2001.
18 European Communities – Regime for the Importation, Sale and Distribution of Bananas –
Understanding on Bananas between the European Communities and Ecuador , WT/DS27/60, 9 July
2001("Ecuador Communication"),quoting EC-Ecuador Understanding, paragraph A.

Ecuador's commitment to and hope for the Understa nding, it was not a mutually satisfactory solution
in the sense of Article 2 of the DSU.

39. (Ecuador) In paragraph 15 of its second written submission, the EC argues that
Ecuador "accepted the legality of the Understandi ng [on Bananas reached between the EC and
Ecuador on 30 April 2001], by initially complying with its provisions." The Panel notes
Ecuador's assertion in paragraph 26 of its opening statement that "the Understanding plainly
requires a waiver of Article I (for which Ecuador agreed to lift its reserve) and a waiver of
Article XIII, which Ecuador committed to promote to permit the EC tariff quota for ACP
countries until 1 January 2006. Ecuador did its part regarding the waivers ..." (Emphasis
added). In the light of this assertion, does Ecua dor consider that it has at least partly complied
with the Understanding? If not, why not? If yes, what are Ecuador's views on the point made
by the EC, in paragraph 62 of the EC's first s econd written submission, that Ecuador's partial
compliance proves the "binding nature" of the Understanding? What implications does the
eventual binding nature of the Understanding have , in Ecuador's view, for the potential status
of the Understanding as a mutually agreed solution?

Ecuador complied with its obligations under the Understanding, which proves none of the illogical
propositions that the EC seeks to derive from Ecuador's compliance.

Compliance with the terms of the bilateral Unde rstanding does not remotely mean that Ecuador
cannot complain under the WTO about measures that th e EC never would have applied if the EC had
complied with the bilateral Understanding. This EC argument turns international law and good faith
on its head, once again. The intention of the pa rties that the Understanding result in a durable
mutually satisfactory solution does not make the Un derstanding such a mutually satisfactory solution,
as Ecuador has previously explained.

40. (Ecuador) In paragraph 4 of its statement during the substantive meeting with the
Panel, Suriname argues that "[i]n this case there can be no doubt that a mutually agreed
solution exists. Therefore, there cannot be any disagreement in the sense of Article 21.5 of the
DSU." Provided that a mutually agreed solution exists, can Ecuador provide a reasoned answer
as to whether it agrees with Suriname's conclusion in regard to Article 21.5 of the DSU.

Ecuador disagrees. There is no provision of the DSU that precludes bringing a complaint under
Article 21.5 simply on the basis that the challenged measure complied or was alleged to comply with
an agreement alleged to constitute a mutually agr eed solution. The DSU en courages mutually agreed
solutions, but carefully does not provide anywhere th at a mutually agreed solution precludes or limits
the right to bring dispute settlement proceedings. Th e DSU drafters were wise not to provide that a
mutually agreed solution limits any DSU rights, fo r any such limitation would be a disincentive for
parties to try to negotiate solutions. This is gra phically illustrated in this dispute, where the EC is
attempting to avoid scrutiny of it flagrant violati ons of the WTO on grounds that the Understanding
constituted a sub silencio waiver of Ecuador's WTO rights. The DSU authorizes and requires Panels
to determine compliance with covered agreements. The DSU does not authorize a Panel to forego or
limit its responsibilities because the defending party in the dispute alleges that the complaining party
waived its WTO rights in a bilateral agreement. De spite their protests, the EC and ACP countries are
urging the Panel out of expediency in this dis pute to fabricate rules regarding mutually agreed
solutions that would make dispute parties, especially complaining parties, reluctant ever to enter into a
mutually agreed solution, since that would cost them their WTO rights. The WTO Agreements do not
provide such a rule, and it would be bad policy and bad law to try to contrive one.

41. (Ecuador) In paragraph 14 of its second writte n submission, the EC states that the term
"1 January 2006" in the phrase "[to further acti ons that, by 1 January 2006 would enable the]
system [to] operate fairly without any waiver at all", used by Ecuador in paragraph 11 of its

own second written submission, is "probably a ty pographical error and should be replaced by
1 January 2008". Does Ecuador agree? If not, why not?

Ecuador agrees and apologizes for the inadvertent error.

42. (Ecuador) Is Ecuador arguing that any non-reciprocal preferential quota can be WTO-
consistent only if covered by an Article XIII wa iver? Alternatively, could other provisions in
WTO agreements, such as the Enabling Clause or Article XXIV of the GATT 1994, also excuse
such non-reciprocal preferential quotas from inconsistency with WTO obligations, in the
absence of an Article XIII waiver?

Ecuador is arguing that any tariff quota must conf orm with Article XIII, unless it is covered by a
waiver or by some other exception. Ecuador has not done a survey of all possible exceptions, and the
EC has not argued that its tariff quotas benefit from a waiver or other exception.

With regard to the possible exceptions mentione d in the question – the Enabling Clause and GATTT
Article XXIV – Ecuador does not consider that the Enabling Clause provides an exception, since it is
expressly an exception only to GATT Article I:1.
19 As noted by the Appellate Body in EC – Tariff
Preferences, the Enabling Clause "excepts Members from co mplying with the obligation contained in
Article I:1 for the purpose of providing differen tial and more favourable treatment to developing
countries ... ."20 It does not permit a Member to derogate from the provisions of other GATT Articles,
including Article XIII.

For Free Trade Areas and Customs Unions that m eet the strict criteria of Article XXIV, that
Article creates an exception that could justify so me kinds of exceptions from the obligations of
Article XIII. As the Appellate Body found in Turkey – Textiles , a GATT-inconsistent quantitative
measure n would only be justified under Article XXIV if: (i) the FTA met the "substantially all trade"
coverage test of Article XXIV:8(b); (ii) the FTA met the requirements of XXIV:5(b) that duties and
regulations not be higher upon the formation of the FTA than prior to it; and (iii) the
GATT-inconsistent measure was necessary for the formation of the FTA.21

Assuming that no higher barriers were imposed on thir d countries, and that the substantially all trade
test were met, it is self-evident that exempting pr oducts of free trade area partners from duties, quotas
and tariff quotas contributes to meeting the test of eliminating duties and other regulations of
commerce on substantially all products of the free tr ade area. Indeed, failure to include such an
exemption, or limiting such exemption through devices such as capping the preferences is a negative
point though not necessarily fatal, since the requirement is not "all trade", but rather "substantially all
trade" must be free from duties or other restrictions. Whether the third test is met– the necessity of
taking the measure inconsistent with the WTO oblig ation in order to form the free trade area – will
depend on the nature of the measures.

43. (Ecuador) If the tariff rate quota of €75/mt for 2.2 million metric tons expired at the end
of 2002, what would be the arguments of Ecuador to demonstrate a violation of Article II:1(a)
and (b) of the GATT 1994? In particular, would in such a case Ecuador accept that the EC's
bound level of duty is merely an MFN duty of 680€/mt? If not, why not?

19 Paragraph 1 of the Enabling Clause provides that '[notwithstanding the provisions of Article I of the
General Agreement, contracting par ties may accord differential and more favourable treatment to developing
countries." Paragraph 2 identifies the four types of measures that can be exem pted from a finding of
inconsistency with Article I:1 under the Enabling Clause. EC – Tariff Preferences (AB)", para. 112.
21 Appellate Body Report, Turkey – Restrictions on Imports of Textiles and Clothing Products ,
WT/DS34/AB/R, adopted 19 November 1999 ("Turkey – Textiles (AB)"), para. 58.

If the DSB found that the EC's €75/mt for 2.2 million metric tons concession expired at the end of
2002, the EC's only bound commitment would be th e €680/mt duty. Neither Ecuador nor any other
WTO member could then claim that a duty of €176/mt – or any duty up to €680/mt – breaches
Article II:1(a) and (b).

44. (Ecuador) What are the specific EC obli gations under Article II of the GATT 1994 that
Ecuador argues are being infringed by the EC dut y of €176/mt applied to bananas originating
in Ecuador and other MFN countries?

Article II:1(a) and (b).

45. (Ecuador) In what way should paragra ph 9 of the Framework Agreement on Bananas
(BFA) be interpreted, if not to establish an expi ration of a 2.2 mt tariff rate quota (TRQ)? In
other words, what exactly has expired, under the terms of paragraph 9, on 31 December 2002?

The BFA expired on that date. The tariff quota c oncession did not expire, because the EC made that
concession independently in its schedule. Since none of provisions of the BFA were WTO-consistent
terms and conditions, their legitimacy and validity were only as commitments among the parties to the
BFA, and thus they must be considered to have expired on 31 December 2002, if they even had any
effectiveness among BFA parties by that point. Ot her provisions that plainly were not terms,
conditions or qualifications of the concession, such as the commitment not to pursue adoption of the
panel report or the commitment to consult in 2001, were not WTO terms conditions or qualifications
on a concession, could not have been enforced in WTO dispute settlement proceedings, and would
have expired with the BFA.

46. (Ecuador) In paragraph 93 of its second written submission, the EC argues that:

"Ecuador's second written submission goes on to assert in paragraphs 69 and 70
that 'eliminating the volume restraint element of a tariff quota does not
authorize ignoring the tariff binding'. In other words, Ecuador seems to imply
that once a tariff quota is granted in a WTO Member's schedules, the tariff part
somehow becomes obligatory and perpetual, while the quota part may be freely
eliminated. This assertion is not supported by any provision of WTO law and
Ecuador's second written submission does not even attempt to offer any
explanation as to its legal basis. Moreover, accepting that the 'tariff element'
and the 'quota element' of a tariff quota are completely separable and each has a
'life of its own' leads to unreasonable re sults. For example, Ecuador should
explain why the rule that it proposes should not be the other way round, i.e. that
the 'tariff element' of a tariff quota m ay be freely amended, while the 'quota
element' should be treated as obligatory and perpetual."
Can Ecuador provide a reasoned answer as to whether it agrees with the EC's arguments.

The EC's concessions are the in-quota concession of €75/mt for 2.2 million mt; and the over-quota
concession of €680/mt, subject. These concessions are subject to such adjustments as may be agreed
in Article XXIV:6 negotiations to account for accessions of countries (who had more favourable
bindings on bananas than those of the EC) since the concession was granted, but the need for such
adjustment is not disputed in this proceeding, an d therefore Ecuador and other parties continue to
refer to the €75/mt for 2.2 million mt; concession, without prejudice to the obligation for adjustments.

Ecuador does not argue that the EC is bound to pr ovide a €75/mt duty for an unlimited quantity of
bananas. However, the EC cannot eliminate the €75/mt for 2.2 million mt obligation by asserting that

it wishes to eliminate the "quota element" of that concession (i.e. the 2.2 million mt) and, having
eliminated that element, then automatically it no longer has any obligation with respect to the €75/mt
duty. It is true that just eliminating the quan titative limit of 2.2 million mt would not breach the EC's
binding and indeed would grant more favourable tr eatment than required by the binding, which is
always welcome, but not required by Article II. What the EC cannot do is avoid its duty obligation by
the simple expedient of eliminating the quota elem ent and announcing that that step eliminates any
tariff obligation. If there were such a right, all WTO members could eliminate all their low duty and
zero duty tariff quota concessions by the same expedient.

47. (Ecuador) In paragraph 3 of its statement during the substantive meeting with the
Panel, Saint Lucia argues that "[i]n 2005 WTO Ministers in Hong Kong accepted the
tariffication proposal in which the TRQ was replaced by a single tariff of €176 per tonne.
Indeed, the Ecuadorian delegation was a leading campaigner for this change and Minister Støre
of Norway was charged with monitoring trade flows that would indicate if the change had in
fact disadvantaged MFN suppliers." In paragr aph 11 of its third party statement Saint Lucia
adds that "Ecuador argues that ... the Europe an Communities was allowed only one shot at
'rectifying the matter'. I trust that [the Panel] will reject this narrow and self-serving reading of
the waiver – a reading that even Ecuador did no t share when it agreed to join the monitoring
group that kept under review the actual effects on import volumes of the tariff of €176 per
tonne." Can Ecuador provide a reasoned answer as to whether it agrees with the arguments
raised by Saint Lucia. Can Ecuador also pr ovide evidence to support the factual assertions
made by Saint Lucia, regarding the acceptan ce by WTO Ministers in Hong Kong of the
tariffication proposal in which the TRQ was replaced by a single tariff of €176 per tonne.

Ecuador does not agree. To the contrary, a la rge number of Latin American nations, including
Ecuador, Honduras, Panama, Colombia, and Nicara gua, made statements at the Ministerial
Conference decrying the EC's adoption of the €176/mt tariff.
22 Ecuador agreed to participate in
Minister Støre's monitoring procedures with the hope that it would produce a speedy negotiated
solution. At the same time, Ecuador expressly reserve d its rights to use all the legal instruments at its
disposal in the WTO to safeguard its rights.23

QUESTIONS ADDRESSED TO PARTIES AND THIRD PARTIES

86. (Both Parties, Belize, Cameroon, Côte d'Ivoire, Dominica, the Dominican Republic,
Ghana, Jamaica, Madagascar, Saint Lucia, Sain t Vincent and the Grenadines, and Suriname)
In paragraph 31 of its statement during the s ubstantive meeting with the Panel, Cameroon
provide evidence for its assertions. Can Beli ze, Côte d'Ivoire, Dominica, the Dominican
Republic, Ghana, Jamaica, Madagascar, Saint Lu cia, Saint Vincent and the Grenadines, and
Suriname confirm that they agree with these sp ecific assertions made by Cameroon. Can
Cameroon, as well as Belize, Côte d'Ivoire, Dominica, the Dominican Republic, Ghana,
Jamaica, Madagascar, Saint Lucia, Saint Vincent and the Grenadines, and Suriname specify the
relevance of this argument, if any, in the context of its eventual analysis of Article XIII of the

22 See Ministerial Conference, Sixth Session, Summary Record of the Fourth Meeting Held in Hong
Kong Convention and Exhibition Centre, Hong Kong, China on Wednesday, 14 December 2005, at 8 p.m ,
WT/MIN(05)/SR/4, 24 February 2006, agenda item 2(b), attached as Exhibit ECU-11.
23 See Hong Kong Statement of Ecuador and Dispute Settlement Body, Minutes of Meeting Held in the
Centre William Rappard on 17 February 2006, WT/DSB/M/205, 31 March 2006, para. 61. Exhibit ECU-11.

GATT 1994, in particular as regards the chapeau of Article XIII:2. Can the Parties provide a
reasoned answer as to whether they agree with th ese assertions, and specify, in their view, how
the same should be taken into a ccount in the context of an eventual analysis of Article XIII of
the GATT 1994, in particular as regards the chapeau of Article XIII:2.

Ecuador has no comment on the relative efficiency of these countries. However, Article XIII:2 does
not permit a restricting Member to use allocations of restrictions to make up for relative economic
inefficiency of one or more supplying Members. To the contrary the goal of Article XII is to achieve
the same distribution of any restrictions as would likely prevail in the absence of the restriction.

87. (Both Parties and Brazil) In paragraph 17 of its statement during the substantive
meeting with the Panel, Brazil argues that "a Member is not exempted from discharging its
burden of proof as regards the compliance of the new measures with the DSB recommendations
and rulings even if such measures are intended
 to implement a suggestion by the panel." Can
Brazil elaborate on this argument, and the Parties provide a reasoned answer as to whether
they agree with Brazil's argument.

Ecuador understood Brazil's statement to agree w ith Ecuador's position that nothing in the DSU
immunizes a measure from challenge in an Article 21.5 proceeding simply on the basis that the
defending party argues or even ultimately proves that the measure conforms with a panel suggestion.
Ecuador may have further comments, depending on the responses to this question.

88. (Both Parties and Colombia) In paragra ph 16 of its third party submission, Colombia
argues that "[a]n applied tariff of €176/tonne does not constitute a 'rebinding' [under the Doha
Waiver]." Can Colombia elaborate on this argument, and the Parties provide a reasoned
answer as to whether they agree with it.

Ecuador understood Colombia to explain that the €176/tonne duty that the EC applies to bananas
(except those benefiting from the zero duty quota) is not in fact bound. The EC does not dispute that
this duty is not bound.

89. (Both Parties and Côte d'Ivoire) In pa ragraph 21 of its oral statement during the
substantive meeting with the Panel, Côte d'I voire argues that "moins d'une année suffit pour
produire et exporter des bananas". Can Côte d' Ivoire provide evidence for its argument. Can
the Parties comment on the argu ment made by Côte d'Ivoire, and explain how rapidly banana
production and exports can be expanded, and how much time is necessary for suppliers to fully
respond to a change in market conditions, such as a change in the EC's import regime for
bananas.

The Côte d'Ivoire underestimates the timetable for completing any new banana project of a
meaningful scale. A new banana project is not simp ly about how long it takes a banana plant, once in
the ground, to produce bananas. When supplie rs establish these new plantations to respond to
improved conditions of entry, a great many preparatory steps must be taken, including, among others:
• identifying the land;

• conducting soil surveys;

• evaluating farm-to-port operations, as well as port operations;

• addressing any government policy or regulatory issues;

• developing infrastructure, including digging drainage, installing irrigation, and
installing roadways;

• contracting for meristems, 1,800 of which are needed for each hectare and often are
difficult to source in significant magnitudes;

• planting the new fields; and

• cultivating export-quality production.

The lead-time required for these steps is typically two to three years, if not more. Thus, while short-
term responses to a change in market conditions o ccur primarily from more intensive production of
existing plantations, a longer period of time is need ed to launch new plantations and bring them to
peak production. willingness on the part of investors to make this investment depends in part on
perception of the stability of market conditions.

90. (Both Parties, Nicaragua and Panama) In paragraph 108 of their respective third party
submissions, Nicaragua and Panama argue that "[t]he EC's €75/mt concession – which from
1995 to 2005 covered all bound in-quota Latin Am erican imports and informed the rate applicable
to all other Latin American bananas entering the EC market – has been the single most important
banana concession in Schedule CXL. In contrast to the prohibitive €680/mt rate, under which
virtually no Latin American volumes have ever been entered , the €75/mt concession is the only
rate that enabled Latin American market acce ss to the EC market from 1995 to 2005. Unless
the €75/mt bound rate receives the full protections of GATT Article II, the entire value of the
EC's mandatory Uruguay Round concessions will be nullified". (Emphasis added). Can
Nicaragua and Panama provide evidence for thei r assertions. If MFN banana imports have
increased under an applied tariff rate of €176/mt, as argued by the EC, how can this be
reconciled with the statement that "a €75/mt co ncession is the only rate that enabled Latin
American market access to the EC market from 1995 to 2005"? Can Nicaragua and Panama
clarify what would be meant by "providing the full protections of GATT Article II" to the
€75/mt tariff rate. Can Parties provide a reaso ned answer as to whether they agree with the
assertions made by Nicaragua and Panama.

Ecuador may comment further after reviewing the response of Nicaragua and Panama. However,
each of the quota assertions in Ecuador's view is corr ect and supported by the record of this dispute.
In particular, evidence introduced by both parties demonstrated that no statistically significant imports
occurred at the €680/mt, and all or virtually all im ports into the EC of MFN bananas occurred at the
€75/mt rate, within the tariff quota. Ecuador has already indicated its agreement that if the panel were
to find that the €75/mt tariff quota is no longe r bound, the EC's Uruguay Round "concessions" would
become simply the prohibitive €680/mt rate. Ec uador believes that Nicaragua and Panama were
simply comparing the 75 and 680 rates, which, were the only rates applicable to MFN bananas in
1995-2005.

91. (Both Parties, Nicaragua and Panama) In paragraph 19 of their combined statement
during the substantive meeting with the Panel, Nicaragua and Panama argue that "[t]he EC
tariff, which was the EC's scheduled banana concession from 1963-1994, was the equivalent of
about 80 euro per tonne." Can Nicaragua and Panama elaborate on this argument and provide
evidence for their assertions, as appropriate. Can the Parties comment on the argument and
assertions.

Ecuador believes that this calculation was demonstrated before the Arbitrator. Ecuador may comment
further on seeing the response of Nicaragua and Panama.

92. (Both Parties and Suriname) In paragraph 10 of its statement during the substantive
meeting with the Panel, Suriname argues that "[b]oth the Doha Waiver and the Understanding
on Bananas were negotiated by the WTO members, including the interested parties, after the
DSB adopted its recommendations and rulings in the original Bananas dispute. These two
instruments constitute new secondary WTO law and create an entirely new legal framework for
the issues that are now pending before the Panel. These new instruments clearly strike a new
balance of rights and obligations for the entire WTO membership, in addition to the parties to
the dispute." Can Suriname elaborate on these arguments. Can both Parties provide a
reasoned answer as to whether they agree with Suriname.

In Ecuador's opinion, the Doha Waiver, which was granted by the WTO membership on a time-
limited and conditional basis, does affect rights and obligations of WTO members. A waiver granted
by WTO Members in accordance with the rules can modify those rules for WTO purposes. However,
the Understanding was between Ecuador and the EC, a nd is not an agreement that can modify rights
and obligations of anyone under the WTO.

93. (Both Parties and the US) Is there any particular reason why the Understandings on
Bananas that the EC reached with Ecuador a nd the US respectively in April 2001 were only
notified to the DSB more than two months later? Is there any reason why such agreements
were not notified jointly to the DSB by both parties to the respective agreements?

As is evident in the response to other questions and the different no tifications that were made, the
parties did not have the same view of the significance and effect of the respective agreements.

94. (Both Parties and US) Paragraph G of the Understanding on Bananas reached between
the EC and Ecuador of 30 April 2001 (documents WT/DS27/58 and WT/DS27/60), states that
"[t]he EC and Ecuador consider that this Underst anding constitutes a mutually agreed solution
to the banana dispute". In turn, the Understanding on Bananas reached between the EC and
the US on 11 April 2001 (document WT/DS27/59), contain no equivalent statement. What
value, if any, should be given to the statement contained in Paragraph G of the Understanding
on Bananas reached between the EC and Ecuador? What value, if any, should be given to the
different language contained in both understandings regarding this issue?

Ecuador believes that the United States may have had a better appreciation at the time it concluded its
negotiations as to how the EC might attempt to misc onstrue or misuse the provision in question. In
any event, Ecuador does not consider that this difference between the two Understandings has any
legal effect in a WTO proceeding. Paragraph G could not have made the Understanding into a
mutually agreed solution in the sense of Article 3 if that had been Ecuador's intent. Further, as noted
previously, a mutually agreed solution in any ev ent does not limit a Member's dispute settlement
rights, nor may a Panel modify its determination of rights and obligations under the WTO to take
account of the US or Ecuadorian Understandings with EC, whether or not either is a mutually agreed
solution in the view of the Panel.

95. (Ecuador and all Third Parties) In pa ragraph 6 of its oral statement during the
substantive meeting with the Panel, Ecuador mentions that "Ecuador's per capita GDP for 2005
was about 8 per cent of the per capita average of the EC, and also is less than that of many of
the ACP countries." In turn, in paragraph 16 of their combined statement during the
substantive meeting with the Panel, Nicaragu a and Panama state that Nicaragua's "Gross
National Income of $910 is below the GNIs of several LDCs and well behind the GNIs of most
ACP countries." Can Ecuador, Nicaragua and Panama provide the data sources that were used
to make their respective assertions and specify the per capita GDP figures in those sources for
Ecuador, the EC and the MFN suppliers and ACP countries that are participating as Third

Parties in these proceedings. Can other Third Pa rties provide a reasoned answer as to whether
they agree with the assertions made by Ecuador, Nicaragua and Panama.

Attached as Exhibit ECU-12, please find the data sources for the assertion made by Ecuador in its oral
statement. In that regard, the GDP per capita of Ecuador for the year 2007 according to the IMF, is
lower than: Belize, Dominica, Dominican Republic , Jamaica, Saint Vincent and the Grenadines,
Suriname and almost two times lower than that of Saint Lucia. Regarding Ecuador's GDP per capita
in comparison to that of the EC-27, for the y ear 2007 and according to EUROSTAT data, our GDP its
9 per cent of that of the EC. The data changes becau se Ecuador made its first calculation, asserted in
our oral statement, comparing the EC-25 for the year 2005.

96. (Ecuador and Nicaragua) In paragraph 6 of its closing statement during the substantive
meeting with the Panel, the EC argues that "the draft dated November 2, 2001, which
Nicaragua has attached to its third party submi ssion as Exhibit N-1, provided that the Doha
Waiver would be terminated automatically within two months after the notification of the
arbitration award to the General Council. Howev er, this provision was not included in the final
version of the Doha Waiver. The link between th e awards of the arbitrator and the termination
of the Doha Waiver was abandoned." Can Ec uador and Nicaragua provide a reasoned answer
as to whether they agree with the statement.

The EC is wrong in claiming that this preparatory waiver document shows that "the link between the
awards of the arbitrator and the termin ation of the Doha Waiver was abandoned."
24 It proves exactly
the contrary.

The document to which the EC is referring was a relatively early version of the draft banana
provisions of the waiver. 25 Developed by the EC, not the MFN supplying countries, it was put
forward before the notion of an Annex had even emer ged. As evidenced by its proposed text, the EC
already well understood by the time this version was put forward that absent a " multilateral control"
on " any re-binding ,"26 and a waiver termination provision linked to that multilateral control, 27 this
waiver would not be approved.

The two-month termination provision in the EC's pr oposed text was an early iteration of what later
became the waiver's mandatory termination provisi on "upon entry into force of the new EC tariff
regime." The EC used the phrase "two months after the notification of the arbitration award" for the
simple reason that under the approach it was propos ing, there were still no requirements as to when
the arbitration procedure would need to begin and end. Indeed, the EC was still envisioning in this
draft that arbitration would occur after the new regime took effect, and, thus, framed the waiver
standard in the present tense, not the future conditional tense ( i.e. "does not result in ...," rather than
"would result in ..."), and pegged the termination prov ision to the notification of the award, whenever
that might occur.

24 Closing statement of the European Communities, 19 September 2007, para. 5.
25 See Council for Trade in Goods, European Communities – The ACP-EC Partnership Agreement:
Revision (Communication from the European Communities), G/C/W/187/Add. 2/Rev. 1, 2 November 2001.
Both Nicaragua and Panama attached this document to their third party written submissions as Exhibits N-1 and
P-1, respectively.
26 Id., Noting Clause 3 in this same document.
27 Id., 3ter.

None of the MFN drafters was willing to accept this imprecisely defined EC draft. 28 As subsequent
drafts and the final waiver text made clear, they insisted, instead, on more elaborated, carefully
sequenced procedures entailing consu ltations and two rounds of arbitr ation that would have to be
concluded in their entirety before the regime took effect. 29 Once the arbitration provisions were
refined by the negotiators to require a conclu sion of all procedures before 2006, the waiver
termination provision, which remained an absolute prerequisite throughout this drafting period, was
necessarily also refined to take effect "upon entry into force of the new EC tariff regime."

The EC, having already acknowledged in its earlier dr aft the necessity of a lapsed waiver linked to
arbitration, cannot be allowed to claim now that the strengthened final text of the waiver no longer
contained that same linkage and granted, instead, blanket authority to the EC to install whatever
regime it wanted to as of 2006.

97. (Ecuador, Nicaragua and Panama) What are exactly, in your view, the current binding
concessions that the EC has, relating to banana s? Is it the TRQ as described in the EC's
Schedules LXXX and CXL; is it a single duty of €75/mt; or is it rather something else? If it was
a single duty of €75/mt, please explain why the Pa nel should consider that the 2.2 million mt
volume and the out-of-quota duty of €680/mt are not a relevant part of the EC's current
concessions.

Please see Ecuador's responses to question 46.

98. (Ecuador, Nicaragua and Panama) Does th e Framework Agreement on Bananas (BFA)
include "terms, conditions or qualifications" to the EC's relevant concession on bananas in the
sense of Article II(1)(b) of the GATT?

As Ecuador has previously noted, all the provisions of the agreement that might have been considered
"terms, conditions or qualifications" of the con cession have either been superseded or found
inconsistent with the EC's obligations or both, in sofar as Ecuador is aware. The €75/mt tariff quota,
while also required by the BFA, is not a term, cond ition or qualification of the concession, but rather
was a plurilateral commitment to make that concessi on, which the EC duly made. Other terms gave
or purported to give procedural rights to BFA par ties that are now moot. As Ecuador has explained
previously, Article 9 terminates the BFA, but does not purport to terminate the €75/mt concession.

99. (Ecuador, Nicaragua and Panama) Do you agree with the EC that a Member could,
through a "term, condition or qualification" on a concession that was included in its
Schedule and accepted by the other Members, provide for the elimination of a bound TRQ?

Traditionally, it was possible (though extraordinarily rare) to provide for a concession of limited
duration. Whether that is still possible, particular ly for an agricultural product and in the light of
commitments made in the Agreement on Agriculture , is a point on which Ecuador wishes to defer
comment. In Ecuador's view, the record plainly estab lishes that, even if there were such a theoretical

28 There were several other elements of this draf t that the Latin American negotiators considered
unacceptable, including: (i) a waiver access standard expressed as an "aim," not a requirement (3bis); (ii) an
access standard that protected both MFN and ACP suppliers, not just MFN suppliers (3bis, 3ter); (iii) an access
standard that would be analyzed by the Arbitrator after the fact ("does not result in"), rather than prospectively
("would result in ..."); and (iv) an access standard that would only be meas ured "at the time of the re-binding,"
not over time (3ter). The MFN negotiators insisted on striking every one of these proposed EC elements. By
replacing (i) and (iii) above with the final waiver te xt, the MFN negotiators were further reinforcing the
unseverable link between the pre-2006 arbitration awards and the termination of the waiver.
29 See Draft EC Proposal for Article I waiver, 11 Novemb er 2001, in Exhibits P-1 and N-1; Ministerial
Conference, European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15, 14 November
2001, WT/L/436 ("Article I waiver"), Annex in Exhibit EC-2.

possibility, the EC did not make its bound TRQ term inate in 2002, and the record, including of the
EC's own actions and arguments s how that this argument is wrong and that the EC even making the
argument is contrary to the principle of good faith that the EC so frequently invokes.

100. (Ecuador, Nicaragua and Panama) In pa ragraph 79 of its second written submission,
the EC argues that:

"[I]n paragraph 59 of its second written submission, Ecuador argues that 'it is
scarcely likely that the negotiators of th e BFA would consider as satisfactory
solution a system that as of 2003 would leave all their banana exports to the EC
subject to an essentially prohibitive duty of €680/mt'. This statement is in full
contradiction with paragraph 25 of Ecua dor's second written submission, where
it is stated that 'in every negotiation parties strive for a balance of benefits, but
the reality does not always turn out as the negotiators were expecting or
assuming at the time of the negotiations. It would destabilize the entire premise
of the WTO tariff system of concession s were to be adjusted according to
whether the concessions had the result contemplated at the time that the
concession was granted'. Perhaps Ecuador should explain whether its statement
in paragraph 25 is correct, in which case it would lose its Article II claims, or
whether its statement in paragraph 59 is correct, in which case it would lose its
Article I claims."
Can Ecuador, Nicaragua and Panama provide a reasoned answer as to whether they agree with
the EC's arguments.

The two statements are not inconsistent.

Paragraph 59 is part of Ecuador's argument that th ere are many factors that support the view that the
termination clause of the Banana Framework Agreem ent did not and was never intended to terminate
the EC's €75/mt tariff quota concession. There is no disagreement that a tariff of €680/mt is
essentially prohibitive. While countries occasionally ma ke unwise bargains, the Panel would have to
presume that the BFA members, as well as all the non-EC members of the WTO were insane or
incompetent to accept, in place of the tariff quota that the EC had proposed, a modest improvement
for 8 years, following which the concession would di sappear the EC would be allowed to essentially
prohibit all imports with a duty up to €680/mt. The EC's only effort to explain this extraordinary
"concession" it achieved in 1994 and re discovered in the summer of 2007 has been to say that the EC
promised to consult with the BFA parties. It w ould have been a dismal consultation had the EC's
current argument been true. It is not technically impossible that a group of small developing countries
or even all of the other WTO members would make a miscalculation of colossal portions such as the
EC is ascribing in this argument to the BFA parties and the acquiescent WTO members, but it is
highly unlikely and a further reason, added to all the other evidence that the EC and all parties always
considered and even argued that the concession c ontinued, to suspect that no one understood the
concession to terminate as now argued by the EC.

Paragraph 25 of Ecuador's submission addresses the EC 's argument that the Doha Waiver must have
meant that the EC was free to set the duty of its choosing so long as it maintained market access
measured, according to the EC, by current trad e. Ecuador was pointing out that the norm in
concessions is that a party takes the risk that th e concessions it bargains for, and the concessions it
grants, may not turn out to have the same co mmercial value that the party projects during
negotiations. Paragraph 59 deals with the current case, where what is disputed is the continued
existence of a concession, an issue which would have extraordinary effects, rendering largely
pointless this dispute and most of the discussion of bananas for at least the last 5 years. Paragraph 25

is simply making the point that concessions that all parties agree were validly made may have not turn
out to be as commercially valuable, or may be more valuable, than originally projected.

101. (Ecuador, Nicaragua, Panama and the US) In paragraph 4 of its closing statement
during the substantive meeting with the Panel, ref erring to the alleged termination of the Doha
Waiver, the EC argues that "[i]f the Doha Waiver wanted to say what Ecuador, Nicaragua and
Panama are arguing, the text should have read that the waiver would terminate 'if the
Arbitrator concludes that the EC has failed to rectify the matter'. The Doha Waiver does not say
so." Can Ecuador, Nicaragua and Panama provide a reasoned answer as to whether they agree
with this statement. Could the US comment on the same, in the light of its argument in
paragraph 21 of its statement during the substant ive meeting with the Panel, reproduced in the
previous question.

As Ecuador explained in paragr aph 24 of Ecuador's second submissi on, the reasonable interpretation
of the fifth Tiret is that the waiver expires after the Arbitrator's finding that the EC has failed to rectify
the matter, without the need for extra words that th e EC claims are needed. The use of identical and
somewhat legalistic terminology of rectifying the matt er supports this meaning. This is reinforced by
the architecture of the waiver, directed at resolv ing the issue before 1 January 2006, while still giving
the EC the chance to reach agreemen t with interested parties or failing that, to persuade a neutral
arbitrator that the EC had met the waiver standards. This is a far more plausible reading than the EC's
interpretation that all those complex and compres sed dispute settlement and consultative procedures
were all but meaningless, because the EC was then free to implement unilaterally whatever the EC
chose.

ANNEX D-2

RESPONSES BY THE EUROPEAN COMMUNITIES
TO QUESTIONS POSED BY THE PANEL

QUESTIONS ADDRESSED TO PARTIES

1. (Both Parties) In paragraph 39 of its th ird party submission, Colombia concludes that
"the tariff level that would result in at least maintaining the conditions of competition between
MFN bananas and ACP bananas is the differen ce between the price gap for MFN bananas
(€97/tonne) and the price gap for ACP bananas (€86/tonne), or €11/tonne." Can the Parties
provide a reasoned answer as to whether they agree with the argument raised by Colombia.

1. The European Communities observes that Colombia's statement echoes price-gap
methodologies suggested during the 2005 Arbitrations . The outcomes of the Arbitration awards have
confirmed the limits of these estimation exercises. With regard to the Colombia's suggestions, the
first Arbitral Award (in paragraph 92) acknow ledged that the price gap methodology implies
"difficulties with the availability and reliability of actual market prices".
2. Today, the use of such a methodology is not ju stified any longer. Almost two years after the
introduction of the new banana import regime there is plenty of real market data available that show
us what has really happened. There is no more ne ed to work with uncertain estimates. The real
market data confirms that the tariff currently ap plied by the European Co mmunities has more than
maintained the total market acce ss of the MFN suppliers. Conseque ntly, the European Communities
does not consider that there is any scope for further discussing Colombia's suggestions.
2. (Both Parties) How has the EC been applying the MFN tariff of €176/mt to individual
imports? What volume and share of its imports have been subject to that tariff?

