Comparative Analysis: Tracing the Evolution of International Trade Law in Indonesia and Panama

1. INTRODUCTION

 

Indonesia and Panama are two dominant countries in the Southern Hemisphere. These two countries are located on the Asian and American continents respectively. Among the developing countries, both Indonesia and Panama have established themselves as true economic leaders in their category. Although these two countries are located in drastically different geographical areas, the economic achievements of these two countries over the last twenty years are absolutely remarkable. 

 

In this regard, it should be noted that in 1997, following the Asian crisis, Indonesia defaulted on its sovereign debt and the economy contracted sharply. However, in two decades, Indonesia's economic situation has recovered exceptionally well: GDP/capita (3876 SDU/capita in 2017) has increased threefold and the poverty rate has been halved. Since 2000, average annual growth has been above 5%. In 2019, Indonesia's GDP accounted for about 35% of ASEAN's GDP and Indonesia ranked as the 16th largest economy in the world. By 2030 Indonesia could be the 10th largest economy in the world[1].

 

On the other side of the globe, due to its advantageous geographical location, the central region of Panama occupies an exceptional place in global maritime trade by taking advantage of the continuous growth of trade. Panama has largely dominated the growth rankings in Latin America in recent years. In fact, Panama has been the fastest growing Latin American economy (6% annual average) over the last ten years. This dynamism is expected to weaken in the short term: in 2019, growth is expected to be 3.6% (after 3.8% in 2018). However, it is higher than in other Central and South American countries. GDP stood at USD 65 billion in 2018. The nominal GDP/capita (USD 15,489 in 2018), is one of the highest in Latin America. Inflation is under control. After reaching 0.7% in 2017, it stood at 1% in 2018. The dollarized country, however, does not have its own monetary policy and is totally dependent on the policy of the US FED. If Panama succeeds in diversifying its economy in the next few years, it too could eventually become one of the world's largest economies[2].

 

To understand the development of international trade in these two countries, it seems essential to trace the history of these countries and their economies.

 

2. RESEARCH AND DISCUSSION RESULTS

 

2.1. The History of International Trade Law in Indonesia 

 

Indonesia is a country that is located between two continents, namely the Australian Continent and the Asian continent. And flanked by the ocean, namely the Indian Ocean, the Pacific Ocean and the South China Sea. As a result, Indonesia's geographical location makes it have two seasons. This happens because of the sea breeze brings a lot of rain to the area of Indonesia. Rainy own punch every six months.[4] Therefore, Indonesia has the rainy season and the dry season. Indonesia is also known for its status as the largest maritime country in the world with a total area 5.80.083 km2 including the mainland with an area of 1.92.570 km2 and covers an area 3.257.483 km2. The country has 17,504 islands extends over the area of 3,977 miles with the boundaries of the sea of 12 miles and an Exclusive Economic Zone (EEZ) of 200 miles.[5] With a large country, the Agency of Statistics Central agency (BPS) recorded that the population in Indonesia has reached 270 million until 2020 September.[6] 

 

This figure increased to 32.57 million of the total population 237,63 million in 2010. Indonesia, which is two-thirds of the sea and a third of the land, have a lot of positive impact on the country, as has much of the flora and fauna, maintain the supply of rain and system irritation of the water, increasing state revenue through the export of fish, area of Land as capital, and the term Indonesia as public transit in international waters after the global trade.

 

The archipelago is an area located between two continents and two oceans as well as have a region that is rich in natural resources and fertile land. Layout of the Archipelago make it into a transit area for the commodity of the eastern region and the western region. Also, a gathering place for the traders who come from different countries.[7] Therefore, it can be said that the Archipelago is very known in the world of international trade. Some commodities, the Archipelago became the target for the international traders, including spices, camphor, sandalwood, and so on.[8]

 

