World Trade Organization

• Author: International Law Group

On September 25, 1997, the WTO Dispute Settlement Body had adopted the Appellate Body report and modified panel reports regarding the case European Communities - Regime for the Importation, Sale and Distribution of Bananas (WT/DSB/M/37). The WTO had agreed with the complainants in that case, including the U.S., that the EU had been unduly favoring banana imports from certain former colonies and hindering imports from certain Central and South American countries. Dissatisfied with EU remedial actions, the complainants continued consultations but without success.

Effective March 3, 1999, the U.S. imposed bonding requirements on EU imports of listed products valued at $520 million annually and levied a 100% duty on each individual importation of the itemized goods. The U.S. Customs Service required bonds from importers to make sure that it could collect any duties that might apply after the WTO arbitrators determined in March 1999 the level of harm caused to the U.S. as a result of the EU banana regime. See 1999 International Law Update 58.

On April 9, 1999, WTO arbitrators determined that the level of nullification and impairment suffered by the U.S. in this case amounted to $191.4 million per year. The EU claimed that the WTO had only authorized the U.S. on April 19, 2000 to suspend concessions as of that date on EU imports valued at $191.4 million. Therefore, the EU requested consultations before the WTO which led to the instant WTO Dispute Settlement Panel decision issued on July 17, 2000.

The Panel finds that the U.S. unilaterally took action on March 3, 1999, because there are no explicit rules on the retroactive application of retaliatory measures. The U.S. did not request retroactivity and such would be contrary to WTO/GATT practice where remedies have traditionally been prospective (Paragraph 6.106). The Panel also rejects the U.S. argument that the EU had unduly delayed the establishment of an arbitration panel and should therefore bear the consequences of unilateral U.S. action since it would not have taken place if the parties had been able to timely set up the arbitration panel.

"We will offer only two brief comments on this defense. First, no WTO violation can justify a unilateral retaliatory measure by another Member; this is the object of the prohibitions contained in Article 23.1 of the DSU. If Members disagree as to whether a WTO violation has occurred, the only remedy available is to initiate a DSU/WTO dispute process and...