(Exhibit Br a-588 submitted by Brazil to the\nPanel), Section 3.CR2).\n171Ibid., para. 314 (quoting United States' appellant's submission, paras. 84 and 119).\n172Ibid., para. 316.\n\n[United States'] evidence into account, and adopted a plausible view on the basis of the evidence as a\nwhole that supported its conclusion regarding the weight to be attached to initial estimates.\"173\n83. Brazil adds that the initial estimates for FY 2006- 2008 are \"not only robust, but of particular\nimportance in these Article 21.5 proceedings\" 174, because these proceedings concern a new fee\nstructure for which, by definition, little past perfo rmance data exists. Moreover, contrary to the\nUnited States' assertion, Brazil does not consider th at reliance on initial estimates for \"only\" three\nfiscal years undermines the \"long-term\" nature of the Panel's assessment 175, because each estimate\nreflects the costs \"over the lifetime of a cohort\", which \"typically exceeds ten years\".176\n84. Brazil takes issue with the United States' asser tion that the Panel incorrectly allocated the\nburden of proof under item (j) of the Illustrative Li st when stating that certain data submitted by\nBrazil \"at the very least raise questions\" about the probative value of the re-estimates data. 177 Brazil\nsubmits that, because it was the United States that offe red the re-estimates data as rebuttal evidence to\ndemonstrate an anticipated profit to the United States Government, the United States bore the burden\nof proof with respect to that evidence and the ar gument allegedly supported by it. According to\nBrazil, the United States submitted the re-estimates data to highlight two points: that the three export\ncredit guarantee programmes at issue in the original proceedings were in fact not provided at a net\ncost to the United States Government; and that in itial estimates in general are not reliable indicators\nof the long-term net cost of the programmes. Braz il argues that the Panel correctly concluded that the\nUnited States had not succeeded in proving either of these two points. The first point had been\n\"definitively disposed of in the original proceedings\"\n178, and, with respect to the second point, the\nUSDA itself recently concluded that the FCRA initial estimate methodology \"provide[d] reliable\nestimates\".\n179 The Panel also attached significance to the \"credit guarantee liability\" figure in the\nCCC's 2005-2006 Financial Statements, as well as cash-basis accounting evidence submitted by\nBrazil. Both sets of data indicated a net loss fo r the three export credit guarantee programmes subject\nto the original proceedings. Weighing this eviden ce, the Panel concluded th at evidence provided by\nBrazil \"at the very least raise[d] questions\" 180 regarding \"whether the United States had succeeded in\nmeeting its burden of proving what it set out to prove with its re-estimates data.\"181\n\n173Brazil's appellee's submission, para. 318. (footnotes omitted)\n174Ibid., para. 324.\n176Ibid., para. 327. (emphasis omitted)\n181Ibid. (original underlining)\n\n(b) Comparison with OECD Minimum Premium Rates\n85. Brazil requests the Appellate Body to dismi ss the United States' arguments concerning the\nPanel's reference to the magnitude of differen ce between the revised GSM 102 fees and OECD MPRs\nas relevant evidence under item (j) of the Illustrative Li st. First, Brazil asserts that the Panel did not\nturn the comparison of the revised GSM 102 f ees with the OECD MPRs into a \"dispositive\"\n182 test\nunder item (j). Instead, the Panel \"expressly considered the comparison ... as one piece of evidence\namong many informing its assessment whether the revised GSM 102 premiums are adequate to cover\nthe long-term operating costs and losses of the program.\" 183 Brazil adds that \"[t]he United States sees\nthe absence from item (j) of express license to consider evidence regarding the OECD MPRs as a\nbar to a panel's consideration of that evidence.\" 184 Brazil explains that, on the contrary, \"the original\npanel and the Appellate Body interpreted the ab sence of any prohibition regarding the type of\nevidence to be considered in an item (j) assessment as an indication of flexibility that permits a panel\nto assess objectively any evidence considered relevant to its inquiry.\"185 Secondly, Brazil argues that\nthe fact that item (j) does not refer to the OE CD Arrangement, whereas the second paragraph of\nitem (k) of the Illustrative List does, similarly do es not preclude the Panel's approach to relying on\nOECD MPRs as relevant evidence. Brazil emphasizes that the Appellate Body's decision in Brazil –\nAircraft also suggests that the OECD Arrangement offers relevant, indicative evidence under item (j).\n86. As regards the United States' allegation that the Panel rendered Article 10.2 of the Agreement\non Agriculture a nullity by \"impos[ing]\" the MPRs as a \"multilaterally agreed discipline\" 186, Brazil\nexplains that the Panel expressly characterized th e comparison of the revised GSM 102 fees to OECD\nMPRs as an evidentiary matter and not as a legally binding benchmark. Brazil highlights the Panel's\nstatement that \"it was the 'magnitude of the difference between MPRs and GSM 102 fees'\" 187 that\nrendered the comparison evidence relevant for purposes of its assessment of the facts under item (j).\n(c) Structure, Design, and Operation of the Revised GSM 102\nProgramme\n87. Brazil submits that the Panel correctly examined the structure, design, and operation of the\nrevised GSM 102 programme, and requests the Appellate Body to reject the United States' appeal in\nthis regard.\n\n182Brazil's appellee's submission, para. 375 (quoting United States' appellant's submission, para. 94).\n184Ibid., para. 379. (original emphasis)\n185Ibid. (original emphasis; footnote omitted)\n\n88. Brazil notes that, as one part of this analysis , the Panel looked at the fees charged for\ncomparable programmes offered by the Ex-Im Bank, \"considered 'the rate of increase (or scaling ) of\nfees with increased risk', and found that 'the \"scaling\" of GSM 102 fees is greatly inferior'\" 188 to that\nfor the Ex-Im Bank programmes. Brazil further s ubmits that, when examining the comparison of fee\nscaling between the GSM 102 programme and the Ex -Im Bank programmes, the Panel \"relied on the\nextent of the difference as an evidentiary indication of the shortcomings\" 189 of the GSM 102\nprogramme. Thus, contrary to the United States' a ssertion, the Panel did not impose or establish any\nspecific affirmative standards that must be met, ex cept that fees must be adequate to cover the long-\nterm operating costs and losses of the programme.\n89. According to Brazil, the Panel's assessment of whether GSM 102 fees are \"risk-based\" is\nconsistent with item (j) of the Illustrative List because, to the extent that fees do not adequately\naccount for increased risks—such as longer tenors (duration of the guarantee), higher country risk, or\nhigher borrower risk—those fees are not designed \"t o cover the long-term operating costs and losses\"\nof a programme. Thus, Brazil argues that the Panel properly assessed whether the fees under the\nrevised GSM 102 programme adequately respond to the increased costs of all the risks faced in\nguaranteed transactions.\n90. Brazil also requests the Appellate Body to dismiss the United States' allegations that the Panel\nincorrectly considered the GSM 102 export credit gu arantees and the two Ex-Im Bank programmes to\nbe comparable. Brazil states that, apart from as serting that the Panel erred in accepting Brazil's\nproffered adjustments for the differences between these programmes, the United States neither\nexplains, nor substantiates, its allegations. Brazil observes that the United States submitted no\nevidence showing that the risks involved in a tran saction differ depending on the product involved.\nSecondly, Brazil explains that the United Stat es' argument that the GSM 102 programme and the\nEx-Im Bank programmes \"differ significantly in te rms of interest and principal cover\" ignores\nadjustments offered by Brazil and considered by the Panel as \"appropriate\".\n190 Thirdly, Brazil asserts\nthat the Panel correctly found that the alleged difference between the GSM 102 programme and the\nEx-Im Bank programmes with respect to recourse benefits for uninsured amounts \"does not exist\".191\n91. Brazil recalls that the Panel considered the one per cent fee cap as one of the elements\nindicating insufficient scaling of fees under the revised programme. According to Brazil, contrary to\n\n188Brazil's appellee's submission, para. 431 (quoting Panel Report, para. 14.126 and footnote 757\nthereto). (underlining added by Brazil; footnote omitted)\n189Ibid., para. 433. (original emphasis)\n190Ibid., para. 452 (quoting United States' appellant's submission, para. 103; and Panel Report,\npara. 14.125, respectively).\n191Ibid., para. 453. (original emphasis)\n\nthe United States' suggestion that the Panel \"interpret ed item (j) to 'mandate[]' removal of fee caps to\navoid an export subsidy finding\"\n192, the Panel did not interpret item (j) to include any such\nrequirement. Rather, the Panel \"treated the one-percent fee cap as another element supporting its\nconclusion that the amended GSM 102 program is not structured, designed and operated to ensure that\nfees cover long-term costs and losses.\" 193 Brazil adds that, as the Panel correctly found, removing\ncertain high-risk countries from eligibility under th e programme did not change the riskiness of the\nGSM 102 portfolio sufficiently to enable risk-based fees, despite the statutory one per cent fee cap.\nBrazil submits that, ultimately, the Panel found Braz il's argument and evidence more persuasive than\nthe United States' argument and evidence, according great er weight to the former than the latter. In\nBrazil's view, this is not a valid basis for concludi ng that the Panel committed a reversible legal error\nbecause, in applying the law to the facts, the Panel adopted a view that was \"more than 'plausible'\".194\n92. Brazil further requests the Appellate Body to re ject the United States' challenge against the\nPanel's reliance on two additional factors in examin ing the structure, design, and operation of the\nrevised GSM 102 programme, namely: (i) the CCC's unlimited access to United States Treasury\nfunds; and (ii) the fact that revised GSM 102 fees still fail to account for foreign obligor risk. With\nrespect to the first factor, Brazil maintains that \"reco urse to [United States] Treasury funds is part and\nparcel of the ordinary course of business for the GSM 102 program\" and, theref ore, is \"a structural\nelement ... on which the complianc e Panel was entitled to rely\" 195, as had the original panel. Brazil\nasserts that, under United States law, the CCC export credit guarantee programmes \"are exempted\nfrom the usual appropriations requirements\" 196, and that the CCC can \"replenish its capital on an\nannual basis through an unlimited budgetary short-cut\". 197 According to Brazil, this indicates that the\ndesigners of the GSM 102 programme considered the likelihood of losses high enough to create an\nexceptional regime. Brazil adds that, because no ch ange had occurred since the original proceedings\nwith regard to this factor, the Panel acted consiste ntly with relevant Appellate Body jurisprudence in\nnot departing from the original panel's reasoning and findings in this regard.\n93. With respect to the second factor, Brazil submit s that the Appellate Body should reject the\nUnited States' assertion that the Panel \"erred in concludi ng that fees were the only proper way to deal\nwith foreign obligor risk\". 198 Recalling the item (j) standard, Brazil considers that fees are not\n\n192Brazil's appellee's submission, para. 467 (referring to United States' appellant's submission,\nparas. 106 and 109).\n193Ibid., para. 469.\n194Ibid., para. 473.\n195Ibid., para. 484.\n196Ibid., para. 486.\n197Ibid., para. 487.\n\ndesigned to adequately \"cover\" long-term costs a nd losses if those fees do not adequately account for\nthe increased costs of increased risk, such as higher foreign obligor risk. Brazil argues that the United\nStates offered no evidence to support its assertion th at existing exposure limits to control foreign\nobligor risk are a sufficient alternative to setting fees commensurate to such risk. Brazil further\nsubmits that the United States did not offer ev idence on the alleged CCC exposure limits for the\nGSM 102 programme. In contrast, Brazil provided ev idence to the Panel in support of its argument\nthat exposure limits and variable fees are used \" in tandem\"199 by commercial financial institutions to\ncontrol for the costs associated w ith borrower risk. In Brazil's vi ew, therefore, the United States\n\"essentially argues that the compliance Panel's er ror lies in not accepting [the United States']\narguments regarding an '[a]lternative[]' way to account for the costs of foreign obligor risk\". 200 Brazil\nreiterates that \"there is no reversible error where a panel adopts 'a plausible view of the facts', 'even\nthough it attributed to these factors a different weight or meaning than did' a party to the dispute.\"201\n94. Brazil concludes that the United States has failed to substantiate a reversible error in any of\nthe Panel's intermediate findings and in its ove rall finding that the revised GSM 102 programme\nconstitutes an export subsidy.\n(d) Article 11 of the DSU\n95. Brazil submits that the United States has failed to demonstrate that the Panel did not conduct\nan objective assessment of the matter as required by Article 11 of the DSU. More specifically, Brazil\nargues that the allegation that the Panel violated Article 11 in its assessment of the United States'\nevidence and argument regarding deficiencies in the initial estimate process is untenable, because the\nUnited States has not demonstrated that the Panel ex ceeded the bounds of its discretion as the trier of\nfacts. With regard to the United States' argument that the Panel violated Article 11 by failing to\nassess the evidence concerning the re- estimates, Brazil emphasizes that the Panel \"did not uncritically\nfollow the original panel's assessment concerning re-estimates, but objectively assessed the evidence\nbefore it.\" 202 According to Brazil, the Panel was called upon to judge the relative weight and\nprobative value of competing evidence, and the fact that the Panel attributed to competing evidence a\ndifferent weight or meaning than the United States does not constitute reversible error under\nArticle 11 of the DSU.\n\n199Brazil's appellee's submission, para. 504 (referring to Panel Report, footnote 735 to para. 14.113, in\nturn referring to Brazil's second written submission to the Panel, footnote 718 to para. 498). (original emphasis)\n201Ibid. (quoting Appellate Body Report, US – Upland Cotton, para. 445).\n202Ibid., para. 354.\n\n96. With respect to the United States' claim that th e Panel acted inconsistently with Article 11 by\nfailing to recognize that the OECD MPRs are not re levant for an analysis under item (j) of the\nIllustrative List, Brazil submits that the Panel si mply disagreed with the United States' arguments\nregarding MPRs and, in so doing, acted consistently with Article 11 of the DSU. Finally, with regard\nto the United States' assertion that the Panel violated Article 11 because it \"offered no support\"\n203 for\nits conclusion that the GSM 102 programme and the Ex-Im Bank programmes are similar, Brazil\nreiterates that, beyond asserting the existence of differences between these programmes, the United\nStates has not explained how the Panel erred in its assessment of the evidence or demonstrated why\nthe Panel exceeded the bounds of its discretion as the trier of facts.\n97. Brazil therefore requests the Appellate Body to uphold the Panel's findings under\nArticles 10.1 and 8 of the Agreement on Agriculture , and Articles 3.1(a) and 3.2 of the SCM\nAgreement, as well as its finding that the United States has failed to withdraw the subsidy without\ndelay, and to reject the United States' claim under Article 11 of the DSU.\n3. Serious Prejudice\n98. Brazil requests the Appellate Body to reject the United States' appeal of the Panel's finding\nthat the effect of marketing loan and counter-c yclical payments provided to United States upland\ncotton producers pursuant to the FSRI Act of 2002 is significant price suppression within the meaning\nof Article 6.3(c) of the SCM Agreement, constituting \"present\" serious prejudice to the interests of\nBrazil within the meaning of Article 5(c) of the SCM Agreement. Brazil also requests the Appellate\nBody to reject the United States' claim that the Panel failed to make an objective assessment of the\nmatter before it as required by Article 11 of the DSU. Brazil asserts that, on the basis of the totality of\nthe evidence, the Panel was well within the bounds of its discretion—and fully supported by the\nevidence—when it found that marketing loan and counter-cyclical subsidies cause significant price\nsuppression.\n(a) Market Insulation\n99. Brazil argues that the United States' appeal re lating to market insulation concerns factual\naspects of the Panel's findings and that the United St ates effectively is asking the Appellate Body to\n\"second-guess\"204 the Panel's appreciation and weighing of th e evidence before it. Brazil asserts that\nthe Panel's findings \"rest on a thorough and proper assess ment of the evidence\", and that it \"did not\n\n203Brazil's appellee's submission, para. 456 (quoting United States' appellant's submission, para. 123).\n204Ibid., para. 540.\n\nexceed the bounds of its discretion in applying the law to the facts.\" 205 Moreover, Brazil rejects the\nUnited States' contention that the Panel relied excessively on the findings of the panel and the\nAppellate Body in the original proceedings. In stead, the Panel reviewed these findings and held,\nbased on its own assessment of the updated evidence be fore it, that these findings remained accurate\n\"under current factual conditions \".206 Brazil notes that an Article 21.5 proceeding \"is part of a\n'continuum of events' and that a compliance panel can be expected to refer and rely on the findings of\nthe panel and the Appellate Body in the original proceeding.\" 207 Brazil further recalls the Appellate\nBody's statement that \"doubts could arise about the objective nature of an Article 21.5 panel's\nassessment if, on a specific issue, that panel were to deviate from the reasoning in the original panel\nreport in the absence of any change in the underlying evidence in the record.\"208\n100. Regarding marketing loan payments , Brazil disagrees with the United States that the Panel\nfocused exclusively on the United States' argument that producers' planting decisions were not\ninfluenced by the possibility of marketing loan subs idies because expected prices were above the loan\nrate. Brazil asserts that the Panel did assess the Unite d States' arguments that price expectations and\nother factors—rather than marketing loan subsidi es—explain the planting decisions of United States\nupland cotton producers. Brazil also recalls that, in the original proceedings, the Appellate Body held\nthat \"[t]he way in which United States upland cotton farmers make decisions relating to the\nproduction of upland cotton, and the basis on which they make such decisions, are factual matters that\nfall within the Panel's task of weighing and assessing the relevant evidence\" 209, and asks that the\nUnited States' appeal be rejected on the same grounds.\n101. Brazil asserts that the fact that expected cash prices were above the marketing loan rate in\ncertain years does not mean that producers did not expect marketing loan payments at the time of\nplanting. In this respect, Brazil notes that the adju sted world price is \"consistently much lower than\nthe [United States] cash price\", and that Un ited States upland cotton producers would expect\nmarketing loan subsidies \"even in situations where the expected cash price is above the loan rate\".210\nBrazil argues that it demonstrated that the expected adjusted world price for upland cotton was below\nthe marketing loan rate in every year since MY 1999 and that the evidence indicates that \"[United\n\n207Ibid., para. 552 (quoting Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) ,\npara. 121).\n208Ibid., para. 555 (quoting Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada),\npara. 103).\n209Appellate Body Report, US – Upland Cotton, para. 441.\n210Brazil's appellee's submission, para. 568. (original emphasis)\n\nStates] upland cotton producers did expect mark eting loan subsidies in each of these years.\"\n211\nMoreover, Brazil argues that uncertainty about the act ual level of the adjusted world price during the\nfollowing marketing year, even if the expected adjusted world price is above the loan rate,\ndemonstrates the significance for producers' plan ting decisions of the \"revenue-stabilization\" 212\nprovided by the marketing loan subsidy.\n102. Brazil submits that, in the light of these facts, \"the United States cannot establish, as it must,\nthat the compliance Panel's finding of market insula tion from marketing loan subsidies has no basis in\nthe evidence before it.\" 213 Instead, according to Brazil, the Panel adopted a plausible view on the\nbasis of the evidence as a whole that supported its conclusion. Brazil adds that, \"even if [United\nStates] upland cotton producers had adapted their pl anting behavior in the direction that market\nsignals would predict— i.e., assuming that the United States' read ing of the evidence were correct—\nthis would not undermine the compliance Panel's finding that [United States] marketing loan subsidies\n'insulate'—or, in the words of the original pa nel, 'numb'—[United States] upland cotton producers\nfrom market price signals.\" 214 Brazil observes that the ordinary meaning of the term \"insulate\" does\nnot require that United States upland cotton producer s are shielded altogether from market signals.\nBrazil submits that the Panel's finding of market insulation would be consistent with evidence\nshowing that United States upland cotton producers react somewhat to market price signals, \"just not\nto the same extent they would ab sent the [United States] subsidy\".\n215 Thus, according to Brazil, \" but\nfor marketing loan and counter-cyclical payments , [United States] upland cotton producers would\nhave reduced their planted acreage by significantly more than merely 14 percent\" 216 in MY 2007.\nBrazil also argues that the Panel did take into account producers' expectations in MY 2006 and\nconcluded that they \"had every reason to expect 'very significant' marketing loan payments when\nmaking their planting decisions.\"217\n103. Regarding counter-cyclical payments, Brazil argues that the Panel did not improperly rely on\nthe new studies in isolation to find that the effect of counter-cyclical subsidies is significant price\nsuppression. Brazil submits that the conclusion that the Panel drew from these studies \"is not—as the\nUnited States argues—that counter-cyclical subsidies have significant production effects; rather, it is\nthat … these subsidies have the potential\n to cause production-increasing effects.\" 218 Brazil points out\n\n211Brazil's appellee's submission, para. 568. (emphasis omitted)\n212Ibid., para. 569.\n213Ibid., para. 575.\n215Ibid.\n216Ibid., para. 581. (original emphasis)\n217Ibid., para. 584. (footnote omitted)\n\nthat it is only in a subsequent step of the analysis that the Panel satisfied itself that \"these potential\nproduction effects in fact exist with respect to [United States] upland cotton production\" 219 and that it\ndid so based on supplementary evidence, including: the fact that the vast majority of upland cotton\nproducers receive counter-cyclical subsidies; the ma gnitude of these counter-cyclical subsidies; their\nimportance as a share of upland cotton producers' re venue; and, their role in covering a significant\npart of upland cotton producers' costs.\n104. Brazil rejects the argument by the United States that \"it is not relevant that 95 percent of\n[United States] upland cotton production takes pl ace on farms holding upland cotton base\", because\n\"[t]his fact would simply be a reflection that areas growing upland cotton in the past exhibit\nfavourable weather and natural e ndowments to continue to do so.\" 220 Brazil notes that this argument\ndoes not undermine the Panel's finding of market insulation and contradicts the United States'\nargument that upland cotton producers \"actively c onsider planting alternative crops, including corn\nand soybeans.\"221 Brazil argues that the evidence shows that, throughout the history of the FSRI Act\nof 2002, roughly 95 per cent of United States upland cotton production has taken place on farms that\nhold upland cotton base acres and receive counter-cycli cal subsidies, which \"means that 95 percent of\n[United States] upland cotton pro duction benefits from the revenue-s tabilizing structure, design and\noperation of this subsidy.\"\n222 Brazil further contends that United States upland cotton producers opt to\nproduce upland cotton, instead of corn and soybean s, because the availability of counter-cyclical\nsubsidies reduces the risk of growing upland co tton, thereby favouring cotton production over\nalternative crops such as corn and soybeans.\n105. Finally, Brazil contends that, contrary to what the United States suggests, there are no\ninconsistencies between the Panel's finding of mark et insulation and certain other findings identified\nby the United States. Brazil asserts that the Pane l's finding of market insulation is not undermined by\nthe relatively stable United States shares of wo rld production and exports, because these market\nshares are determined by the interaction of numer ous factors and not only by producers' responses to\nmarket prices. Neither is that finding undermined by the fact that expected prices were above the\nmarketing loan rate in MY 2006, because United St ates upland cotton producers \"expected to receive\nmarketing loan subsidies in each of the mark eting years at issue, including in MY 2006.\" 223 I n\naddition, Brazil argues that the alleged absence of a \"discernable temporal coincidence\" between\n\n219Brazil's appellee's submission, para. 597 (referring to Panel Report, paras. 10.99-10.102 and 10.104).\n(original emphasis)\n220Ibid., para. 599 (referring to United States' appellant's submission, paras. 154 and 155).\n221Ibid., para. 600 (referring to United States' appellant's submission, paras. 138-141).\n222Ibid., para. 601.\n223Ibid., para. 680. (footnote omitted)\n\nsubsidy payments, increasing e xports, and suppressed prices does not undermine the Panel's finding\nof market insulation, because the Panel never found th at temporal coincidence was completely absent.\nRather, having assessed the relationship between pri ces and United States subsidies, the Panel stated\nthat it was \"unable to detect a similar 'strong discernible coincidence ' between the [United States]\nsubsidies, the increase in [United States] cott on exports and the drop in world market prices\"\n224, and\nimmediately concluded that subsidy payments result in a stabilization of United States cotton\nproducers' revenues.\n106. Finally, Brazil states that the Panel was not required to quantify precisely the price-\nsuppressing effects of the United States subsidies, \"let alone quantify precisely any intermediate\nfindings of market-insulating or production effects.\" 225 Brazil adds that, although a quantitative\nassessment is not required, the Panel did undertak e a quantitative assessment of the degree to which\nmarketing loan and counter-cyclical subsidies insulate United States upland cotton producers from\nmarket signals.\n(b) Divergence between United States Producers' Total Costs and Market\nRevenues\n107. Brazil submits that the Panel properly exercised its discretion in using total costs as a\nbenchmark to assess the effects of the marketing loan and counter-cyclical subsidies on prices.\nAccording to Brazil, the Panel correctly examined total costs in assessing long-term developments in\nthe upland cotton industry, appropriately following the analyses undertaken by both the panel and the\nAppellate Body in the original proceedings. In Brazil's view, because both the original panel and the\nAppellate Body had relied on total costs to analyze the long-term effects of subsidies, there was no\nbasis for the Panel to treat long-term costs any diffe rently from the way they had been treated in the\noriginal proceedings. Furthermore, Brazil notes that the Panel's decision to take into account total\ncosts in its long-term assessment rema ined \"well within [its] discretion\" 226 and was supported, not\nonly by the economic literature in general, but, more specifically, by a study from the United States\nCongressional Research Service (the \"USCRS\").227\n108. Brazil observes that the Panel also engaged in a detailed analysis of the effects of the\nsubsidies on short-term annual planting decisions in the context of its assessment of the structure,\n\n224Brazil's appellee's submission, para. 687 (quoting Panel Report, para. 10.135). (emphasis added by\nBrazil)\n225Ibid., para. 617. (footnote omitted)\n226Ibid., para. 722.\n227Ibid., para. 724 (referring to Congressional Research Service Report for Congress by R. Schnepf and\nJ. Womach, \"Potential Challenges to US Farm Subsidies in the WTO\" (25 October 2006) (Exhibit Bra-577\nsubmitted by Brazil to the Panel)).\n\ndesign, and operation of the marketing loan and counte r-cyclical subsidies. In this analysis, the Panel\nconsidered \"evidence presented by both the Unite d States and Brazil regarding annual data assessing\nvariable costs.\"228 Brazil argues that, had the Panel \"focused exclusively on the short-term effects of\nthe [United States] subsidy regime (measured by expected returns against annual variable costs)—as\nthe United States asserts it should have—the ev idence would unambiguously have shown that\nmarketing loan and counter-cyclical payments di stort the economic decision-making of the average\n[United States] upland cotton producer.\" 229 Brazil submits that an analysis of expected market\nrevenues and annual variable costs of growing upla nd cotton, soybeans, or corn shows that, \"[o]nly\nwhen expected marketing loan and counter-cyclical subsidies are taken into account … does growing\nupland cotton become a viable decision compared to growing corn and soybeans.\"230\n109. Brazil also contests the United States' allegati on that the Panel erred by ignoring off-farm\nincome in its total cost-revenue analysis. Brazil refers to the findings of the original panel, recalled by\nthe Panel, that the references to \"subsidized product\" and \"like product\" in Article 6.3(c) of the SCM\nAgreement circumscribe the examination to the upland cotton industry and that \"the very fact that the\nUnited States relies on such cross-subsidization as a possible source of revenue would tend to support\nthe proposition that upland cotton pro ducers would have lost money over the longer term if they were\ninvolved in upland cotton production alone.\" 231 Moreover, according to Brazil, the Panel \"carefully\nconsidered the evidence submitted by the United States\" and appropriately concluded that it \"did not\nsupport the [United States'] assertion that off-farm income negated th e significant production effects\nof the marketing loan and counter-cyclical subsidies .\"232 Brazil submits that the Panel's finding was\nwell within its discretion as the trier of facts and did not amount to a legal error. On the contrary, in\nBrazil's view, there is a solid evidentiary, economic, and logical foundation for the Panel's conclusion\nthat off-farm income \"did not negate the signifi cant production effects of the marketing loan and\ncounter-cyclical subsidies.\"\n233\n110. Additionally, Brazil rejects the United States' argu ment that the total cost analysis should be\nlimited to total cash costs and should exclude oppor tunity costs. According to Brazil, the Panel\n\n228Brazil's appellee's submission, para. 731 (referring to Panel Report, paras. 10.185-10.195). (original\nemphasis)\n229Ibid., para. 741. (original emphasis)\n230Ibid., para. 737 (referring to Brazil's oral statement at the Panel meeting, paras. 60-78; Analysis of\nPlanting Decisions Based on Expected Returns (Exhibit Br a-634 submitted by Brazil to the Panel); Brazil's\ncomments on the United States' oral st atement at the Panel meeting, para s. 13-27; Analysis of Planting\nDecisions Based on Expected Returns and Cash Costs (Exhibit Bra-665 submitted by Brazil to the Panel); and\nExpected Costs and Returns Using Variable Costs (Exhibit Bra-667 submitted by Brazil to the Panel)).\n233Ibid., para. 753.\n\ncorrectly understood that disregarding opportunity costs is contrary to \"basic economic principles\".\n234\nBrazil notes that, in arriving at this conclusion, the Panel \"relied on USDA economists who also\nrejected the notion that opportunity costs should be excluded from total costs\". 235 Brazil also points\nout that the Appellate Body, in Canada – Dairy (Article 21.5 – New Zealand and US II) , \"has already\nclarified that non-cash 'opportunity' costs are part of cost of production\".236\n111. Finally, in response to the United States' ch allenge to the Panel's use of USDA cost and\nmarket return data, Brazil submits that these data are authentic, accurate, contemporaneous evidence,\nand have the same credibility as the data used in the original proceedings. Brazil further observes that\nthe USCRS's analysis, which was before the Panel, confirms the accuracy of both the USDA's data on\ncost and market return and the Panel's reliance upon it. Brazil considers that, like the original panel\nand the Appellate Body before it, the Panel did not abuse its discretion in using such USDA data to\nassess the significant long-term gap between total costs of production and market revenue. Therefore,\nBrazil asserts that the mere fact that the Panel did not agree with the United States' view of the\nevidence does not amount to legal error under Articles 5(c) and 6.3(c) of the SCM Agreement.\n(c) Economic Simulation Model\n112. Brazil disagrees with the United States' allegati on that the parties' econometric modelling was\ninsufficient to support the Panel's finding of signif icant price suppression. Brazil submits that the\nPanel never concluded that the ec onometric modelling of the parties was \"'sufficient', in and of\nitself\"237, to support a finding of significant price suppression. On the contrary, the econometric\nmodelling was \"just one of many facts that [the Pa nel] considered in its evaluation of whether the\n\n235Ibid., para. 756.\n236Ibid., para. 758 (referring to Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand\nand US II), paras. 102-104).\n237Ibid., para. 830.\n\nsubsidies cause significant price suppression.\" 238 Brazil contends that, because the United States\npresents no legal or factual basis that would ha ve required the Panel to exclude the economic\nsimulation model from its overall analysis of the evidence, the United States' appeal must be\ndismissed. Brazil adds that, \"even though the co mpliance Panel was not in a position to 'judge the\nclaims of the parties about the exact magnitude ' of the price suppression demonstrated by the\neconomic model, it did identify the range of possib ilities, with Brazil demonstrating a change of up\nto 8.9 percent (MY 2002-2005) or 6.05 percent (MY 2006-2008), and the United States alleging a\nchange as low as 1.41 percent (MY 2002-2005) or approximately 1 percent (MY 2006-2008).\" 239\nBrazil emphasizes that \"even if the Panel had determ ined that the number at the lowest end of the\nspectrum advanced by the United States ( i.e., approximately 1 percent) were correct, which it did not,\nthis would have still been high en ough to constitute significant price suppression, in light of other\nconsiderations regarding 'significance'.\"240\n(d) Impact of the Elimination of Step 2 Payments\n113. Brazil asserts that the Panel properly found that the withdrawal of the Step 2 payments does\nnot eliminate the significant price suppression caused by the marketing loan and counter-cyclical\nsubsidies. Brazil notes that the United States a ppears to understand that the Panel's duty was to\n\"(i) identify the level of price suppression caused by the original basket of three subsidies in one\nreference period, (ii) identify the level of pri ce suppression caused by th e Step 2 subsidy alone,\nand (iii) determine whether the remaining pri ce suppression caused by the marketing loan and\ncounter-cyclical subsidies continues to be significant in a different period.\"\n241 However, according to\nBrazil, \"nothing in Part III of the SCM Agreement or Article 21.5 of the DSU mandates [this]\ncircuitous approach\".242 Furthermore, if the United States believe d that \"the withdrawal of the Step 2\nsubsidy necessarily means that the two remaining subsidies cannot cause adverse effects, it bore the\nburden of proving this fact.\" 243 Brazil asserts that the United States failed to meet its burden,\nparticularly because Brazil demonstrated that the remaining subsidies do, in fact, continue to cause\nadverse effects, despite the withdrawal of the Step 2 subsidy.\n114. Brazil submits that the United States' argumen t that the Panel was required to determine\nwhether, and to what extent, the withdrawal of the Step 2 payments caused the decline in United\n\n239Ibid., para. 842 (referring to Panel Report, paras. 10.201, 10.202, and 10.221). (emphasis added by\nBrazil)\n240Ibid., para. 842 (referring to Brazil's first written submission to the Panel, para. 190).\n242Ibid., para. 869.\n243Ibid., para. 872. (original emphasis)\n\nStates exports in MY 2006 is not relevant to the Pa nel's assessment of Brazil's claim. This is because\nthe Panel was only required to assess—and did assess—whether United States production and\nexports, as well as the United States' world market share of production and exports, in MY 2006 were\nsufficiently large to support a finding that the United States exerted a substantial proportionate\ninfluence on world market prices.\n115. Brazil asserts that the Panel properly assessed the effects of the withdrawal of Step 2\npayments on the magnitudes of the marketing loan and counter-cyclical payments. Brazil notes that,\nin assessing the effects of the withdrawal of Step 2 payments, the Panel relied on budget documents\nprepared by the USDA and on an assessment by the United States Congressional Budget Office (the\n\"USCBO\"), and correctly concluded that the withdrawal of Step 2 payments \"will reduce marketing\nloan subsidies by $17 million over ten years, but increase counter-cyclical subsidies by $484 million\nover the same period.\"\n244 Thus, Brazil contends that the Panel adopted a plausible view of the facts\nwhen finding \"relatively modest changes\" in subs idy amounts and that \"these changes run counter to\none another.\" 245 In Brazil's view, although the United Stat es might prefer for the Panel to have\nweighed differently the evidence regarding market ing loan and counter-cyclical payments following\nthe withdrawal of Step 2 payments, it has failed to explain how the Panel erred in making the findings\nit made.\n(e) Magnitude of Marketing Loan and Counter-cyclical Payments\n116. Brazil submits that the Panel properly found th at the magnitude of the marketing loan and\ncounter-cyclical subsidies was a relevant factor in its assessment, and that this factor, in conjunction\nwith others, supported its finding of significant price suppression. Brazil notes that the United States'\nappeal appears to be entirely contingent on it prevailing on its appeal of the Panel's findings\nregarding: \"(i) the revenue-stabilizing and market -insulating role of marketing loan and counter-\ncyclical subsidies; and (ii) their importance to cover [United States] upland cotton producers'\ncost[s].\"246 However, the magnitude of the subsidy is \" one important element that must be considered\nin a holistic analysis.\" 247 In Brazil's view, \"the magnitude of a subsidy cannot be ignored or\ndisregarded, as the United States wishes the Appellate Body to do, even if one of the panel's findings\non another, potentially related, factor were in error— quod non.\"248\n\n244Brazil's appellee's submission, para. 95. (original emphasis)\n246Ibid., para. 784.\n247Ibid., para. 787. (emphasis omitted)\n248Ibid., para. 788.\n\n(f) Substantial Proportionate Influence on the World Market for Upland\nCotton\n117. Brazil argues that the Panel properly found that the \"substantial proportionate influence\"\nexercised by the United States on the world market for upland cotton supports its finding of\nsignificant price suppression in that market. Brazi l notes that United States world market shares of\nupland cotton production and exports since MY 1999 ar e artificially high and reflect the production-\nand export-enhancing effects of the subsidies at issue. Brazil contends that, \"[b]ut for these subsidies,\nthe [United States] market shares would be much smaller.\"\n249 Additionally, Brazil rejects the United\nStates' argument that the relative size of the sh ares of production and expor ts alone cannot support a\nfinding of significant price suppression in the world market for upland cotton. In Brazil's view, this\nargument misrepresents the Panel's finding, because th e Panel analyzed this factor \"in light of the\ntotality of the evidence before [it]\".250\n(g) Other Factors Impacting the World Market Price for Upland Cotton\n118. Brazil requests the Appellate Body to dismiss th e United States' claim that the Panel failed to\nconduct a non-attribution analysis regarding other factors impacting the world market price for upland\ncotton, in particular, the role of China. Br azil asserts that the Panel's analysis included a\ncomprehensive evaluation of China's role in the world market.\n119. Brazil submits that the Panel properly examined the effects of United States subsidies through\na \"'unitary' counterfactual approach\"251, examining a wide variety of factors, including the role played\nby China in the world market. More specifically, Brazil contends that the Panel carefully examined\nthe evidence and arguments from both sides regard ing China's role, and appropriately held that\n\"China's role in the market does not preclude the United States from exerting a 'substantial\nproportionate influence' on the world market, nor does it preclude [United States] subsidies from\nhaving significant price suppressing effects.\"\n252 According to Brazil, the Panel's findings were\nproperly reasoned, as required by Article 12.7 of the DSU, and had a strong evidentiary basis.\n(h) Degree of Price Suppression\n120. Brazil rejects the United States' claim that the Panel erred, as a matter of law, in failing to\nexplain the degree of price suppression that it consid ered to be significant. Brazil observes that,\n\nunlike Article 15.2 of the SCM Agreement , which explicitly requires consideration of whether\nsubsidized imports suppress or depress prices \"to a significant degree\", \"Article 6.3(c) does not refer\nto the 'degree of' anything, but simply uses the phrase 'significant price suppression'.\"\n253 Brazil argues\nthat Article 6.3(c) does not require a panel to \" quantify precisely what degree of price suppression\nwould be 'significant'\". 254 Brazil also notes that the Panel properly followed the same approach\nadopted by the original panel and approved by th e Appellate Body, and endorsed the original panel's\nfinding that, \"in the case of a widely traded commodi ty like upland cotton, 'a relatively small decrease\nor suppression of prices could be significant'\" 255, given the narrow profit margins, the high degree of\nprice sensitivity for sales of a homogenous product, and the sheer size of the market.\n121. Furthermore, Brazil submits that the Panel pr operly based its \"significance\" finding on the\n\"collective effects\" of the subsidies, examin ing \"the totality of the quantitative and qualitative\nevidence before it\" 256, such as, the United States' share of production and exports; the structure,\ndesign, and operation of the United States subsidies; their magnitude; producers' planting decisions,\ncosts of production, and the share of subsidies in th eir total revenues; and overall price trends in the\nworld market for upland cotton. According to Braz il, the Panel's findings on the various individual\nfactors provide an ample evidentiary basis for its ultimate conclusion that the extent of the price\nsuppression it found was \"significant\".257\n(i) Article 11 of the DSU\n122. Brazil asserts that the Panel did not exceed the bounds of its discretion as the trier of facts\nunder Article 11 of the DSU in finding that the effect of marketing loan and counter-cyclical\npayments provided to United States upland cotton producers is significant price suppression and thus\n\n254Ibid., para. 823.\n255Ibid., para. 820 (quoting Panel Report, para. 10.50, in turn quoting Original Panel Report,\npara. 7.1330).\n256Ibid., para. 808.\n257Ibid.\n\nfully complied with its duties under Article 11 of th e DSU. Brazil also rejects the United States'\nallegation that the Panel disregar ded and distorted evidence submitted by the United States in relation\nto both marketing loan payments and counter-cyclical payments. In Brazil's view, the United States\nhas not established that the Panel \"exceeded the bounds of its discretion, as the trier of fact, in\nassessing the evidence before it\" 258 and \"[t]he fact that the Panel accorded the evidence a weight or\nmeaning different than did the United States is not grounds for reversible error.\"259 Brazil furthermore\nrejects the United States' argument that the Panel vi olated Article 11 of the DSU because it did not\nexpressly address in its analysis arguments made by the United States, and notes that \"Article 11 does\nnot require a panel to address each and every argument made by the parties.\"260\n123. In particular, Brazil asserts that the Panel \"adopted a 'plausible'—indeed, likely the only\nplausible—view of the facts, fully supported by the evidence before it, when it found that very large\nprice-contingent marketing loan and counter-cyclical subsidies insu late [United States] upland cotton\nproducers from market price signals.\" 261 Brazil contends that the Panel did not exceed the bounds of\nits discretion in finding market insulation, even in the light of the relatively stable United States shares\nof world production and exports. Brazil additionally argues that the Panel did not exceed the bounds\nof its discretion with respect to the appreciation of the \"substantial proportionate influence\" exercised\nby the United States in the world market of upland cotton.\n124. As regards the econometric model, Brazil states that the United States has not identified errors\nin the Panel's assessment that woul d have precluded reliance on it as part of the evidentiary basis for\nthe significant price suppression finding. Brazil further asserts that the Panel did not \"ignore\",\n\"distort\", or \"misrepresent\" the United States' arguments and evidence relating to the economic model,\nbut instead carefully considered and rejected them. 262 In Brazil's view, \"[t]he essence of the United\nStates' appeal is that, because th e Panel disagreed with the United States, it must have exceeded the\nbounds of its discretion and conducted a non-objective analysis.\" 263 However, the mere fact that the\nPanel did not agree with the United States, and atta ched different weight to the evidence than the\nUnited States, does not mean that the evidence cannot support the Panel's conclusions and that the\nPanel exceeded the bounds of its discretion as the trier of facts.\n\n259Ibid., para. 650. (footnote omitted)\n260Ibid., para. 135 (referring to Appellate Body Report, US – Upland Cotton , para. 446; Appellate\nBody Report, Dominican Republic – Import and Sale of Cigarettes , para. 125; Appellate Body Report, EC –\nPoultry, paras. 135 and 143; and Appellate Body Report, Japan – Agricultural Products II , footnote 39 to\npara. 91).\n262See ibid., paras. 844-853.\n263Ibid., para. 853.\n\n125. Brazil asserts that the Panel properly weighed all the evidence and arguments before it with\nrespect to \"other factors\" that could be affecting prices, such as China's influence on the world market\nprice of upland cotton. Brazil explains that the Pa nel \"understood that China is a significant player in\nthe world market; but it concluded that the Unite d States—as the world's second largest producer and\nlargest exporter—nonetheless continues to exert su bstantial influence in the market place.\"\n264 In\nBrazil's view, the evidence before the Panel am ply supports this conclusion, which \"constitutes a\nmore-than-'plausible' view of the facts\".265\n126. Brazil argues that the arguments submitted by the United States concerning the reasoning of\nthe Panel do not relate to Article 11 of the DSU but, rather, should have been raised under\nArticle 12.7 of the DSU. As the United States made no claim of error under Article 12.7 of the DSU,\nfor that reason alone, these arguments should be dism issed. In any event, Brazil notes that the Panel\ndid provide a basic rationale for its findings, in accordance with Article 12.7 of the DSU.\nC. Claims of Error by Brazil – Other Appellant\n1. Scope of These Article 21.5 Proceedings: The Revised GSM 102\nProgramme\n127. Brazil appeals the Panel's finding that the revised GSM 102 programme is not the measure\nthat was the subject of Brazil's claim. 266 Brazil's appeal is conditional on the Appellate Body\nreversing the Panel's finding that Brazil's claims pertaining to pig meat and poultry meat were\nproperly within the scope of these Article 21.5 proceedings.\n128. Brazil maintains that the revised GSM 102 programme itself was the declared measure taken\nto comply and that this was identified in Brazil' s request for the establishment of an Article 21.5\npanel. Brazil observes that the revised GSM 102 pr ogramme \"applies, without distinction, to all\neligible products falling within its scope\". 267 Brazil argues that, \"[c]onsistent with the declaration by\nthe United States\" 268, Brazil challenged the revised GSM 102 programme as a measure at issue\nthroughout the Article 21.5 proceedings. Brazil not es that it additionally identified as \"measures at\nissue\" individual export credit guarantees issued under the revised GSM 102 programme, including\nthose provided in connection with exports of pig meat and poultry meat.