U.S. – Cotton Subsidies
18 May 2005
BIICL Conference, London
Todd J. Friedbacher
Nicolas J. S. Lockhart
Christian Lau
BEIJING BRUSSELS CHICAGO DALLAS GENEVA HONG KONG LONDON LOS ANGELES NEW YORK SAN FRANCISCO SHANGHAI SINGAPORE TOKYO WASHINGTON D.C.
Results of the Cotton Case
Prohibited subsidies
• Export credit guarantee
programs
• Step 2 program
Results of the Cotton Case (cont.)
Subsidies causing “adverse
effects”
• Marketing loan payments
• Counter-cyclical payments
• Step 2 payments
Topics
• Evidence and the Appellate
Body’s standard of review
• “Green box” domestic support
• Circumvention of agricultural
export subsidy commitments
Evidence
• Complex economic and econometric
evidence
• Numerous studies from various
sources
• Expert testimony
• Alternative approaches offered for
certain issues
No Appellate Review of the Facts
• Article 11 is the bulwark
• Panel’s discretion
• “Egregious” Errors
• Procedural Gloss
U.S. Appeal
“… the evidence did not support the
conclusion that U.S. payments have
insulated U.S. cotton farmers from
market forces.”
Appellate Body
“the United States confirmed that
it has not made an Article 11
claim in this appeal…” (para. 398)
Appellate Body
Application of Law to Facts
NOT
Objective Assessment of Matter?
Appellate Body
“… the Panel adopted a plausible
view of the facts …, even
though it attributed to these
factors a different weight or
meaning than did the United
States.” (para. 445)
Appellate Body
“We are not prepared to secondguess the Panel’s appreciation
and weighing of the evidence
before it …” (para. 448)
Appellate Body
“… this fact seems to support the
Panel’s conclusion …” (para. 449)
Appellate Body
Application of Law to Facts
PERMITS
Review of the Facts on Appeal
“Green Box”
Agricultural domestic support
that is properly classified as
“Green box” is exempt from
domestic support reduction
commitments
Measures at Issue
• Production flexibility contract
payments
• Direct payments
Restrictions on plantings of
fruits and vegetables
Reasons for “Green Box “Challenge
• Peace Clause
• Support of adverse effects
claims
• Clarification of provisions in
view of the Round
“Green Box” Finding
Annex 2 of the Agreement on
Agriculture
Paragraph 6(b): related to, or based
on, the type of production undertaken
after the base period
Planting restrictions on fruits and
vegetables
U.S. programs violate this requirement
Implementation
• No requirement to implement
• Significant incentive to
implement
• Significant difficulties in
implementing
Implications of the green box finding
• Members cannot self-declare
support as green box
• Panels and the Appellate Body
will interpret Annex 2 strictly
Circumvention Findings
Actual
Supported Scheduled
1
Yes
Threat
5
No
Over Commitments
Unsupported
Scheduled
2
No
6
No
Supported
3
Yes
7
No
4
No
8
No
Unscheduled
Unsupported
Unscheduled
Appellate Body
“There is, in other words, no
mechanism in the measure for
stemming, or otherwise
controlling, the flow of FSC
subsidies that may be claimed
with respect to any agricultural
products.” (FSC, para. 149)
Appellate Body
“There is no basis in Article
10.1 for requiring WTO
Members to take affirmative,
precautionary steps to ensure
that circumvention of their
export subsidy commitments
does not occur.” (para. 707)
Circumvention Findings
Actual
Supported Scheduled
1
Yes
Threat
5
No
Over Commitments
Unsupported
Scheduled
2
No
6
No
Supported
3
Yes
7
No
4
No
8
No
Unscheduled
Unsupported
Unscheduled