Since 1963, the European Economic Community (EEC) had negotiated tariff rates with the developing countries that export bananas, and these concessions were bound in the tariff schedules at 20 percent ad valorem. In 1993 the EEC took over banana import regulation from the individual countries. The EEC set up uniform rules on quality, marketing standards, and tariffs. Under the EEC regime, the tariff rates on bananas from the Latin American countries were increased between 20 and 180 percent. A complex licensing scheme was also set up to limit the access of foreign banana traders (e.g., Chiquita, Dole, and Del Monte) to sell in the EEC. The Latin American countries claimed that the regulations impaired their Article II tariff concessions and violated Article I, MFN principles, and other GATT provisions. Notice that prior to the WTO's founding in 1995, countries that were party to the GATT agreement were called "contracting parties," while in the WTO system they are called "members."
1. What is a tariff concession?
2. What is a tariff binding? What was the EEC's bound rate?
3. What actions did the EEEC take that violated its tariff concessions?
4. Why is it important that countries maintain their tariff commitments? If not for tariff commitments, what do you think the impact would be on foreign banana exporters or on exporters in any industry?
5. What is the legal basis for Latin America's objections?