EC Banana Dispute and the GATT/WTO

Abstract

The banana dispute merits attention in that it was dealt with on three levels: the GATT/WTO, the European Court of Justice (“ECJ”) and EC Member States' courts. Because the EC banana import regime discriminated against Latin America bananas to protect ACP bananas, and favored traders of traditional ACP/EC bananas over those of Latin America bananas, it was found by GATT/WTO panels to be inconsistent with GATT/WTO rules. In contrast, the ECJ rejected legal challenges against the EC regime. The author reviewed the banana dispute before the GATT/WTO, the ECJ and national courts to compare each judicial control over the EC trade measure.
The author's conclusion can be summarized as follows:
1. Impact of the WTO on the EC Trade Policy
The banana dispute demonstrated the extent to which the EC trade policy is subject to the WTO adjudicative control. First, the EC could not block the adoption, by the Dispute Settlement Body (“DSB”), of panel and appellate body reports that found the WTO-inconsistency of the EC banana regime. Second, the implementation of the DSB recommendation by the EC was kept under strict surveillance. Third, in the absence of compliance with the DSB recommendation, the DSB authorized the United States to take retaliation against the EC. The WTO dispute settlement procedure therefore proved itself effective to pursue a major country's trade measure inconsistent with the WTO.
2. Passivity of the ECJ
In contrast with the GATT/WTO panels, the ECJ confirmed the EC banana regime. In Germany v. Council, the ECJ rejected the German arguments that the banana regime was void because of the breach of fundamental rights, general principles of law and GATT rules. With regard to the plea of the breach of the GATT, the ECJ held that the German Government could not invoke the breach of the GATT to challenge the legality of the banana regime.
The ECJ remains passive in dealing with a question of whether the WTO rules have direct effect. If the ECJ continues to deny the direct effect of the WTO rules without giving sufficient reasoning, it would be criticized for maintaining the deni de justice. In addition, the ECJ's insufficient judicial control over the EC trade measure would make realize the threat expressed by the so-called Maastricht judgement.
3. Threat of the Maastricht Judgement
The German Constitutional Court in its Maastricht judgement claimed power to supervise whether the EC law protects the essentials of the fundamental rights to a degree which is comparable with the German Constitution. As the banana regime is suspicious to infringe fundamental property rights under Article 14 of the German Basic law, German courts would be confronted with a question of whether the EC banana regulation protects the essentials of the fundamental rights. Consequently, the ECJ's passivity could lead to a serious conflict between the ECJ and the German Constitutional Court, and thereby endanger the principle of primacy of EC law over national laws.