\n\n265Ibid.\n267Ibid., para. 178.\n268Ibid., para. 179.\n\n129. Brazil states that it sees no basis on which the Pa nel could disagree that the measure that is\nthe subject of Brazil's claims is the revised GSM 102 programme itself. According to Brazil, \"[a]\npanel is bound to examine the measure ... identified by the complainant in its panel request, which\nforms the panel's terms of reference.\"269 Brazil further submits that the Panel's finding is \"puzzling\"270\nbecause the Panel examined the revised GSM 102 pr ogramme under item (j) of the Illustrative List\nbut refused to examine the same measure under Article 10.1 of the Agreement on Agriculture.\n130. In Brazil's view, the Panel \"appears to have c onsidered that Brazil could not identify, as the\nmeasure at issue, the GSM 102 program as a whole because Brazil's claims concerning the\ncircumvention of export subsidy commitments were product-specific.\"\n271 Brazil argues that this\napproach \"is flawed because it confuses the sharp distinction between measures and claims\".272 Brazil\nasserts that, although it made a claim under Article 10.1 of the Agreement on Agriculture , the fact\nthat the United States' obligation under that pr ovision applies on a product-specific basis does not\nmean that the measure at issue must also be product-specific.\n131. Brazil recalls the Appellate Body's finding in EC – Chicken Cuts that \"the identification of the\nproducts at issue must flow from the specific meas ures identified in the panel request\", and argues\nthat the Panel did the reverse by \"re-defin[ing] the scope of the measures\" 273 according to the product-\nspecific character of the obligations. Brazil adds that the Panel, by \"unilaterally chang[ing] its terms\nof reference\" 274 and excluding the declared measure take n to comply from these proceedings, also\nfailed to make an objective assessment of the matter as required by Article 11 of the DSU. Brazil\ntherefore requests the Appellate Body to reverse th e Panel's finding and to find, instead, that the\nrevised GSM 102 export credit guarantee programme itself was a \"measure at issue\" before the Panel.\n132. In the event that the Appellate Body reverses the Panel's finding, Brazil further requests the\nAppellate Body to complete the analysis and to fi nd that the revised GSM 102 programme is applied\nin a manner that circumvents the United States' expor t subsidy commitments with respect to pig meat\nand poultry meat, contrary to Articles 10.1 and 8 of the Agreement on Agriculture . Brazil explains\nthat it makes this request because, \"should the Appellate Body accept the United States' appeal against\nthe compliance Panel's finding that [export credit guarantees] for pig meat and poultry meat were\nproperly before the Panel, this would deprive the Panel's substantive finding of its jurisdictional\n\n269Brazil's other appellant's submission, para. 180.\n270Ibid., para. 181.\n271Ibid., para. 182.\n272Ibid., para. 184.\n274Ibid., para. 190.\n\nbasis\"\n275, and the dispute between the parties with respect to export credit guarantees for pig meat and\npoultry meat would remain unresolved.\n133. Brazil submits that the measures challenged and the claims made by Brazil relating to export\ncredit guarantees for pig meat and poultry meat are pr operly within the jurisdiction of the Panel and\nthe Appellate Body. Brazil recalls that, as it has demonstrated, the revised GSM 102 programme is\nthe measure taken to comply, and, thus, Brazil claims that it is entitled to challenge this new measure\n\"in its totality\" without any limitation on the claims. 276 More specifically, Brazil argues that it is\nentitled to challenge the revised GSM 102 programme \"under any provision of the covered\nagreements\" and \"with respect to any product falling within the scope of that 'new' measure\".277\n134. Moreover, according to Brazil, there are sufficien t factual and legal findings by the Panel to\nenable the Appellate Body to complete the analysis . Brazil refers to the following two findings of the\nPanel, and notes that the second finding is not appealed by the United States: (i) the revised GSM 102\nprogramme \"constitutes an 'export subsidy' under item (j) of the Illustrative List\" 278; and (ii) the\nquantity of exports of pig meat and poultry meat \"having benefited from GSM 102 export credit\nguarantees exceeds the [United States' export subsidy] commitments\" 279 by 57 and 14 times,\nrespectively. Brazil maintains that, in any event, under Article 10.3 of the Agreement on Agriculture,\n\"the United States bears the burden of proving\" that its exports of pig meat and poultry meat \"in\nexcess of its quantity-based reduction commitment levels do not benefit from export subsidies\". 280\nBrazil notes that the United States has made no argumen ts in this regard. On this basis, Brazil\nrequests the Appellate Body to complete the anal ysis and to find that the revised GSM 102 export\ncredit guarantee programme is applied in a manner that results in circumvention of the United States'\nexport subsidy commitments with respect to pig meat and poultry meat, contrary to Articles 10.1\nand 8 of the Agreement on Agriculture, and Articles 3.1(a) and 3.2 of the SCM Agreement.\n2. Scope of These Article 21.5 Proceedings: Marketing Loan and Counter-\ncyclical Payments Programmes\n135. Brazil claims that the Panel erred in assessing its terms of reference under Article 21.5 of the\nDSU and concluding that the original panel's \"p resent\" serious prejudice findings and conclusions\n\n275Brazil's other appellant's submission, para. 193. (original emphasis; footnote omitted)\n276See ibid., para. 195 (referring to Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia) ,\nparas. 87 and 90; Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 –\nArgentina), para. 146; and Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), paras. 40 and 41).\n277Ibid., para. 195. (original emphasis)\n280Ibid., para. 200. (original emphasis)\n\ncovered exclusively subsidy payments, and did not ex tend to subsidy programmes. Brazil's appeal is\nconditional on the Appellate B ody reversing the Panel's finding that payments made\nafter 21 September 2005 under the marketing loan and counter-cyclical payments programmes are\nmeasures taken to comply that are properly within the scope of these Article 21.5 proceedings.\n136. Brazil cautions about using the labels \"as such \" and \"as applied\" to describe the measures at\nissue in the context of a claim of adverse effects under Article 5 of the SCM Agreement . Brazil\nexplains that Article 5 allows a complaining Memb er to demonstrate that the \"use\" of a subsidy\nprogramme causes \"adverse effects\". According to Brazil, \"if a panel does examine payments as part\nof the evidence of the 'use' of a program that does not prevent the program itself from being a\nmeasure that causes adverse effects.\" 281 Brazil adds that, \"[a]lthough th is may not be a 'classic' 'as\nsuch' challenge to a program in WTO dispute settlement, it is a type of challenge against subsidy\nprograms that is envisaged by Article 5 of the SCM Agreement.\"282\n137. Brazil does not agree with the Panel that the or iginal panel's reference to \"mandatory price-\ncontingent United States subsidy measures\" \"inevitably\" 283 excludes subsidy programmes from the\nscope of the original panel's findings. For Brazil, \"it is possible, at the least, that the original panel's\nreference to 'mandatory price-contingent ... subsidy measures' includes the four subsidy programs\" 284,\nand the ambiguity in the formulation \"call[s] for furt her elucidation in light of 'the factual and legal\nbackground' provided by the remainder of the original panel report.\" 285 Brazil proceeds to review the\nterms of reference of the original panel and the orig inal panel report, and points to several elements\nthat it considers support its view that \"the orig inal panel's finding regarding 'mandatory price-\ncontingent United States subsidy measures' must be understood to include the subsidy programs, as\nset forth in the 'legislative and regulatory provis ions providing for payment' of the subsidies.\" 286 In\nparticular, Brazil refers to: (i) the original pane l request, which established the original panel's terms\nof reference287; (ii) the original panel's statement of the measures before it 288; (iii) the original panel's\nreasoning regarding those measures, which includes an examination of their \"structure\", \"design\", and\n\n281Brazil's other appellant's submission, para. 62. (original emphasis)\n282Ibid.\n283Ibid., para. 68 (referring to Panel Report, para 9.46, in turn quoting Original Panel Report,\npara. 8.1(g)(i)).\n284Ibid., para. 69.\n285Ibid., para. 70 (quoting Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada) ,\npara. 69).\n286Ibid., para. 122.\n287See ibid., para. 75.\n\n\"operation\"\n289; and (iv) the original panel's reasons fo r exercising judicial economy with respect to\nBrazil's claims of \"threat\" of serious prejudice.290\n138. Brazil also claims that the Panel's finding that the original panel's conclusions and the DSB's\nrecommendations and rulings related to only the su bsidy payments, and not the subsidy programmes,\nconstitutes a violation of the duty to make an \"obj ective assessment of the matter\" under Article 11 of\nthe DSU. Brazil argues that the Panel \"failed to c onsider the original panel's own description of the\n'measures at issue'\" and \"failed to examine the origin al panel's terms of reference, as set forth in the\noriginal panel request.\" 291 Brazil asserts that \"[a] compliance panel cannot objectively assess the\nscope of the original panel's findings if it ignores both the original panel's own statements of the\nmeasures at issue, and its terms of reference.\"\n292\n139. In the event that its conditional appeal is accep ted, Brazil requests the Appellate Body to find\nthat marketing loan and counter-cyclical paym ents made after 21 Se ptember 2005 constitute\n\"measures taken to comply\" with the DSB's recomme ndations and rulings in the original proceedings,\nbecause of the close connection to the marketing loan and counter-cyclical payments programmes that\nare subject to those recommendations and rulings. Alternatively, Brazil requests the Appellate Body\nto find that, through the continued use of the marketing loan and counter-cyclical payments\nprogrammes, the United States causes serious prejudice to Brazil's interests.\nD. Arguments of the United States – Appellee\n1. Scope of These Article 21.5 Proceedings: The Revised GSM 102\nProgramme\n140. The United States submits that, because the re vised GSM 102 programme is not a \"measure\ntaken to comply\" with the DSB's recommendations and rulings, the Appellate Body should reject\nBrazil's conditional appeal against the Panel's finding that the GSM 102 programme was not the\nmeasure subject to Brazil's claims.\n141. The United States recalls that the original panel made findings with respect to specific export\ncredit guarantees for individual products, rather th an the GSM 102 programme itself. The United\nStates refers to the original panel's conclusion that , \"in respect of exports of upland cotton and other\n\n289See Brazil's other appellant's submission, paras. 93-194 (referring to Original Panel Report,\nparas. 7.1191-7.1194, 7.1291-7.1296, 7.1305, 7.1332, and 7.1477).\n290See ibid., para. 106 (referring to Original Panel Report, paras. 7.1498-7.1503).\n291Ibid., para. 128.\n292Ibid.\n\nunscheduled agricultural products ... and in respect of ... rice\" 293, the United States export credit\nguarantees were export subsidies applied in a manner resulting in circumvention of its export subsidy\ncommitments. The United States argues that, \"[a]s is clear from the language\" 294 of this conclusion,\nthe original panel considered specific export cr edit guarantees for individual products to constitute\nexport subsidies, and the DSB's recommendations and rulings applied to only those export credit\nguarantees specifically mentioned in this conclusion.\n142. The United States submits that, in these Article 21.5 proceedings, Brazil did not assert that the\nGSM 102 programme itself circumvents the United St ates' export subsidy commitments but, rather,\nchallenged the GSM 102 programme \"as applied\" with respect to certain products, including pig meat\nand poultry meat. The United States contends that Brazil nevertheless \"attempts to bring the entire\nGSM 102 program before the compliance Panel by ca sting the program as the 'declared' [United\nStates] implementation measure\". 295 The United States maintains that \"the statements made by the\nUnited States when the GSM 102 program was change d do not amount to any such 'declaration' that\nthe GSM 102 program was a measure taken to comply\". 296 Furthermore, these statements do not\n\"amount to any acknowledgement about the scope of the DSB recommendations and rulings and the\nscope of the changes\"297 to the GSM 102 programme.\n143. The United States asserts that, although it ma de changes with respect to export credit\nguarantees generally, including for pig meat and poultry meat, \"it did so as a matter of administrative\nconvenience and not 'to comply'\"\n298 with the DSB's recommendations and rulings. By casting the\nrevised GSM 102 programme itself as the measure ta ken to comply, Brazil's approach suggests that\n\"Members should refrain from efficient manageme nt or good public policy because otherwise they\nrisk an expedited compliance proceeding with no re asonable period of time to respond to any adverse\nfindings.\"299\n144. Furthermore, the United States argues that Braz il mistakenly relies on the Appellate Body's\nfinding in US – Shrimp (Article 21.5 – Malaysia) to support its position that a new measure can be\nchallenged in its totality in Artic le 21.5 proceedings. Noting that the \"new measure\" referred to in\n\n293United States' appellee's submission, para. 77 (quoting Original Panel Report, para. 8.1(d)(i)).\n294Ibid., para. 78.\n295Ibid., para. 80.\n296Ibid.\n297Ibid.\n298Ibid., para. 86.\n299Ibid.\n\nUS – Shrimp (Article 21.5 – Malaysia) was the \"measure taken to comply\", the United States\nreiterates that the measure taken to comply in th ese Article 21.5 proceedings encompasses changes to\nGSM 102 export credit guarantees for unscheduled produc ts and one scheduled product, rice, rather\nthan the revised GSM 102 programme in its totality . In addition, the United States submits that\nBrazil's reliance on the Appellate Body's finding in Canada – Aircraft (Article 21.5 – Brazil) is also\nmisplaced because, in that dispute, Canada was re quired to withdraw the subsidy with respect to \" all\n[Technology Partnerships Canada] assistance to the Canadian regional aircraft industry\".\n300 In\ncontrast, in these proceedings, the \"measure take n to comply\" encompasses only the changes made\nwith respect to a \"subset\" 301 of GSM 102 export credit guarantees with respect to which the United\nStates was required to implement the DSB's recommendations and rulings.\n145. The United States also contests Brazil's claim that the Panel acted inconsistently with\nArticle 11 of the DSU by \"unilate rally chang[ing] its terms of re ference\" and \"excluding measures\nspecifically identified\" 302 by Brazil. According to the United States, the Panel did not exclude\nmeasures listed by Brazil but, rather, addressed Brazil's claims relating to specific GSM 102 export\ncredit guarantees for individual products. The United States argues that, because the revised\nGSM 102 programme was not the subject of Brazil's claims, the Panel \"committed no error by failing\nto address non-existent claims as to that alleged measure\".\n303 In any event, the Panel was entitled to\nlimit its review to those claims which must be addressed in order to resolve the matter at issue in this\ndispute.304 Thus, because the Panel was able to resolve the dispute by reviewing Brazil's claims as to\nspecific GSM 102 export credit guarantees for indi vidual products, the Panel was not required to\nconsider Brazil's other claims \"concerning a di fferent measure\", namely, the revised GSM 102\nprogramme in its totality.305\n146. Finally, the United States contests Brazil's claim that \"there are more than sufficient factual\nand legal findings by the compliance Panel to enable the Appellate Body to complete its legal analysis\n\n300United States' appellee's submission, para. 88 (quoting Appellate Body Report, Canada – Aircraft\n(Article 21.5 – Brazil), para. 2). (emphasis added by the United States)\n301Ibid., para. 88.\n303Ibid., para. 83.\n305Ibid., para. 84.\n\nand find that the amended GSM 102 program results in circumvention\" 306 of the United States' export\nsubsidy commitments with respect to pig meat an d poultry meat. The United States submits that it\nhas demonstrated that the Panel erred as a matte r of law in finding that the GSM 102 programme\nconstitutes an export subsidy under item (j) of the Illu strative List, and that this finding of the Panel\nshould be reversed.\n147. On this basis, the United States requests the A ppellate Body to find that the revised GSM 102\nexport credit guarantee programme is not a \"measure taken to comply\", to reject Brazil's conditional\nappeal, and to deny Brazil's request to complete the analysis with respect to GSM 102 export credit\nguarantees for pig meat and poultry meat.\n2. Scope of These Article 21.5 Proceedings: Marketing Loan and Counter-\ncyclical Payments Programmes\n148. The United States considers that the Panel corr ectly concluded that the \"original panel's\nfindings and recommendations with respect to 'pr esent' serious prejudice were limited to payments\nunder the marketing loan and counter-cyclical programs, and did not encompass the programs\nthemselves.\"307 Accordingly, the United States request s the Appellate Body to reject Brazil's\nconditional appeal regarding marketing loan and counter-cyclical payments programmes.\n149. The United States asserts that Brazil is \"ask[ing] the Appellate Body to revisit the proceedings\nbefore the original panel to ascertain whether th e compliance Panel correctly interpreted the findings\nof the original panel.\" 308 Thus, \"Brazil would have the A ppellate Body reexamine in full the\nproceedings of the original panel regarding the measures at issue and the claims made.\"309 The United\nStates does not see a \"need to revisit and reexamine the original panel proceedings in this way\"\nbecause \"the critical element is the findings of the or iginal panel, as adopted by the DSB, as these set\nthe scope of the compliance proceeding under Article 21.5 of the DSU.\"310\n150. The United States submits that Brazil did not make a claim of \"present\" serious prejudice with\nrespect to the marketing loan and counter-cycli cal payments programmes and, consequently, the\noriginal panel \"could not make\" 311 findings with respect to the pr ogrammes themselves. Moreover,\nthe United States rejects Brazil's reliance on the \"measu res at issue\" listed in Brazil's request for the\n\n306United States' appellee's submission, para. 89 (quoting Brazil's other appellant's submission,\npara. 196).\n307Ibid., para. 20.\n308Ibid., para. 14.\n309Ibid.\n310Ibid., para. 15.\n311Ibid., para. 27.\n\nestablishment of the panel. The United States adds that \"the issue here is the scope of the [original]\npanel's findings on the claims Brazil presented\"\n312, and not the \"measures\" listed in Brazil's original\npanel request. According to the United States, Br azil's claim before the original panel \"did not\ninclude a claim of 'present' serious prejudice with respect to marketing loan and counter-cyclical\nprograms as such.\" 313 Thus, the United States asserts, the \"o riginal panel's findings ... paralleled the\nclaims made by Brazil, showing that the original panel well understood the issues before it.\"314\n151. The United States additionally argues that the \"f act that the original panel analyzed the\n'structure, design, and operation of subsidies' was perfectly consistent with the claims before it\nregarding payments under the marketing loan and c ounter-cyclical payment programs\". 315 T h e\nUnited States explains that, \"[c]ontrary to Brazil's position, even a 'simple' payment can be analyzed\nin terms of 'structure,' 'design,' and 'operation'.\"316\n152. The United States also takes issue with Brazil's reliance on the statement made by the original\npanel when explaining the basis for its exercise of judicial economy on Brazil's claims of \"threat\" of\nserious prejudice, that \"the United States would make changes in its statutory and regulatory\nframework as a result of its finding on 'present' serious prejudice\". 317 For the United States, this point\n\"actually confirms that Brazil is in error\". 318 In the United States' view, if the \"measures taken to\ncomply\" with the recommendations and rulings of th e DSB stretch to include the marketing loan and\ncounter-cyclical payments programmes, \"then the or iginal panel would have had no need to discuss\nclaims concerning threat of serious prejudice with respect to future payments—the original panel\nwould have already found that the programs 'as such' caused serious prejudice and that finding\n(erroneous as it necessarily must be) would have th en had implications for any payments under the\nprograms.\"319\n153. Finally, the United States disagrees with Brazi l's claim that the Panel failed to make an\nobjective assessment of the matter as required by Article 11 of the DSU. The United States asserts\nthat the Panel \"undertook a detailed legal analysis of the original panel's report\" and the Panel's\nconclusion \"correctly interprets the original panel's findings\".320\n\n312United States' appellee's submission, para. 30. (original emphasis)\n313Ibid., para. 31.\n314Ibid., para. 32.\n315Ibid., para. 49. (original emphasis)\n316Ibid., para. 48.\n318Ibid., para. 56.\n319Ibid. (footnote omitted)\n320Ibid., para. 59.\n\n154. Therefore, the United States requests the Appellate Body to uphold the Panel's finding that the\noriginal panel's findings, and the DSB's recommenda tions and rulings, include only marketing loan\nand counter-cyclical payments made in MY 1999 -2002. Should the Appellate Body reverse the\nPanel's finding, the United States requests the Appellate Body: (i) to deny Brazil's request to find that\nmarketing loan and counter-cyclical payments ma de after 21 September 2005 are measures taken to\ncomply with the DSB's recommendations and rulings; and (ii) to deny Brazil's request to find that the\nUnited States, through continued use of the marketing loan and counter-cyclical payments\nprogrammes, causes serious prejudice to Brazil's interests.\nE. Arguments of the Third Participants\n1. Argentina\n155. Argentina agrees with the Panel's finding that marketing loan payments and counter-cyclical\npayments made after 21 September 2005 are pr operly within the scope of these Article 21.5\nproceedings. Argentina disagrees, however, with the reasoning that the Panel used to arrive at this\nconclusion. According to Argentina, looking at \"the original Panel's approach, reasoning, findings\nand recommendations\" 321, it is clear that the marketing loan and counter-cyclical payments\nprogrammes—and not only the pa yments made pursuant to those programmes—were measures\nsubject to the original panel's findings. Hence, Argentina considers that the marketing loan and\ncounter-cyclical payments programmes are within the scope of these Article 21.5 proceedings and,\nconsequently, the payments made pursuant to those programmes after 21 September 2005 are also\nwithin their scope.322\n2. Australia\n156. Australia disagrees with the United States th at export credit guarantees issued under the\nrevised GSM 102 programme with respect to pig meat and poultry meat are outside the scope of these\nArticle 21.5 proceedings. Australia maintains that such export credit guarantees \"have a 'particularly\n\n321Argentina's third participant's submission, para. 15.\n322Ibid.\n\nclose relationship' to the measure taken to comply with the recommendations and rulings\"\n323 of the\nDSB, which, Australia contends, is the revised GSM 102 programme. Australia further argues that,\neven if the Appellate Body finds that the measur es taken to comply are the GSM 102 export credit\nguarantees for those products subject to the DSB's recommendations and rulings (namely,\nunscheduled products and rice), the export cr edit guarantees issued under the revised GSM 102\nprogramme for pig meat and poultry meat would still have a \"particularly close relationship\" to the\nmeasures taken to comply. According to Aust ralia, this is because \"the amended GSM 102\nprogramme applies, without distinction, to all eligible products falling within its scope.\"\n324\n157. Australia takes issue with the United States' argument that allowing Brazil's claims\nconcerning the export credit guarantees for pig meat and poultry meat in these Article 21.5\nproceedings would give Brazil a \"second chance\"\n325 to make such claims. Australia emphasizes that\nthere has been no final resolution to the dispute between the parties in respect of export credit\nguarantees for pig meat and poultry meat, nor is th e Appellate Body's inability to complete the\nanalysis in the original proceed ings a basis for excluding Brazil's claims from these Article 21.5\nproceedings. Australia adds that, in any event, Br azil's claims in these Article 21.5 proceedings relate\nto a new measure that was taken to comply with the DSB's recommendations and rulings.\n158. Australia submits that the marketing loan and counter-cyclical payments made after\n21 September 2005 were properly considered by the Panel to be within the scope of these Article 21.5\nproceedings. Australia disagrees with the United States' assertion that the DSB recommendations and\nrulings applied only to payments made in MY 199 9-2002, and did not cover either future payments,\nor the subsidy programmes themselves. On the cont rary, Australia contends that, by continuing to\nmake payments of a subsidy on the same legal basi s and under the same conditions and criteria as the\nsubsidy found to have caused ser ious prejudice in the original proceedings, the United States has\nfailed to fulfil the requirements of Article 7.8 of the SCM Agreement . According to Australia,\nacceptance of the approach advocated by the United Stat es would lead to \"a situation in which taking\nno action to remove the adverse effects or to withdr aw the subsidy would be sufficient to fulfil the\nobligations imposed by Article 7.8\". 326 In Australia's view, Article 7.8 imposes a positive obligation\non the subsidizing Member and \"[i]t is clear that lack of action to remove the adverse effects or\n\n323Australia's third participant's submission, para. 7.\n324Ibid., para. 8.\n326Ibid., para. 16. (original emphasis)\n\nwithdraw the subsidy does not and could not satis fy the subsidizing Member's obligations under\nArticle 7.8\".327\n159. Australia explains that, under the approach a dvocated by the United States, a complaining\nMember that was successful in the original proceed ings would have to bring a new subsidies claim\n\"with respect to each set of subsidies paid subseq uently to those originally found to have caused\nadverse effects.\" 328 Australia cautions that this approach raises fundamental systemic concerns\nrelating to the nature of dispute settlement pro ceedings, as it would lead to a complaining Member\nbecoming involved in a permanent litigation loop of annual challenges concurrent with the expiry of\neach marketing year. Such an outcome would defeat the object and purpose of Article 21.5\nproceedings, and would also be contrary to Artic les 3 and 21.1 of the DSU, which recognize that\nprompt compliance with the rulings and recommendati ons of the DSB is essential for the effective\nfunctioning of the WTO and the effective resolution of disputes.\n160. Australia additionally asserts that the Panel did not err in concluding that the United States\nacted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement, in that\nthe effect of marketing loan and counter-cyclical payments provided to United States upland cotton\nproducers after 21 September 2005 was significant price suppression constituting present serious\nprejudice to the interests of Brazil. Australia ar gues that the Panel was entitled to take into account\nthe findings in the original proceedings a nd that, \"rather than placing excessive reliance\"\n329 on those\nfindings, the Panel examined the facts and evid ence, including the new and updated economic\nevidence that was submitted by both parties to the dispute, before reaching its conclusions concerning\nthe continuing market-insulating effects of the marketing loan and counter-cyclical payments.\nAustralia further submits that the \"Panel's findings with respect to market insulation, taken together\nwith the Panel's findings on each of the [additional] factors identified by the Panel, supported its\nultimate finding of significant price suppression.\"330\n161. Australia also disagrees with th e United States' contention that the Panel acted inconsistently\nwith Article 11 of the DSU by failing to carry out an objective assessment of the evidence before it in\nassessing Brazil's claim of serious prejudice. In Australia's view, many of the United States'\nsubmissions amount to arguments that the Panel faile d to accord to the eviden ce the weight that the\n\n327Australia's third participant's submission, para. 16.\n328Ibid., para. 17.\n329Ibid., para. 26.\n330Ibid., para. 27.\n\nUnited States believes should have been accorded to it.\n331 These allegations of error, Australia\ncontends, do not amount to a failure to comply with Article 11, which requires an \"egregious error\nthat calls into question the good faith of the panel\". 332 According to Australia, the United States has\nnot demonstrated that the Panel exceeded the bou nds of its discretion in its appreciation of the\nevidence, and therefore the Appellate Body should not interfere with the findings of the Panel.\nAustralia submits that, on the contrary, the manne r in which the Panel analyzed the facts and\nevidence—including the new and updated economic ev idence—and the way in which it took account\nof the panel and Appellate Body findings in th e original proceedings was appropriate in the\ncircumstances of this case.\n3. Canada\n162. Canada disagrees with the United States' argum ent that export credit guarantees for pig meat\nand poultry meat fall outside the scope of these Ar ticle 21.5 proceedings because they are separate\nmeasures not subject to the DSB's recommendations and rulings. Canada submits that the United\nStates revised the GSM 102 programme in order to comply with the DSB's recommendations and\nrulings in the original proceedings, and the GSM 102 export credit guarantees for pig meat and\npoultry meat are not separate measures but are \" part of the measure taken to comply\". 333 This is\ndemonstrated by the fact that, when the United States revised the GSM 102 programme, it did not\nexclude export credit guarantees for pig meat and poultry meat from the modification. Canada further\nsubmits that, even if the export credit guarantees for pig meat and poultry meat were to be considered\nas separate measures, they are closely related to the declared measure taken to comply. This is\nbecause the United States did not treat the GSM 102 export credit guarantees for pig meat and poultry\nmeat differently, but rather modified the en tire GSM 102 programme, without distinction as to\nproduct coverage.\n163. Canada also considers that marketing loan payments and counter-cyclical payments made\nafter 21 September 2005 fall within of the scope of these Article 21.5 proceedings. According to\nCanada, the position advocated by the United States \"is a direct challenge to the effectiveness of\n\n331See Australia's third participant's submission, para. 31.\n332Ibid. (quoting Appellate Body Report, EC – Hormones, para. 133).\n333Canada's third participant's submission, para. 30. (original emphasis)\n\ncompliance proceedings in serious prejudice cases.\" 334 Canada explains that, under the United States'\napproach, a finding that subsidy payments are cau sing serious prejudice would have no consequences\nand require no change in behavi our by the subsidizing Member. This is because a \"Member whose\nsubsidy payments are found to cause serious prejudice would be considered to have brought itself into\nconformity with its obligations where it did nothing affirmative to withdraw the subsidy or remove the\nadverse effects for payments made during the period in question, even where it continued to make\nidentical subsidy payments prospectively\".335\n164. Canada emphasizes that, pursuant to Article 7.8 of the SCM Agreement, the United States\nwas required to withdraw the subsidy at issue or take appropriate steps to remove the adverse effects.\nIn Canada's view, the United States \"seeks to divorce\" 336 Article 7.8 of the SCM Agreement from\nArticle 21.5 of the DSU, and from the object and pur pose of the DSU more generally, and to interpret\nArticle 7.8 \"to insulate its ongoing subsidy payments from challenge.\" 337 Canada contends that the\nUnited States' position would lead to an \"absurd result\" 338 where a finding that subsidy payments are\ncausing serious prejudice would have no consequen ces and require no change of behaviour by the\nsubsidizing Member. The United States' position, Canada argues, ignores that the scope of an\nArticle 21.5 proceeding mandates \"scrutiny of the overall effect of the measures taken to comply\" 339\nin their full context, which, in this case, necessarily includes the con tinued existence of payments of\nthe sort that the DSB found to be causing serious prejudice. Thus, \"[t]he only logical interpretation\"\nof Article 7.8 of the SCM Agreement is that \"a Member does not take appropriate steps to remove the\nadverse effects of a subsidy if it c ontinues to provide payments under the same conditions and\ncriteria as the original subsidy in a manner that causes adverse effects.\"\n340\n165. Canada adds that it is not entirely clear that the DSB recommendations and rulings apply to\nthe \"'combined effects' of a 'basket of measures'\" 341 as the United States alleges. Even if they did, the\nUnited States' positive obligation under Article 7.8 of the SCM Agreement to take appropriate steps\nto remove the adverse effects refers to the paym ents made under the four different programmes that\nwere part of the \"basket of measures\" examined by the original panel. Thus, even if the United States\nhas eliminated one of the payment programmes, in order to assess whether the United States has\n\n334Canada's third participant's submission, para. 17.\n335Ibid.\n336Ibid., para. 15.\n337Ibid.\n338Ibid., para. 17.\n339Ibid., para. 18.\n341Ibid., para. 22 (referring to United States' appellant's submission, paras. 1 and 68).\n\nfulfilled its obligations under Article 7.8, the Panel must necessarily consider the payments under the\n\"remaining programmes in the 'basket of measures'.\"\n342\n166. Canada submits that it takes no position on the meri ts of the United States' allegation that the\nPanel failed to make an objective assessment of the f acts before it, in violation of Article 11 of the\nDSU, in assessing Brazil's claims concerning both GSM 102 export credit guarantees and marketing\nloan and counter-cyclical payments. Canada not es, however, that the United States makes precisely\nthe sort of allegations that the Appellate Body h as described as \"very serious\" and \"going to the very\ncore of the integrity of the WTO dispute settlement process itself\". 343 Moreover, Canada recalls the\nAppellate Body's findings that \"[it] will not interfere lightly with the Panel's discretion 'as the trier of\nfacts'\"344, and that a panel is \"not required to accord to factual evidence of the parties the same\nmeaning and weight as do the parties\".345 Thus, Canada maintains that, in order to prevail on its claim\nthat the Panel failed to make an objective assessment of the facts, \"the United States must establish\nnot only that the Panel erred in its appreciation of the facts, but that its errors were so egregious as to\nviolate fundamental fairness or to call into question the Panel's good faith.\"346\n4. Chad\n167. At the oral hearing, Chad made a statemen t underscoring the importance of cotton for its\neconomy and for the economies of other West African countries. Chad also drew attention to the\nnegative effects that United States subsidies have on Chad's cotton producers. Chad requests the\nAppellate Body to uphold the Panel's findings, in order to ensure that WTO rules and disciplines\napply fully to the cotton sector resulting in a more equitable and market-based system.\n5. European Communities\n168. The European Communities submits that the Un ited States accepts that the revised GSM 102\nprogramme, as it relates to unscheduled products and one scheduled product (rice), was within the\njurisdiction of the Panel. The European Communities argues that there is a \"close nexus\"347 between\nthis part of the revised GSM 102 programme and the part of the same programme that relates to pig\nmeat and poultry meat. According to the European Communities, this is confirmed by the fact that\n\n342Canada's third participant's submission, para. 22.\n346Ibid., para. 39.\n347European Communities' third participant's submission, para. 19. (original emphasis)\n\nthe United States revised the GSM 102 programme in its entirety. Consequently, the European\nCommunities contends, the Panel did not err when it concluded that Brazil's cl aims relating to export\ncredit guarantees for pig meat and poultry meat are within the scope of these proceedings. The\nEuropean Communities nevertheless disagrees with Brazil insofar as it may be suggesting that the\nquestion of what is a \"measure at issue\" in an original panel proceeding is, \"in all cases, entirely\nwithin the hands of the complaining Member.\"348\n169. At the oral hearing, the European Communities explained that the issue of whether the revised\nGSM 102 programme, in its entirety, constitutes the measure taken to comply in this proceeding could\nbe analyzed from both an objective and a subjectiv e perspective. According to the European\nCommunities, the subjective perspective points to wards the conclusion that the revised GSM 102\nprogramme is the measure taken to comply, because the statement the United States made at the time\nof the amendment almost amounts to an admissi on that the United States considered the revised\nprogramme was the measure taken to comply. Th e European Communities submits that the emphasis\nplaced by Brazil on the subjective perspective is fair . With respect to the objective perspective, the\nEuropean Communities maintains that the degr ee of connectedness between the revised GSM 102\nprogramme and the export credit guarantees issued thereunder confirms the proposition that the\nrevised GSM 102 programme should be examined in its totality and is within the scope of these\nproceedings.\n170. The European Communities disagre es with the United States' assertion that marketing loan\nand counter-cyclical payments made after 21 Se ptember 2005 are outside of the scope of these\nArticle 21.5 proceedings. In the European Co mmunities' view, if pa yments under a subsidy\nprogramme have been found to cause adverse effects, the defending Me mber is obliged to withdraw\nthe subsidy or remove the adverse effects. If the defending Member continues to make payments\nunder such a programme, those further payments clea rly fall within the jurisdiction of a compliance\npanel.\n171. In its third participant's submission, the Europ ean Communities also raises an issue related to\nthe Panel's composition. The Eur opean Communities submits that the Panel erred in finding that it\nwas not within its authority to make a ruling with respect to the propriety of its own composition on\nthe basis that the issue had not been raised by eith er of the parties to the dispute and concerns the\napplication by the WTO Director-General of the DSU provisions on panel composition. According to\nthe European Communities, such an interpretation is incorrect because the matter concerns the\n\n348European Communities' third participant's submission, para. 20. (original emphasis)\n\n\"correct legal interpretation of Articles 21.5 and 8.3 of the DSU\"\n349 and, therefore, falls within the\nscope of the WTO dispute settlement system, as defi ned in Article 1 of the DSU. Additionally, the\nPanel was obliged to make findings in relation to th is matter \"notwithstanding the fact that it [was]\nraised by the European Communities as a third part y\", given the Appellate Body's statement that\npanels have to address certain issues of a fundamental nature, such as their jurisdiction or authority to\ndecide on a matter, even if the parties remain silent on those issues.350\n172. The European Communities asserts that, once a pa rty to the dispute has agreed to waive the\nrule in Article 8.3 of the DSU precluding a citizen from a party or third party from serving on the\npanel, the DSU contains no provision permitting such agreement to be withdrawn when the matter is\nreferred back to the panel pursuant to Article 21. 5 of the DSU. Since the United States accepted an\nAustralian citizen to serve as a panelist in the original proceedings, th e European Communities\nunderstands that it could not withdr aw its agreement in the implementation stage without giving any\nnew reasons other than citizenship. The European Communities emphasizes that, once the citizenship\nof a panelist has been put aside as a non-issue, a nd once the panelist has engaged in the dispute, the\npanelist must be protected, throughout the ensu ing proceedings, from inappropriate or capricious\npressure from either party. This is consistent w ith Article 8.6 of the DSU, which provides that the\nparties shall not oppose panelists other than for \"'compelling' reasons\".\n351\n173. The European Communities requests the Appellate Body to reverse the Panel's findings on\nthis issue and to find, instead, that the Panel ha d the authority and the obligation to consider the\npropriety of its own composition. Furthermore, the European Communities requests the Appellate\nBody to find that the composition of the Panel in this case was inconsistent with Articles 21.5 and 8.3\nof the DSU. The European Comm unities, however, does not request the Appellate Body to make any\nfurther consequential reversals, modifications, or findings.\n6. Japan\n174. Japan submits that it takes no position on the meri ts of the United States' contention that\nBrazil's claims relating to export credit guarantees for pig meat and poultry meat are outside the scope\n\n349European Communities' third participant's submission, para. 12. (original emphasis)\n350Ibid., para. 14 (referring to Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US) ,\npara. 36).\n351Ibid., paras. 7 and 8.\n\nof these Article 21.5 proceedings. Japan neverthel ess recalls certain findings by the Appellate Body\nwhich, in Japan's view, should be taken into account when determining whether Brazil's claims\nrelating to pig meat and poultry m eat are within the scope of these Article 21.5 proceedings. More\nspecifically, Japan refers to the Appellate Body's finding that a \"measure taken to comply\" may\ninclude a measure that has a \"particularly close relationship\" with the DSB's recommendations and\nrulings and a declared measure taken to comply. 352 Furthermore, Japan asserts that the question\nwhether a \"close relationship\" exists must be examined on a case-by-case basis depending on\npertinent facts, including \"the timing, nature and e ffects of the various measures\" and \"the factual and\nlegal background against which a declared 'measure taken to comply' is adopted.\"353\n175. Japan submits that the absence of DSB recomme ndations and rulings with respect to export\ncredit guarantees for pig meat and poultry meat w as not due to the fact that such export credit\nguarantees were found to be WTO-consistent in the orig inal proceedings. As a result, the situation in\nthese Article 21.5 proceedings is distinct from that in US – Shrimp (Article 21.5 – Malaysia) and EC –\nBed Linen (Article 21.5 – India) . Japan recalls that, in those disputes, the Appellate Body rejected\ncertain claims in the Article 21.5 proceedings concerning \"measures ... found to be WTO-consistent\nin the original proceeding[s]\". 354 Moreover, Japan maintains that the lack of DSB recommendations\nand rulings regarding export credit guarantees for pig meat and poultry meat \"does not necessarily\nlead to a conclusion that all claims relati ng to [these guarantees under the revised GSM 102\nprogramme] are outside the scope of this panel proceeding.\" 355 Finally, Japan submits that, although\nit agrees with the United States that measures which undo the compliance achieved by a declared\n\"measure taken to comply\" may fall within the scope of Article 21.5 proceedings, it considers that the\nclass of measures falling within the scope of Article 21.5 proceedings is broader than what is\nproposed by the United States. According to Jap an, such measures may include those formally\nseparate from a declared measure taken to comp ly and, thus, could include the export credit\nguarantees for pig meat and poultry meat in these Article 21.5 proceedings.\n176. Japan considers that the Panel Report does not cl early indicate why the Panel considered that\nmarketing loan and counter-cyclical payments made after 21 Septem ber 2005 are within the scope of\nthese Article 21.5 proceedings. Japan requests the A ppellate Body to clarify the scope of the DSB\nrecommendations and rulings stemming from the orig inal proceedings. According to Japan, if the\n\n352See Japan's third participant's submission, para. 7 (quoting Appellate Body Report, US – Softwood\n353Ibid.\n354Ibid., para. 10 (referring to Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), para. 97;\nand Appellate Body Report, EC – Bed Linen (Article 21.5 – India), paras. 90-100). (emphasis added by Japan)\n355Ibid., para. 10.\n\nremoval of the adverse effects caused by payments made after 21 September 2005 is required by the\nDSB recommendations and rulings, then such paymen ts were properly before the Panel and there is\nno need to resort to the \"close relationship\" test developed in US – Softwood Lumber IV\n(Article 21.5 – Canada). However, if the removal of the adver se effects caused by such payments is\nconsidered to be outside the DSB recommendations and rulings, then Japan requests the Appellate\nBody to focus its analysis on: (i) whether the obligation under Article 7.8 of the SCM Agreement\ncreates a \"close relationship\" between the paym ents made after 21 September 2005 and the DSB\nrecommendations and rulings—that is, the removal of the adverse effects caused by payments during\nMY 1999-2002; and (ii) whether the existence of su ch a \"close relationship\" is affected by the fact\nthat Brazil explicitly stated during the original panel proceedings that it was not challenging the\nmarketing loan and counter-cyclical payments progra mmes \"as such\" and, thus, the original panel did\nnot make any finding with respect to the programmes per se.\n7. New Zealand\n\n177. New Zealand submits that the Panel was correct in finding that payments made\nafter 21 September 2005 pursuant to the marketing loan and counter-cyclical payments programmes\nare within the scope of these Article 21.5 proceedings . In New Zealand's view, such payments \"are\nprovided under the same conditions and criteria as the marketing loan and counter-cyclical payments\nsubject to the original panel's finding of serious prejudice\", and are therefore subject to the United\nStates' obligation under Article 7.8 of the SCM Agreement to \"take appropriate steps to remove the\nadverse effects\" of the subsidy. 356 New Zealand argues that, \"[b]y continuing to use mandatory\nprice-contingent subsidies on the 'same legal basis an d subject to the same conditions and criteria' and\nwith the same price suppressing effect\" 357, the United States has not complied with the obligation in\nArticle 7.8 to take \"appropriate steps to re move the adverse effects\" and with the DSB's\nrecommendations and rulings. 358 Moreover, New Zealand states that the Panel correctly concluded\nthat \"there exists a 'particularly close relations hip' between the subsidy that [the United States]\ncontinues to provide and the recommendations and rulings of the DSB in the original proceeding.\" 359\nNew Zealand explains that the United States c ontinues to use the same regulatory and legal\nframework examined in the original proceedings to provide mandatory and price-contingent subsidies\nto its cotton producers.\n\n356New Zealand's third participant's submission, para. 1.2.\n358Ibid., para. 3.5. (original emphasis)\n\n178. New Zealand further asserts that the United St ates' arguments amount to an assertion that it\ncan comply with the DSB's recommendations and rulings \"by changing nothing\" 360, and continuing to\nprovide the same mandatory price-contingent subsidies that were found to be causing price\nsuppression in the original proceedings. As New Zealand sees it, the \"United States' interpretation\ntwists the linkage between the adverse effects provisions of the SCM Agreement and the compliance\nprovisions of the DSU into a kind of Mobius strip—a never-ending cycle of challenge and\n'implementation'.\"361 This, in New Zealand's view, \"robs Article 7.8 of the SCM Agreement of any\nutility\"362 and renders pointless Article 21.5 compliance proceedings as they relate to claims of\nadverse effects. New Zealand also expresses concer n that denying an effective remedy in cases of\nharmful amber box subsidies would significantly undermine both SCM Agreement subsidy\ndisciplines and the integrity of the WTO dispute settlement system as a whole.\n179. New Zealand asserts that the Panel correctly found that the effect of the marketing loan and\ncounter-cyclical payments is significant price suppression. New Zealand disagrees with the United\nStates' contention that the Panel placed excessive re liance on the findings made in the original\nproceedings. According to New Zealand, given the significant factual similarities between the\noriginal proceedings and the current Article 21.5 pr oceedings, \"it was entirely appropriate to consider\nthe original panel and Appellate Body re ports and draw on them as appropriate.