WORLD TRADE
ORGANIZATIONWT/DS27/52
9 November 1999
(99-4861)
Original:  Spanish
EUROPEAN COMMUNITIES – REGIME FOR THE IMPORTATION,
SALE AND DISTRIBUTION OF BANANAS
Recourse by Ecuador to Article 22.2 of the DSU
The following communication, dated 8 November 1999, from the Permanent Mission of
Ecuador to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 22.2 of the
DSU.
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Request for authorization of suspension of concessions or other obligations
Pursuant to Article 22:2 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes  (DSU), and having regard to the content of paragraph 3(c) of that Article,
Ecuador requests authorization from the DSB to suspend the application to the
European Communities (EC), and member States thereof, of concessions or other related obligations
under the General Agreement on Tariffs and Trade 1994 (GATT) , the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS) , and the General Agreement on Trade in Services
(GATS)  and annexes thereto .
Ecuador's aim through this suspension is the practicable or effective withdrawal of
concessions so as to match the level of nullification or impairment of benefits accruing to Ecuador,
amounting to a value of US$450 million, as a result of the EC's failure, as from 1 January 1999, to
bring its regime for the import, sale and distribution of bananas into conformity with the GATT  and
the GATS , or otherwise comply with the reco mmendations and rulings of the DSB in European
Communities - Regime for the import, sale and distribution of bananas , either in the case of the
original panel or in the case arising from Ecuador's recourse to Article 21:5 of the DSU.
To this date the EC has not offered a satisfactory response to Ecuador's request for
compensation, despite having recognized, in consultations, Ecuador's rights under Article 22 of the
DSU.  Ecuador does not rule out the possibility that progress may be made in the coming days inbilateral consultations on this subject, which in turn would have a decisive effect on the request put
forward in this communication.
Background
On 8 May 1996, the DSB established a panel at the request of Ecuador, Guatemala, Honduras,
Mexico and the United States to examine the EC banana import regime.  Both that panel and the
Appellate Body found the EC regime in violation of the GATT  and the GATS .  On
25 September 1997, the DSB adopted the report of the panel, as modified by the Appellate Body.  The
resulting DSB recommendations and rulings includ ed the recommendation that the EC bring the
measures found to be incompatible with the GATT  and the GATS  into conformity with its obligationsWT/DS27/52
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under the agreements (WT/DS27/AB/R, paragraph 257;   WT/DS27/R, paragraph 9.2).  An arbitrator
appointed by the WTO subsequently determined that the "reasonable period of time" for the EC to
implement the DSB recommendations and rulings would expire by 1 January 1999.
On 20 July 1998, the EC Council of Ministers of Agriculture formally approved amendments
to the banana regime and on 28 July the amendments were published in the EC Official Journal
(Regulation (EC) No. 1637/98;  "Regulation 1637" ).  On 31 October 1998, the European Commission
published additional implementing provisions concerning the administration of banana import
licences (Regulation (EC) No. 2362/98;  "Regulation 2362").  Regulations 1637 and 2362 became
effective on 1 January 1999.  These regulations perpetuate discriminatory aspects already condemned
in the previous EC banana import regime that the DSB had ruled to be incompatible with the WTO
Agreements.
On 12 January 1999, Ecuador requested the DSB to establish a panel under Article 21:5 of the
DSU to examine whether the EC had complied with its recommendations and rulings.  On 6 May the
DSB adopted the report of the panel, which found that the EC not only continued to fail to fulfil its
implementation obligations but also had committed further violations of the GATT  1994  and the
GATS .  The EC should have brought its regime for the import, sale and distribution of bananas into
conformity with its WTO obligations on 1 January 1999, but instead had preferred to grant itself an
indefinite period for reforming its regime.
The continuing nullification or impairment of benefits accruing to Ecuador under the GATT
1994  and GATS  has been recognized by the Panel in its report contained in document
WT/DS27/RW/ECU.  Ecuador is thus entitled  to redress under Article 22 of the DSU.
Withdrawal of concessions under Article 22:3(c)
Ecuador is a developing country whose economy is heavily dependent on exports, chief
among which is bananas (30 per cent of total exports).  The main export market for bananas is the EC,
and therefore the illegal restrictions that have been maintained with the European banana import
regime have had extremely serious economic repercussions for Ecuador's economy.
Ecuador is currently facing the worst economic crisis in its history, considerably aggravated
by the occurrence of natural disasters.  Its economy is expected to shrink by between 8 and 11 per
cent of GDP in 1999;  this has a very severe impact on output, on its population in general, and on thebanana sector in particular, on which over a million people depend.
The EC's non-compliance forces Ecuador to proceed in the manner requested despite the
difference in level of development with the EC;  notwithstanding the tremendous imbalance in their
trade relations;  and despite the serious economic situation of the country which places severeconstraints on its ability to exercise its rights under Article 22.  Ecuador is obliged to effect the
withdrawal of concessions in other sectors in order to lessen significantly the adverse economic
impact which the country cannot and should not have to bear, since it is the European Communities
that have failed to comply with their obligatio ns and commitments to the detriment of Ecuador.
The economic cost of withdrawal of concessions in the goods sector alone would have a
greater impact on Ecuador than on the EC, and in proceeding in that way Ecuador would only succeed
in further accentuating the imbalance in their tr ade relations, already seriously injured by the
nullification and impairment of benefits for which the European Communities alone are responsible.
This nullification or impairment of benefits amounts to over 50 per cent of all exports of goods by theEC to Ecuador.  The great majority of these exports consist of capital goods and raw materials that are
essential for the Ecuadorian economy.WT/DS27/52
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Since the withdrawal of concessions in the goods sector is at present not practicable or
effective, and the circumstances are sufficiently serious to justify fully Ecuador exercising its rights
under Article 22, Ecuador requests authorization to suspend concessions and other obligations under
the GATS and TRIPS Agreements.
For the reasons given above, Ecuador proposes to suspend concessions or obligations
stemming from the trade-related intellectual proper ty rights in the following categories set out in
Part II of the TRIPS Agreement:
Section 1: Copyright and related rights, Article 14:  Protection of performers, producers
of phonograms (sound recordings) and broadcasting organizations
Section 3: Geographical indicationsSection 4: Industrial designs
Ecuador also proposes to suspend concessions and obligations in the following subsector in
its Schedule of specific commitments:
4. Distribution services
B. Wholesale trade services (CPC 622)In addition, Ecuador reserves the right to suspend tariff concessions or other tariff obligations
granted in the framework of the GATT 1994 in the ev ent that these may be applied in a practicable
and effective manner.
The suspension of concessions or other obligations will apply to the following EC member
States:  Austria, Belgium, Finland, France, German y, Greece, Ireland, Italy, Luxembourg, Portugal,
Spain, Sweden and the United Kingdom.
Ecuador's request complies with Article 22:4
The suspension of the above concessions or other obligations is fully justified in the sense that
the economic impact of the suspension proposed by Ecuador is much smaller than the economic value
of the nullification and impairment of benefits against Ecuador.  Consequently, the suspension
proposed by Ecuador does not exceed the level that may be considered equivalent to the level of thenullification or impairment.
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