3. The European Communities applies a single tariff of €176/mt to all bananas imported into the
European Communities, with the exception of the first 775 000 tons of bananas coming from ACP
countries which are imported at a zero tariff.
4. The aggregate quantity of bananas imported into the European Communities in 2006 was
4,184,897 tons. The tariff of €176 per ton was a pplied to 3,409,897 tons and the zero duty was
applied to the 775,000 tons of ACP bananas.
3. (Both Parties) In paragraph 15 of its first written submission, Ecuador states that,
subsequent to adopting Council Regulation No. 1964/2005, "the EC has issued implementing
regulations ancillary to [such regulation]." Can Parties identify all ancillary or implementing
regulations associated with Council Regulation No. 1964/2005 adopted by the EC since
November 2005, if any.

5. The implementing Regulations have been adopted by the European Commission on the basis
of the authorisation granted through Regulation 1964/2005. These are:
 (i) Commission Regulation (EC) No 2015/2005 of 9 December 2005 on imports during
January and February 2006 of bananas originating in ACP countries.

 (ii) Commission Regulation 219/2006 of 8 February 2006, on imports of bananas from
ACP countries for the period 1 March to 31 December 2006.

 (iii) 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.

4. (Both Parties) Is the import regime for bananas contained in EC Council Regulation
No. 1964/2005, to be considered "the new EC tariff regime", in the sense that the term is used in
the Doha Waiver? What is the exact date of entr y into force of "the new EC tariff regime"?
Has the EC Council Regulation No. 1964/2005 been modified in any way since its entry into
force?

6. The European Communities understands that the Pa nel's question refers to the third line from
the end of the last paragraph, where it is stated th at "if the EC has failed to rectify the matter, this
waiver shall cease to apply to bananas upon the entry into force of the new EC tariff regime".
7. As mentioned in paragraph 71 of the first written submission of the European Communities
and in paragraph 41 of the second written submissi on of the European Communities, the European
Communities considers that "the new EC tariff re gime" the introduction of which could bring the
termination of the Doha Waiver could only be the ta riff regime that was presented to the Arbitrator
and on which the Arbitrator made a pronouncement in its Award. As further mentioned in paragraph
72 of the first written submission of the Europ ean Communities, the European Communities never
introduced the tariff regime that was presented to th e Arbitrator and on which the Arbitrator made a
pronouncement in its Award. On 1 January 2006, the European Communities introduced, through
Regulation 1964/2005, a different import regime than the one analysed by the Arbitrator.
8. In light of the above, the European Communitie s takes the view that Regulation 1964/2005 is
not
 the "new EC tariff regime", the introduction of which could bring the termination of the Doha
Waiver.
9. Regulation 1964/2005 has not been amended since its adoption on 29 November 2005.
5. (Both Parties) Ecuador has advanced clai ms against the preferences granted by the EC
to ACP bananas under both Articles I and XIII of the GATT 1994. Do Parties see any
particular order in which these two claims should be considered in this dispute? Does Ecuador
consider its claim under Article XIII of the GA TT 1994 a subsidiary or secondary claim to its
claim under Article I? If the preferences grante d by the EC to ACP bananas are inconsistent
with either Article I or Article XIII of the GATT 1994, on what grounds would Ecuador argue
that additional findings regarding the same preferences under the other provision, i.e.
Article XIII or Article I of the GATT, respectiv ely, would also be necessary to resolve the
matter at issue?

10. The European Communities has provided facts and arguments in its two Written Submissions
and in its two Statements supporting the conclusion that its current banana import regime violates
neither Article I, nor Article XIII of the GATT.
11. The European Communities consid ers that the Panel should firs t analyse the claims raised
under Article I, because this analysis is a n ecessary element in assessing Ecuador's claims under
Article XIII.
6. (Both Parties) In paragraph 37 of their jo int third party submission, Belize, Cameroon,
Côte d'Ivoire, Dominica, the Dominican Republic , Ghana, Jamaica, Madagascar, Saint Lucia,
Saint Vincent and the Grenadines, and Suriname state that:

"pursuant to the Understanding [on Bananas reached between the EC and
Ecuador on 30 April 2001], the banana dispute was taken off the agenda of the

DSB in accordance with Article 21.6 of the DSU. Indeed, at the DSB meeting
held on 1 February 2002 [footnote omitte d], the representative of the EC noted
that the EC had implemented the second phase of the Understanding on
Bananas which would be applicable unt il the time the EC's banana import
regime became a tariff-only regime i.e. at the latest by 1 January 2006, and that
the EC considered that this matter should therefore be withdrawn from the DSB
agenda. Ecuador agreed by stating that it 'also considered that this item should
no longer appear on the agenda of future DSB meeting.'"
Can Parties confirm that the issue of the implementation of the rulings and recommendations of
the DSB in the EC – Bananas III dispute was withdrawn from the DSB's agenda with the
consent of both the EC and Ecuador, in accordance with Article 21.6 of the DSU.

12. The issue of the implementation of the EC – Bananas III DSB recommendations and rulings
was indeed withdrawn from the DSB's agenda with the consent of both th e European Communities
and Ecuador, in accordance with Article 21.6 of the DS U. Given that this Article provides that the
issue of implementation "shall remain on the DSB's ag enda until the issue is solved", the removal of
the item from the agenda of the DSB supports the ar gument that Ecuador considered that the issue
was solved with the introduction in 2002 of the new tariff-quota-based import regime as envisaged in
the Understanding.
7. (Both Parties) In paragraph 4 of its statement during the substantive meeting with the
Panel, Brazil argues that "Article 3.7 of the DSU should be interpreted in its integrality, with
due account of all the provisions contained therein, that is to say the preference for negotiated
solutions and the conformity with WTO agreements. Those two elements permit us to conclude
that compliance with the covered agreements ha s precedence over negotiated solutions and that
parties to an agreed solution are not authoriz ed by such instrument to circumvent their
obligations under the multilateral trading rules." Can the Parties provide a reasoned answer as
to whether they agree with this statement.

13. The European Communities considers that th e provisions of the Understanding are in
conformity with the WTO rules. As mentioned in paragraph 15 of the second written submission of
the European Communities, Ecuador does not explain how an initially "consistent with the covered
agreements" Understanding (as evidenced by Ecua dor's initial compliance with its provisions) has
suddenly become "inconsistent with the covered agreements". I ndeed, neither Ecuador, nor Brazil
explains which aspects of the Understanding are not in conformity with a WTO rule (and with which
WTO rule). For these reasons, the European Comm unities does not understand Ecuador's and certain
Third Parties' assertions that the Understanding is not a "mutually agreed solution" because allegedly
it is not in conformity with the WTO agreements.
14. In any event, as mentioned in paragraph 15 of the second written submission of the European
Communities, Ecuador cannot escape the obligations it has undertaken with the Understanding by
claiming the Understanding's alleged non-conformity with the WTO rules. The application of the
principle of bona fides (good faith) bars Ecuador from relyin g on the alleged "illegality" of the
Understanding in order to avoid the obligations it has undertaken through it, when Ecuador has
already reaped the benefits of the Understanding and had from the very beginning full knowledge of
the legal status of the Understanding.
8. (Both Parties) If the Panel was to exam ine whether the current EC regime for bananas
results "in at least maintaining total market ac cess for MFN banana suppliers", what should be
the appropriate criteria to consider? Would the relevant criteria be the same that were
considered by the Arbitrator in its Awards of August 2005 and October 2005?

15. As mentioned in the answer to Question 1, predicting the future is an imprecise exercise by its
own nature. The models used are not perfect and they rely on uncertain assumptions. Fortunately, we
do not need to rely on such imperfect criteria and uncertain methods any more. Two years after the
introduction of the new import regime of the Europ ean Communities there is ample evidence and real
market data that can establish quite easily that the total market access of the MFN suppliers has been
more than maintained.
16. The European Communities considers that the Pa nel can use market statistics that show a
significant increase in the volumes of MFN banan as imported into the European Communities and
market statistics that show that the growth of MF N imports is greater than the growth of the total
market for bananas in the European Communities as evidence establishing that the total market access
of the MFN suppliers has been more than maintained.
9. (Both Parties) In paragraph 38 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that "[i]t will be recalle d that the waiver in any event expires 1 January
2008, but the MFN duty continues, and will be th e margin of preferen ce for any preferences
that the EC grants inconsistent with WTO rul es into the future, past 2007. It will be recalled
that the EC had made plain its intent to use no t only the 'Everything but Arms' initiative but
also WTO-conforming free trade agreements to ca rry on with preferences past 2007. Further,
even if the EC were to grant no future pref erences, the duty will restrict future banana
imports." Can Ecuador elaborate on these arguments, and can the EC provide a reasoned
answer as to whether it agrees.

17. The European Communities notes the inconsistencies in Ecuador's statements in paragraph 38
of Ecuador's oral statement. Ecuador starts by referring to "any preferences that the EC grants
inconsistent with WTO rules into the future". Then, Ecua dor goes on to refer to the EC's intent to use
"WTO conforming free trade agreements to carry on with preferences past 2007". And then Ecuador
concludes by stating that "even if the EC were to grant no future preferences , the duty will restrict
future banana imports".
18. It is clear that these statements have no relevance for the analysis of whether the Doha Waiver
continues to cover the Cotonou Preference until the end of 2007. These statements simply confirm
that Ecuador has brought these proceedings in order to exercise pressure in the tariff negotiations that
the European Communities is currently holding with Latin American banana exporting countries. In
this paragraph, Ecuador rather cynically admits that the examination of the legality of the Doha
Waiver is of secondary importance, since the Doha Waiver and the Cotonou Preference will in any
event expire at the end of 2007. What really inte rests Ecuador is to seek to influence the "MFN duty"
that will "continue past 2007" and which is currently under negotiation.
19. The European Communities invites the Panel to resist Ecuador's attempt to use the WTO
dispute settlement system in order to influence arms-length tariff negotiations which are taking place
in accordance with Article XXVIII of the GATT and in parallel with the negotiations in the Doha
round.
10. (Both Parties) In paragraph 71 of its first written submission, the EC argues that the
phrase "the new EC tariff regime" can only refer to the tariff regime that was presented to the
Arbitrator and on which the Arbitrator made a pronouncement in its Award. Can Ecuador
provide a reasoned answer as to whether it agrees with this statement. Would the EC consider
its argument valid even if it was established that the TRQ to which the Banana Framework
Agreement (BFA) relates has not expired at the end of 2002? Does the EC refer to the applied
system and not the rebinding?

20. As mentioned in paragraph 71 of its first written submission, the European Communities
takes the view that the correct interpretation of th e Doha Waiver is that it would expire upon the
European Communities' implementation of the banana import regime analysed by the Arbitrator and
found not to at least maintain the total market acces s of the MFN suppliers. Given that this situation
relates to the implementation of a new import regime after the end of 2005, this conclusion is not
affected by the characteristics of the banana im port regime that the European Communities had in
place until the end of 2005.
21. As far as the last part of the question is c oncerned: the European Communities notes that the
Doha Waiver provides that "the EC shall rectif y the matter". The European Communities considers
that this means that the continued operation of the Doha Waiver depended on whether the European
Communities would indeed put in place a banana import regime that would at least maintain the total
market access of the MFN suppliers. The Eu ropean Communities does not consider that a
"rebinding" was the only way that the "matter" could be "rectified". This is evidenced by the fact that
the Doha Waiver provides that "the EC shall rectify the matter" and not that "the EC shall rectify the
matter through a new rebinding ". Therefore, the European Communities considers that it has
"rectified the matter" by applying a tariff that more than maintains the total market access of the MFN
suppliers.
11. (Both Parties) In paragraph 23 of its first written submission, the EC argues that "on
1 January 2006, the European Communities intr oduced a tariff only sy stem and the Cotonou
Preference took the form of a tariff quota fo r certain volumes of bananas coming from Cotonou
beneficiary developing countries". Can the EC provide a reasoned answer as to how can an
MFN tariff combined with a tariff-rate quota for ACP countries qualify as a "tariff-only
system". Can Ecuador provide a reasoned answ er as to whether it agrees with the EC's
statement in paragraph 23 and, if not, what would qualify, in its view, as a "tariff-only system".

22. As mentioned in paragraph 24 of the first wr itten submission of the European Communities,
the "tariff only" nature of the banana import regime of the European Communities cannot be disputed.
The fact that there is a limit on the quantity of ACP bananas that can be imported free of duty does not
change this fact.
23. The GATT itself recognizes that tariff quotas are tariff measures and not ordinary quantitative
restrictions. This is seen from the fact that GATT Article XIII, paragraph 5 expressly provides that
the rules of GATT Article XIII "shall also apply to tariff quotas". If tariff quotas were quantitative
restrictions, then there would be no need for GATT Article XIII, paragraph 5 at all.
24. This is a generally accepted principle, which h as also been expressly recognized, e.g., in the
First Arbitration Award, where it is stated that "tariff quota commitments constitute, in the WTO
context, a variant of a tariff concession rather than a non-tariff measure per se"
1. The Arbitrator went
on to conclude that in the particular circum stances of the import regime that the European
Communities had in place until the end of 2005, the ec onomic effect of the particular tariff quotas
applied by the European Communities was compar able to a quota regime (non-tariff measure),
because virtually all imports were being effected through these tariff quotas.
25. Moreover, the fact that a tariff quota with th e characteristics of the Cotonou Preference does
not alter the tariff only character of the import regime is also confirmed in the previous report of this
Panel under Article 21.5, where it is stated in pa ragraph 6.157 that the European Communities could
adopt a "tariff only system with a tariff quota for ACP bananas". This statement shows that the
imposition of a "cap" on a tariff preference does not alter the tariff-only character of an import regime.
This is even more so in the present case, wher e the European Communities needed to impose a "cap"

1 Para 60.

on the trade preference offered to the ACP countries in order to maintain the total market access of the
MFN suppliers, in accordance with the provisions of the Doha Waiver.
26. Last, it should be pointed out that in the process of tariffication carried out regarding
agricultural products in the Uruguay Round, it is evid ent that tariff quotas were regarded as tariffs
since the Modalities Paper explicitly envisaged a role for them in the new tariffied system2:
 Minimum access opportunities shall be implemente d on the basis of a tariff quota at a low or
minimal rate and shall be provided on an m.f.n. basis.

27. The legal basis for tariffication is contained in Article 4.2 of the Agriculture Agreement. The
measures that were to be tariffied are listed in th e footnote to that provision, and they do not include
tariff quotas.
12. (Both Parties) In paragraph 26 of its first written submission, Ecuador argues that
"[t]he burden is on the EC if it wishes to claim that it still has a valid waiver with respect to
bananas, and that this waiver covers the EC meas ures at issue. [E]ven if the burden were on
Ecuador …" Could the Parties develop their lega l arguments as to which of them should bear
the burden of proving that the Doha Waiver is st ill valid and whether it covers the EC measure
at issue.

28. The European Communities consid ers that each party needs to provide sufficient evidence
and legal arguments in order to s upport its claims. In the particular case of the Doha Waiver, the
European Communities notes that the Doha Waiver was lawfully granted by the competent authorities
of the WTO. Its continued operation has not been challenged before any WTO body and no WTO
body has taken the decision to revoke or terminate it . Therefore, if Ecuador wishes to claim that the
Doha Waiver is not applicable any more, it must provide the evidence and legal arguments necessary
in order to support its claims.
13. (Both Parties) In paragraph 43 of thei r respective third party submissions, Nicaragua
and Panama argue that the Latin American supp liers insisted on inserting, into the Bananas
Annex of the Doha Waiver, the sentence "If 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", which did
not appear in the original EC draft. Nicaragu a and Panama argue further that the insertion of
such sentence is an "explicit penalty for EC unilateralism following two arbitration losses",
without which the waiver would not have been approved. Can the Parties provide a reasoned
answer as to whether they agree with this statement.

29. In that section of their third party submissions, Nicaragua and Panama have tried to show that
the negotiating history of the Doha Waiver suppor ts their interpretation of the Doha Waiver.
However, as mentioned in paragraph 6 of the closing statement of the European Communities, the
negotiating history of the Doha Waiver establishe s exactly the opposite of what Nicaragua and
Panama assert and provides support for the European Communities' interpretation of the waiver's
terms. In particular, the draft waiver dated 2 November 2001, which Nicaragua and Panama have
attached to their third party submissions as Exhibit 1, provided that the Doha Waiver would terminate
automatically within two months from the notification of the arbitration award to the General Council.
This provision was not included in the final versi on of the Doha Waiver. The final version provides
that the Doha Waiver would terminate if the Europ ean Communities fails to "rectify the matter". The
link between the awards of the Arbitrator and th e automatic termination of the Doha Waiver was
abandoned.

2 Annex 3, para. 14.

30. This shows that the correct interpretation of th e Doha Waiver is that the termination of the
Doha Waiver would not be automatic and directly related to the outcome of the Arbitration awards,
but that it would depend on whether the European Communities would actually "rectify the matter".
31. Nicaragua and Panama pretend that an extreme penalty, such as the termination of the waiver,
was merely linked to a procedural step. However, this interpretation of the Doha Waiver is neither
supported by the text of the Waiver, nor by the negotiating history of the Waiver.
14. (Both Parties) Under the fifth tiret of the Bananas Annex of the Doha Waiver, can
Parties identify the specific conditions listed ther ein and explain how many of those would have
to be fulfilled for the waiver to cease to apply to bananas?

32. As mentioned in paragraphs 36 and 37 of the first written submission of the European
Communities, the European Communities considers th at the Doha Waiver would terminate if the
European Communities failed to introduce an import re gime that would at least maintain the total
market access of the MFN suppliers. Maintaining total market access for MFN suppliers was the only
condition that had to be satisfied for the continued operation of the Doha Waiver at that stage.
33. Therefore, the only point that Ecuador has raised and which the Panel is invited to rule upon,
is whether the condition for the c ontinued existence of the Doha Wa iver was (a) that the European
Communities implements a new import regime that would at least maintain total market access for the
MFN suppliers; or (b) that the Arbitrator be convi nced that the system proposed by the European
Communities at that time was likely to maintain such total market access in the future. The European
Communities respectfully submits that the Panel shoul d find that the correct interpretation of the
Doha Waiver is that the condition for the continued existence of the Doha Waiver is (a).
34. The Annex also imposed on the European Communities certain other obligations that had to
be complied with at an earlier stage, such as th e obligation to timely initiate negotiations with
interested parties and the obligation to provid e to the interested parties information on the
methodology followed for the calculation of the new level of tariffs. The European Communities has
complied with all these obligations and Ecuador did not challenge this fact in its request for the
establishment of the Panel, or in any of its Wr itten Submissions or oral statements. As these
obligations are not included in the fifth tiret of th e Annex, to which the question of the Panel refers,
the European Communities mentions them here for the sake of completeness.
15. (Both Parties) On what grounds does the EC argue that the phrase "suitable waiver" in
paragraph 6.158 of the report of the first EC – Bananas III compliance Panel should be
interpreted to mean a waiver from only Articl e I of the GATT 1994? On what grounds does
Ecuador argue that the same term should be interpreted as referring to a waiver to both
Articles I and XIII of the GATT 1994?

35. As mentioned in paragraphs 81 and 82 of the first written submission and paragraphs 29 to 34
of the second written submission of the European Co mmunities, there are a number of considerations
establishing that the "suitable waiver" in paragraph 6.157 of the first Article 21.5 Panel report is a
waiver from Article I of the GATT and not from Article XIII of the GATT.
36. First, where the Panel considered that a waiv er from Article XIII was required, the Panel
expressly said so. For example, the Panel expressly stated that a waiver from GATT Article XIII was
needed for the system suggested in paragraph 6. 158 of its report. In the system under the 6.158
suggestion (i) all imports would be made pursuant to tariff quotas (as a result of which the economic
effect of the particular tariff quotas would be comparable to a quota regime, as concluded in
paragraph 60 of the First Arbitration Award); and ( ii) the tariff quotas would be administered in ways
that would not necessarily comply with GATT Article XIII, paragraph 2. The Panel found that such

an import regime would need a waiver from GATT Artic le XIII. If the Panel had considered that the
system suggested in paragraph 6.157 of its report also needed a waiver from GATT Article XIII, it
would have expressly stated so.
37. Second, a tariff only import regime with a tari ff preference for certain WTO Members subject
to a "cap", may need a waiver from GATT Artic le I, but does not need a waiver from GATT
Article XIII. As already mentioned, it would be absurd to consider that an unlimited tariff preference
offered to the ACP countries would be fully compatible with Article XIII, but that a limited tariff
preference is not compatible with Article XIII. Th is would amount to saying that the rights of the
MFN suppliers are hurt when their competitors enjoy a limited tariff preference, but are not hurt when
that tariff preference is completely unlimited.
38. Third, there is no authority in any of the previous banana disputes supporting the proposition
that an import regime with the characteristics of the current import re gime of the European
Communities would need a waiver from Article XIII. For example, during the arbitration that took
place in accordance with the provisions of the D oha Waiver, the Arbitrator took note of the
disagreement of the parties as to the need for an Article XIII waiver and did not reach any conclusion
as to whether such a waiver was needed. Likewise, the Bananas III jurisprudence relates to an import
regime that was the equivalent of a "quota regime", because all imports were made pursuant to tariff
quotas. The characteristics of the 1997 import re gime were completely different from the
characteristics of the current import regime and, th erefore, the Appellate Body's findings of 1997 are
not relevant in the current situation. The same is true for the import regime that was in place in 1999
and which was analysed by this Panel in 1999.
39. There is extensive GATT and WTO practice to support the view that Members do not regard
exclusion from a tariff quota as a matter governed by Ar ticle XIII. This practice is to be found in the
waivers that have been granted for various pref erential schemes. With few exceptions (such as the
2001 waiver respecting bananas) these waivers are li mited to Article I:1, and yet the preferences
granted under these waivers regularly include tariff quotas for the beneficiary countries only.
40. Under the Generalized System of Preferences (GSP), first adopted as a policy by UNCTAD II
in 1968, the major developed countries have introdu ced systems of tariff preferences for the products
of the developing world
3. Such schemes required waiver fro m GATT obligations and the first of
these was given to Australia in 1966 to 'grant pref erential tariff treatment to certain goods of less-
developed countries'4. The waiver was from Article I:1 only, and it explicitly authorized the use of
tariff quotas (in fact these are listed in an annex). The decision contained no reference to Article XIII.
However, this Article was referred to in the working party discussion of the waiver5:
One delegation stated that Article XIII:5 of the General Agreement provided for the
non-discriminatory application of tariff quotas in accordance with the rules in respect
of the administration of quota restrictions contained in that Article. Since the
Australian scheme established preferential tariff quotas for certain imports from less-
developed countries and territories. it was essential that quotas should be so
administered as to involve no discrimination between such countries or territories.
41. Thus, it was the evident understanding of those pa rticipating that the favourable treatment for
developing countries in the form of tariff quotas require d a waiver of Article I:1 but not Article XIII.
However, Article XIII did apply regarding the internal distribution of the tariff quota.

3 See, UNCTAD, Agreed conclusions of the Speci al Committee on Preferences, doc. TD/B/330, 1970;
10 ILM 1083 (1971).
4 L/2627, 1966, BISD 14S/23.
5 L/2527, 1966; BISD 14S/162, para. 30.

42. The GSP schemes of WTO Members are now authorized by the CONTRACTING PARTIES'
decision of 1979 known as the Enabling Clause
6. 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 tr eatment to developing countries'. There is no specific reference in
the text authorizing the use of tariff quotas, but Me mbers have often included them in their schemes.
Thus, a WTO report of 20017 reported that the US scheme used tariff quotas8, as did that of Japan to a
limited extent9, and that the EC scheme had previously made use of them10.
43. Perhaps the waiver that most directly establis hes the understanding of Members in this regard
is that of 1973 in which the CONTRACTING PARTIES decided to waive Article I:1 (only) in respect
of 'tariff-free quotas for handicraft products from South Pacific Islands'.11
44. It should be emphasized that, as decisions of the CONTRACTING PARTIES, all these
instruments form part of GATT 1994 (u nder Annex 1A of the WTO Agreement) 12. They all indicate
that Members assumed that the grant of a tariff quota for the benefit of certain countries to the
exclusion of other Members would be an infringe ment of Article I:1, but not of other GATT
obligations, such as Article XIII.
45. In light of the above, the European Communiti es considers that its current banana import
regime, which has all the characteristics described by the Panel in paragr aph 6.157 of its first
Article 21.5 report, does not need a waiver from the application of Article XIII of the GATT.
16. (Both Parties) In paragraph 96 of its first written submission, the EC states that "the
text of GATT Article XIII, paragraph 1 makes cl ear that a Member can successfully claim that
another Member's measures violate the provisions of GATT Article XIII, only if its can show
that ... the allegedly offending Member impos es a prohibition or restriction on products
originating from the complaining Member and, in principle, there is a nullification and
impairment of a benefit accruing to the complaining Member". Can the EC elaborate its
arguments in support of each of these propositions , i.e. that in order to make a successful claim
under Article XIII:1 of the GATT 1994, the comp laining Member must show: (a) that the
challenged measure must be a prohibition or restriction on products originating from the
complaining Member; and, (b) that there is a nullification and impairment of a benefit
accruing to the complaining Member. Can Ecuado r provide a reasoned answer as to whether it
agrees with the arguments raised by the EC.

46. (a) The European Communities understand this question as mainly concerning the meaning of
paragraph 5 of Article XIII. In the European Comm unities' view the ordinary meaning of the words
'shall apply' in the first part of the paragraph must be considered in their context and in the light of the
object and purpose of the GATT. In particular, the European Communities has in mind the basic
GATT principle that it creates rights for Members but not for non-Members. This principle is itself an
application of the broader principle that contractual arrangements are assumed to create rights only for
the parties. This is not to deny that parties to a tr eaty could if they chose agree with each other to give
benefits to third parties. However, there is no indication that WTO Members have undertaken such
obligations as parties to the GATT. Rather, it is clear that, as illustrated in matters such as anti-

6 BISD 26S/203 (1980).
7 The Generalised System of Preferences, WT/COMTD/W/93, 2001.
8 Ibid. para. 49
9 Ibid., para. 43.
10 Ibid. para. 29
11 L/3968, 1973, BISD 20S/29
12 Appellate Body Report EC – Tariff Preferences, para. 90.

dumping and countervailing duty law, Members have felt themselves free to disregard WTO
obligations when they are dealing with imports from non-Members.
47. As noted in the European Communities' second written submission, depending on the
circumstances, the imposition of a tariff quota can be either beneficial or prejudicial to the Member on
whose trade the tariff quota has been imposed. In contrast, the 'prohibition or restriction' referred to in
paragraph 1 is inherently a prejudicial action. In the European Communities' view this characteristic
must also be respected in the process of 'applying' Article XIII to tariff quotas. If it is not, it will have
the effect of imposing on Members obligations to gi ve benefits to non-Members of the WTO contrary
to the principle just mentioned.
48. To be specific, the problem becomes apparent if paragraph 1 is read (taking the circumstances
of the present case) as saying the following:
49. "No tariff quota may be applied to the importati on of any product of the territory of an ACP
Member or on the exportation of any product destined for the territory of an ACP 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 accorded a quota."
50. This reading would mean that an advantage could not be given to an ACP Member unless a
similar advantage had been given to all third countries. These countries would, of course, include non-
Members of the WTO. The reduction ad absurdum would arise where tariff quotas were given
(without discrimination) to all WTO Members, but not to other countries. On the above reading of
Article XIII this would be forbidden. In the Eur opean Communities' view such an outcome conflicts
with WTO principles.
51. Consequently, the European Communities' view is that in 'applying' paragraph 1 of
Article XIII to tariff quotas account must be taken of the essential characteristic of paragraph 1 – that
it is forbidding the imposition of a prejudicial measure.
52. There are of course many situations where pa ragraph 1 can be applied to tariff quotas while
still respecting this principle. In the European Co mmunities' view the essential field of application of
Article XIII as regards tariff quotas is in the divi sion of the quota element of a tariff quota regime.
Thus, in the context of paragraph 1, if a Member divides up a tariff quota in a way that one Member's
allocation is worse than those of other countries it may invoke paragraph 1 to say that a tariff quota
has been imposed on it when similar tariff quotas have not been imposed on other countries.
53. On the other hand, the situation were a ta riff quota had been conferred on imports from
certain countries, but other countries had been subj ected to a higher tariff, the prejudiced Members
would have their remedy in the rule on preventing tariff discrimination contained in Article I:1.
54. Thus, Article XIII:1 would come into play if a tariff quota had been imposed on banana
imports from the MFN countries and on the ACP countries, in that the MFN countries might, in
appropriate circumstances, claim that the tariff quotas allocated to them were unfairly small compared
to those allocated to the ACP countries. However, since in circumstances of the present case no tariff
quota was imposed on imports from MFN countries no such claim is available to them.
55. In its submission the European Communities' summ ed up this legal situation by saying that
the challenged measure must be a prohibition or restriction on products originating from the
complaining Member.

56. (b) In the remarks on nullification and impairme nt referred to by the Panel, the European
Communities does not intend any departure from the usual interpretation of the presumption
contained in Article 3.8 of the DSU.
17. (Both Parties) In paragraph 60 of its s econd written submission, the EC argued that
"[i]n effect, Ecuador is saying that the discrimi nation constitutes the 'restriction' [within the
context of Article XIII:2 of the GATT 1994]. Havi ng created this 'restrictio n' it then compares
it with that on ACP products and comes, not surprisingly , to the conclusion that there is
discrimination, which it assumes falls within par agraph 2 [of Article XIII]". (Emphasis added)
Can Ecuador provide a reasoned answer as to wh ether it agrees with this statement. Do the
words "not surprisingly" in the EC statement mean that, provided that the existence of the
restriction mentioned by the EC can be proven, the EC accepts that there would be a violation
of Article XIII:2?

57. The explanation of the statement quoted by th e Panel is as follows. The situation being
examined by the Panel is essentially one of tariff discr imination that is governed by Article I:1 rather
than Article XIII. Ecuador attempts to artific ially extend the scope of Article XIII by finding
'prohibitions and restrictions' that do not exist. It argues that for the MFN countries not to be given the
benefit of the tariff quota that is accorded to th e ACP countries is a restriction. Forgetting for the
moment the meaning that 'restriction' has in the GATT, and in particular in Article XIII, one could, in
everyday speech, say that higher tariffs tend to rest rict imports more than lower tariffs. What Ecuador
is trying to do is, in essence, to take that everyday usage and inset it into Article XIII in order to treat
the MFN countries treatment as a restriction for th e purposes of paragraphs 1 and 2. The European
Communities' use of 'not surprisingly' was meant simply to indicate that a higher tariff would
obviously be regarded as a greater restriction than a lo wer tariff, again, using the word 'restriction' in
that broader, everyday sense. However, the flaw in Ecuador's argument is that in Article XIII, as in
Article XI, the word restriction does not include ta riff discrimination. Put another way, although tariff
discrimination may reduce imports from the countries suffering the discrimination, that does not make
such discrimination into a 'restriction'.
58. Thus, the direct answer to the Panel's question is that if the existence of restrictions in terms
of Article XIII:2 can be proven, and there is di scrimination, the European Communities accepts that
there would be a violation of Article XIII:2.
18. (Both Parties) In paragraph 51 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that its "exports are rest ricted by the high duty compared to those who
participate in the zero duty quota. The only di fference between a straight quota and a tariff
quota in this regard is that exclusion from a straight quota means no access, while exclusion
from a tariff quota means access restricted by the higher duty that applies to imports not
benefiting from the tariff quota, which may be proh ibitive in effect." In paragraph 52 of the
same statement, Ecuador adds that "[i]t is true that unlimited preferences for ACP bananas
would be worse than the tariff quota only for ACP countries, but exclusion from the tariff quota
is more restrictive of Ecuador and other members than if they were allowed to participate in the
zero duty tariff quota as they are entitled under Article XIII." Can the EC provide a reasoned
answer as to whether it agrees with this statemen t. Can Ecuador clarify whether it is arguing
that any high duty would qualify as a "restrict ion" under Article XIII of the GATT 1994. If
yes, why? Can Ecuador also clarify on what gr ounds, and according to what criteria, would a
tariff be considered to be "prohibitive in effect ". In Ecuador's view, does the restriction result
from the in-quota tariff or the out-of-quota tariff?

59. The basis of the answer to this question is essentially the same as that for Question 17.
Ecuador is seeking to blur the distinction betw een tariff barriers and non-tariff barriers (notably
quotas). The distinction is a vital one in GATT. It was created not only because of conceptual

differences but for very practical reasons to do with strategies for achieving trade liberalization. The
basic GATT strategy was to abolish non-tariff barriers (as manifested in Article XI), or convert them
into tariffs, and to negotiate mutual reductions in tariffs (as indicated in Article XXVIIIbis). It is a
strategy which has been pursued throughout the history of GATT, most recently in the tariffication
process applied to agricultural non-tariff barriers in the Uruguay Round.
60. To implement this strategy required separate rules to be made for tariffs and non-tariff
barriers, and therefore, as far as possible, for a cl ear distinction to be made between the two concepts.
As with any area of law, drawing distinctions betw een concepts can give rise to difficulties. In the
case of tariff quotas the problem of interpretation is aggravated by the unspecific language of
Article XIII:5, which merely states that 'The provisi ons of this Article sha ll apply to any tariff quota
instituted or maintained by any contracting part y'. However, the present circumstances do not present
difficult issues.
19. (Both Parties) In paragraph 57 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that "[i]t is a fact that the restriction in a tariff quota is achieved by
means of a tariff – the higher duty applied to products imported outside the quota than inside
the quota. That is not a problem because Articl e XIII specifically applies to any tariff quota,
and, unlike Article XI the reference to restrictio ns in Article XIII does not exclude taxes, duties
or other charges." Can Ecuador elaborate on this argument, and the EC provide a reasoned
answer as to whether it agrees with Ecuador's arguments in this context.

61. This observation of Ecuador was addressed in the European Communities' Closing Statement
(at paragraph 8) where it was pointed out that the interpretation that it presents would reduce
Article I:1, perhaps the most well-known of all international trade rules, to an irrelevancy.
62. The EC explains elsewhere the fundamental di stinction made in the GATT between tariff and
non-tariff barriers, a division which is reflected in the relative scopes of Articles I:1 and XIII. As it
does in regard to term 'shall apply' in paragraph 5, Ecuador is endorsing an interpretation that is in
purely literal terms consistent with the words of Ar ticle XIII, without taking account of their context
or object and purpose.
20. (Both Parties) If, under Article II of the GATT 1994, the EC was bound to a €75/mt
tariff rate in-quota duty for 2.2 million metric to ns of bananas, in addition to the zero-duty
TRQ of 775,000 metric tons for ACP bananas, should such a finding affect the manner in which
the Panel conducts its analysis under Article XIII?

63. The European Communities considers that the only binding it currently has for the
importation of bananas is for a tariff of €680 per ton. The current import regime (i.e. with an applied
tariff of €176 per ton) has never coincided with any other binding.
64. The European Communities also notes that the Cotonou Preference has never been bound in
its Schedule of Concessions.
65. The European Communities does not see how the hypothetical in this question can have any
relevance for the application of Article XIII of th e GATT on the current banana import regime of the
European Communities.
21. (Both Parties) In paragraph 19 of its op ening statement during the substantive meeting
with the Panel, the EC argues that "[t]he compla inants attempt to draw some analogy with the
regimes analysed by this Panel in 1997 and 1999. This is not correct. Following the abolition of
the tariff-quota-based system in 2006, the curren t regime is so different to those of the 1990s

that no analogy can be drawn." Can the EC el aborate on this argument, and Ecuador provide
a reasoned answer as to whether it agrees with the same.

66. The European Communities' argument in this extract reflected the fact that the regimes
analysed by the panel in 1997 and 1999 were ones in which the legality of certain tariff quotas was
being determined in regard to their relationshi p with other tariff quotas. In those circumstances a
meaningful comparison could be made of the quantities of the various tariff quotas since the
applicable tariffs were all at the same level. In such a situation it is possible for paragraph 1 of
Article XIII to be invoked because one can say whethe r similar restrictions of a quantitative character
are being applied. Likewise the distribution rul es of paragraph 2 can be invoked because one can
compare the quantities assigned to the various benefiting Members.
67. In contrast, no such comparisons (between th e relative position of ACP and MFN countries)
are possible regarding the regime being examined in the present dispute because imports from MFN
countries are not subject to any tariff quota, still l ess a tariff quota at the level enjoyed by the ACP
countries. Although the ACP have identifiable quantities, for the MFN countries there are none and so
there is nothing on which the comparison may be based . The difference in the treatment of imports in
the two groups lies solely in the field of tariffs.
22. (Both Parties) In paragraph 10 of its stat ement during the substantive meeting with the
Panel, Brazil argues that "the EC abruptly jumps to the flawed conclusion that because the
Member has chosen to implement a suggestion by the panel such Member would always be in
compliance with its obligations under the covered agreements." In paragraph 11 of the same
statement, Brazil adds that "[i]n no provision does the DSU grant Members certainty as to the
'lawfulness' of a measure taken to comply just because such measure is intended to implement a
suggestion made by a panel. 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." Can the Partie s provide a reasoned answer as to whether they
agree with Brazil's argument.