Century-3 M, the Archipelago was active in world trade, especially with India. The relationship is originated from India who lost the source of the gold from Siberia so that India began importing currency of gold from the Romans.[9]  But the import activity was stopped by the Emperor Vesp Asianus with the reason for the economic stability of the Romans and since then the Indians began to switch to the Archipelago. Furthermore, in the 5th century, it was only China began to enter the path of the trade of the Archipelago because at that time the Archipelago provide a commodity that is equivalent to that offered by merchants from West Asia. For example such as frankincense, sandalwood, benzoin, and spices.[10]  

 

In the port of Bubat, there are the foreign traders as well as the conquered areas of Majapahit, as traders are China, Thailand dam Vietnam. However, the heyday of the Majapahit only lasted until the beginning of the 15th century marked with candra sangkala, sirnalang kertaning bumi. After that, the Majapahit suffered a setback drastically in the field of sea trade. The cause of the setback of Majapahit at that time due to his negligence, because just focus on the agriculture sector and neglecting other sectors. Also the other factor is because of the weakness of the reign of king giving rise to a power struggle and civil war. Furthermore, some of the area's subordinates began to break away and managed to control the coastal economy.[11]  And actually, the Majapahit new totally destroyed around the year 1527.        

 

Starting in the 15th century's Malacca began to show his ability in the traffic trade, and the voyage of the Archipelago. This get the attention of hundreds of traders who came from different corners of the world. As China, Arabic, Indian, Persian and region-region sedaerah other.[12] Until ultimately, European nations that ever stopped to Malacca was also intrigued by the situation of the trading.

 

During the 16th century the whole trade relations in Indonesia is still based on every power of the kingdom. Regulations as well as the relationship of the deal was not the same with other countries.  However at the beginning of the 16th century it also, the start of the Dutch colonial period of Indonesia. Based from the official page of Jakarta.go.id, the VOC (Vereenigde Oost-Indische Compagnie) or kongsi dagang, began to be established in 1602 in Amsterdam. The purpose of the establishment of the VOC is due to the occurrence of competition and hostility between the Dutch merchants.[13]  So if not done prevention will bring a big fuss between different partie.[14] At that time, between the Staten Generaal (house of Representatives) and officials of the company in Holland as well as the company Zeeland happened negotiations closely to trade in the Islands of the East Indies.[15]

 

A brief history, slowly VOC began to mark the presence of the Dutch in Indonesia. In this period, the VOC gradually getting crushed. At the start of the behind the power that is magnificent and it is not invincible, it turns out that the VOC had a lot of debt by the ruler of the corruption. This makes the VOC dubbed Vergaan Ondeer Corruptie which means that collapsed because of corruption. Finally the VOC was memutiskan the road mileage of the end by asking for help from the Netherlands. At the end of the 18th century finally VOC completely collapsed and was disbanded on December 31, 1799.

 

Thus, since the VOC disperse, Indonesia submitted to the Dutch government. Despite the fact that Dutch employees it is the former VOC. Precisely on January 1, 1800, the citizens of Indonesia has suffered because of the colonized by the Netherlands. Since that time, Indonesia renamed the Dutch east Indies with the intention to be used as belonging to the Dutch power. And so began the period of colonialism in Indonesia. 100 years of the Dutch colonized Indonesia and deplete Natural Resources to even enslave the workers in Indonesia. Not until there, even in the 1940s happen again the second war between Indonesia and the Netherlands.          

 

On the mark with the formulation of the Draft Law Trade since 1972 until finally legalized on 11 February 2014 in the plenary session of the People's Representative Council (DPR). The process of discussion and deepening of the Trade BILL this lasted for 42 years and was rejected by the president in 1979 and 1982-1986. Later in the period 2010-2011, discussion and deepening of the BILL re-done at the level of the internal stakeholder in the era of the Minister of Trade Mari Elka Pangestu, but not yet delivered to the president. Up to the time of the Gita Wirjawan served as minister of trade, he did intensive discussions since October 2013 on the Trade BILL along with the house until finally the BILL is legitimate. It is intended that Indonesia will soon be separated with BO (Bedrijfsreglementerings the Ordinance) which is the heritage of the Dutch east Indies Government that prevailed in the year 1934.[16]  In addition, Indonesia also finally have the Law on Marine which was passed by the PARLIAMENT in plenary session September 29, 2014. Trade law and the law of Marine strong role related to each other, given that the sea becomes the path of international trade and has the potential marine per year US$ 1.2 trillion or Usd 12.000 trillion. The enactment of law on marine is a step forward of the nation of Indonesia as well as marking the start of the revival of Indonesia as a maritime nation that the center aspires to be a maritime nation.

