Skip to main content
×
×
Home

United States – Subsidies on Upland Cotton Recourse to Article 21.5 by Brazil, WT/DS267/AB/RW (2 June 2008)

  • WILLIAM J. DAVEY (a1) and ANDRÉ SAPIR (a2)
Abstract
Abstract

Two of the four issues in this Appellate Body Report concerned the proper scope of Article 21.5 DSU compliance panel proceedings; the other two issues concerned the Appellate Body's review of the Panel's use of evidence. On the Article 21.5 issues, the Appellate Body essentially ruled that an Article 21.5 compliance proceeding could evaluate the WTO consistency of: (i) the entirety of an implementation measure (including parts of the measure that did not specifically implement DSB recommendations and rulings) and (ii) new subsidy grants made under a program in respect of which prior subsidy grants had been found to cause serious prejudice so as to determine whether the new grants also resulted in serious prejudice. On the evidentiary issues, the Appellate Body upheld the Panel's conclusions, although it modified certain of the Panel's reasoning. Probably the most interesting aspect of the case was the substantial deference showed by the Appellate Body to the Panel's consideration of causation and non-attribution issues. This deference was striking compared to the lack of deference that the Appellate Body has given to national authorities on those issues. We detect, however, a welcome interest on the part of the Appellate Body to require the use of analytical tools on the part of panels evaluating serious-prejudice cases.

Copyright
Corresponding author
*Email: WDAVEY@law.illinois.edu
References
Hide All

1 United States – Subsidies on Upland Cotton – Recourse to Article 21.5 of the DSU by Brazil, WT/DS267/AB/RW (2 June 2008) (hereinafter ‘Appellate Body 21.5 Report’). The Panel and Appellate Body reports in the original proceedings were analyzed in André Sapir and Joel Trachtman, ‘Subsidization, Price Suppression, and Expertise: Causation and Precision in Upland Cotton’, The WTO Case Law of 2004–2005 (ALI, 23 February 2007), also published in 7 World Trade Review 183–209 (2008).

2 United States – Subsidies on Upland Cotton, WT/DS267/1 (3 October 2002).

3 United States – Subsidies on Upland Cotton, WT/DS267/R (8 September 2004) (hereinafter ‘Panel Report’).

4 The Step 2 payments were also found to constitute export and import substitution subsidies under Article 3 SCM.

5 United States – Subsidies on Upland Cotton, WT/DS267/AB/R (3 March 2005) (hereinafter Appellate Body Report').

6 WT/DS267/20 (24 March 2005).

7 WT/DSB/M/188, at 7 (18 May 2005) (minutes of meeting held on 20 April 2005).

8 Appellate Body 21.5 Report, para. 8.

9 Brazil initially requested authorization to take countermeasures for non-implementation on 4 July 2005. WT/DS267/21 (5 July 2005). That action led to an agreement on sequencing between the United States and Brazil, pursuant to which the United States requested arbitration of the level of countermeasures; the arbitrations (technically there are two arbitrations – one under Article 4 SCM and one under Article 7 SCM) were suspended until completion of the Article 21.5 DSU proceedings, and Brazil was allowed to have a 21.5 panel established without further consultations or a second DSB meeting. The agreement is found at WT/DS267/22 (8 July 2005). Brazil requested the establishment of a 21.5 panel on 18 August 2006, WT/DS267/30 (21 August 2006), and it was established on 28 September 2006. WT/DSB/M/220, item 4 (2 November 2006).

10 United States – Subsidies on Upland Cotton – Recourse to Article 21.5 of the DSU by Brazil, WT/DS267/RW (18 December 2007) (hereinafter ‘Panel 21.5 Report’).

11 Appellate Body 21.5 Report, para. 448.

12 WT/DS267/37 (26 June 2008).

13 WT/DS267/38 & 39 (15 October 2008).

14 William J. Davey (2008), ‘Expediting the Panel Process in WTO Dispute Settlement’, in Merit E. Janow, Victoria Donaldson, and Alan Yanovich (eds.), The WTO: Governance, Dispute Settlement and Developing Countries, New York: Juris Publishing, pp. 409, 415–421 .

