United States – Subsidies on Upland Cotton (WT/DS267) Report of the Appellate Body

Summary

INTRODUCTION

The United States and Brazil each appeals certain issues of law and legal interpretations developed in the Panel Report, United States – Subsidies on Upland Cotton (the “Panel Report”). The Panel was established on 18 March 2003 to consider claims by Brazil regarding various United States measures that Brazil alleged constituted actionable subsidies within the meaning of Part III of the Agreement on Subsidies and Countervailing Measures (the “SCM Agreement”), prohibited subsidies within the meaning of Part II of the SCM Agreement, export subsidies within the scope of the Agreement on Agriculture, and/or subsidies actionable under Article XVI of the General Agreement on Tariffs and Trade 1994 (the “GATT 1994”). Brazil also alleged that certain of these measures were inconsistent with Article III:4 of the GATT 1994. The United States argued that some of the measures were domestic support measures that were exempt from certain actions by virtue of paragraphs (a) and (b) of Article 13 of the Agreement on Agriculture.

The Panel Report was circulated to Members of the World Trade Organization (the “WTO”) on 8 September 2004. In paragraph 7.194 of its Report, the Panel made the following findings with respect to whether certain measures fell within its terms of reference:

The Panel rules that the following measures, as addressed in document WT/DS267/7, are within its terms of reference:

(i) export credit guarantees to facilitate the export of United States upland cotton, and other eligible agricultural commodities;

(ii) production flexibility contract payments and market loss assistance payments[.]

The Panel also ruled, in paragraph 7.196 of its Report, that:

… in its request for consultations in document WT/DS267/1, Brazil provided a statement of available evidence with respect to export credit guarantees under the GSM 102, GSM 103 and SCGP programmes relating to upland cotton and eligible agricultural commodities other than upland cotton, as required by Article 4.2 of the SCM Agreement.

With respect to the substantive issues raised by the parties, the Panel set out the following conclusions in paragraph 8.1 of its Report:

(a) Article 13 of the Agreement on Agriculture is not in the nature of an affirmative defence;

(b) PFC payments, DP payments, and the legislative and regulatory provisions which establish and maintain the DP programme, do not satisfy the condition in paragraph (a) of Article 13 of the Agreement on Agriculture;