545 The United States has elsewhere endorsed a 10-year period (First Submission of the United States, para. 173; Rebuttal Submission of the Untied States, para. 161).
546 Compare Rebuttal Submission of the United States, para. 172 and 175.
547 Rebuttal Submission of the United States, para. 175.
548 Exhibit Bra-117 (2 U.S.C. 661a(5)(C)).
549 Rebuttal Submission of the United States, para. 171.
550 See chart at paragraph 161 of the Rebuttal Submission of the United States. See also Exhibit Bra-127 (US budget for FY 2004, p. 107) referencing guaranteed loan subsidy amounts of $97 million, $294 million and $297 million respectively. Brazil notes that the figure for FY 2002 has been reestimated to $137,008,586 since the publication of the FY 2004 budget (See Rebuttal Submission of the United States, chart at para. 161).
551 First Submission Brazil, para. 289; Oral Statement of Brazil, para. 116; Brazil 11 August Comment and Answer to Questions 71(a) (para. 139), 75 (para. 156); Rebuttal Submission of Brazil, para. 103.
552 Rebuttal Submission of the United States, para. 186.
553 See Exhibit Bra-197 (http://www.nedcor.co.uk/forfait-website/forfaiting.htm).
554 United Rebuttal Submission of the United States, para. 187. See also Exhibit Bra-198 (Vincent Whittaker, “The Quick Buck, International Finance, and Forfaiting,” 23 Thomas Jefferson Law Review 249, 258 (Spring 2001) (“In most cases, the forfaiter requires the obligation of the importer to be guaranteed by a bank in the importer’s country because of the impossibility of evaluating the credit risk of every importer in every country, particularly when medium or small sized companies are involved.”)). See also Id., p. 259 (“[I]f a bank guarantee is required, it must be unconditional, irrevocable and freely transferable.”).
555 Exhibit Bra-38 (7 CFR 1493.10(a)(2); 7 CFR 1493.400(a)(2)). See Brazil 11 August Response to Question 82(a) (paras. 183-184).
556 Exhibit Bra-198 (Vincent Whittaker, “The Quick Buck, International Finance, and Forfaiting,” 23 Thomas Jefferson Law Review 249, 251-252 (Spring 2001)).
557 See US 11 August Answer to Question 86 (para. 184).
558 Exhibit Bra-198 (Vincent Whittaker, “The Quick Buck, International Finance, and Forfaiting,” 23 Thomas Jefferson Law Review 249, 251-252 (Spring 2001)).
559 Exhibit Bra-198 (Vincent Whittaker, “The Quick Buck, International Finance, and Forfaiting,” 23 Thomas Jefferson Law Review 249, 256 (Spring 2001)).
560 Exhibit Bra-199 (Trade and Forfaiting Review, “Argentina Trade Finance to the Rescue,” Volume 6, Issue 9, July/August 2003)
561 United States 11 August Response to Question 86 (para. 184).
562 See Brazil 11 August Comments to Questions 84 (para. 192) and 85 (para. 195).
563 United States 11 August Responses to Question 84 (para. 179).
564 Brazil 11 August Comment to Question 84 (para. 193).
565 Exhibit Bra-155 (US Department of Agriculture Foreign Agricultural Service, “Notice to GSM-102 and GSM-103 Programme Participants,” 24 September 2002).
566 Exhibit Bra-155 (US Department of Agriculture Foreign Agricultural Service, “Notice to GSM-102 and GSM-103 Programme Participants,” 24 September 2002).
567 Exhibit Bra-198 (Vincent Whittaker, “The Quick Buck, International Finance, and Forfaiting,” 23 Thomas Jefferson Law Review 249, 254 (Spring 2001)).
