[Federal Register Volume 63, Number 204 (Thursday, October 22, 1998)]
[Notices]
[Pages 56687-56690]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-28271]
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OFFICE OF UNITED STATES TRADE REPRESENTATIVE
[Docket No. 301-100a]
Implementation of WTO Recommendations Concerning the European
Communities' Regime for the Importation, Sale and Distribution of
Bananas
AGENCY: Office of the United States Trade Representative.
ACTION: Notice of proposed determination, request for comment.
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SUMMARY: January 1, 1999 is the deadline for the European Communities'
(EC) implementation of the recommendations of the World Trade
Organization (WTO) Dispute Settlement Body (DSB) concerning the EC
regime for the importation, sale, and distribution of bananas (banana
regime). The United States Trade Representative (USTR) is seeking
written comments on: (1) the measures that the EC has undertaken to
apply as of January 1, 1999 to implement the WTO recommendations
concerning the EC banana regime; and (2) the USTR's proposed
affirmative determination under section 306(b) of the Trade Act of
1974, as amended, (Trade Act) (19 U.S.C. Sec. 2416), that the measures
fail to implement the WTO recommendations. The USTR must make the
determination
[[Page 56688]]
under section 306(b) no later than January 31, 1999.
DATES: Written comments from interested persons are due on or before
November 9, 1998.
ADDRESSES: 600 17th Street, NW, Washington, D.C. 20508.
FOR FURTHER INFORMATION CONTACT:
Rachel Shub, Associate General Counsel (202) 395-7305; 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 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 specifically 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
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.
The WTO panel is 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).
The WTO reports include findings that the following EC measures
violate the EC's obligations under various provisions of the General
Agreement on Tariffs and Trade 1994 (GATT 1994) and/or the General
Agreement on Trade in Services (GATS): (1) 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 countries; (5) the EC's distribution of licenses to ripeners
in the EC, which discriminates against U.S. and Latin American firms in
favor of EC firms; (6) the EC's discriminatory export certificate
requirements; and (7) the EC's distribution of EC and ACP banana
distribution companies of additional licenses, so-called ``hurricane
licenses,'' to import from Latin America. (The complaining parties did
not challenge the EC's preferential tariffs for ``traditional'' ACP
bananas.)
The Appellate Body report includes the recommendation that the DSB
request the EC to being its banana measures found in the Appellate Body
report and in the panel report (as modified by the Appellate Body
report) to be inconsistent with the GATT 1994 and the GATS into
conformity with the EC's obligations under those agreements. On
September 25, 1997, the DSB adopted the Appellate Body and panel
reports (as modified by the Appellate Body report), including this
recommendation.
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.'' 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,
was for the purpose of implementing all the recommendations and rulings
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.
Based on the results of the WTO dispute settlement proceedings, the
public comments received and appropriate consultations, the USTR on
February 10, 1998 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. [63 FR 8248 of
February 18, 1998]. The USTR further determined that the EC's
undertaking to implement all of the rulings and recommendations of the
WTO reports within the reasonable period of time established pursuant
to Article 21.3 of the DSU constituted 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 terminated the investigation without
taking action under section 301 of the Trade Act. The USTR stated in
the termination notice that it would monitor the EC's implementation of
the WTO recommendations under section 306 of the Trade Act and would
take action under section 301(a) if the EC did not comply with its WTO
obligations and commitments.
Section 306(a) of the Trade Act requires the USTR to monitor
measures undertaken by a foreign government to provide a satisfactory
resolution of a matter subject to dispute settlement proceedings to
enforce the rights of the United States under a trade agreement.
Section 306(b) requires the USTR to determine what further action it
shall take under section 301(a) of the Trade Act if the USTR considers
that a foreign country has failed to implement a recommendation made
pursuant to dispute settlement proceedings under the WTO. The USTR
shall make this determination no later than thirty days after the
expiration of the reasonable period of time provided for such
implementation under Article 21.3 of DSU. Section 305(a)(1) requires
the USTR to implement such action by no later than 30 days after the
date on which that determination is made.