68. Brazil's statements echo the position expressed by Ecuador in paragraph 44 of its second
written submission. The European Communities considers that this position is not correct.
69. As mentioned in paragraphs 22 to 25 of the second written submission of the European
Communities, it is settled law that panel reports th at have been adopted by the DSB are binding for
both the complaining and the defending parties to th e dispute. A panel's suggestions as to how the
defending party may put itself in compliance with the WTO rules are not binding for the defending
party: the defending party enjoys the freedom to c hoose any of the various options that may exist to
bring about compliance. However, this does not m ean that suggestions are entirely devoid of legal
significance. On the contrary, a suggestion contai ns a significant legal ruling. In suggesting a
particular course of action, the Panel is finding that such action is lawful and that the implementation
of this suggestion will lead to the defending party' s compliance with the obligations found to have
been infringed.
70. The European Communities considers that if the complaining party does not appeal the
suggestions made by the panel, then following the a doption of the panel's report by the DSB there is a
presumption of legality covering these suggestions which makes them binding on the complaining
party. This means that if the defending party decides to implement the measures suggested by the
panel, the complaining party may not challenge th e conformity of these measures with the WTO rules
in an Article 21.5 procedure. Allowing such a cha llenge would be inconsistent with Article 17.14 of
the DSU read together with Article 16.4 of the DS U, Article 19.1 of the DSU and Article 21.1 of the
DSU, because it would mean that the complaini ng party does not "unconditionally accept" the panel's
report.

71. To hold otherwise would create an undue legal uncertainty for the defending party as to the
course of action that it should follow. It would also seriously compromise the credibility of panels
and of the DSB, because it would create the possibilit y for Article 21.5 Panels to reverse decisions
taken by the DSB. This would curtail the panels ' ability to make suggestions and would render the
relevant provisions of Article 19.1 of the DSU inoperative.
72. Conversely, finding that the measures suggested by a panel cannot be challenged in an
Article 21.5 procedure would not deprive compla ining parties of any procedural rights. A
complaining party disagreeing with a particular suggestion of the panel would always have the right to
lodge an appeal with the Appellate Body, in acco rdance with the procedures and time limits provided
for in the DSU.
73. Moreover, Brazil's position leads to a confusion of the roles of the Appellate Body and of
Article 21.5 panels and opens the door for an ab use of Article 21.5 of the DSU, as well as of
Article 16.4 and Article 17 of the DSU, which descr ibe the procedures and time limits within which
appeals against panel reports should be lodged.
74. As mentioned in paragraphs 27 and 28 of the second written submission of the European
Communities, challenges to panel reports can be brought only in accordance with specific procedures
and within specific time limits, described in Article 16.4, Article 17.4 and Article 17.6 of the DSU.
Article 21.5 of the DSU is meant to cover only the very specific situation where there is a
disagreement as to the proper implementation of th e panels findings by the defending party.
Article 21.5 cannot and should not be used to challenge the panel's findings themselves. This is why a
complaining party should not be allowed to challe nge before an Article 21.5 panel any measures of
the defending party that were expressly suggested in the panel report and have been adopted by the
DSB, which means that they have not been the subject of a successful appeal.
75. To hold otherwise would amount to giving complaining parties the right to "bypass" the strict
procedural requirements for appellate review and "r eplace" the procedures before the Appellate Body
with procedures before Article 21.5 panels. Such a serious weakening of the role of the Appellate
Body would run against the basic principles of the DSU.
76. In light of the above the European Communiti es considers that, once the Panel has satisfied
itself that the current import regime of the European Communities has the characteristics of the import
regime suggested by the Panel in paragraph 6.157 of its first Article 21.5 report, it should reject the
Article XIII claims of Ecuador outright.
23. (Both Parties) The Understanding on Bana nas signed by the EC with Ecuador and the
US seems to include references, in both Phases I and II, to a bound tariff-rate quota, designated
as "quota 'A'", of 2.2 million metric tons with an in-quota tariff rate not exceeding €75/mt, that
would possibly extend beyond the end of 2002. Ca n Parties provide a reasoned answer as to
whether they agree with this reading of the Understanding. Can the EC explain how this can be
reconciled with its argument that the TRQ expired at the end of 2002, considering that the EC
has been arguing for the binding nature of the Understanding on Bananas and that it would
constitute a mutually agreed solution?

77. The European Communities considers that these sp ecific provisions do not contradict any of
the arguments advanced in the written submissions and oral statements of the European Communities.
First, at the time the Understanding was signed (i.e . in April 2001), the tariff quota for the 2.2 million
tons of bananas was still bound. Second, Phase I woul d be implemented during a period of time that
the tariff quota for the 2.2 million tons would still be bound (i.e. between 1 July 2001 and 31
December 2001). Therefore, it is normal that the description of Phase I includes a reference to the
"bound tariff rate quota designated as quota A" and set at 2.2 million tons of bananas.

78. Moreover, part of Phase II would also be implemented during a period of time that the tariff
quota for the 2.2 million of tons would still be bo und (i.e. between 1 January 2002 and 31 December
2002). This explains why the description of the Ph ase II includes the statement that "during Phase II,
the provisions applying to Phase I will continue". However, the casual reference to the continued
application of the provisions of Phase I during Phase II does not have any broader legal significance.
The main points that the description of Phase II sought to address was (i) the increase in the quantities
of bananas imported from MFN countries and th e corresponding reduction in the quantities of
bananas imported from ACP countries during Phase II and (ii) the allocation of licenses for traders of
MFN bananas during Phase II. The drafters of the U nderstanding did not need to add to that part of
the Understanding a more detailed analysis of the lega l nature of tariff quota "A" (i.e. that it would be
bound until the end of 2002 and then continue as an autonomous, unbound tariff quota until the end of
2005).
24. (Both Parties) Irrespective of their differences in the interpretation of the Framework
Agreement on Bananas (BFA), can the Parties identify the document that constitutes the legally
binding schedules of the European Communities fo r bananas at the date of the establishment of
this Panel on 20 March 2007, indicating its WTO document symbol if any, and specify any
changes to that document that might have taken place in regard to bananas.

79. As mentioned in paragraphs 5 to 8 of th e first written submission of the European
Communities, the banana concessions were initia lly contained in Schedule LXXX, which was
executed on 15 April 1994 and withdrawn on 1 January 1995, in light of the European Communities'
enlargement to 15 Member States.
80. A new Schedule CXL was submitted to the WTO on 14 March 1996, which has not yet been
certified, because certain WTO Members have not yet lifted all their objections. Schedule CXL was
withdrawn on 1 May 2004, in light of the European Communities' enlargement to 25 Member States.
The European Communities has not submitted a new Schedule of Concessions yet, as the relevant
negotiations under Article XXIV and Article XXVIII of the GATT are still pending.
81. In any event, the European Communities' banana concessions are the same in both
Schedule LXXX and Schedule CXL.
25. (Both Parties) Paragraph 9 of the Framew ork Agreement on Bananas (BFA) annexed to
the EC Schedules provides that "[t]his ag reement shall apply until 31 December 2002"
(Emphasis added). Could it be concluded fr om this language that only the Framework
Agreement on Bananas annexed to the EC Sc hedules expired on 31 December 2002, but not
Section I B of the EC Schedules, where the tariff rate quota (TRQ) is also indicated? Please
provide a reasoned response.

82. This question reflects the argument advanced in paragraph 58 of Ecuador's second written
submission. As mentioned in paragraph 77 of the second writte n submission of the European
Communities, Ecuador's argument is not correct.
83. First, the Annex is an integral part of the Schedule and contains th e terms, conditions and
qualifications to which the relevant concession is subject. The entries into Section I B of the
Schedule do not have a life independent from the Annex. This is made clear on page 9 of Section I B,
where it is expressly stated that the concession for th e 2.2 million tons is granted "as indicated in the
Annex". The space limitations of pa ge 9 of Section I B of the Schedule, which forced its drafters to
put the time limitation in the Annex and not on page 9 itself, cannot be given a legal significance.
84.
 Second, if indeed the intention was to establish a perpetual concession for the 2.2 million
tons, the European Communities (and the other signatories of the banana framework agreement) could

have simply included in the Schedules the concession without incorporating the provision that limits
the concession's duration. Even better, the Europ ean Communities (and the other parties) could have
stated that the concession for the 2.2 million tons is perpetual and that the expiration date of 31
December 2002 applies only to other aspects of the Anne x. This they did not do. The fact that the
entire text of the agreement was incorporated into the Annex show s that it was clear from the very
beginning that the expiration clause applied to a ll the terms of the concession for the tariff quota of
2.2 million tons.
85. Third, the date of 31.12.2002 as end of the BF A was chosen for a specific reason. Council
Regulation (EEC) No 404/93 of 13 February 1993 on the common organization of the market, 13 in
Article 32 provided what follows:
No later than the end of the third year after the entry into force of this Regulation and,
in any case, when the flat-rate reference income referred to in Article 12 (4) is
reviewed, the Commission shall submit a report to the European Parliament and the
Council on the operation of this Regulation.
This report shall contain among other things an analysis of the development of
Community, of third-country and ACP banana marketing flows since the
implementation of these arrangements. The report shall be accompanied where
necessary by appropriate proposals.
The Commission shall again report to the Eu ropean Parliament and the Council by 31
December 2001 on the operation of this Re gulation and make appropriate proposals
concerning the new arrangements to apply after 31 December 2002.
14
86. In very simple words, the Eur opean Communities had thus decided to make a "state of play"
10 years after the Regulation had entered into for ce and, following this reflection exercise, make
appropriate proposals concerning the new arrangements to apply after 31 December 2002.
87. This explains why the same date was included in the BFA and why there was this end date for
the TRQ.
88. In light of the above, the European Communiti es considers that the Panel should reject the
argument put forward by Ecuador.
26. (Both Parties) Should the expressions "agreed system" used in paragraph 8 of the
Framework Agreement on Bananas (BFA) annexed to the EC Schedules, "the agreement" used
in paragraph 9, and "this agreement" used in paragraphs 9, 10 and 11, be considered to be
equivalent?

89. As mentioned in paragraph 9 of its first written submission, the European Communities
considers that these provisions of the Annex to the Schedule of Concessions of the European
Communities establish (i) the starting date of the concession for the tariff quota of the 2.2 million tons
(i.e. October 1, 1994, in accordance with paragraph 8) and (ii) the termination date for that concession
(i.e. 31 December 2002, in accordance with paragraph 9).
27. (Both Parties) Should paragraph 9 of th e Framework Agreement on Bananas (BFA) be
interpreted as a stand-alone provision or by taki ng into account other parts and sections of the
EC's Schedule, as well as the intentions of the parties in all subsequent procedures?

13 Official Journal L 047, 25/02/1993, p. 1-11.
14 Emphasis adedd.

90. The European Communities notes that, as me ntioned above, the concession was granted "as
indicated in the Annex". Therefore, the Panel needs to interpret the concession contained in page 9 of
Section I B of the European Communities' Schedu le on the basis of the terms, conditions and
qualifications of the Annex as a whole, including the clause providing that the concession would
expire at the end of 2002.
91. The European Communities cannot see the relevance of "the intentions of the parties in all
subsequent procedures" for the Panel's analysis of the terms, conditions and qualifications
incorporated in the Schedule of the European Communities.
92. It is noted that Ecuador was not a party to the Banana Framework Agreement.
28. (Both Parties) In paragraph 69 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that "[t]ariff quota conces sions can be withdrawn, but the withdrawing
member must follow Article XXVIII procedures which the Doha Waiver required and the
European Communities failed to do." Can Ecua dor clarify in what specific way the EC has
"failed" to follow Article XXVIII procedures and wh at would be the legal consequences of such
failure. Can the EC provide a reasoned answer as to whether it agrees with Ecuador's assertion
that it has failed to follow Article XXVIII procedures.

93. As mentioned in paragraph 92 of the second written submission of the European
Communities, the Panel should disregard Ecuador 's claims under Article XXVIII of the GATT,
because Ecuador did not include any Article XXVIII cl aims in its request for the establishment of the
Panel and, therefore, an analysis of Article XXVIII issues is not within the Terms of Reference of this
Panel.
94. In any event, the European Communities considers that it has not violated Article XXVIII and
that there is no scope for a claim that Article XXVIII has been breached.
QUESTIONS ADDRESSED TO THE EUROPEAN COMMUNITIES

48. (EC) In its first written submission, the EC identifies an Exhibit EC-6, which is
described as "[i]ntentionally left blank". Can the EC explain the reason for that.

95. The legal team representing the European Co mmunities had scanned the documents annexed
as Exhibits to the first written submission of the European Communities. Du e to a mistake in the
numbering of these documents, the indication "Exhib it EC-6" was not assigned to any document. In
order to save time, the legal team representing the European Communities decided to leave the
indication "Exhibit EC-6" blank, instead of renumbering and rescanning all Exhibits after
Exhibit EC-5.
49. (EC) Can the EC expand on the factual information provided in Exhibit EC-3 of its
submission by providing annual import data (and their sources) for each year from 1999 to
2003 for EC15 and from 2004 to 2006 for EC25 (also showing separately the EC15 imports from
2004 to 2006, if possible) and for the first half of 2007 for EC27 for the following:

 (a) Volume, CIF value (in Euros/mt and USD/mt) and average unit value (in
Euros/mt and USD/mt) of banana imports by the EC from Ecuador, from each
of the other MFN suppliers, and from each of the ACP countries;

 (b) Ecuador's share (percentage) of EC ba nana imports, both in volume and value
terms;

 (c) Ecuador's share (percentage) of tota l volume of banana imports by the EC
divided by Ecuador's share of global banana exports; and,

 (d) EC's tariff revenue on bananas for the period between 1999 and mid-2007.

96. Exhibit EC-12 illustrates the volume, CIF value and average unit value of banana imports by
the EC from Ecuador, from each of the other MFN suppliers, and from each of the ACP countries.
97. Exhibit EC-13 indicates Ecuador's share of EC banana imports, both in volume and value
terms as well as Ecuador's share of total volume of banana imports by the EC divided by Ecuador's
share of global banana exports.
98. Lastly, Exhibit EC-14 concerns EC's tariff re venue on bananas for the period between 1999
and mid-2007.
99. Import data concerning the European Communiti es were extracted from Comext (Eurostat),
on 26 September 2007. They consist of the imports for EC-15 from 1999 to 2003, from 2004 to 2006
for EC-25, and for the first half of 2007 for EU-27.
100. Figures concerning EC-15 from 2004 to 2006 are also included in Exhibit EC-12 (Table 4), as
requested by the Panel. However, these figures are not completely accurate and thus can be taken only
as indicative. In fact, once bananas have been le gally imported into the Common Market, they enjoy
the right to freely circulate between the different Me mber States. Therefore part of bananas consumed
in the 10 new Member States has been imported via the EC-15.
50. (EC) Can the EC also provide annual import data (and their sources) for each year from
1988 to 1998 for EC12 and EC15, as appropriate (showing separately the EC12 imports, if
possible) with the information requested in letters (a) to (d) of the previous question.

101. The European Communities has c onsulted the data made available by Eurostat but found out
that there are not accurate estimates. The reas on has been explained in the answer given to
Question 49.
102. The only figures which are available to th e European Communities concern volumes
imported and average unit value during the relevant period, and are illustrated in Exhibit EC-15.
51. (EC) Can the EC expand on the factual information provided in Exhibit EC-3 by
providing annual consumption and production da ta (and their sources) for each of the EC
member States, and for each of the years in the period 1999-2006, as well as for the fist half of
2007, for the following:

 (a) Total volume of banana production in the EC;

 (b) Total volume and FOB value of bananas exports by the EC, if any;

 (c) Consumption volumes for each of the EU 27 member States;

 (d) Total sales of bananas within the EC, i.e. domestic consumption including waste,
which equals EC production plus imports minus exports; and,

 (e) Share (percentage) of the total volume of domestic sales within the EC that is
supplied by Ecuador, by other MFN suppliers, and by ACP suppliers.

103. Exhibit EC-16 shows the total annual producti on in the European Communities from 1999 to
2006. To date, there are no official figures for th e EC production in 2007. However, according to
industry and specialised press information, European Communities' production in 2007 is estimated to
be lower than in the previous year since bananas plantations in Martinique and Guadeloupe have been
destroyed by Hurricane Dean on 17 August 2007.
104. There are no exports of bananas from the European Communities.
105. The European Communities does not have data on consumption volumes for each of the
EU 27. In fact, data collected by Eurostat concer n only imports. Just to give an example: Belgium
imports almost 30% of MFN bananas, but this does not imply that all these fruits are consumed in
Belgium. Indeed, a large part of them will be sold and consumed in Germany.
106. Exhibit EC-17 concerns total sales of bananas within the European Communities. One has to
bear in mind that there are no bananas produced in the European Communities which are exported
outside the Communities.
107. Exhibit EC-18 contains shares of the total volume of domestic sales within the European
Communities supplied by Ecuador, by other MFN suppliers, and by ACP suppliers.
52. (EC) In paragraph 36 of its second written submission, the EC states that "during the
period between its first written submission and its second written submission, the European
Communities has updated the information on the fi rst quarter of 2007 with market data from
April and May 2007." Can the EC provide the data source that was used to make the assertions
mentioned subsequently in that same paragraph.

108. All data concerning the internal market s ubmitted by the European Communities have been
provided by Eurostat. These figures are regularly upda ted (often on a daily basis). This explains why
there can be slight differences between different tables provided, or between estimates provided at
different moments in time.
53. (EC) Can the EC provide information abou t the Everything But Ar ms (EBA) scheme in
respect to bananas imports? Are EC banana imports subject to any other preferential systems?
If yes, please describe those systems, indicati ng the relevant dates, and focusing your response
on the period 1999 to 2007.

109. The EBA scheme is laid down in Council Regulati on (EC) no. 980/2005 of 27 June of 2005,
applying a scheme of generalised tariff preferences (GSP), more particularly its Chapter II Section 3
("Special arrangement for least developed countries").
110. According to Article 12.3 of this EC Regulation "Common Customs Tariff duties on the
products of CN code 0803 00 19 shall be reduced by 20% annually as from 1 January 2002. They
shall be entirely suspended as from 1 January 2006". Accordingly, imports of bananas originating
from least developed countries will benefit from duty-free treatment in the EC market.
111. It is worth noting that few least developed countries have the capacity to export bananas.
Since 2000, only four LDCs have exported to th e European Communities (Rwanda, Uganda, Somalia
and Cape Verde) and in very limited quantities. Cont rary to the baseless asser tions contained in the
study produced by the Center for International Economics and submitted by Nicaragua and Panama,
the export potential of countries such as Angola and Mozambique is extremely limited.

112. The EC does not offer any other preferential syst em for banana imports, with the exception of
the Cotonou Preference.
54. (EC) How did the actual conditions for th e import of bananas change following the
various enlargements of the EC in the period 1999 and 2007?

113. Between 1 January 1999 and 31 December 2006, there has been only one enlargement of the
European Communities, which brought the Member Stat es from 15 to 25. In this context, and taking
into account historical imports of bananas by th e new 10 Member States, the European Communities
opened an autonomous TRQ of 300,000 mt subject to the in-quota tariff of €75MT for the period
1 May 2004-31 December 2004. For the year 2005, a TRQ of 460,000 mt was opened. As a result, the
total MFN TRQs increased to 3.113 million MT.
55. (EC) In paragraph 11 of its opening statement during the substantive meeting with the
Panel, the EC argues that Ecuador does "not wi sh to allow the ACP countries to have their
trade preference until the end of this year." Ca n the EC explain the reasons for its reference to
the "end of this year" in this statement.

114. As mentioned in paragraph 34 of the first wr itten submission of the European Communities,
the duration of the Doha Waiver is commensur ate to the duration of the corresponding trade
preferences found in Article 37 of the Cotonou Ag reement, i.e. until 31 December 2007. Moreover,
the Annex to the Doha Waiver provides that the waiver would also cover bananas until 31 December
2007, provided that the terms of the Annex are satis fied. Ecuador claims that these terms have not
been satisfied and, therefore, that the Doha Wa iver on bananas was terminated on 31 December 2005
and, consequently, does not cover bananas until 31 December 2007.
115. Given that the oral statement of the Europ ean Communities was delivered on 18 September
2007, which is in the same year with 31 Dece mber 2007, the European Communities used the
expression "the end of this year" instead of "31 December 2007".
56. (EC) In paragraph 7 of its first written submission, the EC mentions that on 19 January
2004, it had announced its intention to withdr aw Schedule CXL, in the context of the EC
enlargement from 15 to 25, and then to 27, me mber States. Can the EC specify which are the
relevant documents in this respect and whether its concession(s) on bananas was/were described
therein. If so, how was it/were they described? Also, can the EC specify the similar relevant
documents in regard to its enlargement in 2007, and how its concession(s) on bananas was/were
described therein.

116. The European Communities announced on 19 January 2004 the withdrawal of the
commitments in its Schedule of Concession, together with the commitments in the Schedules of
Concessions of 10 other WTO Members. The withdrawal of the commitments was effective as of 1
May 2004, date on which these 10 WTO Members became Member States of the European
Communities. The relevant document is G/SECRET/ 20, dated 30 January 2004. This document did
not make a specific reference to the commitments on bananas, which were withdrawn together with
all other commitments in the Schedules.
117. The relevant negotiations between the Eur opean Communities and the other WTO Members
have not been concluded yet and the European Communities has not submitted a new Schedule of
Concessions yet.
118. It is noted that the European Communities has also withdrawn specifically its banana
concessions on 15 July 2004. The relevant doc ument is G/SECRET/22, dated 2 August 2004.
Following this withdrawal, the European Communi ties announced its intention to grant a banana

concession for a bound duty of €230 per ton on 31 January 2005. The relevant document is

57. (EC) Can the EC confirm that Part I, Section 1.B of the EC's schedule LXXX and CXL
is divided in three sub-sections (i.e. 1. Curren t Access Quotas; 2. Non-Tariffied Product
Quotas; and, 3. Minimum Access Quotas). Do you agree with the argument in paragraph 85 of
the respective third party submissions by Nicaragua and Panama in the sense that the
"2,200,000 mt dutiable at 75 ECU/mt" quota is classified under the "current access" sub-section
of the EC schedule? If that was the case, please provide an explanation of the reasons
for classifying it under that sub-section.

119. Indeed, Part I, Section I-B of Schedules LX XX and CXL include these three sub-sections.
However, these subsections do not affect in any way the administration of the corresponding tariff
quotas. The European Communities had used th ese subsections during the Uruguay Round for
historical reasons (e.g., "Current Access Quotas" covered products the imports of which represented a
substantial part of the European Communities' market, while "Minimum Access Quotas" covered
products with minimal imports into the European Communities). These subsections never had and
still do not have any legal significance in this context.
58. (EC) In paragraph 65 of its first written submission, the EC requests the Panel
"to dismiss the relevant Ecuador claims in their entirety". In paragraph 6 of its second written
submission, the EC adds that "the provisions of the Understanding are binding upon Ecuador
and bar Ecuador from challenging an import re gime with the characteristics of the current
import regime of the [EC]". What is the nature of the EC's argument in this regard? Does the
EC argue that the Panel has no jurisdiction to hear Ecuador's claims?

120. The European Communities does not challenge the Panel's jurisdiction with this preliminary
objection, but rather Ecuador's right to bring these claims.
121. The European Communities considers that the Pa nel should first find that Ecuador is bound
by the terms of the Understanding. Then, the Pa nel should find that, through the Understanding,
Ecuador accepted that the Cotonou Preference would c ontinue to exist for the entire duration of the
waiver that the European Communities had request ed at the time the Understanding was signed and
the grant of which Ecuador accepted to support in th e Understanding. Finally, the Panel should find
that Ecuador must now comply with its undertakings and, therefore, that Ecuador cannot challenge the
Cotonou Preference.
59. (EC) At the DSB meeting of 1 February 2002, Ecuador stated that "Ecuador, like other
countries, also considered that this item should no longer appear on the agenda of future DSB
meetings." (WT/DSB/M/119, para. 5) This sentence was preceded by the following statement by
Ecuador:

"During the dispute settlement process, Ecuador had demonstrated patience and
flexibility and had, in this spirit, signed a bilateral Understanding on Bananas
with the EC on 30 April 2001. This Understanding constituted a sound basis for
the EC to implement a transitional bana na 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 element 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 concerning the measures applied by the
EC, the matter could be referred to the or iginal Panel pursuant to Article 21.5 of
the DSU." (WT/DSB/M/119, para. 5, emphasis added)
 Can the EC provide a legally reasoned comment on this apparent reservation by
Ecuador of its right to invoke Article 21.5.

122. The European Communities has not argued th at the withdrawal of the issue on the
implementation of the DSB rulings and recomme ndations from the agenda of the DSB has any
particular legal significance. The European Communities has argued that Ecuador is barred from
challenging the Cotonou Preference because it had accepted the existence of the Cotonou Preference
until the end of 2007 in the Understanding.
60. (EC) In paragraph 4 of its statement durin g the substantive meeting with the Panel, the
US argues that:

"The Understanding [on Bananas] is not a 'covered agreement' – it is not listed
in Appendix 1. Accordingly, the DSU cannot be used to settle a dispute as to the
meaning or effect of the Understanding, and the DSU cannot enforce the
Understanding by blocking a party to the Understanding from recourse to the
DSU. The EC itself has in fact conceded that there is no bar to proceeding with
dispute settlement even in the face of a mutually agreed solution. It is worth
noting that, during the India – Autos proceeding (which, like the negotiation of
the Bananas Understandings, took place in the spring of 2001), the EC also held
that view that a mutually agreed solu tion could not prevent recourse to the
DSU ... "
Can the EC provide a reasoned answer as to whet her it agrees with this statement and whether
there are any differences between the circumstances of the current proceedings and those in the
India – Autos case regarding a mutually agreed solution.

123. It is important to note, first of all, that India – Autos was an ordinary Article XXIII dispute
whereas the present dispute is a 'compliance' case under DSU Article 21.5. In effect, the mutually
agreed settlement is an acceptan ce that the respondent has complie d with the DSB recommendations
and rulings, since it must be in accordance with WTO rules. It would therefore be perverse to allow
the complainant to commence proceedings that explicitly denied this. By respecting the
Understanding the panel would be doing what is re quired of it in the DSU, which is of course a
covered agreement.
124. Moreover, the European Communities notes that the report of the panel in the India – Autos
case states in paragraph 7.113:
[…] such agreements are expressly referred to and supported by the DSU. It is
certainly reasonable to assume, particularly on the basis of Article 3 of the DSU […]
that these agreed solutions are intended to reflect a settlement of the dispute in
question, which both parties expect will br ing a final conclusion to the relevant
proceedings.
15

15 See the report of the panel in India – Measures Affecting the Automotive Sector , dated 21 December
2001, ("India - Autos"), at paragraph 7.113.

The European Communities also notes that the panel found in paragraph 7.115 of its report that "it
may also be the case that it cannot be lightly assume d that those drafters intended mutually agreed
solutions, expressly promoted by the DSU, to ha ve no meaningful legal effect in subsequent
proceedings". These statements confirm that the panel in India – Autos considered it possible that a
mutually agreed solution could bar a party from commencing dispute settlement proceedings.

61. (EC) In paragraph 16 of its second writte n submission, Ecuador states that "[t]he EC
does not contest that it grants preferences that are contrary to Article I, but argues that the
preferences it grants to bananas of ACP orig in are covered by the Doha Waiver through
31 December 2007." A similar characterization is also made by Nicaragua and Panama in
paragraph 19 of their respective third party submissions and by the US in paragraph 19 of its
statement during the substantive meeting with the Panel. Can the EC provide a reasoned
answer as to whether it agrees with this statement.

125. The European Communities considers that the Doha Waiver covers the Cotonou Preference
and waives the application of Article I of the GATT un til the end of 2007. In light of this fact, the
European Communities does not wish to invoke an y other arguments in favour of the Cotonou
Preference's compatibility with Article I of the GATT.
62. (EC) In paragraph 36 of its statement during the substantive meeting with the Panel,
Ecuador argues that "[i]n its own second submission, the EC did not attempt to refute
Ecuador's analysis of why, following Vienna Conv ention principles, it is plain that the waiver
had expired, and why the EC arguments were no t sustainable. Instead, the EC simply
reaffirmed its position and dismissed Ecuador's reliance on the ordinary meaning of the words
of the waiver in their context and in light of the object and purpose as 'formalistic'." Can the
EC provide a reasoned answer as to whether it agrees with this statement.

126. The European Communities did not simply dism iss Ecuador's arguments as "formalistic", but
rather based its position on the facts and legal ar guments mentioned in its Written Submissions and
oral statements that establish that all the conditions for the continued application of the Doha Waiver
until the end of 2007 have been satisfied. The Eu ropean Communities has al so demonstrated the
absurd results to which Ecuador's arguments lead. None of Ecuador's arguments adequately rebut the
facts and arguments presented by the European Communities.
63. (EC) In paragraphs 13 and 14 of their r espective third party submissions, Nicaragua
and Panama state that "[t]he EC would hardly have agreed to negotiate the terms of the
Article I waiver with Ecuador ha d Ecuador already given away its Article I rights... [and that
t]he EC would not have had to worry about Ecuador's waiver concerns in November 2001 if
Ecuador had already 'contractually' obligated it self in April 2001 to accept any future Article I
violation". Can the EC provide a reasoned answer as to whether it agrees with this statement.

127. This naïve statement echoes a similar argu ment advanced in Ecuador's second written
submission and is equally baseless. Irrespective of the obligations that Ecuador had undertaken with
the Understanding, it is a fact that Ecuador and th e other Latin American countries were blocking the
grant of the waiver for the Cotonou Agreement. Paradoxically, Nicaragua and Panama do confirm
this fact. Therefore, the European Communities ha d no choice other than to negotiate with Ecuador
and the other Latin American countries a solution th at would allow the Cotonou Agreement to receive
its waiver.
64. (EC) In paragraph 24 of their respect ive third party submissions, Nicaragua and
Panama state that the expression "in clinical isolation", which was coined by the Appellate
Body in US – Gasoline when referring to public international law, would not be relevant as used

by the EC, as in paragraph 68 of its first wr itten submission, when referring to the "real
world". Can the EC provide a reasoned answer as to whether it agrees with this statement.

128. The statement criticized by Panama and Nicaragua ne eds to be read very closely. In fact, it is
only "paraphrasing" an expression used in a previous Appellate Body report.
129. The arguments advanced by Ecuador and the Th ird Parties that support it in this case have
confirmed that the Panel is indeed invited to rule in this case "in clinical isolation" from the real
situation in the banana market.
65. (EC) On page 7 of their respective third party submissions – based on the use of the
expressions "whether the EC has rectified the ma tter" and "if the EC has failed to rectify the
matter" in tiret 5 of the Banana Annex to the Doha Waiver, as well as on the expressions "the
new EC tariff regime" and "the new EC tariff on ly regime" in tirets one and five – Nicaragua
and Panama conclude that, after two negative fi ndings by the Arbitrator, the new EC tariff
regime introduced thereafter would not fulfil the "tariff only" requirements of the Annex and,
therefore, would lose waiver coverage "upon its entr y into force, and not at some later point".
Can the EC provide a reasoned answer as to whether it agrees with this statement.

130. See the answer provided in Questions 4 and 13, above.
66. (EC) In paragraph 27 of their respect ive third party submissions, Nicaragua and
Panama argue that the EC's waiver for bananas wa s authorized to continue beyond 2006 only if
the EC either: (a) received a first arbitratio n determination that its "envisaged rebinding
would result in at least maintaining total mark et access for MFN banana suppliers, taking into
account all EC WTO market access commitments; (b) rectified the matter by reaching a
mutually satisfactory solution with the interested parties; or, (c) received a determination in the
second arbitration that the EC had rectified the matter. Can the EC provide a reasoned answer
as to whether it agrees with this statement.

131. It is the opinion of the European Communities that the text of the Doha Waiver makes it clear
that such a waiver would continue to apply until the end of year 2007 under the condition that the
European Communities introduced an import regime that would maintain the total market access of
the MFN banana suppliers. This re gime, moreover, would need to be different from the ones that the
Arbitrators had found unlikely to maintain such market access.
67. (EC) In paragraph 36 of their combined statement during the substantive meeting with
the Panel, Nicaragua and Panama argue that "[ a]s confirmed by its eleventh recital, th[e
Article I Doha] waiver was only able to receive the collective endorsement of the Membership
after the EC committed in the Annex to a strict 'multilateral control' on 'any rebinding.'" Can
the EC provide a reasoned answer as to whether it agrees with this statement.

132. The European Communities considers that the c ondition for the continued application of the
Doha Waiver until the end of 2007 was the introducti on of an import regime that would maintain the
total market access of the MFN suppliers. The section of the recital cited in this question confirms the
European Communities' interpretation of the Doha Waiver.
68. (EC) In paragraph 39 of their combined statement during the substantive meeting with
the Panel, Nicaragua and Panama argue that "[i]f the DSB panel erroneously revisited the
defunct waiver access standard and confirmed what the Arbitrator's prior analytical
framework makes obvious – that a 135% increase in the MFN tariff, and ACP and EBA margin
of preference, definitionally fails to result 'in at least maintaining' MFN conditions of
competition into the future – the EC would be unde terred. It would simply do what it did in

late 2005. It would reduce its tariff by only a few digits and call the matter 'rectified'. If the
Latin American suppliers then returned to the sa me panel, the EC could merely continue the
same sequence for as long as it needed to, re ducing its tariff by minuscule amounts, digit-by-
digit, until the Partnership Agreement expired on its own terms." Can the EC provide a
reasoned answer as to whether it agrees with this statement.

133. The market reality, as evidenced by the statistics and data at the disposal of the Panel, shows
the flaws in the arguments of Nicaragua and Panama. The European Communities' current import
regime has more than maintained the total market access of the MFN suppliers. This shows that the
European Communities has fulfilled the obligations it undertook in the Doha Waiver.
134. Moreover, this statement of Nicaragua and Panama confirms once more that the real intention
of Ecuador and the Third Parties that support it, is to use (or rather abuse) these dispute settlement
proceedings in order to influence the tariff nego tiations with the European Communities. Indeed,
Ecuador and these Third Parties ostensibly request the Panel to find that the Doha Waiver has expired.
However, a Panel finding that the Doha Waiver h as expired would not have any impact on the tariff
applied by the European Communities to bananas from MFN countries, as incorrectly stated by the
legal advisors of Nicaragua and Panama. This la psus in the reasoning of the legal advisors of
Nicaragua and Panama confirms that their challe nge to the Cotonou Preference is in reality a
disguised effort to achieve an advantage in the tariff negotiations.
135. The European Communities respec tfully requests the Panel once more not to allow Ecuador
and the Third Parties that support it to distort the role of the WTO dispute settlement procedures.
69. (EC) In paragraph 21 of its statement durin g the substantive meeting with the Panel, the
US argues that "[t]he phrase '[i]f the EC has faile d to rectify the matter', at the beginning of the
fifth sentence in tiret 5 of the [bananas] Annex [to the Article I Doha Waiver] can only refer
back to the determination made by the second arbitrator following the EC's effort to 'rectify the
matter.'" Can the EC provide a reasoned answer as to whether it agrees with the statement.

136. See answer provided to Question 13.
70. (EC) In paragraph 33 of its first written submission, the EC argues that "[a] similar
waiver [from Article XIII of the GATT 1994, to th e one that expired on December 31, 2005] is
not needed anymore, because in contrast to the old all-tariff-quota regime, the new banana
import system that the European Communities a pplies since 1 January 2006 is not 'comparable
to a quota regime'". Can the EC elaborate on this point.