 

2.2. The History of International Trade Law in Panama

 

The Republic of Panama, located in Central America, is bordered by Costa Rica to the northwest, Colombia to the southeast, and the Caribbean Sea and the Pacific Ocean to the southwest. Its territory of 75,420 km2, smaller than South Carolina, is populated by 4.24 million people (1.5 million of whom live in the capital)[23]. Due to its advantageous geographical location, it has specialized in services (nearly 80% of GDP). The economy is based on three pillars: the Colón Free Trade Zone (2nd largest redistribution platform for consumer goods in the world), the International Banking Center (93 banks - USD 118 billion in assets, i.e. 227% of GDP) and maritime services (Canal and port and logistics infrastructures, flag of convenience, etc.). Panama accounts for 5% of world maritime trade (excluding oil) and 31% of Asia-Pacific/East Coast trade with the United States. The "Americas" air hub of Copa Airlines, the country's flagship company, can now be added as a factor of expansion[24].

 

The central region of Panama has been part of the globalization process since the 16th century, and it occupies an exceptional place in the world maritime trade, benefiting from the continuous growth of trade. Thanks to the facilities offered by the Canal, built at the beginning of the 20th century, it remains an essential point of passage[25]. To understand better Panama's growing place in international trade, it is necessary to study the country's economic history.

 

Panama began to exploit the advantage of its geographical position in the early 16th century with the Spanish colonization of the territory. The conquistadors used Panama to bring gold and silver from Peru to Spain. This period marked the beginning of the country's insertion into the world of international trade[26].

 

Panama’s economy, however, was intensely revived in the mid-19th century with the development of cargo ships and numerous merchants attracted by the California gold rush. The construction of a railroad across the Isthmus of Panama allowed the growth of the country's economy for almost 20 years until the inauguration of the first transcontinental railroad in the United States, which then drastically declined the traffic of the Panamanian Isthmus and consequently its economy[27].

 

Due to the considerable success of the Suez Canal linking the Red Sea to the Mediterranean Sea for international trade, the French architect of the canal considered renewing this feat by imagining the project of a canal in Panama with the help of Gustave Eiffel. It is thus in 1880 that France launched the project of a canal linking the Pacific Ocean to the Atlantic Ocean under the administration of Colombia. Due to an epidemic of malaria and yellow fever on the construction site of the Panama Canal which decimated a large part of the French workers, the project had to be delayed. This event led to the bankruptcy of the Universal Inter-Oceanic Canal Company, which was in charge of the canal construction project. Thanks to an agreement signed in 1904 between the United States and the newly independent state of Panama, the construction of the canal could be taken over by the United States (U.S)[28]

 

[29]

 

The canal was completed in 1914 and between the years 1915 and 1930, the traffic of the Panama Canal increased every year by 15%. The world economic depression of the 1930s, however, impacted Panama's international trade by reducing the trade flows through its canal. This drop in commercial traffic was the source of a massive layoff of employees working in the terminal cities. These workers then reoriented themselves in subsistence  agriculture.[30]

 

Despite the fact that canal activity did not rise during WWII, the economy expanded as the convoy system and the presence of US troops stationed along the canal to safeguard it, attracted international investors in the canal cities. After the war ended, Panama experienced a second economic recession, which resulted in a second influx of unemployed workers into agriculture. The authorities responded by launching a limited public works projects, instituting price supports for main commodities, and increasing protection for specific industrial and agricultural items in reaction to the crisis.[31]

 

