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Brazil v. U.S. Cotton Case .

Brazil v. U.S. Cotton Case . Gleisson Abreu Dela Acolatse George Adair Christine Agnone. Brazil Vs U.S. Cotton History & Context. In late 2002, Brazil formally requested consultations with the U.S. about subsidies provided to US cotton farmers

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Brazil v. U.S. Cotton Case .

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  1. Brazil v. U.S. Cotton Case. Gleisson Abreu Dela Acolatse George Adair Christine Agnone

  2. Brazil Vs U.S. CottonHistory & Context • In late 2002, Brazil formally requested consultations with the U.S. about subsidies provided to US cotton farmers • U.S. paid cotton farmers $2.3 billion in 1999 and $2.06 billion in 2001 (Dept of Agriculture) • In 2002, Brazil exported 97 million /U.S. exported 2 Billion • Brazil produces 3.5 million bales of cotton /U.S. produces 4.6 billion per year • Consultations were held on December 3,4 & 19, 2002 & January 17, 2003

  3. Brazil Vs U.S. CottonHistory & Context • On February 6, 2003 Brazil request that the WTO Dispute Settlement Body (DSB) establish a panel to examine the dispute • On March 18, 2003 the DSB established a panel with standard terms of reference • On April 26, 2004 the WTO issued an interim ruling favoring Brazil • Brazil won its challenge in August 2004 • A final ruling was issued publicly on September 8, 2004 • A final U.S. appeal to the WTO ruling on this issue is expected March 5 ,2005.

  4. Brazil Vs U.S. CottonUS Law Involved • Farm Security and Rural Investment Act of 2002 provide certainty and support for America’s farmers granted in violation of Articles 3 and 8 of the Agriculture Agreement and Article 3 of the Agreement on S C M. • Subsidies against • US -Marketing Loan Program • Counter-Cyclical payment • Direct Payments • Crop Insurance programs • Step Two Subsidies • Export Credit Guarantees • Subsidies fall under the Agricultural Risk Protection Act of 2000- provides crop insurance & economic assistance to farmers

  5. Brazil Vs U.S. CottonUS Law Involved • Agricultural Trade Act of 1978: • Export Subsidies • Exporter Assistance Initiative • Export Guarantee and Subsidy Programs • Market Access-maintain and expand international markets for U.S. agricultural products by increasing export policy & improving the competition in the world market, was amended, and other measures such as the GSM-102, GSM-103, and SCGP programs, and the Step 1 and Step 2 certificate programs.

  6. Brazil Vs U.S. CottonWTO Agreements Involved • Brazil requested consultations with the Government of the United States • Articles 4.1, 7.1 and 30 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement) regulates the use of subsidies • Article 19 of the Agreement on Agriculture, Article XXII of GATT 1994 • Article 4 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). • Article 13 “The Peace Clause”

  7. Brazil Vs U.S. CottonWTO Agreements Involved • 4.1- Remedies-Whenever a Member has reason to believe that a prohibited subsidy is being granted or maintained by another Member, such Member may request consultations with such other Member. • 7.1 - Remedies- Except as provided in Article 13 of the Agreement on Agriculture whenever a Member has reason to believe that any subsidy referred to in Article 1, granted or maintained by another Member, results in injury to its domestic industry, nullification or impairment or serious prejudice, such Member may request consultations with such other Member.

  8. Brazil Vs U.S. CottonWTO Agreements Involved • 30 Dispute Settlement: The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply to consultations and the settlement of disputes under this Agreement, except as otherwise specifically provided herein • Brazil challenged U.S. agricultural programs as being WTO-inconsistent and as not being protected by the "Peace Clause". Article 13 of the WTO Agreement on Agriculture is commonly referred to as the Peace Clause. Generally, as long as a WTO Member is meeting the criteria set out in Article 13, such as domestic support and export subsidy reduction commitments, other WTO Members are prohibited during the implementation period of the Agreement from challenging those domestic support or export subsidy measures through the WTO dispute settlement process

  9. Brazil Vs U.S. CottonWTO Agreements Involved Article 19 of the Agreement on Agriculture Consultation and Dispute Settlement -The provisions of Articles XXII and XXIII of GATT 1994, as elaborated and applied by the Dispute Settlement Understanding, shall apply to consultations and the settlement of disputes under this Agreement Article XXII of GATT 1994 Consultations - Each Member undertakes to accord sympathetic consideration to and afford adequate opportunity for consultation regarding any representations made by another Member concerning measures affecting the operation of GATT 1994 taken within the territory of the former - At the request of a Member, consult with any Member or Members in respect of any matter for which it has not been possible to find a satisfactory solution through consultation under paragraph

  10. Brazil vs. US – CottonParty Positions Brazil’s Complaint: The US government provided subsidies to domestic cotton producers that were inconsistent with provisions of the Agreement on Subsidies and Countervailing Measures, the Agreement on Agriculture, and GATT 1994.

