Initial briefs of parties and third parties


Party Submission, paras. 15-25 and in particular paras. 22 and 23



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453 EC's First Third Party Submission, paras. 15-25 and in particular paras. 22 and 23.


454 Brazil’s First Written Submission, para. 49.

455 US First Written Submission, para. 68.

456 US First Written Submission, para. 60.

457 See, Appellate Body Report, United States – Countervailing Measures Concerning Certain Products from the European Communities, WT/DS212/AB/R, adopted 8 January 2003, para. 110.

458 The New Shorter Oxford English Dictionary, 1993.

459 Appellate Body Report US- Shrimp (21.5 – Malaysia) para. 97.

460 Brazil has asserted that the United States’ approach does not provide any way of taking Step 2 payments into account. Because the availability of Step 2 payments is contingent on certain price conditions existing during the marketing year, the level of support decided must relate to the payment parameters. These have remained the same for Step 2, with the exception of the suspension, through 2006, of the 1.25 cent price difference threshold and payment availability at slightly higher market prices. However, because Step 2 merely provides an alternative avenue of providing support (through processors rather than directly to producers), these minor adjustments do not alter the revenue ensured for producers by the marketing loan rate of 52 cents per pound. In addition, these minor adjustments cannot overcome the greater than 20 cents per pound difference in product specific support between marketing years 1992 and 1999 2002. Similarly, and without prejudice to whether these measures are within the Panel’s terms of reference, we note that cottonseed payments in 1999, 2000, and 2002 ranged in value between 0.6 to 2.3 cents per pound (factoring expenditures over production); thus, they too do not materially affect the comparison between marketing year 1992 and any other year.


461 Brazil’s reading would also seemingly require a Member to make payments even if the recipient’s production was illegal – for example, the production of narcotic crops such as opium poppy or the production of unapproved biotech varieties or environmentally damaging production (for example, planting on converted rain forest or wetlands) – because, under Brazil’s approach, by reducing or eliminating payments for any of these production activities, a decoupled income support measure could be understood to base or relate the amount of payment to the “type” of production undertaken.

462 If, as Brazil has argued, the first sentence is “fundamental” and has independent force, then presumably if a measure meets that “fundamental requirement”, it will be deemed to be green box, irrespective of whether it meets the subordinate basic and policy specific criteria. Thus, on Brazil’s reading, if a measure does not conform to the criteria in Annex 2, it still could meet the “fundamental requirement”, and the complaining party would bear the burden of proof to demonstrate a measure’s inconsistency with that provision.

463 See First Submission of Brazil, para. 157 in which Brazil makes the distinction between Paragraph 6(b) in which the word “type” relating to the type of crop produced contrasted with Paragraph 6(d) which is concerned with the type of production process. The United States has never contested this distinction.

464 The United States reference to “potentially far-reaching results” appears also to include its additional new argument in paragraph 43 relating to the EC’s possible CAP reform imposing, inter alia, fruits and vegetable restrictions. That potential “reform” is obviously not at issue in this case. The EC will have to make a decision how to notify any such measure when it is required to do so under Article 18 of the Agreement on Agriculture. It goes without saying that an improperly categorized green box measure of one Member cannot be justified by relying on a possible future improperly categorized green box measure of another Member.


465 These same exceptions would be available in the unlikely event a Member challenged a direct de-coupled payment for any of the three scenarios posed by the United States in paragraph 43.

466 Rebuttal Submission of the United States, para. 96-98.

467 See Rebuttal Submission of Brazil, paras 54 (special irrigation-related policies for upland cotton), para. 55 (upland cotton producers have much larger pool of insurance subsidies than other types of crops), para. 56 (specific upland cotton income protection policies and catastrophic risk protection), para 57 (much greater use of insurance subsidies than other crops), para. 58 (reinsurance payments for upland cotton).

