SPECIAL JOURNAL CLUB 20TH OF JULY 2005 Insitut für Europa- und Wirtschaftsvölkerrecht SPECIAL JOURNAL CLUB 20TH OF JULY 2005 UNITED STATES - SUBSIDIES ON UPLAND COTTON Presentation by Elisabeth Bürgi, att. at law, iew 18. September 2018

US – Subsidies on Upland Cotton Insitut für Europa- und Wirtschaftsvölkerrecht US – Subsidies on Upland Cotton Complainant: Brazil Respondent: US Panel Request: February 6, 2003 Panel Report Circulated: September 8, 2004 Appellate Body Report Adopted: March 21, 2005 18. September 2018

Background US Support Measures to US Cotton Producers: Insitut für Europa- und Wirtschaftsvölkerrecht Background US Support Measures to US Cotton Producers: -marketing loan program payments (LDPs) -user marketing payments (Step 2; FSRI) -production flexibility contract payments (PFC) -market loss assistance payments (MLA) -direct payments (DP) -counter-cyclical payments (CCP) -measures under the extraterritorial income act (ETI) -export guarantee programs 18. September 2018

Insitut für Europa- und Wirtschaftsvölkerrecht Brazil‘s Arguments Violation of Art. 3.3, 8., 9.1.a and 10.1. Agriculture Agreement (AoA) Art. 9.1.: Definition of Agric. Export Subsidy Art. 10.1: Circumvention Definition Art. 3.3 & 8: Schedule Commitment 18. September 2018

Brazil‘s Argument Violation of Art. Art. 3.1.a., 3.1.b., 3.2., 5., 6. Insitut für Europa- und Wirtschaftsvölkerrecht Brazil‘s Argument Violation of Art. Art. 3.1.a., 3.1.b., 3.2., 5., 6. Agreement on Subsidies and Countervailing Measures (SCM) Art. 3: Prohibited Export Subsidies Art. 5 &6: Actionable Subsidies; Serious Prejudice Violation of Art. XVI GATT Underlying Subsidy Provision of the GATT 18. September 2018

Art. 13 AoA „Peace Clause“ Specifies Relationship between AoA and SCM Insitut für Europa- und Wirtschaftsvölkerrecht Art. 13 AoA „Peace Clause“ Specifies Relationship between AoA and SCM with respect to Green Box Measures Other Domestic Support Measures Export Subsidies Brazil bears the burden of proof 18. September 2018

Art. 13 AoA „Peace Clause“ Temporary Provision: Insitut für Europa- und Wirtschaftsvölkerrecht Art. 13 AoA „Peace Clause“ Temporary Provision: Art. 13 AoA: Implementation Period > Art. 1f AoA: Nine Years commencing in 1995 Case submitted in 2003: Peace Clause still applicable 18. September 2018

Art. 13 AoA „Peace Clause“ General Rule (with exceptions): Insitut für Europa- und Wirtschaftsvölkerrecht Art. 13 AoA „Peace Clause“ General Rule (with exceptions): If the Agriculture Subsidies are contained in the Member‘s Schedule > SCM not applicable at least during the implementation period after the expiry of the peace clause? 18. September 2018

Classification of Support Measures Insitut für Europa- und Wirtschaftsvölkerrecht Classification of Support Measures Export Subsidies: Art. 9 / 10 Aoa Definition & Illustrative List of SCM user marketing payments (Step 2; FSRI) measures under the extraterritorial income act (ETI) export guarantee programs Not scheduled > Aoa & SCM > Prohibited Subsidies 18. September 2018

Classification of Support Measures Insitut für Europa- und Wirtschaftsvölkerrecht Classification of Support Measures Domestic Support Measures: all the remaining ones Not qualified as Green Box Measures (Annex 2 AoA, para. 6.b.) no interpretation of „minimal trade distorting effect“ AoA Art. 13 lit. b: „not grant support in excess of that decided during the 1992 marketing year“ Support in excess > SCM  > Art. 5&6 (even if scheduled!) 18. September 2018

Domestic Support Measures Insitut für Europa- und Wirtschaftsvölkerrecht Domestic Support Measures Price-contingent Subsidies: Serious Prejudice (significant price suppression) > actionable Non-price contingent Subsidies: Serious Prejudice not proved > not actionable 18. September 2018

Implementation of Rulings? Insitut für Europa- und Wirtschaftsvölkerrecht Implementation of Rulings? Recommendations: Prohibited Subsidies: withdraw within 6 months Actionable Subsidies: remove adverse effects or withdraw subsidies within 6 months US intend to live up to some recommendations with respect to prohibited subsidies Brazil asked WTO for permission to retaliate Brazil & US: agreement to suspend efforts to retaliate 18. September 2018

Most important conclusions Insitut für Europa- und Wirtschaftsvölkerrecht Most important conclusions Peace Clause: only applicable if subsidies are scheduled (domestic subsidies: even stronger requirement) > SCM  Even if support measures was scheduled as a Domestic Measure by member country, it can be qualified as Export Subsidy (s. also Sugar and Canada Dairy Case) Illustrative List of SCM serves to interprete AoA export subsidy provisions Serious prejudice is possible to proof 18. September 2018

Insitut für Europa- und Wirtschaftsvölkerrecht Discussion Questions What happens after the expiry of the peace clause? -Export Subsidies prohibited even if scheduled? -Domestic Subsidies actionable even if scheduled? Blurred distinction between domestic support measures and export subsidies? 18. September 2018