Given that the reasonable period of time for the EC's
implementation of the WTO recommendations concerning the EC banana
regime expires on January 1, 1999, the USTR must make the determination
required by section 306(b) no later than January 31, 1999, and, in the
event of an affirmative determination, must implement further
[[Page 56689]]
action no later than 30 days thereafter. These time frames permit the
USTR to seek recourse to the procedures for compensation and suspension
of concessions provided in Article 22 of the DSU.
Monitoring EC Implementation
Following the termination of the investigation, USTR has monitored
EC compliance under section 306 of the Trade Act. EC actions undertaken
since January 1999, and in particular since June 26, 1998, indicate
that EC compliance with its WTO obligations by January 1, 1999 is
unlikely.
The EC Commission proposed amendments to its banana regime on
January 14, 1998, which were then forwarded to the EC Council for its
consideration. The United States and other complaining parties raised
concerns about the consistency with the EC's WTO obligations of these
proposals with EC Commission officials and before the DSB.
The USTR and U.S. Secretary of Agriculture subsequently asked their
counterparts in the European member States to oppose the Commission
proposal when it was presented to the European Agriculture Council. On
June 26, 1998, however, the European Council of Agriculture Ministers
agreed, with few modifications, on proposed amendments to the EC banana
regime that had been approved by the European Commission on January 14,
and the Agriculture Council also specified how the regulation's
provisions on licensing were interpreted. The draft regulations were
approved by the EC Council of Agriculture Ministers on July 20. The
General Affairs Council formally approved the regulations on July 22.
On July 28, 1998, amendments to Regulation 404 were published in the EC
Official Journal (EC 1637/98; ``Regulation 1637'').
The EC Council regulation provides for the allocation of the EC
market among exporting countries and for the distribution of licenses
to import bananas as of January 1, 1999. A comparison of the various
features of the current EC regime and the amended regime is set forth
as Figure 1. On September 14, the complaining parties consulted with
the advised the EC of their joint concerns about the inconsistency of
the EC's adopted measures with WTO obligations. In summary, the
following aspects of the adopted EC measures present particular
problems:
Allocation of the EC market among supplying countries. The
allocation in Regulation 1637 of the EC market among supplying
countries discriminates against bananas from Latin American countries
both in terms of quantities allocated and conditions of access. The
quantities to be allocated bear no resemblance to the shares that would
prevail in the absence of restrictions, as required by Article XIII of
the GATT 1994, and unlike quantities for ACP bananas, permit no growth.
Latin American banana supplying countries in which U.S. distribution
companies are invested would continue to be treated less favorably than
ACP banana exporting countries in that they would be required to
compete with non-traditional ACP bananas for a small share of an
already reduced share of the EC market. Meanwhile, traditional ACP
bananas have their own quota, to which Latin American bananas do not
have access. Like the current regime, the planned allocation will
perpetuate the harmful effects on U.S. companies that distribute Latin
American bananas in the EC of the current allocation, which has been
found to violate Article XIII of the GATT 1994.
Distribution of Import Licenses. The new EC Council regulation
requires the distribution of import licenses on the basis of the
``traditionals/newcomers'' method. On June 26, 1998, the EC Agriculture
Council announced that this term was to be interpreted to mean that
import licenses would be distributed to ``actual importers on the basis
of the presentation of a utilized import license and/or, in particular
in the case of new member States, equivalent proofs, where necessary,''
using ``the years 1994-96 as the initial reference period for
determining operators' rights.'' The selection of a reference period
during the time that a regime which is contrary to the WTO rules was in
effect will perpetuate discrimination against U.S. and Latin American
suppliers of wholesale trade services created by the current regime
(which went into effect in 1993) that has been found to be in violation
of GATS Article II and XVII.
Non-Traditional ACP Bananas. The new EC Council Regulation expands
upon the tariff preferences provided to ``non-traditional'' ACP
bananas; these provisions go beyond the tariff treatment considered by
the WTO Appellate Body to fall within the EC's waiver for certain trade
preferences required by the Lome Convention.