137. See the answers provided in Question 11 and Question 15, above.
71. (EC) In paragraph 61 of their respect ive third party submissions, Nicaragua and
Panama argue that the EC has essentially confir med its violations of Articles XIII:1 and 2 by
repeatedly acknowledging that a tariff quo ta reserved for the ACP would require an
Article XIII waiver of those two paragraphs. In support of this statement, Nicaragua and
Panama contend that: (a) The Understanding the EC signed with Ecuador and the US in 2001,
stipulated that the EC would request a waiver of Article XIII of the GATT 1994 needed for the
management of the [750,000 mt ACP] quota; (b) The EC's 2001 request for a waiver of
Articles XIII:1 and 2 reiterated that the lim ited tariff quota set aside for ACP countries
required a waiver from the obligations establishe d under Article XIII of the GATT; and, (c)
The EC's October 2005 waiver request sought Articl e XIII coverage for its proposal to institute
a 775,000 mt ACP tariff quota in combination with a €187/mt MFN tariff (i.e. an arrangement
that, like the current one, would have subj ected ACP bananas to a tariff quota and MFN
bananas to a flat tariff). Can the EC confirm th e accuracy of the factual assertions raised by

Nicaragua and Panama, and provide a reasone d answer as to whether it agrees with the
arguments raised by these Members.

138. As already mentioned, the import regime that the European Communities had in place until
the end of 2005 was the equivalent of quota regime because virtually all banana imports were made
under tariff quotas. Moreover, there were different tariff quotas allocated to different groups of
countries and administered in different ways. In these circumstances, it is normal that the European
Communities sought and obtained a relevant waiver from the application of Article XIII of the GATT
for that particular import regime.
139. Such a waiver is not needed after the introduction of the tariff only regime on 1 January 2006.
However, in order to provide all parties with a dditional legal security, the European Communities had
placed a request for a new waiver from the application of Article XIII in late 2005. At that time the
Arbitration was still pending and the final form of the import regime that the European Communities
would implement as of 1 January 2006 was not yet clear. Following the introduction of the current
tariff only import regime such a waiver is no longer necessary and this is why the European
Communities does not pursue it anymore.
72. (EC) In paragraph 42 of their respect ive third party submissions, Nicaragua and
Panama argue that the Latin American ba nana-supplying countries agreed to review and
approve a waiver without a specified 2006 tariff-only rate, only after a number of pre-2006
multilateral controls were built into the text a nd drafted to their satisfaction. Before approving
the waiver, the MFN drafters insisted that the Annex: (a) Set forth mandatory commitments
(rather than "aims"); (b) Protect only MFN suppliers (rather than both MFN and ACP
suppliers); (c) Protect against the erosion of pre-2006 applied MFN access conditions over time
(rather than only bound concessions in the shor t term); (d) Automatically terminate the waiver
in the event of a negative second arbitration determination (rather than end the process with a
simple notification to the General Council); and, (e) Clarify that the arbitration and
Article XXVIII procedures had to be conclude d prior to the 2006 tariff-only regime (rather
than allow the procedures to be conducted with out a pre-2006 deadline). Can the EC provide a
reasoned answer as to whether it agrees with th e statement. Can the EC also confirm the
accuracy of the factual assertions raised by Nicaragua and Panama.

140. Please see the answer to Question 13.
73. (EC) In paragraph 46 of their combined statement during the substantive meeting with
the Panel, Nicaragua and Panama argue that "[t]he Bananas III panel and Appellate Body
already expressly found that Article XIII, incl uding Article XIII:5, applies to all bananas
irrespective of origin and irrespective of the regulatory means by which those bananas are
entered. If the unconditional obligations of Article XIII were interpreted otherwise, any
Member could apply a discriminatory tariff quot a with impunity, so long as one or more
suppliers were regulated by other means." Can the EC provide a reasoned answer as to
whether it agrees with these arguments.

141. The European Communities believes that the implementation of a tariff only system for
bananas, following the suggestion of the Panel in Bananas III, would require only a Waiver of
GATT's Article I. As explained in its first written submission, the language used by the Panel in its
report appears to support the said interpretation.
142. More importantly, however, this interpretation is supported by sound legal reasoning. Indeed,
the title of Article XIII of the GATT makes it clear that it does not apply to tariffs
("Non-discriminatory Administration of Quantitative Restrictions").

143. The constant reference in paragraphs 2, 3 and 4 of Article XIII to "quotas" makes it very clear
what the scope of this provision is. The text of paragraph 5 of the same provision is even more
enlightening on this point: "[t]he pr ovisions of this Article shall appl y to any tariff quota instituted or
maintained by any contracting party, and, in so fa r as applicable, the principles of this Article shall
also extend to export restrictions" .
144. In addition, if GATT Article XIII was meant to cover also ordinary tariffs, there would be no
reason of existence for GATT Article I, paragraph 1 nor of several other GATT provisions. In fact, if
any kind of "prohibition or restriction" on imports and exports of goods is caught by Article XIII,
paragraph 1, then the European Communities wond er why the GATT contains different provisions,
each dedicated to a different type of obstacle to trade.
145. Moreover, the Communities wonder why such a general, far reaching and catch-all provision
has not been included in Part I of the GATT, where the basilar and general principles of the agreement
are enshrined, instead of being foreseen after Article XI which concerns "General Elimination of
Quantitative Restrictions".
146. It is thus not by accident that – to the Comm unities' best knowledge – there has never been a
single case in which a measure has been found to be in breach of both Article I and Article XIII
GATT.
147. Finally, the absurd results to which it would lead the interpretation suggested by Ecuador,
Nicaragua and Panama have been illustrated in the oral statement of the European Communities
(paragraphs 17 to 20) and it is therefore unnecessary to repeat them.
148. The European Communities finds regrettable that Nicaragua and Panama distort the Panel and
Appellate Body reports in Bananas III to have these reports say what they actually do not say.
Suffices it to stress once again that those reports assessed a different regime, which – unlike the
current one – included quotas.
74. (EC) If the EC's concession on bananas is still the TRQ as described in Schedules LXXX
and CXL, including the quota volume of 2.2 million metric tons and the in-quota duty of
€75/mt), would the EC agree that an applied duty of €176/mt would be in breach of
Article II:1(a) and (b) of the GATT 1994? If not, why not?

149. The European Communities notes that Article II: 1(a) provides that "each contracting party
shall afford to the commerce of the other contrac ting parties treatment no less favourable than that
provided in the […] Schedule …". The European Communities also notes that Article II:1(b)
provides that "the products […] shall on thei r importation into the territory to which the
Schedule relates and subject to the terms, conditions or qualifications set forth in that Schedule, be
exempt from ordinary customs duties in excess of those set forth and provided therein."
150. Therefore, the answer to the hypothetical question asked by the Panel would depend on
whether the tariff applied by the European Communities was found to be less favourable treatment
than that provided in the Eur opean Communities' Schedules. It would also depend on whether the
tariff applied was found to be in excess of the ordinary customs duties provided in the Schedule,
subject to the terms, conditions and qualifications contained in the Schedule.
151. The Panel does not need to answer these qu estions in the present case, because the only
banana binding in the European Communities Schedules of Concessions is a tariff of €680 per ton.
75. (EC) In paragraph 83 of their respect ive third party submissions, Nicaragua and
Panama argue that the EC's "commitments in th e case of 'fresh bananas' (0803 00 19) are its

Uruguay Round tariffication concessions scheduled to replace its pre-existing consolidated
banana tariff of 20% ad valorem (approximate ly 80 ECU/mt) in effect since 1963 pursuant to
Uruguay Round tariffication". (Footnotes omitte d). Can the EC provide a reasoned answer as
to whether it agrees with the arguments of Nicaragua and Panama.

152. As mentioned in paragraph 72 of the Europ ean Communities' second written submission, the
Marrakesh Agreements constitute a fresh start in the process of accumulating obligations from the
Schedules. As a consequence, the European Communities' concessions in the Uruguay Round
Schedule must be read as they stand, without any reference to earlier concessions. Therefore, the
statement of Nicaragua and Panama does not have any relevance for the current proceedings.
76. (EC) In paragraph 70 of its second written submission, the EC quoted language from
the 1993 Uruguay Round Agriculture Modalities pa per according to which such paper "shall
not be used as a basis for dispute settlement proceedings under the [WTO] Agreement." In the
subsequent paragraph of its submission, the EC states that the Appellate Body has confirmed
that the Agriculture Modalities paper "does not constitute an agreement among the WTO
Members". In response, in paragraph 63 of its statement during the substantive meeting with
the Panel, Ecuador argues that "[t]he EC does not deny that a time-limited concession would
have been inconsistent with the agreed Urugu ay Round modalities, but the EC complains that
those modalities should be ignored because they were not to be used as a basis for dispute
settlement. Ecuador is not making a claim that the EC is violating the modalities, but only
pointing out that the modalities were such that, if the EC intended or was thought by anyone to
have made a time limited access commitment on a product as important as bananas, it is
inconceivable that it would have passed unnoti ced." Can the EC provide a reasoned answer as
to whether it agrees with Ecuador's arguments.

153. In paragraphs 116 and 117 of its first writte n submission, the European Communities referred
to the consistent jurisprudence under the GATT and the WTO which allows WTO Members to subject
their concessions to time limitations, such as th e time limitation which the European Communities
had put in its concession for the tariff quota of the 2. 2 million tons of bananas. Neither Ecuador, nor
the joint submissions of Nicaragua and Panama have attempted to refute this legal argument of the
European Communities.
154. The European Communities regrets the fact that Ecuador tries to use the modalities paper as a
basis for litigation in the present case, when th e modalities paper was issued with the explicit
qualification that it "shall not be used as a basi s for dispute settlement proceedings" under the WTO
and DSU rules. This reflects the WTO Member s' desire to ensure that only their actual
 commitments
are referred to in dispute settlement proceedings. In paragraph 72 of its second written submission the
European Communities has provided additional argum ents establishing that Ecuador's arguments
based on the modalities paper should be rejected.
77. (EC) In paragraphs 9 and 10 of its communica tion to the Arbitrator in the context of the
first Arbitration under the Annex to the Do ha Waiver, dated 13 May 2005, reproduced in
Exhibit ECU-4, the EC stated that it "also has a bound tariff rate quota of 2,200,000 tonnes,
with an in-quota rate of 75€/t. The EC has no other commitments for bananas. Until
31 December 2002, the EC was also bound by th e Framework Agreement on Bananas which
had been incorporated into the EC's Schedule. It is no longer in force." Can the EC advance
legal reasons to reconcile the above with its argume nt in this dispute that the TRQ of 2.2 million
metric tons would now not be in force as a result of the expiration of the Framework Agreement
on Bananas (BFA).

155. As mentioned in paragraph 89 of the second written submission of the European
Communities, the description of the European Commun ities' banana import regime in the Arbitration
Awards and in its own submissions during these Arbitrations is not correct.
156. Moreover, as mentioned in paragraph 90 of the second written submission of the European
Communities, these descriptions do not have any rele vance for the present procedure for a number of
reasons. First, because the Arbitration was not held within the context of the DSU. Second, because
the subject matter of the Arbitration was to determine whether the new import regime of the European
Communities would maintain total market access for MFN suppliers and not to determine what were
the concessions bound in Schedule CXL at the time the Arbitration was held. Therefore, any relevant
statements in the Arbitration Awa rds should be treated as simple dicta that are not binding upon the
parties to this dispute.
157. Moreover, there is no provision in the DSU that could support the proposition that a party's
incorrect description of facts in a different cont ext and in non-DSU proceedings can be taken into
consideration by a panel in order to define that party's rights and obligations under the GATT. The
European Communities respectfully in vites the Panel to disregard any such statements made in a
different context and outside the DSU and to interp ret the Schedules of Concessions of the European
Communities on the basis of the terms of the Schedules themselves.
78. (EC) Can the EC confirm, providing appr opriate evidence, that the only tariff rate
quota (TRQ) it has been applying since the begi nning of 2006 is the zero-duty TRQ of 750,000
metric tons of bananas, and that in practice it has not been applying the TRQ of 2.2 million
metric tons at an in-quota duty of €75/metric ton beyond the end of 2002.

158. The European Communities confirms that the only "tariff quota" applied since 1 January 2006
is the autonomous tariff quota for the Cotonou Pref erence, applied to 775.000 tons of bananas of ACP
origin. As evidence, the European Communities refers to the implementing Commission Regulations,
mentioned in Question 3 above.
159. In the period between the end of 2002 and the end of 2005, the European Communities was
still implementing the tariff-quota-based import regime, as agreed in the Understanding. In
accordance with the provisions of the Understa nding, the EC allocated to MFN countries an
autonomous tariff quota for a total of 2.65 million t ons of bananas, i.e. for much more than the
2.2 million tons that was bound in its Schedules un til the end of 2002. Following the enlargement of
the European Communities in 2004, the European Communities accepted another 300,000 tons for the
period 1 May 2004 to 31 December 2004, which went up to 460,000 tons in 2005. Therefore, the
European Communities accepted a total of 3. 113 million tons of bananas imported from MFN
suppliers in 2005 at a tariff of €75.
160. As already mentioned, after the end of 2002, the European Commun ities accepted these ever
increasing quantities of MFN bananas because it complie d in good faith with the provisions of the
Understanding and not because it had a relevant bi nding in its Schedules. This practice was duly
discontinued at the end of 2005, again in accordan ce with the provisions of the Understanding, to
which the European Communities complied in good faith until the end.
79. (EC) In paragraph 20 of its rebuttal submis sion to the Arbitrator in the context of the
first arbitration under the Annex to the Doha Waiver, dated 7 June 2005, reproduced in Exhibit
ECU-5, the EC stated that:

"In Article XXVIII negotiations, a Member may seek to modify the concessions
which it has bound itself to provide. Merely changing the form of an import
regime does not in itself require a Member to go through an Article XXVIII

procedure. It is only where a Member cannot change the form of an import
regime consistently with its concessions that it is required to go through an
Article XXVIII procedure (otherwise it will act inconsistently with Article II
GATT). In the present case, if the EC was proposing to apply a duty of €75/t or
less on an unlimited basis it would not need to go through an Article XXVIII
procedure because it could provide such treatment consistently with its current
commitment of an in-quota duty of €75/t within a tariff-rate quota of 2,200,000
tonnes and an out-of-quota rate of €680. If the duty is to be €76/t or above the
EC has to conduct an Article XXVIII process. The fact that the Waiver Decision
and the Waiver Annex is replete with references to Article XXVIII GATT
proves that it was accepted that the EC's MFN tariff under a tariff-only regime
would be greater than €75/t" (Footnote omitted).
How does the EC relate its above statement with its argument in paragraph 10 of its first
written submission that the EC's tariff con cessions contain only one bound tariff rate for
bananas, i.e. €680 per ton?

161. As mentioned in paragraph 88 of its second written submission, the European Communities
has engaged in good faith nego tiations under Article XXVIII of the GATT because it has undertaken
to do so in the Understanding. Moreover, the Eu ropean Communities has noted that the panel report
in EEC – Newsprint may support the proposition that "under long standing GATT practice, even
purely formal changes in the tariff schedules of a contracting party which may not affect the GATT
rights of other countries […] have been consider ed to require renegotiations". Therefore,
Article XXVIII negotiations are not necessary only where a WTO Member seeks to increase the level
of its bound tariffs, but may also be necessary when it seeks to decrease the level of its bound tariffs.
Consequently, if the European Communities' statemen ts before the Arbitration took a different view,
those statements were wrong.
162. However, as already mentioned in Question 77, any erroneous statements made by the
European Communities in a different context and in a non-DSU procedure do not have any legal
significance for the current proceedings before the Panel.
80. (EC) In paragraph 99 of their respect ive third party submissions, Nicaragua and
Panama argue that the EC's "legal instruments, WTO assertions, and other official statements
consistently confirm the enduring validity of a €75/mt concession". Nicaragua and Panama
further argue that examples have already been referenced by Ecuador, and offer the following
additional ones: (a) In Regulation 216, the EC would have explicitly referenced a tariff quota of
2 200 000 tonnes at a rate of €75 as bound in the WTO until the entry into force of a tariff-only
regime; (b) In its GATT Article I waiver discuss ions, the EC confirmed it intended to adopt a
tariff-only system in 2006, which would entail a re-binding of its 75 and 680 €/tonne bound rates
under the relevant procedures of Article XXVIII of the GATT 1994; and, (c) In an internal
communication to its own Member States, the EC confirmed that, should the Community wish
to move to a tariff-only system at a rate higher than €75/t., GATT Article XXVIII provided that
such modification should be notified to all GA TT Contracting Parties. Can the EC confirm the
accuracy of the factual assertions raised by Nicaragua and Panama, and provide a reasoned
answer as to whether it agrees with the arguments raised by these Members.

163. The documents cited by Nicaragua and Panama pre-date the expiry of the binding for the
tariff quota for the 2.2 million tons. Council Re gulation (EC) No. 216/2001 was approved on
29 January 2001, was applied as of 1 April 2 001 and was replaced by Regulation 2587/2001 on
19 December 2001. The document cited by Nicar agua and Panama in the context of the GATT
Article I waiver discussions is dated 5 November 2001, when the binding for the tariff quota of the
2.2 million tons was still in place and it was still unclear what bindings the European Communities

would agree with banana suppliers in the futu re. The Communication of the Commission to the
Council, to which Nicaragua and Panama refer, is also dated 1 June 1999.
164. The Annex to the Schedule of the European Co mmunities provided that consultations for the
replacement of the concession on the tariff quota for the 2.2 million tons of bananas would start in
2001. Moreover, the European Communities agreed in the Understanding (which was signed in April
of 2001) that it would hold Article XXVIII negotia tions in order to agree on the new system that
would replace the then applicable banana import re gime. All of the documents cited by Nicaragua,
Panama and Ecuador were prepared before the expi ration of the tariff quota for the 2.2 million tons of
bananas at the end of 2002 and at a time when the European Communities was either about to start
negotiations, or was already holding negotiations for a new import regime. At that time it was not yet
clear what would be the outcome of these negotiations. This explains these documents' references to
then bound tariff quota for 2.2 million tons of banan as. It is evident that these statements do not
amount to a rebinding of that tariff quota.
81. (EC) In paragraph 95 of their respect ive third party submissions, Nicaragua and
Panama argue that the phrase "This agreement shall apply until 31 December 2002", contained
in the Framework Agreement on Bananas "did not say or mean that the EC's multilateral
current-access concessions on bana nas would also terminate as of 31 December 2002. If the
parties had intended to terminate multilateral co ncessions in their plurilateral agreement, they
would have stated this with specificity in the BF A and provided their justification for doing so.
Their use of the alternative word 'agreement' ma de clear they had no intention of revoking the
actual concessions themselves." Can the EC provi de a reasoned answer as to whether it agrees
with the arguments raised by Nicaragua and Panama.

165. Please see the answer to Question 25.
82. (EC) In paragraph 93 of their respect ive third party submissions, Nicaragua and
Panama argue that the EC commitments appear ing in column 4 [of its Schedules] would not
have been identified as 'final', much less 'cur rent access quotas' or 'concessions,' if they were to
lapse shortly after the close of the Uruguay Round implementation period and be replaced by a
€680/mt stand-alone bound rate that wo uld functionally ban all MFN access.
16" Can the EC
provide a reasoned answer as to whether it agrees with the arguments raised by Nicaragua and
Panama.

166. There are a number of flaws in this assertion, most of which have already been identified by
the European Communities in its written submissions and oral statements. First, this assertion ignores
the fact that the BFA was agreed in the aftermath of certain GATT dispute settlement procedures and
not within the context of the Uruguay Round. The simple timing coincidence in these two
independent events does not allow Nicaragua and Pana ma to use the one event in order to make an
argument for the other.
167. Second, the BFA provided that consultations would commence in 2001 (i.e. one year before
the expiration of the concession) for the system that would replace that concession. Therefore, the
arrangement achieved for the MFN suppliers par ticipating in the BFA was quite positive: a bound
concession for 8 years and the possibility to negotia te a new deal better adapted to the market
conditions between 2001 and 2002.
168. Third, the fact that this concession was include d under both the "Initial Quota" and the "Final
Quota" columns simply meant that there would be no period during which there would be successive

16 (footnote original) As the 2005 Arbitrator found, and the EC confirmed, barely negligible volumes of
imports (10,000-20,000 mt) could enter the EC at the 680 €/mt rate. See AAI, para. 60, n.52.

progressive reductions in the bindings of the Europ ean Communities. This confirms that the tariff
quota was indeed granted "as indicated in the Annex", because the Annex expressly provides that the
starting date for the operation of the concession would be a fixed date, i.e. October 1, 1994. For the
avoidance of any doubt, the European Communities notes that the word "Final Quota" in that column
obviously does not mean that the concession would be in place at the end of time.
169. Fourth, as already mentioned, the division of the European Communities' Schedules into
"Current Access Quotas" and "Minimum Access Quotas" was simply reflecting the percentage of the
total market for the specific product that was cove red by imports prior to the conclusion of the
Uruguay Round. This division does not have any le gal implications, it does not affect the way in
which the tariff quotas were administered and it do es not create any additional rights for the exporting
countries.
83. (EC) In Exhibits N-1 and P-1 to their resp ective third party submissions, Nicaragua and
Panama submit a number of documents as "Artic le I waiver negotiating history documents".
Can the EC confirm the accuracy of those documents and provide the Panel with any further
relevant documents relating to those negotiations.

170. Please see the answer to Question 13.
84. (EC) In Exhibits N-2 and P-2 to their resp ective third party submissions, Nicaragua and
Panama submit an analysis made by the Cent re for International Economics, dated August
2007, the main findings of which would be reflected in paragraph 47 of their third party
submissions. Can the EC provide a reasoned an swer as to whether it agrees with the main
findings or any other relevant points in the an alysis made by the Centre for International
Economics, quoted by Nicaragua and Panama.

171. The European Communities does not agree with the conclusions of the above-mentioned
analysis.
172. The study produced by the Centre for Internati onal Economics (the "CIE") is based on totally
incorrect assumptions and contains a number of pred ictions which are turning out to be erroneous and
unfounded.
173. For instance, the study predicts (page 14) for year 2007 a 44 000 tonnes increase in ACP
bananas imports into the European Communities (for a total of 950 000 tonnes). However, the facts
show this prediction to be completely wrong. In fact, in year 2007 the European Communities will
import less ACP bananas than it did in the previous year.
174. Again, the study estimates for year 2008 tota l imports of ACP bananas into the European
Communities to amount to 1 022 000 tonnes. However, actual sales data and trends show that this
forecast will not materialise.
175. The study seems to ignore some basic facts. Fo r instance, one may observe that the only ACP
countries which have recently increased their exports are Dominican Republic and Ghana. Dominican
Republic has specialised in organic bananas, whic h represent 80% of their exports and constitute a
niche in the banana market. Ghana is, on his part, only a small producer and a very minor player in
both the European and, even more, the worldwide ba nana market. Another indicative fact is that the
only new plantation started since the end of 2005 has been in Brazil, not in ACP countries, where
Fyffes started a new plantation in January 2006 and this contributed to the great increase of Brazilian
exports to the European Communities' market in 2006 and 2007.

176. The lack of credibility of this study does not surprise the European Communities, since the
author of the study, the CIE, has also in the past produced studies which turned out to be completely
unreliable.
177. For instance, during the arbitration proceedings Panama presented another study prepared by
the CIE. In page 28 of this document it is stated that at any tariff level above €75 a tonne, Latin
America bananas producers would be severely harmed . At page 29, this loss is quantified in the
following terms: "for every €10 a tonne increase in the tariff, there is a likely 87 000 tonne loss of
Latin American access".
178. However, reality shows that, in spite of a duty of €101/mt higher than the one indicated in the
study (€176/mt instead of €75/mt), in 2006 Latin American countries have exported into the European
Communities 10% more than 2005. Furthermore, in 2007, first semester, there is an additional
increase of 8%, compared to 2006.
179. Another false prediction of the previous CIE's study is as follows: access into the European
Communities' bananas market for Latin America' s producers was supposed to be reduced by 870
000 tonnes, due to the increase of the level of duty to €176/tonne. Facts show, however, that Latin
America access instead has increased by 470 000 tonnes in only 18 months.
180. This is not all. Similarly, other studies presented by Panama in past procedures turned out to
forecast wrong events. The Angolan feasibility st udy submitted during the Arbitration procedures
included forecasts on production in Angola which neve r materialised. None of the 1890 hectares of
land which should have progressively produced bananas in that country has so far produced any.
181. The European Communities also refers to the c onsiderations developed by the Ivory Cost in
its oral statement (points 17 et seq.).
182. In the light of this, the European Commun ities urges the Panel to disregard the study
submitted by Panama and to form its opinion on the basis of the actual sales data which are
undisputed and publicly available.
85. (EC) In Exhibits N-3 and P-3 to their resp ective third party submissions, Nicaragua and
Panama submit a copy of the "EC's Draft Re quest for Article XIII Waiver, 21 May 2001".
Could the EC confirm the accuracy of that do cument and provide the Panel with any further
relevant documents relating to the negotiations for that Article XIII waiver.

183. The European Communities obser ves that the draft request submitted by Nicaragua and
Panama is irrelevant for the purpose of determin ing whether the current ACP TRQ of 775,000 is in
violation of Article XIII of the GATT. The draf t request refers to the tariff-quota-based banana
import regime that the European Communities ha d in place between 1 July 2001 and 31 December
2005, as agreed in the Understanding. As already mentioned, virtually all imports under that import
regime were made under tariff quotas and there were different tariff quotas allocated to different
groups of countries with different terms. As this Panel had found in paragr aph 6.158 of its first
Article 21.5 report, such an import regime would need a waiver from the application of Article XIII of
the GATT. Such a waiver is no longer necessary, because the European Co mmunities has introduced
a tariff only import regime on 1 January 2006.
QUESTIONS ADDRESSED TO PARTIES AND THIRD PARTIES

86. (Both Parties, Belize, Cameroon, Côte d'Ivoire, Dominica, the Dominican Republic,
Ghana, Jamaica, Madagascar, Saint Lucia, Sain t Vincent and the Grenadines, and Suriname)
In paragraph 31 of its statement during the s ubstantive meeting with the Panel, Cameroon

provide evidence for its assertions. Can Beli ze, Côte d'Ivoire, Dominica, the Dominican
Republic, Ghana, Jamaica, Madagascar, Saint Lu cia, Saint Vincent and the Grenadines, and
Suriname confirm that they agree with these sp ecific assertions made by Cameroon. Can
Cameroon, as well as Belize, Côte d'Ivoire, Dominica, the Dominican Republic, Ghana,
Jamaica, Madagascar, Saint Lucia, Saint Vincent and the Grenadines, and Suriname specify the
relevance of this argument, if any, in the context of its eventual analysis of Article XIII of the
GATT 1994, in particular as regards the chapeau of Article XIII:2. Can the Parties provide a
reasoned answer as to whether they agree with th ese assertions, and specify, in their view, how
the same should be taken into a ccount in the context of an eventual analysis of Article XIII of
the GATT 1994, in particular as regards the chapeau of Article XIII:2.

184. The European Communities believes that the f acts described by Cameroon are manifestly
accurate and correct.
185. However, if these elements could have a certain relevance within an analysis of the WTO
compatibility of a regime providing for quantitative rest rictions, they are certainly irrelevant in the
context of an analysis of a tariff-only regime under Article XIII of the GATT 1994.
186. In fact, for the reasons explained in the answer to Question 73, above, Article XIII applies to
quantitative restrictions and not any kind of trade restriction.
87. (Both Parties and Brazil) In paragraph 17 of its statement during the substantive
meeting with the Panel, Brazil argues that "a Member is not exempted from discharging its
burden of proof as regards the compliance of the new measures with the DSB recommendations
and rulings even if such measures are intended to implement a suggestion by the panel." Can
Brazil elaborate on this argument, and the Parties provide a reasoned answer as to whether
they agree with Brazil's argument.

187. The general principles applicable to burden of proof in WTO dispute settlement require that
the party claiming a violation of a provision of the WTO agreements bears the burden of
demonstrating that the measure is not consistent with the relevant provisions of the agreements. As
most recently confirmed in paragraph 6.4 of the report of the Article 21.5 Panel in Korea – Anti-
Dumping Duties on Imports of Certain Paper from Indonesia, Recourse to Article 21.5 by Indonesia ,
dated 28 September 2007 (DS312), this principle al so applies in the context of Article 21.5
proceedings, where the complaining party bears th e burden of demonstrating its claim that the
measure taken to comply by the defending party is not consistent with the WTO rules.
88. (Both Parties and Colombia) In paragra ph 16 of its third party submission, Colombia
argues that "[a]n applied tariff of €176/tonne does not constitute a 'rebinding' [under the Doha
Waiver]." Can Colombia elaborate on this argument, and the Parties provide a reasoned
answer as to whether they agree with it.

188. The European Communities reserves its answer to this question until it has seen Colombia's
elaboration of its argument.
89. (Both Parties and Côte d'Ivoire) In pa ragraph 21 of its oral statement during the
substantive meeting with the Panel, Côte d'I voire argues that "moins d'une année suffit pour
produire et exporter des bananes" . Can Côte d'Ivoire provide evidence for its argument. Can

the Parties comment on the argu ment made by Côte d'Ivoire, and explain how rapidly banana
production and exports can be expanded, and how much time is necessary for suppliers to fully
respond to a change in market conditions, such as a change in the EC's import regime for
bananas.

189. The European Communities reserves its answer to this question until it has seen the response
of Cote d'Ivoire.
90. (Both Parties, Nicaragua and Panama) In paragraph 108 of their respective third party
submissions, Nicaragua and Panama argue that "[t]he EC's 75 €/mt concession – which from
1995 to 2005 covered all bound in-quota Lati n American imports and informed the rate
applicable to all other Latin American bananas en tering the EC market – has been the single
most important banana concession in Schedule CX L. In contrast to the prohibitive 680 €/mt
rate, under which virtually no Latin American volumes have ever been entered, the 75 €/mt
concession is the only rate that enabled Latin American market access to the EC market from
1995 to 2005. Unless the 75 €/mt bound rate receives the full protections of GATT Article II, the
entire value of the EC's mandatory Uruguay Round concessions will be nullified". (Emphasis
added). Can Nicaragua and Panama provide ev idence for their assertions. If MFN banana
imports have increased under an applied tariff rate of 176€/mt, as argued by the EC, how can
this be reconciled with the statement that "a 75 €/mt concession is the only rate that enabled
Latin American market access to the EC market from 1995 to 2005"? Can Nicaragua and
Panama clarify what would be meant by "providi ng the full protections of GATT Article II" to
the 75 €/mt tariff rate. Can Parties provide a reasoned answer as to whether they agree with the
assertions made by Nicaragua and Panama.

190. The European Communities considers that the assertion of Nicaragua and Panama should be
rejected, because it requests the Panel to find that an "applied tariff" becomes a "bound tariff" simply
by virtue of its being applied. If accepted, such a proposition would lead to the collapse of the whole
GATT system and the Doha round negotiations.
191. The European Communities reserves the right to provide more comments once it has seen
Nicaragua's and Panama's response to this question.
91. (Both Parties, Nicaragua and Panama) In paragraph 19 of their combined statement
during the substantive meeting with the Panel, Nicaragua and Panama argue that "[t]he EC
tariff, which was the EC's scheduled banana concession from 1963-1994, was the equivalent of
about 80 euro per tonne." Can Nicaragua and Panama elaborate on this argument and provide
evidence for their assertions, as appropriate. Can the Parties comment on the argument and
assertions.

192. The European Communities is not able to understand the calculations supporting the assertion
of Nicaragua and Panama. The European Communities reserves its answer to this question until it has
seen Nicaragua and Panama's elaboration of their argument.
92. (Both Parties and Suriname) In paragraph 10 of its statement during the substantive
meeting with the Panel, Suriname argues that "[b]oth the Doha Waiver and the Understanding
on Bananas were negotiated by the WTO members, including the interested parties, after the
DSB adopted its recommendations and rulings in the original Bananas dispute. These two
instruments constitute new secondary WTO law and create an entirely new legal framework for
the issues that are now pending before the Panel. These new instruments clearly strike a new
balance of rights and obligations for the entire WTO membership, in addition to the parties to
the dispute." Can Suriname elaborate on these arguments. Can both Parties provide a
reasoned answer as to whether they agree with Suriname.

193. The European Communities reserve s its answer to this questi on until it has seen Suriname's
elaboration of its argument.
93. (Both Parties and the US) Is there any pa rticular reason why the Understandings on
Bananas that the EC reached with Ecuador a nd the US respectively in April 2001 were only
notified to the DSB more than two months later? Is there any reason why such agreements
were not notified jointly to the DSB by both parties to the respective agreements?

194. The European Communities does not know the answer to this question.
94. (Both Parties and US) Paragraph G of th e Understanding on Bananas reached between
the EC and Ecuador of 30 April 2001 (documents WT/DS27/58 and WT/DS27/60), states that
"[t]he EC and Ecuador consider that this Underst anding constitutes a mutually agreed solution
to the banana dispute". In turn, the Underst anding on Bananas reached between the EC and
the US on 11 April 2001 (document WT/DS27/59), contains no equivalent statement. What
value, if any, should be given to the statemen t contained in Paragraph G of the Understanding
on Bananas reached between the EC and Ecuador? What value, if any, should be given to the
different language contained in both understandings regarding this issue?

195. The European Communities consider s that the analysis of the legal status and effect of the
Understanding should be primarily based on its content and not on any unilateral statements issued by
the signatories after its signing. In that re gard, the European Communities notes that the
Understanding (i) describes in great detail the char acteristics of the two banana import regimes that
the European Communities should implement by 1 Ju ly 2001 and by 1 January 2002 respectively and
(ii) expressly provides that Ecuador's right to retaliate will be terminated. In light of the content of the
Understanding and the rights and obligations mutually accepted by both parties, the European
Communities respectfully submits that the Understandi ng is indeed a "mutually agreed solution" to
the banana dispute between Ecuador and the European Communities.
196. The European Communities consider s that the inclusion in the text of the Understanding of
the phrase "the EC and Ecuador consider that th is Understanding constitut es a mutually agreed
solution to the banana dispute" confirms the Europ ean Communities' interpretation of the legal status
and effect of the Understanding.
102. (EC, Nicaragua and Panama) In paragraph 44 of their combined statement during the
substantive meeting with the Panel, Nicaragua an d Panama argue that "[t]he [first compliance]
panel's second suggestion never absolved any discriminatory ACP tariff quota from the
obligations of Article XIII, however the larger import regime might be structured. To the
contrary, the panel, only paragraphs before, found the EC's exclusive ACP tariff quota, by its
own specific shape and nature, to be a quantitat ive restriction covered by Article XIII:5 that
failed to treat like products 'equally, irrespective of origin,' in violation of Article XIII. No
subsequent compliance suggestion can be read to nullify that actual finding of law." Can
Nicaragua and Panama elaborate on these argume nts. Can the EC provide a reasoned answer
as to whether it agrees with the argument.

197. The European Communities does not agree with th is view of the first Article 21.5 panel's
application of Article XII. In the first place, the phrase 'own specific shape and nature' does not appear
in the panel's report. Secondly, the European Comm unities is not even certain what the phrase means
in the context of tariff quotas, but will assume that the Nicaragua and Panama imply that the finding
of breach of Article XIII regarding the tariff quota for ACP countries was made irrespective of
whether or not other countries were subject to tariff quotas.

198. The European Communities notes that at paragraph 6.25 of that report, in application of the
principles enunciated by the Appellate Body in Bananas III, the panel said:
We, therefore, in our examination of the WTO-consistency of the EC's revised
regime, have to apply fully the non-di scrimination and other requirements of
Article XIII to all "like" imported bananas i rrespective of their origin, i.e. regardless
of whether imports occur under the MFN tariff quota of 2,553,000 tonnes or under
the tariff quota of 857,700 tonnes reserved for traditional ACP imports.
199. Thus, it is evident that the panel in reaching its conclusion had explicitly in mind that tariff
quotas were being applied to imports both from th e ACP and from the MFN countries. Furthermore,
this statement was made by way of introduction to the panel's analysis of the application of
paragraphs 1 and 2 of Article XIII.

