1. 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

2. 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

3. 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

4. Insitut für Europa- und Wirtschaftsvölkerrecht
Brazil‘s Arguments
Violation of Art. 3.3, 8., 9.1.a and 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

5. 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

6. Art. 13 AoA „Peace Clause“ Specifies Relationship between AoA and SCM
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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

7. Art. 13 AoA „Peace Clause“ Temporary Provision:
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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

8. 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

9. 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

10. 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

11. Domestic Support Measures
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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

12. 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

13. 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

14. 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