At the end of the 1950s, Panamanian leaders were faced with numerous demonstrations of varying degrees of violence, aimed at defending and asserting Panamanian sovereignty in the face of U.S. administration of the canal. The resurgence of corruption in the political class was also the subject of recurrent complaints. The youth, in particular, rejected the compromise made by Panamanian elites with the powerful American neighbor. In the early 1960s, the protest grew and led to a violent repression. On January 9, 1964, when demonstrators wanted to symbolically raise the Panamanian flag in a U.S. controlled area of the canal, police repression left several people dead. Following this day of violence, renamed “Dia de los Martires”, Panamanian President Roberto Chiari decided to break off diplomatic relations between Panama and the United States. This decision marked the beginning of a process of profound renewal of the relationship with Washington, which led a few years later to the signing of the “Torrijos-Carter Treaty”. At the same time, tensions between civilians and the military worsened, leading to a coup d’état on 11 October 1968 against Arnulfo Arias[32].

 

As a result of this coup, General Omar Torrijos, leader of the Panamanian revolution, became the sole leader of the country until 1981. In power, he set up a constituent assembly that drafted the 1972 Constitution, which is still in force. Omar Torrijos also began negotiations with the administration of Jimmy Carter to develop a new bilateral treaty between Panama and the United States, including the management of the canal. The treaty, signed on September 7, 1977, provided for the end of the Panama Canal Company, the dismantling of the Canal Zone, and the return of the territories under American administration[33].

 

          The retrocession project has been a priority for successive governments, which have neglected the consolidation of the institutions of this emerging democracy. In fact, the Pérez Balladares government (1994-1999) made this consolidation its priority, along with repositioning the country on the international scene. To this end, it moved closer to the Central American Common Market. Finally, on December 31, 1999, the American flag was lowered and the Panamanian state was reconstituted and territorially independent.

 

          Panama gradually became an international financial center for at least four reasons: the administration and expansion of the Canal; the existence of the Colon Free Trade Zone; sustained macroeconomic stability; and the existence of a banking system integrated into the dollarized international financial market with a conservative lending policy. The handover of the Canal to the Panamanian authorities radically transformed the country's economic model. The Panama Canal Authority's financial contribution in 2013 was close to $1 billion, more in one year than all the U.S. payments in 96 years.[34]

 

         The expansion of the canal, decided in the November 2006 referendum, is expected to increase the share of maritime trade captured by the canal from 5% to 30% by 2022.[35]

 

          The Colon Free Zone is the main place for commercial transactions fueled by port services and tax benefits. Indeed, commercial activities carried out in the zone are exempt from value added and transfer taxes. For other economic activities, taxes are at a minimal level. In addition, since 1997 - the date of its accession to the WTO - the Panamanian government has made significant efforts to strengthen its banking system. In 2002 and 2004, the International Monetary Fund (IMF) expressed its support for the Panamanian banking system and stressed its soundness. In 2010, the restrictive lending policy of Panamanian banks resulted in the upgrade of the country's Standard & Poors rating to "BB+".[36]

 

          On the economic and commercial front, the strategy of international positioning also began in the mid-1970s. Under the presidency of General Omar Torrijos, the Panamanian government began efforts to diversify trade and promote national exports. As a result, trade relations with Central American states were intensified. Economic agreements were signed with Central American neighbors: free trade and preferential exchange treaties with El Salvador (1973), Costa Rica, Honduras, Nicaragua (1973) and Guatemala (1974). However, it was mainly during the 1990s that internationalization intensified, especially with a competition policy that allowed economic modernization and generated profound structural changes in the country[37].

 

          The measures implemented under the Ernesto Pérez Balladares government set the stage for international insertion. In 1998, the government created the "Superintendence of Banks", an independent body with the task of supervising financial regulation. Gradually, the country adopted a common set of neo-liberal measures: privatization of state enterprises, market liberalization, development of public-private partnerships. Trade agreements were signed at this time with extra-regional states, including bilateral investment treaties with Argentina, Canada, Chile (1996), Spain (1997), Uruguay (1998), the Czech Republic (1999), the United States, the Netherlands (2000) and South Korea (2001). The Panamanian State is showing its aspiration to greater international economic integration, with a strategy of diversification of trade partners. In addition, the internationalization strategy is being strengthened by a search for centrality in the field of logistics, in particular by the creation in 2002 of a multimodal logistics center for international transport and services, the heart of which is the CEMIS (Multimodal Center for Industry and Services), designed to make of Colon, a continental hub.[38]

