1. The United States submits below responses to the Panel's questions directed at either both parties or the United States alone. Before turning to those questions, the United States notes that important new data has become available since the meeting with the Panel providing even further support for the U.S. arguments that marketing loan and counter-cyclical payments do not “numb” the planting decisions of the U.S. farmers. As the Panel may recall, in the meeting with the Panel, the United States submitted the recently-issued survey of MY 2007 upland cotton planting intentions, showing that U.S. producers intended to pull back on their upland cotton plantings in MY 2007 by approximately 14 percent in response to such factors as the relatively more attractive prices for corn and the poor performance of U.S. exports since August 2006 (at which time the Step 2 program was eliminated). This evidence clearly contradicted Brazil's claims that U.S. farmers do not respond to market signals and continue to plant upland cotton in situations where – without marketing loan and counter-cyclical payments – they would not do so.

2. Brazil has attempted to dismiss this evidence asserting that “[i]f marketing loan and CCP subsidies did not exist, and if U.S. cotton farmers would have to react to market price signals, far more than 14 percent of cotton acreage predicted by the NCC would switch to substitute crops.”