STATEMENT OF STEVEN G. WARSHAW, PRESIDENT AND CHIEF OPERATING OFFICER, CHIQUITA BRANDS INTERNATIONAL, INC., CINCINNATI, OHIO Mr. WARSHAW. Mr. Chairman, my name is Steve Warshaw. I am president and chief operating officer of Chiquita Brands International. Chiquita Brands brings a unique perspective to these issues, being one of a very small group of American companies to have experienced every step of the WTO process from beginning to an end that never occurs. In 1994, as Congress debated U.S. accession to the WTO, Undersecretary of Commerce Jeffrey Garten made the following statement: "The new WTO dispute settlement process will be much more effective than that of the old GATT system. Whereas in the past, parties could interminably delay the resolution of disputes, dispute settlement procedures will now be subject to strict deadlines and the adoption of panel findings will be binding and all but automatic." Clearly the banana and recent beef cases are proof that the dispute settlement process has not lived up to that promise. Injured parties can litigate for years, win their cases and still not be compensated for damages. The EU has lost two GATT rulings and four WTO rulings in the banana case, but its illegal banana trade practices remain in effect today. Chiquita Brands and Latin American economies continue to be harmed. The WTO calculated that Europe's illegal actions have cost U.S. interests alone $191.4 million annually, almost all of which has been borne by Chiquita Brands. When any company suffers annual losses of this magnitude, timely relief becomes essential. The WTO procedures alone took 32 years just to get to the point of retaliation and there is still no relief. After the U.S. won a favorable ruling in the banana case, Europe was entitled to continue its illegal practices for another 15 months. This 15-month grace period alone caused $270 million of additional injury to our interests. At the end of that period, the EU was able to claim that it was in compliance, even though it was not, as a way of further prolonging the procedures. Such a system provides absolutely no incentive for prompt compliance. In reality it rewards delays, obstruction and noncompliance. And so, Europe has delayed, blocked, evaded, argued, appealed, vetoed and repeatedly sought ways to avoid its obligations under international trade rules. The only tool for reversing noncompliance under the WTO is retaliation. In order to accomplish its objective of inducing compliance, it needs to be effectively applied. To date, the banana and beef retaliatory actions against Europe have been unsuccessful by any standard or measure. Five months after retaliation took effect in the banana case Europe is still proposing WTO inconsistent banana arrangements. In the beef case Europe is promising never to lift its ban. Their continuing obstruction has persuaded several U.S. farm groups that static retaliation is not sufficient leverage. In order to increase internal pressure to comply, we recommend that retaliation targets within Europe be rotated at regular intervals. We believe this so-called "carousel retaliation" approach would be en tirely consistent with WTO law and urge the Trade Subcommittee to insist on its use to bring disputes to their proper conclusion. As this Subcommittee considers the critical issue of dispute settlement in the months leading up to the Seattle Ministerial, we urge you to examine the serious flaws that have emerged as a result of the banana and beef disputes. The banana case in particular offers several valuable lessons. This has become the most litigated trade issue in the history of dispute settlement. The United States and the Latin Americans have won every major round. The rulings have been unambiguous, decisive and precedent setting and still, despite more than 6 years of successful decisions in the GATT and WTO, Europe's illegal practices continue. If the shortcomings raised in the banana and beef disputes are resolved, the WTO can still live up to the promise that former Undersecretary Garten described and that Congress endorsed. But unless they are resolved and existing rulings and agreements are enforced, new agreements should not be pursued. Chiquita Brands is eager to assist the Trade Subcommittee in addressing these critical issues in the coming months. Thank you, Mr. Chairman. [The prepared statement follows:] Statement of Steven G. Warshaw, President and Chief Operating Officer, Chiquita Brands International, Inc., Cincinnati, Ohio Mr. Chairman and Members of the Committee, my name is Steve Warshaw. I am President and Chief Operating Officer of Chiquita Brands International. As this Committee knows, the Banana case-for reasons quite apart from bananas-has become important for what it says about the WTO system. The case makes clear the imperative for more effective, streamlined procedures; for good faith compliance on the part of all WTO members; for more effective application of retaliation; and, above all, for a system that delivers measurable relief to the injured U.S. commercial interests. Chiquita Brands brings a unique perspective to these issues, being one of a very small group of American companies to have experienced every step of the WTO process from beginning to an end that never