ANNEX D-3

RESPONSES BY BELIZE, CAMEROON, CÔTE D'IVOIRE, DOMINICA,
DOMINICAN REPUBLIC, GHANA, JAMAICA, MADAGASCAR, SAINT LUCIA,
SAINT VINCENT AND THE GRENADINES, AND SURINAME
TO QUESTIONS POSED BY THE PANEL

86. (Both Parties, Belize, Cameroon, Côte d'Ivoire, Dominica, the Dominican Republic,
Ghana, Jamaica, Madagascar, Saint Lucia, Sain t Vincent and the Grenadines, and Suriname)
In paragraph 31 of its statement during the s ubstantive meeting with the Panel, Cameroon
provide evidence for its assertions?

There are various elements relating to the producti on of bananas and the placing on the market of
bananas which determine the competitiveness of banana producers.

First, there are natural factors. In that respect, the ACP producer s are in a worse position than the
MFN producers, in particular with respect to the following elements :

 – scarcity of land which is appropriate for growing bananas;
 – the poor quality of the ground on which the bananas are grown;
 – more significant temperature differences;
 – the need to irrigate and drain the ground on which the bananas are grown;
 – more frequent ground infestations, necess itating replanting every five or six years
(compared with several decades for MFN countries).

Second, there are the economic and human factors in relation to which the ACP countries also find
themselves in a worse position:

 – higher input costs (fertilizers, treatment products, packaging, etc.). These costs are
significant due to the lack of local producers of these input products;

 – the impossibility of economies of scales due to the limited size of the plantations.
Where the ACP country with the highest production annually exports around 250,000
tons only, Ecuador exports more than 4,000,000 tonnes.

 – more expensive shipping costs due to the limited size of the volumes which are
shipped and due to the insularity of the countries concerned, which does not allow
producers and transporters to optimise costs;

As a result:

 – the yields amount to around 40 tonnes per hectare in the ACP countries compared
with 50 tonnes per hectare in MFN countries;

 – the number of boxes obtained per stem of bananas is around 1 in ACP countries
compared with 1.25 in MFN countries;

 – the productivity of the workers is much higher in MFN countries than in ACP
countries (0.7 man per ha in the MFN countries and 1.15 man per ha in the ACP
countries).

As a result of the more limited yields and the hi gher costs, the banana producers in the ACP countries
are less competitive than the banana producers in MFN countries. The less competitive position of
ACP banana producers has also been noted by the Pr esident of Chiquita Europe in an interview in
2007 which was annexed to Côte d'Ivoire's Oral Statement.
1 The lack of competitiveness is also
demonstrated by the fact that the ACP countries fro m the Carribean are unable to export to the US
market which is geographically much closer than the EC market.

Can Belize, Côte d'Ivoire, Dominica, the Do minican Republic, Ghana, Jamaica, Madagascar,
Saint Lucia, Saint Vincent and the Grenadines , and Suriname confirm that they agree with
these specific assertions?

Yes.

Can Cameroon, Belize, Côte d'Ivoire, Domini ca, the Dominican Republic, Ghana, Jamaica,
Madagascar, Saint Lucia, Saint Vincent a nd the Grenadines, and Suriname specify the
relevance of this argument, if any, in the context of its eventual analysis of Article XIII of the
GATT 1994, in particular as regards the chapeau of Article XIII:2?

As a preliminary remark, Cameroon, Belize, Cô te d'Ivoire, Dominica, the Dominican Republic,
Ghana, Jamaica, Madagascar, Saint Lucia, Sain t Vincent and the Grenadines, and Suriname
(hereinafter referred to as the ACP third parties) would like to reassert that they do not consider
Article XIII of the GATT to be relevant in the present case since no prohibition or quantitative
restriction on imports of bananas exists and a fortiori no such prohibition or quantitative restriction is
imposed by the EC on Ecuador or other MFN suppliers.

If, however, the Panel would reach the surprising c onclusion that the cap of 775,000 tons imposed on
the preferential tariff treatment gr anted to the ACP countries in the context of a flat tariff regime
allowing unlimited supplies at the MFN rate is a rest riction within the meaning of GATT Article XIII,
it should, in order to interpret that provision, ta ke into account that the limitation of 775,000 is a
limitation on a preference
 covered by an Article I waiver. It is as such a disadvantage to the ACP
countries which are the beneficiaries of the preference. Therefore, the shares which the ACP countries
might be expected to obtain in the absence of such a restriction on their preferential access would be
at a minimum equivalent to their current share. Indeed, the ACP countries would, in such a case,
benefit from an unlimited preferential tariff access.

89. (Côte d'Ivoire) In paragraph 81 of its or al statement during the substantive meeting
with the Panel, Côte d'Ivoire argues that "moi ns d'une année suffit pour produire et exporter
des bananas". Can Côte d'Ivoire provide evidence for its argument?

In its Oral Statement, Côte d'Ivoire has indicated that "In 2007, the Center for International economics
has postponed the outcome of its predictions to 2014 in order to explain the reasons of the failure of
its forecasting model. According to it, projects would currently be ongoing in Mozambique and
Angola. Why would we need to wait until 2014 to ev aluate the results while less than a year is
sufficient to produce and export bananas." If a project ha d been initiated in 2005 or beginning of 2006
when the European Communities implemented its new import regime, this new production would

1 See also the Italtrend Report on "Etat des lieux et compétitivité des plantations de bananas en Côte
d'Ivoire" and the Horus Report on "La banane africaine dans l'Union européenne", which are attached as an
Annex to this Reply.

have been placed on the market around September 2006, consistent with the agronomic possibilities
of this plant as demonstrated by the official in formation from the Agricultural Research Center for
International Development (CIRAD) which is attached as an annex to this reply.2

92. (Suriname) In paragraph 10 of its statement during the substantive meeting with the
Panel, Suriname argues that "[b]oth the Doha Waiver and the Understanding on Bananas were
negotiated by the WTO Members, including the interested parties, after the DSB adopted is
recommendations and rulings in the original Bana nas dispute. These two instruments constitute
new secondary WTO law and create an entirely new legal framework for the issues that are now
pending before the Panel. These new instruments clearly strike a new balance of rights and
obligations for the entire WTO membership, in a ddition to the parties to the dispute." Can
Suriname elaborate on these arguments?

The legal background against which the WTO compa tibility of the measures which are challenged in
the present dispute needs to be assessed is radically different from the legal framework existing at the
time the original Bananas III dispute was decided. This new le gal framework now includes the Doha
Waiver and the Understandings on Bananas.

The Understanding on Bananas is secondary WTO law to the extent that it is a mutually agreed
solution putting an end to a dispute brought before the Dispute Settlement Body. The Understanding
was duly notified to the DSB and is, indeed, referred to in the Doha Waiver.

The Doha Waiver is secondary WTO law since it is a decision by all WTO Members to grant a waiver
of the obligations under Article I of the GATT in order to make the Cotonou preference possible.

These two new legal instruments must be taken into account to decide on the WTO compatibility of
the new EC banana import regime. Since these two ne w instruments were not in existence at the time
of the decision of the Bananas III dispute, it is clear that the legal framework has changed
fundamentally. The adoption of these new legal instruments has modified the balance of rights and
obligations for the WTO Members and as such constitutes a clear break in the chain of events between
the original dispute and the new EC banana import regime. The legal analysis which must be carried
out in examining the WTO compatibility of the ne w EC banana regime is therefore substantially
different from the analysis carried out in the cont ext of an Article 21.5 compliance review. The fact
that any challenge of the new EC banana import regime must take place in the framework of new
dispute settlement proceedings is also c onsistent with the Panel's findings in Canada – Aircraft II
where it rejected Canada's argument that certain clai ms were not properly before the Panel and stated
that de novo proceedings are appropriate where the matters are different or broader than those that
were the subject of the original dispute (at para. 7.18)

The existence of this new legal background, i.e. the Understanding on Bananas and the Doha Waiver
adopted to make possible the implementation of the Cotonou Agreement as opposed to the former
Lomé Agreement, also means that the measures being challenged by Ecuador are not measures taken
to comply with the recommendations and rulings of the DSB in the original Bananas III dispute.
Indeed, these measures being challenged have b een adopted to implement the commitments
undertaken in the Understanding on Bananas and in the Doha Waiver which were adopted after the
DSB issued its recommendations and rulings in the original Bananas III case. Any challenge of the
new EC banana import regime should therefore be subject to new dispute settlement proceedings
under Article 6 of the DSU.

95. (Ecuador and all third parties) In paragraph 6 of its oral statement during the
substantive meeting with the Panel, Ecuador mentions that "Ecuador's per capita GDP for 2005

2 Exhibit CI-1.

was about 8 per cent of the per capita average of the EC, and also is less than that of many of
the ACP countries." In turn, in paragraph 16 of their combined statement during the
substantive meeting with the Panel, Nicaragu a and Panama state that Nicaragua's "Gross
National Income of $910 is below the GNIs of several LDCs and well behind the GNIs of most
ACP countries." Can Ecuador, Nicaragua and Pana ma provide the data sources that were used
to make their respective assertions and specify the per capita GDP figures in those sources for
Ecuador, the EC and the MFN suppliers and ACP countries that are participating as Third
Parties in these proceedings? Can other Third Parties provide a reasoned answer as to whether
they agree with the assertions made by Ecuador, Nicaragua and Panama?

Cameroon, Belize, Côte d'Ivoire, Dominica, the Dominican Republic, Ghana, Jamaica, Madagascar,
Saint Lucia, Saint Vincent and the Grenadines, and Suriname consider that it is regrettable that
Ecuador, in order to support its case, tries to cr eate conflicts among developing countries and that it
does not take into account the fact that, with resp ect to bananas, some countries clearly benefit from
production conditions and distribution opportunities which are largely more favourable than those
enjoyed by other countries.

In any case, Cameroon, Belize, Côte d'Ivoire, Domi nica, the Dominican Rep ublic, Ghana, Jamaica,
Madagascar, Saint Lucia, Saint Vincent and the Gren adines, and Suriname consider that the GDP and
the GNI are not decisive criteria in assessing the development of countries. If one wants to do so, it is
more appropriate to refer to the development index elaborated by the United Nations in the framework
of its development program. In the 2006 Human Deve lopment Report of the UNDP which is attached
as an annex to this reply, Ecuador and the other MFN countries are ranked at a more developed level
than most ACP countries.

103. (Cameroon) In paragraphs 16-19 of its or al statement during the substantive meeting
with the Panel, Cameroon makes reference to a series of statistics about the volume of imports
of MFN bananas to the EC. Can Cameroon provide its data sources?

Data concerning import volumes into the EC have be en taken from Eurostat and were annexed to the
ACP third party written submission.

Data concerning import volumes into the Unite d States have been taken from USDA and were
annexed to the ACP third party written submission.

The source of the data concerning wholesales prices is the European Commission. The price data used
were annexed to the EC's first written submission as Exhibit EC-7.

105. (Côte d'Ivoire) In paragraphs 4 to 6 of its oral statement during the substantive meeting
with the Panel, Côte d'Ivoire ref ers to trade statistics for the years of 2005 to 2007. Can Côte
d'Ivoire provide its data source?

Data were taken from Eurostat and were annexed to the ACP third party written submission.

114. (Suriname) In paragraph 7 of its statement during the substantive meeting with the
Panel, Suriname argues that " [t]o allow Ecuador to challeng e the new EC banana import
regime in the framework of Article 21.5 compliance proceedings would be equivalent to ignoring
the legal effects of the mutually agreed solution reached between Ecuador and the EC".
(emphasis added). In Suriname's view what are the main legal effects under the DSU of a
mutually agreed solution reached between the parties to a dispute?

A mutually agreed solution has mainly two major legal effects.

First, a mutually agreed solution is the prefe rred way of settling a dispute which is the ultimate
objective of the dispute settlement system. As stated by Article 3.7 of the DSU: "the aim of the
dispute settlement mechanism is to secure a positiv e solution to a dispute. A solution mutually
acceptable to the parties to a dispute and consistent with the covered agreements is clearly to be
preferred." By solving the dispute, the mutually ag reed solution thus puts an end to the dispute with
respect to which it has been agreed . As a result, subsequent measures that would be adopted in the
same sector, for instance in order to implement th e mutually agreed solution, cannot be challenged
through compliance proceedings. Thus, the mutually agreed solution constitutes a bar to any further
Article 21.5 proceedings. Any measures taken to im plement the mutually agreed solution are no
longer measures taken to comply with the recommenda tions and rulings of the original dispute. There
is a break in the link between the recommendations a nd rulings of the DSB in the original dispute and
subsequent measures adopted to implement a mutually agreed solution.

It has been argued by Ecuador that any solution which serves the purpose of Article 3 of the DSU
should be consistent with the WTO rules. The solution agreed in the Understanding on Bananas
between Ecuador and the EC was fully consistent with WTO rules. Indeed, it provides for the
introduction of a tariff-only regime for imports of bananas no later than 1 January 2006 and requires
that Ecuador lifts its reserve concerning the waiver of Article I of the GATT requested by the EC for
the Cotonou preference. Thus, the solution envisaged in the Understanding is fully consistent with
WTO rules. Whether the waiver covering the Coton ou preference is still valid taking into account the
provisions and the terms of the waiver is a differe nt issue which would need to be examined, if
challenged, in the framework of new dispute settle ment proceedings but not in the framework of
Article 21.5 compliance proceedings.

Second, a mutually agreed solution is a binding in ternational agreement whereby the parties are free
to make concessions to achieve an acceptable balance of concessions between them. Parties
negotiating a mutually agreed solution may go beyond the issues at stake in the specific dispute. A
mutually agreed solution is in the first place an agreement between sovereign states which are free to
accept and grant rights and obligations in areas other than those covered by the dispute in order to
achieve an equitable overall balance. A mutually agr eed solution is therefore not to be equated to the
simple implementation of the recommendations and ru lings of the DSB. For that reason, Article 3.7
DSU states "[i]n the absence of a mutually agreed 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 any of the cove red agreements". A mutually agreed solution, being
an agreement between sovereign st ates, is binding upon its parties pursuant to public international
law. Both parties have to comply with its term s in good faith and cannot put its terms into question
thereafter.

As a final remark, it should be emphasized that th e issue as to whether the Understanding on Bananas
is a covered agreement under the DSU does not appear to be relevant. Indeed, the issue in the present
case is not to examine whether the new EC bana na import regime is consistent with the
Understanding on Bananas, but about the legal effects of the Understanding on Bananas in subsequent
proceedings, in particular in Article 21.5 proceedings , in the framework of the DSU. As noted by the
Panel in India – Autos , "At the very least, the Panel sees merits in India's argument that the issue in
this respect is not solely whether the mutually agr eed solution is a covered agreement, but rather,
what effects it may have on the exercise of procedural rights under the DSU in subsequent
proceedings."(at para. 7.116)

In that case, India had argued that the issue was wh ether the DSU may be invoked again in respect of
a matter formally raised under the DSU and settled through a mutually agreed solution. India's
argument was based on the premise that the matter ra ised before the Panel was the same as the matter
which had been settled through the mutually agreed solution and that this prevented from challenging
it in the framework of new dispute settlement proceedings . The Panel, however, found that the

matter referred to it had not been settled by the mutu ally agreed solution. Thus, there was no need to
rule on the legal effects of mutually agreed solutions.

The argument raised by the ACP third parties in th e present case is different. The ACP Third Parties
submit that the existence of a mutually agreed solution means that the original dispute has been settled
and thus prevents the parties from challenging subsequent measures in the framework of Article 21.5
proceedings. However, it is similar to India's argument in India – Autos in the sense that it requires
the Panel to rule on the effects which mutually agreed solutions may have on the exercise of
procedural rights in subsequent proceedings. The DSU which is a covered agreement expressly refers
to mutually agreed solutions. The Panel in the present case should thus determine the impact, in
procedural terms, of the Understanding on Bana nas in the Article 21.5 proceedings initiated by
Ecuador. The ACP Third Parties submit that the Pane l should conclude that this mutually agreed
solution prevents Ecuador from challenging the new EC banana import regime in the framework of
Article 21.5 proceedings.

115. (Suriname) In paragraph 8 of its statem ent during the substantive meeting with the
Panel, Suriname argues that "Ecuador should not be allowed to bring this case before a
compliance panel [because] the measures now ch allenged are not measures taken to comply
with the recommendations and rulings of the orig inal Panel [but] constitute an entirely new
import regime. Can Suriname elaborate on the rea sons why, in its view, the EC banana import
regime challenged by Ecuador is not a meas ure taken to comply with the rulings and
recommendations of the DSB in the original Bana nas III case. It is because, as stated in
paragraph 10 if the same statement, "[b]ot h the Doha Waiver and the Understanding on
Bananas were negotiated by the WTO Members, in cluding the interested parties, after the DSB
adopted its recommendations and rulings" or fo r some other reason? Please provide a reasoned
response, making reference to any relevant legal sources.

Two points are relevant to explain why the EC ba nana import regime challenged by Ecuador in the
present dispute is not a measure taken to comply with the recommendations and rulings of the DSB in
the original Bananas III case.

First, the measure being challenged in the present dispute is radically different from the measure
examined by the Panel and the Appellate Body in th e original dispute: the new regime is a tariff-only
regime while the previous regime was a quota re gime whereby various quotas were allocated to
various groups.

Second, the measure being challenged has not been taken to implement the recommendations and
rulings of the DSB in the original Bananas III case but to implement the Understanding on Bananas
and the Doha Waiver. The existenc e of this new legal framework wh ich did not exist at the time the
original dispute was decided breaks any possible li nk between the new EC banana import regime and
the recommendations and rulings of the original dispute.

The above is confirmed by the minutes of the DSB. Once the Understandings on Bananas were
concluded and notified to the DSB, at the regul ar DSB meetings, WTO Members did no longer refer
anymore to the implementation of the recommenda tions and rulings of the DSB in the original
Bananas III dispute but to the implementation of the U nderstandings. For instance, the representative
of Ecuador, at the DSB meeting held on 16 May 2001(WT/DSB/M/105) stated that "[h]is country
would follow closely the implementation of both Understandings reached by the EC in this case."
Similarly, during the meeting of 20 June 2001 (WT/DSB/M/106), he indicated that "his country
would monitor closely the implementation of the Understanding reached between the EC and
Ecuador, which provided that a new banana regime based on tariffs would become effective in 2006.
Ecuador would also monitor closely a transitional regime to be put in place in the meantime." In other

words, once the Understandings were agreed betw een the EC and Ecuador and the US, the issue
became an issue about the implementation of the Understandings.

ANNEX D-4

RESPONSES BY BRAZIL TO QUESTIONS POSED BY THE PANEL

87. (Both Parties and Brazil) In paragraph 17 of its statement during the substantive
meeting with the Panel, Brazil argues that a "M ember is not exempted from discharging its
burden of proof as regards the compliance of the new measures with the DSB recommendations
and rulings even if such measures are intended to implement a suggestion by the panel". Can
Brazil elaborate on this argument, and the parties provide a reasoned answer as to whether they
agree with Brazil's argument.

 The Appellate Body has already established that "in WTO dispute settlement, as in most legal
systems and international tribunals, the burden of pr oof rests on the party that asserts the affirmative
of a claim or defence".
1 In Brazil's opinion, "the EC's claim is based on nothing more than the
Communities' own assertion that it has implemented a suggestion by a panel. By solely declaring –
unilaterally – that the current import regime is co mpatible with the WTO rule because it derives from
a suggestion made by the panel, the EC is not supporting its claim".2

 In addition, the fact that the EC has c hosen to bring its measures into compliance by
supposedly implementing one of the panel's three s uggestions does not lead to automatic compliance
with the covered agreements, exempting the Commun ities from discharging its burden of proof. The
EC remains to prove how and why the new measures comply with the DSB rulings and
recommendations.

 Contrarily to what the Communities purports, there is no automatic compliance in the DSU.
In no provision does the DSU grant Members certainty as to the "lawfulness" of a measure taken to
comply just because such measure is intended to implement a suggestion made by a panel. Neither
does the DSU oblige Members to implement such a suggestion. Rather, the DSU sets out that those
suggestions derive from a discretionary right conferred to panels and the Appellate Body.
3 This being
the case, even if a panel or the Appellate Body makes a suggestion under Article 19.1 of the DSU,
according to the WTO jurisprudence, "members re main free to choose how they implement the DSB
recommendations and rulings".
4

 Moreover, as stressed by Brazil before the pa nel, "whether or not a Member's intention
 to
comply meets the test of consistency with covered agreements is an assessment that should be left to a
panel. That is so because even in the case a Me mber chooses to implement a suggestion by the panel,
such a measure is still subject to an Article 21.5 review. 5 (…) [W]ithin Article 21 (…), the
declarations of the implementing Member form an integral part of the surveillance of implementation,
but they do not stand alone. Rather, they are complemented by, an d subject to, multilateral review
within the WTO".6 (emphasis added)

 Brazil reiterates that "if the EC's arguments were to prevail, they would lead to absurd results.
If accepted, they would render Article 21.5 devoid of any significance, for the reason that any

1 See Appellate Body Reports in Chile – Price Band System (Article 21.5 – Argentina), para. 134; US –
2 See Brazil's third party oral statement, para. 8.
3 See Appellate Body Reports US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 –
Argentina), paras. 182 and 189.
4 See Panel Report in EC – Bananas III (Article 21.5 – Ecuador), para. 6.154.
5 See Brazil's third party submission, para. 12.
6 See Appellate Body Report in US – Softwood Lumber IV (Article 21.5 – Canada), para. 70.

measure based on a panel's suggestion would automa tically escape the test of consistency with the
covered agreements. Thereby it would give the im plementing Member a blanket waiver from proving
that it has met its obligations and depriving th e complaining party of any surveillance of the
implementation process"7.

95. (Ecuador and Third Parties) In paragraph 6 of its oral statement during the substantive
meeting with the Panel, Ecuador mentions that "Ecuador's per capita GDP for 2005 was about
8 per cent of the per capita average of the EC, a nd also is less than that of many of the ACP
countries". In turn, in paragraph 16 of their combined statement during the substantive
meeting with the Panel, Nicaragua and Panama state that Nicaragua's "Gross National Income
of $910 is below the GNIs of several LDCs and well behind the GNIs of most ACP countries".
Can Ecuador, Nicaragua and Panama provide th e data sources that were used to make their
respective assertions and specify the per capita GDP figures in those sources for Ecuador, the
EC and the MFN suppliers and ACP countries that are participating as Third Parties in these
proceedings. Can other Third Parties provide a reasoned answer as to whether they agree with
the assertions made by Ecuador, Nicaragua and Panama.

 At the outset, it should be noted that Brazil ha s had no access to the figures used by Ecuador,
Nicaragua and Panama in order to make such asserti ons. Notwithstanding, it is possible to affirm that
the ACP group consists of African, Caribbean and Pacific countries that were, at some point in
history, colonies or territories of European countries. To Brazil's knowledge, the fundamental criteria
that determine the participation of a country in the ACP group would be the historical ties that link the
ACP countries to some European nations. Those cr iteria being essentially of a political nature, it
would not be impossible that social and economic conditions in other countries from either Latin
America or other parts of the world are worse than those in some ACP countries.

7 See Brazil's third party submission, para. 14.

ANNEX D-5

RESPONSES BY COLOMBIA TO QUESTIONS POSED BY THE PANEL

1. (Both Parties) In paragraph 39 of its th ird party submission, Colombia concludes that
"the tariff level that would result 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." Can the Parties
provide a reasoned answer as to whether they agree with the argument raised by Colombia.

Colombia would like to take this opportunity to be tter explain the statement in paragraph 39 of its
third party submission.

The use of the price-gap methodology provides an estimat e of a tariff equivalent of a trade restriction.
The larger the price-gap, the larger is the level of protection accorded to the domestic producers.

The difference between the price-gap of MFN banan as and the price-gap of ACP bananas for the EC
market gives the relative commercial disadvantage of MFN bananas with respect to ACP bananas, on
account of the trade restrictions imposed by th e EC. A difference of zero means that the tariff
equivalents are the same and the conditions of co mpetition are equal. On the other hand, a large
difference means that their tariff equivalents are wide apart, and it is a measure of the differences in
conditions of competition of one supplier with respect to the other supplier.

Therefore, the €11/ton should be the margin of pr eference for ACP bananas in order to at least
maintain the conditions of competition between MFN bananas and ACP bananas.

88. (Both Parties and Colombia) In paragra ph 16 of its third party submission, Colombia
argues that "[a]n applied tariff of €176/tonne does not constitute a 'rebinding' [under the Doha
Waiver]." Can Colombia elaborate on this argument, and the Parties provide a reasoned
answer as to whether they agree with it.

Pursuant to the Understanding on Bananas betw een the EC and Ecuador of 30 April 2001, the EC
undertook– among other things – to initiate GATT Article XXVIII ne gotiations. This commitment
was incorporated in two recitals of the "Decision of 14 November 2001" (WT/L/436) under which the
EC was granted a waiver from Article I:1 of the GATT in order to provide preferential tariff treatment
to products originating in ACP States. The relevant recitals state:

• "Noting that the implementation of the pref erential tariff treatment for bananas may be
affected as a result of GATT Article XXVIII negotiations"

• "Noting the assurances from the Parties to the Agr eement that any re-binding of the EC tariff
on bananas under the relevant GATT Article XXVIII procedures should result in at least
maintaining total market access for MFN bana na suppliers and their willingness to accept a
multilateral control on the implementation of this commitment"

Additionally, the Annex to the waiver provides that if any interested party requests arbitration, "the
mandate of the arbitrator shall be to determine … whether the envisaged rebinding of the EC tariff on
bananas would result in at least maintaining total market access for MFN banana supplier ...".

For Colombia, measures that do not take the form of a binding in the EC's schedule cannot be
considered as fulfilling the EC's commitments under the Doha Waiver.

To illustrate why this is so, let us assume that the EC has an applied tariff of €11/tonne 1, but does not
commit itself to bind this tariff. Although this tari ff level would certainly comply with the tariff level
standard, this action does not rectify the matter. This is because the Annex to the Doha Waiver
requires that the instrument used to ensure at least maintaining total market access for MFN bananas
must take the form of a "rebinding". Autonom ous or unilateral concessions which do not take the
form of a binding are not envisaged in the Annex to the Doha Waiver. This is because the level of
certainty and security of market access that is provided by an autonomous concession simply cannot
be compared with the legally binding guarantee pr ovided by a tariff binding in a Member's schedule.
An autonomous concession cannot be enforced in ordinary dispute settlement proceedings under
Article II of the GATT, and it does not give ri se to negotiating rights under Article XXVIII of the
GATT.

Furthermore, Colombia notes that,in paragraph 36 of its first award the Arbitrator ruled that "all EC
WTO market-access commitments relating to bana nas includes commitments incurred as a result of
EC enlargement under Articles XXIV:6 and XXVIII of GATT 1994". In the negotiations regarding
EC enlargement from fifteen to twenty five Member States, the EC has claimed that its applied tariff
of €176 per metric ton amounts to adequate comp ensation for its enlargement. Since the €176 per
metric ton tariff is not bound, the general level of reciprocal and mutually advantageous concessions
envisaged in paragraph 2 of Article XXVIII of th e GATT have not been re-established. Thus, by
failing to alter its scheduled commitment on bana nas, the EC has also failed to comply with
commitments arising from its enlargement.

The foregoing is the elaboration of Colombia's pr ior statement that "[a]n applied tariff of €176/tonne
does not constitute a 'rebinding' [under the Doha Wa iver]." [Colombia notes th at similar objections
have been raised by Ecuador.
2]

104. (Colombia and Panama) In paragraph 6 of its oral statement during the substantive
meeting with the Panel, Cote d'Ivoire said that:

Européenne de 59.000 tonnes par rapport à 2005 et diminué de
40 000 tonnes celles à destination des USA,
• le Costa Rica a accru de près de 200.000 tonnes ses exportations vers
l'Union Européenne et de 105.000 tonnes ses exportations vers les USA,
progressé que de 5.500 tonnes,

1 The tariff level that would maintain conditions of competition between ACP bananas and MFN
bananas with 2002-2004 as the reference period. See first written submission of Colombia, Costa Rica,
Ecuador, and Guatemala, 24 June 2005, footnote 84; Responses of Colombia, Costa Rica, Ecuador, and
Guatemala to Question No. 3 from the Arbitrator, 22 June 2005.
2 See second written submission of Ecuador, para. 34.

de 2.700 tonnes."
Can Colombia and Panama provi de a reasoned answer as to whether they agree with the
assertions made by Côte d'Ivoire.

First of all, Colombia wishes to underline the following finding of the Arbitrator in its first Award:
"… it has been stated that tariff bindings under Article II of GATT 1994 represent generally,
"commitments on conditions of competition for trade, not on volume trade" … Indeed, as far as
market access opportunities provided through tariff c oncessions are concerned, all that is guaranteed
for an exporting Member is an opportunity to ente r the market of an importing Member under secure
and predictable conditions (but not a guarantee to export certain volumes to that market)" (WT/L/616
paragraph 30).

Now, according to Eurostat, imports of bananas from Colombian to the EC-25 increased 69.257 tons
or 7.8% from 2005 to 2006 and, according to Colombia n statistics, Colombian exports of bananas to
the United States decreased 46.700 ton or 8.9% for th e same period. However, the increase in banana
exports to the EC–25 is not necessarily related with the decrease in exports to the United States during
the same period of time.

As Colombia explained during the Panel hearing, tr ade flows are explained by a number of factors,
especially variations in conditions of supply and demand. Indeed, although the tariff rate for bananas
in the United States is 0%, Colombian exports to the United States went down in 2006.

Variations in conditions of suppl y include improvements in the pr oductivity of foreign suppliers,
changes in the behaviour of competitive foreigner supp liers to the EU market, variations in conditions
of supply for domestic producers and external shocks. Variations in the conditions of demand include
changes in relative prices, appreciation of the Eu ro, substitution in consum ption and increases in
disposable income.

As stated in paragraph 24 of Colombia's third party submission, "it is impossible to isolate the impact
of the measure at issue on trade flows from the my riad of other factors that constantly affect
fluctuations in international trade (whether on the supply-side, demand-side or other)".

It is important for all parties to remember that th e relevant issue before the Panel is whether the EC
has at least maintained total mark et access for MFN Banana exporters. In this regard an improvement
in the volume of exports to the EC does not establish that the EC is complying with its obligations
under the Doha Waiver.

ANNEX D-6

RESPONSE BY JAPAN TO THE QUESTION POSED BY THE PANEL

106. (Japan) In paragraph 7 of its third part y submission, Japan argues that it "understands
the point here to be that the fact that the EC's current import regime is the measure taken in
accordance with the Understanding, that is, a mutually agreed solution, itself was not established at
the time when Ecuador initiated this panel proceeding . [Footnote omitted] Therefore, even if the
EC's argument concerning the validity of the Doha Waiver for Article I of the GATT is justified
in the later proceeding, and thus the EC's cu rrent import regime is established to be in
compliance with the mutually agreed solution, there is still a merit in bringing this claim to the
panel under Article 21.5 of the DSU" (Emphasis added). Can Japan elaborate on the
emphasized part of the above argument.

1. The argument of Japan in paragraph 9 of its third party submission (paragraph 7 of its
Executive Summary) relates to the EC's statement in paragraph 38 of its second written submission, to
which Japan referred in its submission at footnote 15. The EC's statement in the said paragraph reads
as follows: "[i]t is a well established fact that the current import regime more than maintains the
market access of Ecuador and the other MF N countries and Ecuador already knew this fact when it
initiated the current proceedings." (Emphasis added.) In this regard, even if the EC's argument is right
in that the current import regime is consistent with the Understanding as long as it actually maintains
the market access of MFN countries, Japan cons iders that the above-mentioned fact was not
established when Ecuador initiated th is panel proceeding, and thus, the fact that "the EC's current
import regime is the measure taken in accordance with the Understanding" was not established, either.

2. Japan understands that, in this compliance pa nel, one of the core issues is the question
whether or not the EC maintains a valid waiver from GATT Article I for implementing its preferential
import regime in accordance with the EC-Ecuador "Understanding of Bananas." The validity of the
waiver is subject to the fulfillment of the conditions set out in the Annex of the "Doha Waiver", and
one of those conditions is that the EC's scheme "maintains total market access for MFN suppliers."

3. In Japan's view, the question whether the EC's import regime would result in maintaining the
market access for MFN countries or not primarily requires a careful examination of the meaning of
the term, "maintaining the market access", which do es not seem so obvious in the context of the Doha
Waiver. It was also an issue in the past two ar bitration proceedings, whose mandate was to determine
whether the proposed EC regime would preserve the market access for MFN countries: EC's
calculation methodology for assessing the market ac cess was much contended among the interested
parties.

4. Moreover, Ecuador mentions that the current EC banana measures would not have found to
meet the requirement of the waiver even if it ha d been proposed as the second EC proposal prior to
2006.
1 Japan believes that such Ecuador's comment i ndicates that Ecuador does not consider that the
EC's current regime actually maintains the market access for MFN countries.

5. For the above reasons, Japan consider s that the EC's statement that the " fact that the current
import regime more than maintains the market access of Ecuador" is " well established " is too
assertive and unilateral, and thus, in Japan's view , the fact the EC's current import regime was
consistent with the Understanding was not yet established when Ecuador initiated this panel
proceeding. Therefore, Japan believes that such a statement of the EC will not make Ecuador's claim
without merit.

1 Second written submission of Ecuador, para. 17.

ANNEX D-7

RESPONSES BY NICARAGUA AND PANAMA
TO QUESTIONS POSED BY THE PANEL

 The Governments of Nicaragua and Panama set forth below their written responses to the
25 September 2007 Questions of the Panel directed to Nicaragua and Panama, virtually all of which
are posed to both countries in combination. In the two instances in which questions are posed to
Nicaragua and not Panama, and the one instance in which a question is posed to Panama and not
Nicaragua, the answers provided are the views of that country to which the question is addressed.

90. (Both Parties, Nicaragua and Panama) In paragraph 108 of their respective third party
submissions, Nicaragua and Panama argu e that "[t]he EC's €75/mt concession – which from
1995 to 2005 covered all bound in-quota Latin Am erican imports and informed the rate applicable
to all other Latin American bananas entering the EC market – has been the single most important
banana concession in Schedule CXL. In contrast to the prohibitive €680/mt rate, under which
virtually no Latin American volumes have ever been entered , the €75/mt concession is the only
rate that enabled Latin American market acce ss to the EC market from 1995 to 2005. Unless
the €75/mt bound rate receives the full protections of GATT Article II, the entire value of the
EC's mandatory Uruguay Round concessions will be nullified". (Emphasis added). Can
Nicaragua and Panama provide evidence for thei r assertions. If MFN banana imports have
increased under an applied tariff rate of €176/mt, as argued by the EC, how can this be
reconciled with the statement that "a €75/mt co ncession is the only rate that enabled Latin
American market access to the EC market from 1995 to 2005"? Can Nicaragua and Panama
clarify what would be meant by "providing the full protections of GATT Article II" to the
€75/mt tariff rate. Can Parties provide a reaso ned answer as to whether they agree with the
assertions made by Nicaragua and Panama.

 This multi-part question asks that the statem ents in paragraph 108 of the third party
submissions of Nicaragua and Pana ma be substantiated, related to market access under the current
arrangement, and clarified as they relate to Article II "protections."

Paragraph 108

 Paragraph 108 states that as between the EC's in-quota and over-quota concessions on
bananas, MFN access during the years 1995-2005 was essentially only possible at the €75/mt in-quota
rate, and not at the €680/mt over-quota rate. This same point was confirmed by the Arbitrator in
2005:

[T]he economic effect of the EC tariff quot as for bananas is, in an analytical sense,
comparable to a quota regime (non-tariff measure), as evidenced by the negligible
volume of banana imports entering the European Communities at the out-of-quota
tariff.
1

1 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 ("AAI"), para. 60; see
also third party written submission of Panama, 20 August 2007 ("third party written submission of Panama"), n.
106; third party written submission of Nicaragua, 20 August 2007 ("third party written submission of
Nicaragua"), n. 106.

