BACKGROUND

The present arbitration was initiated pursuant to the procedures set out in the Annex to the waiver decision with respect to Article I of the General Agreement on Tariffs and Trade 1994 (“GATT 1994”) contained in the document “European Communities – The ACP-EC Partnership Agreement, Decision of 14 November 2001” (the “Doha Waiver”, attached). This was one of two waivers adopted at the Doha Ministerial Conference, inter alia, to facilitate implementation by the European Communities of two understandings (between the European Communities and the United States, and the European Communities and Ecuador, respectively) relating to the resolution of the WTO EC – Bananas III dispute.

As part of those understandings, the European Communities undertook to reform its banana regime so as to replace its then existing WTO-inconsistent measures based on several tariff rate quotas with a “Tariff Only regime for imports of bananas”. The tariff-only regime is to be implemented by 1 January 2006, with interim tariff quota arrangements until that date. The EC - Bananas III dispute was initiated by Ecuador, Guatemala, Honduras, Mexico and the United States in 1996 and addressed the then EC banana regime. In the context of those proceedings, Ecuador and the United States were authorized by the Dispute Settlement Body (the “DSB”) to suspend certain concessions and, in the case of Ecuador, other WTO obligations towards the European Communities. In the context of seeking to resolve outstanding implementation issues, Ecuador and the United States negotiated understandings with the European Communities that included, inter alia, suspension (United States) or termination (Ecuador) of the right to suspend concessions or other obligations vis-à-vis the European Communities, adjustment of the tariff quota levels and the introduction of a tariffonly regime for imports of bananas as from 1 January 2006 as well as the lifting of these countries’ reservation with respect to the banana waiver.

On 15 July 2004, the European Communities announced, in a communication to WTO Members, that it intended to modify, in accordance with Article XXVIII, paragraph 5 of GATT 1994, its concessions with respect to tariff item CN 08030019 (bananas) included in the EC Schedule CXL.