15 More often than not, the original panelists are available and do serve. See ibid., at 464–470 .

16 Panel 21.5 Report, para. 9.23.

17 United States – Final Countervailing Duty Determination with respect to Certain Softwood Lumber from CanadaRecourse to Article 21.5 of the DSU by Canada, WT/DS257/AB/RW (adopted 20 December 2005).

18 Panel 21.5 Report, paras. 9.24–9 .25.

19 Panel 21.5 Report, para. 9.26, citing European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from IndiaRecourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW (adopted 24 April 2003).

20 Appellate Body 21.5 Report, para. 201.

21 Appellate Body 21.5 Report, paras. 203–204 .

22 As to the Panel's reliance on the USSoftwood Lumber IV case, the Appellate Body noted that the case applied where there was a measure taken to comply and another closely related measure that could not be so characterized. That issue was explored in much more detail in United StatesLaws, Regulations and Methodology for Calculating Dumping Margins (Zeroing), WT/DS294/AB/RW (adopted 11 June 2009).

23 Appellate Body 21.5 Report, para. 206.

24 Appellate Body 21.5 Report, para. 207. The Appellate Body could have noted, but did not, that Article 21.5 proceedings are typically not all that expedited. See note 14 supra.

25 Appellate Body 21.5 Report, para. 210. An example would be a claim in respect of which a prima facie case had not been established. See European Communities – Anti-Dumping Duties on Imports of Cotton-Type Bed Linen from India – Recourse to Article 21.5 of the DSU by India, WT/DS141/AB/RW (adopted 24 April 2003).

26 Appellate Body 21.5 Report, para. 211. An example would be a new claim against an unchanged part of the contested measure.

27 It is likely that there would be different panelists, since the respondent could object to the same panelists and the Director-General might hesitate to appoint the same panelists, as different issues would be at stake.

28 The Panel determined that the DSB recommendations and rulings addressed only payments made under the subsidy programs and not the programs themselves. Brazil conditionally appealed this finding, but the Appellate Body found it unnecessary to decide the issue. Appellate Body 21.5 Report, paras. 250–254 .

29 Panel 21.5 Report, paras. 9.79.

30 Panel 21.5 Report, para. 9.80.

31 Appellate Body Report, para. 237.

32 Ibid. The Appellate Body found support for its view of Article 7 in the operation of Article 4 SCM (prohibited subsidies). It noted that where a Member replaced condemned prohibited subsidies with new subsidies, those new subsidies could be challenged in an Article 21.5 proceeding. United States – Tax Treatment of ‘Foreign Sales Corporations’ – Second Recourse to Article 21.5 of the DSU by the European Communities, WT/DS108/AB/RW2 (adopted 14 March 2006).

33 Appellate Body 21.5 Report, para. 237.

34 Appellate Body 21.5 Report, para. 238.

35 The rules at issue in USCotton effectively limit the right of a WTO Member to provide subsidies, while the rules on CVDs concern a Member's right to impose compensatory duties to offset subsidized exports from other members. It is true, of course, that an investigation of past conduct in a CVD case serves as the basis for a prospective remedy.

36 European Communities – Regime for the Importation, Sale and Distribution of Bananas – Recourse to Article 21.5 by Ecuador, WT/DS27/RW/ECU, paras. 6.3–6 .12, especially para. 6.09 (adopted 6 May 1999).

37 See, e.g., United States – Measures Relating to Zeroing and Sunset Reviews – Recourse to Article 21.5 of the DSU by Japan, WT/DS322/RW (24 April 2009) (on appeal, report expected 18 August 2009).

