WTO issues Compliance Report in U.S. Brazil Cotton Dispute
On December 18, 2007, a Panel of the World Trade Organization (WTO) issued its report on U.S. compliance with the original Panel and the Appellate Report in the U.S. Brazil Dispute over U.S. subsidies for Upland Cotton (DS267).
This dispute goes back to September 2002, when Brazil requested consultations with the U.S. regarding U.S. subsidies to producers of cotton. The WTO established a Panel to hear the dispute.
The Dispute Settlement Panel issued its report in May 2004, which was largely confirmed by the Appellate Body. In particular, the Appellate Body upheld, among other things:
(1) the Panel's finding that the challenged U.S. price contingent subsidies (marketing loan program payments, user marketing payments, market loss assistance payments, counter cyclical payments) are a significant price suppression within the meaning of Article 6.3(c) of the SCM Agreement;
(2) the Panel's finding that "user marketing payments"¯ (payments to domestic users of such products) under Section 1207(a) of the Farm Security and Rural Investment Act of 2002 (FSRI) are subsidies contingent on the use of domestic over imported goods that are inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement; and
(3) the Panel's finding that the U.S. credit guarantee programs (so called GSM 102, GSM 103 and SCGP, which support commercial financing of agricultural exports) are export subsidies within the meaning of the SCM Agreement.
Brazil requested an Article 21.5 panel in August 2006 to review U.S. compliance with the recommendations of the Dispute Settlement Panel. The Panel issued its compliance report, concluding that:
(1) The U.S. has acted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter cyclical payments to U.S. upland cotton producers under the FSRI Act of 2002 is a "significant price suppression"¯ within the meaning of Article 6.3(c). Thus, the U.S. has failed to comply with the WTO recommendations.
(2) The U.S. has acted inconsistently with Article 10.1 of the Agreement on Agriculture through the GSM 102 export credit guarantees issued after 1 July 2005. The U.S. is applying export subsidies in a way to circumvent the U.S. export subsidy commitments. Thus, the U.S. has failed to bring its measures in conformity with the Agreement on Agriculture and failed to withdraw the subsidy without delay.
The U.S. must remove the adverse effects or withdraw the subsidy under Article 7.8 of the SCM Agreement.
Citation: United Statesā€”Subsidies on Upland Cotton, Recourse to Article 21.5 of the DSU by Brazil (WT/DS267/RW) (18 December 2007).
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