Determinations Under Section 304 of the Trade Act of 1974: European Communities' Banana Regime

[Federal Register Volume 63, Number 32 (Wednesday, February 18, 1998)]
[Notices]
[Pages 8248-8249]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-3919]


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OFFICE OF THE UNITED STATES TRADE REPRESENTATIVE

[Docket No. 301-100]


Determinations Under Section 304 of the Trade Act of 1974: 
European Communities' Banana Regime

agency: Office of the United States Trade Representative.

action: Notice of determinations, termination and monitoring.

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summary: The United States Trade Representative (USTR) has determined 
that certain acts, policies and practices of the European Communities 
(``EC'') that discriminate against U.S. banana marketing companies and 
distort international banana trade violate, or otherwise deny benefits 
to which the United States is entitled under, the General Agreement on 
Tariffs and Trade (GATT) 1994 and the General Agreement on Trade in 
Services (GATS). This determination is based on the report of a dispute 
settlement panel convened under the auspices of the World Trade 
Organization (WTO) at the request of the United States, Ecuador, 
Guatemala, Honduras, and Mexico and the report of the WTO Appellate 
Body reviewing the panel report. The Appellate Body report and the 
panel report, as modified by the Appellate Body report, (``the WTO 
reports'') were adopted by the WTO Dispute Settlement Body (DSB) on 
September 25, 1997. Following the adoption of the reports by the DSB 
and during a WTO arbitration hearing convened on December 17, 1997 to 
establish ``the reasonable period of time'' for the EC to implement the 
WTO reports, the EC stated its intention to comply with its 
international obligations and to implement all the rulings and 
recommendations in the WTO reports within a ``reasonable period of 
time,'' that is, by January 1, 1999. In light of the foregoing, the 
USTR will not take action under section 301 of the Trade Act of 1974 
(``the Trade Act'') at this time and has terminated this investigation. 
However, the USTR will monitor the EC's implementation of the WTO 
reports, and will take action under section 301(a) of the Trade Act if 
the EC does not come into compliance.

effective date: February 10, 1998.

addresses: 600 17th Street, NW., Washington, DC 20508.

for further information contact: Rachel Shub, Associate General Counsel 
(202) 395-7305; William Kane, Associate General Counsel (202) 395-6800; 
or Ralph Ives, Deputy Assistant U.S. Trade Representative, (202) 395-
3320.

supplementary information: On September 27, 1995, the USTR initiated an 
investigation under section 302(b) of the Trade Act (19 U.S.C. 2412(b)) 
regarding the EC's regime for the importation, sale and distribution of 
bananas and requested public comment on the issues raised in the 
investigation and the determinations to be made under section 304 of 
the Trade Act. 60 FR 52026 of October 4, 1995. This investigation 
specially concerned EC Council Regulation No. 404/93 and related 
measures distorting international banana trade and discriminating 
against U.S. marketing companies importing bananas from Latin America, 
including a restrictive and discriminatory licensing scheme designed to 
transfer market share in the wholesale distribution sector from U.S. 
banana marketing firms to firms of EC or African, Caribbean and Pacific 
(``ACP'') nationality.
    As required under section 303(a) of the Trade Act, the United 
States held consultations with the EC under the procedures of the WTO 
Understanding on Rules and Procedures Governing the Settlement of 
Disputes (DSU). After holding a first set of consultations with the EC 
on October 26, 1995, the United States and the governments of 
Guatemala, Honduras and Mexico decided to delay the request for a 
dispute settlement panel until Ecuador, the world's largest banana 
exporter, had completed its accession and could join the dispute 
settlement proceeding. Pursuant to a new request filed jointly by the 
governments of Ecuador, Guatemala, Honduras, Mexico and the United 
States (``Complaining parties''), a second set of WTO consultations 
with the EC was held on March 14, 1996. A dispute settlement panel was 
established on May 8, 1996.
    Pursuant to Section 304(a)(1)(A) of the Trade Act (19 U.S.C. 
2414(a)(1)(A)), the USTR must determine in this case whether any act, 
policy or practice of the EC violates, or otherwise denies benefits to 
which the United States is entitled under, any trade agreement. If that 
determination is affirmative, the USTR must take action under section 
301 of the Trade Act (19 USC 2411), subject to the specific direction 
of the President, if any, unless the USTR finds that one of the 
circumstances set forth in section 301(a)(2)(B) exists.