568 Oral Statement of Brazil, para. 116.
569 See First Submission of Brazil, paras. 263-268.
570 See Brazil’s 11 August Answer to Question 82, paras. 182-189.
571 http://www.fapri.iastate.edu/Outlook2003/PageMker/OutlookPub%20USCrops.pdf. The information on CCP and direct payment per acre payments in US dollars for each of the programme crops is found in the last two lines of pages 55 (wheat), 57 (rice), 59 (corn), 61 (sorghum), 63 (barley), 65 (oats), 69 (soybeans), 75 (peanuts) and 79 (upland cotton). Brazil notes that its figures for soybeans and peanuts differ slightly. The underlying reason for this difference is that Brazil had to base its figures on its estimates about the payments yields and it appears that FAPRI’s figures for payment yields are slightly different from Brazil’s.
572 See for example, “Analysis of the grain, oilseed and cotton provision of the, ‘Agriculture, Conservation, and Rural Enhancement Act of 2001 – S.1731.’” FAPRI-UMC Report #18-01 November 2001. http://www.fapri.missouri.edu/FAPRI_Publications.htm. Also see http://www.card.iastate.edu/about_card/news/press_releases/Highest_Honor.html
573 FAPRI’s 2003 US Baseline, http://www.fapri.iastate.edu/Outlook2003/PageMker/OutlookPub%20USCrops.pdf, p. 78.
574 FAPRI’s 2003 US Baseline, http://www.fapri.iastate.edu/Outlook2003/PageMker/OutlookPub%20USCrops.pdf, p. 79.
575 FAPRI’s 2003 US Baseline, http://www.fapri.iastate.edu/Outlook2003/PageMker/OutlookPub%20USCrops.pdf, p. 78.
576 In the case of market price support. In fact, Annex 3, paragraph 8, states: “Budgetary outlays made to maintain this gap, such as buying-in or storage costs, shall not be included in the AMS.”
577 In the case of non-exempt direct payments dependent on a price gap. See Agreement on Agriculture, Annex 3, paragraph 10.
578 Of course, the US view is that the “fundamental requirement” of the first sentence is met by a measure that conforms to the basic criteria and any applicable policy-specific criteria. In this regard, Brazil errs in claiming that the United States has “acknowledged that such effects can be presumed if the specific criteria in paragraph 6 of Annex 2 are not complied with.” Brazil’s Rebuttal Submission, para. 8 fn. 13. In fact, we believe the opposite. Meeting the basic and policy-specific criteria of Annex 2 establishes that a measure meets the “fundamental requirement” of paragraph 1. However, the converse is not necessarily true. So, according to Brazil’s approach, Brazil would bear the burden of establishing that a measure that did not comply with the basic and policy-specific criteria in Annex 2 failed to meet the “fundamental requirement” of paragraph 1 of Annex 2.
579 Recall that “under 1992 programme provisions, producers of non-cotton programme crops (i.e., wheat, corn, barley, grain sorghum, oats, and rice) could plant up to 25 per cent of their [non-cotton] crop programme base to cotton as Normal Flex Acres or Optional Flex Acres. Acreage Reduction Programme compliance reports indicate that, in 1992, 447,164 acres of cotton were planted on a much larger quantity of available Normal Flex Acres and Option Flex Acres of non-cotton programme base.”) Exhibit US-24 (Report by Dr. Joseph Glauber, Deputy Chief Economist, US Department of Agriculture). In 1992, there were 153.9 million acres of non-cotton “complying base” and 197.2 million acres of non-cotton “effective base.” See Exhibit US-39. Thus, the marketing loan was effectively available with respect to all upland cotton production.
580 Other factors beyond a Member’s control could also influence outlays, such as whether some additional producers chose to begin participating in the support programmes.
581 Even taking into account the maximum theoretical effect on the deficiency payment effective price of the 1992 acreage reduction percentage (10 per cent) and normal flex acres (15 per cent) for the 1992 marketing year. Since the acreage reduction percentage was lower for 1993 marketing year (7.5 per cent versus 10 per cent) support, which was also decided during the 1992 marketing year, the adjusted level of support (68.27625 cents per pound) was even higher for the 1993 marketing year.
