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United States—Subsidies on Upland Cotton, Recourse to Article 21.5 of the DSU by Brazil

  • Karen Halverson Cross (a1)

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1 See Appellate Body Report, United States—Subsidies on Upland Cotton, WT/DS267/AB/R (adopted Mar. 21, 2005), modifying Panel Report, United States—Subsidies on Upland Cotton, WT/DS267/AB/R (adopted Mar. 21, 2005). A case report by Richard Steinberg on the Appellate Body decision appears at 99 AJIL 852 (2005). Materials on specific WTO disputes are available at <http://www.wto.org/english/tratop_e/dispu_e/dispu_e.htm.

2 Appellate Body Report, United States—Subsidies on Upland Cotton (Recourse to Article 21.5 of the DSU by Brazil), WT/DS267/AB/RW (adopted June 20, 2008), modifying Panel Report, United States—Subsidies on Upland Cotton (Recourse to Article 21.5 of the DSU by Brazil) (adopted June 20, 2008) [hereinafter U.S.— Upland Cotton (Article 21.5—Brazil)]. A previous version of this case report appeared in ASIL Insights (Sept. 16, 2008), at <http://www.asil.org.

3 Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization [hereinafter WTO Agreement], Annex IC, in World Trade Organization, The Results of the Uruguay Round of Multilateral Trade Negotiations: The Legal Texts 321 (1999) [hereinafter The Legal Texts], reprinted in 33 ILM 1197 (1994). WTO legal texts are available at <http://www.wto.org/english/docs_e/legal_e/legal_e.htm.

4 See supra note 1. For a discussion of the original proceeding, see Cross, Karen Halverson King Cotton, Developing Countries and the ‘Peace Clause’: The WTO’s US Cotton Subsidies Decision , 9 J. Int’l Econ. L. 149 (2006).

5 In addition to other subsidies, Brazil challenged Step 2 payments (payments made to buyers of U.S.–grown cotton when its price exceeds a European benchmark price); export credit guarantees for cotton and other commodities (including the GSM 102 program, which covers credit terms between 90 days and three years); marketing loan payments (non–recourse government loans to farmers using cotton crops as collateral, allowing repayment at a lower rate if world cotton prices decline); and countercyclical payments (payments linked to a cotton farmer’s production during a fixed, historical period, triggered when the market price for cotton falls below a certain threshold).

6 A marketing year is the twelve–month period following a harvest, beginning August 1 and continuing through July 31 of the following year. The period at issue thus corresponds to August 1999 through July 2003.

7 Apr. 15,1994, WTO Agreement, supra note 3, Annex 1A, in The Legal Texts, supra note 3, at 33, reprinted in 33 ILM 1167 (1994).

8 Apr. 15, 1994, WTO Agreement, supra note 3, Annex 1 A, in The Legal Texts, supra note 3, at 231, reprinted in 33 ILM 1195 (1994) [hereinafter SCM Agreement].

9 See supra note 5.

10 Under the Agreement on Agriculture, WTO members agreed not to provide export subsidies except as specified in a member’s schedule. Agreement on Agriculture, supra note 7, Art. 8.

11 See supra note 5.

12 See supra note 5.

13 See supra note 5.

14 See Schnepf, Randy U.S. Agricultural Policy Response to WTO Cotton Decision , CRS Report for Congress 4 (updated Sept. 8, 2006).

15 Apr. 15, 1994, WTO Agreement, supra note 3, Annex 2, in The Legal Texts, supra note 3, at 354, reprinted in 33 ILM 1226 (1994) [hereinafter DSU].

16 Panel Report, United States—Subsidies on Upland Cotton (Recourse to Article 21.5 by Brazil), WT/DS267/ RW, para. 15.1 (adopted June 20, 2008).

17 The Appellate Body reversed one intermediate finding of the compliance panel. The panel dismissed new data that had been introduced by the United States showing its export credit guarantee programs to be profitable. Although the Appellate Body found the rejection of this evidence to be a failure to make an objective assessment of the matter before it under the DSU, it upheld on alternate grounds the panel’s ultimate conclusion—specifically, that the GSM 102 export credit guarantee program operated at a loss and therefore satisfied the definition of an export subsidy (paras. 295, 321).