468 Exhibit Bra-144 (G/AG/R/31, para. 31).

469 Rebuttal Submission of the United States, para. 98.

470 G/AG/N/MEX/7, p. 4.

471 Rebuttal Submission of the United States, para. 98.

472 Rebuttal Submission of Brazil, para. 59 (Excluded agricultural commodities from US insurance programme represent 52 per cent of the value of all US farm cash receipts).

473 Rebuttal Submission of the United States, para. 97.

474 The United States even claims credit for being conservative by not netting the negative support by the marketing loan benefits against the positive support provided by the other domestic support programmes, Rebuttal Submission of the United States, para. 116 and note 148.


475 Rebuttal Submission of the United States, para. 114.

476 Rebuttal Submission of the United States, para 114 (last sentence).

477 See Article 18.2 of the Agreement on Agriculture and various US notifications cited herein.

478 Exhibit Bra-191 (G/AG/AGST/USA, p. 20)

479 Exhibit Bra-150 (G/AG/N/USA/10, p. 18)

480 Exhibit Bra-191 (G/AG/AGST/USA, p. 20 and supporting tables on p. 21-22).

481 Exhibit Bra-191 (G/AG/AGST/USA, p. 20).

482 Exhibit Bra-150 (G/AG/N/USA/10, p. 18).

483 The United States entire argument in paragraphs 114-117 is premised on the alleged need for Brazil “to be consistent” as stated in the last sentence in paragraph 114. As noted, it is Brazil who has been consistent in using actual US notifications and the US calculation method during the Uruguay Round, not the United States who now seeks to ignore them.

484 US 11 August Answer to Question 67, para. 128-134.

485 Exhibit Bra-47 (G/AG/N/USA/43, p. 20).

486 Exhibit US-24, p. 1.

487 Neither Brazil nor Professor Sumner were aware of any flex acres from other programme crops planted to upland cotton or of data concerning any such plantings.


488 Dr. Glauber raises in the first sentence of paragraph 2 what he called “statistical problems in comparing planted acres to programme acres.” He points out that “planted acres” information was collected and reported by NASS, while “programme acres” are reported by the Farm Service Agency. (In 1992 this part of USDA was known as the Agricultural Stabilization and Conservation Service.) Dr. Glauber goes on to explain that a significant amount of cotton acreage is planted and abandoned each year. But the relevance of this information in critiquing Professor Sumner’s analysis remains unclear. Brazil notes that contrary to Dr. Glauber’s assumption, Professor Sumner’s calculations do not rely on data published by NASS, but instead on published information in the Farm Service Agency’s “Fact Sheet: Upland Cotton” (Exhibit Bra-4). This Farm Service Agency source provides data on planted acres, the abandonment rate as well as harvested acres of upland cotton for MY 1992.

489 Exhibit US-3 (7 CFR 1413.7(c)). (“[T]he crop acreage base shall be equal to the average of the acreage planted and considered planted to such crop for harvest on the farm in each of the 3 crop years preceding such crop year”). For a farmer within the programme the acreage could never change, as all the acreage was planted (or if idled or – in case of flex acreage – if planted to other crop, it was “considered” planted to upland cotton). Thus, an increase of acreage could only take place, if a farmer withdrew from the programme and exceeded the planting limits imposed by the programme. Thus, MY 1992 base acreage is constitutes the 3-year average of acreage planted and considered planted in MY 1989-1991.


490 Or of 3 additional acres are planted in the previous year, among other possible constellations.

491 Compare Annex 2 to Exhibit Bra-105, p. 3.

492 Brazil’s 22 August Comment on Question 66, para. 81.

493 Brazil’s 22 August Comment on Question 66, para. 81.

494 Exhibit US-24, p. 3.

495 The United States has not made this document available and thus we are unable to evaluate its applicability to the current situation. Professor Sumner had relied on the best information available to him and Brazil, which was the average upland cotton yield per planted acre during the reference period of MY 1981-1985.