To support that conclusion, the Arbitrator referenced information supplied by the EC indicating that:

between 10,000 to 20,000 tonnes of bananas are imported out of quota every year.
That represents about 0.3% of the tota l imports and they correspond to marginal
imports of residual quantities, consisting fo r the most part of a few tonnes, in
consignments. There is no consolidated information about their origin.
2
 Since Nicaragua and Panama were only commenting in paragraph 108 on MFN access under
the rates bound in the EC's Schedule, MFN mark et access under the current deconsolidated
arrangement was not intended to be addressed by the passage quoted above.

Market access under the current arrangement

 On the issue of market ac cess under the current arrangement, the position of Nicaragua and
Panama remains as follows:
• As of 1 January 2006, the issue of market acces s lost all legal relevance when the waiver for
bananas lapsed.

• Even if the waiver had not lapsed, the curre nt EC arrangement – which represents a 135%
increase in the €75/mt tariff applied to all MFN banana imports from 1995 to 2005, a 135%
increase in the prior ACP and EBA margin of preference of €75/mt, and a 25,000 mt increase
in the prior exclusive ACP tariff quota – fails on its face to preserve into the future total
competitive opportunities as between MFN and EC producers, and MFN and ACP producers.

• The trade-flow and pricing arguments put forward by the EC find no place in the WTO's legal
concept of market access. In any event, tho se selectively-presented, short-term data badly
misrepresent the relative and evolving picture in the EC marketplace for MFN and ACP
banana imports.

Article II protections

 In stating that the EC's concessions are en titled to Article II protection, Nicaragua and
Panama were making the point that the EC must uphold the guarantees built into Article II to give
"security and predictability" to all, not just some, of its scheduled concessions.
3 Article II:1(a)
ensures MFN banana-supplying Members that the EC will not accord import treatment less favourable
than that provided for in its Schedule. Article II:1(b) ensures MFN suppliers that the EC will not
apply a customs duty in excess of those provided fo r in its Schedule. By applying an ordinary
customs duty far in excess of €75/mt to all imports of MFN bananas, the EC has breached both of
those Article II protections.

91. (Both Parties, Nicaragua and Panama) In paragraph 19 of their combined statement
during the substantive meeting with the Panel, Nicaragua and Panama argue that "[t]he EC

2 AAI, n.52.
3 See GATT Panel Report, Panel on Newsprint , L/5680, adopted 20 November 1984, BISD 31S/114
("Newsprint"), para. 52 (wherein the panel " shared the view expressed before it relating to the fundamental
importance of the security and predictability of GATT tariff bindings, a principle which constitutes a central
obligation in the system of the General Agreement .") (Emphasis added); and Appellate Body Report, European
Communities – Customs Classification of Certain Computer Equipment , WT/DS62/AB/R, WT/DS67/AB/R,
WT/DS68/AB/R, adopted 22 June 1998 (" EC – Computer Equipment (AB) "), para. 82 (wherein the Appellate
Body stated that "Article II:1 of the GATT 1994 ensures the maintenance of the security and predictability of
tariff concessions by requiring that Members not acco rd treatment less favourable to the commerce of other
Members than that provided for in their Schedules.") (emphasis in original).

tariff, which was the EC's scheduled banana concession from 1963-1994, was the equivalent of
about €80 per tonne." Can Nicaragua and Panama elaborate on this argument and provide
evidence for their assertions, as appropriate. Can the Parties comment on the argument and
assertions.

 The full passage at issue in this question reads as follows:

Access was possible [for Nicaragua] because those markets were encumbered by a
simple tariff of 20% ad valorem and, in the case of Germany, no tariff at all. The
20% tariff, which was the EC's schedul ed banana concession from 1963-1994, was
the equivalent of about 80 Euro per tonne.
 The level and duration of the prior EC ba nana concession from 1963 to 1990 was confirmed
by the Bananas III panel: "From 1963, the EC had a consolid ated tariff of 20 per cent ad valorem on
bananas."
4 As regards MFN access under that former concession, most Latin American bananas
entered the EC through the northern EC Member States. 5 Belgium, Denmark, Ireland, Luxemburg
and the Netherlands all allowed MFN access su bject only to the EC's 20% bound tariff rate.
Germany, which accounted for approximately one -third of all MFN imports into the EC, 6 accorded
pursuant to the Treaty of Rome a tariff-free quota fo r imports of bananas from all sources in an
amount equivalent to Germany's total consumption (i.e. duty-free access for all imports).7

 The estimated €80/mt referenced in the ques tion above was derivatively calculated from the
tariff conversions put forward in Bananas III and Bananas II:

• As stated in the Bananas III Report,

Guatemala and Honduras submitted data show ing the following three-month average
ad valorem equivalencies: (a) based on 1993 data: (i) ECU 100 per tonne - 30.03 per
cent; and (ii) ECU 75 per tonne – 22.6 per cent."
8
 The EC did not provide any contradictory data in that proceeding. Using these conversion
ratios, a 20% bound rate would have approximated 75 ECU/mt.9

• In the Bananas II Report, the complainants submitted evidence showing that 100 ECU/mt
equaled to over 25 per cent ad valorem.10 Here, too, the EC did not submit evidence to the

4 Panel Report, European Communities – Regime for the Importation, Sale and Distribution of
Bananas – Complaints by Ecu ador, Guatemala and Honduras , Mexico, and the United States , WT/DS27/R,
adopted 25 September 1997, as modified by Appellate Body Report, WT/DS27/AB/R (" Bananas III (Panel) "),
para. 3.31, see also Panel Report, EEC – Member States' Import Regimes for Bananas , 3 June 1993, unadopted,
DS32/R ("Bananas I"), para 13.
5 Bananas I, para. 12.
6 Id.
7 Id., para 17.
8 Bananas III (Panel), para. 4.96.
9 Guatemala and Honduras calculated the ad valorem equivalents for each of weeks 29-41 and then
averaged those AVEs as shown in Exhibit N/P-1 (For purposes of this submission, Panama and Nicaragua have
used the designation N/P- x to identify joint exhibits). If an average per metric tonne price for weeks 29-41 is
used, the calculations would be as follows: 100 ECU ÷ 332 ECU/mt price = 30%; and 75 ECU ÷ 332 ECU/mt
price = 22.6%.
10 Panel Report, EEC – Import Regime for Bananas , 11 February 1994, unadopted, DS38/R
("Bananas II"), para. 24.

contrary.11 Using that conversion as the refere nce point, a 20% bound rate would have
approximated 80 ECU/mt.12

 Whichever of these two calculations is used, the point remains that, for decades, Nicaragua
had access to the northern EC markets free of duty in the case of Germany, and at a duty the
equivalent of 75-80 ECU/mt in all other EC market s into which its product entered. Today, after
winning multiple dispute settlement actions, Nicarag ua faces a €176/mt ($4.33/box) customs burden;
a €176/mt tariff disadvantage relative to the EC's pr eferred suppliers; and an exclusive ACP tariff
quota in which Nicaragua has no right to participate. Thus, while ACP supplie rs (most of which are
economically far better situated than Nicaragua ) have seen their discriminatory access advantages
multiply, Nicaragua has seen its access opportunities dete riorate, so much so that its producers can no
longer even enter the EC's banana market.

95. (Ecuador and all Third Parties) In pa ragraph 6 of its oral statement during the
substantive meeting with the Panel, Ecuador mentions that "Ecuador's per capita GDP for 2005
was about 8 per cent of the per capita average of the EC, and also is less than that of many of
the ACP countries." In turn, in paragraph 16 of their combined statement during the
substantive meeting with the Panel, Nicaragu a and Panama state that Nicaragua's "Gross
National Income of $910 is below the GNIs of several LDCs and well behind the GNIs of most
ACP countries." Can Ecuador, Nicaragua and Panama provide the data sources that were used
to make their respective assertions and specify the per capita GDP figures in those sources for
Ecuador, the EC and the MFN suppliers and ACP countries that are participating as Third
Parties in these proceedings. Can other Third Parties provide a reasoned answer as to whether
they agree with the assertions made by Ecuador, Nicaragua and Panama.

 Nicaragua's Gross National Income ("GNI") of $910 for 2005 was obtained from the World
Bank preliminary estimates set forth in Exhibit N/ P-2. The updated World Bank data, also included
in that Exhibit, reflect a slightly higher 2005 GNI for Nicaragua of $950, which is still well below the
GNIs of most ACP countries. The requested per cap ita GDP figures for all Parties and Third Parties
in this proceeding can also be found in Exhibit N/P-2.

96. (Ecuador and Nicaragua) In paragraph 6 of its closing statement during the substantive
meeting with the Panel, the EC argues that "the draft dated 2 November 2001, which Nicaragua
has attached to its third party submission as Ex hibit N-1, provided that the Doha Waiver would
be terminated automatically within two months after the notification of the arbitration award to
the General Council. However, this provision wa s not included in the final version of the Doha
Waiver. The link between the awards of the arbi trator and the termination of the Doha Waiver
was abandoned." Can Ecuador and Nicaragua pr ovide a reasoned answer as to whether they
agree with the statement.

 The EC is wrong in claiming that this preparatory waiver document shows that "the link
between the awards of the arbitrator and the termination of the Doha Waiver was abandoned."
13 It
proves exactly the contrary.

 The document to which the EC is referring was a relatively early version of the draft banana
provisions of the waiver. 14 Developed by the EC, not the MFN supplying countries, it was put

11 Id., para. 134.
12 100 ECU ÷ 400 ECU/mt price = 25%; and 80 ECU ÷ 400 ECU/mt price = 20%.
13 Closing statement of the European Communities, 19 September 2007, para. 5.
14 See Council for Trade in Goods, European Communities – The ACP-EC Partnership Agreement:
Revision (Communication from the European Communities), G/C/W/187/Add.2/Rev.1, 2 November 2001. Both

forward before the notion of an Annex had even emer ged. As evidenced by its proposed text, the EC
already well understood by the time this version was put forward that absent a " multilateral control"
on " any re-binding ,"
15 and a waiver termination provision linked to that multilateral control, 16 this
waiver would not be approved.

 The two-month termination provision in the EC's proposed text was an early iteration of what
later became the waiver's mandatory termination provision "upon entry into force of the new EC tariff
regime." The EC used the phrase "two months after the notification of the arbitration award" for the
simple reason that under the approach it was propos ing, there were still no requirements as to when
the arbitration procedure would need to begin and end. Indeed, the EC was still envisioning in this
draft that arbitration would occur after the new regime took effect, and, thus, framed the waiver
standard in the present tense, not the future conditional tense ( i.e. "does not result in ... ," rather than
"would result in ..."), and pegged the termination prov ision to the notification of the award, whenever
that might occur.

 None of the MFN drafters was willing to accept this imprecisely defined EC draft.
17 A s
subsequent drafts and the final waiver text made clear, they insisted, instead, on more elaborated,
carefully sequenced procedures entailing consultations and two rounds of arbitration that would have
to be concluded in their entirety before the regime took effect.
18 Once the arbitration provisions were
refined by the negotiators to require a conclu sion of all procedures before 2006, the waiver
termination provision, which remained an absolute prerequisite throughout this drafting period, was
necessarily also refined to take effect "upon entry into force of the new EC tariff regime."

 The EC, having already acknowledged in its earlier draft the necessity of a lapsed waiver
linked to arbitration, cannot be allowed to claim now that the strengthened final text of the waiver no
longer contained that same linkage and granted, in stead, blanket authority to the EC to install
whatever regime it wanted to as of 2006.

97. (Ecuador, Nicaragua and Panama) What a re exactly, in your view, the current binding
concessions that the EC has, relating to banana s? Is it the TRQ as described in the EC's
Schedules LXXX and CXL; is it a single duty of €75/mt; or is it rather something else? If it
was a single duty of €75/mt, please explain why the Panel should consider that the 2.2 million mt
volume and the out-of-quota duty of €680/mt are not a relevant part of the EC's current
concessions.

 The EC's in-quota concessions are €75/mt for 2.2 million mt; its over-quota concession is
€680/mt. The continuing effect of those concessions, in their entirety, is confirmed by Sections 1A
and 1B of the EC's Schedule; by the findings of Bananas III; by the findings of the 2005 Arbitrator,

Nicaragua and Panama attached this document to thei r third party written submissions as Exhibit N-1 and
Exhibit P-1, respectively.
15 Id., Noting Clause 3 in the same document.
16 Id., 3ter.
17 There were several other elements of this draf t that the Latin American negotiators considered
unacceptable, including: (i) a waiver access standard expre ssed as an "aim," not a requirement (3bis); (ii) an
access standard that protected both MF N and ACP suppliers, not just MFN supp liers (3bis, 3ter); (iii) an access
standard that would be analyzed by the Arbitrator after the fact ("does not result in"), rather than prospectively
("would result in ..."); and (iv) an access standard that would only be meas ured "at the time of the re-binding,"
not over time (3ter). The MFN negotiators insisted on striking every one of these proposed EC elements. By
replacing (i) and (iii) above with the final waiver te xt, the MFN negotiators were further reinforcing the
unseverable link between the pre-2006 arbitration awards and the termination of the waiver.
18 See Draft EC Proposal for Article I waiver, 11 N ovember 2001, in Exhibit P-1 and Exhibit N-1;
Ministerial Conference, European Communities – The ACP-EC Partnership Agreement , WT/MIN(01)/15,
14 November 2001, WT/L/436 ("Article I waiver"), Annex in Exhibit EC-2.

and by the EC's own common, consistent, discerna ble pattern of acts and pronouncements evidenced
throughout the period in which those bindings have been in effect.19

 It bears noting that these EC Uruguay Round conc essions were for the EC of 12. There are
now 15 other EC Member States. The great majority of those 15 Member States had an incidence of
bound duties and regulations on banana imports prior to accession that was far less restrictive than the
incidence of banana duties and restrictions applied following accession.
20 The EC has yet to fulfil its
GATT Article XXIV obligation to adjust its Urugua y Round concessions (or provide compensation)
to redress these accession abrogations.

98. (Ecuador, Nicaragua and Panama) Does the Framework Agreement on Bananas (BFA)
include "terms, conditions or qualifications" to the EC's relevant concession on bananas in the
sense of Article II(1)(b) of the GATT?

 As defined by prior cases, the phrase "terms , conditions or qualifications" used in GATT
Article II:1(b) covers qualifying restrictions or cond itions made to the substantive content or scope of
concessions
21 that do not otherwise diminish a Member's multilateral obligations. 22 The BFA does
not include "terms, conditions or qualifications" to the EC's relevant concessions in the sense of
Article II:1(b).

 The so-called "terms and conditions" alleged by th e EC were not even a part of the BFA. As
explained in the third party submissions and oral statements of Nicaragua and Panama, the BFA
contained no qualification of any sort relating to the continuing effect of the EC's in-quota
concessions.
23 This plurilateral "agreement," signed well before the EC's Uruguay Round Schedules
were even finalized, primarily related to coun try allocations and the administration of those
allocations under terms favourable to the four Latin American signatories. While that plurilaterally
"agreed system" and "agreement" were qualified by the termination language of paragraph 9, the BFA
nowhere stated that the EC's multil aterally-required "current access" concessions, which the EC still
separately needed to schedule in the Uruguay Round, would be null and void as of 2003.

 As regards the numerous tariff-quota allocation, re-allocation, and administrative provisions
of the BFA that were not otherwise addressed in the EC's attempted termination claim, these were all
found to be inconsistent with th e EC's WTO obligations in the 1997 Bananas III rulings.
24 T h e
illegality of those provisions prevented them from be ing "terms, conditions or qualifications" in the
sense of Article II(1)(b).

19 Third party written submission of Panama, pa ras. 99-100; third party written submission of
Nicaragua, paras. 99-100.
20 E.g., Prior to 1995, Austria, Finland, and Swed en accorded unlimited bo und duty-free access to
banana imports. Likewise, prior to 2004, most of th e ten Central and Eastern European countries accorded
bound zero-duty or low-duty access to banana imports. None of the 15 countries that acced ed to the EC from
1995 forward accorded preferential access to the ACP.
21 Appellate Body Report, Canada – Measures Affecting the Importation of Milk and the Exportation of
Dairy Products, WT/DS103/R, WT/DS113/R and Corr. 1, adopted 27 October 1999, para. 134.
22 Appellate Body Report, European Communities – Measures Affecting the Importation of Certain
Poultry Products , WT/DS69/AB/R, adopted 23 July 1998, para. 98; and Bananas III (Panel) ,
paras. 7.113-7.114.
23 Third party written submission of Panama, para. 95; third party written submission of Nicaragua,
24 See Bananas III (Panel) , para. 7.399; Appellate Body Report, European Communities – Regime for
Importation, Sale and Distribution of Bananas , WT/DS27/AB/R, adopted 25 September 1997 (" Bananas III
(AB)"), para. 255.

99. (Ecuador, Nicaragua and Panama) Do you agree with the EC that a Member could,
through a "term, condition or qualification" on a concession that was included in its
Schedule and accepted by the other Members, provide for the elimination of a bound TRQ?

 Although no WTO case has yet examined the issue of whether a Member in the Uruguay
Round was entitled to insert a "term, condition or qua lification" into its Schedule that would later
eliminate an agricultural current- access tariff quota, it is hard to see how a scheduled elimination of
any current-access quota would be consistent with the Uruguay Round reform process and the WTO
Agreement on Agriculture ("AoA"). Unlike the circumstances in the US – Sugar Waiver case, where
request-and-offer concessions in the Annecy Round we re at issue, the issue here is a current-access
tariff quota formed pursuant to the Uruguay Round Draft Modalities. The "tariffication" principles of
those Draft Modalities " required [Members] to maintain, for tariffied products, current import access
opportunities at levels corresponding to those existing during the 1986-88 base period."
25 A s
confirmed in the AoA itself, the objective of the tariffication process was to enable the "substantial
progressive reduction in agricultural ... protec tion ... over an agreed period of time." 26 The Bananas
III Appellate Body considered this reform objective to be embodied in AoA Article 4.1:

Article 4.1 of the Agreement on Agriculture provides as follows:
Market access concessions contained in Schedules relate to bindings
and reductions of tariffs, and to other market access commitments as
specified therein.
In our view, Article 4.1 does more than merely indicate where market access
concessions and commitments for agricu ltural products are to be found. Article 4.1
acknowledges that significant, new market access concessions, in the form of new
bindings and reductions of tariffs as well as other market access commitments (i.e.
those made as a result of the tariffication process), were made as a result of the
Uruguay Round negotiations on agriculture and included in Members' GATT 1994
Schedules. These concessions are fundamen tal to the agricultural reform process
that is a fundamental objective of the Agreement on Agriculture.
27
 If the "agricultural reform process" underlying the AoA and the principle of "significant, new
market access concessions" acknowledged in AoA Article 4.1 are to have meaning, they should, at a
minimum, be read to create a presumption against a scheduled revocation of the very same current-
access opportunities that were required in that "agricultural reform process." Absent a showing by the
Member alleging the revocation that (i) it had expressly notified the Membership of its intention to
deny future current-access opportunities, and (ii) the Membership had expressly authorized that
intention, a Uruguay Round "term, condition or qua lification" that revoked "current access" should
not otherwise be allowed.

 Nicaragua and Panama are aware of no current-access revocation authority extended to any
agricultural product during the Uruguay Round. To the contrary, where there were "special treatment
cases" under the access modalities (all of which relate d to rice), these were specifically delineated in
Annex 5 of the AoA, and required minimum-access opportunities and reform over time.

 In the case of bananas, not only was there no express authority from the Membership to
revoke the EC's in-quota concessions, none of the fi ve BFA signatories themselves understood at that

25 Third party written submission of Panama, para. 80, n. 89; third party written submission of
26 Id., para. 81, n.90.
27 Bananas III (AB), para. 156 (emphasis added).

time, or in the 13 years thereafter, that the in- quota concessions would terminate. The EC's own
consistent validation of the in-quota bindings throughout the years confirms this was so.

 As to the non-BFA countries, it bears noting th at the EC submitted the BFA as a Corrigendum
to its Schedule on 29 March 1994, 4 days after the end of the Uruguay Round schedule verification
process was closed.
28 It is impossible to see how the entire Membership can now be held subject to
BFA provisions that most had never seen before th e Schedules closed and that, in any case, contained
no language anywhere within its four corners that expressly terminated the EC's Section 1B Uruguay
Round concessions on this product.

100. (Ecuador, Nicaragua and Panama) In pa ragraph 79 of its second written submission,
the EC argues that:

"[I]n paragraph 59 of its second written submission, Ecuador argues that 'it is
scarcely likely that the negotiators of th e BFA would consider as satisfactory
solution a system that as of 2003 would leave all their banana exports to the EC
subject to an essentially prohibitive duty of €680/mt'. This statement is in full
contradiction with paragraph 25 of Ecua dor's second written submission, where
it is stated that 'in every negotiation parties strive for a balance of benefits, but
the reality does not always turn out as the negotiators were expecting or
assuming at the time of the negotiations. It would destabilize the entire premise
of the WTO tariff system of concession s were to be adjusted according to
whether the concessions had the result contemplated at the time that the
concession was granted'. Perhaps Ecuador should explain whether its statement
in paragraph 25 is correct, in which case it would lose its Article II claims, or
whether its statement in paragraph 59 is correct, in which case it would lose its
Article I claims."
Can Ecuador, Nicaragua and Panama provide a reasoned answer as to whether they agree with
the EC's arguments.

 The two quoted statements are addressing two entirely unrelated points, are in no respect
contradictory, and are both correct.

First statement

 The first statement ("it is scarcely likely that the negotiators of the BFA would consider a
satisfactory solution a system that, as of 2003, would leave all their banana exports to the EC subject
to an essentially prohibitive duty of 680 €/mt") is a point that Nicaragua and Panama themselves made
in their third party submissions. It is a point that correctly highlights the absurdity of inferring into
the BFA a "term, condition or qualification" ( i.e. prohibited access as of 2003) that would nullify the
BFA's sole purpose of improving access in order to "settle" Bananas II.

 The statement's underlying point – that texts cannot be read in a way that leads to absurd
results – is equally valid in the case of Ecuador's Article I claim. Like the EC's BFA reading, the EC's
assertion that it was free to establish a regime of its own choosing after tw o rounds of exhaustive
arbitration would absurdly nullify the Annex's so le purpose of requiring a "multilateral control" on
"any rebinding." The principle of effectiveness being asserted in Ecuador's first statement, thus,
broadly upholds Ecuador's Article I claim, not causes it to fail.

28 See Trade Negotiations Committee, Informal Meeting of Heads of Delegation , 20 January 1994,
MTN.TNC/W/131; Trade Negotiations Committee, Informal Meeting of Heads of Delegation , 24 March 1994,
MTN.TNC/W/139, 29 March 1994; EC – Computer Equipment (AB), para. 95, n.92.

Second statement

 The second statement ("in every negotiation parties strive for a balance of benefits, but the
reality does not always turn out as the negotiators were expecting or assuming at the time of the
negotiations") was made by Ecuador in response to th e EC's argument that Ecuador's interpretation of
the waiver would lead to an "unreasonable" result. The "unreasonable" result alleged by the EC was
one under which the EC would still be able to bene fit from the waiver even if the Arbitrator had
validated a proposed rate that later caused MFN volumes to diminish.

 Ecuador's second statement draws an analogy to Article II to make the point that even if the
EC's hypothetical occurred, it would not have been "unreasonable" under GATT practice. Ecuador
correctly notes that whenever countries set concessions, they have no advance certainty as to the
impact those concessions will have on future trade flows. As the Oilseeds panel confirmed, Article II
can only be read to protect "competitive conditions " because governments can neither "predict with
precision what the impact of their interventions on import volumes will be ... ,"
29 nor later determine
whether the trade impact "following a change in polic ies is attributable to that change or to other
factors." Ecuador was, thus, simply saying that the Annex's prospective assessment of conditions of
competition, which the Arbitrator was required to apply under the ordinary meaning of its text,
entailed an orientation broadly comparable to that used when rights are established under Article II on
the basis of a prospective assess ment of conditions of competition. Hence, there was nothing
"unreasonable" or irregular about this orientation.

 The EC's proposed reading, on the other hand – under which the EC would be free to
establish whatever arrangement it wants to following two rounds of exhaustive arbitration based on its
unilateral assessment of "real world" trade flows at some post-2006 point in time – truly would be
unreasonable and contrary to WTO practice. There is nothing in the WTO rules or prior cases that
would support an ad hoc volume assessment of a "new tari ff regime" (indeed, an autonomous one)
after it has already taken effect.

 The issue present in Ecuador's second statement – i.e. the necessity and appropriateness of
assessing an "envisaged rebinding" prospectively, rather than after the fact – is entirely unrelated to
Ecuador's Article II argument. In the case of th e EC's scheduled concessions, the MFN suppliers
could not possibly have assessed prospectively a 680 €/ mt stand alone tariff for the simple reason that
there was no such stand-alone concession to assess. The EC's assertion that Ecuador's second
statement causes Ecuador to "lose its Article II claim, " is, thus, an unfortunate confusion of both that
second statement and the Article II claim itself.

101. (Ecuador, Nicaragua, Panama and the US) In paragraph 4 of its closing statement
during the substantive meeting with the Panel, ref erring to the alleged termination of the Doha
Waiver, the EC argues that "[i]f the Doha Waiver wanted to say what Ecuador, Nicaragua and
Panama are arguing, the text should have read that the waiver would terminate 'if the
Arbitrator concludes that the EC has failed to rectify the matter'. The Doha Waiver does not say
so." Can Ecuador, Nicaragua and Panama provi de a reasoned answer as to whether they agree
with this statement. Could the US comment on the same, in the light of its argument in
paragraph 21 of its statement during the substant ive meeting with the Panel, reproduced in the
previous question.

 Tiret five did not have to use the words " the Arbitrator concludes that " because those words
were already obviously captured by sentences three, four, and five of that tiret.

29 GATT Panel Report, European Economic Community – Payments and Subsidies Paid to Processors
and Producers of Oilseeds and Related Animal-Feed Proteins , L/6627, adopted 25 January 1990, BISD 37S/86
("EEC –Oilseeds I"), paras. 150-151.

 As demonstrated in the third party submissi ons of Nicaragua and Panama, the EC had two
ways to "rectify the matter" under tiret five. It c ould reach a "mutually satisfactory solution" with the
interested parties prior to the Second Arbitration or , in the absence of a mutually satisfactory solution,
it could receive a Second Arbitration determination that it "has rectified the matter."

 Sentences two and three of tiret five ("Within 10 days of the notification of the arbitration
award to the General Council, the EC will enter into consultations with those interested parties that
requested the arbitration. In the absence of a mutu ally satisfactory solution, the same arbitrator will
be asked ...") address the "mutually satisfactory solution" option. Read together they make clear that
if a Second Arbitration is initiated, a "mutually satisfactory solution" is no longer an option
achievable under the timetable called for by the Annex.

 The ensuing sentences, thus, speak solely to the second rectification option, a Second
Arbitration ("... the same arbitrator will be asked to determine, within 30 days of the new arbitration
request, whether the EC has rectifie d the matter. The second arbitration award will be notified to the
General Council. If 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."). In the last of those sentences, the phrase "if the
EC has failed to rectify the matter" conspicuously repeats the same past-per fect formulation of the
Second Arbitration's terms of refe rence defined in sentence three (" whether the EC has rectified the
matter"). The replicated terms of reference in sen tence five, following two sentences that solely and
explicitly relate to the Second Arbitration, instil th e phrase "if the EC has failed to rectify the matter"
with a meaning identical to "if the Arbitrator conclu ded that the EC has failed to rectify the matter."
Indeed, the Arbitrator fulfilled that very meaning by determining the EC "has failed to rectify the
matter" in its final determination.
30

 There is a special irony in the EC's query as to why the fifth sentence did not state "if the
Arbitrator concludes." Whereas Ecuador, Nicaragua, Panama, and the Untied States can easily
demonstrate that those words were redundant under the ordinary meaning of tiret five, the EC cannot
possibly explain why the drafters neglected to writ e into tiret five the numerous words needed to
substantiate its tortured reading ( i.e. "only if the EC implements the exact arrangement invalidated in
Arbitration, or forgets to declare anot her regime of its own choosing ‘rectified,' " will the waiver
cease to apply). Not a single word or passage of the Annex supports that alleged meaning.

102. (EC, Nicaragua and Panama) In paragraph 44 of their combined statement during the
substantive meeting with the Panel, Nicaragua an d Panama argue that "[t]he [first compliance]
panel's second suggestion never absolved any discriminatory ACP tariff quota from the
obligations of Article XIII, however the larger import regime might be structured. To the
contrary, the panel, only paragraphs befo re, found the EC's exclusive ACP tariff quota, by its
own specific shape and nature , to be a quantitative restriction covered by Article XIII:5 that
failed to treat like products 'equally, irrespective of origin,' in violation of Article XIII. No
subsequent compliance suggestion can be read to nullify that actual finding of law." Can
Nicaragua and Panama elaborate on these argume nts. Can the EC provide a reasoned answer
as to whether it agrees with the argument.

 In a number of carefully reasoned passages, the Bananas III (Article 21.5 – Ecuador) panel
explicitly found the EC's exclusive ACP tariff quota, by its own specific shape and nature, to be a
quantitative restriction covered by Article XIII:5 that failed to treat like products "equally, irrespective
of origins" in violation of Article XIII:

30 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 (" AAII"),
para. 127.

• In response to the EC's claim that the ACP tariff quota constitu tes an "upper limit on a tariff
preference and is not a tariff quota subject to Article XIII," the panel confirmed that the
reserve was definitionally a tariff quota covered under Article XIII:

Article XIII:5 provides that the provisions of Article XIII apply to
"tariff quotas". The European Co mmunities essentially 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 XIII. 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.
31
• In response to the EC's claim that the ACP tariff quota is unreviewable under Article XIII
because it constitutes a "regime" separate and distinguishable from the MFN tariff
arrangement, the panel found that the "separ ate" ACP arrangement was still necessarily
covered by the non-discrimination obligations of Article XIII:

The issue here is not whether the European Communities is correct in
stating that two separate regimes exist for bananas, but whether the
existence of two, or more, separate EC import regimes is of any
relevance for the application of th e non-discrimination provisions of
the GATT 1994 and the other Annex 1A agreements. The essence of
the non-discrimination obligations is that like products should be
treated equally, irrespective of their origin. As no participant
disputes that all bananas are like products, the non-discrimination
provisions apply to all imports of bananas, irrespective of whether
and how a Member categorises or subdivides these imports for
administrative or other reasons. If, by choosing a different legal
basis for imposing import restrictions, or by applying different tariff
rates, a Member could avoid the application of the non-
discrimination provisions to the imports of like products from
different Members, the object and purpose of the non-discrimination
provisions 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 agreements, if these provisions apply only within
regulatory regimes established by that Member.
32
 Since the foregoing findings would be nullifie d by the EC's contention that the panel's
"second suggestion" absolves the current exclus ive ACP tariff quota of all GATT Article XIII
obligations, that EC reading of the suggestion cannot be correct.

31 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
("Bananas III (Article 21.5 – Ecuador)"), para. 6.20. (Emphasis added.)

QUESTIONS ADDRESSED TO THIRD PARTIES

104. (Colombia and Panama) In paragraph 6 of its oral statement during the substantive
meeting with the Panel, Cote d'Ivoire said that:

Européenne de 59.000 tonnes par rapport à 2005 et diminué de
40 000 tonnes celles à destination des USA,
• le Costa Rica a accru de près de 200.000 tonnes ses exportations vers
l'Union Européenne et de 105.000 tonnes ses exportations vers les USA,
progressé que de 5.500 tonnes,
de 2.700 tonnes."
Can Colombia and Panama provi de a reasoned answer as to whether they agree with the
assertions made by Côte d'Ivoire.

 Panama does not accept the assertions made by Côte d'Ivoire on either legal or factual
grounds.

 As a legal matter, the issue of market access to the EC market no longer has relevance under
GATT Article I. Even if it had relevance, a Memb er's volume performance is not part of the WTO's
legal concept of "market access." Conditions of competiti on (in this case, "as a pplied" conditions of
competition between MFN and EC producers, and MF N and ACP producers) are what is covered by
that term. A regime that installs a 135% increas e in the €75/mt tariff on MFN bananas applied from
1995 to 2005, a 135% increase in the prior ACP a nd EBA margin of preference of €75/mt, and a
25,000 mt increase in the prior exclusive ACP tari ff quota cannot be considered to preserve prior
conditions of competition.

 Even on purely factual grounds, the Ivory Coast's selective reference to Panama's export
levels conveys a distorted impression of the EC mark et. In 1999, when the EC became obligated to
come into compliance with Bananas III , Panama's banana exports to the EC were 465,000 mt.
33
Panama's EC exports have system atically dropped in virtually every year since then, reaching only
311,000 mt in 2006. This represents a 33% decline since 1999. The picture for the group of ACP
suppliers, on the other hand, is exactly the re verse. The ACP saw their 1999 export volume of
688,000 mt systematically grow to 891,000 mt in 2006, reflecting a 30% increase since 1999. The
graph set forth in Exhibit N/P-3 portrays these strikingly divergent market trends.

107. (Nicaragua) Since Nicaragua was a party to the negotiations of the Framework
Agreement on Bananas (BFA), can Nicaragua cl arify what was, in its view, the purpose and

33 Exhibit N/P-3.

meaning of paragraph 9 of the BFA. More specifically, what is the precise (nature of the)
"agreement" that "shall apply until 31 December 2002"?

 Paragraph 9 of the BFA states that " [t]his agreement shall apply until 31 December 2002."
34
For reasons relating to the nature of the BFA (and for the interpretive reasons separately addressed in
Nicaragua's third party submission, oral statemen t, and response to Question 110 below), Nicaragua
and the other BFA signatories included paragraph 9 to terminate the plurilateral "agreement" itself by
2003, but certainly not to terminate the separat e multilateral concessions set forth in the EC's
Schedule.

 The "agreed system" laid down in the BFA included a number of administrative provisions
for allocating and reallocating quantities under the EC's banana tariff quota. All signatories
recognized the complexity of that "agreed system." Its export quota-allocation, quota-transferability,
and licensing rules, which themselves were complex, had to be integrated into the equally complex
import-quota and licensing rules of Regulation 404. The signatories recognized, too, that the EC's
future enlargements, referenced in paragraph 1 of the BFA ("... subject to any increase resulting from
the enlargement of the Community"), would com pound the administrative challenge and require
regulatory adaptations to ensure proper implementation of the BFA's "agreed system."

 Because of these various complexities and future developments, and the EC's insistence that
the Latin American signatories agree to a "peace clause" throughout the duration of the BFA,
Nicaragua and the other signatories considered a term ination date to be prudent. The termination
provision was to serve as a check, or quality control, on the functioning of the "agreed system," and a
backstop to ensure that the rights of the Latin Amer ican signatories would continue to be upheld as
the EC Member States grew in number. Thus, when the BFA signatories stated in paragraph 9 that
"[t]his agreement shall apply ...," they meant simply that the BFA itself would terminate. They never
once contemplated a termination of the multilatera l concessions separately contained in the EC's
Schedule.

 Indeed, because the BFA, by its very nature, was a plurilateral agreement, it could not have
set a limitation on the multilateral concessions contai ned in the EC's Schedule. The five signing
countries, which reached this agreement before the EC had even officially scheduled its multilateral
banana commitment, had no legal authority to inva lidate future multilateral concessions. If Members
were free to pre-empt concessions on a bilateral or plurilateral basis, the global trading system of
multilateral concessions would lose the certainty, secu rity, and predictability guaranteed under GATT
Article II.
35

108. (Nicaragua and Panama) In paragraph 6 of their respective third party submissions,
Nicaragua and Panama state that:

"when the EC contends in this proceeding that its current measures fulfil its
important 'international development effort s,' it is conspicuously obscuring the
paramount objective underlying the measur es at issue, the protection of its own
heavily subsidized production". (Footnote omitted)
Could Nicaragua and Panama elaborate on such statement and explain in what manner, if any,
such circumstance would become relevant for the Panel's analysis in the current proceedings.

34 Emphasis added.

The EC's banana regime's objective of ensuring th e "satisfactory marketing of bananas produced
within the Community"36

 The EC produces bananas in Spain (the Canary Islands), France (Guadeloupe and
Martinique), Portugal (continental Portugal, Madeir a, and the Azores), Greece (Crete), and Cyprus. 37
Despite only modest production levels, EC producers have for decades insisted on support and market
protections to insulate local production from external competition.

