Annex C Oral Statements of Parties and Third Parties At
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WT/DS267/R/Add.1 Page C-1 ANNEX C ORAL STATEMENTS OF PARTIES AND THIRD PARTIES AT THE FIRST SESSION OF THE FIRST SUBSTANTIVE MEETING Contents Page Annex C-1 Executive Summary of the Opening Statement of Brazil C-2 Annex C-2 Executive Summary of the Closing Statement of Brazil C-7 Annex C-3 Executive Summary of the Opening Statement of the United States C-12 Annex C-4 Executive Summary of the Closing Statement of the United States C-16 Annex C-5 Third Party Oral Statement of Argentina C-20 Annex C-6 Third Party Oral Statement of Australia C-27 Annex C-7 Third Party Oral Statement of Benin C-33 Annex C-8 Third Party Oral Statement of Canada C-36 Annex C-9 Third Party Oral Statement of China C-40 Annex C-10 Third Party Oral Statement of the European Communities C-43 Annex C-11 Third Party Oral Statement of India C-53 Annex C-12 Third Party Oral Statement of New Zealand C-55 Annex C-13 Third Party Oral Statement of Paraguay C-58 Annex C-14 Third Party Oral Statement of Chinese Taipei C-61 WT/DS267/R/Add.1 Page C-2 ANNEX C-1 EXECUTIVE SUMMARY OF THE ORAL STATEMENT OF BRAZIL AT THE FIRST SUBSTANTIVE MEETING OF THE PANEL WITH THE PARTIES I. INTRODUCTION 1. Brazil addresses first various peace clause issues, followed by Step 2 export and domestic payments, export credit guarantees and the ETI Act subsidies. Finally, Brazil addresses the “preliminary issues” raised by the United States. II. PEACE CLAUSE ISSUES The Peace Clause is an Affirmative Defence 2. The peace clause is in the nature of an affirmative defence and it is, thus, the US burden to prove that Brazil’s claims under the SCM Agreement are “exempt from actions”. An affirmative defence is a provision that does not set out any positive obligations but enables Members to maintain measures that are otherwise inconsistent with its WTO obligations. The peace clause does not in itself set out any positive obligations for Members, but simply provides a conditional shelter against certain actionable and prohibited export subsidy claims under the SCM Agreement. The peace clause meets the criteria set forth by the Appellate Body for an affirmative defence in US – FSC and in the Aircraft disputes, by being an exception to a legal regime otherwise applicable. Given the extraordinary protection it provides, it is not “bizarre”, as the United States argues, that the peace clause requires the defending Member to prove that its domestic and export subsidies meet the conditions for peace clause protection. “such measures do not grant support to a specific commodity” 3. This phrase in AoA Article 13(b)(ii) means that in calculating the amount of support for any marketing year between 1995-2003, all non-”green box” support provided to a specific commodity must be tabulated, regardless of whether the type or form of the support is “product-specific”, “non- product specific”, de minimis, or “blue box”. This is certainly evidenced by the decision of negotiators not to use the phrases “product-specific” and “AMS” in Article 13(b)(ii) to qualify the type of support to a specific commodity. The US attempt to read “product-specific” into Article 13(b)(ii) is inconsistent not only with the text but also the context of the phrase “such measures” in Article 13(b)(ii). The US interpretation of “product-specific support” is further incompatible with the object and purpose of the Agreement on Agriculture. It would create a new category of non-actionable trade-distorting non-”green box” subsidies and sanction huge increases in spending for “amber box” and, therefore trade-distorting, domestic support as long as it took the form of support for multiple commodities. This is contrary to the presumption of trade and production- distorting effects for individual products from non-”green box” domestic support, which flows from a domestic measure being inconsistent with the “green box” requirements of AoA Annex 2. WT/DS267/R/Add.1 Page C-3 “that decided during the 1992 marketing year” 4. This word “decided” does not require any particular type of “decision”. As a neutral term, the meaning of “decided” must be interpreted in a way that does justice to the ordinary meaning of other terms in Article 13(b)(ii) that are not neutral. Most importantly, the term “decided” must be interpreted in a manner that permits a comparison between a “grant” of non-”green box” “support” to a specific commodity for individual marketing years between 1995-2003, and a “decision” regarding such support in MY 1992. A textual interpretation reveals that the term “that” refers back to “support” and that support is accompanied by the term “granted”. 