RESTRICTED
WORLD TRADE WT/DSB/M/15
15May1996
ORGANIZATION(96-1882)
DISPUTE SETTLEMENT BODY
24April 1996
MINUTES OFMEETING
Held intheCentre William Rappard
on24April 1996
Chairman: Mr.Celso Lafer (Brazil)
Subjects discussed: Page
1. European Communities -Régime fortheimportation, saleanddistribution of
bananas. 1
- Request byEcuador, Guatemala, Honduras, Mexico, andtheUnited States
fortheestablishment ofapanel 1
2. Korea -Measures concerning bottled water 2
- Statement byCanada 2
3. Turkey -Action onimports oftextiles andclothing 3
- Statement byIndia 3
4. Mutually agreed solutions 5
- Announcement bytheChairman 5
1. European Communities -Régime fortheimportation, saleanddistribution ofbananas.
- Request byEcuador, Guatemala, Honduras, Mexico, andtheUnited States forthe
establishment ofapanel (WT/DS27/6)
TheChairman drewattention toajointcommunication fromEcuador, Guatemala, Honduras,
Mexico andtheUnited States inWT/DS27/6 containing theirrequest fortheestablishment ofapanel
toexamine theEuropean Communities 'régime fortheimportation, sale,anddistribution ofbananas.
Therepresentative ofGuatemala, speaking alsoonbehalf ofEcuador, Honduras, Mexico, and
theUnited States, saidthatthepresent request fortheestablishment ofapanel wasthemost recent
attempt, inaseries ofunsuccessful efforts toobtain openandfairmarket access forbananas intothe
Communities which would beconsistent withtheGATT andtoday withtheWTO. Thetwopanels
establishedonthesematters1hadfoundtheCommunities'régimefortheimportation,saleanddistribution
ofbananas tobeinconsistent withitsobligations under theGATT: in1993, withrespect tonational
banana import systems inmember States, andin1994, withrespect tothecommon market organization
1Panel reports arecontained inDS32/R andDS38/R.WT/DSB/M/15
Page2
forbananas pursuant totheCouncil Regulation (EEC) 404/93. Instead ofbringing itsbanana import
régime intoconformity withtheGATT, theCommunities hadfurther aggravated thediscriminatory
conditions forimports ofbananas fromthirdcountries, orfromtheso-called "dollar zone", inparticular,
asaresult oftheFramework Agreement onbananas inforce since 1January 1995. AttheGATT
Council meetings fromMay1994untilDecember 1995, hisdelegation, onbehalf ofEcuador, Honduras,
Mexico andPanama, hadunsuccessfully requested afairandmutually acceptable solution tothismatter.
On28September 1995, Guatemala, Honduras, Mexico andtheUnited States hadrequested consultations
withtheCommunities onthismatter.2Although consultations hadbeenheldon26October, thematter
remained unresolved, partly because theCommunities hadnomandate forfinding asolution. Ecuador
hadjoined theabove-mentioned countries when anewrequest forconsultations wasmade on5February
19963.Consultations heldon14-15 March, inwhich theCommunities again participated without a
mandate, hadfailed notonlytosettle thisdispute, buthadoffered nohopethatthismatter might be
resolved without recourse toapanel.
Therepresentative oftheEuropean Communities saidthatthismatter, which wasofgreat
importance andcomplexity, hadbeen addressed ondifferent occasions. Consultations withthe
complaining parties werecurrently underway inaneffort tofindamutually satisfactory solution, and
contacts continued tobepursued. Since theCommunities wished topursue further these contacts,
itbelieved thatitwasnotopportune toestablish apanel atthepresent meeting asrequested bythe
complaining parties.
Therepresentative ofMexico, speaking alsoonbehalf ofEcuador, Guatemala, Honduras and
theUnited States, regretted theCommunities 'decision nottoagree totherequest fortheestablishment
ofapanel atthepresent meeting. There wasnoindication thattheCommunities weremaking efforts
toresolve thisdispute inaWTO-consistent manner. TheCommunities hadmade onlyaproposal aimed
attrying toinduce certain countries toaccept specific quotas within thetariff quota inexchange for
theiragreement towithdraw theirobjections totheCommunities 'discriminatory licensing system found
bythelastGATT panel in1994 tobeinconsistent withArticles IandIIIoftheGATT. Hetherefore
regretted thattheCommunities could notjointheconsensus ontheestablishment ofapanel atthepresent
meeting andrequested thatthismatter beincluded ontheagenda ofthenextDSBmeeting tobeheld
on8May.
TheDSBtooknoteofthestatements andagreed torevert tothismatter atitsnextmeeting
on8May.