\"\n363 New Zealand\nfurther argues that, in appealing the Panel's treat ment of the economic studies, \"the United States\ncontinues to blur the line between counte r-cyclical payments and decoupled payments.\"364 According\nto New Zealand, counter-cyclical payments, by co ntrast to decoupled payments, are \"clearly and\nexplicitly linked to prices\" and \"are clearly not green box measures and hence are presumptively trade\ndistorting\".365\n180. New Zealand also disagrees with the United Stat es' allegation that, in determining whether\nthere was \"market insulation\", the Panel ignored its own finding that United States production and\nexports fluctuated in the same manner as those of other producers such that United States shares of\nworld cotton production and exports remained stable. New Zealand considers that the \"Panel spent\nconsiderable time examining\" 366 this point and \"correctly concluded that the stability of the United\nStates' share of world production and exports do es not prove the absence of market insulation.\" 367 In\n\n360New Zealand's third participant's submission, para. 3.9.\n361Ibid., para. 3.9.\n362Ibid.\n363Ibid., paras. 1.6 and 4.6.\n364Ibid., para. 4.7.\n365Ibid., para. 4.8.\n366Ibid., para. 4.11.\n367Ibid.\n\nNew Zealand's view, \"the critical question is not whether the United States production and exports\nincreased in line with other world production and exports, but rather, what would have happened to\nthe United States production and exports but for the guaranteed minimum prices.\"\n368 New Zealand\nunderstands that, \"but for\" the existence of marketing loan and counter-cyclical payments\nprogrammes, United States farmers, like cotton farmer s in the rest of the world, would experience no\nsuch insulation.\n181. New Zealand agrees with the Panel's finding of a significant gap between United States\nupland cotton farmers' total costs of production and market revenues. It also disagrees with the\nUnited States' contention that the Panel should have used variable costs instead of total costs of\nproduction in its comparison. According to Ne w Zealand, the purpose of comparing costs of\nproduction with revenues is to determine whether ma rketing loan and counter-cyclical payments are\nplaying an important role in affecting the economi c viability of United States upland cotton farming.\nNew Zealand explains that, \"if United States cotton producers are not covering total costs of\nproduction in the long term, they will exit the cotton farming, unless their cotton revenues are\n'supplemented' in order to 'finance' this gap.\"\n369\n182. New Zealand further submits that the United States' claim about the significance of the\nremoval of the Step 2 payments programme \"is undermined by a comparison of the amounts paid\nunder the various programmes.\"\n370 In New Zealand's view, it is the marketing loan and counter-\ncyclical payments that underpin producers' price ex pectations and, therefore, their planting decisions,\nnot Step 2 payments. Moreover, New Zealand cont ests the United States' argument that the Panel\nshould have considered the effect on prices of China's cotton production and consumption. New\nZealand asserts that, even if it were true that Chin a's cotton trade is impac ting upon the world market\nprice of cotton, the Panel's findings of price s uppression stands independently of any other global\nfactors that might also be suppressing world market prices. New Zealand additionally asserts that the\nPanel showed full cognizance of the fact that price suppression must be \"significant\" in order to cause\nserious prejudice within the meaning of Article 6.3(c) of the SCM Agreement.\n183. Turning to the United States' claim under Article 11 of the DSU, New Zealand contends that\nthe United States simply repeats \"the arguments it ma de in appealing the 'legal conclusions' of the\ncompliance Panel\".371 For the reasons already stated, New Ze aland does not consider that the Panel\nerred in making its finding of serious prejudice under the SCM Agreement , let alone that it made\n\n368New Zealand's third participant's submission, para. 4.11. (original emphasis)\n369Ibid., para. 4.18.\n370Ibid., para. 4.22.\n371Ibid., para. 4.31.\n\n\"egregious\" errors rising to a level that calls into question the objectivity of the Panel's assessment. 372\nThus, for these same reasons, New Zealand submits that the Appellate Body should reject the United\nStates' appeal under Article 11 of the DSU.\n184. As regards Brazil's conditional appeal, New Zealand agrees with Brazil that the Panel\nincorrectly found that the original panel's findings do not cover the marketing loan and counter-\ncyclical payments programmes. New Zealand asserts that, \"[i]n the circumstances of this case, it is\nnot possible to divorce the payments from the pr ogrammes under which they are made\", because the\n\"mandatory price contingent nature of the subsidi es derives from the conditions and criteria set out in\nthe marketing loan and counter-cyclical payment programmes, and this is central to the analysis of the\neffects of the actual payments made\".\n373 New Zealand considers that \"the original panel's finding of\nserious prejudice, which explicitly refers to 'the mandatory price-contingent' subsidy measures, is\nconsistent with this interpretation\". 374 New Zealand also finds support for its position in the original\npanel's statement that \"the United States is obliged to take action concerning its present statutory\nand regulatory framework as a result of our 'present' serious prejudice finding\". 375 Moreover, New\nZealand does not consider that \"the 'as such'/'as applied' lexicon is ... helpful in the present case\"\nbecause, in accordance with Article 5 of the SCM Agreement , \"[i]t is the use of the subsidy\nprogrammes in this case that result[s] in the adverse effects\".376\nIII. Issues Raised in This Appeal\n185. The following issues are raised in the appeal filed by the United States:\n(a) whether the Panel erred in finding that Br azil's claims relating to export credit\nguarantees for pig meat and poultry meat were properly within the scope of the\nArticle 21.5 proceedings;\n(b) whether the Panel erred in finding that Brazil's claims against marketing loan and\ncounter-cyclical payments made by the United States after 21 September 2005 were\nproperly within the scope of the Article 21.5 proceedings;\n(c) whether the Panel erred in finding that export credit guarantees issued under the\nrevised GSM 102 programme after 1 July 2 005 constitute export subsidies because\n\n372New Zealand's third participant's submission, para. 4.31 (referring to United States' appellant's\nsubmission, para. 230).\n373Ibid., para. 3.13.\n374Ibid., para. 3.14.\n375Ibid. (quoting Original Panel Report, para. 7.1501). (emphasis added by New Zealand)\n376Ibid., para. 3.15. (original emphasis)\n\nthey are provided at premium rates whic h are inadequate to cover the long-term\noperating costs and losses of the programme, within the meaning of item (j) of the\nIllustrative List of Export Subsidies annexed to the SCM Agreement;\n(d) whether the Panel failed to make an objective assessment of the matter under\nArticle 11 of the DSU in its assessment of the revised GSM 102 programme pursuant\nto item (j) of the Illustrative List;\n(e) whether the Panel erred in finding that the effect of marketing loan and\ncounter-cyclical payments provided to United States upland cotton producers\npursuant to the FSRI Act of 2002 is signifi cant price suppression, within the meaning\nof Article 6.3(c) of the SCM Agreement , in the world market for upland cotton,\nconstituting \"present\" serious prejudice to the interests of Brazil, within the meaning\nof Article 5(c) of the SCM Agreement; and\n(f) whether the Panel failed to make an objective assessment of the matter under\nArticle 11 of the DSU in its assessment of Brazil's claim that the effect of marketing\nloan and counter-cyclical payments is significant price suppression.\n186. The following issues are raised in the other appeal filed by Brazil:\n(a) in the event that the Appellate Body reve rses the Panel's finding that Brazil's claims\npertaining to export credit guarantees provi ded to pig meat and poultry meat were\nproperly within the scope of the Article 21. 5 proceedings, whether the Panel erred or\nfailed to make an objective assessment of th e matter, under Article 11 of the DSU, in\nfinding that the measure that is the subject of Brazil's claims is not the revised\nGSM 102 programme itself; and,\n(b) in the event that the Appellate Body reve rses the Panel's finding that Brazil's claims\nagainst marketing loan and counter-cyclical payments made after 21 September 2005\nwere properly within the scope of the Ar ticle 21.5 proceedings, whether the Panel\nerred or failed to make an objective assessme nt of the matter, under Article 11 of the\nDSU, in finding that the original panel' s conclusions and recommendations addressed\nonly the payments made under the programmes, and not the programmes themselves.\nIV. Scope of These Article 21.5 Proceedings: Pig Meat and Poultry Meat\n187. We begin with the United States' appeal of the Panel's finding that Brazil's claims relating to\nexport credit guarantees for pig meat and poultry meat are within the scope of these Article 21.5\n\nproceedings. Before examining the issues raised on appeal, we briefly set out, in Section A, the\nrelevant findings in the original proceedings. In Section B, we describe the measures taken by the\nUnited States subsequent to the DSB's recommendati ons and rulings in the original proceedings.\nSection C summarizes the Panel's findings in these Article 21.5 proceedings. Section D provides an\noverview of the claims and arguments raised on appeal by the participants. In Section E, we examine\nthe United States' claim regarding the scope of these Article 21.5 proceedings.\n188. Brazil conditionally appeals the Panel's rejection of Brazil's argument that the measure that\nwas the subject of Brazil's claims is the revi sed General Sales Manage r (\"GSM\") 102 programme\nitself. Brazil's appeal is premised upon a reversal of the Panel's finding that Brazil's claims pertaining\nto export credit guarantees for pig meat and poultry meat are properly within the scope of these\nArticle 21.5 proceedings. We address Brazil's other appeal in Section F.\nA. Original Proceedings\n189. In the original proceedings, Brazil challenged three United States agricultural export credit\nguarantee programmes—the GSM 102, the GSM 103, and the Supplier Credit Guarantee Program\n(\"SCGP\")—under Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of\nthe SCM Agreement.\n377 All three programmes were used to guarantee the repayment of credit made\navailable to finance commercial export sal es of United States agricultural commodities. 378 T h e\noriginal panel first determined whether the e xport credit guarantees constitu ted an export subsidy\nwithin the meaning of Articles 10.1 and 8 of the Agreement on Agriculture . For this purpose, the\noriginal panel sought contextual guidance from the SCM Agreement and, in particular, relied on\nitem (j) of the Illustrative List of Export Subsid ies (the \"Illustrative List\") annexed to that\nAgreement.379\n190. Having determined that the export credit guara ntee programmes were export subsidies, the\noriginal panel proceeded to examine these programmes under Article 10.1 of the Agreement on\nAgriculture. Article 10.1 requires export subsidies not to be applied in a manner that results in\ncircumvention of a WTO Member's export subsidy co mmitments. The original panel found that the\n\n377See Original Panel Report, para. 7.762.\n378See Panel Report, para. 3.13. In general, an ex port credit guarantee is a commitment to cover losses\nthat an exporter would suffer should there be a default on the repayment of the credit granted to the foreign\nimporter to finance the purchase of the exported product. A detailed description of the three programmes is\nprovided in paragraphs 7.242-7.244 of the original panel report, which are reproduced in paragraph 3.14 of the\nPanel Report.\n379See Original Panel Report, para. 7.763. Pursuant to item (j) of the Illustrative List, the original panel\nexamined whether the United States export credit guarantee programmes were provided at premium rates which\nwere inadequate to cover the long-term opera ting costs and losses of the programmes. (See ibid.,\nparas. 7.787-7.869)\n\nUnited States had granted export subsidies with respect to upland cotton and other unscheduled\nproducts.\n380 As regards scheduled products, the original panel recalled that Brazil \"initially alleged\"381\nthat the United States provided export subsidies to thirteen scheduled ag ricultural commodities in\nexcess of its quantitative reduction commitments. The original panel noted the United States'\nsubmission that it was in compliance with its quan titative reduction commitments in respect of ten of\nthose products, and that this \"would also be true for poultry meat\" 382 in fiscal year (\"FY\") 2002; pig\nmeat was not mentioned by the United States. The original panel concluded that \"[i]t has not been\nestablished ... that ... actual circumve ntion has resulted in respect of the twelve other United States\nscheduled commodities\"383, including pig meat and poultry meat.\n191. On appeal in the original proceedings, Brazil cl aimed that the original panel erred by failing\nto find that the United States applied its export cr edit guarantee programmes in a manner that led to\nactual circumvention of its export subsidy commitmen ts with respect to pig meat and poultry meat\nin 2001.384 In examining Brazil's claim, the Appellate Body noted that, although the original panel\nrecognized that Brazil's claims of circumvention ex tended to pig meat and poultry meat, the original\npanel did not mention pig meat in its analysis and used the phrase \"would also be true\" for poultry\nmeat, hence suggesting uncertainty as to the actua l circumvention with respect to poultry meat.\nConsequently, the Appellate Body reversed the orig inal panel's conclusion that circumvention had not\nbeen established in respect of pig meat and poultry meat. 385 Nevertheless, because there were\ninsufficient uncontested facts on the record, the Ap pellate Body was unable to complete the analysis\nand determine whether the United States' export cred it guarantees had been applied in a manner that\n\n 380Original Panel Report, para. 7.875.\n381Original Panel Report, para. 7.878. Article 10.3 of the Agreement on Agriculture provides a special\nrule for proof of export subsidies that applies in certa in disputes under Articles 3, 8, 9, and 10 of that\nAgreement. The special rule in Article 10.3 applies to scheduled products. (See Appellate Body Report, US –\nUpland Cotton, para. 652) In Canada – Dairy (Article 21.5 – New Zealand and US II) , the Appellate Body\nexplained that the burden of proof under Article 10.3 operates as follows:\n[W]here a Member exports an agricultu ral product in quantities that exceed\nits quantity commitment level, that Me mber will be treated as if it has\ngranted WTO- inconsistent export subsidies, for the excess quantities,\nunless the Member presents adequate ev idence to \"establish\" the contrary.\nThis reversal of the usual rules obliges the responding Member to bear the\nconsequences of any doubts co ncerning the evidence of export\nsubsidization.\n(Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand and US II), para. 74 (original emphasis))\n382Ibid., para. 7.879.\n383Ibid., para. 7.881.\n384See Appellate Body Report, US – Upland Cotton, para. 681.\n385Ibid., para. 694.\n\nresulted in actual circumvention of the United St ates' export subsidy commitments for pig meat and\npoultry meat.386\nB. Measures Taken by the United States\n192. Following the adoption of the pane l and Appellate Body reports in the original proceedings,\nthe United States made several changes to its expo rt credit guarantee programmes. On 30 June 2005,\nthe United States Department of Agriculture (t he \"USDA\") announced that the United States\nCommodity Credit Corporation (the \"CCC\") would no longer accept applications for export credit\nguarantees under the GSM 103 programme. 387 Subsequently, in October 2005, the CCC ceased\nissuing export credit guarantees under the SCGP. 388 The GSM 102 programme remained operational,\nbut the USDA announced, on 30 June 2005, that the CCC would use a new fee structure for the\nGSM 102 programme.\n389 Under the new fee structure, fees were increased and now vary according to\ncountry risk, length of repayment term (tenor), and repayment frequency (annual or semi-annual). 390\nCountries are classified in eight risk categories (0 -7), and exports to coun tries in the riskiest\ncategory (7) are classified as ineligible to receive export credit guarantees.391\nC. Article 21.5 Proceedings\n193. Before the Panel, Brazil claimed that the measur es taken to comply by the United States with\nregard to the GSM 102 export credit guarantee programme are inconsistent with Articles 10.1 and 8 of\nthe Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement.392 The United\nStates requested the Panel to make a preliminar y ruling that Brazil's claims relating to GSM 102\n\n386See Appellate Body Report, US – Upland Cotton, paras. 693 and 694.\n387See Panel Report, para. 3.16 (referring to Exhib its Bra-502 and Bra-503 s ubmitted by Brazil to the\nPanel, supra, footnote 17).\n388See ibid. (referring to United States' first written subm ission to the Panel, para. 20; and Exhibit\nBra-513 submitted by Brazil to the Panel, supra, footnote 19).\n389See ibid., para. 3.16. The new fee structure was al so applicable to the SCGP until the USDA\nannounced that it would no longer accept application under that programme.\n390Ibid. (referring to \"USDA changes its fees to risk-based method for the GSM-102 and Supplier\nCredit Guarantee programs\", USDA FAS Online News Release of 30 June 2005 (Exhibit Bra-504 submitted by\nBrazil to the Panel); as well as Exhibit Bra-502 submitted by Brazil to the Panel, supra, footnote 17;\n\"GSM-102 Guarantee Fee Rate Sche dule\", USDA FAS Online (Exhibit Bra-505 submitted by Brazil to the\nPanel); and \"SCGP Guarantee Fee Rate Schedule\", USDA FAS Online (Exhibit Bra-506 submitted by Brazil to\nthe Panel)).\n391See ibid., para. 3.16. The Panel noted that \"[a] number of countries that were previously eligible\nwere reclassified into this ineligible risk category.\" ( Ibid., footnote 39 to para. 3.16 (referring to United States'\nfirst written submission to the Panel, footnote 15; an d Country Risk Category (for the GSM-102 and Supplier\nCredit Guarantee Program) updated on 1 July 2005, US DA FAS Online (Exhibit US-2 submitted by the United\nStates to the Panel))\n392See ibid., para. 4.2.\n\nexport credit guarantees for pig meat and poultry m eat were outside the scope of the Article 21.5\nproceedings.\n393\n194. The Panel described the issue before it as follows:\n[W]hether in this proceeding under Article 21.5 of the DSU Brazil\nmay present claims relating to export credit guarantees for pig meat\nand poultry meat considering that: (i) Brazil presented such claims in\nthe original proceeding; (ii) the or iginal panel rejected these claims;\n(iii) the Appellate Body reversed the original panel's rejection of\nthese claims, but found itself unable to complete the analysis; such\nthat (iv) the original proceeding did not result in a finding of WTO-\ninconsistency in respect of export credit guarantees for pig meat and\npoultry meat.\n394\n195. Turning to the measure at issue, the Panel found that the export credit guarantees in respect of\npig meat and poultry meat are measures in themselves. According to the Panel, \"that the [revised]\nprogramme applies to all products in the same manne r does not alter the fact that the application of\nthe programme to an individual product constitutes a 'measure'.\" 395 The Panel then recalled the\nAppellate Body's finding in US – Softwood Lumber IV (Article 21.5 – Canada) that \"[s]ome measures\nwith a particularly close relationship to the d eclared 'measure taken to comply', and to the\nrecommendations and rulings of the DSB\" 396, may also be subject to review by a panel established\nunder Article 21.5 of the DSU. The Panel consid ered that the GSM 102 export credit guarantees for\npig meat and poultry meat had a \"particularly clos e relationship to the declared measure taken to\ncomply and to the recommendations and rulings of the DSB\". 397 The Panel based its finding on the\nfollowing elements: (i) the revised GSM 102 progr amme applied in the same manner to all products\ncovered by the programme; (ii) most of the legal and factual issues raised by Brazil's claims relating\nto export credit guarantees pertain to the revised GS M 102 programme in general, without distinction\nbetween individual products to which the programme applies; and (iii) the United States argued that\nthe Panel should examine Brazil's claim solely unde r the standard contained in item (j) of the\nIllustrative List, a standard that required the Pa nel to analyze the GSM 102 programme as a whole,\nrather than in relation to particular products.\n398\n\n393See Panel Report, para. 9.7.\n394Ibid., para. 9.21.\n395Ibid., para. 9.25.\n396Ibid., para. 9.24 (quoting Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada),\npara. 77).\n397Ibid., para. 9.25.\n398See ibid.\n\n196. The Panel then observed that there was no pre- existing jurisprudence regarding the precise\nquestion of whether a WTO Member may assert a claim in an Article 21.5 proceeding in respect of\nwhich the Appellate Body had found itself unable to complete the analysis in the original\nproceeding.399 Nonetheless, the Panel fou nd it \"significant\" that, in US – Oil Country Tubular Goods\nSunset Reviews (Article 21.5 – Argentina) , the Appellate Body held that a claim relating to an aspect\nof the measure with respect to which the panel in the original proceeding had exercised judicial\neconomy was properly within the scope of review under Article 21.5 of the DSU. 400 This, according\nto the Panel, \"demonstrates that a claim relating to a measure that has a sufficiently close nexus with\nthe measure taken to comply or with the DSB recommendations and rulings in the original proceeding\ncan be within the scope of Article 21.5 [proceed ings]\", even though that measure \"has not been the\nsubject of DSB recommendations and ru lings in the original proceeding.\" 401 Based on these\nconsiderations, the Panel concluded that \"the clai ms of Brazil relating to export credit guarantees for\nexports of pig meat and poultry meat are within the scope of this proceeding under Article 21.5 of the\nDSU.\"402\nD. Claims and Arguments on Appeal\n197. On appeal, the United States submits that GSM 102 export credit guarantees for pig meat and\npoultry meat are individual measures and are not subject to the DSB's recommendations and rulings in\nthe original proceedings. Therefore, the United States argues, there \"logically\" 403 could be no\ndisagreement regarding the existence of \"measures taken to comply\" or their consistency with the\ncovered agreements with respect to export credit guarantees for pig meat and poultry meat. The\nUnited States maintains that the Panel's finding, which rested on a perceived \"particularly close\nrelationship\" between the GSM 102 export credit gua rantees for pig meat and poultry meat, on the\none hand, and the declared measure taken to comp ly with the DSB's recommendations and rulings, on\nthe other hand, is not supported by the text of Article 21.5.404\n198. Brazil submits that the Panel properly found that the export credit guarantees for pig meat and\npoultry meat have a \"particularly close relationshi p\" with, and are \"inextricably link[ed]\" to, the\n\n399See Panel Report, para. 9.26.\n400Ibid. (referring to Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews\n(Article 21.5 – Argentina), para. 152).\n401Ibid., para. 9.26.\n402Ibid., para. 9.27. Having found that these claims were within the scope of its mandate, the Panel\nproceeded to find that the United States has applied export subsidies in the form of GSM 102 export credit\nguarantees in a manner which has resulted in the circumvention of the United States' export subsidy reduction\ncommitments for poultry meat and pig meat in the period from 1 October 2005 to 30 September 2006, and for\npoultry meat in the period from 1 July to 30 September 2005. (See ibid., para. 14.149)\n404See ibid., para. 43.\n\nUnited States' \"declared compliance measure\", that is, the revised GSM 102 programme.\n405 Brazil\nargues that this \"particularly close relationship\" arises because the export credit guarantees for pig\nmeat and poultry meat are factually and legally dependent on the GSM 102 programme.406\nE. Whether Brazil's Claims Relating to Expor t Credit Guarantees for Pig Meat and\nPoultry Meat are within the Scope of These Article 21.5 Proceedings\n199. The issue on appeal is whether Brazil's claims regarding export credit guarantees issued under\nthe revised GSM 102 programme for pig meat and poultry meat are within the scope of these\nArticle 21.5 proceedings.\n200. Article 21.5 of the DSU provides, in relevant part:\nWhere there is disagreement as to th e existence or consistency with a\ncovered agreement of measures taken to comply with the\nrecommendations and rulings such disputes shall be decided through\nrecourse to these dispute settlement procedures, including wherever\npossible resort to the original panel. The panel shall circulate its report\nwithin 90 days after the date of referral of the matter to it.\n201. As in original dispute settlement proceedings, the \"matter\" in proceedings brought pursuant to\nArticle 21.5 of the DSU consists of two elements: the specific measures at issue and the legal basis of\nthe complaint (that is, the claims).\n407 Thus, in order to determine whether Brazil's claims relating to\nthe revised GSM 102 programme concerning pig meat and poultry meat are properly within the scope\nof these Article 21.5 proceedings, we must first iden tify the \"measure taken to comply\" by the United\nStates. We must then determine whether there are any limitations on the claims that may be raised by\nBrazil with respect to that measure in these Article 21.5 proceedings.\n202. The Appellate Body has stated that \"the phrase 'measures taken to comply' refers to measures\nwhich have been, or which should be, adopted by a Member to bring about compliance with the\nrecommendations and rulings of the DSB.\" 408 It has further explained that \"determining the scope of\n'measures taken to comply' in any given case must ... involve examination of the recommendations\nand rulings contained in the original report(s) adopted by the DSB.\" 409 While the DSB's\nrecommendations and rulings are a relevant startin g point for identifying the \"measures taken to\ncomply\" in an Article 21.5 proceeding, they are no t dispositive as to the scope of such measures.\nWhere alternative means of implementation are available, a WTO Member enjoys some discretion in\n\n405Brazil's appellee's submission, paras. 213 and 232.\n406See ibid., paras. 194-199.\n407See Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 78.\n408Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), para. 36.\n409Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 68.\n\ndeciding what measures to take to comply with the DSB's recommendations and rulings. A WTO\nMember may choose to take measures that are broader than strictly required to comply with the DSB's\nrecommendations and rulings. The identification of th e \"measure taken to comply\" is determined by\nreference to what a Member has actually done, and no t to what a Member might have done, to ensure\ncompliance with the DSB's recommendations and ruli ngs. Therefore, when the measures actually\n\"taken\" by the implementing Member are broader than the DSB's recommendations and rulings, we\ndo not see why the scope of the DSB's recommenda tions and rulings should necessarily limit the\nscope of the \"measures taken to comply\" for purposes of the Article 21.5 proceedings.\n203. As we noted earlier 410, the original panel found that Brazil had not established that export\ncredit guarantees for pig meat and poultry meat result ed in circumvention of the United States' export\nsubsidy commitments. The Appellate Body reversed this finding, but was unable to complete the\nanalysis of Brazil's claims. Thus, although Brazil' s claims were extensively argued, there were no\nfindings of consistency or incons istency specifically addressed to the export credit guarantees for pig\nmeat and poultry meat that were part of the DS B's recommendations and rulings in the original\nproceedings. Following the adoption of the DSB' s recommendations and rulings, the United States\nrevised the fee structure of the GSM 102 programme. The changes to the fee structure were taken in\nrelation to the GSM 102 programme in its totality. The new fee structure applies to export credit\nguarantees provided to all eligible commodities unde r the revised GSM 102 programme; individual\nguarantees are issued under the same terms a nd conditions and no distinction is made on a\ncommodity-specific basis. In the Panel's view, \"t hat the [revised GSM 102] programme applies to all\nproducts in the same manner does not alter the fact that the application of the programme to an\nindividual product constitutes a 'measure'.\" 411 The Panel's finding does not take due account of the\nprogramme-wide nature of the changes made by the United States. The changes made to the\nGSM 102 programme apply equally to all eligible commodities and the terms and conditions of the\nprogramme are the same for guarantees issued with respect to all eligible commodities. 412 Treating\nthe revised GSM 102 programme in an integrated ma nner is consistent with the Appellate Body's\nstatement in US – Shrimp (Article 21.5 – Malaysia) that \"the task of a panel in a matter referred to it\nby the DSB for an Article 21.5 proceeding is to consider that new measure in its totality.\"413\n\n410See supra, para. 190.\n411Panel Report, para. 9.25.\n412If one were to follow the Panel's approach to the extreme, every individual export credit guarantee\nissued under the revised GSM 102 programme would be a distinct \"measure\".\n413Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), para. 87.\n\n204. This conclusion is also supported by the Unite d States' own description of its implementation\nefforts.\n414 In these Article 21.5 proceedings, the United States rejected the description of the revised\nGSM 102 programme as the \"measure taken to comp ly\". Yet, statements made by United States\nGovernment agencies when the changes to the GSM 102 programme were adopted indicate the\nopposite. For instance, a USDA press release expl ains that the changes to the GSM 102 programme\nwere made \"to comply with a recent World Trade Organization (WTO) cotton decision in a dispute\nwith Brazil.\" 415 Similarly, in the answers to the \"Frequently Asked Questions\" published on its\nwebsite, the USDA indicates that the changes made to the GSM 102 (as well as to the GSM 103 and\nthe SCGP) programme were taken in response to a key finding in the recent WTO dispute with Brazil\nrelated to this programme. 416 The United States maintains that th ese are merely press statements and\nhave no legal relevance. 417 We agree that these statements, on their own, are not dispositive. The\nstatements, however, indicate that the United States itself considered that the revisions made to the\nGSM 102 programme were adopted with the objective of complying with the DSB's\nrecommendations and rulings in the original dispute.\n205. We recall that, after finding that GSM 102 e xport credit guarantees for pig meat and poultry\nmeat were distinct measures in themselves, the Panel went on to find that these measures have a\n\"particularly close relationship to the declared me asure taken to comply and to the recommendations\nand rulings of the DSB\"\n418 and, consequently, were properly w ithin the scope of the Article 21.5\nproceedings.419 The Panel referred to the Appellate Body's findings in US – Softwood Lumber IV\n(Article 21.5 – Canada) that \"[s]ome measures with a particular ly close relationship to the declared\n'measure taken to comply', and to the recommend ations and rulings of the DSB, may also be\nsusceptible to review by a panel acting under Article 21.5.\" 420 In our view, the Appellate Body's\nreasoning in US – Softwood Lumber IV (Article 21.5 – Canada) addressed a different situation. In\nthat case, two distinct measures were taken under tw o separate legal provisions: (i) a determination\nunder Section 129, which is the United States' lega l framework for issuing new determinations to\ncomply with recommendations and rulings of the DSB; and (ii) an administrative review\n\n414The Appellate Body has stated that a \"Member's designation of a measure as one taken 'to comply',\nor not, is relevant\" but not \"conclusive\" to determining what constitutes such a measure. (Appellate Body\nReport, US – Softwood Lumber IV (Article 21.5 – Canada), para. 73)\n415See Exhibit Bra-502 submitted by Brazil to the Pane l, footnote 17 (as referred to in Panel Report,\nfootnote 38 to para. 3.16).\n416See \"Frequently Asked Questions: Risk-Based Fees\", USDA FAS Online (Exhibit Bra-501\nsubmitted by Brazil to the Panel).\n417United States' response to questioning at the oral hearing.\n418Panel Report, para. 9.25.\n419See ibid., para. 9.26.\n420Ibid., para. 9.24 (quoting Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada),\npara. 77).\n\ndetermination, which was required to be issued in the ordinary course of the application of the United\nStates' countervailing duty laws. Because the administ rative review determination had the effect of\nundermining compliance with the DSB's recommenda tions and rulings, and because both measures\nconcerned the same analysis of subsidies for so ftwood lumber production, the Appellate Body found\nthat the administrative review determination was so \"inextricably linked\" and \"clearly connected\"421 to\nthe Section 129 determination as to fall within th e scope of the Article 21. 5 panel's mandate. The\nAppellate Body's reasoning in US – Softwood Lumber IV (Article 21.5 – Canada) is not applicable in\nthis dispute. The dispute in US – Softwood Lumber IV (Article 21.5 – Canada) concerned the\nidentification of closely connected measures so as to avoid circumvention. In this case, we must\ndetermine whether a single programme may be permissibly atomized.\n206. The United States contends that there are systemic problems if the identification of the\n\"measure taken to comply\" goes beyond the recomme ndations and rulings of the DSB. The United\nStates raises two related objections. First, the United States argues that it would give WTO Members\nan incentive to make the least possible cha nges to their measures in response to DSB\nrecommendations and rulings.422 Secondly, the United States submits that it would \"create a tangle of\nseparate regimes to address the application of a m easure in different situations simply to avoid\nexposure to a dispute settlement challenge\" 423 pursuant to Article 21.5 of the DSU. The Appellate\nBody has stated that, where alte rnative means of achieving complia nce are possible, the choice of\nmeans \"belongs, in principle, to the implementing Member\". 424 Because it is for the implementing\nMember to choose among alternative means of im plementation, WTO dispute settlement cannot be\nsaid to provide incentives or disincentives for a WTO Member to take broader or narrower action as\npart of its implementation efforts. In other word s, the WTO dispute settlement system is neutral in\nterms of the breadth of the actions to be adopted by the implementing Member, provided the changes\nare sufficient to bring that Member into compliance with its WTO obligations.\n207. The United States also refers to the fact that Article 21.5 proceedings are \"on an expedited\nbasis with no reasonable period of time [for the responding Member] to co me into compliance\". 425\nFollowing the original proceedings, the United States was given a \"reasonable period of time\" to\nimplement the DSB's recommendations and rulings. The United States could have excluded pig meat\nand poultry meat from the revised GSM 102 progra mme. However, the United States revised the\n\n421Appellate Body Report, US – Softwood Lumber IV (Article 21.5 – Canada) , paras. 81 (referring to\nPanel Report, US – Softwood Lumber IV (Article 21.5 – Canada), para. 4.41) and 90.\n423Ibid., para. 54.\n424Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina),\npara. 184.\n\nGSM 102 fee structure on a programme-wide basis, th ereby changing the terms and conditions for all\nguarantees issued under the programme, including e xport credit guarantees for pig meat and poultry\nmeat. Under these circumstances, we do not cons ider that the unavailab ility of a new \"reasonable\nperiod of time\" gives rise to the \"systemic concerns \" alleged by the United States. Moreover, it is a\ncharacteristic of Article 21.5 proceedings that no reasonable period of time for implementation is\navailable if the new measure taken to comply with the DSB's recommendations and rulings is found to\nbe WTO-inconsistent.\n208. Having said that, we must now determine whether there is any limitation on the scope of the\nclaims that can be raised by Brazil in these Article 21.5 proceedings.\n209. The United States draws our attention to EC – Bed Linen (Article 21.5 – India) , where the\nAppellate Body found that India could not reassert in the Article 21.5 proceedings a claim that it had\nasserted in the original proceedings. The United Stat es considers it \"highly instructive\" that in both\nEC – Bed Linen (Article 21.5 – India) and in the present dispute there are no DSB recommendations\nand rulings that must be implemented with respect to the part of the measu re that the complaining\nparty alleged to be within the scope of the Article 21.5 proceedings.\n426 According to the United\nStates, \"[t]o allow Brazil's claims here would essentia lly give Brazil another chance, this time before\nthe compliance panel, to argue against GSM 102 guaran tees with respect to exports of pig meat and\npoultry meat.\"427\n210. We agree with the United States that the scope of claims that may be raised in an Article 21.5\nproceeding is not unbounded. As the Appellate Body found in EC – Bed Linen (Article 21.5 – India) ,\na complainant who had failed to make out a prima facie case in the original proceedings regarding an\nelement of the measure that remained unchanged since the original proceedings may not re-litigate the\nsame claim with respect to the unchanged element of the measure in the Article 21.5 proceedings. 428\nSimilarly, a complainant may not reassert the same claim against an unchanged aspect of the measure\nthat had been found to be WTO-consistent in the original proceedings. 429 Because adopted panel and\nAppellate Body reports must be accepted by the parties to a dispute 430, allowing a party in an\nArticle 21.5 proceeding to re-argue a claim that has been decided in adopted reports would indeed\n\n426See United States' appellant's submission, para. 47.\n427Ibid., para. 49.\n428See Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 93.\n429See Appellate Body Report, US – Shrimp (Article 21.5 – Malaysia), para. 96.\n430Ibid., para. 97; and Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 93.\n\nprovide an unfair \"second chance\" to that party. The situation before us is different. Brazil's claims\nagainst export credit guarantees provided under the original GSM 102 programme to pig meat and\npoultry meat were not resolved on the merits in the original proceedings, because the Appellate Body\nwas unable to complete the analysis as a result of there being insufficient factual findings or\nundisputed facts on the record. 431 Thus, allowing Brazil's claims in this case would not raise the due\nprocess concerns identified by the United States. Br azil is not unfairly getting a \"second chance\" to\nmake a case that it failed to make out in the origin al proceedings such that the finality of the DSB's\nrecommendations and rulings would be compromised. There is an additional distinction between the\nfacts before the Appellate Body in EC – Bed Linen (Article 21.5 – India) and the facts before us in\nthis case. In EC – Bed Linen (Article 21.5 – India) , India challenged an unchanged aspect of the\nEuropean Communities' measure. 432 In the present case, the revised GSM 102 programme is a new\nmeasure.\n211. We do not suggest that Brazil could raise just any claim in these Article 21.5 proceedings,\nwithout limitation, against the revised GSM 102 programme. A complaining Member ordinarily\nwould not be allowed to raise claims in an Article 21.5 proceeding that it could have pursued in the\noriginal proceedings, but did not. Brazil has referred to Canada – Aircraft (Ar ticle 21.5 – Brazil) as\nsupport for the proposition that, because the \"me asure taken to comply\" is a new measure, a\ncomplaining Member may raise new claims against that measure in the Article 21.5 proceedings. 433\nThe Appellate Body's statement in Canada – Aircraft (Article 21.5 – Brazil) refers to the situation in\nwhich the responding Member is seeking to circum vent its compliance obligations by replacing the\nWTO-inconsistent measure with a new measure that is also WTO-inconsistent, albeit with a provision\nnot at issue in the original proceedings. This is not the situation in this dispute.\n212. Finally, we note that \"the aim of Article 21.5 of the DSU is to promote the prompt\ncompliance with DSB recommendations and rulings and the consistency of 'measures taken to\ncomply' with the covered agreements by ma king it unnecessary for a complainant to begin new\nproceedings and by making efficient use of the or iginal panelists and thei r relevant experience.\" 434\nMoreover, having an Article 21.5 panel examine Brazil's claims against export credit guarantees\n\n431See Appellate Body Report, US – Upland Cotton, paras. 693 and 694.\n432Appellate Body Report, EC – Bed Linen (Article 21.5 – India), para. 89.\n433In Canada – Aircraft (Article 21.5 – Brazil) , the Appellate Body stated that, in order to \"examine\nfully the 'consistency with a covered agreement of the measures taken to comply', as required by Article 21.5 of\nthe DSU\", a panel acting under Article 21.5 of the DSU sh ould not be \"restricted to examining the new measure\nfrom the perspective of the claims, arguments and factua l circumstances that related to the original measure\".\n(Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), para. 41)\n434Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 – Argentina),\npara. 151.\n\nprovided under the revised GSM 102 programme to upl and cotton and certain other products, while a\nnew panel examines Brazil's claims against export credit guarantees provided under the same\nprogramme to pig meat and poultry meat, would not be the most efficient use of WTO dispute\nsettlement procedures.\n435\n213. In sum, we are of the view that the revised GSM 102 programme is \"a measure taken to\ncomply\" within the meaning of Article 21.5 of the DSU. In addition, we find that Brazil is not\nprecluded from asserting its claims in relation to export credit guarantees issued under the revised\nGSM 102 programme for pig meat and poultry meat. Accordingly, we uphold the Panel's finding, in\nparagraph 9.27 of the Panel Report, that Brazil's claims relating to export credit guarantees for pig\nmeat and poultry meat are properly within the scope of these Article 21.5 proceedings.\nF. Brazil's Other Appeal\n214. Brazil appeals the Panel's finding that the revised GSM 102 programme itself was not the\nmeasure that was the subject of Brazil's claims. 436 However, this appeal is conditional on the\nAppellate Body reversing the Panel's finding that Brazil's claims pertaining to export credit guarantees\nprovided to pig meat and poultry meat are properly within the scope of these Article 21.5 proceedings.\nShould this condition be fulfilled, Brazil requests th e Appellate Body to comp lete the analysis and\nfind that the revised GSM 102 programme itself is a pplied in a manner that results in circumvention\nof the United States' export subsidy commitments with respect to pig meat and poultry meat.437\n215. The United States submits that , because the revised GSM 102 programme is not a measure\ntaken to comply with the DSB's recommendations and rulings, the Appellate Body should reject\nBrazil's conditional appeal.438\n216. We have upheld the Panel's conclusion that Brazi l's claims pertaining to pig meat and poultry\nmeat are properly within the scope of these Arti cle 21.5 proceedings. Accordingly, the condition\nupon which Brazil's other appeal is predicated has not been met, making it unnecessary for us to\naddress it further.\n\n435See Appellate Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article 21.5 –\nArgentina), para. 151.\n436See Brazil's other appellant's submission, para. 165 (referring to Panel Report, para. 9.25).\n437See ibid., paras. 192-201.\n438See United States' appellee's submission, paras. 64, 74, and 75.\n\nV. Scope of These Article 21.5 Proceedings: Marketing Loan and Counter-cyclical\nPayments Made After 21 September 2005\n217. We turn next to the United States' appeal of the Panel's finding that marketing loan and\ncounter-cyclical payments made after 21 September 2005 are properly within the scope of these\nArticle 21.5 proceedings.\n218. We begin, in Section A, with a summary of th e findings made in the original proceedings.\nSection B describes the measures taken by the United States following the adoption of the DSB\nrecommendations and rulings in the original proceedings. A summary of the Article 21.5 proceedings\nis then provided in Section C. Section D provides an overview of the arguments raised on appeal by\nthe participants and the third participants. In S ection E, we analyze whether the Panel properly found\nthat marketing loan and counter-cyclical payments made after 21 September 2005 are within the\nscope of these Article 21.5 proceedings.\n219. Brazil conditionally appeals the Panel's finding that the original panel's conclusions and\nrecommendations addressed only the payments made under the marketing loan and counter-cyclical\npayments programmes, and not the programmes themselves. Brazil's appeal is conditional upon our\nreversal of the Panel's finding that marketing loan and counter-cyclical payments made\nafter 21 September 2005 are within the scope of these Article 21.5 proceedings. We address Brazil's\nconditional appeal in Section F.\nA. Original Proceedings\n220. After reviewing the evidence submitted by Brazil in support of its claim of serious prejudice,\nthe original panel found that \"the effect of the ma ndatory, price contingent United States subsidies at\nissue—that is, marketing loan programme payments , user marketing (Step 2) payments and [market\nloss assistance] payments and [counter-cyclical] payments—is significant price suppression in the\nsame world market for upland cotton in the peri od MY [(\"marketing year\")] 1999-2002 within the\nmeaning of Articles 6.3(c) and 5(c) of the SCM Agreement .\"\n439 In the \"Conclusions and\nRecommendations\" section of its report, the original panel concluded:\n(g) concerning serious prejudice to the interests of Brazil:\n(i) the effect of the mandatory price-contingent\nUnited States subsidy measures—marketing loan\nprogramme payments, user marketing (Step 2)\npayments, [market loss assistance] payments and\n[counter-cyclical] payments—is significant price\n\n439Original Panel Report, para. 7.1416.\n\nsuppression in the same world market within the\nmeaning of Article 6.3(c) of the SCM Agreement\nconstituting serious prejudice to the interests of\nBrazil within the meaning of Article 5(c) of the SCM\nAgreement[.]\n440\n221. In the light of its conclusion, the original pane l recalled the obligation set out in Article 7.8 of\nthe SCM Agreement and observed that, \"upon adoption of this report, the United States is under an\nobligation to 'take appropriate steps to remove the adverse effects or ... withdraw the subsidy'.\"441 The\nAppellate Body upheld the original panel's finding of serious prejudice under Article 6.3(c) of the\nSCM Agreement.442\nB. Measures Taken by the United States\n222. The United States Congress enacted legislation 443 on 1 February 2006 repealing the user\nmarketing (Step 2) payments (\"Step 2 payments\") programme, which was one of the price-contingent\nsubsidy measures covered by the original panel's finding of serious prejudice.444 The Panel noted that\n\"[i]t is not in dispute that the United States pres ently provides marketing loan and counter-cyclical\npayments on the same legal basis and subject to the same conditions and criteria as the marketing loan\npayments and counter-cyclical payments that were subject to the panel's finding of 'present' serious\nprejudice\".445\nC. Article 21.5 Proceedings\n223. Before the Panel, the United States submitted that \"the subsidies subject to the obligation in\nArticle 7.8 of the SCM Agreement to 'take appropriate steps to remove the adverse effects or ...\nwithdraw the subsidy' were the subsidies provi ded during MY 1999-2002 which the original panel\nhad found to cause 'present' serious prejudice in MY 1999-2002.\" 446 Thus, the United States argued\nthat marketing loan and counter-cyclical paymen ts made after 21 September 2005 \"are not properly\n\n440Original Panel Report, para. 8.1.\n441Ibid., para. 8.3(d).\n442See Appellate Body Report, US – Upland Cotton, para. 763(c)(i).\n443Section 1103 of the Deficit Reduction Act of 2005, Public Law No. 109-171; see also Panel Report,\npara. 3.7.\n444The Step 2 payments programme was repealed effective as of 1 August 2006. In addition to Step 2\npayments, marketing loan payments, and counter-cyclical payments, the original panel's finding of serious\nprejudice covered market loss assistance payments. Ac cording to the original panel, market loss assistance\npayments were \"ad hoc emergency and supplementary assi stance provided to producers\" under \"four separate\npieces of legislation, one each for the years 1998 through 2001\". (Original Panel Report, para. 7.216 (quoted in\nPanel Report, para. 3.10))\n445Panel Report, para. 9.79; see also ibid., paras. 3.9 and 3.12.\n446Ibid., para. 9.73. (footnote omitted)\n\nwithin the scope of these Article 21.5 proceedings\". 447 Brazil responded that \"even if in this dispute\nthe original panel had made findings limited to payments made in MY 1999-2002, the obligation of\nthe United States under Article 7.8 would not be lim ited to the removal of the adverse effects of\npayments made in that period.