496 Exhibit Bra-4 (“Fact Sheet: Upland Cotton,” USDA, January 2003, p. 4).

497 Exhibit US-24, p. 3.

498 Exhibit Bra-140 (Pindyck, Robert S. and Rubinfeld, Daniel L. , Microeconomics, 5th edition (2002), Prentice Hall, New Jersey, p. 313-317).

499 Brazil Rebuttal Submission, para. 127.

500 See Brazil Statement at the First Panel Meeting, paras. 100-115; Brazil 11 August Responses to Panel Questions 70 (para. 138); Brazil 22 August Rebuttal Submission, paras. 99-100; Brazil 22 August Comments on Answers to Panel Questions 74 (paras. 89-90), 80 (para. 98), 88(b) (paras. 117-119).


501 Export credit guarantees are not per se subject to these disciplines, as they would be if they were included in Article 9.1 of the Agreement on Agriculture (See e.g.: Brazil’s 22 August Comment, para. 97, New Zealand’s Answer to Third Party Question 35, EC’s Answers to Third Party Questions 35, para. 70). Brazil has demonstrated that the GSM 102, GSM 103 and SCGP programmes constitute export subsidies under Articles 1(e) and 10.1 of the Agreement on Agriculture, under Articles 1.1 and 3.1(a) of the SCM Agreement, and under item (j) of the Illustrative List of Export Subsidies annexed to the SCM Agreement.

502 Appellate Body Report, EC – Sardines, WT/DS231/AB/R, para. 201-208; Appellate Body Report, EC – Hormones, WT/DS26/AB/R, para. 128. See discussion at paragraphs 107-108 of the Oral Statement of Brazil.

503 Oral Statement of Brazil, paras. 105-106.

504 Rebuttal Submission of the United States, para. 135.

505 Appellate Body Report, Chile – Agricultural Products (Price Band), WT/DS207/AB/R, para. 213; Appellate Body Report, Japan – Alcoholic Beverages, WT/DS8/AB/R, WT/DS10/AB/R, WT/DS11/AB/R, p. 107.

506 See Third Party Submission of Canada (paras. 51-54); Third Party Submission of the European Communities (paras. 28-31); Third Party Submission of New Zealand (paras. 3.13-3.16).


507 G/AG/NG/S/13 (26 June 2000), para. 44 (“[A]s matters currently stand the only rules and disciplines on agricultural export credits are those of the Agreement on Agriculture but only to the extent that such measures constitute export subsidies for the purposes of the Agreement on Agriculture.”).

508 Rebuttal Submission of the United States, paras. 136-138.

509 See Exhibit US-25.

510 Exhibit US-27.

511 Paragraph 48(a) corresponds to Article 9.1(a), paragraph 48(e) to Article 9.1(e), paragraph 48(f) to Article 9.1(d), paragraph 48(j) to Article 9.1(f), paragraph 48(k) to Article 9.1(c).

512 Rebuttal Submission of the United States, paras. 140-142.

513 Rebuttal Submission of the United States, para. 140.

514 Rebuttal Submission of the United States, para. 141.

515 The United States’ assertion that the phrase “internationally agreed disciplines” in Article 10.2 of the Draft Final Act referred to those disciplines “contemplated by the SCM Agreement of the Draft Final Act” is not credible. Where negotiators meant to refer to pending WTO agreements outside of the draft Agreement on Agriculture, they cited those WTO agreements by name. For example, Article 5.8 of the Draft Final Act (regarding special agricultural safeguards) refers specifically to the GATT and the Safeguards Agreement. Similarly, the final version of Article 13 of the Agreement on Agriculture includes numerous specific citations to the SCM Agreement.


516 Appellate Body Report, EC – Sardines, WT/DS231/AB/R, para. 201-208; Appellate Body Report, EC – Hormones, WT/DS26/AB/R, para. 128. See discussion at paragraphs 107-108 of the Oral Statement of Brazil.

517 See, e.g., Article 13 of the Agreement on Agriculture, footnote 15 to Article 6.1(a) of the SCM Agreement, and the second paragraph of item (k) of the Illustrative List of Export Subsidies.