Reasons for Determinations

(1) EU Acts, Policies and Practices

    The WTO panel in this case circulated its report on May 22, 1997. 
It included numerous findings that the EC banana regime is inconsistent 
with the EC's WTO obligations. The EC appealed all of the panel's 
adverse findings, and the Complaining Parties cross-appealed three. On 
September 9, 1997, the Appellate Body issued its report confirming all 
the major panel findings against the EC regime, and reversing the panel 
report on two issues that had been decided in the EC's favor (agreeing 
with the Complaining parties). On September 25, 1997, the DSB adopted 
the Appellate Body and the panel report (as modified by the Appellate 
Body report). The WTO reports include findings that the following EC 
measures violate the EC's obligations under various provisions of the 
GATT 1994 and/or the GATS: The EC's discriminatory allocation of shares 
of its market to certain ACP countries and to certain countries 
signatory to the Banana Framework Agreement; (2) the EC's 
discriminatory rules for reallocating annual country shares in the 
event of a country's shortfall; (3) the EC's discriminatory 
distribution to EC and ACP banana distribution companies of ``Category 
B'' licenses to import bananas from non-EC, non-ACP countries (mainly 
Latin America); (4) the EC's requirements for obtaining licenses to 
import from Latin America, which impose burdens not imposed on imports 
from ACP counties; (5) the EC's distribution of licenses to ripeners in 
the EC, which discriminates against U.S. and Latin America firms in 
favor of EC firms; (6) the EC's discriminatory export certificate 
requirements; and (7) the EC's distribution to EC and ACP banana 
distribution companies of additional licenses, so-called ``hurricane 
licenses,'' to import from Latin America. (The Complaining parties did 
not challenge

[[Page 8249]]

the EC's preferential tariffs for ``traditional'' ACP bananas.)
    Thus, based on the results of the WTO dispute settlement 
proceedings, the public comments received and appropriate 
consultations, the USTR has determined that certain acts, policies and 
practices of the EC violate, or otherwise deny benefits to which the 
United States is entitled under, GATT 1994 and the GATS.

(2) U.S. Action

    At a meeting of the DSB on October 16, 1997, the EC stated that it 
would ``fully respect its international obligations with regard to this 
matter'' and would require a ``reasonable period of time to do so.'' On 
December 17, 1997, at a WTO arbitration hearing requested by the 
Complaining parties to determine the ``reasonable period of time'' 
pursuant to Article 21.3 of the DSU, the EC made it clear that the 
``reasonable period of time'' it requested, i.e., until January 1, 
1999, is for the purpose of implementing all the recommendations and 
ruling of the DSB adopted on September 25. On January 7, 1998, the WTO-
appointed arbitrator circulated his determination that the period until 
January 1, 1999, would be the ``reasonable period of time'' for the EC 
to implement the DSB rulings and recommendations.
    On the basis of the foregoing, the USTR finds that the EC's 
undertaking to implement all of the rulings and recommendations of the 
WTO reports within the established reasonable period of time pursuant 
to Article 21.3 of the DSU constitute for the purposes of section 
301(a)(2)(B)(i) the taking of satisfactory measures to grant the rights 
of the United States under the GATT 1994 and GATS. Therefore, pursuant 
to section 301(a)(2) the USTR will not take action under section 301 of 
the Trade Act at this time and has terminated this investigation. 
However, pursuant to section 306 of the Trade Act, the USTR will 
monitor the EC's implementation of the WTO reports and will take action 
under section 301(a) of the Trade Act if the EC does not come into 
compliance.
Irving A. Williamson,
Chairman, Section 301 Committee.
[FR Doc. 98-3919 Filed 2-17-98; 8:45 am]
BILLING CODE 3190-01-M