\" 448 Brazil explained that, \"if a panel makes a finding of 'present'\nadverse effects, such a finding applies beyond the hist orical period considered by the panel and ... the\nMember whose subsidies cause such adverse effects is therefore obligated under Article 7.8 to take\nappropriate steps to fully withdraw the present, ongoing and future effects of the subsidies.\"449\n224. At the outset of its analysis, the Panel observe d that, \"[s]ince the original panel made a\nfinding of present serious prejudice in respect of subsidies provided during MY 1999-2002, the\nquestion arises whether the obligation to take appropriate steps to remove the adverse effects only\napplies to payments of subsidies made in those years.\"\n450 The Panel next interpreted the requirement\nin Article 7.8 of the SCM Agreement to \"take appropriate steps to remove the adverse effects\" of the\nsubsidy:\nIn our view, the remedy under Article 7.8 must be viewed in its\nrelationship to the obligation in Article 5 not to cause through the use\nof any subsidy referred to in Articles 1.1 and 1.2 of the SCM\nAgreement adverse effects to the interests of other Members. It must\nserve to restore conformity with the Member's obligation to avoid\ncausing adverse effects through the use of any subsidy. As a\nconsequence, a Member does not take appropriate steps to remove\nadverse effects of a subsidy if it continues to provide payments under\nthe same conditions and criteria as the original subsidy in a manner\nthat causes adverse effects.\n451\n225. The Panel rejected the \"interpretation advocated by the United States, whereby the obligation\nunder Article 7.8 of the SCM Agreement is limited to the removal of the adverse effects caused by\nsubsidies granted in a particular period of time\". 452 As the Panel saw it, the United States'\ninterpretation \"implies that it would not be possible to review in an Article 21.5 proceeding whether a\nMember causes adverse effects by continuing to grant subsidies under the same conditions and criteria\n\n447Panel Report, para. 9.73. (footnotes omitted) Article 7.9 of the SCM Agreement provides that, \"[i]n\nthe event the Member has not taken appropriate steps to remove the adverse effects of the subsidy or withdraw\nthe subsidy within six months from the date when the DSB adopts the panel report or the Appellate Body report,\nand in the absence of agreement on compensation, the DSB shall grant authorization to the complaining\nMember to take countermeasures\". The panel and Appe llate Body reports in the original proceedings were\nadopted on 21 March 2005. Thus, as Brazil explains, th e six-month period referred to in Article 7.9 expired\non 21 September 2005. (See Brazil's first written submission to the Panel, paras. 41 and 42)\n448Panel Report, para. 9.74.\n449Ibid. (footnote omitted)\n450Ibid., para. 9.78.\n451Ibid., para. 9.79.\n452Ibid.\n\nas the subsidies found to have caused adverse effects.\"\n453 According to the Panel, \"[s]uch an\ninterpretation fails to take into account the relati onship between Article 7.8 and Article 5 of the SCM\nAgreement and thus fails to interpret Article 7.8 in its proper context.\"454\n226. Having interpreted Article 7.8 of the SCM Agreement , the Panel turned to the Appellate\nBody's jurisprudence concerning measures that may be challenged in Article 21.5 proceedings. The\nPanel observed that the Appellate Body has held th at \"measures taken to comply\", within the meaning\nof Article 21.5 of the DSU, include \"measures with a particularly close relationship to the declared\n'measure taken to comply', and to the recommendations and rulings of the DSB.\"455 The Panel further\nreasoned that, \"where payments of a subsidy ha ve been found to cause serious prejudice and the\nMember in question continues to provide the same subsidy under the same conditions and criteria,\nthere exists 'a particularly close relationship' between the subsidy that the Member continues to\nprovide and the recommendations and rulings of the DSB in the original proceeding.\"456\n227. The Panel concluded:\n[T]o the extent marketing loan payments and counter-cyclical\npayments made by the United States after 21 September 2005 are\nprovided under the same conditions and criteria as the marketing loan\npayments and counter-cyclical payments subject to the original\npanel's finding of \"present\" serious prejudice, they are subject to the\nobligation of the United States under Article 7.8 of the SCM\nAgreement to take appropriate steps to remove the adverse effects of\nthe subsidy. As a consequence, we also consider that Brazil's claim\nthat the United States has failed to comply with its obligations under\nArticle 7.8 with respect to these payments is properly before this\nPanel. In our view this claim pertains to a disagreement between the\nparties as to the \"existence or consistency with a covered agreement\nof measures taken to comply\" with the recommendations and rulings\nof the DSB.\n457\nD. Claims and Arguments on Appeal\n228. On appeal, the United States claims that the Pa nel erred in finding that marketing loan and\ncounter-cyclical payments made after 21 Septembe r 2005 are properly within the scope of these\nArticle 21.5 proceedings. According to the United States, the only measures subject to the DSB's\nrecommendations and rulings concerning present se rious prejudice \"were payments made under the\n\n453Panel Report, para. 9.79.\n454Ibid.\n455Ibid., para. 9.80 (referring to Appellate Body Report, US – Softwood Lumber IV (Article 21.5 –\nCanada), para. 77).\n456Ibid., para. 9.80.\n457Ibid., para. 9.81.\n\nStep 2, marketing loan and counter-cyclical payment programs in MY 1999-2002 (i.e.,\nthrough July 31, 2003).\" 458 Therefore, the United States assert s, the \"marketing loan and counter-\ncyclical payments made after September 21, 2005 were not subject to the DSB's recommendations\nand rulings\" and \"the payments ma de after September 21, 2005 were not in any way [United States]\nmeasures taken to comply with other recommendations and rulings of the DSB.\"459\n229. In the United States' view, the Panel's err oneous finding resulted from its fundamental\nmisunderstanding of both the obligation of the United States under Article 7.8 of the SCM Agreement\nand the relationship between Article 7.8 of the SCM Agreement and Article 21.5 of the DSU. 460 The\nUnited States emphasizes that \"the obligation un der Article 7.8 extends only as far as the DSB's\nrecommendations and rulings\", and that, \"[i]n this dispute, the DSB's recommendations and rulings\napplied only to the Step 2, ma rket loss assistance, marketing loan, and counter-cyclical payments\nmade during MY 1999-2002, and did not cover either future paym ents, or the subsidy programs\nthemselves.\"461 The United States further submits that \"[ d]isallowing Brazil's over-expansive claims\nin this proceeding would not mean that Members ha ve no remedy to address the adverse effects of a\nsubsidy.\"462 It explains that a WTO Member may challenge: (i) the present adverse effects of past or\ncurrent payments; (ii) the threat of serious prejudice of past, current, or future payments; or (iii) the\nprogrammes \"as such\". 463 The obligations of the responding Member under Article 7.8 of the SCM\nAgreement would depend on the outcome of those challenges.\n230. Brazil submits that the Panel correctly in terpreted and applied Article 7.8 of the SCM\nAgreement and Article 21.5 of the DSU in finding that marketing loan and counter-cyclical payments\nmade after 21 September 2005 are properly within the scope of these Article 21.5 proceedings. 464\nBrazil argues that the United States \"fails to recognize that … Article 21.5 concerns ' new and different\nmeasure[s] that [were] not before the original panel ' and that are, therefore, not the same measures\nfound to be WTO-inconsistent in the original proceedings.\" 465 Consequently, in Brazil's view, the\nUnited States is wrong to suggest that the new ma rketing loan and counter-cyclical payments cannot\n\n459Ibid.\n460See ibid., para. 63.\n461Ibid., para. 65 (referring to Original Panel Report, paras. 8.1(g)(i) and 8.3(d)).\n462Ibid., para. 72.\n463See ibid.\n464Brazil's appellee's submission, heading III.B.4, p. 60.\n(emphasis added by Brazil)\n\nbe included in these proceedings just because they were not subject to the DSB's recommendations\nand rulings.\n466\n231. According to Brazil, the Panel properly found that a particularly close relationship exists\nbetween the old and the new marke ting loan and counter-cyclical paym ents, such that the latter are\nsubject to these Article 21.5 proceedings. 467 Brazil submits that the United States' actions in this case\ninvolve replacing the old marketing loan and coun ter-cyclical payments, and their effects, with a\nstream of new payments in increased amounts that are substantively identical, made to the same\nrecipients, for the same crops, and on the same te rms and conditions. Given the substantive nature,\ntiming, and effects of the new payments at issue— which were the first replacement measures adopted\nafter the end of the implementation period—the Pane l correctly concluded that the new payments are\n\"measures taken to comply\". 468 Finally, Brazil cautions about the consequences of accepting the\nUnited States' position, which would mean that the grant of annually recurring subsidies becomes \"a\nmoving target that escape[s] from [the WTO subsidy] disciplines'.\"469\n232. Argentina470, Australia 471, Canada 472, the European Communities 473, and New Zealand 474\nassert that the Panel did not err in finding that ma rketing loan and counter-cyclical payments made\nafter 21 September 2005 are properly within the scope of these Article 21.5 proceedings.475\nE. Whether Marketing Loan and Counter-cyclical Payments Made After\n21 September 2005 are Properly within the Scope of These Article 21.5 Proceedings\n233. Brazil and the United States disagree on whether the original panel's findings extend to the\nmarketing loan and counter-cyclical payments programmes, or are limited to the payments made\nunder the programmes. The Panel in these Article 21.5 proceedings concluded that the original\npanel's findings were addressed to the payments, and not to the programmes themselves. Brazil\nconditionally appeals this finding, but requests that we address its claim only if we reverse the Panel's\n\n467Ibid., para. 232.\n468Ibid., para. 256.\n469Ibid., para. 243 (quoting Panel Report, US – Softwood Lumber IV (Article 21.5 – Canada) ,\npara. 4.30).\n470Argentina's third participant's submission, para. 6. Argentina's argument, however, focuses on the\nPanel's finding concerning the marketing loan and counter-cyclical payments programmes.\n471Australia's third participant's submission, para. 19.\n472Canada's third participant's submission, para. 23.\n473European Communities' third participant's submission, para. 25.\n474New Zealand's third participant's submission, para. 3.10.\n475Japan requests that the Appellate Body \"clarify the scope of the DSB's recommendations and\nrulings\" when applying the \"particularly close relationship\" test to marketing loan and counter-cyclical\npayments made after 21 September 2005. (Japan's third participant's submission, para. 12)\n\nfinding on the admissibility of Brazil's claim ag ainst marketing loan and counter-cyclical payments\nmade after 21 September 2005.476\n234. We have some difficulty accepting the notion th at a subsidy programme and the payments\nprovided under that programme can be assessed sepa rately. While the payments may cause adverse\neffects, the amount of the payments, beneficiaries, and the terms and conditions of eligibility will be\nprovided in the subsidy programme or legislation authorizing those payments. However, because\nBrazil has made it clear that its appeal is cond itional upon our reversal of the Panel's findings\nconcerning the payments, we begin our analysis by considering the United States' claim that the Panel\nerred in finding that marketing loan and counter-cyclical payments made after 21 September 2005\nare properly within the scope of these Article 21.5 proceedings.\n235. In cases like this one, involving a determination that subsidies have resulted in adverse effects\nto the interests of another WTO Member, Article 7.8 of the SCM Agreement provides that \"the\nMember granting or maintaining\" the subsidy \"shall take appropria te steps to remove the adverse\neffects or shall withdraw the subsidy\". 477 Article 7.8 is one of the \"special or additional rules and\nprocedures on dispute settlement cont ained in the covered agreements\" 478 that are identified in\nArticle 1.2 and Appendix 2 of the DSU, which prev ail over the general DSU rules and procedures to\nthe extent that there is a difference between them. As we see it, Article 7.8 specifies the actions that\nthe respondent Member must take when a subsidy gr anted or maintained by that Member is found to\nhave resulted in adverse effects to the interests of another Member. This means that, in order to\ndetermine whether there is compliance with the DSB's recommendations and rulings in a case\ninvolving such actionable subsidies, a panel would have to assess whether the Member concerned has\ntaken one of the actions foreseen in Article 7.8 of the SCM Agreement. We agree, therefore, with the\nPanel that we must also take into account Article 7.8 of the SCM Agreement in order to determine\nthe proper scope of these Article 21.5 proceedings.479\n236. Pursuant to Article 7.8, the implementing Member has two options to come into compliance.\nThe implementing Member: (i) shall take appropriate steps to remove the adverse effects; or (ii) shall\nwithdraw the subsidy. The use of the terms \"shall take\" and \"shall w ithdraw\" indicate that\n\n476Brazil's other appellant's submission, para. 204.\n477(emphasis added) Article 7.8 of the SCM Agreement reads in full:\nWhere a panel report or an Appellate Bo dy report is adopted in which it is\ndetermined that any subsidy has resulted in adverse effects to the interests of\nanother Member within the meaning of Article 5, the Member granting or\nmaintaining such subsidy shall take appropriate steps to remove the adverse\neffects or shall withdraw the subsidy.\n478Article 1.2 of the DSU.\n479See Panel Report, paras. 9.79-9.81.\n\ncompliance with Article 7.8 of the SCM Agreement will usually involve some action by the\nrespondent Member. This affirma tive action would be directed at effecting the withdrawal of the\nsubsidy or the removal of its adverse effects. A Member would normally not be able to abstain from\ntaking any action on the assumption that the subsidy w ill expire or that the adverse effects of the\nsubsidy will dissipate on their own.\n480\n237. The question then becomes: With respect to which subsidies must the implementing Member\ntake such action? Such action would certainly be expected with respect to subsidies granted in the\npast and which may have formed the basis of a pa nel's determination of present serious prejudice and\nadverse effects.481 However, we do not see the obligation in Article 7.8 as being limited to subsidies\ngranted in the past. Article 7.8 expressly refers to a Member \"granting or maintaining such subsidy\".\nThe verb \"maintain\" suggests, to us, that the oblig ation set forth in Article 7.8 is of a continuous\nnature, extending beyond subsidies granted in the p ast. This means that, in the case of recurring\nannual payments, the obligation in Article 7.8 w ould extend to payments \"maintained\" by the\nrespondent Member beyond the time period examined by the panel for purposes of determining the\nexistence of serious prejudice, as long as those payments continue to have adverse effects.\n482\nOtherwise, the adverse effects of subsequent payments would simply replace the adverse effects that\nthe implementing Member was under an obligation to remove. Such a reading of Article 7.8 would\nnot give meaning and effect to th e term \"maintain\", which is distin ct from the term \"grant\", and has\nalso been included in that Article. Indeed, it would render the term \"maintain\" redundant. In\naddition, it would fail to give meaning and effect to the obligation to \"take appropriate steps to\nremove the adverse effects\" in Article 7.8, and to the requirement under Article 21.5 to \"comply\" with\nthe DSB's recommendations and rulings, including th e requirement to take the remedial action\nforeseen in Article 7.8 as a consequence of a finding of adverse effects.\n238. Our interpretation of Article 7.8 is consistent w ith the context provided by Article 4.7 of the\nSCM Agreement, which applies in cases involving prohibited subsidies. In US – FSC (Article 21.5 –\nEC II) , the Appellate Body stated that, \"if, in an Article 21.5 proceeding, a panel finds that the\nmeasure taken to comply with the Article 4.7 r ecommendation made in the original proceedings does\n\n480See Australia's third participant's submission, para. 16.\n481As noted below, the use of a historical reference or investigation period will usually be necessary\nwhen examining a claim of serious prejudice. (See infra, para. 243)\n482As we see it, the period MY 1999-2002 was merely the historical reference period examined by the\noriginal panel. As an evidentiary matter, that period determined the data set that the original panel would\nexamine. (See Original Panel Report, paras. 7.1198 and 7.1199) Although the original panel referred to the\nperiod MY 1999-2002 in the conclusion that it reached at the end of its analysis of significant price suppression\n(ibid., para. 7.1416), it made no reference to any time period in the \"Conclusions and Recommendations\"\nsection of its report, nor in its discussion of the United States' obligations under Article 7.8 of the SCM\nAgreement. (Ibid., paras. 8.1(g)(i) and 8.3(d))\n\nnot achieve full withdrawal of the prohibited subsidy—either because it leaves the entirety or part of\nthe original prohibited subsidy in place, or becau se it replaces that subsidy with another subsidy\nprohibited under the SCM Agreement —the implementing Member continues to be under the\nobligation to achieve full w ithdrawal of the subsidy\".483 Similarly, a Member would not comply with\nthe obligation in Article 7.8 to withdraw the subsi dy if it leaves an actionable subsidy in place, either\nentirely or partially, or replaces that subsidy with another actionable subsidy. We recognize that,\nunlike Article 4.7, Article 7.8 gives Members th e option of removing the adverse effects as an\nalternative to withdrawing the subsidy. The availa bility of this option is arguably a consequence of\nthe fact that actionable subsidies are not prohibited per se; rather, they are actionable to the extent\nthey cause adverse effects. Nevertheless, the option of removing the adverse effects cannot be read as\nallowing a Member to continue to cause adverse effe cts by maintaining the subsidies that were found\nto have resulted in adverse effects. As observed ear lier, if the contrary proposition were accepted, the\nadverse effects of subsequent subsidies, especially in the case of recurrent subsidies, would simply\nreplace the adverse effects that the implementing Member was required to remove, making the\nobligation in Article 7.8 to \"take appropriate steps to remove the adverse effects\" meaningless.\n239. Our interpretation of Article 7.8 is also c onsistent with the approach taken under the SCM\nAgreement with respect to countervailing duty measures. A determination that the existence of a\nsubsidy causes material injury provides a basis for the prospective application of countervailing duty\nmeasures. Thus, even though the basis for a countervailing duty determination is the injury\ndetermined to exist in the past, the remedial measures are prospective.\n240. The United States submits that \"the obligation under Article 7.8 extends only as far as the\nDSB's recommendations and rulings\"\n484, and asserts that Article 7.8 cannot modify \"the terms of\nreference or the scope of compliance pr oceedings under Article 21.5 of the DSU\". 485 We believe the\nUnited States misinterprets the relevance of Ar ticle 7.8 for interpreting the scope of DSB\nrecommendations and rulings in cases where subsidies are found to cause adverse effects. Article 7.8\ninforms the meaning and scope of the DSB's recomm endations and rulings arising from the original\nproceedings. In our view, Article 7.8 specifies the ac tions that the United States had to take in order\nto comply with the DSB's recommendations and rulings. 486 To the extent a WTO Member fails to\n\n483Appellate Body Report, US – FSC (Article 21.5 – EC II) , para. 84 (referring to subsidies provided\nunder the Foreign Sales Corporation (\"FSC\") Act of 1984 and the FSC Repeal and Exterritorial Income\nExclusion (\"ETI\") Act of 2000, and not fully withdrawn by the Jobs Creation Act of 2004).\n485Ibid., para. 66.\n486See New Zealand's third participant's submission, para. 3.3. New Zealand explains that this result\ndoes not \"amount to 'somehow modifying Article 21.5 of the DSU' as the United States claims\" but rather \"is\nsimply the result of effective treaty interpretation\". (Ibid., para. 3.4)\n\ncomply with the requirement in Article 7.8 that it take steps to remove the adverse effects or withdraw\nthe subsidy, because it maintains the subsidy, it can not be said to have achieved full compliance with\nthese DSB recommendations and rulings.\n241. Brazil and several of the third participants have cautioned that accepting the United States'\napproach would deny effective relief to WTO Memb ers who successfully demonstrate that subsidies\nprovided by another Member have resulted in adverse effects.\n487 The United States, however, rejects\nthe notion that its interpretation would \" undermine the effectiveness of Article 7.8\" 488 of the SCM\nAgreement. It asserts that \"[d]isallowing Brazil's over-expansive claims in this proceeding would not\nmean that Members have no remedy to address the adverse effects of a subsidy\" because \"[n]othing\nprevents Members from challenging the present adver se effects of past or current payments; the\nthreat of serious prejudice of past, current, or futu re payments; or present adverse effects or threat of\nserious prejudice from payment programs 'as such.'\"489\n242. We examine, first, the United States' argu ment that Brazil could have challenged the\nprogrammes \"as such\". As we indicated above 490, we have difficulty accepting the notion that\npayments under a subsidy programme can be assessed separately from the programmes or legislation\npursuant to which those payments are made. 491 This is because the terms and conditions,\nbeneficiaries, amounts, and other aspects of a paym ent will be set in the programme or authorizing\nlegislation, especially in the case of annually recurring payments. The difficulty of divorcing the\npayments from the programmes, in this case, is evident in the Panel's approach to this issue. Despite\nfinding that only the payments we re properly within the scope of the Article 21.5 proceedings, the\nPanel nevertheless considered that it could not exclude completely from its assessment the\nprogrammes under which the payments were provided.\n492\n243. Moreover, even if a complainant brings an \" as such\" challenge to a subsidy programme, it is\ndifficult to see how a panel would assess whether th e subsidy has resulted in adverse effects without\nreviewing the payments actually made under that programme during a past reference period. The\n\n487See infra, footnote 499.\n489Ibid., para. 72.\n490See supra, para. 234.\n491The European Communities and New Zealand expressed similar views at the oral hearing.\n492See Panel Report, para 9.54. Because \"the original panel's finding of serious prejudice was based on\nan analysis that took into consideration the legal pr ovisions or subsidy programmes pursuant to which the\nsubsidies were provided\", the Panel \"c onsider[ed] that it is appropriate in this proceeding to conduct a similar\nanalysis of subsidies in the context of the legal provisions or subsidy programmes pursuant to which the\nsubsidies are granted.\" (Ibid.)\n\nUnited States acknowledges that \"serious prejudice, by its nature, is fact-sp ecific and depends on the\nsituation in the market, a situation that may be cons tantly changing such that the terms and conditions\nfor a subsidy that causes serious prejudice during one time period are not causing serious prejudice for\nanother time period.\" 493 Thus, we find it difficult to conceive how an analysis of whether a\nprogramme \"as such\" resulted in adverse effects w ould differ from an analysis of whether payments\nunder a programme have resulted in such effects.494\n244. Secondly, the United States asserts that paym ents made after 21 September 2005 would have\nbeen covered by the DSB's recommendations and ru lings if Brazil had succeeded in its threat of\nserious prejudice claim in the original proceedings. The United States notes, in this regard, that the\noriginal panel \"declined to make any finding of 'thr eat' of serious prejudice with respect to payments\nallegedly 'mandated' to be made in MY 2003-2007; and ... declined to make any find[ing] of 'threat'\nof serious prejudice with respect to the Step 2, marketing loan, and counter-cyclical payment\nprograms themselves (which would have implicated all payments under the programs).\" 495\nHowever, a claim of serious prejudice may relate to a different situation than a claim of threat of\nserious prejudice. A claim of present serious prejudice relates to the existence of prejudice in the\npast, and present, and that may continue in the future. By contrast, a claim of threat of serious\nprejudice relates to prejudice that does not yet exist, but is imminent such that it will materialize in the\nnear future. Therefore, a threat of serious pr ejudice claim does not necessarily capture and provide a\nremedy with respect to the same scenar io as a claim of present serious prejudice. 496 A distinction\nbetween injury and threat of injury also exists in the context of countervailing duty measures. Once a\n\n494We do not believe that only DSB recommendations and rulings of \"as such\" WTO-inconsistency\ncreate implementation obligations with prospective effect. DSB recommendations and rulings involving\nfindings of \"as applied\" WTO-inconsistency also give ri se to prospective implementation obligations as of the\nadoption of the panel and Appellate Body reports. Indeed, remedies in WTO law are generally understood to be\nprospective in nature.\n495United States' appellant's submission, para. 60. (original emphasis; footnote omitted)\n496See ibid. The original panel declined to make a findin g on Brazil's threat of serious prejudice claim\npartly because it considered that:\n[b]ecause the Panel's \"present\" serious prejudice findings include findings of\ninconsistency that deal with the FSRI Act of 2002 and subsidies granted\nthereunder in MY 2002, the United States is obliged to take action\nconcerning its present statutory and regulatory framework as a result of our\n\"present\" serious prejudice finding. We recall that, pursuant to Article 7.8 of\nthe SCM Agreement, the United States is under an obligation to \"take\nappropriate steps to remove the adverse effects or ... withdraw the subsidy\".\n(Original Panel Report, para. 7.1501 (emphasis added; footnote omitted))\n\ndetermination of present material injury is ma de, a Member may impose countervailing duties on\nfuture imports without any obligation to demonstrate a threat of material injury.\n245. Thus, the approach advocated by the United St ates would have serious implications for a\ncomplaining Member's ability to obtain relief agains t adverse effects of actionable subsidies. Under\nsuch an approach, a complaining Member that has demonstrated that subsidies provided by another\nMember have resulted in adverse effects would obtai n relief only with respect to any lingering effects\nof the subsidies provided during the period examined by the panel.\n497 As Australia notes 498, such\npanel findings would essentially be declaratory in nature, because there would be no impact on\nsubsidies granted or maintained after the panel made its finding. The complaining Member would\nhave to initiate another dispute to obtain relief w ith respect to payments made after the period\nexamined by the panel, even if those subsidies are recurring payments or otherwise of the same nature\nas those found to have resulted in adverse effects. Even if the complaining Member were to succeed\nin its claims a second time, the subsidizing Member could provide further subsidies after the second\npanel's ruling, and the complaining Member would have to initiate yet another dispute, and this cycle\ncould continue. As Brazil and several of the thir d participants have warned, the inability of a\ncomplaining Member to obtain relief against subsidi es that result in adverse effects to its interests\nwould seriously undermine the disciplines contained in Articles 5 and 6 of the SCM Agreement.499\n246. The approach advocated by the United States would not only compromise the effectiveness of\nthe provisions on actionable subsidies in the SCM Agreement, it is also difficult to reconcile with the\nobjectives of the DSU. According to Article 3.3, one of the objectives of the DSU is \"the prompt\nsettlement of situations in which a Member consid ers that any benefits accruing to it directly or\nindirectly under the covered agreements are being impaired by measures take n by another Member\".\nArticle 21.1 further provides that \"[p]rompt complia nce with recommendations or rulings of the DSB\nis essential in order to ensure effective resolutio n of disputes to the benefit of all Members\".\n\n497This assumes that it is even possible to remove the effects of a subsidy that has already been granted.\n498Australia's responses to questioning at the oral hearing.\n499See Brazil's appellee's submission, para. 245. Aust ralia asserts that the ap proach advocated by the\nUnited States \"would lead to a complaining Member becoming involved in a permanent litigation loop of annual\nchallenges concurrent with the expiry of each marketi ng year\", thereby \"defeat[ing] the object and purpose of\nArticle 21.5 proceedings, and would al so be contrary to Articles 3 and 21 .1 of the DSU, which recognize that\nprompt compliance with the recommendations and rulings of the DSB is essential to the effective functioning of\nthe WTO and the effective resolution of disputes.\" (Austra lia's third participant's submission, para. 17 (footnote\nomitted)) Canada describes the United States' position as \"a direct challenge to the effectiveness of compliance\nproceedings in serious prejudice cas es\". (Canada's third participant's submission, para. 17) New Zealand\nsubmits that \"[t]he United States' interpretation twists th e linkage between the adverse effects provisions of the\nSCM Agreement and the compliance provisions of the DSU into a ... never-ending cycle of challenge and\n'implementation'\", and adds that \"[s]uch an interpretation robs Article 7.8 of the SCM Agreement of any utility\nand renders pointless Article 21.5 compliance proceedings as they relate to adverse effects claims of this\nnature\". (New Zealand's third participant's submission, para. 3.9)\n\nRequiring a WTO Member to initiate new proceedings to challenge the same type of recurrent\nsubsidies that were found to result in adverse effe cts, simply because the subsidies were provided\nsubsequent to the original proceedings, does not promote \"prompt settlement\" nor \"prompt\ncompliance\". Moreover, the issue before us is one of admissibility. Even if the claim is allowed to\nproceed in an Article 21.5 proceeding, the compla ining Member would still have to establish the\nexistence of adverse effects that allegedly result from the subsidies at issue.\n247. It is undisputed that the only action the United States had taken to comply with the DSB's\nrecommendations and rulings concerning serious pr ejudice, and thereby with its obligations under\nArticle 7.8 of the SCM Agreement, was the repeal of the Step 2 payments programme effective as\nof 1 August 2006.500 The United States has not contested that it continues to provide marketing loan\nand counter-cyclical payments to United States produ cers of upland cotton and that \"the legislative\nand regulatory provisions governing these ... payments have not been changed\".501 Thus, the question\nthat remained before the Panel was whether the United States had ta ken \"appropriate steps to remove\nthe adverse effects\" of the subsidies found to have r esulted in adverse effects to the interests of Brazil.\nIn order to respond to that question, it was proper for the Panel to examine the marketing loan and\ncounter-cyclical payments made by the United States after the expiration of the implementation period\non 21 September 2005.\n248. Accordingly, we agree with the Panel that, \"to the extent marketing loan payments and\ncounter-cyclical payments made by the United St ates after 21 September 2005 are provided under the\nsame conditions and criteria as the marketing loan pa yments and counter-cyclical payments subject to\nthe original panel's finding of 'present' serious pr ejudice, they are subject to the obligation of the\nUnited States under Article 7.8 of the SCM Agreement to take appropriate steps to remove the\nadverse effects of the subsidy\". 502 We further agree that, as a consequence, Brazil's claim that the\nUnited States failed to comply with its obligations under Article 7.8 with respect to those payments\nwas properly within the scope of the Article 21. 5 proceedings, because the \"claim pertains to a\ndisagreement between the parties as to the 'existen ce or consistency with a covered agreement of\nmeasures taken to comply' with the r ecommendations and rulings of the DSB.\"503 More precisely, the\nclaim relates to whether the measure taken by th e United States achieves full compliance with the\n\n500See Panel Report, para. 3.7.\n501Ibid., paras. 3.9 and 3.12. See also ibid., para. 9.79, noting that \"[i]t is not in dispute that the United\nStates presently provides marketing loan and counter-cyclical payments on the same legal basis and subject to\nthe same conditions and criteria as the marketing loan payments and counter-cyclical payments that were subject\nto the panel's finding of 'present' serious prejudice\".\n502Ibid., para. 9.81.\n503Ibid.\n\nDSB's recommendations and rulings as informed by the obligation of the United States under\nArticle 7.8 of the SCM Agreement.\n249. For these reasons, we uphold the Panel's finding, in paragraph 9.81 of the Panel Report, that\nBrazil's claims against marketing loan and counte r-cyclical payments made by the United States\nafter 21 September 2005 are properly within the scope of these Article 21.5 proceedings.\nF. Brazil's Other Appeal\n250. In its other appeal, Brazil claims that the Pane l erred in concluding that the original panel's\nfindings did not cover the marketing loan payment and counter-cyclical payments programmes.\n504\nAccording to Brazil, the Panel's finding constitutes a le gal error or, alternatively, a failure to make an\nobjective assessment of the matter under Article 11 of the DSU. 505 Brazil's appeal is conditional on\nthe Appellate Body reversing the Panel's finding that payments made af ter 21 September 2005, under\nthe marketing loan payments and counter-cyclical payments programmes, are measures taken to\ncomply that are properly within the scope of these Article 21.5 proceedings.506\n251. In the event that its conditional appeal is accep ted, Brazil requests the Appellate Body to find\nthat marketing loan and counter-cyclical payments made after 21 September 2005 constitute measures\ntaken to comply with the DSB's recommendations a nd rulings in the original proceedings because of\nthe close connection to the marketing loan and counter-cyclical payments programmes that are subject\nto those recommendations and rulings. Alternatively, Brazil requests the Appellate Body to find that,\nthrough the continued use of the marketing loan and counter-cyclical payments programmes, the\nUnited States causes serious prejudice to Brazil's interests.507\n252. The United States asserts that the \"original panel's findings and recommendations with respect\nto 'present' serious prejudice were limited to pa yments under the marketing loan and counter-cyclical\nprograms, and did not encompass the programs themselves\". 508 It explains that the original panel\n\n504See Brazil's other appellant's submission, para. 46 (referring to Panel Report, para. 9.54).\n 505Brazil submits that, \"[i]n mischaracterizing the sc ope of the original panel's findings, and of the\nDSB's recommendations and rulings, the Panel failed to make an 'objective assessment of the matter before it'.\"\n(Brazil's other appellant's submission, paras. 127) In pa rticular, Brazil alleges that the Panel failed to consider\nthe original panel's description of the \"measures at issu e\" and failed to examine the original panel's terms of\nreference, as set forth in the original panel request. Brazil adds, however, that \"the Appellate Body need not\naddress this claim under Article 11 of the DSU if it find s that the compliance Panel erred under Article 21.5 of\nthe DSU in examining its terms of reference pursuant to the DSB's recommendations and rulings regarding the\nsubsidy programs\". (Ibid., para. 130)\n506See ibid., para. 204.\n507Ibid., para. 205.\n508United States' appellee's submission, para. 20 (referring to Original Panel Report, paras. 7.1416\nand 8.1(g)(i)).\n\n\"conducted its analysis consistent with Brazil's clai ms, which, ... did not include a claim of 'present'\nserious prejudice regarding the marketing lo an and counter-cyclical payment programs\nthemselves\".509 In addition, the United States argues that Brazil has failed to demonstrate that the\nPanel failed to discharge its duties under Article 11 of the DSU by \"disregarding or misconstruing\" 510\nthe findings of the original panel, or the partie s' arguments concerning those findings. Thus, the\nUnited States requests the Appellate Body to uphold the Panel's finding that \"the original panel's\nfindings, and the DSB's recommendations and ruli ngs, include only marketing loan and counter-\ncyclical payments made in MY 1999-2002\".511\n253. Argentina and New Zealand support Brazil's conditional appeal. 512 By contrast, the European\nCommunities considers that the original panel's fi ndings related to the marketing loan and counter-\ncyclical payments and not to the programmes authorizing those payments.513\n254. We have upheld the Panel's finding that mark eting loan and counter-cyclical payments made\nafter 21 September 2005 are properly within the scope of these Article 21.5 proceedings and,\ntherefore, the condition on which Brazil's other a ppeal is predicated has not been fulfilled.\nConsequently, we do not need to address Brazil's other appeal.\nVI. GSM 102 Export Credit Guarantees\n255. We turn now to the United States' appeal of the Panel's conclusion that export credit\nguarantees issued after 31 July 2005 under the revised GSM 102 programme constitute export\nsubsidies because they are provided at premiums which are inadequate to cover the long-term\noperating costs and losses of the programme, within th e meaning of item (j) of the Illustrative List.\nWe begin our analysis by providing a summary of the relevant aspects of the original proceedings in\nSection A and a description of the measures taken by the United States to comply with the DSB's\nrecommendations and rulings in Section B. This is followed by summaries of the Panel's findings in\nthese Article 21.5 proceedings in Section C and of the claims and arguments raised on appeal in\nSection D. We then analyze in Section E the specific issues raised in the United States' appeal against\nthe Panel's assessment of the revised GSM 102 progr amme under item (j) of the Illustrative List.\nFinally, in Section F, we set out our conclusions.\n\n510Ibid., para. 59.\n512See Argentina's third participant's submission, pa ra. 17; and New Zealand's third participant's\nsubmission, para. 3.11.\n 513See European Communities' third participant's submission, para. 26.\n\nA. Original Proceedings\n256. As described above\n514, Brazil challenged three export credit guarantee programmes in the\noriginal proceedings: the GSM 102, the GSM 103, and the SCGP. The GSM 102 programme\nguarantees the repayment of credit made available to finance export sales of agricultural commodities\non credit terms between 90 days and 3 years. To obtain the guarantee, the exporter had to pay a fee\ncalculated on the basis of guaranteed value, according to a schedule of rates applicable to different\ncredit terms and repayment intervals. The fee is capped by law at one per cent of the guaranteed\nvalue.\n515 The GSM 103 programme operated in a similar fashion to the GSM 102 programme,\nalthough the GSM 103 programme guaranteed export credits with longer terms (between three and ten\nyears) and the fees under GSM 103 were not capped by law. 516 Finally, the SCGP guaranteed credits\nprovided by the exporter to the purchaser for a term not exceeding 180 days. 517 Like the GSM 102,\nfees for the SCGP are capped by law at one per cent of the dollar amount guaranteed.518\n257. The original panel and the Appellate Body foun d that export credit guarantees provided under\nthe GSM 102, GSM 103, and SCGP programmes to un scheduled products (including upland cotton)\nand one scheduled product (rice) constituted export s ubsidies applied in a manner that resulted in\ncircumvention of the United States' export subsid y commitments, and were thereby inconsistent with\nArticles 10.1 and 8 of the Agreement of Agriculture .519 To the extent that these subsidies did not\nfully conform to the Agreement on Agriculture , these export credit guarantees were also found to be\nprohibited export subsidies within the meaning of Articles 3.1(a) and 3.2 of the SCM Agreement.520\nB. Measures Taken by the United States\n258. Following the adoption of the original pa nel and Appellate Body reports, the USDA\nannounced that, as of 1 July 2005, it would no longer accept applications under the GSM 103\nprogramme and would apply a new fee structure to the GSM 102 and SCGP programmes. Under the\nnew fee structure, fees were increased and differe nt fees are applicable depending on country risk,\nrepayment term, and repayment frequency.\n521 More specifically, countries are classified into eight\n\n514See supra, para. 189.\n515Panel Report, para. 3.14.\n516Ibid.\n517Ibid.\n518Original Panel Report, para. 7.244.\n519Ibid., para. 8.1(d)(i).\n520Appellate Body Report, US – Upland Cotton, para. 763(e)(iv).\n521Fees were increased by 46 per cent on average (23 per cent on a weighted-average basis). (Panel\nReport, para. 14.119)\n\nrisk categories, according to the extent of the ri sk. Credit guarantees for exports to countries in a\nhigher risk category are subject to higher fees, and exports to countries in the highest risk category are\nnot eligible for credit guarantees. However, the one per cent statutory fee cap was maintained.\nSubsequently, in October 2005, the United States announced that it would no longer issue export\ncredit guarantees under the SCGP.522\nC. Article 21.5 Proceedings\n259. In the Article 21.5 proceedings, Brazil claimed that \"GSM 102 export credit guarantees\nprovided to exports of unscheduled products and exports of three scheduled products—rice, pig meat\nand poultry meat—since the end of the implementation period, i.e. 1 July 2005\" resulted in\ncircumvention of the United States' export subsidy commitments, contrary to Articles 10.1 and 8 of\nthe Agreement of Agriculture , and are consequently also prohib ited export subsidies contrary to\nArticle 3.1(a) and 3.2 of the SCM Agreement.523\n260. The Panel observed that it would first dete rmine whether GSM 102 export credit guarantees\nconstitute \"export subsidies\" within the meaning of Article 10.1 of the Agreement on Agriculture .\nThe Panel noted that, because \"the Agreement on Agriculture does not contain a comprehensive\ndefinition\" of the term \"export subsidy\", it would refer to the SCM Agreement for contextual\nguidance.524 In particular, the Panel said it would determine whether GSM 102 guarantees are \"export\nsubsidies\" by applying the standard set out in item (j) of the Illustrative List. 525 In order to determine\nwhether export credit guarantees under the GSM 102 programme were provided at \"premium rates\nthat are inadequate to cover its long term operating costs and losse s\", the Panel conducted a \"two-step\nanalysis\".526 It first reviewed evidence of a \"quantitative nature submitted by the parties\" and then it\nexamined \"evidence pertaining to elements of th e 'structure, design and operation' of the GSM 102\nprogramme submitted by Brazil\".527\n\n522Panel Report, para. 3.16.\n523Ibid., para. 14.40. (footnote omitted)\n524Ibid., para. 14.48.\n525Ibid., para. 14.52. In addition to claiming that the export credit guarantees did not meet the\nbenchmark in item (j) of the Illustrative List, Brazil claimed that the export credit guarantees meet the definition\nof an export subsidy under the terms of Articles 1.1 and 3.1(a) of the SCM Agreement, (that is, that they are\n\"financial contributions\" that confer a \"benefit\" and are contingent upon export performance). Brazil described\nthese two lines of inquiry as separate claims and asked the Panel to resolve the latter one first. The Panel,\nhowever, rejected Brazil's request because it considered th e two lines of inquiry as alternative arguments, rather\nthan separate claims. It went on to state that it would only address Brazil's argument based on the definition of\nan export subsidy in Articles 1.1 and 3. 1(a) if it did not resolve the matter under item (j) of the Illustrative List.\nBecause the Panel made a finding under item (j), it foun d it unnecessary to address Brazil's other argument.\n(Ibid., paras. 14.49-14.53 and para. 14.135)\n526Ibid., para. 14.64.\n527Ibid.\n\n261. As regards the evidence of a \"quantitative natu re\", the Panel noted that the United States\nbudgets for 2007 and 2008 continued to project a loss in connection with GSM 102 export credit\nguarantees issued between 2006 and 2008.\n528 The Panel agreed with the original panel that\n\"consistently positive initial subsidy estimates pr ovide an indication by the [United States]\ngovernment that it expects the export credit guara ntee programmes ... to be run at a net cost\". 529 The\nPanel considered it \"highly significant that the [United States] Government continues to project, at the\ntime of their issuance, that new GSM 102 guarant ees issued under the revised programme will be\nprovided at a net cost.\" 530 The Panel rejected the United Stat es' arguments that the initial estimates\nwere unreliable because they were established before any use is made of the programme and were\ncalculated on the basis of government-wide estimati on rules without regard to CCC's actual default\nexperience. According to the Panel, these initial estimates were subsequently re-adjusted in the\nUnited States budgets of the two years subsequent to the fiscal year in which the initial estimate\nappears\n531, and in no case had such an adjustment turn ed a positive subsidy estimate into a negative\none.532 The Panel additionally noted a USDA statement that the credit models used to calculate the\nsubsidy estimate \"currently provide reliable estimates\" 533, and concluded that the CCC's estimation\nmethod is relied upon by the United States' government itself to assess the long-term net costs of its\nexport credit guarantee programmes.\n262. The Panel also considered new budget da ta submitted by the United States concerning\ncumulative subsequent re-estimates of the initial su bsidy estimates on a cohort-specific basis for the\n\n528Panel Report, para. 14.69.\n530Ibid., para. 14.71.\n531Ibid., para. 14.76. As the Panel noted, \"[e]ach annual budget provides long-term subsidy estimates\nfor three cohorts of export credit guarantees: the cohort of guarantees to be i ssued in the fiscal year that has not\nyet begun (for instance, in the 2008 budget, the 2008 cohort ), the cohort of guarantees issued in the fiscal year\nthat has partly elapsed at the time the budget is released (in the 2008 budget, the 2007 cohort), and the cohort of\nguarantees issued in the fiscal year that has most r ecently ended (in the 2008 b udget, the 2006 cohort).\" ( Ibid.,\nfootnote 681 to para. 14.76) In addition, the estimates are subject to further re-estimates over the lifetime of a\ncohort. (See infra, footnote 534)\n532Ibid., para. 14.76 (referring to Exhibit Bra-617 submitted by Brazil to the Panel and Exhibit US-8\nsubmitted by the United States to the Panel). The Panel explained:\nWe need not quantify such a cost. Therefore, the fact that the initial subsidy\nestimate may be overstated does not, in our view, mean that it is not a reliable\npredictor of a net cost to the [United States] Government.\n(Ibid., para. 14.76)\n533Ibid., para. 14.77 (referring to Exhibit Bra- 588 submitted by Brazil to the Panel, supra,\nfootnote 170).\n\nperiod 1992-2006.534 A cohort is comprised of all guarantees issued in a given year. 535 The United\nStates submitted a table showing an anticipated profit of US$926 million for the 1992-2002 cohorts\n(which are the cohorts examined by the origin al panel) and of US$403 million for the 1992-2006\ncohorts. The Panel was not convinced that the re- estimates data established that all positive initial\nestimates would eventually turn in to negative ones. The Panel noted , in particular, that the United\nStates Government continued to project, for th e new cohorts issued under the revised GSM 102\nafter 1 July 2005, that the guarantees woul d be provided at a long-term net cost. 536 Moreover, it\nobserved that the re-estimates data (\"except those related to the 1994 and 1995 cohorts, which have\nclosed\") were still estimates, albeit revised, and they did not est ablish that the programmes were not\nprovided at a net cost to the government. 