 

          Faced with the global economic and financial crisis, from 2008, the strategic priority is to strengthen and diversify trade agreements. New treaties were signed with Costa Rica, Honduras (2007), Guatemala, Sweden (2008), Nicaragua (2009), Canada (2010), Peru (2011) and the European Union (2012). In addition, Panama targets multilateral, and particularly regional, arenas. In 2011, Panama applied for membership in the Pacific Alliance (Mexico, Colombia, Chile, Peru), of which it is now an observer member. It became a member of the Latin American Integration Association (LAIA) in 2012, and in 2013 a free trade treaty was signed with Colombia and Mexico (April 2013). This strategy now makes Panama one of the most economically connected countries in the Latin American continent, behind Mexico and Brazil[39].

 

          The FTA signed in 2014 with Mexico paves the way for it to join the Pacific Alliance, although the agreement with Colombia has yet to be ratified. In addition, the WTO ruled in Panama's favor in the trade dispute over customs duties imposed by Colombia on products from the Colon Free Zone. Finally, two other agreements have been finalized with Israel and South Korea[40].

 

          While Panama has largely dominated the growth rankings in Latin America in recent years, much of the benefits of this growth have been captured by the wealthier segments of the population. While the poverty rate is declining (22.1 percent of the population in 2016 compared to 23 percent in 2015), inequalities remain high in education, health and access to basic services, particularly in the autonomous provinces with an Indian majority. Achieving more sustainable development that benefits more people remains a challenge.[41]  

 

          Financial transparency remains an important issue for Panama, which is heavily dependent on foreign investment and has created a credible and efficient financial center. The "Panama Papers" revelations revealed the practices of Panamanian business lawyers and the country was reinstated on the French list of non-cooperative states. The direct "reputational" effects on the Panamanian economy are for the moment very limited. However, these events have led the authorities to react. Panama has ratified the convention on mutual administrative assistance for the exchange of tax information and two fundamental laws to enable financial transparency have come into force.[42] The 2017 GAFILAT assessment measured the country's commitment to addressing money laundering and terrorist financing risks. Finally, as a result of the accelerated review process by the OECD Global Forum in 2017, Panama has provisionally received a largely compliant rating, which temporarily removes the risk of being placed on a virtual international blacklist.[43]

 

Amidst the global economic meltdown in 2020, international trade has also felt the pinch: the WTO reports a 9.2% drop for the year. And yet, some commercial superstructures are not suffering. This is the case of the Panama Canal "which is experiencing a small economic miracle in the midst of a pandemic"[44] claims the French journalist Laurence Cuvillier. Indeed, Pandemic or not, the Panama Canal has not been closed for a single moment to container ships. In fact, more than 30 of them pass through every day. Victim of the pandemic ? No, on the contrary! Panama has suffered a decrease in traffic on its canal of 20% between May and July 2020. However, the Vice President of Communications of the Panama Canal, Marianela Denfo de De Obaldia says that the year 2020 ended very well since “the goods transported increased by 1%”[45]. Panama ended the year 2020 with an increase in revenue thanks to its canal that could save it from the economic crisis that represents the Covid-19.

 

2.3   Similarities

Panama and Indonesia have some similarities in the world economy, specifically is about kelautannya which is considered to give a great advantage for the development of the country. The first example is the geographical location. As we can see, Panama and Indonesia are the two countries that become the center of world attention because of its trading course. The geography of Indonesia is considered strategic because it is located in between two continents (Asia and Australia) and two oceans (the Indian Ocean and the Pacific). As well as the layout state of Panama flanked by the Pacific and the Atlantic Ocean. In this case, Indonesia and Panama benefit the economy of the position of the cross country.  In Panama, they have a channel of water or more often referred to as the channel. This path is much ship from different countries with the aim of accelerating the path of international trade. As well as for Europe, the line is easy to voyage to Asia without a circumnavigation of the African continent. Of course it provides advantages, such as saving time and transportation costs. 