2. Korea -Measures concerning bottled water
- Statement byCanada
Therepresentative ofCanada, speaking under "Other Business", announced thatKorea and
Canada hadreached amutually agreed solution withregard toKorea 'smeasures concerning bottled
water. Thisagreement followed Canada 'srequest forconsultations made on8November 1995, which
hadbeencirculated inWT/DS20/1. Theletters exchanged outlining theagreement would beattached
tothewritten notification pursuant toArticle 3.6oftheDSU, andwould besenttotheChairman of
theDSBshortly withtherequest thatitbecirculated toMembers.4
2WT/DS16/1.
3WT/DS27/1.
4WT/DS20/6.WT/DSB/M/15
Page3
Therepresentative ofKorea confirmed thatthematter concerning bottled water hadbeensettled
inamutually-acceptable manner. Asindicated byCanada, thewritten notification onthissettlement,
including thetextoftheagreement, would soonbesubmitted totheDSBandrelevant Councils and
Committees inaccordance withArticle 3.6oftheDSU.
TheDSBtooknoteofthestatements.
3. Turkey -Action onimports oftextiles andclothing
- Statement byIndia
Therepresentative ofIndia, speaking under "Other Business", saidthaton21March 1996,
India hadrequested consultations withTurkey under Article XXIII:1 ofGATT 1994, andArticle 4
oftheDSU ontheunilateral imposition ofquantitative restrictions onimports oftextile andclothing
products fromIndia. Thisrequest contained inWT/DS34/1 hadbeenaccepted byTurkey on1April.
Inaletter confirming this,Turkey hadmentioned thatithadagreed toenter intoconsultations "on
textiles andclothing restrictions applied byTurkey" atamutually acceptable timeandvenue. Turkey
considered that"theEureopean Communities asourpartner inthecustoms union should alsobe
represented intheconsultations". On4April, Indiahadproposed thatconsultations beheldinGeneva
on18-19 April, andhadclearly stated thatitcould notaccept Turkey 'sview thattheEuropean
Communities participate intheseconsultations since, under theGATT andWTO practices, consultations
under Article XXIII:1 ofGATT 1994werebasically ofabilateral nature. Indoing so,India hadonly
followed thestand taken byamajor trading entity concerning thebilateral character ofArticle XXIII:1
consultations, asrecorded inGATT documents. India hadrequested thatTurkey confirm thevenue
andtimeproposed forconsultations tobeheldwithout theparticipation oftheCommunities.
On16April, Turkey hadreplied that"theTurkish authorities would beprepared toholdwith
theirIndian counterparts theconsultations requested byIndia..on theunderstanding thatrepresentatives
oftheECwould alsobeparticipating. Thismeeting could beheldon18April 1996 from3.30p.m.
to6p.m.assuggested byIndia." Despite thisextremely short notice, India ensured thepresence of
itsdelegationatconsultations.Regrettably,thedelegationofTurkeydidnotattendthescheduledmeeting
noritprovided explanation foritsabsence. Nevertheless, India, ingood faith, hadsentanother
communication toTurkey on18April, proposing toenter intobilateral consultations on19April.
Regrettably, thedelegation ofTurkey hadagain failed toparticipate. Persevering initsgood faith,
India hadcontacted Turkey andhadbeentoldthatthelatter could notenter intothese consultations
without theparticipation oftheCommunities, andthatthiswould beconveyed inwriting byclose-of-
business on19April. Thiscommunication, dated 19April hadbeenreceived on22April.
India wasconcerned about themanner inwhich aMember haddealtwiththeprocedures for
thesettlement ofdisputes which hadbeennegotiated andaccepted byallMembers. Hisdelegation
didnotwishtoenter intothesubstance ofthematter buthadbeencompelled tobring thisunfortunate
situation totheattention oftheDSB. Therather casual treatment ofprocedures andprocesses contained
intheDSU andtheGATT 1994 should beofconsiderable concern forallMembers. Thissituation
alsoraised some questions thattheDSB might wishtoconsider. First, could aconsulting Member
refuse toattend consultations ithadagreed toenter intowithout anyadvance notice? Second, ifthe
response totheabove wereaffirmative, howmight thisbereconciled withtheten-day ruleprovided
forinArticle 4.3oftheDSU? Third, whatwastherequired period oftimeaMember requesting
consultations hadtowaitforaconsulting Member toarrive atamutually agreed venue andtimebefore
concluding thattheconsultations hadnotbeenentered into? Fourth, could aconsulting Member acquire
therighttodecide unilaterally toinclude another Member inbilateral consultations iftherequest had
notbeenaddressed toanyother Member other thantheconsulting Member? What didsuchunilateral
action imply fortherights ofaMember requesting consultations under Article XXIII:1 ofGATT 1994WT/DSB/M/15
Page4
andArticle 4oftheDSU? Fifth, whatredress could theDSBgivetoaMember which hadacted in
good faithtouphold theletter andthespirit oftherules-based multilateral trading system?