537 In addition, the Panel reviewed cash accounting evidence\nsubmitted by Brazil and relevant figures reported in the CCC's Financial Statements, both of which, in\nthe Panel's view, pointed to the programmes bein g provided at a net cost to the United States\nGovernment.538\n263. The Panel concluded:\n[N]otwithstanding the reestimates data submitted by the United States,\nwe find it highly significant that the [United States] Government\ncontinues, at the time of their issu ance, to project that new GSM 102\nexport credit guarantees will, in the long-term, be provided at a net\ncost to the Government. In light of this, we consider that the initial\nsubsidy estimates provide a str ong indication that GSM 102 export\ncredit guarantees are provided against premia which are inadequate to\ncover the long-term operating costs and losses of the GSM 102\nprogramme.\n539\n264. The Panel next examined a comparison submitte d by Brazil of the prem iums charged under\nthe revised GSM 102 programme and the minimum premium rates (the \"MPRs\") provided in the\nOrganisation for Economic Co-opera tion and Development (the \"OEC D\") Arrangement on Officially\nSupported Export Credits (the \"OECD Arrangement\") . The Panel observed that the MPRs do not\n\n534Pursuant to the Federal Credit Reform Act of 1990 (the \"FCRA\") ( supra, footnote 168), initial\nsubsidy estimates in annual bu dgets are subject to re-estimations until a cohort is closed. The CCC is required\nto re-estimate the subsidy cost throughout the life of each cohort to account for differences between the original\nassumptions of cash flow and actual cash flow or revised assumptions about future cash flow. (Panel Report,\nparas. 14.78 and 14.79; Original Panel Report, footnote 1003 to para. 7.843) Only the 1994 and 1995 cohorts\nhave closed. (Panel Report, para. 14.81) According to the United States, this re-estimate process \"project[ed]\ncashflows to and from the government over the life of the cohort\". (United States' response to Question 111\nposed by the Panel, Panel Report, p. D-430, para. 240)\n535Panel Report, para. 14.57.\n536Ibid., para. 14.80.\n537Ibid., para. 14.81.\n538Ibid., paras. 14.81-14.87.\n539Ibid., para. 14.89.\n\nprovide a legally binding benchm ark for determining whether a programme constitutes an export\nsubsidy within the scope of item (j).\n540 Nevertheless, the Panel opined that the MPRs are relevant\n\"from an evidentiary point of view\". 541 In the light of the magnitude of the difference between the\nMPRs and the fees under the revised GSM 102 pr ogramme (the MPRs are on average 106 per cent\nabove GSM 102 fees), the Panel considered that \"the MPRs may provide an indication, on an\ninformed basis, of the fact that GSM 102 fees are set at a level which is insufficient to cover the long\nterm operating costs and losses.\"542\n265. Turning to the structure, design, and operation of the revised GSM 102 programme, the Panel\nrecalled the original panel's finding that the CCC ha s access to funds from the United States Treasury\nand benefits from the full faith and credit of the Un ited States Government. According to the Panel,\n\"this is still the case\" with respect to the revised GSM 102 programme. 543 Furthermore, the Panel\nrecalled the original panel's finding that the fees charged by the CCC were not \"risk based\" either with\nrespect to country risk or the cr edit-worthiness of the borrower in an individual transaction. With\nregard to borrowers' credit-worthiness, the Pane l found that the GSM 102 fees were not risk-based\ninsofar as they did not take into account the risk of default that is specific to an individual foreign\nobligor.544 With regard to country risk, the Panel concluded that the non-repeal of the one per cent fee\ncap was an indication that the fees charged for GSM 102 export credit guarantees were still not \"risk-\nbased\".\n545\n266. The Panel found that this conclusion was confirmed by the evidence presented by Brazil with\nrespect to the insufficient \"scaling\" (namely, the rate of increase) of GSM 102 fees in relation to the\nrisks that the programme does take into consideration—country risk and length of tenor. As the Panel\nexplained, Brazil's evidence showed significant di fferences between the rates of increase, based on\ncountry risk, of GSM 102 fees and the fees charged by the United States Export-Import Bank (the\n\"Ex-Im Bank\") for two of its programmes: the Letter of Credit Insurance (the \"LCI\") and the\nMedium-Term Export Credit Insurance (the \"MTI\").\n546 In the Panel's view, the fact that the financial\nproducts being compared are not identical did not fundamentally undermine the evidentiary relevance\n\n540Panel Report, para. 14.94.\n541Ibid., para. 14.95. The Panel added that the MPRs \"may be regarded as representing an assessment,\ndeveloped by and agreed upon by the export credit experts of the Participants to the Arrangement, of the premia\nlevels that are necessary to ensure that export credit guarantee programmes cover their long-term operating costs\nand losses\". (Ibid., para. 14.96)\n542Ibid., para. 14.97.\n543Ibid., para. 14.110.\n544Ibid., para. 14.115.\n545Ibid., para. 14.120.\n546Ibid., para. 14.125.\n\nof the comparison of the scaling of their fees. 547 The Panel found, therefore, that the significant\ndifference between the scaling of fees suggested that the one per cent statutory fee cap on GSM 102\nfees prevented the adoption of a truly risk-based fee structure by the CCC.548\n267. On the basis of its examination of the structure, design, and operation of the GSM 102\nprogramme, the Panel concluded:\nIn light of these considerations – the CCC's access to funds from the\n[United States] Treasury, which f acilitates the functioning of the\nprogramme, the fact that GSM 102 fees do not vary with foreign\nobligor risk, the fact that the one per cent fee cap has not been\nrepealed and in our view prevents the adoption of risk-based fees\n(notably due to the insufficient \"scaling\" of GSM 102 fees) – we\nconclude that the GSM 102 programme is not designed to cover its\nlong term operating costs and losses.\n549\n268. In concluding its analysis under item (j), the Panel stated:\nWe find that Brazil has met its burden of proof in this respect and that\nit has established that the GSM 102 export credit guarantee\nprogramme constitutes an \"export subsidy\" because it is provided\nagainst premiums which are inad equate to cover its long term\noperating costs and losses under the terms of item (j) of the Illustrative\nList.\n550\nThe Panel emphasized that it reached this conclusi on \"on the basis of the totality of the evidence\nsubmitted by Brazil in this respect\".551\n269. The Panel further found that, by applying th e GSM 102 export credit guarantees in a manner\nthat resulted in circumvention of its export subs idy commitments regarding three scheduled products\n(rice, pig meat, and poultry meat) and unscheduled products (including upland cotton) supported by\nthe guarantees, the United States acted inconsistently with Articles 10.1 and 8 of the Agreement on\nAgriculture.552 To the extent that the GSM 102 export credit guarantees did not conform to the\nprovisions of the Agreement on Agriculture , the Panel found that the United States also \"acted\ninconsistently with Articles 3.1(a) and 3.2 of the SCM Agreement by providing export subsidies to\nunscheduled products and by providing export subs idies to scheduled products in excess of its\ncommitments under the Agreement on Agriculture \".553 Consequently, the Panel concluded that the\n\n547Panel Report, para. 14.126.\n548Ibid., para. 14.128.\n549Ibid., para. 14.131.\n550Ibid., para. 14.133.\n551Ibid.\n552Ibid., paras. 14.140 and 14.149.\n553Ibid., paras. 14.150 and 14.156.\n\nUnited States had failed to comply with the DSB' s recommendations to bring its measures into\nconformity with the Agreement on Agriculture , and had failed to comply with the DSB's\nrecommendation, pursuant to Article 4.7 of the SCM Agreement , to withdraw the prohibited\nsubsidies.\n554\nD. Claims and Arguments on Appeal\n270. The United States challenges on appeal several aspects of what it describes as the Panel's\napplication of item (j) to the facts of the case. Fi rst, the United States submits that, in conducting its\nquantitative analysis, the Panel erroneously relie d on initial budgetary estimates presented by Brazil\neven though Brazil accounted for neither the \"flaws inherent in the initial subsidy estimates\", such as\ngovernment-wide default and recovery rates, nor th e new re-estimates submitted by the United States\nthat show \"profitability\".555 Secondly, the United States alleges that the Panel inappropriately made a\ncomparison of GSM 102 fees to MPRs under the OECD Arrangement despite recognizing that the\nlatter do not have any legal status as a benchmark for examining agricultural export credit guarantees\npursuant to item (j). 556 Thirdly, the United States argues th at the Panel erred in comparing the\n\"scaling\" of the fees under the revised GSM 102 programme with fees under the \"fundamentally\ndissimilar\" programmes of the United States Ex-Im Bank. 557 Fourthly, the United States maintains\nthat the Panel erred in finding that the continued existence of the one per cent fee cap prevented the\nimposition of risk-based fees. 558 Finally, the United States asserts that the Panel \"fundamentally\nmisinterpreted\" item (j) in relying on certain factors not foreseen by that provis ion, including the fact\nthat the CCC has unlimited access to United States Government funds and that the GSM 102 fees do\nnot reflect foreign obligor risk.559\n271. The United States also argues that the Panel failed to make \"an objective assessment of the\nmatter\", as required by Article 11 of the DSU, with respect to Brazil's claim that the GSM 102 export\ncredit guarantees constituted export subsidies. According to the United States, the Panel:\n(i) disregarded the import of the budgetary re -estimates data submitted by the United States; 560 and\n(ii) distorted the meaning of the evidence on reco rd when relying on \"flawed\" comparisons between\nGSM fees and MPRs 561, and a comparison of the \"scaling\" of fees under the GSM 102 programme\n\n554Panel Report, paras. 14.150 and 14.157.\n556Ibid., para. 89.\n557Ibid., para. 103.\n558Ibid., para. 109.\n559Ibid., para. 110.\n560Ibid., para. 117.\n561Ibid., para. 121.\n\nand the Ex-Im Bank's export credit insurance progra mmes, despite \"the obvious factual distinctions\"\nbetween these programmes.562\n272. Brazil responds that the Panel properly relied on the initial estimates in the United States\nbudget data in reviewing the revised GSM 102 progr amme pursuant to item (j), because the evidence\nin the record \"provides a more than plausible basis for concluding that the initial estimates are\nsignificant indicators that new GSM 102 guarantees issued under the revised programme will be\nprovided at a cost.\" 563 Moreover, Brazil maintains that the Panel did not ignore the evidence\nsubmitted by the United States relating to re-estimates, and that it was within the bounds of the Panel's\ndiscretion to have attributed to the evidence a different weight or meaning than did the United\nStates.\n564 Brazil further submits that the Panel did not consider the comparison of the new GSM 102\nfees to the OECD MPRs as \"dispositive\" and that, in any event, consideration of the comparison is\nconsistent with the Panel's discretion as the trier of facts. 565 Furthermore, Brazil maintains that the\nPanel properly assessed whether revised GSM 102 fees adequately respond to the increased costs of\nrisk—including country risk and tenor length—by comparing the scaling of fees under the revised\nGSM 102 programme and the Ex-Im Bank's programmes. In so doing, the Panel did not \"dictate ...\nspecific standards as to scaling\" but relied on the extent of the differ ence as an evidentiary indication\nof the shortcomings of the GSM 102 programme.566 Brazil additionally argues that the Panel properly\ntreated the one per cent fee cap as another element supporting its conclusion that the revised GSM 102\nprogramme is not structured, designed, and operate d to ensure that fees cover long-term costs and\nlosses, without according \"presumptiv e weight to such evidence\". 567 Finally, Brazil argues that the\nPanel was entitled to rely on the fact that the CCC has access to government funds568, and submits that\nthe Panel's consideration of the revised GSM 102 programme's failure to account for foreign obligor\nrisk represents a proper interpretation of item (j), because the fact that the new GSM 102 fees failed to\naccount for costs associated with increased foreign obligor risk \"is not cured by diversifying the\nriskiness of its portfolio through exposure limits\". 569 On this basis, Brazil concludes that the United\nStates failed to substantiate error in any of the Panel's intermediate findings, much less error in its\n\n564Ibid., para. 362.\n565Ibid., paras. 376 and 391.\n566Ibid., para. 433.\n567Ibid., paras. 469 and 470.\n568Ibid., para. 484.\n569Ibid., para. 506.\n\noverall finding that the revised GSM 102 programme constitutes an export subsidy which was based\non the totality of a broad range of evidence.\n570\n273. With respect to the United States' claim under Ar ticle 11 of the DSU, Brazil submits that the\nUnited States' allegation that the Panel should no t have attached the weight it did to Brazil's\narguments and evidence is insufficient to demons trate that the Panel did not make an objective\nassessment of the matter.571\nE. The Panel's Assessment of the Revised GSM 102 Programme under Item (j) of the\nIllustrative List of Export Subsidies\n274. Before turning to the specific i ssues raised in the United States ' appeal, we consider it useful\nto recall certain general observations made by the Appellate Body concerning the interpretation of\nitem (j) of the Illustrative List of Export Subsidies, referred to in Article 3.1 of the SCM Agreement.\n275. Article 3.1 of the SCM Agreement provides, in relevant part:\nExcept as provided in the Agreem ent on Agriculture, the following\nsubsidies, within the meaning of Article 1, shall be prohibited:\n(a) subsidies contingent, in law or in fact, whether solely or as one\n of several other conditions, upon export performance, including\n those illustrated in Annex I 5; (footnote omitted)\n5Measures referred to in Annex I as not constituting export subsidies\nshall not be prohibited under this or any other provision of this\nAgreement.\n\n276. Item (j) of the Illustrative List reads:\nThe provision by governments (or special institutions controlled by\ngovernments) of export credit guarantee or insurance programmes, of\ninsurance or guarantee programmes ag ainst increases in the cost of\nexported products or of exchange risk programmes, at premium rates\nwhich are inadequate to cover the long-term operating costs and\nlosses of the programmes.\n277. The Appellate Body has explained that \"the measure of value under item (j) is the overall cost\nto the government, as the service provider, of providing the service.\"\n572 It has described the test set\nout in item (j) as \"essentially financial, as it requires a panel to look at the financial performance of an\nexport credit guarantee program, that is, its revenu es from premiums and its long-term operating costs\n\n571Ibid., paras. 459 and 510.\n572Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand and US I), para. 93.\n\nand losses\".573 According to the Appellate Body, \"the fo cus of item (j) is on the inadequacy of the\npremiums\".574 This focus implies that \"what is require d is a finding on whether the premiums are\ninsufficient and thus whether the specific export credit guarantee program at issue constitutes an\nexport subsidy\".575 Item (j) does not require \"a finding of the precise difference between premiums\nand long-term operating costs and losses\". 576 Nor does item (j) require a panel \"to choose one\nparticular basis for the calculation\" of the adequacy of the premiums.577\n278. Thus, to the extent relevant data is available, an analysis under item (j) will primarily involve\na quantitative evaluation of the financial performance of a programme. Such an analysis will focus on\nthe difference, if any, between the revenues derived from the premiums charged under the programme\nand its long-term operating costs and losses. An analysis under item (j) may examine both\nretrospective data relating to a programme's hist orical performance and projections of its future\nperformance. Evidence concerning a programme's stru cture, design, and operation may be relevant in\nsituations where financial data is not available. It may also serve as a supplementary means for\nassessing the adequacy of premiums where relevant da ta are available. We note that the Panel was\npresented with various financial data relating to the performance of the revised GSM 102 programme.\nThus, as a general matter, we consider it appropriate for the Panel to have first examined the evidence\nof a quantitative nature submitted by the parties be fore evaluating evidence concerning the structure,\ndesign, and operation of the programme as additional elements for appraisal.\n1. The Panel's Quantitative Analysis under Item (j)\n279. The Panel reviewed four pieces of evidence in its quantitative analysis under item (j). The\nPanel began by examining evidence submitted by Br azil regarding the initial subsidy estimates\nreported in the 2007 and 2008 United States budgets. Observing that these estimates projected losses\nfor the 2006, 2007, and 2008 cohorts, the Panel stated that \"[i]t is in our view highly significant that\nthe [United States] Government continues to project, at the time of their issuance, that new GSM 102\nguarantees issued under the revised progra mme will be provided at a net cost.\" 578 The United States\nsubmitted subsidy re-estimates data, which conc erned the period 1992-2006, and which became\navailable after the original proceedings, to dem onstrate that its export credit guarantee programmes\nwere not provided at a net cost to the United St ates Government \"even before it took measures to\n\n573Appellate Body Report, US – Upland Cotton, para. 667.\n574Ibid., para. 666. (footnote omitted)\n575Ibid.\n576Ibid.\n577Ibid., para. 665.\n578Panel Report, para. 14.71.\n\ncomply with the DSB recommendations.\"\n579 The Panel reviewed the re-estimates data, but did not\nconsider that they established that the revi sed GSM 102 programme did not operate at a loss. 580 In\nreaching this conclusion, the Panel examined two additional pieces of quantitative evidence submitted\nby Brazil, namely: (i) the CCC's consolidated Fi nancial Statements for FY 2005 and FY 2006, which\nreport a \"credit guarantee liability\" of US$220 m illion in relation to the CCC's GSM 102, GSM 103,\nand SCGP export credit guarantee programmes 581; and (ii) cash-basis accounting data compiled by\nBrazil concerning the cumulative receipts and disbursements under the GSM 102, GSM 103, and\nSCGP programmes between 1992 and 2005, which shows a net loss of over US$689 million.582\n280. On appeal, the United States claims that the Pa nel \"improperly failed to take into account ...\nthe undisputed evidence of profit\" reflected in the subsidy re-estimates data, which became available\nafter the original proceedings and which were \"in marked contrast to the analogous figures considered\nby the original panel\". 583 The United States further claims that the Panel failed to conduct an\nobjective assessment of the matter, as required by Article 11 of the DSU, because it \"disregarded the\nimport of the budgetary re-estimates data submitted by the United States.\"\n584\n281. As background, we note that the initial estimates submitted by Brazil were made pursuant to\nthe Federal Credit Reform Act of 1990 585 (the \"FCRA\"), which is intended to \"measure more\naccurately the costs of Federal credit programs\" a nd applies to United States federal credit agencies\nsuch as the CCC. 586 Accordingly, the CCC is required to make annual subsidy estimates of the cost\n(in net present value terms) associated with th e export credit guarantees issued in a given year\n(referred to as a \"cohort\"). 587 These initial subsidy estimates are subsequently re-adjusted in the\nbudgets prepared for the two years following the budget year in which the initial estimate appears. 588\nThe FCRA further requires that the initial estimate (as adjusted in the third budget year since the\nissuance of the guarantees) be subject to annual re-e stimates over the lifetime of the cohort, that is,\nuntil all guarantees in a cohort are closed. 589 These re-estimates \"'take into account all factors that\nmay have affected the estimate of each component of the cash flows, including prepayments, defaults,\n\n579Panel Report, para. 14.78.\n580Ibid., para. 14.89.\n581Ibid., para. 14.81.\n582Ibid., para. 14.84. Brazil constructed the cash-basis accounting calculations using data from the\nUnited States Budgets for FY 1993-2006. (Ibid., footnote 701 to para. 14.85)\n584Ibid., para. 117.\n585Federal Credit Reform Act of 1990, enacted as part of the Omnibus Budget Reconciliation Act\nof 1990, Public Law No. 101-508.\n586Panel Report, footnote 668 to para. 14.69.\n587Ibid.\n589Ibid., para. 14.78.\n\ndelinquencies, and recoveries', to the extent that those factors have changed since the initial estimate\nwas made\".590 Consequently, re-estimates are \"revisions of the subsidy cost estimate of a cohort ...\nbased on information about the actual performance a nd or estimated changes in future cash flows of\nthe cohort\".591 Re-estimates are tracked in Table 8 of the Federal Credit Supplement accompanying\nthe budget.592\n282. The re-estimates data submitted by the United States in these Article 21.5 proceedings cover\nthe period 1992-2006. The data for the period 1992-2005 relate to export credit guarantees issued\nunder the GSM 102, GSM 103, and SCGP programmes, while the data for 2006 relate to export credit\nguarantees issued under the revised GSM 102 programme . The re-estimates data record a downward\ntrend in the costs associated w ith the three export credit programmes during the period 1992-2006.\nAs the Panel noted, the table shows an aggregat e overall anticipated profit of US$926 million for the\n1992-2002 cohorts (the cohorts examined by the original panel) and US$403 million anticipated profit\nfor the 1992-2006 cohorts.593\n283. The United States asserts that the retros pective data, showing profitability over 15 years\nunder the three export credit guarantee programmes exam ined by the original panel, is \"compelling\"\nevidence as to what one should anticipate under the revised GSM 102 programme, particularly\nbecause two programmes have ceased to be operational, and the revision to the fee structure of the\nremaining GSM 102 programme has resulted in higher fees. 594 Consequently, this \"new information\nundermined the initial subsidy estimates submitted by Brazil, which the Panel relied on to find that the\npremia under the GSM 102 program were inadequate to cover the program's long-term operating costs\nand losses\".595\n284. Thus, the re-estimates data were a central piece of evidence that the United States adduced in\nthe Panel proceedings as part of its defence agains t Brazil's claims under item (j). In addressing this\nevidence, the Panel began by recalling that, in the original proceedings, the United States also\nsubmitted cumulative re-estimates data for the th ree export credit guarantee programmes at issue in\n\n590Original Panel Report, para. 7.843 (quoting Section 185.3(x) of Executive Office of the President,\nOffice of Management and Budget, June 2002: Circular No. A-11, Part 5: Federal Credit Programs , p. 185-12\n(Exhibit Bra-116 submitted by Brazil to the original panel)). See also Panel Report, footnote 686 to para. 14.78.\n592Panel Report, footnote 681 to para. 14.76.\n593Ibid., para. 14.79.\n594United States' responses to questioning at the oral hearing.\n\nthose proceedings. The Panel recognized that, unlike in the original proceedings, the re-estimates data\nsubmitted by the United States in these Article 21.5 proceedings showed an overall profit.\nNevertheless, the Panel stated, in paragraph 14.80 of its Report:\nThe original panel was not persuaded that cohort reestimates, over time,\nwould necessarily not give rise to a net cost to the United States\nGovernment. Similarly, we are not convinced that the re-estimates data\nsubmitted by the United States establishes that all positive subsidy\nestimates—and in particular, those for cohorts 2006-2008—will\neventually turn into negative ones.\n596\n285. In the US – Softwood Lumber VI (Article 21.5 – Canada) , the Appellate Body noted that\n\"doubts could arise about the objective nature of an Article 21.5 panel's assessment if, on a specific\nissue, that panel were to deviate from the reasoning in the original panel report in the absence of any\nchange in the underlying evidence in the record\". 597 There has been, however, a change in the\nevidence from the original proceed ings to these Article 21.5 proceedings. The re-estimates data\nsubmitted by the United States in these Article 21.5 proceedings are not the same as those submitted\nin the original proceedings. The data submitted in the original proceedings covered the period\n1992-2002 and showed an overall net cost to the United States Government of $230 million 598 for the\nentire period. The original panel recognized the re levance of this figure because it \"reveals that over\nthe long term the United States government anticipates that it may not break even with its export\ncredit guarantee programmes\".\n599 The data submitted in these Article 21.5 proceedings cover the\nperiod 1992-2006 and, as the Panel itself recognized, the data now projects overall profits for the\nsame programmes over a longer period of time. Mo reover, the original panel noted that, for the 1994\ncohort, \"a cohort that [was] on the verge of closing\" 600, the re-estimates data still showed a net cost.\nThe re-estimates data submitted in these Article 21.5 proceedings indicate that the 1994 cohort has\nclosed and was profitable.601 The same occurs with the 1995 cohort. 602\n286. Thus, whereas the original panel \"was not persuaded that cohort reestimates, over time, would\nnecessarily not give rise to a net cost\", the re-estimates data before the Panel project overall profits for\n\n596Panel Report, para. 14.80. (footnote omitted)\n597Appellate Body, US – Softwood Lumber VI (Article 21.5 – Canada), para. 103.\n598Original Panel Report, para. 7.852.\n599Ibid., para. 7.854.\n600Ibid., para. 7.853 and footnote 1028 thereto.\n601Panel Report, para. 14.81; United States' respon se to Question 111 posed by the Panel, Panel\nReport, p. D-440, paras. 277 and 278.\n602Ibid.\n\nthe period 1992-2006, and the two cohorts that have already closed show actual profits. Accordingly,\nthe original panel's reasoning, as quoted by the Panel in paragraph 14.80 of its Report, was not\napplicable given that the factual circumstances have changed.\n287. The Panel reasoned that, \"because [the re-estimates] are revised estimates, they do not\nestablish that the programmes were provided at no net cost to the United States Government\". 603 We\nfocus upon the Panel's reasoning because it is this reasoning that gives rise to serious concern.\nNeither the initial estimates, nor th e re-estimates, are a final and definitive account of the financial\nperformance of the programmes concerned. Rather, they are both projections (except for the two\nclosed cohorts) and are hence subj ect to uncertainty. The Panel c onsidered that this uncertainty\nprovided a basis for marginalizing the re-estimates da ta. At the same time, the Panel considered the\ninitial estimates of central importance despite the fa ct that they suffered fro m the same uncertainty\ngiven that they too are estimates. If anything, the re-estimates might be expected to be more reliable\nbecause they reflect the historical performance of the programme. They also include two closed\ncohorts (1994 and 1995) for which th e data is final. Moreover, th e re-estimates data cover a longer\nperiod of time and thus provide a basis for a long-term assessment, the very question at issue under\nitem (j).\n288. After considering the re-estimates data, the Panel went on to examine two additional pieces of\nquantitative evidence submitted by Brazil. In particul ar, the Panel noted that the CCC's consolidated\nFinancial Statements for FY 2005 and FY 2006 report a \"credit guarantee liability\" of US$220 million\nin relation to the CCC's GSM 102, GSM 103, and SCGP export credit guarantee programmes. 604 The\nPanel recalled the original panel's finding that the credit guarantee liability figure is \"another\nindicator, used and relied upon by the United St ates government, to assess the estimated long-term\ncost\" to the government of export credit guarantees. 605 Following the same line of reasoning, the\nPanel relied on the definitions from the CCC's Fina ncial Statements and observed that the credit\nguarantee liability figure represents \"the estimated net cash outflow (loss) of the guarantees on net\npresent value basis\" and \"records a liability and an expense to the extent ... CCC will be unable to\nrecover claim payments\". 606 According to the Panel, theref ore, the \"credit guarantee liability\"\n\n603Panel Report, para. 14.81. (original emphasis)\n604Ibid.\n605Ibid. (quoting Original Panel Report, para. 7.855). We note that the United States submitted before\nthe Panel that the original panel's explanation in paragraph 7.855 of its report, specifically quoted by the Panel,\n\"is an accurate and proper definition of liability\". (United States' response to Question 107 posed by the Panel,\n606Panel Report, para. 14.82 and footnote 693 thereto (referring to Audit Report, Commodity Credit\nCorporation, Consolidated Financial Statements – Fiscal Years 2006 and 2005 (November 2006) (Exhibit\nBra-585 submitted by Brazil to the Panel), p. 11 of Notes to the Financial Statements). (emphasis added)\n\nreported in the CCC's Financial Statements indicates that, \"with respect to guarantees that were\noutstanding as of 30 September 2006, the [United States] Government estimates future disbursements\nof US$220 million\".\n607 The Panel noted that the credit guara ntee liability figure also represented an\nestimated loss by the United States Government. 608 The Panel did not provide any reasoning,\nhowever, as to why it was appropriate to place strong reliance on this evidence, which is an estimated\nfigure, while not relying on the re-estimates data \"because they are estimates\".\n289. The final category of quantitative evidence re viewed by the Panel was the cash basis\naccounting data submitted by Brazil. This data concerned cumulative receipts and disbursements\nunder the GSM 102, GSM 103, and SCGP programmes between 1992 and 2005, and shows a net loss\nof over US$689 million.\n609 As the Panel noted, however, th is cash basis accounting data \"only\ncapture[] receipts and disbursement s to date\" and \"do[] not ... record projected receipts and\ndisbursements, including (as the United States indicates) projected recoveries under rescheduled\namounts\".610 By this observation, the Panel appeared to recognize the major difference between\nBrazil's cash basis accounting data and the re-estimat es data, in that the former record actual receipts\nand disbursements to date, whereas the latter project future costs on a net present value basis. Given\nthat the Panel itself recognized the different nature of these data, we find it somewhat puzzling that\nthe Panel referred to the cash basi s accounting data as one of the fact ors affecting the reliability of the\nre-estimates.611\n290. After reviewing these four categories of quantitative evidence, the Panel stated:\nIn conclusion, notwithstanding the reestimates data submitted by the\nUnited States, we find it highly significant that the [United States]\nGovernment continues, at the time of their issuance, to project that new\nGSM 102 export credit guarantees will, in the long-term, be provided at a\nnet cost to the Government. In light of this, we consider that the initial\nsubsidy estimates provide a strong indication that GSM 102 export credit\nguarantees are provided against premia which are inadequate to cover the\nlong-term operating costs and losses of the GSM 102 programme.\n612\n291. Thus, the Panel dismissed the import of the re- estimates data as estimates, yet concluded that\nthe initial estimates provided a \"strong indication\" th at the GSM 102 programme is expected to run at\n\n607Panel Report, para. 14.83.\n608Ibid.\n609Ibid., para. 14.84. The source of the data is the United States Budgets for FYs 1993-2006. ( Ibid.,\nfootnote 701 to para. 14.85) On appeal, except for sta ting that the cash basis accounting data are \"separate and\napart from the [United States] budget accounting approach\", the United States does not provide other arguments\nagainst the Panel's review of this data. (United States' appellant's submission, para. 85)\n610Panel Report, para. 14.87. (original emphasis)\n611Ibid., para. 14.88.\n612Ibid., para. 14.89.\n\na net cost. However, all the quantitative evidence examined by the Panel, except for the cash basis\naccounting data submitted by Brazil, are estimates, or projections, of future fi nancial performance.\nThere is no rationale offered by the Panel as to why it marginalized the re-estimates data while, at the\nsame time, accepting the initial estimat es as \"provid[ing] a strong indication\" 613 that the GSM 102\nprogramme is expected to run at a net cost.\n292. The Panel's treatment of the competing evid ence submitted by the parties is therefore\ninternally inconsistent. The initial estimates, the re-estimates, and the CCC's Financial Statements are\nall routinely produced by the United States Governme nt, yet obvious discrepancies exist among them.\nFor example, both the re-estimates data and the cred it guarantee liability figure relate to the financial\nperformance of the CCC's export credit guarantee programmes up to 2006, but the former project\nprofits, whereas the latter projects losses. The Panel did not reconcile these discrepancies. If this was\nnot possible, the Panel should have provided a reasoned explanation as to why it preferred one\ncategory of quantitative evidence over the other. Instead, the Panel dismissed the import of the\nre-estimates, which were the central piece of evid ence relied on by the United States, on the basis of\nreasoning that, in our view, is internally incohe rent, and compounded the matter by relying on\nevidence that suffered from the same limitation as th e re-estimates. The Panel's treatment of the\nevidence submitted by the parties lacked even-handedness.\n293. Brazil underscores that, as the trier of facts, the Panel was entitled to determine the probative\nvalue and relative weight of the re-estimates data submitted by the United States. 614 According to\nBrazil, the fact that \"the compliance Panel attribut ed to the competing evidence a different weight or\nmeaning than did the United States does not constitute reversible legal error in the application of\nitem (j) to the facts.\" 615 We agree that the Appellate Body has consistently held that it would not\ninterfere lightly with a panel's exercise of its authority as the trier of facts. 616 The Appellate Body has\nexplained that, under Article 11 of the DSU, \"a pa nel is charged with the mandate to determine the\nfacts of the case and to arrive at factual findings. In carrying out this mandate, a panel has the duty to\n\n613Panel Report, para. 14.89.\n615Ibid. (footnote omitted)\n616See, for example, Appellate Body Report, EC – Asbestos, para. 161; Appellate Body Report, EC –\nHormones, para. 132; Appellate Body Report, EC – Sardines , para. 299; Appellate Body Report, Japan –\nApples, para. 222; Appellate Body Report, Korea – Dairy, para. 137; and Appellate Body Report, US – Wheat\nGluten, para. 151.\n\nexamine and consider all the evidence before it\"\n617, and may not \"disregard\" evidence or \"appl[y] a\ndouble standard of proof\".618\n294. Our concern with the Panel's treatment of the re-estimates, however, is not directed towards\nits weighing of the evidence. Rather, there is a lack of explanation and coherent reasoning by the\nPanel that led it to marginalize the re-estimates. The Panel was presented w ith a class of quantitative\nevidence that is based on estimates, including the initial estimates, the re-e stimates, and the CCC's\nFinancial Statements, but effectively disregarded the re-estimates data submitted by the United States.\nThe error is amplified by the fact that the Pa nel unquestioningly accepted the initial estimates and\nCCC Financial Statements submitted by Brazil, although they too are based on estimates. The Panel's\ninternally incoherent treatment of the same class of quantitative evidence thus vitiates the conclusion\nit drew based on the financial data submitted by the parties.\n295. In sum, we find that, by dismissing the import of the re-estimates data submitted by the\nUnited States on the basis of internally inconsiste nt reasoning, the Panel did not make \"an objective\nassessment of the matter before it, including an objective assessment of the facts of the case\", under\nArticle 11 of the DSU. Consequently, the Panel erre d in its intermediate conclusion that \"the initial\nsubsidy estimates provide a st rong indication that GSM 102 expor t credit guarantees are provided\nagainst premia which are inade quate to cover the long-term ope rating costs and losses of the\nGSM 102 programme.\"619\n296. Having reversed the Panel's intermediate fi nding, we turn to examine whether we can\ncomplete the analysis and make our own assessment of the quantitative evidence on the record. In the\npast, the Appellate Body has completed the legal anal ysis when there was a su fficient factual basis in\nthe panel record to enable it to do so.620\n297. The United States and Brazil disagree on the significance of the initial estimates and\nre-estimates data on record. According to the United States, the re-estimates data are \"highly\nprobative\" because they \"demonstrated that the export credit guarantee programs in the aggregate—\n\n618Appellate Body Report, Korea – Alcoholic Beverages , para. 164. In cases concerning a panel's\nexamination of determinations by domestic investigating authorities, the Appellate Body has also held that a\npanel must assess \"whether the explanations provided by the authority are 'reas oned and adequate' ... and\n[assess] the coherence of its reasoning.\" (Appellate Body Report, US – Softwood Lumber VI (Article 21.5 –\nCanada), para. 97) In cases where a panel operates as the initial trier of facts, such as this one, it would\nsimilarly be expected to provide reasoned and adequate explanations and coherent reasoning.\n619Panel Report, para. 14.89.\n620See, for example, Ap pellate Body Report, Canada – Periodicals , p. 24, DSR 1997:I, 449, at 469;\nAppellate Body Report, Australia – Salmon , para 118; Appellate Body Report, US – Shrimp , para. 124; and\nAppellate Body Report, US – Section 211 Appropriations Act, para. 352.\n\neven before the adoption of the new fee structure for the GSM 102 program and the elimination of the\nlonger-term GSM 103 export credit guarantee program and the riskier SCGP—charged premium rates\nmore than adequate to cover long-term ope rating costs and losses of the three programs\". 621 B y\ncontrast, Brazil argues that historical data regard ing the export credit guarantee programmes, such as\nthe re-estimates, have serious limitations because they merely reflect one possible outcome (in this\ncase, profits), whereas the initial estimates reflect an evaluation of all possible outcomes regarding the\nprogrammes' financial performance.\n622\n298. The Panel itself recognized that it is \"factually correct\" that \"the initial estimates are\nestablished before any use is made of the programme and ... are based on the projected use of the\nprogramme\".623 The Panel also noted that the initial est imates are \"subsequently re-adjusted in the\nUnited States Budget two years after the budget year in which the initial estimates appears\" 624 and,\n\"[i]n subsequent years, re-estimates are tracked in Table 8 of the Federal Credit Supplement\naccompanying the budget\".625 These re-estimates show a consiste nt downward trend in the estimated\ncosts of the export credit guarantee programmes, thus calling into question the reliability of the initial\nestimates for purposes of evaluating the programme's \"long-term operating costs and losses\".\n299. Although the measure subject to these proceed ings is the GSM 102 programme, as revised\nsince July 2005, the re-estimates data cannot be dismissed simply because the data concern the\nfinancial performance of the three programmes examined in the original proceedings. As noted by the\nPanel, \"GSM 102 export credit guarantees made up 93 per cent of the CCC guarantees portfolio\". 626\nUnder the revised fee structure, fees for GSM 102 e xport credit guarantees were increased by 23 per\ncent (on a weighted-average basis). 627 It is not unreasonable to assume that the increase of fees\nresulting from the revision of the GSM 102 programme would accentuate the downward trend shown\nin the re-estimates data for the 15-year period. Thus, we consider that the re-estimates data, which\nshow better-than-expected historical performance, are an important indicator of the revised GSM 102\nprogramme's likely future performance.\n\n621United States' appellant's submission, paras. 117-119.\n622Brazil's response to questioning at the oral hearing.\n623Panel Report, para. 14.76. (original emphasis)\n624Ibid. The Panel stated that \"[i]n no case has such an adjustment turned a positive subsidy estimate\ninto a negative one\". (Ibid.) The Panel, in stating such, referred to Exhibit Bra-617, supra, footnote 532, which\ncontains the initial estimates as they first appeared in United States budgets and as re-adjusted in the two\nsubsequent United States budgets. Howe ver, these \"re-adjustments\" in the th ird year are not final, as the Panel\nitself noted, but continue to be re-estimated in subsequent years and recorded in Table 8 of the Federal Credit\nSupplement accompanying the budget. (Ibid., para. 14.76 and footnote 681 thereto)\n625Ibid., footnote 681 to para. 14.76.\n626Ibid., para. 14.118.\n627Ibid., para. 14.119.\n\n300. We recall that Brazil also submitted to the Pa nel the CCC's audited Financial Statements,\nwhich are another indicator of the performance of the CCC's export credit guarantee programmes up\nto 2006. Both the re-estimates data submitted by the United States and the audited Financial\nStatements of the CCC were routinely produced by the United States Government, and neither were\nproduced specifically for this dispute. In these circ umstances, both are relevant for the appraisal of\nthe long-term financial performance of the revised GSM 102 programme. While the re-estimates data\nproject overall profits of US$403 million under the CCC's export credit guarantee programmes for the\nperiod 1992-2006\n628, the CCC's Financial Statements estima te a credit guarantee liability of US$220\nmillion with respect to post-1991 guarantees that were outstanding as of 30 September 2006. 629\nAlthough, at the oral hearing, we tried to explor e possible ways of reconciling these two figures, we\ndid not get a clear explanation from either party as to how this could be done.\n301. Thus, the quantitative eviden ce submitted by Brazil and the United States support two\nplausible conclusions that one could draw rega rding the profitability of the revised GSM 102\nprogramme: (i) the CCC's Financial Statements indicate that the programme is making losses; and\n(ii) the re-estimates data indicate that the progr amme is making profits. Therefore, the critical\nquantitative data before the Panel give rise to conf licting conclusions. The data also give rise to\nsimilar probabilities that point to opposite conclusion s as to the binary outcome in item (j), that is,\nwhether a programme is making a loss or not. We r ecall, however, that the Panel also examined other\nevidence adduced by Brazil, \"which further convince[d]\"\n 630 the Panel that the premiums under the\nrevised GSM 102 programme are inadequate to cover its long-term operating costs and losses, within\nthe meaning of item (j). This evidence incl udes a comparison between fees under the revised\nGSM 102 programme and the OECD MPRs, and various elements relating to the structure, design,\nand operation of the programme. We now turn to examine the United States' arguments regarding the\nPanel's consideration of this evidence in order to determine whether the ev idence as assessed by the\nPanel makes one of the two probable outcomes th at emerge from the quantitative evidence more\nlikely than not.\n2. Comparison with MPRs under the OECD Arrangement\n302. The United States submits that the Panel \"fundame ntally misinterpreted\" the requirements of\nitem (j) in \"[making] determinations\" under that provision based on a comparison of GSM 102\nprogramme fees with MPRs under the OECD Arrangement.\n631 According to the United States,\n\n628Panel Report, para. 14.79.\n629Ibid., para. 14.83.\n630Ibid., para. 14.90.\n\n\"[d]espite its recognition of the inapplicability of the OECD Arrangement and MPRs\", the Panel\n\"compared OECD MPRs to fees charged under th e GSM 102 program, and found that comparison\ndispositive for purposes of the item (j) analysis.\" 632 The United States adds that the Panel acted\ninconsistently with Article 11 of the DSU by \"disregard[ing] the irre levancy of the [OECD\nArrangement] MPRs\" for purposes of the analysis under item (j).633\n303. In our view, the United States exaggerates th e importance the Panel attached to the fee\ncomparison of GSM 102 fees with the MPRs in its overall analysis under item (j). After reviewing\nthe budgetary evidence described above, the Panel tu rned to review the evidence relating to MPRs\nsubmitted by Brazil. At the outset, the Panel made clear that it did not consider the MPRs to be\ndirectly applicable in determining whether an export credit guarantee programme falls within the\nscope of item (j). 634 The Panel emphasized that item (j) makes no reference to the OECD\nArrangement and that the MPRs do not provide a legally bindi ng benchmark for purposes of an\nanalysis under item (j). As the Panel explained:\nWhile the MPRs were developed at least in part to ensure that\nParticipants would comply with item (j), item (j) itself does not refer\nto the OECD Arrangement or to an y other international agreement or\nbenchmark in determining whether the premia are inadequate to\ncover the long term operating costs and losses of export credit\nguarantee programmes and other programmes covered by item (j) of\nthe Illustrative List. As the United States points out, this contrasts\nwith the second paragraph of item (k) of the Illustrative List, where\nsuch a reference is made. In con sequence, there is in our view no\nbasis to treat the OECD MPRs as providing a legally binding\nbenchmark to determine whet her an export credit guarantee\nprogramme falls within the scope of item (j) of the Illustrative List.\n635\n(footnote omitted)\n304. The Panel further noted that the OECD Arrange ment does not cover exports of agricultural\ncommodities and applies only to government support for credit terms of two years or more. 636 Thus,\nthe Panel did not consider that the OECD MPRs constituted a valid benchmark under item (j).\n305. Although the Panel recognized that MPRs have no le gal status in the context of an analysis\nunder item (j), it did consider them relevant \"from an evidentiary point of view\".637 In particular, what\nthe Panel found relevant was the magnitude of the difference between the MPRs and the GSM 102\n\n633Ibid., para. 121.\n634Panel Report, para. 14.94.\n635Ibid.\n636Ibid. (footnote omitted)\n637Ibid., para. 14.95. (emphasis added)\n\nfees. Based on the comparison submitted by Brazil, the Panel observed that, \"[o]n average, the MPRS\nare 106 per cent above GSM 102 fees\".\n638 The magnitude of the differ ence in the fees is repeatedly\nemphasized by the Panel in its reasoning. The Panel explained that, \"in this particular case, because\nof the magnitude of the difference between the MPRs and GSM 102 fees, the MPRs may provide an\nindication, on an informed basis, of the fact that GSM 102 fees are set at a level which is insufficient\nto cover the long term operating costs and losses of the programme.\" 639 The Panel emphasized that it\ntook into account the comparison of MPRs and GSM 102 fees \"because of the importance of the\ndifference between them\". 640 The Panel immediately cautioned that it was \"not suggest[ing] that\nany difference in this respect could be relie d upon as an indication that an export guarantee\nprogramme meets the criteria of item (j) of the Illustrative List\".641\n306. Therefore, contrary to the United States' assertions, the Panel did not make a definitive\ndetermination under item (j) on the basis of the comparison between MPRs and GSM 102 fees, nor\ndid the Panel find \"that comparison dispositive for purposes of the item (j) analysis\". 642\nConsequently, we see no basis in the Panel's analys is for the United States' argument that the Panel\nmisinterpreted the requirements in item (j) by imposing a legal benchmark not specified therein.\n307. In addition, the United States argues that the Pane l acted inconsistently with Article 11 of the\nDSU by making \"conclusory observations ... unsupported by evidence\" that \"the MPRs would\nincrease if agricultural products were made subject to it\", because industrial products \"offer a better\nsecurity\".\n643 We recall the Panel's emphasis on the \"ma gnitude of the difference between MPRs and\nGSM 102 fees\" when it found that the MPRs \"may pr ovide an indication\" that the GSM 102 fees are\ninadequate to cover long-term operating costs and losses.644 Noting that MPRs are on average 106 per\ncent above GSM 102 fees, the Panel stated that \"t here is ... no reason why the MPRs should be\nlowered were agricultural products to fall under its product coverage.\" 645 It is within this context that\nthe Panel agreed with Brazil's submission that, \"i f anything, the MPRs woul d increase if agricultural\nproducts were made subject to it\". 646 Thus, even if these observations, taken in isolation, were to be\nunsupported by specific evidence, they do not under mine the Panel's overall conclusion that the\nsignificant difference in fees provides an additional evidentiary basis for its analysis under item (j).\n\n638Panel Report, para. 14.98. (footnote omitted)\n639Ibid., para. 14.97. (original underlining)\n640Ibid.\n641Ibid. (original emphasis)\n644Ibid., paras. 14.97 and 14.98.\n645Ibid., para. 14.101.\n646Ibid.