18 Recourse to Article 4.10 of the SCM Agreement and Article 22.2 of the DSU by Brazil, United States— Subsidies on Upland Cotton, WT/DS267/21 (July 5, 2005) [hereinafter July Notification].

19 Apr. 15, 1994, WTO Agreement, supra note 3, Annex 1B, in The Legal Texts, supra note 3, at 284 (1999), reprinted in 33 ILM 1167 (1994).

20 Understanding Between Brazil and the United States Regarding Procedures Under Articles 21 and 22 of the DSU and Article 4 of the SCM Agreement, United States—Subsidies on Upland Cotton, para. 10, WT/DS267/22 (July 8, 2005).

21 Communication from Brazil, United States—Subsidies on Upland Cotton, WT/DS267/38, WT/DS267/39 (Oct. 15, 2008).

22 See Marin, Denise Chrispim Brasil quer autorização da OMC para retaliar EUA em US$ 4 bi , O Estado de SÃo Paulo (Aug. 23, 2008), available at <http://www.mre.gov.br ; Ed Taylor, Collapse of Doha Talks Signals Setback for Brazil’s WTO–Oriented Trade Strategy, 25 Int’l Trade Rep. (BNA) 1169 (Aug. 7, 2008).

23 Brazil submitted two requests for countermeasures in 2005: in July, when the compliance period for prohibited subsidies expired (equivalent to U.S.$3 billion annually); and in October, when the compliance period expired for the subsidies that caused serious prejudice to Brazil (equivalent to U.S.$1,037 billion annually). See July Notification, supra note 18; Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by Brazil, United States—Subsidies on Upland Cotton, WT/DS267/26 (Oct. 7, 2005).

24 Decision by the Arbitrators, European Communities—Regime for the Importation, Sale and Distribution of Bananas (Recourse to Arbitration by the European Communities Under Article 22.6 of the DSU), WT/DS27/ARB/ECU (Mar. 24, 2000).

25 Decision by the Arbitrator, United States—Measures Affecting the Cross–border Supply of Gambling and Betting Services (Recourse to Arbitration by the United States Under Article 22.6 of the DSU), WT/DS285/ARB (Dec. 21, 2007).

26 DSU, supra note 15, Art. 22(3)(c). Additionally, the circumstances should be sufficiently “serious” to justify cross–retaliation. Id.

27 Appellate Body Report, United States—Import Prohibition of Certain Shrimp and Shrimp Products (Recourse to Article 21.5 of the DSU by Malaysia), para. 87, WT/DS58/AB/RW (adopted Nov. 21, 2001).

28 Appellate Body Report, Canada—Measures Affecting the Export of Civilian Aircraft (Recourse by Brazil to Article 21.5 of the DSU), para. 41, WT/DS70/AB/RW (adopted Aug. 4, 2000).

29 Appellate Body Report, European Communities—Anti–dumping Duties on Imports of Cotton–Type Bed Linen from India—Recourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW (Apr. 24, 2003).

30 Appellant Submission of the United States of America, United States—Subsidies on Upland Cotton (Recourse to Article 21.5 of the DSU by Brazil), paras. 7–8 (Feb. 19, 2008), at <http://www.ustr.gov/Trade_Agreements/Monitoring_Enforcement/Dispute_Settlement/WTO/Section_Index.html.

31 SCM Agreement, supra note 8, Art. 7.8.

32 Argentina, Australia, Canada, the European Communities, and New Zealand each argued to uphold the compliance panel’s finding that marketing loan and countercyclical payments made after September 2005 were within the scope of the compliance proceedings (para. 232).

33 Third Participant’s Submission of Australia, United States—Subsidies on Upland Cotton—Recourse to Article 21.5 of the DSU by Brazil, para. 17 (Mar. 13, 2008), at <http://www.dfat.gov.au/trade/negotiations/disputes/bulletin/index.html (under June 2008).

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