seems to occur. It is my hope that our company's experience can contribute constructively to the national debate and congressional focus in the months leading up to the Seattle WTO Ministerial. The Need for More Effective, Streamlined Procedures More than five years ago, as Congress debated U.S. accession to the WTO, Undersecretary of Commerce Jeffrey E. Garten made the following statement: "The new World Trade Organization dispute settlement process will be much more effective than that of the old GATT system. Whereas in the past, parties could interminably delay the resolution of disputes, dispute settlement procedures will now be subject to strict deadlines and the adoption of panel findings will be binding and all but automatic." Clearly, the Banana case is proof that the WTO system and its dispute settlement process have not lived up to that promise described by former Undersecretary Garten. In fact, what this case—and the recent Beef case-show is that the WTŎ has a dispute non-settlement procedure. Injured parties can litigate for years, win their cases, and still not be compensated for damages as the illegal trade practices continue unimpeded. Let me briefly review the history of the six-year Banana case, which has taken away more than half of our 100-year-old European business, and inflicted serious economic injury on many of the poorer banana-producing nations of Latin America at a time when these developing countries were being required to open their markets and abide by new trade obligations. • In 1993, the EU instituted an illegal banana policy that systematically and deliberately destroyed much of Chiquita Brands market share in Europe. • In late 1993, the GATT ruled that the EU banana policy violated trade agreements. In response, the EU blocked the GATT ruling and maintained its illegal practices. In 1994, the GATT again ruled that the EU banana policy was illegal. In response, the EU again blocked this second GATT ruling and maintained its illegal practices. • In May 1997, using new trade rules, the WTO found that the EU banana policy violated the WTO. In response, the EU appealed the ruling and continued its illegal practices. • In September 1997, a WTO appeals panel reiterated the ruling that the EU banana policy contained more illegalities than virtually any other policy ever reviewed in dispute settlement. Having exhausted its appeal process, the EU finally changed its banana policy-by making it more illegal and more damaging to U.S. interests. • In March 1999, at the request of the United States, the WTO determined that the EU's "new" banana policy also violated WTO rules. In response, the EU ignored the WTO and maintained its illegal practices. • In April 1999, when the United States imposed punitive tariffs against Europe in retaliation, the EU ignored the action. To this day, Europe's illegal banana trade practices remain in effect. Chiquita Brands and Latin American economies continue to be harmed. The adverse impact to our business has been substantial. The WTO calculated that Europe's illegal actions have cost U.S. interests $191.4 million annually-almost all of which has been borne by Chiquita Brands. The U.S. government and our company believe that number, which was determined by an arbitration panel, is far below actual U.S. and Latin loses. When any company suffers annual losses of this magnitude, timely relief becomes essential. The WTO procedures alone took three and a half years just to get to the point of retaliation, and there is still not resolution or relief. This timetable is entirely too long when significant injury is compounded year after year. By authorizing prolonged delays, the WTO effectively legitimizes evasion, obstruction, and runaway injury to the prevailing party. How many American companies, farmers or industries could sustain that amount of injury for that amount of time? The delays are all the more frustrating because they arise for inequitable and illogical reasons. In the Banana case, for example, consistent with standard WTO procedures, even after the United States received a favorable ruling, Europe was entitled to continue its illegal, harmful practices for another 15 months. To make matters worse, WTO rules prohibited the United States from scrutinizing Europe's socalled compliance or plans for a "new" banana policy during those 15 months. As a result, at the end of that period, the EU was able to claim that it was in compliance, even though it was not, as a way of further prolonging the procedures and its illegal trade practices. Using the WTO's own injury calculations, the aggregate harm done to our interests during the multi-year period from when the WTO procedures first began to the date retaliation took effect was $670 million. The EU's 15-month grace period-that is, the period after the favorable ruling-alone caused $270 million of additional injury to our interests. Under present WTO rules, Chiquita Brands can never recover the damages incurred during those periods. Relief, if provided, will be strictly prospective, with no retroactive penalty imposed on Europe for the damage it has caused in the meantime. Such a system provides no incentive at all for prompt compliance and every incentive for protectionist member countries to gain a lasting