\n\n3. Structure, Design, and Operation of the Revised GSM 102 Programme\n308. We turn next to examine the United States' ar guments concerning the elements relied on by\nthe Panel in analyzing the structure, design, and operation of the revised GSM 102 programme. These\nelements are: (i) the one per cent statutory fee cap applicable under the GSM 102 programme; (ii) a\ncomparison of the \"scaling\" of fees under the GSM 102 programme and the two credit insurance\nprogrammes of the Export-Import Bank; (iii) the fact that foreign obligor risk is not reflected in\nrevised GSM 102 fees; and (iv) the CCC's access to government funds.\n309. The United States maintains that the Panel \"erred as a matter of law in relying on the one per\ncent fee cap as proof that the revised GSM 102 program was not risk-based\". 647 According to the\nUnited States, nothing in item (j) says that, just because a programme has a fee cap, it cannot satisfy\nthe test that premium rates cover long-term operati ng costs and losses. We do not consider that the\nPanel made such a conclusion. Rather, the Panel focused its analysis on the \" effects of the remaining\npresence of the one per cent fee cap\" 648—namely, how the fee cap affect s the adequacy of the fees in\nrelation to risks—and did not find that a fee cap, in itself, necessarily prevents a programme from\ncovering its long-term operating costs and losses, as the United States' argument seems to suggest.\n310. The United States further claims that the Panel erred in relying on the comparison of \"scaling\"\nof fees under the revised GSM 102 programme an d the Ex-Im Bank programmes for its analysis\nunder item (j).\n649 We recall that Brazil submitted a comparison of the rate of increase, corresponding\nto increased risk (by country risk category and le ngth of tenor), of fees charged by the GSM 102\nprogramme with the rate of increase of fees unde r two programmes of the Ex-Im Bank—the LCI and\nthe MTI. The Panel reviewed this comparison and concluded that the \"significant difference between\nthe rates of increase\" for GSM 102 fees and for the LCI and the MTI suggests that \"the [one] per cent\nfee cap ... does indeed prevent the adoption of a truly risk-based fee structure by the CCC.\"650\n311. The United States submits that the Ex-Im Bank programmes are \"fundamentally dissimilar\" to\nthe GSM 102 programme. 651 According to the United States, \"[i] n addition to the fact that [LCI and\nMTI] are subject to MPRs, and that MTI is not av ailable for agricultural goods, [LCI and MTI] differ\nsignificantly in terms of interest and principal cove r, as well as the availability of recourse to a third\nparty for uninsured amounts.\" 652 Despite these dissimilarities, the United States argues, the Panel\n\n648Panel Report, para. 14.121. (emphasis added)\n650Panel Report, para. 14.128.\n652Ibid.\n\n\"acceded to Brazil's proffered adjustments to ta ke into account these differences and force a scaling\ncomparison\".\n653\n312. We note that, rather than \"forcing a comparison\" despite the dissimilarities between the\nprogrammes, the Panel specifically addressed the di ssimilarities by reviewing various adjustments\nmade in the evidence submitted by Brazil to re nder the LCI and the MTI more analogous to the\nGSM 102 programme, and considered them to be \"appropriate\". 654 Furthermore, the Panel did not\nfocus on the differences between the amount of fees charged under the GSM 102 programme and\nunder the Ex-Im Bank programmes. Rather, the compar isons were intended to show that, due to the\nlimitation placed by the one per cent fee cap, th e revised GSM 102 fees increase much slower, in\nresponse to the increased risk, than the rate of increase of the fees charged under the Ex-Im Bank\nprogrammes. We therefore do not consider that it w as improper for the Panel to conclude that \"[t]he\nfact that the financial products being compared are not identical\" did not fundamentally undermine the\nevidentiary value of the comparisons regarding scaling of fees under the programmes.655\n313. In addition, the United States contests the releva nce of scaling to an analysis under item (j),\narguing that \"[i]tem (j) does not even impose a 'r isk-based' condition\", and that the only condition\nunder item (j) is whether the premiums under an ex port credit guarantee programme are adequate to\ncover its long-term operating costs and losses. 656 We agree that the analysis of risk is not expressly\nrequired by the text of item (j) in assessing the ad equacy of premiums of an export credit guarantee\nprogramme. However, an export credit guarantee programme exposed to risk of default is more likely\nto incur costs and losses if its design and structure do not adequately safeguard against such risk.\nTherefore, we consider that risk is a relevant factor in the assessment of a programme's structure,\ndesign, and operation under item (j).657\n314. The United States argues that, \"[e]ven were a ri sk based standard relevant, item (j) does not\nindicate any specific standards as to scaling.\" 658 We concur that item (j) does not impose a standard\nas to scaling. The Panel did not impose such a st andard. Rather, the Panel reviewed the scaling\n\n654Panel Report, para. 14.125.\n655Ibid., para. 14.126.\n657We note that the original panel, in a finding not subject to appeal, stated that, \"where a programme\ndoes not provide for premium rates that are fully reflective of the risks of a particular transaction, this might be\none indicator that the programme was set up in such a way that its long-term operating costs and losses have to\nbe borne, in total or in part, by the government.\" (O riginal Panel Report, para. 7.805 (quoted in Panel Report,\npara. 14.108))\n\ncomparison with the Ex-Im Bank programmes to apprai se the effect of the one per cent fee cap under\nthe revised GSM 102 programme. The Panel noted that the scaling comparisons \"convincingly\ndemonstrated that the GSM 102 fees only minimall y respond to increased country risk and increased\nrisk in the form of longer tenors\", as compared to the LCI and the MTI fees.659 In particular, the Panel\nfound that, \"while the fees for lowest country risk categories are relatively similar between GSM 102\nand the LCI and MTI, there is a sharp difference between the fees charged by the Ex-Im Bank and the\nCCC for the highest risk categories.\"\n660\n315. We note that the United States itself acknowledges that \"[s]caling is ... relevant with respect\nto a comparison of those transactions that are eligible under the program.\" 661 The United States\nnevertheless contends that \"[a] full examination of whether a program is risk-based would also take\ninto account those transactions that are wholly inelig ible [and for which] the current fee is effectively\ninfinite\".662 The comparisons provided by Brazil were ma de between individual eligible countries in\nthe corresponding risk categories of the revised GSM 102 programme and the Ex-Im Bank\nprogrammes.\n663 In our view, the fact that a number of countries are ranked as \"ineligible\" under the\nrevised GSM 102 programme does not affect the validity of the fee comparisons insofar as the eligible\ncountries are concerned.\n316. The United States further maintains that the Pane l acted inconsistently with Article 11 of the\nDSU by accepting Brazil's evidence regarding \"scaling\" of fees under the GSM 102 and the Ex-Im\nBank programmes. According to the United States, despite the \"obvious factual distinction\" regarding\nthe product coverage under the Ex-Im Bank MTI a nd the GSM 102 programme, the Panel concluded\nthat the distinction does not fundamentally undermine the value of the comparison but offered \"no\nsupport for this conclusion\".\n664 We recall that the Panel found that the differences regarding product\ncoverage did not undermine the value of the co mparison, because the relevant comparison being\nconducted was between the rates of increase of the fees, rather than the fees themselves.665 Moreover,\n\n659Panel Report, para. 14.127.\n660Ibid., para. 14.127. In making this observation, th e Panel referred to certain graphs submitted by\nBrazil showing that Ex-Im Bank fees rise more sharply than GSM 102 fees in response to increased risks\ninvolved in a transaction. ( Ibid., footnote 758 to para. 14.127) The Panel further noted that, for a tenor of 36\nmonths, the GSM 102 fee and the MTI fee for a country fa lling within risk category 2 are, respectively, 0.637\nper cent and 1.060 per cent. For a country falling with in risk category 6, however, the GSM 102 fee is 1 per\ncent, whereas the MTI fee is increased to 4.325 per cent. (Ibid., footnote 759 to para. 14.127)\n662Ibid.\n663See, for example, Exhibits Bra-693 and Bra-694 subm itted by Brazil to the Panel (as referred to in\nPanel Report, para. 14.125 and footnote 755 thereto).\n665Panel Report, para. 14.126.\n\nthe Panel examined the adjustments made by Braz il which, in the Panel's view, made the Ex-Im\nBank's programmes more comparable to the GSM 102 programme.\n317. According to the United States, the Panel fa iled to conduct an objective assessment of the\nmatter, as required by Article 11 of DSU, when it stated, \"[without] any basi s in the evidence\", that\nthe 100 per cent increase in fees under the revised GSM 102 programme between the lowest and\nhighest risk category \"suggests that f ees insufficiently take account of\" risk.\n666 The United States'\nargument does not take full account of the context in which the Panel's statem ent is made. The Panel\nmade the observation that fees insufficiently take account of risk after reviewing the evidence\nshowing that the rate of increase of the f ees charged under the Ex-Im Bank programmes is\nsignificantly higher than 100 per cent. 667 The Panel noted, in particular, that, \"while the fees for the\nlowest country risk categories are relatively sim ilar between GSM 102 and the LCI and MTI, there is\na sharp difference between the fees charged by the Ex-Im Bank and the CCC for the highest risk\ncategories.\"668 When seen in the context in which it w as made, the Panel's statement does have a\nbasis.\n318. The United States contests two other factors relied on by the Panel as \"not germane to an\nanalysis under item (j).\" 669 First, the United States argues that the Panel erroneously concluded that\n\"the fact that the United States sets bank limits w ith respect to each foreign bank obligor does not ...\nalter the fact that foreign obligor risk is not reflected in GSM 102 fees.\" 670 The United States argues\nthat nothing in item (j) specifies how a government programme shall be designed to ensure the\nadequacy of premiums, and managing foreign obli gor risk is one important way to ensure this\nadequacy. Therefore, according to the United States, the Panel erred in concluding that \"fees were the\nonly proper way to deal with foreign obligor risk.\"671 This, however, is not what the Panel concluded.\nRather, the Panel highlighted \"the fact that fore ign obligor risk is not reflected in GSM 102 fees\" 672,\nand noted Brazil's argument that \"prudent fiscal management compels commercial banks to take\n\n667See, for example, Brazil's first written submission to the Panel, para. 400, Figure 32 (referred to in\nPanel Report, para. 14.127 and footnote 758 thereto). This figure contains tables showing that fees under the\nEx-Im Bank programmes increase by much more than 100 per cent between the lowest and highest country risk\ncategories.\n668Panel Report, para. 14.127 and footnote 759 theret o (referring to the resp ective fees under the GSM\n102 programme and under the LCI and the MTI for individual countries in risk categories 0 to 6 (Exhibit\nBra-536 submitted by Brazil to the Panel)). We note that, in an apparent clerical error in footnote 759, the Panel\nreferred to Exhibit Bra-548, which does not contain the evidence the Panel described in this footnote.\n670Panel Report, para. 14.115.\n672Panel Report, para. 14.115.\n\nvarying borrower risk into account not only via exposure limits, but also through fees\".673 Thus, the\nPanel recognized the relevance of exposure limits , but found that setting exposure limits alone was\ninsufficient to account for foreign obligor risk, when such risk was not adequately taken into account\nin the determination of fees for the transactions within the exposure limits.\n319. In addition, the United States submits that the Panel mistakenly relied on the fact that the\nCCC has access to funds from the United States Treasu ry and that it benefits from the full faith and\ncredit of the United States government, even though \"[s]uch considerations ... are irrelevant under\nitem (j)\". 674 The United States maintains that, according to the Panel's \"overly-broad approach, a\ngovernment-backed export credit ... program could ne ver satisfy the item (j) test because ... the\nunlimited access to government funds discourages the design of a programme that meets long-term\noperating costs and losses\".\n675 We share the view that access to government funds, alone, is not a\nsignificant factor for purposes of determining profitability under item (j). The Panel, however, did not\nseem to place much emphasis on this factor. Rather , the Panel recalled that this was a factor taken\ninto account by the original panel and confirmed that the CCC still has the same access to government\nfunds.676\n320. In sum, we are not persuaded that the Panel erred in finding that \"the GSM 102 programme is\nnot designed to cover its long term operating costs and losses.\"677\n321. At the outset of its analysis, the Panel stated that it would \"first conduct [its] analysis as if\nBrazil bore the burden of proof with respect to both the quantitative and the subsidization elements of\nits claims, i.e. as if Article 10.3 [of the Agreement on Agriculture] did not apply\".678 We have found\nthat the Panel failed to make an objective assessment of the matter, as required under Article 11 of the\nDSU, in its assessment of the quantita tive evidence submitted by the parties. 679 We have explained,\nfurthermore, that the two critical pieces of evidence, the re-estimates data and the CCC Financial\nStatements, tend to show that, in the long run, th e revised GSM 102 programme may be either profit-\nmaking or loss-making. Also, we stated our view that the analysis under item (j) should proceed\nprimarily on the basis of quantitative evidence, where such evidence is available. We have\nrecognized, however, that evidence relating to the structure, design, and operation has a\nsupplementary role to play in an assessment conducte d under item (j). The Panel, in this case, relied\n\n673Panel Report, para. 14.113. (emphasis added; footnote omitted)\n675Ibid.\n676Panel Report, para. 14.110.\n677Ibid., para. 14.131.\n678Ibid., para. 14.47.\n679See supra, para. 295.\n\non several elements relating to the structure, design, and operation of the revised GSM 102\nprogramme, and we have not found flaws in the Pa nel's analysis of this evidence. The Panel\nrecognized that these elements are not in and of themselves dispositive. Nonetheless, according to the\nPanel, the evidence on the structure, design, and operation supports the proposition that the revised\nGSM 102 programme operates at a loss. We recall th at we have found that the quantitative data give\nrise to opposite conclusions with similar probabilities as to the binary outcome in item (j). The\nPanel's finding on the structure, design, and operation, in the light of the two plausible outcomes with\nsimilar probabilities that emerge from the quantitati ve evidence, provides a sufficient evidentiary\nbasis for the conclusion that it is more likely th an not that the revised GSM 102 programme operates\nat a loss. Therefore, we consider that Brazil has succeeded in establishing that the revised GSM 102\nprogramme is provided at premiums that are inad equate to cover its long-term operating costs and\nlosses.\nF. Conclusion\n322. For these reasons, we consider that the Panel did not err in finding that \"the GSM 102 export\ncredit guarantee programme constitutes an export s ubsidy because it is provided against premiums\nwhich are inadequate to cover its long-term opera ting costs and losses under the terms of item (j) of\nthe Illustrative List\".\n680\n323. Accordingly, we uphold the Panel's findings that GSM 102 export credit guarantees issued\nafter 1 July 2005 are export subsidies within the meaning of Article 3.1(a) of the SCM Agreement\nand Article 10.1 of the Agreement on Agriculture .681 Therefore, the Panel's findings in\nparagraphs 14.140, 14.149, 14.150, 14.156, 14.157, and 15.1(c) also stand.\nVII. Serious Prejudice\n324. We turn finally to the United St ates' appeal of the Panel's finding that the effect of marketing\nloan and counter-cyclical payments provided to United States upland cotto n producers is significant\nprice suppression in the world market for upland cotton, constituting \"present\" serious prejudice to the\ninterests of Brazil, within the meaning of Articles 5(c) and 6.3 of the SCM Agreement. Section A\nsummarizes the findings made in the original proceedings, and Section B describes the measures\ntaken by the United States to comply with the DSB's recommendations and rulings. The Article 21.5\nproceedings are summarized in Section C. Secti on D provides an overview of the arguments raised\non appeal by the participants and third participants. In Section E, we discuss the Panel's findings of\n\n680Panel Report, para. 14.133.\n681Ibid., para. 14.134.\n\n\"present\" serious prejudice under Articles 5(c) and 6.3 of the SCM Agreement. Finally, in Section F,\nwe set out our conclusions.\nA. Original Proceedings\n325. In the original proceedings, Brazil challe nged several United States domestic support\nmeasures under Articles 5 and 6 of the SCM Agreement. Brazil argued that these measures were not\nexempt from being challenged as actionable subsidi es under paragraphs (a) and (b) of Article 13 of\nthe Agreement on Agriculture , and that they caused serious prejudi ce to its interests, within the\nmeaning of Article 5(c) of the SCM Agreement, because their effect was to significantly suppress the\nprice of upland cotton, within the meaning of Article 6.3(c) of the SCM Agreement.682\n326. Having found that the United States domestic support measures were not exempt from\nchallenge under Article 13 of the Agreement on Agriculture , the original panel found that the effect\nof the mandatory price-contingent United States s ubsidy measures—marketing loan payments, Step 2\npayments, market loss assistance payments, and counter-cyclical payments—was significant price\nsuppression in the same world market within the meaning of Article 6.3(c) of the SCM Agreement,\nconstituting serious prejudice to the interests of Brazil within the meaning of Article 5(c) of the SCM\nAgreement.683 The Appellate Body upheld the original panel's findings.684\n327. In accordance with Article 7.8 of the SCM Agreement , which specifies the remedies\napplicable in cases where subsidies have been determ ined to result in adverse effects, the original\npanel stated that, upon adoption of the panel repor t, \"the United States [was] under an obligation to\n'take appropriate steps to remove the adverse effects or ... withdraw the subsidy'.\"685\nB. Measures Taken by the United States\n328. On 1 February 2006, United States Congress enact ed legislation amending the Farm Security\nand Rural Investment Act of 2002 686 (the \"FSRI Act of 2002\") by repealing the Step 2 payments\nprogramme, which was one of the price-contingent subsidy measures covered by the original panel's\n\n682Original Panel Report, para. 3.1(vi).\n683Ibid., paras. 7.1416 and 8.1(g)(i).\n684Appellate Body Report, US – Upland Cotton, para. 496.\n685Original Panel Report, para. 8.3(d).\n686Farm Security and Rural Investment Act of 2002, Public Law No. 107-171; see Original Panel\nReport, para. 7.201.\n\nfinding of serious prejudice.\n687 The Step 2 payments programme was repealed effective as\nof 1 August 2006.688 The Panel noted that it is undisputed that the United States continues to provide\nmarketing loan and counter-cyclical payments to United States producers of upland cotton, and that\nthe legislative and regulatory provisions governing these payments have not been changed.689\nC. Article 21.5 Proceedings\n329. On 18 August 2006, Brazil requested the establishm ent of a panel pursuant to Article 21.5 of\nthe DSU, because it considered that the United States had failed to implement the recommendations\nand rulings of the DSB stemming from the original dispute. 690 Brazil claimed that the repeal of the\nStep 2 payments programme is insufficient to brin g the United States into compliance with the DSB's\nrecommendations and rulings. 691 In particular, Brazil claimed that payments made under the\nmarketing loan and counter-cyclical payments pr ogrammes continued to cause \"present\" serious\n\n687In addition to Step 2 payments, marketing loan payments, and counter-cyclical payments, the\noriginal panel's finding of serious prejudice covered market loss assistance payments. According to the original\npanel, market loss assistance payments were \"ad ho c emergency and supplementary assistance provided to\nproducers\" under \"four separate pieces of legislation, one each for the years 1998 through 2001\". (Original\n688Section 1103 of the Deficit Reduction Act of 2005, Public Law No. 109-171; see also Panel Report,\npara. 3.7.\n689Panel Report, paras. 3.9 and 3.12.\n690Request for the Establishment of a Panel by Brazil, WT/DS267/30.\n 691Brazil also claimed before the Panel that the United States had taken no actions to comply with the\nDSB's recommendations and rulings during the period between 22 September 2005 and 31 July 2006—that is,\nbetween the expiration of the six-month time period set out in Article 7.9 of the SCM Agreement and the\neffective date on which the Step 2 payments programme was repealed. The Panel di sagreed with Brazil that\nArticle 21.5 of the DSU contemplated a finding on the existence of or consistency with a covered agreement of\na measure taken to comply at the end of the six-month period set out in Article 7.9 of the SCM Agreement, in\naddition to a finding on the existence of a measure taken to comply as of the date of the establishment of an\nArticle 21.5 panel. Therefore, the Panel found that it was not appropriate to make a finding on Brazil's claim\nthat the United States had failed to take any measures to remove the adverse effects or to withdraw the three\nprice-contingent upland cotton subsidy programmes between 22 September 2005 and 31 July 2006. (Panel\nReport, paras. 9.70 and 9.71) This finding of the Panel was not appealed by Brazil.\n\nprejudice to the interests of Brazil in the form of significant price suppression in the world market for\nupland cotton according to Article 6.3(c) of the SCM Agreement.692\n330. At the outset of its analysis, the Panel said it would adopt a \"unitary\" approach to determine\nwhether the effect of the marketing loan and counter-cyclical payments was significant price\nsuppression within the meaning of Article 6.3(c) of the SCM Agreement . Therefore, it did \"not\nseparate the question of the existence of signifi cant price suppression from the issue of the causal\nrelationship between significant price suppression and the subsidies at issue.\"693 Moreover, relying on\nthe Panel Report in Korea – Commercial Vessels , the Panel said it would adopt a \"but for\" approach\nto analyze whether the effect of the subsidies is significant price suppression. 694 Thus, in order to\ndetermine whether the effect of marketing loan and counter-cyclical payments to upland cotton\nproducers was significant price suppression within the meaning of Article 6.3(c) of the SCM\nAgreement, the Panel considered it necessary to determin e whether, \"but for\" these subsidies, the\nworld market price for upland cotton would have increased significantly, or would have increased by\nsignificantly more than was in fact the case.695\n331. Having set out the approach it would follow, the Panel turned to the assessment of the\n\n692Brazil also made a claim of thr eat of serious prejudice under Articles 5(c) and 6.3(c) of the SCM\nAgreement. Having found \"present\" serious prejudice under Articles 5(c) and 6.3(c) of the SCM Agreement, the\nPanel considered it unnecessary to make additiona l findings with respect to Brazil's claim of threat of serious\nprejudice. (Panel Report, para. 11.4) This finding of the Panel was not appealed by Brazil.\nIn addition to its price suppression claims under Articles 5(c) and 6.3(c) of the SCM Agreement, Brazil\nalleged under Articles 5(c) and 6.3(d) that the effect of the marketing loan and counter-cyclical payments in\nMY 2005 was an increase in the United St ates' share of the world market for upland cotton. Brazil argued that\nthe United States' share of the world market for upland cotton in MY 2005 increased as compared to the average\nUnited States world market share duri ng MY 2002-2004. In analyzing the United States' world market share,\nthe Panel relied on world production data (rather than on world export data). ( Ibid., para. 10.264) The Panel\nfound that the evidence submitted did not support Brazil' s argument that there was an increase in the United\nStates' world market share of upland cotton as compared to the average United States world market share during\nthe previous three years. Thus, the Panel concluded that Brazil had not made a prima facie case. ( Ibid.,\npara. 10.268) This finding of the Panel was not appealed by Brazil.\n693Panel Report, para. 10.46.\n694See ibid., para. 10.48 (referring to Panel Report, Korea – Commercial Vessels , paras. 7.537\nand 7.612).\n695See ibid., para. 10.49. In addition, the Panel agreed with the original panel that the term\n\"significant\" in Article 6.3(c) of the SCM Agreement relates to \"the degree of the price suppression or\ndepression in the context of the prices that have been affected\" and that \"the 'significance' of any degree of price\nsuppression may vary from case to case, depe nding on the factual circumstances\". ( Ibid. (referring to Original\nPanel Report, paras. 7.1328 and 7.1329)) The Panel also quoted the following statement of the original panel:\n... for a basic and widely traded commodity, such as upland cotton, a\nrelatively small decrease or suppressi on of prices could be significant\nbecause, for example, profit margins may ordinarily be narrow, product\nhomogeneity means that sales are price se nsitive or because of the sheer size\nof the market in terms of the amount of revenue involved in large volumes\ntraded on the markets experiencing the price suppression.\n\nevidence submitted by Brazil in support of its claim. The Panel considered a number of factors, taken\ncollectively, to determine whether the effect of marketing loan and counter-cyclical payments to\nUnited States upland cotton producers was significant price suppression in the world market for\nupland cotton.\n332. First, the Panel reviewed data on the United States' share of world upland cotton production\nand world upland cotton exports, and concluded that the United States exerts a substantial\nproportionate influence on the world market for upland cotton.\n696 The Panel then examined the\nstructure, design, and operation of the mark eting loan and counter-cyclical payments. 697 The Panel\nfound that marketing loan and counter-cyclical pa yments affected the level of United States upland\ncotton acreage and production as a result of their mandatory and price-contingent nature, and their\nrevenue-stabilizing effect.\n698\n333. The next factor examined by the Panel was th e alleged \"large magnitude\" of the marketing\nloan and counter-cyclical payments. 699 The Panel recalled that, al though the Appellate Body had\nfound in the original proceedings that a precise quantification of the amount of a subsidy was not\nrequired in an analysis under Article 6.3(c) of the SCM Agreement , it had also held that the\nmagnitude of a subsidy and its relationship to prices were factors relevant to an analysis of whether\nthe effect of a subsidy is significant price suppression. 700 Having reviewed the data on the record, the\nPanel found that the order of magnitude of the marketing loan and counter-cyclical subsidies was such\nthat, in conjunction with other factors, this element supported a finding that significant price\nsuppression was the effect of the marketing loan and counter-cyclical payments.701\n334. The Panel also examined Brazil's claim that there was a \"link between high levels of [United\nStates] subsidies and high levels of [United States] planted acreage, production and exports\". 702 The\nPanel noted that the fact that the United States' share of world cotton production and exports remained\nrelatively constant during the period MY 2002-20 05 suggested that United States cotton producers\n\n696See Panel Report, paras. 10.52-10.58. Over the period MY 2002-2005, th e average United States'\nshare of world upland cotton production and exports was 19.7 per cent and 40.5 per cent, respectively. For\nMY 2006, the projected United States' share of world upland cotton production and exports was 18.6 per cent\nand 36.3 per cent, respectively. (See ibid., paras. 10.56 and 10.57)\n697See ibid., paras. 10.59-10.105.\n698See ibid., para. 10.104. The Panel emphasized that it considered this factor in conjunction with other\nfactors, such as: (i) the fact that the adjusted world price in most r ecent years had been below the marketing\nloan rate; (ii) the magnitude of the marketing loan an d counter-cyclical payments; (iii) the importance of these\nsubsidies as a share of the revenues of United States upland cotton producers; and (iv) the role of these\nsubsidies in covering a significant part of the costs of production of these producers.\n699See ibid., paras. 10.106-10.111.\n 700See ibid., para. 10.109 (referring to Appellate Body Report, US – Upland Cotton, para. 461).\n701See ibid., para. 10.111.\n702Ibid., paras. 10.112-10.127.\n\nhad increased production and exports in the sa me proportion as had foreign cotton producers. 703\nHowever, according to the Panel, the United Stat es' stable share of world cotton production and\nexports did not mean an absence of insulation of United States producers from market price signals,\nbut that the degree of price insulation that the or iginal panel had found had become weaker, possibly\nbecause prices were not as depressed as during the period examined by the original panel.704\n335. Next, the Panel examined Brazil's assertion that there was a \"discernible temporal\ncoincidence\"705 of suppressed world market prices and large marketing loan and counter-cyclical\npayments. The Panel observed that, while the Un ited States' share of world production and exports\nremained stable in MY 2002-2006, world upland cotton prices did not sharply decline over the same\nperiod, as they had done in MY 1998-2001. Inst ead, in MY 2002-2006, world upland cotton prices\nwent through \"intermittent peaks and troughs\"\n706, rising strongly from MY 2002 to MY 2003,\ndeclining sharply in MY 2004, and climbing again in MY 2005 and MY 2006. The Panel explained\nthat, the fact that recent years had not witnessed the sharp decline in the world market price for upland\ncotton that occurred during the period considered by the original panel, does not necessarily mean that\nthere is currently no price suppression within the meaning of Article 6.3(c) of the SCM Agreement.707\n336. The Panel then turned to Brazil's argument that there was a gap between long-term costs of\nproduction and market revenues of United States upland cotton producers. 708 In comparing market\nrevenues and costs of production, the Panel consider ed it essential to look at medium- to long-term\ndevelopments in the United States upland cotton sector . As a consequence, the Panel compared the\nmarket revenue with total costs of production (which included both variable and fixed costs). 709 The\nPanel found that there was a significant gap between the total costs of production of United States\nupland cotton producers and their market revenue, suggesting that the subs idies at issue are an\nimportant factor affecting the economic viability of United States upland cotton farming.710\n337. The next factor examined by the Panel was the impact of the elimination of Step 2\npayments.711 The Panel considered that, given that l ess than one year had passed since the Step 2\n\n703See Panel Report, para. 10.127.\n704Ibid.\n705Ibid., para. 10.128.\n706Ibid., para. 10.141.\n707See ibid., para. 10.146.\n708See ibid., para. 10.147.\n709The Panel also found that: (i) certain items such as land, unpaid labour, and capital recovery costs\nshould be counted as fixed costs (Panel Report, para. 10.166); (ii) non-cash opportunity costs should be counted\nas part of total costs (para. 10.170); and (iii) off-farm income did not play a significant role in sustaining the\neconomic viability of United States upland cotton farmers (para. 10.184).\n710Panel Report, para. 10.196.\n711Ibid., paras. 10.223-10.239.\n\npayments programme was terminated, and that the amount of Step 2 payments was much smaller than\nthe amount of marketing loan and counter-cyclical payments, it was not possible \"to determine with\nany … precision or confidence just how much of the projected decline in [United States] exports of\nupland cotton [was] due to the elimination of the Step 2 payments.\"\n712 The Panel further considered\nthat the evidence on the effect of the elimination of Step 2 payments on the amounts of marketing\nloan and counter-cyclical payments suggested that \"the indirect impacts on [United States] production\nand exports are likely to be small, given the rela tively modest changes projected in the amounts of\nmarketing loan and counter-cyclical payments, and the fact that these changes run counter to one\nanother.\"\n713\n338. The Panel also considered economic simulati ons conducted by the parties, estimating the\nimpact of the United States subsidies on world prices for upland cotton. 714 The Panel noted that there\nwas disagreement between the parties on the adequacy of the model chosen and on the appropriate\nparameter values (demand and supply elasticity and coupling factor), which led to divergent results as\nto the magnitude of the impact of United States subsidies on the world price. Although the United\nStates did not present its own model and criticized Brazil's model, it ran a simulation using Brazil's\nmodel with the parameters it deemed to be appropr iate. For MY 2005, Brazil's simulation estimated\nthat removal of marketing loan and counter-cycli cal payments would have increased the world price\nof cotton by 9.3 per cent to 10.7 per cent, while the simulation conducted by the United States showed\nan increase of between 1.41 per cent and 2. 26 per cent over the period MY 2002-2005.\n715 The Panel\nfound that all the simulations conducted by the parties pointed in the direction that marketing loan and\ncounter-cyclical payments led to an increase in United States production and exports of cotton that\nthen led to the suppression of world prices.\n716\n339. Finally, in considering other factors which might also have an impact on the world market\nprice for upland cotton, the Panel recalled that it had adopted a \"but for\" approach to the question of\nwhether the effect of United States marketing loan and counter-cyclical payments to upland cotton\nproducers was significant price suppression within the meaning of Article 6.3(c) of the SCM\nAgreement.717 The Panel observed that, because it had fo llowed this approach, it was not necessary to\nundertake a comprehensive analysis of other fact ors affecting the world market price for upland\n\n712Panel Report, para. 10.231.\n713Ibid., para. 10.239.\n714See ibid., paras. 10.197-10.222.\n715Ibid., paras. 10.201 and 10.202.\n716Ibid., para. 10.222.\n717See ibid., paras. 10.240-10.243.\n\ncotton. Rather, the question before the Panel wa s whether the evidence supported the conclusion that,\nin the absence of the United States marketing loan and counter-cyclical subsidies, \"the world market\nprice would increase significantly\". 718 The Panel considered that, while China may have played a\nsignificant role in the market for upland cotton, this did not diminish the significance of the impact of\nUnited States subsidies on the world price for upl and cotton resulting from their effect on the United\nStates' supply to the world market. The Panel noted that developments concerning the role of China's\ndemand and supply did not change the fact that, with a share of world exports of around 40 per cent,\nthe United States was capable of exerting a substantial proportionate influence on the world market.719\n340. On the basis of its evaluation of these factors, the Panel found that the United States acted\ninconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement , in that the effect of marketing\nloan and counter-cyclical payments was significan t price suppression in the world market for upland\ncotton, within the meaning of Article 6.3(c), constitu ting \"present\" serious prejudice to the interests of\nBrazil, within the meaning of Article 5(c).720 The Panel concluded that the United States had failed to\ncomply with the recommendations and rulings of th e DSB because it had failed \"to take appropriate\nsteps to remove the adverse effects or ... withdraw the subsidy\" 721, as required under Article 7.8 of the\nSCM Agreement.722\nD. Claims and Arguments on Appeal\n341. The United States claims that the Panel erred in finding that the effect of marketing loan and\ncounter-cyclical payments provided to United St ates upland cotton producers pursuant to the FSRI\nAct of 2002 is significant price suppression in the world market for upland cotton, within the meaning\nof Article 6.3(c) of the SCM Agreement , constituting \"present\" serious prejudice to the interests of\nBrazil, within the meaning of Article 5(c) of the SCM Agreement.\n342. In particular, the United States argues that th e Panel erred in: (i) finding that the United\nStates marketing loan and counter-cyclical paymen ts insulated United States upland cotton producers\nfrom market signals723; (ii) finding that there was a gap between market revenues and the production\ncosts of United States upland cotton producers 724; (iii) its assessment of the economic simulations\nconducted by the parties725; (iv) its evaluation of the impact of the elimination of Step 2 payments on\n\n718Panel Report, para. 10.243.\n719See ibid., para. 10.243.\n720Ibid., para. 10.256.\n721Ibid., para. 15.1(a).\n722Ibid., para. 10.257.\n723See United States' appellant's submission, para. 133.\n724See ibid., para. 165.\n725See ibid., para. 196.\n\nUnited States upland cotton production and exports and on marketing loan and counter-cyclical\npayments\n726; (v) its consideration of the alleged larg e magnitude of marketing loan and counter-\ncyclical payments727; (vi) finding that the United States exer ted a substantial pro portionate influence\non the world market for upland cotton 728; (vii) failing to conduct a prope r non-attribution analysis as\nrequired by Article 6.3(c) of the SCM Agreement in respect of other factors, particularly China's role\nin the world upland cotton market 729; and (viii) failing to determine the degree of price suppression it\nconsidered to be significant within the meaning of Article 6.3(c) of the SCM Agreement. 730\n343. The United States also claims that the Panel fa iled to make an objective assessment of the\nmatter before it as required by Article 11 of the DS U, because it deliberately disregarded, and refused\nto consider, evidence submitted by the United States; wilfully distorted and misrepresented this\nevidence; and failed to provide a reasoned and adequa te explanation of its conclusions in the light of\nother plausible alternative explanations.731\n344. Brazil responds that the Panel did not err in finding that the effect of marketing loan and\ncounter-cyclical payments provided to United St ates upland cotton producers is significant price\nsuppression, constituting \"present\" serious prejudice to the interests of Brazil, within the meaning of\nArticles 5(c) and 6.3(c) of the SCM Agreement.\n345. More specifically, Brazil argues that the Panel: (i) did not exceed the bounds of its discretion\nin finding that marketing loan and counter-cycli cal subsidies insulate United States upland cotton\nproducers from market price signals by stabilizing their revenue 732; (ii) properly exercised its\ndiscretion in relying on total costs of production and market revenue data generated by the USDA\nwhen finding that there was a gap between market revenues and production costs of United States\nupland cotton producers 733; (iii) did not err in relying on the economic simulations as support for its\nfinding of significant price suppression734; (iv) did not err in finding that the withdrawal of the Step 2\npayments does not eliminate the significant pri ce-suppressing effects of the marketing loan and\ncounter-cyclical subsidies 735; (v) properly found that the large magnitude of marketing loan and\ncounter-cyclical subsidies supports its finding of significant price suppression 736; (vi) properly found\n\n726See United States' appellant's submission, para. 197.\n727See ibid., para. 217.\n728See ibid., paras. 218 and 219.\n729See ibid., para. 214.\n730See ibid., para. 221.\n731See ibid., paras. 227-243.\n732See Brazil's appellee's submission, para. 624.\n733See ibid., paras. 707-777.\n734See ibid., paras. 838-843.\n735See ibid., para. 900.\n736See ibid., para. 790.\n\nthat the substantial proportionate influence exercised by the United States on the world market for\nupland cotton supports its finding of significant price suppression in that market 737; (vii) properly\nassessed the role of other factors, including the role of China in the world market for upland cotton 738;\nand (viii) properly found that the price suppression caused by the subsidies is of a \"significant\" 739\ndegree, based on a comprehensive consideration of both qualitative and quantitative factors.\n346. Brazil submits that the Panel did not exceed the bounds of its discretion as the trier of facts\nunder Article 11 of the DSU in finding that the effect of marketing loan and counter-cyclical\npayments provided to United States upland cotton producers is significant price suppression. 740 Brazil\nalso asserts that certain arguments of the United St ates that are directed at the sufficiency of the\nPanel's reasoning do not properly belong under Article 11 of the DSU, but should have been raised\nunder Article 12.7 of the DSU. 741 Brazil argues that the United States made no claim of error under\nArticle 12.7 of the DSU and that, for this reason alone, these arguments should be dismissed. 742 In\nany event, Brazil notes that the Panel did provide a basic rationale for its findings.743\n347. Australia, Canada, and New Zealand address the Panel's finding of serious prejudice in their\nthird participant's submissions. Australia submits that, in finding that the effect of marketing loan and\ncounter-cyclical payments provided to United St ates upland cotton producers is significant price\nsuppression, the Panel acted within its discretion in the appreciation of the evidence and made\nappropriate use of the findings in the original proceedings. 744 As regards the United States' claims\nunder Article 11 of the DSU, Australia asserts that the conduct of the Panel in assessing the evidence\npresented to it was not such as to give rise to \"the deliberate disregard of, or refusal to consider, the\nevidence submitted to a panel\" nor to \"the willful di stortion or misrepresentation\" of that evidence so\nas to amount to an \"egregious error that ca lls into question the good faith of a panel\". 745 Canada\naddresses the claims of the United States under Article 11 of the DSU exclusively, arguing that \"the\nAppellate Body should accord to the Panel's appreci ation of the evidence the same deference it has\nroutinely accorded in other cases.\"\n746 Finally, New Zealand states that the Panel correctly concluded\nthat United States upland cotton producers are insu lated from market signals and correctly relied on\n\n737See Brazil's appellee's submission, para. 804.\n738See ibid., para. 941.\n739See ibid., paras. 806-829.\n740See ibid., para. 136.\n741See ibid., para. 142.\n742See ibid., paras. 156 and 157.\n743See ibid., para. 158.\n744See Australia's third participant's submission, para. 23.\n745Ibid., para. 31.\n746Canada's third participant's submission, para. 40.\n\nseveral other factors in supporting its finding of present serious prejudice.\n747 Moreover, New\nZealand argues that the Panel did not make \"egregious\" errors rising \"to a level that calls into question\nthe objectivity of the Panel's assessment\" 748, which is required for a claim under Article 11 of the\nDSU to succeed.\nE. The Panel's Findings of \"Present\" Serious Prejudice under Articles 5(c) and 6.3(c) of\nthe SCM Agreement\n348. We begin our analysis by addressing the United States' claim that the Panel failed to\ndetermine the degree of price suppression that it found to be \"significant\" within the meaning of\nArticle 6.3(c) of the SCM Agreement. We then turn to the Panel's analysis of causation and to the\nUnited States' claim that the Pane l failed to conduct a proper non-attribution analysis, as required by\nArticle 6.3(c) of the SCM Agreement . Next, we discuss the standard of review applicable in our\nexamination of the various other errors the United St ates alleges that the Panel made in its assessment\nof the various factors supporting its finding of si gnificant price suppression. In the light of the\napplicable standard of review, we finally consider the United States' argument that the Panel erred in\nits evaluation of the various factors supporting its finding of significant price suppression.\n1. Significant Price Suppression under Article 6.3(c) of the SCM Agreement\n\n349. In terms of Article 6.3(c) of the SCM Agreement , \"serious prejudice\", in the sense of\nArticle 5(c) of the SCM Agreement, may arise where:\n… the effect of the subsidy is a significant price undercutting by the\nsubsidized product as compared with the price of a like product of\nanother Member in the same market or significant price suppression,\nprice depression or lost sales in the same market.\n\n747See New Zealand's third participant's submission, paras. 4.3 and 4.16-4.30.\n748Ibid., para. 4.31.\n\n350. In the original proceedings, the Appellate Body agreed with the following description of price\nsuppression provided by the original panel:\nThus, \"price suppression\" refers to the situation where \"prices\"—in\nterms of the \"amount of money set for sale of upland cotton\" or the\n\"value or worth\" of upland cotton—either are prevented or inhibited\nfrom rising (i.e. they do not increase when they otherwise would\nhave) or they do actually increase, but the increase is less than it\notherwise would have been. Price depression refers to the situation\nwhere \"prices\" are pressed down, or reduced.[*]\n749 (emphasis added\nby the Appellate Body)\n\n[*original footnote 1388] In the remainder of our analysis, we use the term\n\"price suppression\" to refer both to an actual decline (which otherwise\nwould not have declined, or would have done so to a lesser degree) and an\nincrease in prices (which otherwise would have increased to a greater\ndegree).\nThe Appellate Body observed that \"'the situation where 'prices' ... are prevented or inhibited from\nrising' and 'the situation where \"prices\" are pressed down, or reduced' may overlap.\" 750 However, it\ndisagreed with the original panel's use of the term \"price suppression\" as short-hand for both price\nsuppression and price depression, noting that Article 6.3(c) refers to the two as distinct concepts.751\n351. At a conceptual level, we see some differenc es between the concepts of \"price depression\"\nand \"price suppression\" as defined in the original pr oceedings. While price depression is a directly\nobservable phenomenon, price suppression is not so. Falling prices can be observed; by contrast,\nprice suppression concerns whether prices are le ss than they would otherwise have been in\nconsequence of various factors, in this case, the subsidies. The identification of price suppression,\ntherefore, presupposes a comparison of an observable factual situation (prices) with a counterfactual\nsituation (what prices would have been) where one has to determine whether, in the absence of the\nsubsidies (or some other controlling phenomenon) , prices would have increased or would have\nincreased more than they actually did. Price depressi on, by contrast, can be directly observed, in that\nfalling prices are observable. The determination of whether such falling prices are the effect of the\nsubsidies will require consideration of what pric es would have been absent the subsidies. Thus,\ncounterfactual analysis is an inescapable part of an alyzing the effect of a subsidy under Article 6.3(c)\nof the SCM Agreement.\n\n749Original Panel Report, para. 7.1277 and footnote 1388 thereto (quoted in Appellate Body Report,\nUS – Upland Cotton, para. 423).\n750Appellate Body Report, US – Upland Cotton , para. 424 (quoting Original Panel Report,\npara. 7.1277).\n751See Appellate Body Report, US – Upland Cotton, para. 424.\n\n352. In the original proceedings, the panel conducte d a two-step analysis of whether \"price\nsuppression\" existed and whether it was \"significant\". In the first step, the original panel examined:\n(i) the relative magnitude of United States production and exports; (ii) general price trends; and\n(iii) the nature of the subsidies.\n752 Under the second step, the original panel interpreted the term\n\"significant\" as meaning \"important, notable ... consequential\" 753, and noted that the term may have a\n\"numeric\"754 connotation, but that the nature of the ma rket and of the product under consideration\nmay enter into such assessment as we ll. The original panel recalled its assessment of the evidence in\nthe light of the same three factors mentioned above, and concluded that it was not looking at an\n\"insignificant or unimportant world price phenomenon\".\n755\n353. By contrast, in these Article 21.5 proceedings, the Panel stated that it would adopt a\n\"unitary\"756 approach and would not separate into thr ee analytical steps whether there was price\nsuppression in the world market for upland cotton, wh ether this price suppression was significant, and\nwhether a causal relationship existed between this significant price suppression and the subsidies.\nThe Panel found support for this approach in the finding of the Appellate Body in the original\nproceedings that \"it would be difficult to make a judgement on significant price suppression without\ntaking into account the effect of the subsidies.