Further information on the new EC banana regime is available in the
USTR Reading Room in Docket WTO/DS-4.
Proposed Determination
The USTR proposes to determine, pursuant to section 306(b) of the
Trade Act, that the measures the EC has undertaken to apply as of
January 1, 1999 with respect to this banana regime fail to implement
the WTO recommendations. Such a determination will require the USTR
also to determine what further action to take under section 301(a) in
the event that the EC has failed to implement the WTO recommendations
by January 1, 1999. Permissible actions include: action to suspend,
withdraw or prevent the application of benefits of trade agreement
concessions to the EU; imposition of duties or other import
restrictions on goods of the EU or fees or restrictions on services of
the EU; and restriction or denial of service sector access
authorizations with respect to services of the EU. The USTR intends to
determine by December 15, 1998 what action to take.
Written Comments--Requirements for Submissions
Section 306(c) of the Trade Act provides that the USTR shall allow
an opportunity for the presentation of views by interested parties
prior to the issuance of a determination pursuant to section 306(b).
Interested persons are invited to submit written comments on: (1) the
measures that the EC has undertaken to apply as of January 1, 1999 to
implement the WTO recommendations concerning the EC banana regime; and
(2) the USTR's proposed affirmative determination under section 306(b)
of the Trade Act that the measures fail to implement the WTO
recommendations. Comments must be filed in accordance with the
requirements set forth in 15 CFR Sec. 2006.8(b) [55 FR 20,593] and must
be filed on or before noon on Monday, November 9, 1998. Comments must
be in English and provided in twenty copies to: Sybia Harrison, Staff
Assistant to the Section 301 Committee, Room 416, Office of the U.S.
Trade Representative, 600 17th Street NW., Washington, DC 20508.
Comments will be placed in a file (Docket 301-100a) open to public
inspection pursuant to 15 CFR 2006.13, except confidential business
information exempt from public inspection in accordance with 15 CFR
2006.15. Confidential business information submitted in accordance with
15 CFR 2006.15 must be clearly marked ``BUSINESS CONFIDENTIAL'' in a
contrasting color ink at the top of each page on each of 20 copies, and
must be accompanied by a nonconfidential summary of the confidential
information. The nonconfidential summary shall be placed in the file
that is open to public inspection. An appointment to review Docket No.
301-100a may be made by
[[Page 56690]]
calling Brenda Webb at (202) 395-6186. The USTR Reading Room is open to
the public from 9:30 a.m. to 12 noon and 1:00 p.m. to 4:00 p.m., Monday
through Friday, and is located in Room 101.
Joanna K. McIntosh,
Chairman, Section 301 Committee.
Figure 1.--EC Banana Regime: Current v. EC Council Approach
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Provision Current regime EC council approach
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Latin American TRQ of 2.53 75 ECU/ton tariff; 75 ECU/ton tariff;
million tons. access at zero no limit on ACP
tariff for ``non- access at zero
traditional'' ACP tariff.
bananas limited to
90,000 tons.
Latin American bananas 765 ECU/ton tariff.. 765 ECU/ton tariff.
entering over the TRQ.
ACP traditional bananas' Zero tariff, with Same; zero tariff,
quota of 857,700 tons. twelve country with no allocations
allocations. yet announce.
Tariff on ``non- Zero tariff for Zero tariff for
traditional'' ACP bananas. 90,000 tons within unlimited tons
Latin American TRQ. within Latin
American TRQs'
``others''
category.
ACP over-quota tariff....... 665 ECU/ton......... 565 ECU/ton.
Latin American Import About 50% to License-users to
Licenses. historical receive same
importers (Latin amounts as they
American and U.S.) used in 1994-96
and rest to EC/ACP under illegal
companies system.
(importers/
ripeners).
EC Producer Price Subsidy... 622.5 ECU/ton....... 640.3 ECU/ton.
EC funds from tariff on 185 million ECU..... 185 million ECU.
Latin American bananas.
Review date................. 2002................ 2005.
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[FR Doc. 98-28271 Filed 10-21-98; 8:45 am]
BILLING CODE 3190-01-M