Sofar,Turkey hadnotnotified theWTO norIndia ofthedetails oftherestrictions ontextile
andclothing products. When India sought consultations under Article XXIII:1 ofGATT 1994 and
Article 4oftheDSU, ithadbeentoldthatinthesebilateral consultations some other delegations should
alsobepresent. ItwasIndia'sunderstanding thatthismajor trading entity, whose participation Turkey
considered necessary inthebilateral consultations, hadbeentaking aconsistent stand intheGATT
andtheWTO thatArticle XXIII:1 consultations could onlybebilateral. Furthermore, Indiaunderstood
thatwhen Members having acommon interest onatrade measure taken bythismajor trading entity
hadrecently sought jointconsultations, thismajor trading entity hadtaken thestand thattheinterests
oftheparties would bebestserved byholding separate bilateral consultations. Hetherefore requested
thatthismajor trading entity "sensitize" Turkey 'sauthorities tothestand ithadtaken withrespect to
Article XXIII consultations inthepast. India therefore found thatitsrecourse totheprovisions of
theGATT 1994 andtheDSU hadbeenfrustrated inamostunprecedented manner. Ithadmade its
request forthese bilateral consultations ingoodfaith, andinfulltransparency withaviewtoreaching
amutually satisfactory solution. Since Turkey hadnotentered intotheseconsultations within thethirty-
dayperiod, asrequired under Article 4.3oftheDSU, India reserved itsrights onthismatter under
theDSU provisions.
Therepresentative ofTurkey confirmed thatseveral written communications onthismatter
hadbeenexchanged between India andTurkey. However, India'sstatement atthepresent meeting
didnotrefertothecommunication inwhich Indiahadindicated thatitcould notagree totheparticipation
oftheCommunities intheconsultations. On17April 1996, following receipt ofthatcommunication,
Turkey hadthought thatsinceitsproposal regarding theparticipation oftheCommunities hadnotbeen
accepted, consultations would notbeheld. Since on18and19April Turkey hadattended ameeting
withEFTA States, ithadnotreceived thecommunication sentbyIndiaon18April ontimeandtherefore
hadbeenunable toreply properly. Asstated byTurkey attheDSBmeeting on17April, theDSU
provisions hadnotbeendesigned todealwithsituations arising fromtheestablishment ofthecustoms
union. Unlike previous enlargements oftheCommunities, Turkey wasthefirstandperhaps theonly
country which hadentered intothecustoms union withtheCommunities without having acceded as
afullmember. Article XXIV ofGATT 1994clearly stated that"acustoms union shallbeunderstood
tomean thesubstitution ofasingle customs territory fortwoormore customs territories"; inother
words, acustoms union asasingle entity shallapply unified commercial policy instruments. Inthis
respect anymeasure, taken bythecustoms union oreither partner toit,would beapplied within that
single customs territory. Therefore anyrequest forconsultations onthemeasure taken asaresult of
thecompletion ofthecustoms union should beaddressed tobothpartners ofthecustoms union. This
point hadalready beenmade bytheCommunities andTurkey attheDSBmeeting on27March. He
reiterated Turkey 'swillingness todiscuss thismatter withIndia tofindamutually agreeable solution
without excluding theother partner ofthecustoms union.
Therepresentative oftheEuropean Communities noted thestatements made bytheprevious
speakers, andagreed thatconsultations under Article XXIII:1 werebilateral innature. Themeasure
consideredtobeinconsistentwithWTOobligationshadbeenagreedwithintheframeworkofthecustoms
union. TheGATT 1994hadprocedures forsuchsituations andworking parties hadbeenestablished
under Article XXIV. Themeasure under consideration resulted fromcompletion ofthecustoms union
andother procedures maynotbeapplicable tothisparticular situation inthesame way. The
Communities considered thatamember ofthecustoms union wasnotinaposition tochange ameasure
without theconsent oftheother partners. Therefore, ifameasure taken within theframework ofthe
customs union were tobechallenged, itwasonlynatural forbothpartners tothecustoms union to
participate inconsultations inorder toassess therequest anddraw conclusions. Thismatter required
further reflection bytheDSB.WT/DSB/M/15
Page5
Therepresentative ofHong Kong expressed hisdelegation 'sconcern regarding thedifficulties
experienced byanumber ofdelegations incommunicating proposed arrangements forconsultations.