38 Appellate Body 21.5 Report, para. 279.

39 Panel 21.5 Report, para. 14.89.

40 Ibid., para. 14.81.

41 See figures in Appellate Body 21.5 Report, para. 262.

42 Appellate Body 21.5 Report, para. 294.

43 Ibid., para. 295.

44 Ibid., para. 301.

45 Ibid., para. 300.

46 The Panel also compared the GSM 102 program fees with the OECD's minimum premium rates (MPRs), established under the OECD's ‘Arrangement on Officially Supported Export Credits – 2008 Revision’, OECD Doc. TAD/PG(2007)28/Final (see paras. 23–25 thereof) and noted that there was a significant difference. While the OECD MPRs are set to ensure that certain, non-agricultural credit guarantee programs charge appropriate premia to reflect non-payment risks, their scope of application is sufficiently different that the Panel did not place much reliance on the OECD MPRs, except to note that the difference in fees was of considerable magnitude. The Appellate Body also did not place much emphasis on the differences. Appellate Body 21.5 Report, paras. 302–307 .

47 The US criticisms were largely an attempt to suggest that these other comparators were different than the GSM 102 program, which the Panel and Appellate Body accepted. The US arguments that they were therefore irrelevant was not so persuasive and was rejected.

48 Appellate Body 21.5 Report, para. 320.

49 Ibid., para. 321.

50 As panelists, we would have analyzed the evidence in its totality and concluded that it all supported Brazil – including the re-estimates of recent cohorts – except for the re-estimates of cohorts from the past. Absent more evidence on why the experience of those cohorts should outweigh the current US government view of whether the program would lose money, that counter-evidence would not outweigh what Brazil had presented. By dividing the evidence into two groups – quantitative and other – and essentially determining that the more important group was inconclusive, the Appellate Body arguably made the issue a closer one than it really was. After all, the US government issued the guarantees on the assumption that they would lose money and, to the extent that the cost of the guarantees at issue here was re-estimated, they still showed losses.

51 The United States raised several other evidentiary issues that the Appellate Body grouped together in one section and rejected – in part because they involved questions of fact and in part because the Appellate Body thought the Panel's decision to follow the approach of the original panel on a number of issues was appropriate. Appellate Body 21.5 Report, paras. 382–446 .

52 Appellate Body 21.5 Report, paras. 352–353 .

53 Ibid., paras. 354 et seq.

54 Ibid., paras. 363–365 .

55 Panel 21.5 Report, para. 10.50, quoting Panel Report (emphasis added).

56 Appellate Body 21.5 Report, para. 365.

57 Appellate Body 21.5 Report, para. 378.

58 Panel 21.5 Report, para. 10.243.

59 Appellate Body 21.5 Report, para. 381.

60 Ibid., para. 368.

61 United States – Anti-Dumping Measures on Certain Hot-Rolled Steel Products from Japan, WT/DS184/AB/R, para. 223 (adopted 23 August 2001).

62 Panel Report, para. 7.1205.

63 Ibid., para. 7.1206.

64 Ibid., para. 7.1209.

65 Appellate Report, para. 447.

66 Ibid., para. 448 (footnote omitted).

67 André Sapir and Joel Trachtman, World Trade Review, see note 1 supra, p. 208.

68 Panel 21.5 Report, para. 10.198. The omitted footnote 491 at the end of the first sentence noted the transparency of the model, with Brazil providing to the United States and to the Panel ‘full access to the model, its assumptions and the results’. We recall that in the original proceeding the Panel had deplored that the model used by Brazil was not equally available to the parties and to the Panel itself.

69 Ibid., para. 10.220.

70 Ibid. Para. 10.222.

71 Appellate Body 21.5 Report, para. 357.

72 Ibid., para. 358.

73 Ibid., para. 357.

74 Ibid., para. 293, n.618.

75 André Sapir and Joel Trachtman, see note 1 supra, p. 206.

Recommend this journal

Email your librarian or administrator to recommend adding this journal to your organisation's collection.

World Trade Review
  • ISSN: 1474-7456
  • EISSN: 1475-3138
  • URL: /core/journals/world-trade-review
Please enter your name
Please enter a valid email address
Who would you like to send this to? *
×

Metrics

Full text views

Total number of HTML views: 4
Total number of PDF views: 26 *
Loading metrics...

Abstract views

Total abstract views: 287 *
Loading metrics...

* Views captured on Cambridge Core between September 2016 - 15th December 2017. This data will be updated every 24 hours.