\"757\n354. Because of the counterfactual nature of price suppression, it is difficult to separate price\nsuppression from its causes. Hence, the Panel's \"unitary \" analysis\", at least in respect of identifying\nprice suppression and its causes, has a sound conceptual foundation.\n355. In this case, the Panel was required to consid er the impact of marketing loan and counter-\ncyclical payments on the prices of upland cotton on the world market. Brazil did not allege that\nmarketing loan and counter-cyclical payments to United States upland cotton farmers have a direct\nimpact on world market prices. Rather, these payments are alleged to have had an impact on farmers'\nplanting decisions and, consequently, on domestic upland cotton production levels. Thus, the analysis\nshould initially focus on the effects of the subsidi es on production levels by examining whether there\nwas more production than there otherwise would ha ve been as a result of the marketing loan and\ncounter-cyclical payments. It is the marginal production attributable to the marketing loan and\ncounter-cyclical payments that matters. If there were to be increased upland cotton production, the\n\n752See Original Panel Report, para. 7.1280.\n753Ibid., para. 7.1325.\n754Ibid., para. 7.1329.\n755Ibid., para. 7.1332. The Appellate Body did not disturb the original panel's analysis. (See Appellate\nBody Report, US – Upland Cotton, paras. 429 ff)\n756Panel Report, para. 10.46.\n757Appellate Body Report, US – Upland Cotton, para. 433.\n\nanalysis would then focus on whether that increase in supply had effects on prices in the world\nmarket. All else being equal, the marginal production attributable to the subsidy would be expected to\nhave an effect on world prices, particularly if the subsidy is provided in a country with a meaningful\nshare of world output.\n356. Given the focus on production and price effects, an analysis of price suppression would\nnormally include a quantitative component. 758 There is some inherent difficulty in quantifying the\neffects of subsidies, because, as we have indicated, the increase in prices, absent the subsidies, cannot\nbe directly observed. One way to undertake the analysis is to use economic modelling or other\nquantitative techniques. These techniques can be used to estimate whether there are higher levels of\nproduction resulting from the subsidies and, in turn, the price effects of that production. Economic\nmodelling and other quantitative techniques provide a framework to analyze the relationship between\nsubsidies, other factors, and price movements.\n357. Brazil presented an economic simulation model before the Panel. The United States criticized\ncertain structural aspects of the economic simulation model presented by Brazil, as well as the\nparameters used in that model. Instead of offering its own model, the United States ran Brazil's model\nusing its own preferred parameters. The results of both simulations were presented to the Panel. The\nPanel provided an extensive discussion of the simula tions presented by both parties, the differences in\nthe parameters used by each, and the explanations provided by each party to justify their choice of\nparameters.\n759 It also described the resu lts of the various simulations. 760 The Panel concluded that\n\"all the simulations conducted by the parties support th e view that [United States] marketing loan and\ncounter-cyclical payments have led to an increase in [United States] producti on and exports of cotton\nthat have then suppressed world prices.\" 761 Because the examination of price suppression necessarily\ninvolves an analysis of what would have been the case in the absence of an intervening event,\nmodelling exercises are likely to be an important an alytical tool that a panel should scrutinize. The\nrelative complexity of a model and its parameters is not a reason for a panel to remain agnostic about\nthem. Like other categories of evidence, a pane l should reach conclusions with respect to the\n\n758The original panel stated that \"the 'significance' of any degree of price suppression may vary from\ncase to case, depending upon the factual circumstances, and may not solely depend upon a given level of\nnumeric significance\". It added that \"[o]ther considerations, including the nature of the 'same market' and the\nproduct under consideration may also enter into such an assessment, as appropriate in a given case.\" (Original\nPanel Report, para. 7.1329 (footnote omitted); see also Appellate Body Report, US – Upland Cotton, para. 434)\nThese findings were not disturbed by the Appellate Body. (Appellate Body Report, US – Upland Cotton ,\npara. 490)\n759See Panel Report, paras. 10.197-10.222.\n760The results are graphically set out in Figure 4 at ibid., para. 10.203.\n761Ibid., para. 10.222.\n\nprobative value it accords to economic simulations or models presented to it. This kind of assessment\nfalls within the panel's authority as the initial trier of facts in a serious prejudice case.\n358. In the present case, the Panel did not take a position on which parameters were more\nappropriate to measure the effect of the subsidies at issue on prices, or the appropriateness of the\nstructure of the model itself. The Panel simply concluded that all simulations showed increases of\nproduction and exports and the con sequential suppression of prices. While the Panel appropriately\nexamined the model, the parameters used by each party, and the arguments made by the parties\n762, and\nnoted the different results generated by the simula tions conducted by each party, the Panel could have\ngone further in its evaluation and comparative analys is of the economic simulations and the particular\nparameters used.\n359. We proceed to consider the specific aspects of the Panel's analysis challenged by the United\nStates, namely, the Panel's alleged failure to dete rmine the degree of price suppression it found to be\n\"significant\", the Panel's non-attribution analysis, a nd the other allegations of error raised by the\nUnited States.\n2. The United States' Claim that the Pane l Failed to Determine the Degree of\nPrice Suppression It Found to Be \"Significant\"\n360. The United States claims on appeal that the Panel failed to determine what degree of price\nsuppression was \"significant\"763, as required by Article 6.3(c) of the SCM Agreement.\n361. The Panel adopted, as indicated, a \"unitary\" approach\". It did not, as the original panel did,\nseparate its analysis into three steps to determ ine whether there was price suppression in the world\nmarket for upland cotton, whether this price suppression was significant, and whether a causal\nrelationship existed between such signifi cant price suppression and the subsidies. 764 Rather, in\nundertaking a unitary analysis, the Panel considered both quantitative and qualitative elements in its\nassessment. It made a quantitativ e assessment of significance by ev aluating the magnitude of the\nsubsidies, the gap between United States upland co tton producers' revenues and costs of production,\nthe United States' share of world production and expo rts, and the economic simulations; and it made\n\n762We note that in paragraph 10.198 of its Report, the Panel stated that it had considered \"in some detail\nthe arguments made by the parties about the model, its assumptions and results\" and that, to the extent possible,\nit had \"provided [its] assessment of these arguments, and based on that arrived at an overall conclusion about the\nsimulation results.\" However, its overall conclusion in paragraph 10.222 is limited to the consideration that \"all\nthe simulations conducted by the par ties support the view that [United States] marketing loan and counter-\ncyclical payments have led to an increase in [United States] production and exports of cotton that have then\nsuppressed world prices\".\n764See Panel Report, para. 10.46.\n\na qualitative assessment by evaluating the structure, design, and operation of the subsidies. The\nadoption of a unitary approach, however, did not absolve the Panel from clearly explaining its\nposition on the question of \"significance\". The Pane l could have provided a clearer explanation of\nhow the factors that it examined supported its finding that the price suppression was \"significant\".\n362. In our view, several of the factors evaluated by the Panel support the proposition that the\neffect of the marketing loan and counter-cyclical payments is \"significant\" price suppression in the\nworld market for upland cotton. The Panel noted that there was some disagreement between Brazil\nand the United States on the exact magnitude of the subsidies, particularly in relation to counter-\ncyclical payments, with the United States' data showing lower payments than Brazil's data. 765 T h e\ndata submitted by the United States showed that ma rketing loan payments exceeded US$1.7 billion in\nMY 2004, and US$1.2 billion in MY 2005. 766 The United States indicated that counter-cyclical\npayments to upland cotton production exceeded US$800 million in MY 2004 and in MY 2005. 767 In\nother words, the subsidies provided to upland cotton production under the marketing loan and\ncounter-cyclical payments programmes exceeded US $2 billion in both MY 200 4 and MY 2005. This\nmagnitude of the marketing loan and counter-cycli cal payments is significant not only in absolute\nterms, but also as a share of Unite d States producers' total revenues. The Panel found, in this regard,\nthat \"[t]he share of marketing loan payments an d counter-cyclical payments in total revenues of\n[United States] upland cotton producers was 35 per cent in MY 2004 and 27 per cent in MY 2005.\"768\n363. Although the Panel did not quantify the effect of these subsidies on upland cotton plantings\nand production, it established that the marketing lo an and counter-cyclical payments \"affect the level\nof [United States] upland cotton acreage and produc tion as a result of their mandatory and price-\ncontingent nature and their revenue-stabilizing effect.\"769 Moreover, the Panel found that \"there exists\na significant gap between the total costs of productio n of [United States] upland cotton producers and\n\n765The Panel provided a table comparing the results of various calculations provided by Brazil and the\nUnited States of the amounts of counter-cyclical payments to United States upland cotton producers. (See\nTable 2A, Panel Report, para. 10.32)\n766See ibid., para. 10.24, Table 1: Marketing Loan Payments, MY 2002-2005 (referring to data\nprovided by the United States in its response to Question 4 posed by the Panel, Panel Report, p. D-140,\npara. 14).\n767See ibid., para. 10.32, Table 2A: Counter-cyclical Payments (non-Annex IV Methodology),\nMY 2002-2005 (referring to data provided by the United States in its response to Question 4 posed by the Panel,\nibid., p. D-141, para. 16).\n768Ibid., para. 10.111. (footnote omitted)\n769Ibid., para. 10.248. The United States has appealed the Panel's findings with respect to the \"market-\ninsulating\" effects of the marketing loan and counter-cyclical payments. The United States claims are examined\ninfra, para. 387. We uphold the Panel's findings.\n\ntheir market revenue.\"\n770 The gap between revenues and costs was found to exist in four of the five\nyears examined by the Panel, if ginning costs are in cluded in the calculation, or in three of the five\nyears, if ginning costs are excluded. 771 Costs exceeded market revenues by between 3.7 per cent\nand 71.9 per cent, if ginning costs are included, or by 12.3 per cent and 83.6 per cent, if ginning costs\nare excluded.772 The Panel reasoned in this regard:\n[V]iewed together with other ev idence on the record, including the\nfact that the adjusted world price in most recent years has been below\nthe marketing loan rate, the magnitude of the marketing loan and\ncounter-cyclical payments, the importance of these subsidies as a\nshare of the revenues of [United States] upland cotton producers and\ntheir role in covering a significant part of the costs of production of\nthese producers, it is reasonable to conclude that without these\nsubsidies the level of [United States] upland cotton acreage and\nproduction would likely be significantly lower.\n773 (footnote omitted)\nThe effect of marketing loan and counter-cycli cal payments on production of upland cotton was\nconfirmed in the economic simulations conducted by the parties. Even when run using the parameters\nthat the United States considered to be appropria te, the simulation showed 12 per cent to 18 per cent\nadditional production of upland cotton due to marke ting loan and counter-cyclical payments in the\nperiod MY 2002-2005.774\n364. The Panel also found that \"the United States exerts a substantial proportionate influence on\nthe world market for upland cotton\". 775 According to the Panel, th e United States' share of world\nupland cotton production was 19.6 per cent in MY 2002, 20.9 per cent in MY 2005, and was projected\nto be 18.6 per cent in MY 2006. 776 The United States' share of world exports of upland cotton\nwas 39.9 per cent in MY 2002, 39.8 per cent in MY 2005, and was projected to be 36.3 per cent in\nMY 2006.777 We understand the Panel's finding to imply that, given the United States' significant\nshares of world exports and production, the incr eased production resulting from the marketing loan\nand counter-cyclical payments would have an eff ect on the world market for upland cotton and would\nbe reflected in the world market price of upland cotton.\n\n770Panel Report, 10.196. The United States has also challenged the Panel's assessment of the difference\nbetween United States upland cotton producers' revenues and costs. These claims are addressed infra, para. 419.\nWe also uphold the Panel's findings in this regard.\n771See ibid., paras. 10.189 and 10.190, Tables 6A and 6B.\n772Ibid.\n773Ibid., para. 10.104.\n774See United States' first written submission to the Panel, Annex I, Table A8, p. 14.\n775Panel Report, para. 10.58.\n776See ibid., para. 10.58.\n777Ibid.\n\n365. The Panel found confirmation for this propos ition in the economic simulations. The\nsimulation with the parameters preferred by the Un ited States showed that the removal of marketing\nloan and counter-cyclical payments would have increased the world price of upland cotton\nby 1.41 per cent to 2.26 per cent in the period MY 2002-2005. 778 The simulation run with the\nparameters suggested by Brazil showed that, in MY 2002-2005, the world price of upland cotton\nwould have been higher by 8.2 to 8.9 per cent in the absence of the marketing loan and counter-\ncyclical payments.\n779 The Panel further noted the significan ce of even relatively small changes in\nprice for commodity products such as upland cotton, endorsing the original panel's view that:\n… for a basic and widely traded co mmodity, such as upland cotton, a\nrelatively small decrease or suppression of prices could be significant\nbecause, for example, profit margins may ordinarily be narrow,\nproduct homogeneity means that sales are price sensitive or because\nof the sheer size of the market in terms of the amount of revenue\ninvolved in large volumes traded on the markets experiencing the\nprice suppression.\n780\nThe United States has not challenged the accuracy of th is statement. Thus, the range of price effects\nresulting from the simulations would fall within the Panel's view of what constitutes \"significant\"\nprice suppression in the specific context of the world price of upland cotton.\n366. Therefore, we find that the evidence on the r ecord supports the Panel's conclusion that the\neffect of the marketing loan and counter-cyclical payments is \"significant\" price suppression, within\nthe meaning of Article 6.3(c) of the SCM Agreement.\n3. Causation and Non-attribution\n367. The United States submits that the Panel failed to conduct a proper non-attribution analysis\nunder Article 6.3(c) of the SCM Agreement , despite having recognized that it had an obligation to\ndo so.781 According to the United States, \"[m]issing fro m the Panel's analysis was any discussion of\njust how other factors, including China, actually played a role in establishing the world price for\nupland cotton.\"782\n368. The Appellate Body explained in the original proceedings that Articles 5 and 6.3 of the SCM\nAgreement do not contain the more elaborate and precise \"causation\" and \"non-attribution\" language\n\n778See Panel Report, para. 10.202.\n779See ibid., para. 10.201.\n781See United States' appellant's submission, para. 210.\n782Ibid., para. 214.\n\nfound in the trade remedy provisions of the SCM Agreement.\n783 This means that \"a panel has a certain\ndegree of discretion in selecting an appropriate me thodology for determining whether the 'effect' of a\nsubsidy is significant price suppression\". 784 In the original proceedings, the Appellate Body found\nthat the original panel's approach with respect to causation and non-attribution was similar to that\nreflected in Appellate Body findings in the contex t of other WTO agreements, which defined a causal\nlink as involving \"a genuine and substan tial relationship of cause and effect\" 785 and required the non-\nattribution of effects caused by other factors. The Appellate Body \"agree[d] with the [original panel]\nthat it is necessary to ensure that the effects of ot her factors on prices are not improperly attributed to\nthe challenged subsidies\", explaining that, \"[i]f th e significant price suppression found in the world\nmarket for upland cotton were caused by factors othe r than the challenged subsidies, then that price\nsuppression would not be 'the effect of' the challenged subsidies in the sense of Article 6.3(c).\"786\n369. The approach to causation and non-attributio n taken by the Panel in these Article 21.5\nproceedings differs from the approach taken by the or iginal panel. In the original proceedings, the\npanel's approach consisted of \"exami n[ing] whether or not 'the effect of the subsidy' is significant\nprice suppression which [it had] found to exist in the same world market\". 787 The original panel then\nseparately \"consider[ed] the role of other alleged cau sal factors in the record before [it] which may\n[have] affect[ed] [the] analysis of the causal link between the United States subsidies and the\nsignificant price suppression.\" 788 The Panel in these Article 21.5 proceedings \"adopted a 'but for'\napproach to the question of whether the effect of [United States] marketing loan and counter-cyclical\nsubsidies to upland cotton producers is significant price suppression within the meaning of\nArticle 6.3(c) of the SCM Agreement\".789 The Panel also considered that, having adopted a \"but for\"\napproach, \"it is not necessary in this respect to undertake a comprehensive evaluation of factors\naffecting the world market price for upland cotton.\"790\n370. We recall that \"a panel has a certain degree of discretion in selecting an appropriate\nmethodology for determining whether the 'effect' of a subsidy is significant price suppression\". 791\nArticles 5(c) and 6.3(c) of the SCM Agreement do not exclude, therefore, that a panel could examine\n\n783See Article 15.5 of the SCM Agreement. See also Article 3.5 of the Anti-Dumping Agreement and\nArticle 4.2(b) of the Agreement on Safeguards.\n784Appellate Body Report, US – Upland Cotton, para. 436.\n785Ibid., para. 438.\n 786 Ibid., para. 437.\n 788Appellate Body Report, US – Upland Cotton , para. 437 (quoting Original Panel Report,\npara. 7.1346).\n789Panel Report, para. 10.243.\n790Ibid.\n791Appellate Body Report, US – Upland Cotton, para. 436.\n\ncausation based on a \"but for\" approach. We have explained that a price suppression analysis is\ncounterfactual in nature. The Panel's choice of a \"but for\" approach reflects this. In consequence, the\nPanel had to determine whether the world price of upland cotton would have been higher in the\nabsence of the subsidies (that is, but for the subsidies).\n371. In the original proceedings, the Appellate Body observed that:\n... the ordinary meaning of the transitive verb \"suppress\" implies the\nexistence of a subject (the challenged subsidies) and an object (in this\ncase, prices in the world market for upland cotton). This suggests\nthat it would be difficult to make a judgement on significant price\nsuppression without taking into account the effect of the subsidies.\nThe Panel's definition of price suppression, explained above, reflects\nthis problem; it includes the notion that prices \"do not increase when\nthey otherwise would have\" or \"they do actually increase, but the\nincrease is less than it otherwise would have been\". The word\n\"otherwise\" in this context refers to the hypothetical situation in\nwhich the challenged subsidies are absent. Therefore, the fact that\nthe Panel may have addressed some of the same or similar factors in\nits reasoning as to significant price suppression and its reasoning as\nto \"effects\" is not necessarily wrong.\n792 (original emphasis; footnotes\nomitted)\nThe Panel's choice of a \"but for\" approach, theref ore, is consistent with the definition of price\nsuppression endorsed by the Appellate Body in the or iginal proceedings, insofar as the counterfactual\ndetermination of whether price suppression exists cannot be separated from the analysis of the effects\nof the subsidies.\n372. We note that Article 6.3(c) does not use the wo rd \"cause\" but, rather, provides that serious\nprejudice may arise where \"the effect of the subs idy is ... significant price suppression\". The\nAppellate Body stated in the origin al proceedings that the text of Article 6.3(c) nevertheless requires\nthe establishment of a causal link between th e subsidy and the significant price suppression. 793 We\nagree that Article 6.3(c) requires the establishmen t of a causal link, but we observe that, while the\nterm \"cause\" focuses on the factors that may trigger a certain event, the term \"effect of\" focuses on the\nresults of that event. The effect—price suppressi on—must result from a chain of causation that is\nlinked to the impugned subsidy.\n373. The United States has not appealed the Panel's choice of a \"but for\" approach per se. Instead,\nthe United States argues that the Panel erred in dec lining to carry out a comprehensive evaluation of\nother factors affecting the world market price fo r upland cotton. According to the United States,\n\n792Appellate Body Report, US – Upland Cotton, para. 433.\n793See ibid., para. 435.\n\n\"[t]he very use of a but-for analysis ... requires th e Panel not to attribute effects to [United States]\npayments that they are not having.\"\n794\n374. The Panel does not clearly articulate the standard implicated in its \"but for\" approach. Brazil\nsubmits that the Panel's \"but for\" standard \"effectively isolated the effects of [United States]\nsubsidies from the effects of other factors.\" 795 New Zealand asserts that the Panel's finding—that\nwithout the United States subsidies the price of upland cotton would be higher—\"stands independent\nof any other global factors that might also be suppressing world market prices\". 796 T h i s m a y\nsomewhat oversimplify the position. A subsidy may be necessary, but not sufficient, to bring about\nprice suppression. Understood in this way, the \"but for\" test may be too undemanding. By contrast,\nthe \"but for\" test would be too rigorous if it required the subsidy to be the only cause of the price\nsuppression. Instead, the \"but for\" test should determine that price suppression is the effect of the\nsubsidy and that there is a \"genuine and substantial relationship of cause and effect\".\n797\n375. The United States argues that the Panel was re quired to conduct a non-attribution analysis as\npart of its \"but for\" approach. While we agree th at Article 6.3(c) requires the Panel to have ensured\nthat the effects of other factors on prices did not di lute the \"genuine and substantial\" link between the\nsubsidies and the price suppression, Article 6.3(c) leaves some discretion to panels in choosing the\nmethodology used for this assessment. In the light of this flexibility, it would not have been improper\nfor the Panel to have assessed the effect of other f actors as part of its counterfactual analysis, rather\nthan conducting a separate analysis of non-attribution. In our view, the Panel's \"but for\" standard,\nunderstood as we have set out above, is permissible under Article 6.3(c) of the SCM Agreement, and it\nis consistent with the Panel's counterfactual analysis of price suppression.\n376. The United States relied upon only one other fa ctor that it considered required a non-\nattribution analysis. That factor is China's role in the upland cotton market. The Panel considered\nthat \"based on the evidence before it, ... while China may play a si gnificant role in the market for\nupland cotton, this does not diminish the significance of the impact of [United States] subsidies on the\nworld price for upland cotton as a result of their effect on [United States] supply to the world\nmarket\".798 It further noted that \"[d]evelopments concerning the role of China's demand and supply\n\n795Brazil's appellee's submission, para. 921. (original emphasis)\n796New Zealand's third participant's submission, para. 4.25.\n797Appellate Body Report, US – Upland Cotton , para. 438 (quoting Appellate Body Report, US –\nWheat Gluten, para. 69).\n798Panel Report, para. 10.243.\n\ndo not change the fact that, with a share of world exports of around 40 per cent, the United States is\ncapable of exerting a substantial proportionate influence on the world market\".799\n377. The United States asserts that China is \"one of the most important 'other' factors influencing\nthe world price of upland cotton.\" 800 According to the United States, China is \"the world's largest\nproducer of upland cotton, the world's largest cons umer of upland cotton and world's largest importer\nof upland cotton\" with \"its share of world im ports rising from only 1% in MY 1998 to 44% in\nMY 2005\".801 The United States also asserts that \"downward pressure on cotton prices may also have\nresulted from uncertainty over China's supply and demand statistics, as well as ad hoc changes to\ngovernment policies.\"802\n378. As we review the United States' arguments, we have considerable difficulty understanding\nhow China's increasing consumption and imports of cotton could have contributed to the suppression\nof the world price of cotton. To the contrary, the additional demand from China's imports would have\nbeen likely to contribute positively to world prices. We are also not persuaded that the United States\nhas established how uncertainties over China's supply and demand statistics and ad hoc changes in\ngovernment policies have contributed to price suppression. In both cases, the United States asserts\nthat China has an impact on world upland cotton pr ices, but fails to demonstrate how China's role\nimpacts negatively on world prices. The United States relies on a report of the International Cotton\nAdvisory Committee, which notes that \"uncertain ties regarding statistics on cotton production,\nconsumption, and stocks\" make it \"difficult to est imate the gap between supply and use in China ...,\nand therefore to predict the level of Chinese imports from one season to another\", and that the \"timing\nand amount of import quotas released by China ... has t hus become precious information to evaluate\nthe need for cotton by Chinese mills.\" 803 The report further suggests that \"the lack of information\nabout the future releases of these import quot as may contribute to pushing prices downward\". 804\nHowever, the same report is unambiguous about th e general overall effect of China on the price of\ncotton, stating that, \"[i]n the past 25 years, significant increases in Chinese imports resulted in hikes in\ninternational cotton prices\". 805 Moreover, the evidence submitted by the United States suggests that\nuncertainty about China's demand may cause pri ce volatility in the world upland cotton market.\n\n799Panel Report, para. 10.243.\n800United States' appellant's submission, para. 211. In its appellant's submission, the United States\nsometimes refers to \"other factors\", in the plural. However, it only makes arguments on the role of China.\n801Ibid.\n802Ibid., para. 212.\n803United States' first written submission to the Panel, para. 315 (quoting International Cotton Advisory\nCommittee (ICAC) Report, p. 7 (Exhibit Bra-485 submitted by Brazil to the Panel, supra, footnote 131).\n804Ibid. (emphasis added by United States omitted)\n805Ibid.\n\nHowever, we are not persuaded that the evidence of volatility demonstrates prima facie that Chinese\nconsumption of cotton and policies have a suppressi ng effect on the price of upland cotton in the\nworld market. The effects of volatility appear to be inconclusive. Therefore, while the Panel agreed\nwith the United States that \"China may play a significant role in the market for upland cotton\"\n806, it\nproperly concluded that this does not diminish price suppressing effects of marketing loan and\ncounter-cyclical payments.\n379. For these reasons, we find that the Panel did not e rr in finding that the role of China's trade in\ncotton \"does not attenuate the link between significa nt price suppression and the subsidies at issue in\nthis proceeding\".\n807\n380. The United States also argues that the Panel faile d to make an objective assessment of the\nmatter, as required by Article 11 of the DSU, by disregarding evidence that the United States had\nsubmitted that was relevant to the non-attribution analysis, and by failing to provide a reasoned and\nadequate explanation for its conclusions in the light of possible alternative explanations.808\n381. We have found that the Panel's finding concerni ng the role of China is not inconsistent with\nArticle 6.3(c) of the SCM Agreement. We disagree with the assertion by the United States that the\nPanel \"ignored completely, and never took into account\" 809, evidence concerning the role of China\nsubmitted by the United States. 810 Although its analysis of China's role may be succinct, the Panel\nconsidered, \" based on the evidence before it , that while China may play a significant role in the\nmarket for upland cotton, this does not diminish the significance of the impact of [United States]\nsubsidies on the world price for upland cotton as a r esult of their effect on [United States] supply to\nthe world market.\"811 Moreover, we stated above that the evidence submitted by the United States on\nthe role of China in the world cotton trade does not establish that China is a factor that contributes to\nthe suppression of world upland cotton prices. We do not believe, therefore, that the Panel was\nrequired to conduct a more thorough analysis of the role of China in the light of the evidence\n\n806Panel Report, para. 10.243.\n807Ibid., para. 10.252.\n808See United States' appellant's submission, para. 243.\n809Ibid.\n810Brazil argues that the United States should have raised this claim under Article 12.7 of the DSU. We\nare not persuaded by the argument put forward by Brazil that such a claim should have been raised under\nArticle 12.7 of the DSU and that, as it was not, it should fail for that reason. We recall that Article 12.7 requires\npanels to set out the findings of fact, the applicability of relevant provisions, and the basic rationale behind any\nfindings and recommendations it makes.\n811Panel Report, para. 10.243. (emphasis added)\n\nsubmitted by the United States. In our view, theref ore, the Panel did take into account the evidence\nsubmitted by the United States on the role of China and properly reached the conclusion that China's\nrole in the world cotton trade did not impact negati vely on world upland cotton prices. For the same\nreasons, we also do not believe that the Panel faile d to provide a \"reasoned and adequate explanation\"\nfor its conclusions in the light of \"possible alternative explanations\" 812, as alleged by the United\nStates.813\n4. Other Allegations of Error Raised by the United States\n(a) Standard of Review\n382. The United States claims that the Panel erred in its evaluation of the various elements, which\nsupported its finding that marketing loan and co unter-cyclical payments cause significant price\nsuppression. In particular, the United States asserts that the Panel erred: (i) in finding that marketing\nloan and counter-cyclical payments insulated Un ited States producers of upland cotton from market\nsignals; (ii) in finding that there was a significant gap between the total costs of production of United\nStates upland cotton producers and th eir market revenues; (iii) in its evaluation of the economic\nsimulations conducted by the parties; (iv) in its ev aluation of the impact of the withdrawal of Step 2\npayments; and (v) in its assessment of the magn itude of the marketing loan and counter-cyclical\npayments and the alleged substantia l proportionate influence of the United States in the world upland\ncotton market.\n383. Before turning to the arguments raised by the United States, we address the preliminary\nquestion of the applicable standard of review, bearing in mind that, with respect to some of these\nclaims, the United States has challenged the Pane l's findings under both Article 6.3(c) of the SCM\nAgreement and Article 11 of the DSU.\n384. We recall that, in the original dispute, the Appellate Body stated:\nPursuant to Article 17.6 of the DSU, appeals are \"limited to issues of\nlaw covered in the panel report and legal interpretations developed by\nthe panel\". To the extent that th e United States' arguments concern\nthe Panel's appreciation and weighing of the evidence, we note from\nthe outset that the Appellate Body will not interfere lightly with the\nPanel's discretion \"as the trier of facts\". At the same time, the\nAppellate Body has previously poin ted out that the \"consistency or\ninconsistency of a given fact or set of facts with the requirements of a\ngiven treaty provision is ... a lega l characterization issue\". Whether\nthe Panel properly interpreted the re quirements of Article 6.3(c) of\n\n812See Appellate Body Report, US – Lamb, para. 106.\n\nthe SCM Agreement and properly applied that interpretation to the\nfacts in this case is a legal question. This question is different from\nwhether the Panel made \"an objective assessment of the matter\nbefore it, including an objective asse ssment of the facts of the case\",\nin accordance with Article 11 of the DSU.\n814 (footnotes omitted)\n\n385. The United States has characterized its appeal under Article 6.3(c) of the SCM Agreement as\none relating to the Panel's application of the law to the facts, although it has also brought some claims\nunder Article 11 of the DSU that challenge the objectivit y of the Panel's assessme nt of the facts. We\nrecognize that the boundary between an issue that is purely factual and one that involves mixed issues\nof law and fact is often difficult to draw. However, we consider that many of the United States'\nclaims against the Panel's evaluation of the elem ents supporting its finding of significant price\nsuppression are primarily directed at the Panel's a ppreciation and weighing of the evidence, and the\ninferences that the Panel drew from the evidence, both of which fall within its authority that is\nrecognized under Article 11 of the DSU.\n815 Therefore, we shall review those claims and arguments\nraised by the United States concerning the applicati on of the law to the facts under the legal standard\nof Article 6.3(c) of the SCM Agreement , and those claims and argum ents concerning the Panel's\nappreciation and weighing of the evidence under Article 11 of the DSU.\n386. The United States claims that, in its finding of significant price suppression, the Panel relied\nexcessively on the findings in the origin al panel and Appellate Body reports. 816 A s t h e P a n e l\nrecognized, the Appellate Body has stated that proceedings under Article 21.5 of the DSU do not\noccur in isolation, but are part of a \"continuum of events\" 817, and \"doubts could arise about the\nobjective nature of an Article 21.5 panel's assessment if, on a specific issue, that panel were to deviate\nfrom the reasoning in the original panel report in the absence of any change in the underlying\nevidence in the record\". 818 Thus, in this case, it was appropria te for the Panel to have relied on the\nfindings from the original proceedings unless \"any ch ange in the underlying evidence in the record\"\nwould have justified departing from them. It is undisputed \"that the conditions of application of the\nmarketing loan and counter-cyclical payments, as de fined in the relevant provisions of the FSRI Act\nof 2002, are the same at present as when th e original panel analyzed these measures.\" 819 On appeal,\nhowever, the United States asserts that \"[t]he fact s in the original proceeding and this compliance\nproceeding vary in fundamental ways which make unsupportable the Panel's reliance on the original\n\n814Appellate Body Report, US – Upland Cotton, para. 399.\n815See Appellate Body Report, EC – Sardines, para. 299.\n816See United States' appellant's submission, para. 135.\n817Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 121.\n818Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para. 103.\n819Panel Report, para. 10.71.\n\npanel and Appellate Body reports on issues related to market insulation.\" 820 According to the United\nStates, this is so because the DSB's recommendations and rulings related to a package of payments\nthat included Step 2 payments, which have been repealed. 821 We note that the Panel specifically\naddressed the repeal of Step 2 payments and anal yzed the impact of the elimination of these\npayments, an issue to which we return below. 822 As regards marketing loan and counter-cyclical\npayments, the Panel concluded that \"[n]othing in the facts presented ... in this proceeding would\nappear to warrant a conclusion different from the conclusion drawn by the panel and the Appellate\nBody in the original proceeding\".823\n(b) Market Insulation\n387. The United States claims that the Panel erred in finding that marketing loan and counter-\ncyclical payments insulated United States pr oducers of upland cotton from market signals. 824 I n\nparticular, the United States challenges the Panel' s evaluation of upland cotton producers' planting\ndecisions825; the Panel's assessment of the economic studies submitted by the parties about the impact\nof counter-cyclical payments on production 826; and the Panel's analysis of the relationship between\nupland cotton base acres and production.827 The United States also argues that the Panel made several\nfindings that contradict its conclusion that marke ting loan and counter-cyclical payments insulated\nUnited States producers of upland cotton from market signals.828 Finally, the United States challenges\nthe Panel's alleged failure to determine the degr ee of market insulation and the degree of production\neffects related to that insulation.829\n\n820United States' appellant's submission, para. 136. The United States adds:\nNeither the original panel nor the A ppellate Body addressed the precise\nserious prejudice claims that Brazil made before the Panel. The findings\nand recommendations of the original panel and Appellate Body, and the\nrecommendations and rulings of the DSB, related to the package of Step 2,\nmarket loss assistance, marketing loan, and counter-cyclical payments made\nin MY 1999-2002. The compliance proceeding pertained to marketing loan\npayments and counter-cyclical payments made in MY 2006. Whether these\npayments insulated [United States] upl and cotton producers, and ultimately,\nwhether they caused significant price suppression, was a question of first\nimpression, which involved the consid eration of new evidence on market\nconditions and producers' expectations.\n(Ibid. (footnotes omitted))\n821See United States' appellant's submission, para. 136.\n822See infra, para. 436.\n823Panel Report, para. 10.82.\n824See United States' appellant's submission, para. 132.\n825See ibid., para. 134.\n826See ibid., paras. 144 and 145.\n827See ibid., para. 154.\n828See ibid., para. 157.\n829See ibid., para. 164.\n\n388. Before examining the specific arguments raised by the United States, we note that the Panel\ndid not examine whether marketing loan or counter-c yclical payments, \"taken individually, [were] a\ncause of significant price suppression\", nor did the Panel \"pronounce on the relative importance of\neach of these subsidies in causing significant price suppression\".\n830 Instead, the Panel \"conduct[ed] an\nexamination of the collective effects of the marketing loan and counter-cyclical payments\".831\n(i) Factors Relevant to Planting Decisions\n389. The United States submits that the Panel \"did not adequately take into account all factors\nrelevant to producers' planting decisions\" 832, and, instead, placed \"excessive reliance\" on the findings\nfrom the original proceedings. 833 We have determined that the Panel did not improperly rely on the\nfindings from the original proceedings, considering th at the conditions of application of the marketing\nloan and counter-cyclical payments are the same as when the original panel analyzed these measures.\n390. The United States points to several elements th e Panel allegedly failed to take into account,\nwhich show that \"[United States] producers looked to other factors, aside from the expected price of\nupland cotton, and responded to them as the market would predict.\" 834 First, the United States asserts\nthat \"in MY 2003-2007, producers' decisions on pl anting [upland] cotton were consistent with\nexpectations concerning the costs and revenues of competing crops.\" 835 We observe that the United\nStates' argument regarding competing crops was examined by the Panel, albeit in a separate section of\nits report. 836 The Panel dismissed the relevance of the data submitted by the United States on the\nrelationship between cotton and soybean prices:\nThe Panel notes, in this regard, that the ratio of cotton futures prices\nto soybean futures prices and [United States] cotton planted acreage\nonly moved in the same direction in MY 2006. In MY 2003, the\nratio of cotton futures prices to soybeans futures prices increased\nsharply while cotton planted acreage declined. The ratio decreased in\nboth MY 2004 and MY 2005, while planted acreage increased in\nboth years. Thus, even if we agree with the argument of the United\nStates that futures prices of altern ative crops to cotton need to be\ntaken into account, the data does not support an important role for\nthis ratio of cotton futures prices to soybeans futures prices.\n837\n\n830Panel Report, para. 10.51.\n831Ibid., para. 10.51.\n833See ibid., para. 135.\n834Ibid., para. 140.\n835Ibid.\n836See Panel Report, Section X.B.7, dealing with the alleged link between high levels of United States\nsubsidies and high levels of United States planted acreage, production and exports.\n837Ibid., para. 10.124.\n\n391. The fact that \"the relationship of [United St ates] planted acreage to the soybean and cotton\nfutures ratio did move in the same direction\" 838 in MY 2006 is, in our view, insufficient to rebut the\ndata from other years in which such relationship m oved in opposite directions, or the other evidence\non which the Panel relied. 839 The United States also asserts that , in MY 2005, there was a shift from\nsoybean to cotton production \"due to concerns about an outbreak of Asian soybean rust in\nMY 2004.\"840 A USDA document cited by the United States in support of this argument indicates that\nthe gains in upland cotton planted acres only \"partly\" 841 reflected the impact of Asian rust. Moreover,\nwe observe that, while the United States provides fra gmentary evidence as to the impact of the price\nof competing crops on upland cotton planting decisi ons, it does not provide a systematic account of\nsubstitutability between upland cotton and other crops.\n392. The United States' argument appears to focus on the short-term impact of marketing loan\npayments, that is, on how they affect year-to-year planting decisions. However, nothing in\nArticle 6.3(c) of the SCM Agreement suggests that the examination of the effect of a subsidy must\nfocus exclusively on the short-term perspective. Whether production of a particular product is higher\nthan it would have been in the absence of the subsid y is often a critical issue in establishing whether\nthe effect of the subsidy is significant price suppres sion. In our view, the effect of a subsidy on\nproduction can also be assessed on the basis of a long-term perspective that focuses on how the\nsubsidy affects decisions of producers to enter or ex it a given industry. The Panel considered, in this\nregard, that \"the evidence on the record, notably the evidence regarding the role of marketing loan and\ncounter-cyclical payments in covering the differenc e between the market revenue of [United States]\nupland cotton producers and their costs of productio n, supports the view that these subsidies have a\nlong-term impact on acreage and production of upland cotton by affecting decisions of [United States]\ncotton farmers to enter or exit cotton farming.\"842\n393. Secondly, the United States refers to \"survey evidence of MY 2007 upland cotton planting\nintentions, showing that [United States] producer s intended to pull back on their upland cotton\nplantings\".843 As the United States recognizes 844, the Panel examined this survey in its analysis of the\n\n838United States' appellant's submission, footnote 157 to para. 140.\n839The United States also submits that the comparison it submitted of planted upland cotton acreage to\nthe ratio of soybean and cotton future prices was a simplified analysis, a nd that other crops and extraneous\nfactors could, and did, influence farmers' decisions. ( Ibid.) Given that this point was offered by the United\nStates in rebuttal, we consider that it bears the responsibility for any limitations in the evidence that it presented.\n840Ibid., para. 140.\n841Cotton and Wool Situation and Outlook Yearbook (November 2005) (Exhibit Bra-448 submitted by\nBrazil to the Panel), p. 2 (quoted in United States' first written submission to the Panel, para. 234).\n842Panel Report, para. 10.83.\n844See ibid.\n\nimpact of the elimination of Step 2 payments, i ndicating that the reduction of plantings would be\n\"consistent\" with the argument that the elimination of that programme is having an effect. Thus, as\nwe see it, the decline in plantings in MY 2007 could be, at least in part, explained by the fact that\nStep 2 payments were no longer available, and does not demonstrate that marketing loan and counter-\ncyclical payments do not \"insulate\" producers from market signals.\n394. In addition, the United States submits that th e Panel erred by failing to evaluate whether\nproducers actually expected that harvest prices woul d be below the marketing loan rate in MY 2006\nor in any other year.\n845\n395. The Panel, like the original panel, considered that the marketing loan payments operate as a\nsafety net, stabilizing producers' revenue and influenc ing producers' decisions regardless of the level\nof expected prices. This is so because, at the time of planting, upland cotton producers know they will\nreceive a payment should the actual harvest price be below the loan rate. We find no flaws with this\nlogic. Furthermore, we do not see why the Panel was required to establish whether producers, in fact,\nexpected harvest prices to fall below the loan rate. In any event, the Panel observed that \"in most\nrecent years actual market prices have been lower th an expected market prices at the time of planting\nand ... the adjusted world price has been below the marketing loan rate\".\n846 In our view, it is not\nunreasonable to assume that producers were aware of these historical trends and that, on this basis,\nthey would have expected to receive a payment in the event that the price fell below the loan rate,\neven when the expected price was above the loan rate.\n396. We further observe that some of the United States' arguments seem to be premised on a\nparticular understanding of the Pane l's finding: that marketing loan and counter-cyclical payments\ncompletely insulate United States producers from other factors that may affect planting decisions. We\ndo not consider that the Panel adopted such a rigid vi ew of market insulation. Instead, we understand\nthe Panel to have taken the position that marketi ng loan and counter-cyclical payments make United\nStates upland cotton producers less responsive to other factors that affect planting decisions. This is\nevident from the Panel's finding that \"the degree of price insulation that the original panel found is\n\n845The United States focuses on the following statement of the Panel:\n[E]ven if expected market prices at the time of planting are higher than the\nmarketing loan rate and producers do not expect to receive marketing\npayments at that time, the availability of marketing loan payments can be\nconsidered to influence planting deci sions. While [United States] upland\ncotton producers may be uncertain at the time of planting as to whether\nactual harvest prices will be below the marketing loan rate, there is no\nuncertainty as to the fact that, if actual harvest prices are below the\nmarketing loan rate, they will receive marketing loan payments.\n846Ibid., para. 10.81.\n\nnow weaker\".847 Moreover, the Panel referred to the origin al panel's description of price-contingent\nsubsidies (which include marketing loan and count er-cyclical payments) as \"numbing the response of\nUnited States producers to production adjustment decisions when prices are low\". 848 The use of the\nterm \"numbing\" also suggests that the Panel intended \"market insulation\" to mean \"lower\nresponsiveness\" rather than complete insulation. While the Panel clearly took into account the new\nevidence submitted by the parties, it did not find that market insulation was reduced to such an extent\nthat subsidies would no longer have an effect on the production and prices of upland cotton.