Over several meetings, theDSBhadheard ofthese difficulties butthematter remained unresolved.
Referring tothestatements made byTurkey andtheCommunities regarding therelevance ofArticle
XXIV totheconsultations requested byIndia, hereserved hisdelegation 'srights torevert tothismatter
ifnecessary atalaterstage. Heobserved thataseparate forum wasavailable forconsultations under
Article XXIV, andthatnoreference hadbeenmade toArticle XXIV intherequest forconsultations
made byIndia.
Therepresentative ofIndia thanked Members fortheirstatements. Referring tothestatement
byTurkey, hesaidthaton17April, Indiahadsentacommunication toTurkey inwhich, among other
things, ithadindicated thattherewasnoquestion ofparticipation intheseconsultations ofthirdparties.
Hereiterated thatatthepresent meeting hedidnotwishtoenter intothesubstance ofthismatter.
Heregretted that,notwithstanding Article XXIII:1 oftheGATT 1994andArticle 4.1,and4.2ofthe
DSU, hiscountry, which hadsuddenly beenfaced withquantitative restrictions, could notinduce the
consulting Member tohearitscomplaint.
TheDSBtooknoteofthestatements.
4. Mutually agreed solutions
- Announcement bytheChairman
TheChairman, speaking under "Other Business", drew attention toArticle 3.5oftheDSU,
whichprovidedthat:"allsolutionstomattersformallyraisedundertheconsultationanddisputesettlement
provisions ofthecovered agreements..shall beconsistent withthose agreements andshallnotnullify
orimpair benefits accruing toanyMember under those agreements, norimpede theattainment ofany
objective ofthoseagreements". Inorder toensure thisresult, Article 3.6further provided that"mutually
agreed solutions tomatters formally raised under theconsultation anddispute settlement provisions
ofthecovered agreements shallbenotified totheDSBandtherelevant Councils andCommittees,
where anyMember mayraiseanypoint relating thereto". TheDSBhadsofarreceived notification
ofmutually agreed solutions inthree cases: (i)Malaysia -Prohibition ofimports ofpolyethylene and
polypropylene (WT/DS1); (ii)Korea -Measures concerning theshelf-life ofproducts (WT/DS5);
(iii)United States -Imposition ofimports duties onautomobiles from Japan under Section 301and
304oftheTrade Actof1974 (WT/DS6). Atthepresent meeting, Canada andKorea hadinformed
Members thattheyhadreached amutually agreed solution withregard toKorea 'smeasures concerning
bottled water. However, itappeared thatthere wereother cases where parties toadispute under the
DSU hadreached amutually agreed solution. These hadnotbeennotified totheDSBunder Article
3.6oftheDSU, norhadtheirwithdrawal beennotified. Herecalled thatinJuly1995, following
Singapore 'swithdrawal ofitsrequest forconsultations withMalaysia, theChairman oftheDSBhad
stated that:"itwasimportant thatatthisstagewhen DSBpractices werebeing established thatMembers
considered theneedtoregister formally notonlytheinitiation ofdisputes butalsothesettlement and
resolution thereof". Thisprecedent hadnotbeenfollowed. Atthepresent meeting, hewished tocall
uponMembers toimplement fullytheprovisions ofArticle 3.6oftheDSUinorder tosecure thefullest
transparency inthematter ofdispute settlement.
Therepresentative ofIndia thanked theChairman forhisstatement andpointed outthatthe
obligation tonotify mutually agreed solutions wasnotlimited tomatters raised intheDSBpursuant
toDSU provisions. Hereferred toArticle 3.6oftheDSU andpointed outthatallmutually agreed
solutions onmatters formally raised under thedispute settlement provisions ofthecovered agreements
havetobenotified totheDSBandtherelevant Councils andCommittees. Healsomentioned that
Article 3.5oftheDSU clearly highlighted theconcern thatmutually agreed solutions should notWT/DSB/M/15
Page6
undermine amultilateral covered agreement andthatparagraph 6flows outofparagraph 5.Inthis
context, hesuggested thattheSecretariat provide information onthedispute settlement provisions of
covered agreements apartfromthose contained intheDSUandfeltthatthisinformation would provide
guidance toMembers aswellastotheDSBregarding thecategories ofmutually agreed solutions which
hadtobenotified totheDSBandtherelevant Councils andCommittees.
TheChairman saidthatIndia'ssuggestion would beconveyed totheSecretariat.
TheDSBtooknoteofthestatements.