European banana regime and United States retaliation (1993-2001)

The European Community's 1993 banana regime and the United States response produced a prolonged, rules-based trade confrontation. Regulation 404/93 combined tariff quotas, preferences and licensing arrangements. Effects differed among African, Caribbean and Pacific suppliers, Latin American exporters and distribution firms, so the regime should not be reduced to one tariff.

Dispute sequence

Ecuador, Guatemala, Honduras, Mexico and the United States challenged the regime. Their legal and commercial interests were not identical. The United States produced few bananas but had goods and services interests connected to distribution firms. Original panel and Appellate Body findings, later compliance proceedings and retaliation arbitration answered different legal questions.

In April 1999 an arbitrator assessed United States nullification or impairment at USD 191.4 million per year. The Dispute Settlement Body authorised suspension of concessions on 19 April. The United States applied 100 per cent additional duties to selected European products under its final implementing list. Cashmere appeared in threatened-list debate but was not on the final list. A later statutory carousel mechanism was not implemented in this dispute.

The increased duties were actually collected on covered entries until suspension under the 2001 understanding. This was adjudicated retaliation up to an authorised annual level, not an unlimited United States sanction.

Settlement and assessment

The 2001 United States-European Community understanding provided a transition in licensing and movement towards a tariff-only regime. Ecuador reached a separate understanding. The arrangements suspended retaliation and changed implementation but did not end every dispute over bananas, preferences or tariff treatment.

The case demonstrates both discipline and delay. WTO procedures separated findings, compliance review, arbitration and retaliation, placing a ceiling on coercion. Yet repeated proceedings and negotiated transition were needed before commercial pressure changed the regime.

See also

World Trade Organization · GATT · Section 301, Trade Act (1974) · Tariff as coercive instrument · Most-favoured-nation withdrawal

Sources

1. Council of the European Communities, Regulation (EEC) No. 404/93 on the common organisation of the market in bananas, 13 February 1993.
2. World Trade Organization, European Communities: Regime for the Importation, Sale and Distribution of Bananas, DS27, complete procedural record.
3. World Trade Organization Appellate Body, *European Communities: Regime for the Importation, Sale and Distribution of Bananas*, WT/DS27/AB/R, 9 September 1997.
4. World Trade Organization arbitrator, *European Communities: Regime for the Importation, Sale and Distribution of Bananas*, WT/DS27/ARB, 9 April 1999.
5. World Trade Organization, European Communities and United States accept procedural compromise, 29 January 1999.
6. World Trade Organization, Notification of Mutually Agreed Solution, WT/DS27/58, 2 July 2001, including the separate United States and Ecuador understandings.
7. United States Trade Representative, Understanding on Bananas, 11 April 2001, official record of the applied duties and transition.