 

Region of Indonesia which is located so that it becomes the center of trade routes and cruise the world between East Asian countries with European countries, India and the Middle East. Also be a trade route between Asia to Australia and New Zealand. As well as a number of ships from Japan, China and the other East Asian yany heading to Europe through Indonesia dam vice versa. If simplified, the major shipping routes on the cruise line in the world is to connect North America, Asia Pacific and Europe through the Strait of Malacca, the Canal suarez and the Panama Canal.

 

The equation further of the two countries is the wealth of marine resources. As said earlier, Indonesia and Panama have vast waters, which means they have a variety of biodiversity. In the year 2021, the Government of Panama has expanded the zone of water conservation hers up to 68 thousand square km, or 30% of the initial area. Conservation zone is even almost equal to its area of 75,517 square km and become the first Latin American to achieve the initiative 30x30 of the united nations. Meanwhile, Indonesia is the largest archipelagic state in the world. Stretches from Sabang to Merauke, Indonesia has 17.499 island with a total area of Indonesia is about 7,81 million km2. Of the total area of the region, 3.25 million km2 is the ocean and 2.55 million km2 is the Exclusive Economic Zone. Only about of 2.01 million km2 in the form of the mainland. With the breadth of the territorial sea, Indonesia has the potential of marine and fisheries is very large. Fishing is one of the sectors that relied upon for national development. In 2019, the export value of fishery products in Indonesia reached Usd 73.681.883.000, values are up 10.1% compared to the exports of the year 2018. Seafood such as shrimp, tuna, squid, octopus, crab and seaweed is a commodity that is sought. Panama was only discovered in 1513, so its place in international trade is less important than Indonesia's, since Panama developed its international commerce much more recently than Indonesia. It is therefore difficult to compare Indonesia's achievements with those of Panama, since the two countries are not at the same stage of progress in international trade. Panama's economy, due to its geographical position, is largely oriented towards services, banking, tourism and trade. The service sector, including the Panama Canal, contributes 80% of its gross domestic product[46]. On the other hand, Indonesia has a market economy in which the government is largely involved. There are more than 164 state-owned enterprises and the government controls the prices of many commodities such as oil, rice and electricity. 

 

2.4   Differences

 

With extensive expanses of agriculture, forestry, and fisheries, Panama has a lot of assets. Panama produced 2.9 million tons of sugarcane, 400,000 tons of bananas, 314,000 tons of rice, 112,000 tons of corn, 109,000 tons of pineapple, 46,000 tons of palm oil, and 40,000 tons of oranges in 2018, in addition to small quantities of other agricultural products like potato, cassava, watermelon, onion, coconut and so on. Coffee, bananas and sugar canes are the most commonly exported agricultural products[47].

 

Rice, cocoa, natural rubber, cassava, coffee, copra, palm oil; pig, beef, chicken, and eggs are among Indonesia's primary agricultural products. Palm oil production is critical to the economy because Indonesia is the world's largest producer and user, accounting for roughly half of global supply. Indonesia has a much more varied trade than Panama. In Indonesia, Agriculture accounts for 27.7% of GDP, industry accounts for 22.6% of GDP and services account for 49.6% of GDP. As for Panama, agriculture represents 2.4% of GDP, industry corresponds to 15.6% of GDP and services represent 82% of GDP. In 2019, Indonesia exported nearly $186 billion exporting goods such as gas, oil electrical appliances, rubber, textiles, manufactured goods, steel and iron. Panama exported nearly $15 billion in fruits, nuts, fish, wood, and iron and steel. Panama's main customers are the United States, while Indonesia's customers are more varied, mainly China, the United States and Japan.[48]

 

 A final indication of Indonesia's lead over Panama is the significant number of bilateral agreements signed by Indonesia. Indeed, Indonesia has signed treaties with a large number of countries around the world. Indonesia has agreements with countries in Africa, South and North America, South and North Asia, Europe and Oceania. On the other hand, although Panama has developed its number of bilateral agreements over the last twenty years, they remain much less extensive than those of Indonesia. Indeed, Panama has trade agreements with only 40 countries.