518 Rebuttal Submission of the United States, para. 142.

519 See e.g.: Brazil’s 22 August Comment, para. 97, New Zealand’s Answer to Third Party Question 35, EC’s Answers to Third Party Questions 35, para. 70.

520 Rebuttal Submission of the Untied States, para. 148.

521 Rebuttal Submission of the United States, para. 149.

522 Rebuttal Submission of the United States, paras. 147-153, see the heading to that section.

523 Rebuttal Submission of the United States, para. 151. The arguments of the United States in this case demonstrate that it continues to be of the view that its programmes do not constitute export subsidies within the meaning of Articles 1.1 and 3.1(a), including item (j) of the SCM Agreement, nor within the meaning of Articles 1(e), 10.1 and 8 of the Agreement on Agriculture.


524 Brazil’s 22 August Comment on Question 80, para. 98. See also EC’s 11 August Answer to Third Party Question 30, para. 65. New Zealand’s 11 August Answer to Third Party Question 35.

525 Rebuttal Submission of the United States, para. 160.

526 (2,737 – 297) – (2,629 + 870) + (1,262 + 297) = 500. Since no reestimates have yet been made for 2004, Brazil has reduced the original subsidy amount included in Exhibit US-31 by the $297 million estimate included in the 2004 budget. Had the United States subtracted downward reestimates from and added upward reestimates to the original subsidy estimate included in the “budget year” column of the “guaranteed loan subsidy” line of the annual US budget, it would have yielded a positive subsidy, and thus a loss, of $2.038 billion. See Exhibit Bra-192.

527 See paragraph 132 of Brazil’s 22 July Statement at the First Panel Meeting, and accompanying citations.

528 First, the United States has offered no documentation verifying the accuracy of the reestimate figures provided in the chart for the period 1993-2000. In contrast, the chart included in paragraph 115 of Brazil’s 22 August Rebuttal Submission provides cumulative reestimates on a cohort basis that are taken directly from Table 8 of the Federal Credit Supplement included with the 2004 US budget. See Exhibit Bra-182. Second, although the United States asserts that it has netted cumulative reestimates against the “original subsidy estimate,” it has in fact netted cumulative reestimates against the “guaranteed loan subsidy” figure included in the “prior year” column of the US budget, which yields a lower number. Using, subsidy data from the US budget for “prior year,” the chart included at paragraph 115 of Brazil’s 22 August Rebuttal Submission would still yield a positive subsidy of $211 million, to which the $43 million in administrative expenses should be added, for a total loss of $254 million over the period 1992-2002. See Exhibit Bra-193. Third, the United States has not included administrative expenses for the CCC export guarantee programmes, which amount to $43 million for the period 1992-2003.


529 Even accepting the validity of the data entered in the US chart, Brazil notes that summing up those figures yields a result different from the $381.35 million total provided by the United States. Using the US data, Brazil reaches a subsidy figure net of reestimates of $230,127,023.

530 Exhibit Bra-158 (US Department of Agriculture, Office of Inspector General, Financial and IT Operations, Audit Report, Commodity Credit Corporation’s Financial Statements for Fiscal Year 2002, Audit Report No. 06401-15-FM (December 2002), Notes to the Financial Statements, p. 19).

531 Brazil notes that according to USDA’s Inspector General, CCC estimates are in fact understated. In audit reports for fiscal years 1999, 2000 and 2001, CCC’s estimates and reestimates were found to have “understated” costs and losses by amounts ranging from to $11 million to $430 million. Exhibit Bra-194 (US Department of Agriculture Office of Inspector General Great Plains Region Audit Report, Commodity Credit Corporation’s Financial Statements for Fiscal Year 2001, Audit Report No. 06401-4-KC, February 2002, p. 11); Exhibit Bra-195 (US Department of Agriculture Office of Inspector General Financial and IT Operations Audit Report, Audit Report No. 06401-14-FM, Commodity Credit Corporation’s Financial Statements for Fiscal Year 2000, June 2001, p. 9); Exhibit Bra-196 (US Department of Agriculture Office of Inspector General Financial and IT Operations Audit Report, US Department of Agriculture Consolidated Financial Statements for Fiscal Year 1999, Report No. 50401-35-FM, February 2000, p. 9).


