The World Trade Organization and the Environment

By P. K. Rao | Go to book overview

A few milestones in the evolution of the now notorious banana dispute may be summed up. In May 1993 the GATT panel found the EC in violation of the provisions of the GATT, and in July 1993 EC blocs' adoption of the panel repeat; this cycle repeats itself again during January and February 1994 in respect of (rather in lack of respect of!) the second panel under the GATT. During 1995-96, soon after the formation of the new WTO, the US and four of the Latin American Countries file the dispute under the new DSU. In May 1997 a WTO panel finds violations in the EC banana trade regime, soon after which the EC appeals. In September 1997, the Appellate Body under the WTO upholds the panel findings and later, the DSB adopts the panel report. EC virtually ignores the recommendations and scope for negotiated settlement. In January 1998, WTO Arbitrator gives EC until 1 January, 1999 to comply with the WTO panel rulings. In June 1998, EC's Agricultural Council adopts a few minor modifications to the banana trade rules and unilaterally declares them to be WTO-consistent.

The retaliation option was available to the US when authorized by the DSB. The EU objected to the magnitudes of imposition of tariffs (rates and coverage of items), the matter can be proposed for reference to a mandatory arbitration to decide whether the level of retaliation is equivalent to the level of the offense ('nullification or impairment at stake', according to Article 22.7 of Annex 2 of the DSU of the WTO). This mechanism tends to limit the type and degree of retaliation. It goes without much confusion that any retaliation can be a lose-lose scenario and retrograde step in the ultimate analysis. The real lacuna in the current list of provisions under the WTO and its DSU seem to be lack of realistic compensatory measures to offset any trade effects of tainted trade measures adopted by members. There is no plausible reason why these measures cannot be devised and brought under the DSU. This can be accomplished at the next Ministerial Conference of the WTO.

US requested the WTO its authorization to impose trade tariffs and suspend concessions to specific items of import from EU (except those of the Netherlands and Denmark). The specific amounts was determined in April 1999 at $191 million, determined by a binding arbitration. It is apt to recall an observation of the 1997 Appellate Body Report of WTO on the EC banana import regime: '... with the increased interdependence of the global economy ... Members have greater stake in enforcing WTO rules than in the past.'


References

Chang, H. F. ( 1995) "An economic analysis of trade measures to protect the global environment", Georgetown Law Journal, 83.6, 2131-213.

Esty, D. C. ( 1994) Greening the GATT Trade, Environment, and the Future, Washington, DC: Institute for International Economics.

Fletcher, C. R. ( 1996) "Greening world trade reconciling GATT and multilateral environmental agreements within the existing world trade regime", Journal of Transnational Law and Policy, 5.2, 341-72.

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