582 Brazil’s Comments on US Answers, para. 66 fn. 49.
583 Brazil’s Rebuttal Submission, para. 71.
584 Brazil’s Rebuttal Submission, para. 73.
585 Brazil’s Rebuttal Submission, para. 76.
586 US Rebuttal Submission, paras. 114-118.
587 Brazil has stated (with respect to deficiency payments) that “the formula approach under Annex 3, paragraphs 10-11 of the Agreement on Agriculture [is] warranted for upland cotton AMS calculations.” Brazil’s Rebuttal Submission, para. 73 fn. 172. Because the Peace Clause proviso comparison must compare the support that challenged measures grant to “that decided during the 1992 marketing year,” the price gap methodology is the only AMS approach that reflects only the United States’ decisions and not market prices beyond the United States’ control. For the same reason, it is equally appropriate to use the price gap methodology for marketing loan payments.
588 Total deficiency payments calculated via the price gap methodology equal unadjusted basic deficiency payments ($724 million / 0.875) + 50/92 deficiency payments ($30 million) – that is, $858 million. See US Rebuttal Submission, para. 115 fn. 144.
589 To calculate the deficiency payment support using the price gap methodology and consistent with the 1995 US WTO notification and G/AG/AGST/USA, we made the following calculations.
Total deficiency payments are equal to basic deficiency payments plus 50/92 payments. Basic deficiency payments are equal to eligible production times a price gap measured as the difference between the target price and a fixed reference price. Eligible production is measured as eligible base acreage times average programme yield. Eligible base acreage is equal to participating base acreage minus Acreage Conservation Reserve acres minus Normal Flex Acres minus acres enrolled in the 50/92 programme. The fixed reference price is the1986 88 average of the higher of the market price or loan rate for each year.
Payments for the 50/92 programme were calculated in a similar fashion by multiplying base acres in the 50/92 programme times the average programme yield times 92 per cent of the price gap.
In 1992, the target price was 72.9 cents per pound and the fixed reference price for 1986-88 was 57.9 cents per pound. This gives a price gap of 15.0 cents per pound. Eligible production for basic deficiency payments in 1992 was equal to 5,544 million pounds (9.226 million acres times the average programme yield of 601 pounds per acre). Multiplying the price gap times eligible production gives basic deficiency payments equal to $832 million.
The same formula is used to calculate deficiency payments under the 50/92 programme. For 1992, the price gap is the same as that calculated for the basic deficiency payments (15 cents per pound). Eligible production under the 50/92 programme was 254 million pounds (404 thousand acres times the average programme yield of 50/92 participants of 628 pounds per acre). Deficiency payments under the 50/92 programme were thus equal to $35 million (0.92 times 254 million times $0.15).
Total deficiency payments under the price gap methodology were thus equal to $867 million ($832 million plus $35 million). Sources: US Department of Agriculture, Compliance Report for 1992 Acreage Reduction Programme (1993) (Exhibit US-39); Commodity Credit Corporation Commodity Estimates Book for the FY 1995 President's Budget (February 1994); G/AG/AGST/USA, p. 18.
590 See Exhibit Bra-105, Annex 2 (1st source document: US Department of Agriculture, Provisions of the Federal Agricultural Improvement and Reform Act of 1996, at 142) (giving 1992 effective base acreage of 14.9 million acres); id., Annex 2 (2nd source document: Daniel A. Sumner, Farm Programmes and Related Policy in the United States, at 4) (same).
591 Agreement on Agriculture, Annex 3, para. 10.
592 We also note that Brazil never quotes that passage in full since the first half reflects the US view throughout this dispute that “exempt from actions” means not liable to a legal process or suit. See 1995 Statement, at 68 ( “Under Article 13(b)(ii) and (iii), governments may not initiate adverse effects, serious prejudice or non-violation nullification and impairment challenges in the WTO . . . .”) (emphasis added). There are numerous other statements in the 1995 Statement that Brazil similarly does not draw to the Panel’s attention. See id. at 67 (“Article 13, commonly referred to as the peace clause, reflects an agreement among WTO countries to refrain from challenging certain of each other’s agricultural subsidy programmes . . . through WTO dispute settlement procedures . . . .”) (emphasis added); id. (“Article 13(b) addresses possible challenges to domestic support measures falling outside the green box in circumstances in which the WTO member providing the subsidy is meeting its total AMS commitments.”) (emphasis added).