 Regulation 404 was premised on the guarantee th at bananas produced in the EC would not be
"place[d] in a worse situation" than before the introduction of the Common Market Organization
("CMO") and would be "disposed of on the Commun ity market providing an adequate income for
[EC] producers."
38 Those pre-eminent CMO guarantees, while not emphasized when the EC
externally defends its banana po licies, have guided the structure of the EC's successive banana
regimes since 1993.

 To ensure remunerative prices for EC-grown ba nanas, the EC's original banana CMO, and
every modified CMO since then, has relied on two fo rms of EC grower protections: large banana
subsidy payments and strict limitations on EC ac cess for Latin American bananas. The producing
Member States and EC Commission have considered th ese two protections to be inextricably linked.
In their view, large subsidies put an "adequate inco me" into the pocket of the producers, while border
restrictions ensure the marketing and fiscal stability needed to sustain those payments over time.

 Of those two forms of protection, banana subsidies have always been the true centerpiece of
the CMO, around which the border measures have been structured for fiscal reinforcement.
39

• From 1993 through 2006, the subsidy scheme, known as "compensatory aid," conferred a type
of deficiency payment to EC producers. U nder that arrangement, total compensatory aid
payments in recent years amounted on average to over $300 million annually (or
approximately $7.50 a box), making bananas one of the most subsidized of all products
covered by the EC's Common Agricultural Policy.40

• As of 1 January 2007, the EC "ref ormed" its banana subsidy scheme by enlarging its
"envelope" of production-oriented subsidies fo r the sector. The new scheme, amounting to
approximately $380 million a nnually for the next 6 years, 41 continues to be for the express
purpose of "support[ing] [EC] banana production" and "ensur[ing] a fair standard of living for
EC banana producers." 42 The enlarged "envelope" is bei ng allocated to Spain, France, and
Portugal for distribution as those Member States see fit, including through nationally
administered "system[s] of deficiency payments close to the [prior] scheme" of compensatory

36 Council Regulation (EEC) 404/93 of 13 February 1993 on the common organization of the market in
bananas, OJ L 47/1, 25 February 1993 (hereinafter "Regulation 404"), Whereas clause 10.
37 In recent years, total EC banana production has averaged approximately 750,000 mt annually,
historically amounting to 16% or less of total EC consumption.
38 Regulation 404, Whereas clauses 3 and 7, and Title III.
39 Id., Title III and Whereas clauses 3, 4, and 7.
40 Id. See also "A Tariff Only Regime for Bananas – W hy the Tariff Rate Should be Set at a Low
Level," Swedish Ministry of Agriculture, Food, and Consumer Affairs, 23 September 2004, pp. 3-4.
41 See "CAP Reform: Commission welcomes Council agreement on reform of banana regime," EC
Press Release, IP/06/1842, 19 December 2006, providing that € 280 million of ai d is provided to banana
growers as of 1 January 2007, with € 278.8 million transferred to the POSEI program and € 1.2 million to the
single payment scheme. This equates to $380 million at an exchange rate of € 1.36 = $1.
42 Council Regulation (EC) No. 2013/2006 of 19 December 2006 amending Regulations (EEC) No.
404/93, (EC) No. 1782/2003, and (EC) No. 247/2006 as regards the banana sector, OJ L 384/13, 29 December
2006, Whereas clauses 1 and 5.

aid.
43 The new payment level equates to a subsidy of $9.50 per box, an amount almost
equivalent to Latin America's entire per-box FOB, ocean freight, discharge, and handling
costs to the EC market.

The EC's border restrictions have served to "ring-fence" those ample subsidies as follows:

• From 1993 to the end of 2005, the EC's restric tive tariff-quota system created an artificially
high, stable internal price and "supply balance, " thereby better ensuring "profitable [grower]
prices" and fiscal predictability in subsidy outlays.
44

• Likewise, from 2006 forward, the EC has chosen a high tariff only a few digits lower than the
one rejected in Arbitration and a tariff quot a on competitive ACP bananas expressly for the
purpose of " ensur[ing] that Community production is maintained and that these producers
are not put in a less favourable situation as before the entering into force of its import quota
regime in 1993."45

Legal relevance

 Given that conditions of competition as betw een MFN and EC banana producers lost legal
relevance after the GATT Article I waiver lapsed, the EC's extensive, and now enlarged, banana
subsidy payments merely help set this dispute in its proper factual context.

 If the lapsed waiver standard (and, hence, conditions of competition) were still relevant,
however, prior WTO cases have found that MFN "competitive opportunities" are nullified or impaired
by the subsequent modification and enlargement of domestic subsidy measures.
46 Thus, under the
prior waiver standard, the EC's enlarged banana subsidy payments as of 2007 would simply have
reaffirmed that MFN conditions of competition are not being maintained by the current regime.

109. (Nicaragua and Panama) In paragraph 48 of their combined statement during the
substantive meeting with the Panel, Nicaragua and Panama argue that "[t]he EC itself appears
to recognize that its Article XIII defences are no t convincing. Why else would it still have a
request pending for a renewed Article XIII waiver to cover its exclusive ACP tariff quota under
an arrangement in which MFN bananas would sep arately be entered under a flat tariff?" Can
Nicaragua and Panama provide evidence of the factual assertions raised in this statement.

 The chronological sequence of the EC's renewed Article XIII waiver request
47 has been as
follows:

• On 31 December 2005, the EC's 2001 Article X III waiver for its exclusive ACP tariff-quota
expired.

43 Towards a Reform of the Internal Aspects of the Common Organisation of the Market in Bananas,
Consultation Document of the Impact Analysis Steering Group, 3 April 2006, p. 8.
44 Regulation 404, Whereas clauses 3, 4, 9, and 10; and Article 16.
45 European Commission, Communication from the Commission on the Modification of the European
Community's Import Regime for Bananas, COM (2004) 399, final, 2 June 2004, p. 4. (Emphasis added.)
46 Panel Report, Japan – Measures Affecting Consumer Photographic Film and Paper , WT/DS44/R,
adopted 22 April 1998, paras. 10.33-10.41 (emphasis added); EEC–Oilseeds I, paras. 142-151 (emphasis
added).
47 Request for Extension of a Waiver Under GATT Article XIII, Tariff Rate Quota for Bananas of ACP
Origin, G/C/W/529, 11 October 2005.

• On 7 October 2005, the EC requested an "extension" of that waiver until 31 December 2007
to cover its proposal to install as of 1 January 2006 a 775,000 mt ACP duty-free tariff quota in
combination with a 187 €/mt MFN tariff.
48

• On 10 March 2006, 9 May 2006, 12 July 2006, a nd 20 November 2006, the EC's Article XIII
waiver request was taken up by the Council for Trade in Goods ("CTG"). 49 In each of those
meetings, the Latin American supplier count ries raised concerns about the technical
deficiencies of that request and the unsettled nature of the banana dispute.

• On 19 March 2007, also in the context of a CTG meeting, the EC asked "to suspend the
discussions on [its] request for the extension of the Article XIII waiver ... until further
notice."50 The EC made clear at the time that although it was requesting a "delay" in the
debate on the waiver in light of the concerns raised by the Latin Americans, it was "definitely
maintaining its request," not withdrawing it.51

There has been no further action on the EC's waiver request since that time.

110. (Nicaragua and Panama) In their respectiv e third party submissions, Nicaragua and
Panama seem to argue that several drafting-histo ry considerations, subsequent developments
and contextual elements should be taken into account in interpreting Paragraph 9 of the
Framework Agreement on Bananas (BFA) ("[t]his agreement shall apply until 31 December
2002"). If so, can Nicaragua and Panama elaborate on the legal reasons as to why that should
be the case.

Interpretive framework

 The Panel's interpretation of the BFA shoul d be governed by the rules of the Vienna
Convention.

 Because the EC has argued that the terms of the BFA set a time limitation on its WTO
Schedule, and Ecuador, Nicaragua, a nd Panama have argued to the cont rary, an interpretation of the
EC's Schedule and BFA has become necessary.
52 As reaffirmed by the Appellate Body in U.S.-
Gambling, interpreting the text of a Member's Schedule "involves identifying the common intention of
Members, and is to be achieved by following the customary rules of interpretation of public
international law, codified in Articles 31 and 32 of the Vienna Convention ."53 The Panel should
accordingly interpret the ordinary meaning of the Schedule and BFA, taking into account contextual

48 Id.
49 See Council for Trade in Goods, Minutes of the Meeting of the Council for Trade in Goods –
10 March 2006, G/C/M/83, 1 May 2006, para. 5.2; Council for Trade in Goods, Minutes of the Meeting of the
Council for Trade in Goods – 9 May 2006 , G/C/M/84, 29 June 2006, para. 6.2; Council for Trade in Goods,
Minutes of the Meeting of the Council for Trade in Goods – 12 July 2006 , G/C/M/85, 14 September 2006,
paras. 4.1-4.4; Council for Trade in Goods, Minutes of the Meeting of the Council for Trade in Goods –
20 November 2006, G/C/M/86, 3 January 2007, paras. 6.1-6.3.
50 Council for Trade in Goods, Minutes of the Council for Trade in Goods – 19 March 2007 ,
G/C/M/88, 26 April 2007, paras. 3.2, 3.3. Exhibit N/P–4.
51 Id., para. 3.2.
52 See first written submission of the European Communities, 20 July 2007, para. 9 and para. 114 ("The
Annex, which is an integral part of the Schedules ... .") (emphasis added); second written submission of the
European Communities, 13 August 2007, para. 69.
53 Appellate Body Report, United States – Measures Affecting the Cross-Border Supply of Gambling
and Betting Services, WT/DS285/AB/R, adopted 20 April 2005 ("US – Gambling (AB)"), para. 159, citing EC –
Computer Equipment (AB), para. 109 (emphasis in original).

elements, objectives, drafting histories, and sub sequent developments, to determine the common
intention of Members respecting paragraph 9 and the other relevant text in question.
54

Text

 The clear text of the BFA and the EC's Schedule demonstrates that paragraph 9 of the BFA
did not set a time limitation on the EC's banana concession. As demonstrated by Panama and
Nicaragua in their written submissions, the ordinary meaning of the terms "final," "current access
quotas," and "concessions," used to define the banana commitments inscribed in the EC's Schedule,
cannot be reconciled with commitments that lap sed shortly after the Uruguay Round implementation
period.

 As further explained by Nicaragua in its r esponse to Question 107 above, the cross-reference
to the BFA in column 7 of the EC's Schedule does no thing to change the finality of those concessions.
While the BFA terminated itself, it did not term inate the EC's scheduled multilateral commitments,
nor could it due to its plurilateral nature.

Context and purpose

 The contextual elements reinforce that read ing. The BFA was intended to improve access for
the MFN signatories for the purpose of "settling" Bananas II . A €680/mt stand-alone tariff would
create a prohibitive regime as of 2003 worse than the one challenged in Bananas II.

 Likewise, multilateral concessions are intended to "yield rights and grant benefits,"
55 not erect
a stand-alone tariff higher than any the EC had ever scheduled before.

Subsequent practice

 As noted by the Appellate Body in US – Gambling, in order for subsequent "practice" within
the meaning of Article 31(3)(b) of the Vienna C onvention to be established "(i) there must be a
common, consistent, discernible pattern of acts or pronouncements; and (ii) those acts or
pronouncements must imply agreement on the interpretation of the relevant provision."
56

 Both of these cumulative conditions are satisfied here. The EC has consistently pronounced
that the banana commitments set out in its Schedul e are bound. Until this dispute, the EC continued
to state as much in public announcements, and conti nued to accord imports the treatment described in
its Schedule well after the purported 20 02 "termination" of its concessions. 57 Those pronouncements
and actions reflect the same understanding shared by the other parties to the BFA, the Latin American
signatories. Thus, subsequent practice confirms that the EC's €75 binding did not expire.

Supplementary means

 In US – Gambling , the Appellate Body relied on several supplementary means – including
explanatory notes on drafts of the US Schedule and Uruguay Round scheduling guidelines (the "1993
Scheduling Guidelines") – to complete its interpretation of the U.S. Schedule. 58 In this dispute, the

54 Even if the BFA is not integral to the EC's Schedule, it is nevertheless an agreement among States
that should be interpreted according to the rules of the Vienna Convention. See Panel Report, India – Measures
Affecting the Automotive Sector, WT/DS146/R, WT/DS175/R and Corr. 1, adopted 5 April 2002, para. 7.118.
55 Bananas III (AB), para. 154.
56 US – Gambling (AB), para. 192 (emphasis in original).
57 See Exhibit N/P-5.
58 See US – Gambling (AB), paras. 204-213.

original draft of the EC's Uruguay Round Sche dule proposed a bound tariff rate of 100 ECU/mt
without time limitations of any sort, confirming the absence of any EC intention to set a termination
date for its concession. Further, the Uruguay Round "Draft Modalities" from which these concessions
were formed, required the EC "to maintain, for tarrified products, current import access opportunities
at levels corresponding to those existing during the 1986-88 base period," meaning that "current
access" would need to be bound from that point forward.
59 The EC's suggestion that the BFA imposes
a termination date on its banana concession ignores that drafting mandate.

 Thus, every element of the required Vienna C onvention analysis confirms that the "common
intention" of WTO Members regarding the EC's sc heduled banana commitments was, and is, that
those commitments have no limitation in time.

111. (Nicaragua and Panama) In paragraph 50 of their combined statement during the
substantive meeting with the Panel,, under a nu mber of bullet points, Nicaragua and Panama
make reference to various documents, such as for instance "the EC's 1994 corrigendum". Are
the contents of this "EC's 1994 corrigendum" contained in the EC's Schedules LXXX and
CXL? Can Nicaragua and Panama specify the references to those documents that are not
annexed to their respective submissions and provide copies of the same, if possible.

The Corrigendum – Section 1-B of Schedule LXXX

 The EC's 29 March 1994 "corrigendum to the European Communities schedule of
concessions for agricultural products as regards ba nanas" was made part of the EC's Uruguay Round
Schedule LXXX, which governed the EC of 12. That corrigendum, set forth in Exhibits N-5 and P-5
of the third party written submissions of Nicaragua and Panama, contains Section 1-B (Tariff Quotas)
of Schedule LXXX, which reflects the EC's sche duled in-quota concession on bananas (75 ECU/t for
2.2 million tones) and, behind that, the BFA.

Section 1-A of Schedule LXXX

 The corrigendum did not include Section 1-A (Tariffs) of Schedule LXXX, which sets forth
the EC's Uruguay Round out-of-quota banana concessi on (850 ECU/t, to be reduced over the six-year
Uruguay Round reduction period to 680 ECU/t). Section 1-A (Tariffs) of Schedule LXXX is set forth
in Exhibits N-4 and P-4 of the third party written submissions of Nicaragua and Panama.

Schedule CXL

 Schedule CXL, governing the EC of 15, was submitted to the WTO on 28 February 1996, but
has never been certified by the WTO.
60 The banana commitments in Schedule CXL, which can be
found in Exhibit EC-1, are the same as those in Sections 1-A and 1-B of Schedule LXXX. As in
Schedule LXXX, the BFA appears in a separate Annex.
112. (Nicaragua and Panama) In paragraph 52 of their combined statement during the
substantive meeting with the Panel, Nicaragua and Panama argue that "there is ample paper
trail of EC acknowledgements that [the EC's] €75/mt concession would have to be accorded

59 Modalities for the Establishment of Specific Binding Commitments Under the Reform Programme,
Market Access, Annex 3, MTN.GNG/MA/W/24, 20 December 1993 (" Draft Modalities"). Agriculture:
Explanation: Market Access , www.wto.org/English/tratop_e/agric_e/ag_intro02_access_e.htm (last visited
14 August 2007).
60 See GATT, Procedures for the Modification and Rectification of Schedules of Tariff Concessions ,
L/4962, 28 March 1980.

Article II protection in the EC's move to 'tari ff only'." Can Nicaragua and Panama specify the
documents referenced and provide copies of the same, if possible.

 Since June 1999 when the EC first announced its proposal to move to a tariff-only regime to
comply with the Bananas III ruling, the EC has consistently made clear that its €75/mt in-quota
Uruguay Round rate has continuing bound effect (i.e. continuing coverage under GATT Article II). A
long list of EC statements confirming the continuing effect of the €75/mt concession and its obligation
to conduct Article XXVIII negotiations for any tariff ove r that rate (as well as the relevant documents
from which those statements are taken) can be found in Exhibit N/P-5.

ANNEX D-8

RESPONSES BY THE UNITED STATES
TO QUESTIONS POSED BY THE PANEL

93. (Both Parties and the US) Is there any particular reason why the Understandings on
Bananas that the EC reached with Ecuador a nd the US respectively in April 2001 were only
notified to the DSB more than two months later? Is there any reason why such agreements
were not notified jointly to the DSB by both parties to the respective agreements?

1. The Understanding between the United States a nd the EC was not itself a mutually agreed
solution, but only a step in the process that could have led to a mutually agreed solution. As a result,
Article 3.6 of the DSU did not apply to the Understanding, and there was no need to notify the
Understanding to the Dispute Settlement Body.

2. Without seeking the consent of the United St ates, in June 2001, the EC notified the EC-US
Understanding to the DSB and, incorrectly, asserted that the Understanding was a "mutually agreed
solution" for purposes of Article 3.6. In a co mmunication to the DSB on 26 June 2001, the United
States corrected the record by ex plaining that the EC-US Understanding was not a mutually agreed
solution for purposes of Article 3.6 of the DSU. The United States said:

As we have explained to the EC during bila teral discussions last week and indicated
at meetings of the DSB, the Understanding identifies the means by which the long-
standing dispute over the EC's banana im port regime can be resolved, but, as is
obvious from its own text, it does not in itsel f constitute a mutually agreed solution
pursuant to Article 3.6 of the DSU. In addition, in view of the steps yet to be taken
by all parties, it would also be premature to take this item off the DSB agenda.
1
94. (Both Parties and the US) Paragraph G of the Understanding on Bananas reached
between the EC and Ecuador of 30 April 2001 (documents WT/DS27/58 and WT/DS27/60),
states that "[t]he EC and Ecuador consider that this Understanding constitutes a mutually
agreed solution to the banana dispute". In turn, the Understanding on Bananas reached
between the EC and the US on 11 April 2001 (document WT/DS27/59), contain no equivalent
statement. What value, if any, should be given to the statement contained in Paragraph G of the
Understanding on Bananas reached between the EC and Ecuador? What value, if any, should
be given to the different language contained in both understandings regarding this issue?

3. The United States would leave to Ecuador and the EC, as the negotiators and drafters of the
Understanding between them, the question of what value to place on the language in Paragraph G of
the Ecuador-EC Understanding. In this regard, th e explanations expressed by Ecuador after the
unilateral notification by the EC of both th e Ecuador-EC Understanding and the EC-US
Understanding, would appear helpful. In a communication to the DSB
2, Ecuador emphasized that the
Understanding "identified means by which the long-st anding dispute" could be solved, but that the
Understanding was comprised of phases and required implementation of several key features
requiring collective WTO membership action. 3 Ecuador also noted that si nce "several steps" needed
to be taken, "it would be prematur e to take this item off the DSB agenda which considers this issue at
every regular meeting pursuant to Article 21.6 of the DSU." 4 Finally, Ecuador concluded that

1 WT/DS27/59, G/C/W/270, 2 July 2001, second paragraph.
2 WT/DS27/60, G/C/W/274, 9 July 2001
3 Id., para. 1.
4 Id., para. 3.

although it "sees the Understanding as an agreed solution that can contribute to an overall, definite
and universally accepted solution, it must be made cl ear that the provisions of Article 3.6 of the DSU
are not applicable."
5 (Emphasis added).

4. In any event, as the United States explained in its third party oral statement, whether the
Understandings were a "mutually agreed solution" or not is irrelevant. Nothing in the Dispute
Settlement Understanding (DSU) precludes a part y to a mutually agreed solution from having
recourse to the DSU. The US arguments on this point are set out in paragraphs 3 through 13 of its
third party oral statement.

101. (Ecuador, Nicaragua, Panama and the US) In paragraph 4 of its closing statement during
the substantive meeting with the Panel, referring to the alleged termination of the Doha Waiver,
the EC argues that "[i]f the Doha Waiver wanted to say what Ecuador, Nicaragua and Panama
are arguing, the text should have read that the waiver would terminate 'if the Arbitrator
concludes that the EC has failed to rectify the matt er'. The Doha Waiver does not say so." Can
Ecuador, Nicaragua and Panama provide a reasone d answer as to whether they agree with this
statement. Could the US comment on the same, in the light of its argument in paragraph 21 of
its statement during the substantive meeting wi th the Panel, reproduced in the previous
question.

5. The Annex clearly sets out a mechanism whereb y once an arbitrator found twice that the EC
had presented a tariff proposal that did not meet the conditions of the Annex, the waiver would
automatically expire once the new EC tariff regime went into effect. The EC argument ignores the
plain text of the waiver and the Annex. As the United States explained in paragraph 21 of its third
party statement, the phrase "[i]f the EC has failed to rectify the matter", at the beginning of the fifth
sentence in tiret 5 of the Annex, can only refer back to the determination required to be made by the
arbitrator pursuant to the third sentence of tiret 5. The fourth sentence requires that the arbitration
award be notified to the General Council. The fi fth sentence then provides the consequence arising
from such a notified arbitration award where the arb itrator found that the EC failed to "rectify the
matter" – the waiver shall cease to apply upon entry in to force of the new EC tariff regime. There is
no need to explain again in the fifth sentence that it was the arbitrator who had to conclude that the
EC had failed, since the sentence and the actions therewith flow from the preceding two sentences.
The EC's interpretation would "read" the role of the second arbitrator out of the Annex, allowing for a
unilateral determination by the EC itself that its new regime met the conditions of the Annex.

6. The United States notes that 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 bana nas under the relevant GATT Article XXVIII
procedures should result in at least maintaining total market access for MFN banana
suppliers and their willingness to accept a multilateral control on the implementation
of this commitment.
6
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", or unilateral choice
of banana import regime, by the EC.

116. (US) In paragraph 4 of its statement during the substantive meeting with the Panel, the
US argues that the Understanding on Bananas reached between the EC and US on 11 April 2001

6 Article I Waiver, Recital 11 (emphasis added ).

(document WT/DS27/59) "is not a 'covered agreement' – it is not listed in Appendix 1." Does
the US argue that, under the DSU, a panel should attribute no legal consequences to a mutually
agreed solution reached between the parties to a di spute? Does, in the view of the US, the fact
that a particular agreement between WTO Member s is not part of the list of "Agreements
Covered by the Understanding" in Appendix 1 of the DSU, mean that a WTO Panel should
attribute no legal consequences to such agreement in the context of a particular dispute?

7. With respect to the first part of the Panel' s question, in which the Panel inquires about the
legal consequences of a mutually ag reed solution, the United States wishes to begin by recalling that
the EC-US Understanding on Bananas is not a mutually agreed solution.

8. The United States recognizes that the EC-U S Understanding, as well as the Ecuador-EC
Understanding, are important documents. Indeed, there was great expectation that the Understandings
would serve as the path to the eventual resoluti on of the dispute. Nonetheless, the importance
ascribed to the Understandings is a separate matter from the question of whether any legal
consequences arise from them.

9. Turning to the question of the legal consequences of mutually agreed solutions in general, the
United States notes that the DSU does not itself prov ide for any legal consequences, with only three
exceptions. Article 3.6 requires that mutually agreed solutions be notified to the DSB and the relevant
Councils and Committees. Article 12.7 provides that the existence of a mutually satisfactory solution
reached prior to the conclusion of a panel proceed ing affects the form and content of the panel's
report: "Where a settlement of the matter among the parties to the dispute has been found, the report
of the panel shall be confined to a brief descrip tion of the case and to reporting that a solution has
been reached." Article 22.8 provides that "the susp ension of concessions or other obligations shall be
temporary and shall only be applied until such time as the measure found to be inconsistent with a
covered agreement has been removed, or the Member that must implement recommendations or
rulings provides a solution to the nullification or im pairment of benefits, or a mutually satisfactory
solution is reached." The fact that the legal con sequences of a mutually ag reed 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 EC would now attribute to such solutions.
There is therefore no basis in the DSU for attribu ting any legal consequences to a mutually agreed
solution other than the limited ones specified in Articles 3.6, 12.7, and 22.8.

10. In particular, there is no basis in the DSU, or elsewhere in the covered agreements, for the EC
argument that parties to a "mutually agreed solution" are precluded from having recourse to
Article 21.5 proceedings. The US arguments on this point are set out in paragraphs 6 through 13 of its
third party oral statement. Indeed, and as noted in our third party oral statement, the EC agreed with
this position in the India – Autos proceeding. There, the EC held the view that a mutually agreed
solution could not prevent recourse to the DSU. The EC argued that the relevant 1997 EC-India
Agreement was not a "covered agreement" in the sense of Article 1.1 of the DSU and therefore the
rights and obligations of the parties under the 1997 Agreement were not enforceable under the DSU.
7

11. Mutually agreed solutions are not "covered agreements" within the meaning of Article 1 of
the DSU. Indeed, a mutually agreed solution may not take the form of a written agreement at all. 8

7 Panel Report, India – Measures Affecting the Automotive Sector , WT/DS146/R, WT/DS175/R,
adopted 5 April 2002, para. 4.38.
8 There is no requirement in the DSU that the "mutually agreed solution" be in writing or even "agreed"
before the "solution" is accepted. For example, a responding Member may take an action on its own that is then
considered acceptable by the complaining party. At that point, after the action has been taken, the complaining
party may "agree" with the respondent that the action constitutes a "mutually agreed solution" that needs to be
notified pursuant to Article 3.6.

Since mutually agreed solutions are not "covered agreements," the dispute settlement mechanism of
the WTO is not available to enforce the provisions of mutually agreed solutions that take the form of a
written agreement. The EC position, if adopted by this Panel, would therefore lead to very
unfortunate consequences: a responding Member that failed to comply with the terms of a mutually
agreed solution would appear to be able to cl aim immunity both from further proceedings on the
original dispute (by virtue of the EC position on th e legal effect of mutually agreed solutions) as well
as from a claim under the mutually agreed solution (in view of the absence of mutually agreed
solutions from the list of covered agreements in the DSU). Nothing in the DSU suggests that a
complaining Member should lose its rights in such a way.

12. The second part of the Panel's question asks whether a WTO Panel should attribute no legal
consequences to an agreement between the parties in the context of a particular dispute. To be clear,
the United States has argued in this dispute that th e alleged mutually agreed solution between the EC
and Ecuador would not have the le gal consequences suggested by the EC – that is, to bar Ecuador
from bringing this proceeding. The United Stat es has not advanced, and would not support, the
proposition that any agreement between the parties is never entitled to legal consequences in WTO
dispute settlement. To the contrary, some DSU provisions provide explicitly for certain agreements to
have such consequences, for example, DSU Articles 4.3, 21.3(b), and 25. In addition, certain other
WTO agreements provide for legal consequences of agreements between Members; free trade
agreements meeting the requirements of Article XXIV of the GATT 1994 are one example. And, it
has sometimes been necessary to examine the legal consequences of an agreement among Members in
order to understand the meaning of a WTO legal oblig ation that makes reference to that agreement;
for example, in the original Bananas proceeding it was necessary to examine the Lomé Convention in
order to understand the waiver, adopted pursuant to Articles IX:3 and IX:4 of the Marrakesh
Agreement, for the then-extant EC bananas regime. And as noted above, in Articles 3.6, 12.7, and
22.8, the DSU does assign certain legal consequences to mutually agreed solutions.

13. However, in each such situation, it is an id entifiable provision of the covered agreements that
forms the basis for ascribing legal consequences within WTO dispute settlement to an agreement
other than a covered agreement. By contrast, in this proceeding, the EC has not identified – and
cannot identify – any WTO provision that would give the Understanding the legal consequences that
the EC claims. As a result, there is no basis for th is Panel to ascribe any such legal consequences to
the Understanding either.

ANNEX D-9

COMMENTS BY ECUADOR TO THE RESPONSES
OF THE EUROPEAN COMMUNITIES AND THIRD PARTIES

13. (Both Parties) In paragraph 43 of their respective third party submissions, Nicaragua
and Panama argue that the Latin American suppliers insisted on inserting, into the Bananas
Annex of the Doha Waiver, the sentence "If 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", which did
not appear in the original EC draft. Nicaragu a and Panama argue further that the insertion of
such sentence is an "explicit penalty for EC unilateralism following two arbitration losses",
without which the waiver would not have been approved. Can the Parties provide a reasoned
answer as to whether they agree with this statement.

Ecuador agrees with the response of Nicaragua and Panama and disagrees with that of the EC.
Further evidence that the EC once shared the view of Ecuador, Nicar agua and Panama is found in the
EC's closing statement to the Arbitrator:

Mr. Chairman, Distinguished Arbitrators, today, we all stand on a precipice. In one
week's time you will render your Award ... If the Award is negative, then all the
parties represented here fall off the precipi ce together. The landing risks to be hard.
The EC loses its waiver for the ACP prefer ence upon the entry into force of tariff-
only yet it is required, by the ACP-EC Part nership Agreement, to ensure preferential
treatment for ACP products.
1
15. (Both Parties) On what grounds does the EC argue that the phrase "suitable waiver" in
paragraph 6.158 of the report of the first EC – Bananas III compliance Panel should be
interpreted to mean a waiver from only Article I of the GATT 1994? On what grounds does
Ecuador argue that the same term should be interpreted as referring to a waiver to both
Articles I and XIII of the GATT 1994?

Ecuador reaffirms its response to Question 15, but wi shes to add further commen ts in response to the
EC argument that "extensive GATT and WTO practi ce" supports the EC argument that "exclusion
from a tariff quota" is a matter governed not by Article XIII, but by Article I. This aspect of the EC
response is contained in paragraphs numbered 38-44 of the EC response.

First, the EC renews its assertion that the Bananas III findings were not relevant because they
concerned a regime with multiple tariff quotas, while now there is only a single tariff quota with duty
free preference for ACP countries. However, nothing in the findings of the Bananas III Appellate
Body and Article 21. 5 reports suggests that it would make any difference how many tariff quotas a
country created. The Panel said, at paragraph 6.20 of the Article 21.5 report:

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 XIII. However, by definition, a tariff quota

1 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 (" AAII"),
Oral Statement by the Eu ropean Communities, 19 October 2005, para. 4, available at
http://trade,ec,europa.eu/wtodispute/show.cfm?id=239&code=2 (emphasis added).

is a quantitative limit on the availability of a specific tariff rate. Thus, Article XIII
applies to the 857,700 tonne limit.
2
The Appellate Body, in a finding cited by the Article 21.5 Panel, said:

The issue here is not whether the European Communities is correct in stating that two
separate regimes exist for bananas, but whether the existence of two, or more,
separate EC import regimes is of any re levance for the application of the non-
discrimination provisions of the GATT 1994 and the other Annex 1A agreements.
The essence of the non-discrimination obliga tions is that like products should be
treated equally, irrespective of their origin. As no participant disputes that all
bananas are like products, the non-discrimina tion provisions apply to all imports of
bananas, irrespective of whether and how a Member categorises or subdivides these
imports for administrative or other reasons. If, by choosing a different legal basis for
imposing import restrictions, or by applyi ng different tariff rates, a Member could
avoid the application of the non-discrimination provisions to the imports of like
products from different Members, the object and purpose of the non-discrimination
provisions would be defeated. It would be very easy for a Member to circumvent the
non-discrimination provisions of th e GATT 1994 and the other Annex 1A
agreements, if these provisions apply only within regulatory regimes established by
that Member.
3
Certainly there is nothing in the text of Article XIII of the GATT that could lead to another
conclusion. Article XIII:5 does not limit any aspect of the application of the provisions of Article
XIII to situations where there is more than one tariff quota or more than one regime.

As Ecuador has discussed in prior submissions, in accordance with the Bananas III rulings and
recommendations, the 2001 Understanding called for waivers of both Articles XIII and I to cover the
exclusive "interim" ACP tariff quota to be implemented by the EC in various stages prior to "tariff
only." The EC in fact obtained such waivers and s ought but did not obtain an extension of the Article
XIII waiver for its ACP tariff quota.

The EC has continued to seek approval of that Artic le XIII request, albeit feigning, in the light of its
unsuccessful pursuit of the waiver that a waiver is for security rather than necessity.
4
Against the plain language of Article XIII, the rulings in Bananas III, and this waiver practice, the EC
now argues in its response that "extensive practice" es tablishes that a waiver of Article I is sufficient
to cover a tariff quota whose preferential rate of duty is limited to a few countries and excludes
principal suppliers. However, the "practice " to wh ich the EC refers appears to be an EC assertion
that a few Members maintain or have maintain ed what the EC says are tariff quotas under their
respective generalized systems of preferences, not withstanding that the waiver for generalized
preferences, as originally granted and as incorpor ated in the Enabling Clause, was only a waiver of
Article I. The EC also points to a 1973 waiver of Article 1:1 for "tariff-free quotas for handicraft
products from South Pacific Islands."

2 Appellate Body Report, European Communities – Regime for Importation, Sale and Distribution of
Bananas, WT/DS27/AB/R, adopted 25 September 1997 ("Bananas III (AB)"), para. 190.
3 Panel Report, European Communities – Regime for the Importation, Sale and Distribution of
Bananas – Complaints by Ecuador, Guatemal a and Honduras, Mexico, and the United States , WT/DS27/R,
adopted 25 September 1997, para. 7.69. ("Bananas III (Panel)"), as modified by Bananas III (AB).
4 Although the EC "suspended" discussion of the proposed extension on 19 March 2007, the EC stated
at the time that it was "definitely maintaining its requ est," not withdrawing it. C ouncil for Trade in Goods,
Minutes of the Council for Trade in Goods – 19 March 2007 , G/C/M/88, 26 April 2007, para. 3.2. Exhibit
N/P-4.

As the EC would have to agree, the Enabling Clause and GSP preferences are not at issue here. If
they were, the EC would be requi red to extend GSP preferences to all similarly-situated developing
countries, including the Latin American supplying c ountries, which it has never been willing to do in
the case of bananas. Neither are the measures of other countries that the EC says are tariff quotas at
issue in this dispute, including the measures for ha ndicraft products of South Pacific Islands. It may
be that the measures are not tariff quotas, or have some other justification, or it may be that the
measures, if challenged under Article XIII, would be found inconsistent with the obligations of the
countries concerned. None of that is relevant. It is not a defense for the violations of any WTO rules
that the defending party thinks that other countries may also violate that rule , nor does the absence of
a challenge of particular measures establish that tho se measures are consistent with the rules. There
are many instances in which measures so very lo ng standing have been f ound inconsistent with WTO
rules when finally challenged; th e EC's successful challenges of Ca nada's automotive measures thirty
five years after they were instituted or FSC measures of the United States taxation measures nearly 20
years after they were implemented are just two examples.
5

The EC's effort, even now, to try to induce this Pa nel on such a flimsy basis to ignore the provisions
of Article XIII and overrule prior rulings only under lines the need for this Panel to rule on all of
Ecuador's claims.

16. (Both Parties) In paragraph 96 of its first written submission, the EC states that "the
text of GATT Article XIII, paragraph 1 makes cl ear that a Member can successfully claim that
another Member's measures violate the provisions of GATT Article XIII, only if its can show
that... the allegedly offending Member imposes a prohibition or restriction on products
originating from the complaining Member and, in principle, there is a nullification and
impairment of a benefit accruing to the complaining Member". Can the EC elaborate its
arguments in support of each of these propositions , i.e. that in order to make a successful claim
under Article XIII:1 of the GATT 1994, the complaining Member must show: (a) that the
challenged measure must be a prohibition or restriction on products originating from the
complaining Member; and, (b) that there is a nullification and impairment of a benefit accruing
to the complaining Member. Can Ecuador provide a reasoned answer as to whether it agrees
with the arguments raised by the EC.

The EC responds as if Article XIII:1 provided that no benefit could be conferred on products of a
Member unless the same benefit were conferred on every other country, including non-members. The
EC then becomes very angry with the straw man it has created. However, unfortunately for the EC,
the prohibition in Article XIII:1 is against imposing a restriction on products of a member if products
of other countries are not similarly restricted. In the case of any tariff quota, the restriction is the
higher duty imposed on imports not benefiting from th e preferential tariff quota. The EC can impose
any higher duty it wishes on non-members. What the EC cannot do under WTO rules is consign
Ecuadorian and other MFN bananas to the high duty, while excluding them from fair participation in
the zero duty tariff quota.