  11. Brazil vs. US – CottonParty Positions Brazil Specifics:

  12. Brazil vs. US – CottonParty Positions US Response: The US government is acting consistently with provisions of the Agreement on Subsidies and Countervailing Measures, the Agreement on Agriculture, and GATT 1994. The US answers relied on technical merits regarding the implementation of GATT/WTO agreements.

  13. Brazil vs. US – CottonParty Positions Price Specifics:

  14. Brazil vs. US – CottonPanel Decision We conclude that, to the extent that the United States has acted inconsistently with the covered agreements, it has nullified or impaired benefits accruing to Brazil under these agreements.

  15. Brazil vs. US – CottonAppellate Body Upon receipt of the Panel decision, the US reviewed the decision for 60 days . After reviewing the decision, the US filed an appeal with the WTO’s Appellate Body in October 2004. The US is seeking full relief from the Appellate Body. A decision is expected no later than early March 2005.

  16. Implementation Decision • The Panel report of August 9, 2004 ordered the United States to withdraw its subsidies to cotton producers. • The ruling called for the U.S. to withdraw the subsidies “without delay”. Deadline is July 1st, 2005 or six months after the adoption of the Panel report by the Dispute Settlement Body.

  17. Implementation IssuesStrong Supporters • Established in the 1990 Farm Bill, Step 2 cost $2.16 billion over the past nine years, and provided a handful of corporations more than $80 million apiece. • Cotton exporters would not be able to sell over-priced, subsidized American cotton overseas. • They would be priced out of the international market (over 30 percent of U.S. cotton is exported). • National Cotton Council

  18. US Upland Cotton Acreage, 1997

  19. States that Produce Cotton and Their Representation in the House • Missouri (9) • Georgia (13) • California (52) • Arizona (8) • New Mexico (3) • Texas (30) • Alabama (7) • North Carolina (12) • South Carolina (6) • Mississippi (4) • Florida (23) • Louisiana (7) • Total: 174/435

  20. Implementation IssuesThe Bigger Picture • Cotton subsidies are one of many agricultural subsidies that is susceptible to the WTO. • Developing countries may use the ruling to move their case forward in the Doha Round.

  21. Proposal • The U.S. appeal is likely to be rejected in this case. • The U.S. cotton industry will have to adapt to the new environment. As a specific sector it may shrink, but consumers will benefit.

  22. Proposal • Subsidies found unlawful by the WTO must be removed • If the U.S. appeal is denied, the administration has an opportunity to match its rhetoric and remove subsidies.

  23. Proposal • For Brazil and other LDCs, ruling is a promising, significant step in opening developed countries agricultural markets. • WTO credibility as a fair mediator, and the whole trade system are at stake if its rulings are not respected.

  24. Sources • “Brazil vs. US: Cotton Subsidies and Implications for Development,” Trade Notes – The World Bank Group, 12 July 2004, Author – John Baffes. • House of Representatives. Representative Offices (by state). http://www.house.gov/house/MemberWWW_by_State.shtml • “NCC Issues Statement on Budget Proposal.” News Release. February 7, 2005. www.cotton.org. • T. Cotton Nelson. “Step 2 Program Vital to U.S. Cotton Competitiveness.” News Release. November 4, 2003. • US Upland Cotton Acreage, 1997. National Agricultural Statistics Survey. 1997. www.farms.com.

  25. Bibliography • www.economist.com • www.abcburkina.net • www.cotton.org • www.globalexchange.org • www.azcentral.com • http://www.ustr.gov/Document_Library/Press_Releases/2004/September/WTO_Panel_Issues_Mixed_Verdict_in_Cotton_Case.html • www.usatoday.com • www.worldbank.org/trade • http://thomas.loc.gov/cgibin/cpquery/?&db_id=cp107&r_n=hr424.107&sel=TOC_528704& • http://www.ewg.org/farm/findings.php • http://www.ncseonline.org/NLE/CRSreports/04Sep/RL32571.pdf • http://www.farmfoundation.org/farmpolicy/josling.pdf • http://www.oxfam.org/eng/pdfs/pp030827_corn_dumping.pdf • http://www.ustr.gov/assets/Trade_Agreements/Monitoring_Enforcement/Dispute_Settlement/WTO/Dispute_Settlement_Listings/asset_upload_file148_5598.pdf • http://www.wto.org/english/tratop_e/dispu_e/dispu_subjects_index_e.htm#bkmk33 • http://clas.berkeley.edu:7001/Events/fall2004/10-04-04-summer/ • www.wto.org/english/tratop_e/dispu_subjects_index_e.htm#bkmk33

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