593 Brazil’s Opening Statement, para. 35; Brazil’s Rebuttal Submission, para. 75; see also 1995 Statement of Administrative Action, at 68 (subsequently in same paragraph quoted by Brazil stating “a WTO Member will not be protected by the Peace Clause if its support for the product is above that decided during the 1992 marketing year.”) (emphasis added).
594 Brazil’s General Comment on US Answers to Questions 47-69 from the Panel (para. 55).
595 Brazil’s General Comment on US Answers to Questions 47-69 from the Panel (para. 56).
596 See US Rebuttal Submission, paras. 106-09.
597 For example, for storage payments we estimate expenses incurred with respect to upland cotton put under loan and pledged as collateral.
598 See US Rebuttal Submission, paras. 114-17.
599 Brazil’s Rebuttal Submission, paras. 4-9.
600 Brazil’s Rebuttal Submission, para. 6. Brazil concludes the thought: “Otherwise, it logically could not be a ‘type’ of production. It would be nothing at all.”
601 See Brazil’s Rebuttal Submission, para. 4 (“The relevant text of paragraph 6(b) prohibits any linkage of the ‘amount of payments’ to any ‘type of production’ of an agricultural product.”) (emphasis added).
602 Brazil’s reference to paragraph 6(e) does not answer this objection. Brazil argues that “negotiators addressed any possible misunderstanding in this regard by including the very concept of prohibiting the requirement to produce in paragraph 6(e).” Brazil’s Rebuttal Submission, para. 6. However, as Brazil immediately points out, conformity with paragraph 6(e) “does not exempt . . . payments from conforming to the requirement of paragraph 6(b).”
603 Brazil’s Comment on US Answer to Question 32 from the Panel (para. 44).
604 See US First Written Submission, para. 57 fn. 46.
605 See, e.g., Brazil’s Rebuttal Submission, para. 19 (again misquoting the definition of product-specific support in Article 1(a) by eliminating the phrase support provided “for an agricultural product” and failing to interpret that definition according to the customary rules of interpretation of public international law); Brazil’s Comments on US Answer to Question 43 from the Panel (paras. 58-60) (criticizing US interpretation of product-specific support but failing to interpret that definition according to the customary rules of interpretation of public international law); Brazil’s Comments on US Answer to Question 38 from the Panel (paras. 48-49) (same).
606 See The New Shorter Oxford English Dictionary, vol. 1, at 1073 (first definition of “in general”: “† (a) in a body; universally; without exception”); id., vol. 1, at xv (sec. 4.5.2: Status symbols) (“The dagger [†] indicates that a word, sense, form, or construction is obsolete. It is placed before the relevant word(s) or relevant sense number.”).
607 See, e.g., Brazil’s Answer to Question 67 from the Panel (table, fn. 2, 3, 4, 5).
608 We also would reiterate that such payments would not be “support to a specific commodity” as explained in Article 1(a) and reflected in Annex 3.
609 For example, Brazil admits that “this acknowledged legal flexibility to grow other crops does not answer the question of whether the producers planting 14.2 million aces of upland cotton in MY 2002 received direct and counter-cyclical payments. Nor does it answer the question of whether the 14.2 million acres planted to upland cotton in MY 2002 were planted on upland cotton base acreage.” Brazil’s Rebuttal Submission, para. 38 (emphasis in original). The United States agrees completely, and while Brazil’s approach would require that these questions be answered, Brazil has not answered them, even though under Brazil’s approach, Brazil would have the burden of proof in this regard. Rather, Brazil tries to construct a series of assumption based on what Brazil considers “likely” or “maybe” or “probably.”