532 Again, using “prior year” subsidy figures for this chart results in a positive subsidy of $211 million over the period 1992-2002. See Exhibit Bra-193 (Net Lifetime Reestimates of Guaranteed Loan Subsidy by Cohort)

533 Exhibit Bra-158 (US Department of Agriculture, Office of Inspector General, Financial and IT Operations, Audit Report, Commodity Credit Corporation’s Financial Statements for Fiscal Year 2002, Audit Report No. 06401-15-FM (December 2002), Notes to the Financial Statements, p. 19).

534 Exhibit Bra-162 (Government-Wide Audited Financial Statements Task Force on Credit Reform, Issue Paper, Model Credit Programme methods and Documentation for Estimating Subsidy Rates and the Model Information Store, 96-CR-7 (1 May 1996), p. 2).

535 Exhibit Bra-118 (Federal Accounting Standards Advisory Board, Statement of Federal Financial Accounting Standards No. 19, Technical Amendments to Accounting Standards for Direct Loans and Loan Guarantees in Statement of Federal Financial Accounting Standards No. 2 (March 2001), p. 16 (para. 36)). See also Exhibit Bra-160 (US Department of Agriculture, Office of the Chief Financial Officer, Credit, Travel, and Accounting Division, Agriculture Financial Standards Manual (May 2003), p. 120 (“In estimating default costs, the following risk factors are considered: (1) loan performance experience; . . .”)).


536 Exhibit Bra-163 (Office of Management and Budget Annual Training, Introduction to Federal Credit Budgeting, 24 June 2002, p. 9).

537 Contrary to the United States’ assertion at paragraph 170 of its Rebuttal Submission, Brazil has not misread Note 5 to CCC’s 2002 financial statements. The amounts in the “subsidy allowance” column are in fact the amounts of receivables associated with post-1991 CCC guarantees that CCC considers uncollectible. The Panel will recall that under the FCRA, the subsidy allowance is recorded on a net present value basis, which means that it represents the cost CCC considers it will incur on a guarantee cohort at the time that cohorts is closed. The $770 million listed in the “subsidy allowance” column in the receivables table for post-1991 guarantees is therefore as uncollectible as the $ 2,567 billion listed in the “uncollectible” column of the pre-1992 CCC guarantee receivables table (See Notes to Financial Statements contained in Exhibit Bra-158 (US Department of Agriculture, Office of Inspector General, Financial and IT Operations, Audit Report, Commodity Credit Corporation’s Financial Statements for Fiscal Year 2002, Audit Report N° 06401-15-FM (December 2002) p. 14).

538 Rebuttal Submission of the United States, para 169.

539 Oral Statement of Brazil, para. 122.

540 Oral Statement of Brazil, para. 122. Brazil’s 11 August Answer to Question 77, para. 162.

541 See Brazil’s 22 August Comments, para. 99. Exhibit Exhibit Bra-158 (US Department of Agriculture, Office of Inspector General, Financial and IT Operations, Audit Report, Commodity Credit Corporation’s Financial Statements for Fiscal Year 2002, Audit Report No. 06401-15-FM (December 2002), Notes to the Financial Statements, p. 14).


542 Rebuttal Submission of the United States, para. 172.

543 Bra-157 (US General Accounting Office, Report to the Chairman, Task Force on Urgent Fiscal Issues, Committee on the Budget, House of Representatives, International Trade: Iraq’s Participation in US Agricultural Export Programmes, GAO/NSIAD-91-76 (November 1990), p. 27 (Table IV.2)).




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