commercial edge over U.S. interests without fear of penalty or economic consequence. In reality, the WTO procedures reward delays, obstruction and non-compliance: European banana interests continue to earn illegally conceived profits. There is no mystery in why the EU continues to procrastinate and evade compliance with GATT and WTO rulings. The Need for Good Faith Compliance Another major concern arising from the Banana case is one that Ambassador Barshefsky has described as Europe's "30-year pattern of refusing to accept panel decisions." Nowhere is that pattern more apparent than in the Banana case. Under the old GATT, the EU blocked two banana panel rulings. New WTO rules were supposed to prevent such tactics. However, even under the WTO, the EU has continued to do everything possible to avoid compliance. For decades, the EU has demonstrated this pattern of protectionism and prevarication. In case after case, Europe has delayed, blocked, evaded, argued, appealed, vetoed and repeatedly sought ways to avoid obligations under international trade rules. It has happened on citrus, pasta, canned fruit, soybeans, beef, and bananas. The list goes on, and so do Europe's unlawful trade practices. For Chiquita, the problem of chronic non-compliance threatens our business. For the WTO system, the stakes are equally high. If Europe, the largest WTO member, continues its pattern of non-compliance, legitimate questions will be raised about the real value of the WTO. The Need for More Effective Retaliation The only tool for reversing non-compliance under the WTO is retaliation. When WTO-sanctioned retaliation is imposed, it must be applied in a way that induces compliance as quickly as possible. If retaliation is the end-result, the injured petitioning interest gets no relief and the entire multi-year litigation process becomes futile. To date, the Banana and Beef retaliatory actions against Europe have been unsuccessful by any standard. Five months after retaliation took effect in the Banana case, Europe is still proposing WTO-inconsistent banana arrangements. In the Beef case, Europe is promising never to lift its ban. Europe's response to these retaliations has persuaded the American Farm Bureau, the National Cattlemen Beef Association, the American Meat Institute, the U.S. Meat Export Federation, the Hawaii Banana Industry Association and Chiquita Brands that static retaliation is not sufficient leverage. In order to increase internal pressure to comply, we recommend that retaliation targets within Europe be rotated at regular intervals. Because the overall level of retaliation against Europe would not change, we believe this so-called "carousel retaliation" approach would be entirely consistent with WTO law. We urge the Trade Subcommittee to insist on the use of carousel retaliation in order to bring these cases-and future disputes-to their proper conclusion. The Need for Measurable Relief to the Injured U.S. Industry Ultimately, the proper and equitable conclusion of dispute settlement must be full WTO compliance and the delivery of quantifiable relief to the petitioning U.S. industry. Chiquita, like other U.S. companies and farmers, has availed itself of dispute settlement with that singular objective in mind. U.S. interests, particularly agricultural interests, have often made the point that if prominent cases like Bananas and Beef are not resolved in a way that produces a fair outcome and tangible relief, WTO dispute settlement will inevitably lose its appeal. This overriding imperative has not yet been grasped by the European Commission, which continues to propose certain new banana arrangements that would in fact increase injury to Chiquita Brands. Congress and the Administration need to reinforce in the clearest way possible the message to Europe that dispute settlement is intended to accord commercial relief from illegal practices and that outcomes that fall short of that objective will be unwelcome and of no help in lifting U.S. retaliation. Conclusion America's agricultural sector is the most productive and competitive in the world. Despite this fact, some of our nation's most important export markets are being stolen away by illegal trade practices. We don't permit America's intellectual property, patents, or high technology industries to be subjected to such treatment, and we shouldn't allow it in agriculture. As this Subcommittee considers the critical issue of dispute settlement in the months leading up to the Seattle Ministerial, we urge you to examine the serious flaws that have emerged as a result of the Banana and Beef disputes. These cases provide concrete examples of the obstacles that any U.S. interest could encounter when taking on unfair practices by the EU. Unless solutions to these inadequacies can be found prior to the WTO Ministerial Meeting, many will question the value of new agreements, given that existing ones cannot be enforced. On the other hand, with proper attention to the concerns raised in the Banana and Beef disputes, the WTO can still live up to the promise that former Undersecretary Garten described and that Congress endorsed. Chiquita Brands is eager to assist the Trade Subcommittee in addressing these critical issues in the coming months. Chairman CRANE. Thank you. |