610 See Brazil’s Rebuttal Submission, paras. 24-50. Brazil makes a lengthy presentation of new data and calculations, including some with respect to crops other than upland cotton, to assert that these four payments are support for upland cotton because without them upland cotton farmers could not cover their costs. However, Brazil’s approach is flawed in terms of its facts and the premises on which it relies. In the time available we have not been able to identify and describe all the flaws and inaccuracies in Brazil’s presentation of the data. Simply by way of example, however, we note that (1) Brazil includes a figure for cottonseed payments in its graph purporting to show MY 2001 market revenue and government support (Rebuttal Submission, paragraph 30), but Brazil’s own table at paragraph 84 of its rebuttal submission reflects that there were no cottonseed payments for the 2001 marketing year; (2) Brazil’s theory would appear to be that cotton production on cotton base acres are “necessary” because without government payments costs of production would not be covered, but Brazil presents information only with respect to one year, marketing year 2001, with record low prices - Brazil does not explain its theory or present any data with respect to other years with more typical prices; (3) Brazil asserts that upland cotton production “is produced only in particular regions . . . and producers tend to specialize and not readily switch to other crops” – whereas cotton is produced in 17 of the 50 United States and, for all US cotton farms, average cotton area is approximately 38 per cent of a farm’s acres (469 of 1,222 acres) (US Department of Agriculture, Characteristics and Production Costs of US Cotton Farms (October 2001).)
611 See Exhibit US-38 (http://www.fsa.usda.gov/dam/BUD/bud1.htm) (for crop years 1999, 2000, and 2001).
612 The US Department of Agriculture estimates that direct payments for the 2002 marketing year with respect to upland cotton base acres will total $173 million. Exhibit US-18 (www.fsa.usda.gov/dam/BUD/estimatesbook.htm).
613 The US Department of Agriculture estimates that counter-cyclical payments for the 2002 marketing year with respect to upland cotton base acres will total $873 million. Exhibit US-18 (www.fsa.usda.gov/dam/BUD/estimatesbook.htm).
614 See, e.g., US Rebuttal Submission, paras. 79-92, 99-105.
615 We note that, once again, Brazil has misquoted the definition of product-specific support in Article 1(a). Brazil quotes that definition as follows: “For support not provided to agricultural producers in general, the test is whether the support is ‘provided in favour of the producers of the basic agricultural product.’” Brazil’s Rebuttal Submission, para. 19. The actual text of Article 1(a), in pertinent part, reads: “support . . . provided for an agricultural product in favour of the producers of the basic agricultural product” (emphasis added). What Brazil describes as “the narrow US Article 13(b)(ii) specificity standard” in fact flows from an interpretation of Article 13 that makes sense of the entire text of Article 1(a) and not just selected parts of it.
616 Indeed, Brazil’s argument in paragraph 36 of its rebuttal submission rests on a non sequitur. Brazil’s statement is that: “Thus, direct payments are not available to the great majority of US producers of agricultural commodities, i.e., they are not provided to US agricultural producers in general.” (Emphasis in original.) The illogic in Brazil’s statement is that, by removing the requirement to produce any particular crop or any crop at all in order to receive these payments, the United States does in fact make the payments available to producers in general. Recipients are free to produce a broad range of commodities, and so are producers of agricultural commodities “in general.” Brazil appears to acknowledge that the payments are not in fact tied to current production when, in paragraph 50, Brazil concedes that the payments are made to “upland cotton base acreage holders” rather than to upland cotton producers.
617 See Brazil’s Rebuttal Submission, paras. 24 (quoting first half of definition), 29 (“Thus, as with PFC payments, market loss assistance payments were not paid to agricultural producers in general but rather to only a select group of US producers), 36 (“Direct payments are targeted support to “producers” farming, inter alia, on upland cotton base acreage.”), 48 (“But the evidence demonstrates that CCP funds in MY 2002 paid to “historic” (i.e., 1998-2001 or 1993-1995) upland cotton producers are paid to a tiny fraction of total US producers of agricultural commodities.”).