5. The Appellate Body agreed with the panel in Brazil – Aircraft that the phrase “the level of export subsidies granted” meant “something actually provided”, which means actual budgetary expenditures. Thus, the neutral term “decision” (for MY 1992) can only be read harmoniously with the term “grant support” (for MY 1995-2003) where the “decision” is to fund non-”green box” support to a specific commodity for marketing year 1992. 6. In addition, even if Article 13 would refer to a level of (income) support, as the United States alleges, the Appellate Body has held in Brazil – Aircraft that the “level” of export subsidies refers to actual expenditures. 7. The US interpretation of a “level of support” is furthermore inconsistent with its own interpretation of Article 13(b)(ii) in its Statement of Administrative Action (SAA). In the SAA, it stated that governments would have peace clause protection from adverse effects and serious prejudice challenges in the WTO “unless the AMS for the particular commodity exceeds the level decided in the 1992 marketing year”. Brazil strongly disagrees with the notion of “AMS” as the relevant standard for the peace clause, but this official US interpretation of the peace clause in 1995 is nevertheless compelling evidence of the United States view of the “decision” it had taken during MY 1992. The calculation of the AMS for a particular commodity requires the calculation of the support provided in monetary terms. AoA Annex 3 offers two options for the calculation of AMS: budgetary outlays or the price gap formula detailed on paragraphs 10 and 11. Under either option, the AMS represents a measurement of support in monetary terms. 8. In sum, Brazil is of the firm view that the text of Article 13(b)(ii) requires comparing MY 1992 support with MY 1995-2003 support by comparing actual expenditures. This methodology produces an “amount” of support – not a “rate”. Thus, any decision under Article 13(b)(ii), by definition, must relate in some way to an “amount” of expenditures. Only this methodology allows a clear comparison between the two time periods, regardless of the type of support. 9. However, even if the Panel were to decide that the relevant standard is a “rate of support” standard, Brazil has provided the testimony of Professor Daniel Sumner indicating that – following the US approach to measuring “support to upland cotton” – the “rate of support” to upland cotton in MY 1999-2002 was much higher than the “rate of support” to upland cotton in MY 1992. Based on the evidence and analysis presented by Professor Sumner, Brazil also asserts that even under the US “rate of support” methodology, the United States has failed to demonstrate that its MY 1999-2002 support does not exceed its support to upland cotton decided in MY 1992. US “statute of limitations” interpretation of the peace clause 10. There is no express or implied “statute of limitations” in the peace clause. Subsidizing Members such as the United States are offered conditional protection under the peace clause during a 9-year period. But the rights of Members injured by subsidies provided in excess of 1992 marketing year levels are preserved throughout the implementation period as well. This is the balance struck by the peace clause. WT/DS267/R/Add.1 Page C-4 11. The US “statute of limitations” argument in this case is very similar to one rejected by the Appellate Body in US – Lead Bars. This argument is further inconsistent with the views of the Indonesia – Automobiles panel, which held that measures applied in the past must be examined to assess present serious prejudice. The US interpretation would cut off a Member’s right to challenge such measures because it missed an imaginary deadline. This US interpretation is inconsistent with the object and purpose of the AoA because it would permit Members to provide huge “non-green” box support one year without peace clause protection, and then claim absolution as soon as the next marketing year began. “Support to Upland Cotton” 12. Brazil has produced extensive evidence providing the factual basis for the Panel to find that CCP, DP, market loss, and PFC payments are “support to” upland cotton within the meaning of the peace clause. USDA categorizes the PFC and market loss payments as part of “total payments” to upland cotton. US National Cotton Council officials repeatedly testified and produced documents revealing that their producer members requested, received, and depended on all four of these subsidies. Crop insurance is also support to cotton as evidenced by specific upland cotton crop insurance policies and groups of policies for upland cotton. Moreover, USDA specifically identifies and tabulates crop insurance subsidies for upland cotton. In addition, all five domestic support measures fail to meet the requirements of AoA Annex 2. Therefore, they constitute non-“green box” support that is presumed to be production and trade distorting.