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United States vs. Brazil: Upland Cotton (DS267)

United States vs. Brazil: Upland Cotton (DS267). Catlin, Britt Choe, Won Deschauer, Christian. Table of Contents. History and Context Main Issues U.S. Position Brazil’s Position WTO decision Implementation Proposal. History and Context. Cotton is an important commodity Uses Textiles

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United States vs. Brazil: Upland Cotton (DS267)

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  1. United States vs. Brazil:Upland Cotton (DS267) Catlin, Britt Choe, Won Deschauer, Christian

  2. Table of Contents • History and Context • Main Issues • U.S. Position • Brazil’s Position • WTO decision • Implementation • Proposal

  3. History and Context • Cotton is an important commodity • Uses • Textiles • Industrial • Cottonseed (cooking oil) • Paper (part of cellulose) • Upland cotton is a common name for Gossypium hirsutum • Hardly breed of cotton, suitable for different growing conditions

  4. History and Context (continued) • Major component of U.S. agricultural sector • World’s third-largest producer of cotton • World’s largest exporter • Exports as a share of domestic production is 70% • U.S. cotton share in world market has increased • As a result, subsidies have drawn international attention

  5. U.S. Subsidies and Support

  6. U.S. Subsidies and Support (continued)

  7. Brazil’s PositionU.S. Position • Claim 1.) Violation of Peace Clause – excess of 1992 level • Claim 2.) Direct payments do not qualify for exemption • Claim 3.) Step 2 Program functions as a subsidy • Response to 1.) “Exempt from Actions” takes precedence • Response to 2.) PFC and DP programs have no or minimal trade distorting effects • Response to 3.) Step 2 Program payments are for domestic support

  8. Brazil’s PositionU.S. Position • Claim 4.) Export Credit Guarantees are export subsidies • Claim 5.) Subsidies have caused “serious prejudice” • Claim 6.) FSC-ETI Act of 2000 is an export subsidy • Response to 4.) Export guarantees are consistent with WTO obligations • Response to 5.) Weakness in world demand is the cause • Response to 6.) No case has been made

  9. WTO Dispute Settlement Panel’s Recommendation • Synopsis:The WTO has ruled on two separate occasions that Washington’s cotton subsidies are out of line with the U.S. commitments at the global trade body • The WTO’s Appellate Body upheld Brazil’s complaint that U.S. subsidies to its upland cotton producers violated the country’s world trade obligations

  10. Timeline: U.S. – Brazil WTO Dispute Settlement Case 267 • DATEEVENT • Sept. 2002Brazil makes formal “request for consultations” with U.S. • Oct. 2002 to Jan. 2003Brazil and U.S. hold 3 consultation to discuss dispute – unsuccessful • Feb. 20031st request from Brazil for establishment of dispute panel to rule on complaint is vetoed by U.S. • March 2003After 2nd request from Brazil, WTO DSB establishes a panel

  11. Timeline: U.S. – Brazil WTO Dispute Settlement Case 267 • DateEvent • May 2003 WTO appoints panelists and grants 6 months to hold hearings and gather testimony before final report • July 20031st meeting with DSB panel. Panel decides to review the peace clause issue and Brazil’s challenge to U.S. cotton subsidies separately • Sept. 2003Panel decides both issues will be decided together • Nov. 2003An extension for the decision is granted • April 2004

  12. Timeline: U.S. – Brazil WTO Dispute Settlement Case 267 • DateEvent • June 2004 WTO panel releases final report • Oct. 2004 U.S. notifies intent to appeal 14 points of report to the Appellate Body (AB) • March 2005 The AB upholds most of the panel’s initial rulings. Concurrence of report by DSB and the AB initiates U.S. compliance deadlines*

  13. The Final ReportWTO Findings Against U.S. • “Peace clause” violation • U.S. direct payments do not qualify for exemption from reduction commitments as decoupled income support • The Step 2 Program functions as an export subsidy

  14. The Final ReportWTO Findings Against U.S. • U.S. Export Credit Guarantees function as export subsidies • U.S. subsidies have caused “serious prejudice” (against Brazil cotton)

  15. U.S Implementation of WTO Findings • Withdrawal of prohibited subsidies “without delay” • Prohibited export subsidies • Export Credit Guarantees/GSM-102* • Step 2 Program payments to exporters of upland cotton • Prohibited import subsides • A. Step 2 Program payments to domestic users of upland cotton

  16. U.S Implementation of WTO Findings • Withdraw of “actionable” subsidies or removal of their adverse effects • The establishment of a fund totaling $147.3 million USD/annually to finance projects that will benefit Brazilian cotton crops

  17. Epilogue • June 2008: WTO says U.S. failed to comply with dispute panel rulings • Feb 2008: Brazil seeks authority for retaliatory trade measures • Aug 2008: Brazil requests resumption of arbitration review of proposed countermeasures • March 2009: Revision of Brazil’s total retaliation request

  18. Proposals • African consortium of cotton producers* • Subsidies suppress world price of cotton and harms developing countries • U.S. doesn’t lose much (relatively) • During the Doha Development Round negotiations • Subsidies for agricultural products in developed countries should be removed • In the meantime, similar U.S. subsidies on “principle crops” including wheat, rice, feed grains, soybeans and peanuts should be removed • Similar system of direct payments exist for all principle crops • Could result in similar disputes

  19. Questions?

  20. Works Cited/Sources Referenced • http://www.washingtonpost.com/wp-dyn/content/article/2010/03/08/AR2010030805359.html • http://www.nationalaglawcenter.org/assets/crs/RL32571.pdf • http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds267_e.htm • http://www.washingtonpost.com/wp-dyn/content/article/2010/06/02/AR2010060204228.html • http://reason.com/blog/2010/06/04/us-cotton-subsidy-shame • http://www.pbs.org/wnet/wideangle/episodes/the-dying-fields/global-cotton-industry/cotton-subsidies-and-the-world-trade-organization/1945/ • http://www.orange.mu/kinews/afp/business/106908/mandelson-charges-us-hiding-behind-smokescreen-on-cotton-subsidies.html • http://www.oxfam.org.uk/resources/policy/trade/downloads/bp64_cotton_dumping_060904.pdf • http://fpc.state.gov/documents/organization/57876.pdf • http://www.iatp.org/tradeobservatory/library.cfm?refID=107376 • http://www.oxfam.org/en/pressroom/pressrelease/2009-08-31/oxfam-reaction-wto-judgement-us-cotton-subsidies • http://www.worldtradelaw.net/articles/benitahexportcredits.pdf • http://www.jstor.org/pss/20456726 • http://www.twnside.org.sg/title2/wto.info/twninfo20080618.htm • http://www.ideascentre.ch/documents/Newsletter85CottonBrazilvsUSA.pdf • http://www.policyarchive.org/handle/10207/bitstreams/2204.pdf • http://ncseonline.org/nle/crsreports/08July/RS22187.pdf

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