22. (Both Parties) In paragraph 10 of its stat ement during the substantive meeting with the
Panel, Brazil argues that "the EC abruptly ju mps to the flawed conclusion that because the
Member has chosen to implement a suggestion by the panel such Member would always be in
compliance with its obligations under the covere d agreements." In paragraph 11 of the same
statement, Brazil adds that "[i]n no provision does the DSU grant Members certainty as to the
'lawfulness' of a measure taken to comply just because such measure is intended to implement a

5 Appellate Body Report, Canada – Certain Measures Affecting the Automotive Industry ,
WT/DS139/AB/R, WT/DS142/AB/R, adopted 31 May 2000; Panel Report, United States – Tax Treatment for
"Foreign Sales Corporations", WT/DS108/R, adopted 8 October 1999.

suggestion made by a panel. 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." Can the Partie s provide a reasoned answer as to whether they
agree with Brazil's argument.

Among the myriad of fallacies in the EC argument, it is perhaps sufficient to note again here that
accepting a panel report, unconditionally or otherwise, does not mean accepting the wholly unfounded
interpretation that the other Party in the dispute opts to impute to a suggestion in the Panel report.

25. (Both Parties) Paragraph 9 of the Framew ork Agreement on Bananas (BFA) annexed to
the EC Schedules provides that "[t]his agreement shall apply until 31 December 2002"
(Emphasis added). Could it be concluded fr om this language that only the Framework
Agreement on Bananas annexed to the EC Sc hedules expired on 31 December 2002, but not
Section I B of the EC Schedules, where the tariff rate quota (TRQ) is also indicated? Please
provide a reasoned response.

Throughout this proceeding, the EC has been unable to point to a single EC act or pronouncement
from 1994 forward that supports its contention that the BFA terminated the EC's in-quota banana
concessions as of 31 December 2002. Every uttera nce the EC has made on the matter until this
dispute settlement proceeding demonstrates implicitly or explicitly that the EC considered the 75
Ecu/mt concession on 2.2 million mt to have no termination date.

The EC errs in thinking it was necessary to st ate that the concession was perpetual, because
concession are presumed to be without time limit, al l the more so in light of the modalities governing
the agriculture negotiations, of which the EC is quick to claim the advantage when it suits. The
concession does not state that it was granted as indicated in the Annex, but that the further conditions
were as indicated in the Annex.

The EC's argument that it's newly discovered termin ation theory for the banana concession gains is
justified by the hopes of EC internal regulations is not serious. The EC argues that the date of
termination of the BFA was designed to coincide w ith the date in 2002 on which the EC's internal
regulation of 1993 aspired that the EC would be able to have a new banana regime. This is not
credible, as there is no evidence even from the EC that even BFA signatories were aware of or
considered credible, let alone bi nding, the EC's ten year projections for it to undertake reforms.
Certainly WTO members cannot be charged with ag reeing that the EC's vague and unilateral plans
should inform the understanding of the EC's tariff quota concession in this regard.

Even the EC's own authors of the EC's final repor t on the operation of the EC banana regime fully
understood that those in-quota concessions would endure . When the EC issued that report in 2005, it
confirmed (yet again) that "Quota A" covered "2.200.000 tonnes at a bound tariff rate of EUR 75/t."
6

80. (EC) In paragraph 99 of their respect ive third party submissions, Nicaragua and
Panama argue that the EC's "legal instruments, WTO assertions, and other official statements
consistently confirm the enduring validity of a €75/mt concession". Nicaragua and Panama
further argue that examples have already been referenced by Ecuador, and offer the following
additional ones: (a) In Regulation 216, the EC would have explicitly referenced a tariff quota of
2 200 000 tonnes at a rate of €75 as bound in the WTO until the entry into force of a tariff-only
regime; (b) In its GATT Article I waiver discussi ons, the EC confirmed it intended to adopt a
tariff-only system in 2006, which would entail a re- binding of its 75 and 680 €/tonne bound rates
under the relevant procedures of Article XXVIII of the GATT 1994; and, (c) In an internal

6 Report from the Commission to the European Parliament and the Council on the Operation of the
Common Organisation of the Market in Bananas (SEC(2005) XXX), COM(2005 50 final, § 1.4.1

communication to its own Member States, the EC confirmed that, should the Community wish
to move to a tariff-only system at a rate hi gher than €75/t., GATT Article XXVIII provided that
such modification should be notified to all GA TT Contracting Parties. Can the EC confirm the
accuracy of the factual assertio ns raised by Nicaragua and Panama, and provide a reasoned
answer as to whether it agrees with the arguments raised by these Members.

The EC asks the Panel to believe that in November of 2001, knowing that (according to the EC) the
binding on the 75 Ecu/mt tariff quota was going to expire leaving in place (according to the EC 2007)
only the 680 Ecu/mt duty, the EC was unclear what tariff binding the EC would agree with banana
suppliers in the future. Ecuador asks that the Panel, in evaluating the credibility of the EC in asserting
to this panel that the tariff concession expired 31 December 2002, consider not only the language of
the concession and the consistent record of the EC and the WTO until this Panel proceeding, but also
that the EC has repeatedly argued that statements it makes in a dispute settlement proceeding (at least
in regard to this topic) should be dismissed if "erroneous" or made "in the heat of litigation.".

ANNEX D-10

COMMENTS BY THE EUROPEAN COMMUNITIES TO THE
RESPONSES OF ECUADOR AND THIRD PARTIES

QUESTIONS ADDRESSED TO PARTIES

2. (Both Parties) How has the EC been applying the MFN tariff of €176/mt to individual
imports? What volume and share of its imports have been subject to that tariff?

1. The European Communities notes that there are certain mistakes in the market data provided
by Ecuador. For example, Ecuador's data shows in Exhibit ECU-6 that Uganda imported 1,128 mt of
bananas into the European Communities in year 2006, while the correct figure is only 28 mt.
1
9. (Both Parties) In paragraph 38 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that "[i]t will be recalled that the waiver in any event expires 1 January
2008, but the MFN duty continues, and will be th e margin of preferen ce for any preferences
that the EC grants inconsistent with WTO rul es into the future, past 2007. It will be recalled
that the EC had made plain its intent to use no t only the 'Everything but Arms' initiative but
also WTO-conforming free trade agreements to ca rry on with preferences past 2007. Further,
even if the EC were to grant no future pref erences, the duty will restrict future banana
imports." Can Ecuador elaborate on these arguments, and can the EC provide a reasoned
answer as to whether it agrees.

2. Ecuador's response to this question is not correct for a number of reasons. First, the market
data establishes that the domestic banana produc tion of the European Co mmunities has decreased
following the introduction of the new import regime on 1 January 2006. Therefore, Ecuador's
assertion that the tariff currently applied to banana imports "protects EC domestic banana production"
more than the import regime in place prior to 1 January 2006 is factually incorrect. Second, the
market data also shows that im ports from the group of MFN suppliers grow at a higher rate than
imports from the group of ACP suppliers. Therefore, Ecuador's assertion that the tariff currently
applied does not maintain the pre-2006 total market access of the MFN group of suppliers vis-à-vis
the group of ACP suppliers is factually incorrect. Th ird, the conditions for the continued existence of
the Doha Waiver until the end of 2007 have no re lation to any market developments that may occur
after the expiration of the Doha Waiver and the Cotonou Preference (i.e. after 31 December 2007).
Therefore, Ecuador's assertions are not relevant for the proceedings before this Panel.
12. (Both Parties) In paragraph 26 of its first written submission, Ecuador argues that
"[t]he burden is on the EC if it wishes to claim that it still has a valid waiver with respect to
bananas, and that this waiver covers the EC meas ures at issue. [E]ven if the burden were on
Ecuador …" Could the Parties develop their lega l arguments as to which of them should bear
the burden of proving that the Doha Waiver is st ill valid and whether it covers the EC measure
at issue.

3. The European Communities does not agree with what Ecuador
 states in its response to the
Panel's questions. The European Communities believ es that Ecuador's arguments are manifestly in
contradiction with the settled case-law.
4. The basic rule concerning the allocation of burde n of proof in WTO disputes has been clearly
established in US – Wool Shirts and Blouses , where the Appellate Body st ated that "the burden of

1 See Exhibit EC-19. Source of data: Eurostat.

proof rests upon the party, whether complaining or defending, who asserts the affirmative of a
particular claim or defence. If that party adduces evidence sufficient to raise a presumption that what
is claimed is true, the burden then shifts to th e other party, who will fail unless it adduces sufficient
evidence to rebut the presumption."2
5. The situation in the current proceedings is very different from that of the European
Communities-conditions for the granting of tariff preferences to developing countries. In that case the
contested measure was considered to be in viol ation of Article I, unless covered by the Enabling
Clause. In our case it is undisputed that the WTO has granted a waiver covering the Cotonou
Preference and that such waiver is in force until proven to have terminated.
6. In the first written submission of Ecuador, Ecuador argues that:
"Pursuant to [the] provisions [of the two U nderstandings on Bana nas], and with the
participation and consent of other WT O members, suitable GATT Article I and
GATT Article XIII waiver conditions appli cable to bananas were negotiated and
granted at the Doha Ministerial Conference in November 2001. As discussed more
fully below, the Article I Waiver include d an Annex on bananas requiring that the
EC's future tariff-only regime "result in at least maintaining total market access for
MFN banana suppliers," taking into account "all EC WTO market-access
commitments relating to bananas ...". In the event of disagreement over whether the
proposed regime met the conditions of the Annex, the Annex provided for arbitration.
If the EC was found by the Arbitrator twice to have failed to satisfy the terms of the
Annex standard, the waiver of Article I w ith respect to bananas would expire. In
2005, the EC twice proposed a new MFN rate for bananas that was, in each case,
challenged by substantial suppliers and re jected by Arbitrators as not meeting the
standards of the Article I waiver. The EC , nevertheless, proceeded to impose a new
MFN duty at €176/mt, with a tariff rate quota for ACP countries at a zero duty for
775,000 mt., notwithstanding the termination of the Article I waiver with respect to
bananas."
3
7. It is therefore evident that Ecuador's ac knowledges that the Cotonou preference enjoyed a
legally valid waiver from Article I of the GATT 1994 but claims that, following the two arbitrations,
that waiver has ceased to apply. Therefore, Ecuador, as a Party asserting a fact, ought to prove that its
arguments regarding the termination of the Doha Waiver are founded. The European Communities
submits that Ecuador has failed to discharge such burden of proof.
14. (Both Parties) Under the fifth tiret of the Bananas Annex of the Doha Waiver, can
Parties identify the specific conditions listed ther ein and explain how many of those would have
to be fulfilled for the waiver to cease to apply to bananas?

8. The European Communities has already provided its interpretation as to the conditions that
had to be satisfied in order for the Doha Waiver to be terminated at the end of 2005. The European
Communities considers that these conditions have not been satisfied and, therefore, that the Doha
Waiver continues to exist until the end of 2007.
9. Ecuador seeks to rely on Article XXVIII in order to support its claims. The European
Communities notes that Article XXVIII provides the framework through which WTO Members are
supposed to negotiate. Contrary to Ecuador's as sertions, a failure to reach a negotiated agreement
cannot be impugned only upon one of th e negotiating parties. Ecuador and the Third Parties that

2 Page 14.
3 Paras 11 to 13.

support it in these proceedings prevented the successful conclusion of the negotiations by not agreeing
with the proposals of the European Communities. In fact, Ecuador still prevents the successful
conclusion of the negotiations toda y, by initiating these proceedings. Therefore, Ecuador cannot rely
on the non-conclusion of the negotia tions to support its claims, b ecause this non-conclusion is as
much its fault as it is the fault of the other negotiating parties.
10. The European Communities considers that this interpretation is in accordance with the
principle of good faith ( bona fides ), which is enshrined in Article 31 of the Vienna Convention,
according to which "a treaty shall be interprete d in good faith in accordance with the ordinary
meaning to be given to the terms of the treaty in their context and in the light of its object and
purpose". Accordingly, in Korea – Procurement , the panel found that this principle, expression of a
principle of public international law, must be taken into account by WTO adjudicating bodies.
16. (Both Parties) In paragraph 96 of its first written submission, the EC states that "the
text of GATT Article XIII, paragraph 1 makes cl ear that a Member can successfully claim that
another Member's measures violate the provisions of GATT Article XIII, only if its can show
that... the allegedly offending Member imposes a prohibition or restriction on products
originating from the complaining Member and, in principle, there is a nullification and
impairment of a benefit accruing to the complaining Member". Can the EC elaborate its
arguments in support of each of these propositions , i.e. that in order to make a successful claim
under Article XIII:1 of the GATT 1994, the comp laining Member must show: (a) that the
challenged measure must be a prohibition or restriction on products originating from the
complaining Member; and, (b) that there is a nullification and impairment of a benefit
accruing to the complaining Member. Can Ecuado r provide a reasoned answer as to whether it
agrees with the arguments raised by the EC.

11. The European Communities has already provided its views on the proper interpretation of
Article XIII and its application to facts such as those faced by the Panel in this case. The Bananas III
panel, which dealt with facts that were complete ly different from the facts of the present case, can
hardly have intended in this single sentence to reject a well-established GATT practice in this regard.
12. In any event, in accordance with DSU Ar ticle 3.8, the European Communities has
demonstrated that subjecting the tariff preference granted to ACP countries to a "cap" does not cause
Ecuador any "nullification or impairment".
23. (Both Parties) The Understanding on Bana nas signed by the EC with Ecuador and the
US seems to include references, in both Phases I and II, to a bound tariff-rate quota, designated
as "quota 'A'", of 2.2 million metric tons with an in-quota tariff rate not exceeding €75/mt, that
would possibly extend beyond the end of 2002. Ca n Parties provide a reasoned answer as to
whether they agree with this reading of the Understanding. Can the EC explain how this can be
reconciled with its argument that the TRQ expired at the end of 2002, considering that the EC
has been arguing for the binding nature of the Understanding on Bananas and that it would
constitute a mutually agreed solution?

13. The European Communities notes with satisfaction that Ecuador does not
 claim that the
Understanding amounted to a rebinding of the Euro pean Communities' concession for the 2.2 million
tons of bananas. The European Communities agrees with this position and, therefore, for purposes of
these proceedings it is undisputed that the Understa nding does not have the effect of rebinding this
concession.
28. (Both Parties) In paragraph 69 of its stat ement during the substantive meeting with the
Panel, Ecuador argues that "[t]ariff quota conces sions can be withdrawn, but the withdrawing
member must follow Article XXVIII procedures which the Doha Waiver required and the EC

failed to do." Can Ecuador clarify in what specific way the EC has "failed" to follow
Article XXVIII procedures and what would be the legal consequences of such failure. Can the
EC provide a reasoned answer as to whether it agrees with Ecuador's assertion that it has failed
to follow Article XXVIII procedures.

14. As the European Communities has already expl ained, the only binding in its Schedules of
Concessions on 1 January 2006 was for a tariff of €680 per ton of bananas imported. An applied tariff
of €176 per ton constitutes neither a "rebinding in violation of Article XXVIII", nor a violation of
Article II. Therefore, Ecuador's claims are factually incorrect.
15. Moreover, as already mentioned, the European Communities initiated the negotiations in full
compliance with the provisions of the Doha Waiver. However, it takes two parties to reach an
agreement in negotiations. Ecuador cannot put the blame solely on the European Communities for the
fact that a negotiated agreement has not yet been reached.
QUESTIONS ADDRESSED TO ECUADOR

29. (Ecuador) Can Ecuador expand on the factual information provided in Chart 1 of its
first written submission by providing annual da ta (and their sources) for each year from 1999
(where "EC" refers from 1999 to 2003 to EC15 and from 2004 to 2006 to EC25, but, if possible,
also show separately EC15 from 2004 to 2006; and for the first half of 2007 for EC27) for the
following:

(a) Volume, FOB value and average unit value (in Euros/mt and USD/mt) of
banana exports from Ecuador to the EC, and to the rest of the world;
(b) Share (percentage) of banana exports from Ecuador going to the EC, in
volume and value terms;
(c) Share (percentage) of total volume of banana exports by Ecuador going
to the EC divided by the EC's share of global banana imports; and,
(d) Amount of duties paid to the EC for the importation of bananas from
Ecuador for each of the years specified above.
16. The European Communities has some doubts on the accuracy of certain figures provided by
Ecuador
 in the Exhibits ECU-8, ECU-9, ECU-10 as well as in its in response to Panel's questions 29,
30, 31, 32, 33, 34, and 35. For instance, the European Communities obser ves a major discrepancy
between the data contained in Exhibit ECU-8, part (a) continued, under B (world imports from
Ecuador) and the answer provided by Ecuador to qu estions 29-35, page 2, table on volume exports
from Ecuador. Some differences between these tables are quite significant (for instance, in 2006, more
than 550,000 tons).
17. The European Communities would like to point out that the figures it had provided in its own
submissions on this point were taken from the Ecuadorean Central bank (Exhibit EC-13 Table 9).
18. The discrepancies signalled above appear, in turn , to affect the shares in Exhibit ECU-8,
part (b), since it seems that worldwide exports taken into account in this table could be higher than the
real ones. Therefore, the European Communities considers that this table may not be accurate.
19. In addition, the same problem seems to arise w ith regard to the data on world imports shown
in part (c) of same Exhibit. Indeed, FAO data on world imports and exports are much lower than those

shown in Exhibit ECU-8, part (c). So, the EC's sh ares of global imports indicated under letter G may
not be completely correct.
20. Import and export data, as provided by FAO are enclosed in Exhibit EC-20.
30. (Ecuador) Chart II in Exhibit ECU-3 refers to "Imports of Bananas by The EU – 27"
for the years 2005-2007. In regard to this chart, could Ecuador:

(a) Explain how it calculated the figures for 2005-2006, i.e. before the
enlargement of the EU to 27 member States;
(b) Clarify whether the figures for 2007 are estimates and, if so, explain the
calculations involved; and,
(c) State whether the figures for 2007 need any rectification, in the light of
any relevant subsequent events since the submission of Ecuador's first
written submission.
21. See above, paragraphs 16 and seq.
31. (Ecuador) In paragraph 46 of its first written submission, the EC mentions that
"although the group of MFN countries (to wh ich Ecuador belongs) has seen a spectacular
increase in the volumes exported into the European Communities since 1 January 2006,
Ecuador has experienced a slight reduction in its own exports: its 2006 volumes were
approximately 3.6% below its 2005 volumes." In paragraph 7 of its opening statement during
the substantive meeting with the Panel, the EC goes on to argue that "[t]he group of MFN
banana suppliers had never exported so many bananas into the European Communities as it did
in 2006." Can Ecuador provide a reasoned answer as to whether it agrees with these
statements. If so, what are the reasons to expl ain the decrease in EC imports of bananas from
Ecuador, accompanied by an apparent increase in the EC imports of other MFN bananas?

22. Ecuador submits market data that are not relevant to the issues before this Panel and that seek
to confuse the issues. First, the Doha Waiver obliged the European Communities to maintain the total
market access of the group of MFN suppliers. This means that the relevant periods that must be
compared are (i) the period under the new import re gime (i.e. 2006 and the first 6 months of 2007)
with (ii) the period under the old regime (i.e. 1 January 2002 until 31 December 2005). Therefore,
Ecuador's comparison of the export performance of the MFN and ACP countries between 1999 and
2005 has no relation to the question of whether the standard of the Doha Waiver has been satisfied. In
contrast, the European Communities has provided ma rket data comparing the relevant periods and
establishing that the MFN suppliers' market access was more than maintained under the current
regime.
23. Second, as already explained, it is not necessar y any more to use the methods used by the
Arbitrators prior to the introduction of the current import regime of the European Communities. At
that time, the Arbitrators were trying to predict the future and were relying on various assumptions
and models. This is not needed anymore, given that there is now ample evidence and market data
from the real operation of the import regime that establishes that the MFN suppliers' market access
has been more than maintained.
24. Third, the table provided by Ecuador confirms the fact that the MFN suppliers exported to the
European Communities larger quantities of bananas in 2006 than in any other year since 1999.

25. Finally, Ecuador chooses not to provide any mark et data for 2007. As already explained,
these data confirm the trends observe d in 2006 and establish that the growth in MFN imports is larger
than the growth in ACP imports.
32. (Ecuador) In paragraph 50 of its first written submission, the EC argues that:

"there is ample evidence that Ecuador's banana industry is facing a number of
difficulties that have nothing to do with the new import regime of the European
Communities. These difficulties include:
(i) Adverse climatic conditions negatively affecting the 2006 production:
the drought at the end of 2005 was followed by heavy rain at the
beginning of 2006.
(ii) According to Aprobanec, the Asso ciation of banana growers in Quevedo,
Ecuador’s banana production was significantly damaged by the eruption
of the volcano Tungurahua on August 16, 2006. The volcano caused
significant damage to approximately 35% of the banana plantations in
the Los Rios province, which produces about 30% of all Ecuadorian
bananas.
(iii) Ecuador introduced certain administrative measures that encouraged
traders operating in the European Communities' market to source
bananas from other countries. For example, a letter sent by the
Association of German Fruit Importers to Mr. Rizzo, Minister of
Agriculture in Ecuador on 15 Augu st 2006, expresses the discontent of
the German traders with an Ecuadorian decree providing that the fruit
should be inspected only at the plantation and not at the port. This
administrative measure incited German traders to source bananas from
other MFN countries, neighbouring Ec uador. Another administrative
measure with a similar effect on European traders was adopted in
August 2006: it imposed a minimum price of $3.25 per box and obliged
exporters to pay producers via the Central Bank." (Footnotes omitted)
Can Ecuador provide a reasoned answer as to whether it agrees with these assertions.

26. The European Communities notes that Ecuador's response does not deny the accuracy of the
facts mentioned in the first submission of the European Communities. The European Communities
considers that these facts have affected the decisi ons of traders sourcing bananas for the European
markets and helps explains the reasons for the sm all reduction in the quantities of bananas exported
from Ecuador into the European Communities. Th e European Communities al so notes that, despite
these problems, the quantity of bananas exported from Ecuador into the European Communities in
2006 is greater than the quantity of bananas exporte d in 2004 (under the old import regime). This
confirms that the new import regime has not restricted in any way Ecuador's market access into the
European Communities.
27. Further information on the adverse climatic conditions are included in Exhibit EC-21 and
Exhibit EC-22. The former is a report publishe d on the web-site of FAO in May 2006 which
specifically describes the effects of the adverse climatic conditions on the bananas production of,
among other countries, Ecuador
4. The latter is a general description of the heavy rainfall and flooding

4 http://www.fao.org/es/esc/en/20953/20987/highlight_107821en.html

which occurred in Ecuador in year 2006, and is taken from the web-site of NOAA's Satellite and
Information Services
5.
28. In Exhibit EC-23 also it is also shown that Ecua dor is diverting some of its sales to countries
other than the European Communities and the United States (e.g. Russia, Ukraine etc.) where it can
have better prices, and that its plantations suffer of some structural problems in comparison to other
MFN bananas producers (e.g. Costa Rica and Colombia).
37. (Ecuador) Can Ecuador confirm that it si gned an Understanding on Bananas with the
EC on 30 April 2001, the text of which is reproduced in documents WT/DS27/58 and
WT/DS27/60. If so, did the legal and factual assumptions based upon which Ecuador signed
such understanding on 30 April 2001 change by June 2001 when the Understanding was notified
to the DSB?

29. The European Communities notes that the text of the Understanding itself provides that it is a
"mutually agreed solution". The European Communities has never understood what prompted
Ecuador to seek to re-characterise the legal nature of the Understanding after its signing. In any
event, Ecuador's unilateral statement cannot affect the legal nature of the Understanding as established
by the Understanding's express provisions and its general content.
38. (Ecuador) Paragraph G of the Banana U nderstanding provides that "[t]he EC and
Ecuador consider that this Understanding constitu tes a mutually agreed solution to the banana
dispute." Why did Ecuador then state in its notification of the Understanding to the DSB
(document WT/DS27/60) that "although Ecuador sees the Understanding as an agreed solution
which can contribute to an overall, 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"? Please
provide a reasoned response.

30. The European Communities notes that Ecuador's response confirms its desire to avoid
compliance with the provisions of the Understanding by seeking to re-characterise its legal nature.
The European Communities respectfully requests the Pa nel not to allow Ecuador to distort to true
nature of the Understanding.
40. (Ecuador) In paragraph 4 of its statement during the substantive meeting with the
Panel, Suriname argues that "[i]n this case th ere can be no doubt that a mutually agreed
solution exists. Therefore, there cannot be any disagreement in the sense of Article 21.5 of the
DSU." Provided that a mutually agreed solution exists, can Ecuador provide a reasoned answer
as to whether it agrees with Suriname's conclusion in regard to Article 21.5 of the DSU.

31. Ecuador
 merely states that it disagrees with Suriname's assertion for two reasons: (i) there is
no provision of the DSU that precludes bringing a complaint under Article 21.5 even if presence of a
mutually agreed solution, and (ii) such a rule woul d be a "disincentive for parties to try to negotiate
solutions".
32. On the former, paraphrasing Ecuador's statemen t, one could argue that there also is no
provision of the DSU which precludes a Panel to take into account a mutually agreed solution. On the
contrary, the European Communities believes that bilateral agreements between WTO members form
part of the "applicable rules of law" between the part ies to the dispute, in conformity with Article 31,
paragraph 3(c) of the Vienna Convention on the La w of Treaties. On the latter, the European
Communities believes that, actually, the contrary of what Ecuador states holds true. In fact, were
WTO Members free to disregard their commitments pr ovided for in a mutually agreed solution, this

5 http://www.ncdc.noaa.gov/oa/climate/research/2006/mar/hazards.html

would really be a disincentive for parties to negotiate solutions. In fact, the value of a mutually agreed
solution would be largely thwarted by such a rule.
33. In this context, the European Communities not es that even the Unites States does not argue
that mutually agreed solutions cannot not be taken into consideration by the DSB. In its answer to
Panel's question 101, the Unites States in fact asserts that "[t]he United States has not advanced, and
would not support, the proposition that any agreemen t between the parties is never entitled to legal
consequences in WTO dispute settlement."
42. (Ecuador) Is Ecuador arguing that any non-reciprocal preferential quota can be WTO-
consistent only if covered by an Article XIII wa iver? Alternatively, could other provisions in
WTO agreements, such as the Enabling Clause or Article XXIV of the GATT 1994, also excuse
such non-reciprocal preferential quotas from inconsistency with WTO obligations, in the
absence of an Article XIII waiver?

34. As the European Communities has shown in paragraphs 35 to 45 of the European
Communities' Answers to the Panel's Questions , the GATT CONTRACTING PARTIES repeatedly
authorized the use of tariff quotas by granting waiv ers, such as the Enabling Clause, which covered
Article I but made no reference to Article XIII. In the form of the Enabling Clause, at least, they
continue to operate and to be taken advantage of under the WTO in order to justify exclusion from
preferences granted by tariff quotas. These waiver s and their application constitute concordant,
common and consistent practice and as such are ‘subsequent practice’ within the meaning of
Article 31(3)(b) of the Vienna Convention on the Law of Treaties indicating that Article XIII does not
regulate exclusion from tariff quotas.
35. Another example of such waivers from Article I:1 of the GATT regarding tariff quotas is the
Italy – Preferences for Libya Decision of 9 October 1952 (see Exhibit EC-24).
6 One can observe that
a waiver from Article XIII was neither considered necessary, nor ever discussed.
45. (Ecuador) In what way should paragra ph 9 of the Framework Agreement on Bananas
(BFA) be interpreted, if not to establish an expira tion of a 2.2 mt tariff rate quota (TRQ)? In
other words, what exactly has expired, under the terms of paragraph 9, on 31 December 2002?

36. The European Communities disagrees with Ecuador 's answer to the present question. The
European Communities does not understand the reasons why – according to Ecuador - other parts of
the BFA have expired at the end of year 2002, while the €75/mt concession has not.
37. Ecuador's assertion that "the EC made that concession independently in its schedule" is
simply untrue, considering that the Schedule of the European Communities makes an explicit
reference to its Annex for the "terms and condition" applying to that concession.
46. (Ecuador) In paragraph 93 of its seco nd written submission, the EC argues that:

"Ecuador's second written submission goes on to assert in paragraphs 69 and 70
that 'eliminating the volume restraint element of a tariff quota does not
authorize ignoring the tariff binding'. In other words, Ecuador seems to imply
that once a tariff quota is granted in a WTO Member's schedules, the tariff part
somehow becomes obligatory and perpetual, while the quota part may be freely
eliminated. This assertion is not supported by any provision of WTO law and

6 The Exhibit contains a copy of the mentioned decision (document L/2824, p. 7) as well as a copy of
the Report by the Working Party on Italy/Libya and Italy/Somalia Waivers in which the various modifications
and extension of the Waiver for Libya are described.

Ecuador's second written submission does not even attempt to offer any
explanation as to its legal basis. Moreover, accepting that the 'tariff element'
and the 'quota element' of a tariff quota are completely separable and each has a
'life of its own' leads to unreasonable re sults. For example, Ecuador should
explain why the rule that it proposes should not be the other way round, i.e. that
the 'tariff element' of a tariff quota m ay be freely amended, while the 'quota
element' should be treated as obligatory and perpetual."
Can Ecuador provide a reasoned answer as to whether it agrees with the EC's arguments.

38. The European Communities notes that the OECD glossary of statistical terms gives the
following definition of "tariff quota": "A tariff quot a is a quantitative threshold (quota) on imports
above which a higher tariff is applied. The lower tariff rate applies to imports within the quota". This
makes it evident that the tariff and the quantitative th reshold are inextricably and inevitably linked, as
one is set at a given level because of the other, and vice-versa. The European Communities is unaware
of any dispute arisen because a WTO Member c ontended that another Me mber would be bound to
apply to future imports the in-quota tariff after the elimination of a tariff quota.
QUESTIONS ADDRESSED TO PARTIES AND THIRD PARTIES

90. (Both Parties, Nicaragua and Panama) In paragraph 108 of their respective third party
submissions, Nicaragua and Panama argue that "[t]he EC's €75/mt concession – which from
1995 to 2005 covered all bound in-quota Lati n American imports and informed the rate
applicable to all other Latin American bananas en tering the EC market – has been the single
most important banana concession in Schedule CX L. In contrast to the prohibitive €680/mt
rate, under which virtually no Latin American volumes have ever been entered, the €75/mt
concession is the only rate that enabled Latin American market access to the EC market from
1995 to 2005. Unless the €75/mt bound rate receives the full protections of GATT Article II, the
entire value of the EC's mandatory Uruguay Round concessions will be nullified". (Emphasis
added). Can Nicaragua and Panama provide ev idence for their assertions. If MFN banana
imports have increased under an applied tariff rate of €176/mt, as argued by the EC, how can
this be reconciled with the statement that "a €75/ mt concession is the only rate that enabled
Latin American market access to the EC market from 1995 to 2005"? Can Nicaragua and
Panama clarify what would be meant by "providi ng the full protections of GATT Article II" to
the €75/mt tariff rate. Can Parties provide a reaso ned answer as to whether they agree with the
assertions made by Nicaragua and Panama.

39. The question already highlights the inconsiste ncy of the thesis supported by Nicaragua and
Panama: the fact that MFN banana imports in creased under a €176/mt duty shows clearly that it
cannot be argued that "a €75/mt concession is the only rate that enabled Latin American market
access to the EC market from 1995 to 2005".
40. The European Communities has provided the prop er market data relating to the properly
defined relevant periods which establish that Nicaragua and Panama's assertions are not correct.
91. (Both Parties, Nicaragua and Panama) In paragraph 19 of their combined statement
during the substantive meeting with the Panel, Nicaragua and Panama argue that "[t]he EC
tariff, which was the EC's scheduled banana concession from 1963-1994, was the equivalent of
about €80 per tonne." Can Nicaragua and Panama elaborate on this argument and provide
evidence for their assertions, as appropriate. Can the Parties comment on the argument and
assertions.

41. As the European Communities has already e xplained, the concessions resulting from the
Uruguay Round must be read on their own. The European Communities does not have the
information necessary to calculate what would be th e equivalence in today's prices for the European
Communities of 25 Member States of the tariffs applied by various European countries in the 1960s
and 1970s. Moreover, these assertions of Nicaragua and Panama have no relevance to the issues
before the Panel.
92. (Both Parties and Suriname) In paragraph 10 of its statement during the substantive
meeting with the Panel, Suriname argues that "[b]oth the Doha Waiver and the Understanding
on Bananas were negotiated by the WTO members, including the interested parties, after the
DSB adopted its recommendations and rulings in the original Bananas dispute. These two
instruments constitute new secondary WTO law and create an entirely new legal framework for
the issues that are now pending before the Panel. These new instruments clearly strike a new
balance of rights and obligations for the entire WTO membership, in addition to the parties to
the dispute." Can Suriname elaborate on these arguments. Can both Parties provide a
reasoned answer as to whether they agree with Suriname.

42. The European Communities generally agrees with the arguments developed by Suriname in
its response.
96. (Ecuador and Nicaragua) In paragraph 6 of its closing statement during the substantive
meeting with the Panel, the EC argues that "the draft dated 2 November 2001, which Nicaragua
has attached to its Third Party submission as Exhibit N-1, provided that the Doha Waiver
would be terminated automatically within two mo nths after the notification of the arbitration
award to the General Council. However, this provision was not included in the final version of
the Doha Waiver. The link between the awards of the arbitrator and the termination of the
Doha Waiver was abandoned." Can Ecuador an d Nicaragua provide a reasoned answer as to
whether they agree with the statement.

43. The European Communities disagrees with the interpretation provided by Ecuador
and by
Nicaragua and Panama. The European Communities was never prepared to accept (and did not accept
with the Doha Waiver) a system whereby the Do ha Waiver would terminate automatically on the
basis of predictions about the future found in an Arbitration award.
102. (EC, Nicaragua and Panama) In paragraph 44 of their combined statement during the
substantive meeting with the Panel, Nicaragua an d Panama argue that "[t]he [first compliance]
panel's second suggestion never absolved any discriminatory ACP tariff quota from the
obligations of Article XIII, however the larger import regime might be structured. To the
contrary, the panel, only paragraphs before, found the EC's exclusive ACP tariff quota, by its
own specific shape and nature, to be a quantitat ive restriction covered by Article XIII:5 that
failed to treat like products 'equally, irrespective of origin,' in violation of Article XIII. No
subsequent compliance suggestion can be read to nullify that actual finding of law." Can
Nicaragua and Panama elaborate on these argume nts. Can the EC provide a reasoned answer
as to whether it agrees with the argument.

44. The European Communities does not agree with Nicaragua and Panama . Nicaragua and
Panama continue to misuse the findings of the Pane l in 1999, in an attempt to apply these findings to
the current regime. However, the European Commun ities wishes to stress once gain that the current
regime presents a large number of differences from the one scrutinised by the Panel in 1999. Thus, the
comparison between the two systems, made by Nicaragua and Panama, is incorrect and misleading.
113. (Saint Lucia) In paragraph 3 of its statement during the substantive meeting with the
Panel, Saint Lucia argues that "[i]n 2005 WTO Ministers in Hong Kong accepted the

tariffication proposal in which the TRQ was replaced by a single tariff of €176 per tonne.
Indeed, the Ecuadorian delegation was a leading campaigner for this change and Minister Støre
of Norway was charged with monitoring trade flows that would indicate if the change had in
fact disadvantaged MFN suppliers." Can Saint Lucia provide evidence to support its assertion
that in Hong Kong WTO Ministers accepted the tariffication proposal in which the TRQ was
replaced by a single tariff of €176 per tonne.

45. The European Communities considers that the description of meetings at the WTO
Ministerial of Hong Kong made by Santa Lucia
 is accurate.
46. Also, the European Commission would like to stress how the "Understanding between Costa
Rica Columbia, Ecuador, Guatemala and the European Commission on the Banana Issue" (annexed to
Santa Lucia's answer to the Panel's question) shows the good faith in which the European
Communities negotiated a solution with the MFN coun tries and its willingness to revise its tariff level
"if the collected data indicates market imbalances" (see point 7 of the Understanding).