 

2.5. Case review of Panama: The Banana war, case DS105 [49]

 

The international banana trade is a major challenge and a source of market conflicts. Indeed, after “rice, wheat and maize, bananas are the world’s fourth most important food crop”[50]. The banana trade is a dispute between Latin America and the European Union since 1994 before the World Trade Organization (WTO).

 

Before 1993, in the European Union, there were three different regimes for banana imports:

- A few European countries used to grant preferential access (based on the protection of local production) to certain countries with which they had close historical ties. It was the case of Spain and Great Britain that mostly imported from their former colonies. This preferential tariff treatment is the result of the Lomé Convention signed in 1975, whose agreement was to be renewed every five years. This agreement only concerned bananas from African, Caribbean and Pacific countries. These bananas are called ACP bananas.

- The largest and the most dynamic regime was the one fueled by Germany that imported bananas from Latin America on the basis of a free market with no import restrictions. These bananas are called Dollar bananas. 

-The last one concerned European countries that imported bananas mainly from Latin America but without granting to them any preferential treatment.

 

To replace the numerous national banana import policies that existed, the European Economic Community (EEC) Regulation No. 404/93 provided a common market organization in the banana sector (CMOB) on February 13, 1993. The establishment of a CMOB was required to unify banana access to European territory. The goal of this regulation was to remove internal trade restrictions within the Union so that the economy could flourish; to maintain former colonial favors in order to secure their production under the Lomé Convention, and ultimately to preserve European banana distribution businesses. However, Bananas from third nations, particularly those from Latin America, were still subject to customs duties and required import permits.

 

The CMOB was deemed too protective by the dollar zone countries as soon as it was established. Latin American countries, which are intimately linked to the three huge American companies Del Monte, Dole and Chiquita, promptly accused the European Union of impeding international trade regulations. Several Latin American banana-producing nations, including  were hostile to the EEC's establishment of a common market for bananas.They then filed for an investigation into the regime's conformity with international trade rules under the jurisdiction of the GATT. The newly formed group of experts determined in February 1994 that the regime violated the most-favorable-nation criterion and that the distribution of import licenses was unequal. In other words, not only were the EEC's special tariffs on banana imports contradictory to Articles III and XIII of the GATT172, but so were the EEC's preferential tariffs on bananas from African, Caribbean, and Pacific (ACP) countries.

 

Mexico, Honduras, Guatemala and the United States requested consultations with the EEC on the EEC regime applicable to the sale, import, and distribution of bananas on September 28, 1995, under the auspices of the WTO.

 

In response to these complaints, the EEC justified this preferential treatment by arguing that it was essential for the survival of small banana producers in the countries that signed the Lomé Convention. On the other hand, the EEC argued that the quota system provides the protection of Community producers in the West Indies by limiting imports of dollar bananas, which are very competitive because they are sold at a low price compared to bananas from Martinique and Guadeloupe.

 

A WTO panel was established and issued its findings on April 12, 1999. The report of this panel makes three observations:

- the quantity of 857 000 tones is to be considered as a tariff quota and cannot be reserved for ACP countries without a derogation under Article XIII of the GATT;

- insofar as the ACP countries have access to two quotas while third countries have access to only one quota of 2.53 million tones, the Community discriminates between supplier countries;

- the allocation of banana import licenses is discriminatory both in terms of the reference period chosen - in this case, for 1999, the period from 1994 to 1996 - and the conditions for acquiring newcomer status.           

 

The panel then listed three options:

- a purely tariff-based system with a preferential duty for the ACP states;

- a tariff-only system with a specific quota for ACP bananas

- maintaining tariff quotas, but without allocating specific shares per country unless there is an agreement among all suppliers with a substantial interest.

 

Faced with international pressure, Europe agreed to revise the CMOB (Common Market Organization for Bananas) in 2006. It replaces the quota of banana imports by a customs duty that it considers important enough to limit the entry of Dollar bananas.

 

 

Alexandre GERMOUTY