\n397. Turning to the structure, design, and operation of marketing loan payments, the Panel made a\ncomprehensive assessment of the arguments and the evidence before it. The Panel referred to the\nfindings made in the original proceedings, which was the proper thing for it to do considering that\nArticle 21.5 and original proceedings are part of a \"continuum of events\" 849 and that the programs\nauthorizing marketing loan payments remained unc hanged. More importantly, it is clear from the\nPanel Report that the Panel examined the new argu ments and evidence submitted by the parties. For\ninstance, the Panel examined upland cotton pri ce patterns from the most recent years before\nconcluding that the relationship found by the origin al panel between (higher) expected harvest prices\nand (lower) actual prices has not changed.850\n398. For these reasons, we do not consider that the United States has demonstrated that the Panel\nimproperly relied on the conclusions from the original proceedings or failed to take into account other\nfactors that may have influenced producers' plan ting decisions. We recall that, in the original\nproceedings, in addressing the appeal by the United States relating to the specific reasons behind the\noriginal panel's conclusions that the effect of the price-contingent subsidies was significant price\nsuppression within the meaning of Article 6.3(c) of the SCM Agreement, the Appellate Body noted:\nThe way in which United States upland cotton farmers make\ndecisions relating to the production of upland cotton, and the basis on\nwhich they make such decisions, are factual matters that fall within\nthe Panel's task of weighing and assessing the relevant evidence, and\nwe will not review these matters. However, in our view, the\napplication of the legal requirements of Article 6.3(c) to the facts\ndetermined by the Panel falls within the scope of appellate review.\n851\n399. The United States also claims, unde r Article 11 of the DSU, that the Panel failed to carry out\nan objective assessment of the f acts, because it disregarded the ne w evidence submitted by the United\n\n847Panel Report, para. 10.127.\n849Appellate Body Report, Mexico – Corn Syrup (Article 21.5 – US), para. 121.\n850See Panel Report, paras. 10.80 and 10.81.\n851Appellate Body Report, US – Upland Cotton, para. 441.\n\nStates on producers' expectations and competing cr ops; relied exclusively on findings from the panel\nand the Appellate Body in the original proceedings ; and failed to provide a reasoned and adequate\nexplanation for its conclusions in the light of plausible alternative explanations.\n852 In our view, the\nPanel did not fail to analyze the new evidence a nd arguments submitted by the United States, nor did\nit, in the light of the reasons given above, re ly excessively on the findings from the original\nproceedings. For these reasons, we do not believe that the Panel failed to carry out an objective\nassessment of the facts, as required by Article 11 of the DSU.\n(ii) Studies on the Production Impact of Counter-cyclical\nPayments\n400. Next, the United States challenges the Panel's evaluation of certain studies853 submitted by the\nparties on the effects of counter-cyclical payments on plantings and production. 854 The United States\nargues that the Panel downplayed and improperly interpreted the studies submitted by the United\nStates855 and that it \"did not even address the shortc omings of the research submitted by Brazil.\"856 In\nour view, the United States is asking us to revi ew the Panel's appreciati on and weighing of these\nstudies, which is a matter that was within the Panel's authority as the trier of facts. It is evident from\n\n852See United States' appellant's submission, paras. 232 and 233.\n853The following studies were submitted by the United States: B. Goodwin and A. Mishra, \"Another\nLook at Decoupling: Additional Evidence on the Production Effects of Direct Payments\" (2005) 87(5) American\nJournal of Agricultural Economics 1200 (Exhibit US-41 submitted by the United States to Panel); W. Lin and\nR. Dismukes, \"Supply Response Under Risk: Implications for Counter-cyclical Payments' Production Impacts\"\n(2005) 29(1) Review of Agricultural Economics 64 (Exhibit US-85 submitted by the United States to the Panel);\nW. Lin and R. Dismukes, \"Risk Considerations in Supply Response: Implications for Counter-Cyclical\nPayments' Production Impact,\" Selected Paper, American Agricultural Economics Association (July 2005)\n(Exhibit US-34 submitted by the United States to the Panel); P.A. Westcott, \"Counter-Cyclical Payments Under\nthe 2002 Farm Act: Production Effects Likely to be Limited\" (2005) 20(3) Choices (a publication of the\nAmerican Agricultural Economics Association) p. 201 (Exhibit US-35 submitted by the United States to the\nPanel); C.E. Young, A. Effland, P.A Westcott, and D. Johnson, \"US Agricultural Policy: Overview and Recent\nAnalyses\", presented at the 93rd seminar of the European Association of Agricultural Economists, \"The Impacts\nof Decoupling and Cross Compliance on Agriculture in the Enlarged EU \" held on 22-23 September 2006 in\nPrague, Czech Republic (Exhibit US-40 submitted by th e United States to the Pane l); Abler and Blandford\nstudy, Exhibit US-32 submitted by the United States to the Panel, supra, footnote 98).\nThe following studies were submitted by Brazil: B. Goodwin and A. Mishra, \"Are 'Decoupled' Farm\nPayments Really Decoupled? An Empirical Evaluation\" American Journal of Agricultural Economics (Exhibit\nBra-618 submitted by Brazil to the Panel); N. Key, R. Lubowski and M. Roberts, \"Farm-Level Production\nEffect From Participation in Government Commodity Programs: Did the 1996 Federal Agricultural\nImprovement and Reform Act Make a Difference?\" (2005) 87(5) American Journal of Agricultural Economics\n1211 (Exhibit Bra-566 submitted by Brazil to the Panel); C.R. McIntosh, J.F. Shogren, and E. Dohlman,\n\"Supply Response to Counter-Cyclical Payments and Base Acre Updating under Uncertainty: An Experimental\nStudy\" American Journal of Agricultural Economics (Exhibit Bra-565 submitted by Brazil to the Panel);\nE.J. O'Donoghue and J. Whitaker, \"How distorting are direct payments?\", paper prepared for presentation at\nthe 2006 American Agricultural Economics Association in Long Beach, California (Exhibit Bra-568 submitted\nby Brazil to the Panel).\n854See United States' appellant's submission, para. 145.\n856Ibid., para. 153.\n\nthe Panel Report that the Panel carefully reviewed the studies submitted by both parties and reached\nits own conclusions as to the meaning and signifi cance of these studies for the present dispute. It\nfound that the studies were of \"somewhat limited relevance\", because none of them \"specifically\nanalyzes the experience with counter-cyclical payments to growers of upland cotton\". 857 The Panel\nalso found that all of the studies concurred that counter-cyclical payments can or may have production\neffects, because they increase wealth and reduce risk aversion, thus leading farmers to increase\nproduction.858\n401. As we indicated earlier, the Panel did not assess whether counter-cyclical payments, taken\nindividually, were a cause of significant price suppression but, rather, conduc ted \"an examination of\nthe collective effects of the marketi ng loan and counter-cyclical payments\". 859 Therefore, the Panel's\nevaluation of the production effects of counter-cycli cal payments must be understood in the light of\nthe collective assessment of the two subsidy measures.\n402. The Panel observed that the studies submitted by the United States examine other types of\npayments programmes (such as production flexibility contract payments), or examine counter-cyclical\npayments provided to producers of crops other than upland cotton (such as corn, wheat, and soybean).\nThe Panel noted that some of the studies that exam ined the effects of counter-cyclical payments on\nplantings of other crops did not carry out an empirical analysis of their effects but, rather, are surveys\nof other studies. In addition, the Panel pointed out that there was \"some variation in the type and\nquality of the studies: some are published or slated to be published in academic journals while others\nare articles in newsletters or unpublished manuscripts\". 860 The Panel considered that the studies\nsubmitted by Brazil suffered from similar shortcomings.\n403. The United States also claims, unde r Article 11 of the DSU, that the Panel failed to carry out\nan objective assessment of the facts, because it wilf ully distorted and misrepresented the meaning of\nthe economic studies submitted by the United States on the effects of counter-cyclical payments on\nproduction, and failed to provide a reasoned and adequate explanation for its conclusions in the light\nof plausible alternative explanations. 861 The Panel relied on the new studies on counter-cyclical\npayments submitted by the parties only \"insofar as they provide new information [that was] not\navailable to the original panel reflecting the experience with the operation of counter-cyclical\n\n857Panel Report, para. 10.91.\n858Ibid., para. 10.92.\n859Ibid., para. 10.51.\n860Ibid., paras. 10.91 and 10.92.\n861See United States' appellant's submission, para. 234.\n\npayments to upland cotton.\"\n862\n404. In our view, the arguments presented by the United States do not succeed in demonstrating\nthat the Panel erred in its evaluation of the economic studies submitted by the United States on the\neffects of counter-cyclical payments on producti on. To the contrary, the Panel made a careful\nevaluation of the studies. For this reason, we do not consider that the Panel wilfully distorted and\nmisrepresented the studies submitted by the United St ates on counter-cyclical payments, nor that it\nfailed to provide a reasoned and ad equate explanation for its conclusions in the light of plausible\nalternative explanations. The fact that the Pane l accorded to the studies a different meaning and\nweight than did the United States does not constitute a failure to make an objective assessment of the\nmatter under Article 11 of the DSU.\n405. The United States also argues that the Panel erred in finding that \"a strongly positive\nrelationship exists between recipients of upla nd cotton counter-cyclical payments who hold upland\ncotton base acres and those who continue to plant upland cotton\" because it \"never actually tested the\nstrength of the relationship between payments and plantings in order to conclude that the former was\ndriving the latter.\" 863 The Panel based this finding on da ta which showed that, in MY 2005,\n95 per cent of cotton acreage was planted on farms that held upland cotton base acres and\nthat 83 per cent of cotton planted acreage corres ponded directly to cotton base acres eligible for\ncounter-cyclical payments.864 We note that the United States does not question the accuracy of these\ndata, although it disagrees with the conclusions the Panel reached based on the data. With respect to\nthe United States' argument that 40 per cent of upland cotton base acres are not currently planted to\nupland cotton, the Panel found that \"[United St ates] upland cotton base acres are not a reliable\nmeasure to compare to annual [United States] upland cotton acreage\" 865, considering that total base\nacres have been historically higher than total pro duction. The Panel explained that, when given an\nopportunity to update their base acres, only those farmers producing more than in the past have\nelected to update, while those producing less declined to do so.866\n406. We see nothing improper in the Panel's reasoning that the fact that 83 per cent of cotton\nplanted acreage corresponded directly to upland cotton base acres supports the conclusion that a\n\n862Panel Report, para. 10.90.\n865Ibid., footnote 341 to para. 10.97.\n866Relying on an argument made by Brazil, the Panel noted that the high level of upland cotton base\nrelative to production reflects the fact that with consecu tive base updates, United States farms elected to update\nonly if that would increase their high payment upland cotton base, while they declined to update if this would\nhave decreased upland cotton base in favour of a lower payment crop base. (Ibid., footnote 341 to para. 10.97)\n\nstrongly positive relationship exists between recipi ents of upland cotton counter-cyclical payments\nwho hold upland cotton base acres and those who continue to plant upland cotton. In any event, we\nconsider that, on this issue, the United States is essentially challenging the inferences drawn by the\nPanel from the evidence before it, and this is a matte r that was within the Panel's authority as the trier\nof facts. We note that the United States did not raise a claim under Article 11 of the DSU on this\nissue.\n(iii) The Panel's Alleged Contradictory Findings\n407. Next, the United States argues that the Panel \"made several findings that contradict its\nultimate conclusion that marketing loan and count er-cyclical payments insulated [United States]\nproducers of upland cotton from market prices.\"867\n408. First, the United States refers to the Panel's findi ng that \"[t]he fact that the [United States']\nshare of production and exports has remained relatively constant in MY 2002-2005 suggests to us that\n[United States] producers have increased production and exports in proportionately the same way as\nforeign producers.\" 868 The United States submits that, \"[i]f the [United States'] share of world\nproduction and exports was stable, and if [United States] producers acted in much the same way as\nthose in other countries, then the Panel could not rationally have found that [United States] payments\ninsulated [United States] producers to any meaningful degree.\"869 The Panel did not disregard the fact\nthat the United States ' market share of world upland cotton production had remained stable in\nMY 2002-2005. The Panel specifically addressed this i ssue and noted that \"the stable [United States]\nshare of world production and exports does not mean an absence of insulation of [United States]\nproducers from market price signals.\"\n870 Rather, it means that \"the degree of price insulation that the\noriginal panel found is now weaker possibly b ecause prices are not as depressed as during the period\nexamined by the original panel.\" 871 The Panel further explained that \"insulation of [United States]\nproducers from market price signals applies in partic ular when expected prices are below intervention\nlevels\", and that it is \"less wh en expected cotton prices are above their intervention levels\". 872\nTherefore, we do not consider that the Panel \"overlooked\" 873 its own findings in this regard. Its\nconclusions do not lack a rational basis, nor are they contradictory.\n\n868Panel Report, para. 10.127.\n870Panel Report, para. 10.127.\n871Ibid.\n872Ibid.\n\n409. Secondly, the United States refers to the Panel' s finding that \"Brazil's claim of insulation of\n[United States] producers from market price signals applies in particular when expected prices are\nbelow their intervention levels. ... However, the degree of insulation is less when expected cotton\nprices are above their intervention levels. In such a situation, [United States ] cotton producers\nshould respond to higher expected cotton prices much in the same way as foreign cotton\nproducers.\"\n874 The United States points out that it demonstrated to the Panel that, \"in MY 2006, the\nyear relevant to the analysis of 'present' signifi cant price suppression, the e xpected market price of\nupland cotton was above the marketing loan rate\" 875 and, thus, \"[a]ccording to the Panel's own logic,\n[United States] producers should have responded just as foreign producers did, a fact proven by the\nexistence of stable [United States] shares of world upland cotton production and exports.\"876\n410. We note that, while the United States' share of world upland cotton production remained\nstable in MY 2002-2005, the United States has been providing subsidies to upland cotton over a long\nperiod of time. Therefore, the fact that its shar es of world upland cotton production remained stable\nover a three-year period is not necessarily indicative of a reduction in the market insulating effects of\nthe subsidies.\n411. Contrary to the United States' assertion, the Pa nel did take into account the fact that, in\nMY 2006, the expected market price of upland cotto n was above the marketing loan rate. The Panel\nstated that:\n... the fact that [United States] co tton producers know that they will\nreceive marketing loan payments wh enever the adjusted world price\nis below the marketing loan rate c ontinues to be an important factor\naffecting the level of acreage plante d to cotton (and thus the level of\nproduction), even when, a s i n M Y 2 0 0 6, the expected market price\nfor upland cotton at the time of pl anting is higher than the marketing\nloan rate.877 (emphasis added)\nThus, the Panel considered that, even when expected prices were higher than the marketing loan rate,\nthe availability of marketing loan payments affected plantings.\n412. Moreover, in the statement to which the Un ited States draws attention, the Panel\nacknowledges that \"the degree of insulation is less when expected cotton prices are above their\n\nadded by the United States)\n875Ibid. The United States explains that it also showed a similar pattern in MY 2003 and MY 2004. In\nMY 2005, where expected prices were below the marketing loan rate, the United States explained that other\nfactors drove planting decisions. (Ibid., footnote 192 to para. 161)\n876Ibid., para. 161.\n877Panel Report, para. 10.81.\n\nintervention levels\".878 The Panel was not suggesting that there would be no insulation when expected\nprices are higher than the marketing loan rate but, rather, that such insula tion would be of a lesser\ndegree. The Panel's following statement—that, \"[i]n such a situation, [United States] cotton producers\nshould respond to higher expected cotton pr ices much in the same way as foreign cotton\nproducers\"879—should be read in the light of the previous statement. In other words, the Panel was\nindicating that, given that the degree of insulation would be less when expected prices were higher\nthan the marketing loan rate, the behaviour of Un ited States farmers, in those situations, should\ndiverge less from the behaviour of their foreign co mpetitors. Therefore, we do not see a contradiction\nin the Panel's statements, as the United States suggests.\n413. Thirdly, the United States refers to the Panel' s finding that \"the data ... indicates that with\nrespect to several key factors relied upon by the original panel in finding 'a discernible temporal\ncoincidence' of suppressed world market prices and th e price-contingent [United States] subsidies, the\ncurrent situation is significantly different from the situation considered by the original panel.\" 880 The\nUnited States also draws attention to the Panel's c onclusion that \"two factors—first, that other major\ncotton producers were increasing their production and exports at the same time as [United States]\nproducers and second, that prices received by [Unite d States] cotton producers were not declining\ndramatically during this period—make it more difficult to discern a pronounced temporal coincidence\nbetween the [United States] subsid ies, the increase in [United States] cotton exports and the drop in\nworld market prices.\"\n881 In the United States' view, the absen ce of a discernible temporal coincidence\nreinforced the United States' arguments that mark eting loan and counter-cyclical payments did not\ninsulate United States producers from market signa ls. Therefore, the United States argues that, in\nfinding that marketing loan and counter-cyclical payments insulated United States producers, the\nPanel contradicted its own findings regarding the lack of discernible temporal coincidence.882\n414. The difficulty in discerning a temporal coincidence between the United States subsidies, the\nincrease in United States exports, and the drop in market prices, does not, in our view, necessarily\nundermine the Panel's finding on market insulation. Th e Panel did take into account the fact that the\nshare of United States production and exports was not increasing, but it did not consider that this fact\nundermined its conclusion regarding market insulatio n made on the basis of a number of factors, such\n\n878Panel Report, para. 10.127. (emphasis added)\n879Ibid.\nadded by the United States)\n881Ibid. (quoting Panel Report, para. 10.139).\n882See ibid., para. 163.\n\nas their mandatory and price-contingent nature and their revenue-stabilizing effect. Therefore, we do\nnot consider that the Panel's finding on the diffi culty of discerning a temporal coincidence between\nthe United States subsidies, upland cotton exports, and upland cotton prices necessarily contradicts its\nfinding on market insulation.\n415. The United States has also raised a claim under Article 11 of the DSU that the Panel failed to\ncarry out an objective assessment of the facts, b ecause it \"deliberately distorted\" the meaning and\nsignificance of the evidence on stable United Stat es shares of world upland cotton production and\nexports, and failed to provide a reas oned and adequate explanation for its conclusions in the light of\nplausible alternative explanations.\n883 We do not consider that the arguments presented by the United\nStates succeed in demonstrating that the Panel erre d in its evaluation of the meaning and significance\nof the evidence on stable United St ates shares of world upland cotton production and exports. As we\nexplained above, the Panel did not disregard or dist ort the meaning and significance of such evidence,\nnor did it fail to provide a reasone d and adequate explanation for its conclusions in the light of\nplausible alternative explanations. We, therefore, find that the Panel did not fail to carry out an\nobjective assessment of the facts, as required by Article 11 of the DSU.\n(iv) Degree of Market Insulation\n416. Finally, the United States claims that the Pa nel failed to determine the degree of market\ninsulation. As the Appellate Body explained in th e original proceedings, \"Article 6.3(c) does not set\nforth any specific methodology for determining whether the effect of a subsidy is significant price\nsuppression\" and, consequently, \"[t]here may well be different ways to make this determination\".\n884\nAccordingly, Article 6.3(c) does not specifically require a panel to dete rmine whether a subsidy\n\"insulates\" producers, nor does it require a quantification of the degree of such insulation. What\nArticle 6.3(c) does require is that the price suppression be \"significant\", which the Appellate Body has\nunderstood as \"connoting something that can be characterized as \"important, notable or\nconsequential\".885 However, the fact that the price supp ression must be \"significant\" does not mean\nthat a panel examining various factors that support a finding of significant price suppression, as did\nthe Panel, must make a determination precisely quantif ying the effects of each factor. A factor that\nitself is not \"significant\" may, together with othe r factors (whether individually shown to be of a\nsignificant degree or not), establish \"significant pri ce suppression\". What needs to be significant is\nthe degree of price suppression, not necessarily the degree of each factor used as an indicator for\n\n883See United States' appellant's submission, para. 237.\n884Appellate Body Report, US – Upland Cotton, para. 427.\n885Ibid., para. 426.\n\nestablishing its existence. Nor does each factor nec essarily have to be capable of demonstrating, to\nthe same extent, significant price suppression.\n417. In the present case, the Panel examined market insulation as part of its examination of the\nstructure, design, and operation of the marketing loan and counter-cyclical payments. The structure,\ndesign, and operation of the payments, in turn, were one of several elements on which the Panel based\nits conclusion that the effect of marketing loan and counter-cyclical payments is \"significant price\nsuppression\". Moreover, the Panel emphasized that, \"in determining whether the structure, design and\noperation of these subsidies support a finding of significant price suppression under current factual\nconditions, we need to consider this factor in conjunction with other facts.\"\n886\n418. Article 6.3(c) requires a demonstration of \"si gnificant\" price suppression. It does not require\nthat panels make a determination of \"significance\" for each of the factors examined in its price\nsuppression analysis. We do not consider that the Panel erred by not determining the precise degree\nof market insulation887, which is but one factor in the Panel's overall analysis.\n(c) Costs of Production\n419. The United States claims that the Panel erred in finding that there is \"a significant gap\nbetween the total costs of production of [Unite d States] upland cotton producers and their market\nrevenue\".888 In particular, the United States disagrees with the Panel's decision to: (i) use total costs\nof production as the relevant parameter instead of variable costs 889; (ii) use only crop-specific cost\ndata published by the USDA 890; (iii) include opportunity costs for items such as unpaid labour and\nowned land in total costs of production 891; and (iv) disregard off-farm income and income from other\ncrops in calculating producers' revenues.892\n420. We note that the United States has not raised a claim under Article 11 of the DSU against the\nPanel's determination that there is a significant gap between costs of production and revenues of\nUnited States upland cotton producers. Therefore, pu rsuant to Article 17.6 of the DSU, we can only\n\n886Panel Report, para. 10.104. (original emphasis)\n887The Panel implicitly made a quantitative assessment of the degree of market insulation when it noted\nthat such insulation is now weaker than it was in the period considered in the original proceedings. (See Panel\nReport, para. 10.127) In its appellee's submission, Brazil argues that, although it was not required to do so, the\nPanel did quantify the degree of market insulation resulting from marketing loan and counter-cyclical payments\nby quantifying their order of magnitude and their importa nce as a share of the revenu e of United States upland\ncotton producers. (See Brazil's appellee's submission, paras. 618-620)\n889See ibid., paras. 170-172.\n890See ibid., para. 181.\n891See ibid., paras. 184-188.\n892See ibid., para. 189.\n\nreview the claim by the United States to the extent that it relates to an error of interpretation or\napplication of Article 6.3(c) of the SCM Agreement.\n421. In the original proceedings, the United States made similar arguments concerning the\ncalculation of production costs and revenues.\n893 The Appellate Body found that the original panel had\nnot erred in finding that \"the six-year period from 1997-2002 ... lends itself to an assessment of the\nmedium- to longer-term examination of developmen ts in the United States upland cotton industry\" 894\nand, as a consequence, in relying on total rather than variable costs of production. The original panel\nalso relied on USDA cost data and declined to ta ke into account off-farm income, noting that it was\nexamining \"costs and market revenues … of the upland cotton industry\". 895\n422. In US – Softwood Lumber VI (Article 21.5 – Canada) , the Appellate Body noted that \"doubts\ncould arise about the objective nature of an Article 21 .5 panel's assessment if, on a specific issue, that\npanel were to deviate from the reasoning in the origin al panel report in the absence of any change in\nthe underlying evidence in the record\". 896 The only relevant difference between the situation before\nthe Panel and the original proceedings in this disput e is the length of the review period considered to\nestablish whether significant price suppression exists : six years in the original proceedings\n(MY 1997-2002) as opposed to five years in the Article 21.5 proceedings (MY 2002-2006). In our\nview, this difference does not justify a departur e from the costs and reve nues methodology used by\nthe original panel, or from the medium- to long-te rm analysis contemplated in the original panel\nreport, considering also that compliance measures subject to Article 21.5 proceedings by their very\nnature will be in force for a shorter period of time. Moreover, the marketing loan and counter-cyclical\nprogrammes remained unchanged since the original proceedings. 897 Therefore, considering that\nrelevant circumstances in the current proceedings ha ve not changed since the original proceedings, it\nwas proper for the Panel not to have deviated from the approach of the panel and the Appellate Body\nin the original proceedings, which relied on total co sts of production, and did not to take into account\noff-farm income when comparing production cost with revenues.\n423. The Panel's decision to undertake an analysis over the medium- to long-term and, therefore, to\ncompare market revenues with total costs, rather th an with variable costs, is consistent with the\napproach adopted by the Appellate Body in Canada – Dairy (Article 21.5 – New Zealand and US) .\n\n893See Appellate Body Report, US – Upland Cotton, paras. 452 and 453; and Original Panel Report,\npara. 7.1354 and footnote 1470 thereto.\n894Appellate Body Report, US – Upland Cotton , para. 453 (quoting Original Panel Report,\npara. 7.1354).\n896Appellate Body Report, US – Softwood Lumber VI (Article 21.5 – Canada), para. 103.\n897See Panel Report, paras. 3.9 and 3.12.\n\nThe Appellate Body explained, in that case, that \"fixed and variable costs are the total amount which\nthe producer must spend in order to produce [a commodity] and the total amount it must recoup, in the\nlong-term, to avoid making losses\". 898 The fact that a producer does not recover the total costs of\nproduction may indicate that it is covering its lo sses from some other source, such as subsidies. 899\nConsequently, we do not consider that the Pane l erred in using total costs of production when\ncalculating whether there was a gap between producers' costs of production and revenues.\n424. In any event, the methodology used by the Panel in determining which production costs and\nrevenues to compare to establish whether there is a gap between upland cotton producers' costs of\nproduction and revenues is not an issue of legal inte rpretation or application under Article 6.3(c) of\nthe SCM Agreement . The existence of a revenue gap is not a legally required benchmark under\nArticle 6.3(c). In other words, there is no lega l consequence under Article 6.3(c) that necessarily\nflows from the fact that there is a gap between produc ers' revenues and costs. Rather, it is merely one\nof the elements that the Panel considered in determining whether there was \"significant price\nsuppression\". Thus, the profitability of upland cotton production is a factual matter, the evaluation of\nwhich fell to the Panel to determine.\n425. Regarding the use by the Panel of crop-specifi c data published by the USDA, we observe that\nthe Panel relied on USDA cost of production surveys 900, which combined total costs and total returns\nfrom upland cotton lint and cottonseed. 901 This type of cost data was also relied upon by the original\npanel in making its findings about United States upland cotton producers' cost of production. The\nPanel referred to the original panel's statement that these \"data are calcula ted in accordance with a\nmethodology which the USDA itself has deemed to be a sufficiently reliable reflection of United\nStates upland cotton producers' costs and revenues.\" 902 Although the Panel agreed with the United\n\n898Appellate Body Report, Canada – Dairy (Article 21.5 – New Zealand and US), para. 87.\n899See ibid.\n900The United States also argues that using USDA cost data would lead to the absurd result that total\ncost of production was greater than market returns for nearly all United States field crops in MY 2005. (United\nStates' appellant's submission, paras. 174-176) We note that, in response, Brazil refers to a report prepared by\nthe United States Congressional Research Service, which indicates, based on USDA data, that it is only with the\naid of subsidies that a substantial portion of United States production (of all crops) is made economically viable.\n(Brazil's appellee's submission, paras. 770 and 771 (refe rring to Schnepf and Womach, \"Potential Challenges to\nUS Farm Subsidies in the WTO\" (Exhibit Bra-577 submitted by Brazil to the Panel), supra, footnote 227))\n901See Panel Report, para. 10.185.\n902Original Panel Report, para. 7.1354.\n\nStates that imputing values to resources for which there are no market transactions is not as reliable as\ndirect market valuation, the Panel noted that \"the methodology used by the USDA conforms to\nstandards recommended by the [American Agricultura l Economics Association], and the application\nof that methodology probably produces the best estimates that can be achieved.\"\n903\n426. We see no reasons to interfere with the Panel's decision to rely on data calculated on the basis\nof a methodology that the United States Government itself deems to be reliable and which was\naccepted by the panel in the original proceedings . Despite considering that the United States\nGovernment deemed the cost data relied upon by the original panel (including revenues from\ncottonseed and costs from ginning) to be sufficientl y reliable, the Panel also took into account the\napproach proposed by the United States in its submissions, which included only revenues from cotton\nlint and excluded ginning costs. The Panel foun d that, even excluding the revenues from cottonseed\nand the ginning costs, a significant gap existe d between market revenues and total costs of\nproduction.904\n427. As for non-cash opportunity costs for items such as unpaid labour and owned land, the Panel\nagreed with Brazil that such costs should be incl uded in the calculation of total costs of production,\nbecause this was consistent with the basic economic principle that resources allocation is guided by\nopportunity cost. The Panel noted that all resources that a farmer uses to produce cotton have a cost\n(whether this must be paid in cash or not), whic h is the value they can obtain when employed in the\nnext best alternative. In addition, the Panel noted that, by applying the methodology used by the\nUSDA, it was possible to impute opportunity costs and arrive at a reliable estimate of total costs.905\n428. Moreover, we note that, in Canada – Dairy (Article 21.5 – US and New Zealand II) , the\nAppellate Body ruled that non-cash opportunity costs such as family labour or cost of capital should\nhave been included in the calculation of the cost of production of milk, noting that \"the [cost of\nproduction standard] must cover all of the eco nomic resources invested in the production ...\n\n903Panel Report, para. 10.169.\n904See ibid., paras. 10.190, 10.191 and 10.196.\n905See ibid., paras. 10.169 and 10.170.\n\nirrespective of whether the resour ces involve an actual cash cost.\" 906 The Panel's approach was\nconsistent with the approach followed by the Appellate Body in Canada – Dairy (Article 21.5 – US\nand New Zealand II) . We see no reason, therefore, to interfe re with the Panel's decision to include\nnon-cash opportunity costs for items such as unpaid labour and owned land in the calculation of total\ncosts of production.\n429. Turning to the Panel's decision not to take into account off-farm income and income from\nother crops in calculating producers' revenues, we r ecall that the original panel had already rejected\nthe United States' request to include off-farm income as part of United States upland cotton producers'\nrevenues. The original panel reasoned that its ex amination of costs and re venues should be confined\nto the upland cotton industry, considering that th e legal focus of its analysis under Articles 5\nand 6.3(c) of the SCM Agreement was on the subsidized product of upland cotton lint. The original\npanel also noted that the very fact that Un ited States upland cotton farmers relied on cross-\nsubsidization from off-farm income and income fro m other crops supported the proposition that, in\nthe long term, they would lose money if they were involved in upland cotton production alone.907\n430. The Panel in these Article 21.5 proceedings not ed the reasoning of the original panel in\nrejecting off-farm income and turned to two new stud ies, which, according to the United States, \"note\nthe increased prevalence of off-farm employment a nd off-farm income for farm households in the\nUnited States\".908 The Panel noted that the new studies submitted by the United States demonstrate\nthat off-farm income has grown in importance to fa rm operators' income, but are ambivalent as to the\n\n906Appellate Body Report, Canada – Dairy (Article 21.5 – US and New Zealand II) , para. 102. The\nAppellate Body also found that:\n… For the dairy farmer, and his or her family, the investment of services in\nthe dairy enterprise has an economic cost, as those services cannot be put to\nan alternative remunerative use. … [F]rom the perspective of economic\ntheory, any labour and management services provided to an enterprise involve\nsuch an economic \"opportunity\" cost. …\nThe same is also true of any equity the owner invests in the dairy enterprise.\nThe allocation of such capital is, clearly, an investment of economic resources\nand carries an economic opportunity co st to the owner because the capital\ncannot simultaneously be invested elsewhere.\n(Ibid., paras. 103 and 104 (footnotes omitted))\n907See Original Panel Report, footnote 1470 to para. 7.1354.\n 908Panel Report, para. 10.178.\n\nimpact of off-farm income on farm exit.\n909 The Panel concluded that, due to this ambivalence, the\nnew studies submitted by the United States did not su cceed in showing that off-farm income played a\nrole in sustaining the economic viability of upland cotton farming and that, therefore, the studies\nfailed to undermine Brazil's argument that Unite d States producers would exit upland cotton farming\nwithout the support of marketing loan and counter-cyclical payments.\n431. In our view, it was reasonable for the Panel to exclude off-farm income from United States\nupland cotton producers' income. First, considering that the Panel was assessing the profitability of\nupland cotton producers, we agree that its analysis should have been limite d to costs and revenues\nrelated to upland cotton. Secondly, assuming that off-farm income plays a role in keeping upland\ncotton producers in business, such cross-subsidizati on by other activities appears to confirm, rather\nthan contradict, the Panel's conclusion that uplan d cotton production is not economically viable for\nsome producers. Thirdly, the Panel properly conclu ded that the studies produced by the United States\nare inconclusive as to the role played by off-farm income in upland cotton production.\n432. The exclusion of off-farm income is one com ponent of the Panel's determination of the\nexistence of a revenue gap. We have already c onsidered that the profitability of upland cotton\nproduction is a factual matter, the evaluation of which fell within the Panel's authority. Accordingly,\nwe see no reason to interfere with the Panel's decision to rely on total costs, use USDA crop-specific\ndata, include opportunity costs for items such as unpaid labour and owned land, and exclude off-farm\nincome. We, therefore, find that the Panel's ev aluation of these factors was proper and within the\nbounds of its authority as the trier of facts. Th e United States has not made a claim under Article 11\nof the DSU with respect to the Panel's finding on the existence of a revenue gap, nor in relation to the\ncomponents of the Panel's determination.\n(d) Economic Simulation Model\n433. The United States claims that th e Panel erred in its evaluation of the economic simulations\nconducted by the parties regarding the impact of United States' subsidies on world prices for upland\ncotton. In particular, the United States submits that, \"to rely on the results of modeling for its\n\n909Panel Report, paras. 10.180-10.184. For instance, the study by Hoppe and Korb notes that:\nOff-farm work could hypothetically aff ect exits in two ways. First, off-farm\nwork may be the first step in an exit from farming, which would be reflected\nin higher exits for farms the operators of which work off-farm. Second, off-\nfarm work might lower the probability of exit by providing farm operator\nhouseholds with another source of income.\n(Hoppe and Korb, \"Understanding US Farm Exits\" (Exhibit US-46 submitted by the United States to the Panel),\nsupra, footnote 116, p. 20)\n\nconclusion, the Panel would had to have concluded which model or models were appropriate,\ndetermined the level of price suppression resulting from that model, and found that such price\nsuppression was significant\".910\n434. We have already considered that, while the Panel appropriately examined the model, the\nparameters used by each party, and the arguments made by the parties, it could have gone somewhat\nfurther in its evaluation and comparative analysis of the economic simulati ons and the particular\nparameters used. We nevertheless concluded that, in its assessment of the simulations, the Panel did\nnot commit an error of law.\n435. The United States asserts that the Panel failed to make an objective assessment of the matter,\nas required by Article 11 of the DSU, because it ov erlooked flaws in Brazil's economic simulation\nmodel and it misrepresented and distorted the re sults of the simulation conducted by the United\nStates.911 We disagree that the Panel \"overlooked the fl aws\" in Brazil's economic model, considering\nthat the Panel expressly stated that it was \"mindful of the criticism by the United States that Brazil's\nmodel 'has no foundation within economic circles'\" and that Br azil's model \"needs to earn the\nconfidence of this Panel\". 912 Nor do we consider that the Pane l \"misrepresented and distorted\" the\nresults of the simulations carried out by the Unite d States. The arguments presented by the United\nStates on appeal do not succeed in demonstrating that the Panel erred in its evaluation of the economic\nsimulation. Contrary to the United States' asser tion, the Panel did not find that the United States'\nsimulation demonstrated that the price suppression was significant. The Panel's finding was that the\nmodel, when run using parameters preferred by the United States, also showed price suppression,\nwhich the United States does not deny. The United St ates, rather, contends that the results showed\nthat the price suppression would be minimal. 913 The Panel simply did not take a view on the\nsignificance of the results. Moreover, the Panel did not rely exclusively on the results of the\n\n910United States' appellant's submission, para. 196. (original emphasis)\n911See ibid., paras. 196 and 240.\n912Panel Report, para. 10.220 (quoting United States' second written submission to the Panel, Annex I,\npara. 7). See also ibid., paras. 10.202, 10.205, 10.207, and 10.216.\n 913The United States explains that:\nUsing long-run values for supply and demand elasticities, complete removal\nof the two programs would only show an increase in world prices\nof 2.26 per cent over the period MY 2002-2005 and 1.52 per cent over the\nperiod MY 2006-2008. Even though the [United States] estimates were\noverstated given the structural flaws in Brazil's model for which the United\nStates was unable to adjust, the magnitude of the price suppression as\ndemonstrated by the [United States] adjustments to the Brazilian model\ncould hardly be called \"significant\".\n(United States' appellant's submission, para. 238 (footnotes omitted))\n\nsimulations; rather, it noted that all simulations conducted by the parties \"support the view\" that\nmarketing loan and counter-cyclical payments have led to an increase in United States production and\nexports of upland cotton that woul d then have suppressed world prices, a conclusion the Panel also\nreached on the basis of other elements and indicators. Thus, the results of the simulations were one of\nseveral elements on which the Panel based its finding under Article 6.3(c) of the SCM Agreement. In\nour view, the Panel's assessment of the economic simulations falls with in its authority as the trier of\nfacts and we have not been persuaded that the Panel exceeded the bounds of its authority.\n(e) Impact of the Elimination of Step 2 Payments\n436. The United States challenges the Panel's analysis of the impact of the elimination of Step 2\npayments on three grounds. First, the United Stat es argues that it demonstr ated that there was a\nsignificant decline in United States production and exports of upland cotton in MY 2006 after the\nrepeal of Step 2 payments.\n914 As a result, the United States submits, Brazil had the burden of proving\nthat the impact of the repeal of Step 2 payments on United States production and exports was modest.\nTherefore, the United States considers that the Panel erred in finding that \"the elimination of this\nsubsidy does not affect the price suppressing effect s of the marketing loan payments and counter-\ncyclical payments in the world market for upland cotton.\"915\n437. In our view, the United States' argument is based on a mischaracterization of Brazil's claim\nand of the findings of the Panel. As the compla inant in these Article 21.5 proceedings, Brazil set out\nto prove that the effect of marketing loan a nd counter-cyclical payments was significant price\nsuppression, within the meaning of Article 6.3(c) of the SCM Agreement. This did not require Brazil\nto establish that the impact of the elimination of Step 2 payments was \"modest\", though it did require\nit to demonstrate that the payments under the ot her two programmes (marketing loan and counter-\ncyclical payments) caused significant price suppr ession. We observe that the Panel's finding of\nsignificant price suppression did not rest on the impact of the elimination of Step 2 payments. The\nPanel found significant price suppression based on the following: its examination of the structure,\ndesign, and operation of marketing loan and coun ter-cyclical payments; the existence of a gap\nbetween United States upland cotton producers' co sts of production and revenues; and the large\nmagnitude of the subsidies and the substantial pr oportionate influence of the United States in the\nworld market for upland cotton. Therefore, the Panel's finding of significant price suppression stands\nindependently of the impact of the elimination of Step 2 payments.\n\n914See United States' appellant's submission, para. 198.\n\n438. Secondly, the United States contends that th e Panel misconstrued and overlooked the United\nStates' evidence as to the indirect impact of the repeal of Step 2 payments, which will result,\naccording to the United States, in the substantial decrease of marketing loan payments and in no\nsignificant increase of counter-cyclical payments.916\n439. In assessing the indirect impact of the elimination of Step 2 payments, the Panel referred to\nprojections of the United States Congressional Budget Office (the \"USCBO\"), which it found\n\"credible\"917, and according to which \"lower [United States ] prices due to elimination of Step 2 would\nlead to an increase in counte r-cyclical payments of $484 milli on over the 2006-2015 period\" and\n\"higher world prices would reduce the cost of cotton marketing loans by $17 million over\nthe 2006-2015 period.\"\n918 The United States does not contest the accuracy of these figures but, rather,\nrefers to other projections from a study by the F ood and Agricultural Policy Research Institute (the\n\"FAPRI\"), which show that the elimination of the Step 2 payments programme results in an average\nincrease of 0.4 cent/lb in the adjusted world pr ice in MY 2006-2010, and a decline of the same\namount in the marketing loan payments.919\n440. In our view, the Panel did not exceed its authorit y as the trier of facts when it decided to rely\non the USCBO projections after having found them to be credible. 920 We note, moreover, that the\nPanel specifically took note of the point made by the United States 921 that the projected reduction in\nmarketing loan payments would apply only to MY 2006 and MY 2007, since no payments were\nexpected beyond that date.922 However, the Panel still found this projected reduction (US$17 million)\nto be modest compared to the annual payments unde r the marketing loan programme and the increase\n\n916See United States' appellant's submission, para. 201.\n917Panel Report, para. 10.238.\n918Congressional Budget Office Cost Estimate, 20 October 2005, Agricultural Reconciliation Act\nof 2005, as approved by the Senate Committee on Agriculture, Nutrition, and Forestry on 19 October 2005,\n(Exhibit Bra-482 submitted by Brazil to the Panel), p. 5.\n919See United States' appellant's submission, para. 202.\n920The Appellate Body has repeatedly stated that the credibility and weight of the evidence is within the\npanel's discretion as the trier of facts. Appellate Body Report, EC – Hormones , para. 132; Appellate Body\nReport, US – Wheat Gluten , para. 151; Appellate Body Report, EC – Sardines , para. 299; Appellate Body\nReport, US – Carbon Steel, para. 142; Appellate Body Report, Japan – Apples, para. 221.\n921See United States' appellant's submission, para. 204.\n922See Panel Report, para. 10.238.\n\nin counter-cyclical payments projected by the USCBO (US$484 million).\n923 The Panel also noted that\nit would not be enough simply to compare the magnit ude of the reduction in marketing loan payments\nwith that of the increase in counter-cyclical payments, because the production inducing effects of\nmarketing loan payments were greater than those of counter-cyclical payments. Overall, however, the\nPanel found that the indirect effects of the elimination of Step 2 payments on United States production\nand exports would likely be small, considering the modest projected reduction in marketing loan\npayments coupled with significant increases in count er-cyclical payments and the fact that these\nchanges would run counter to one another.924\n441. Finally, according to the United States, the Panel's analysis of the impact of the elimination of\nStep 2 payments was flawed, because the Panel did not determine how much of an effect remained\nafter the repeal of Step 2 payments, and how this compared to the price suppression found to exist in\nthe original proceedings, in order to determin e whether the remaining effect was significant. 925 The\nPanel set out to determine whether the effect of marketing loan and counter-cyclical payments was\npresent serious prejudice in the form of significant price suppression, and for this purpose conducted\nan evaluation of several factors. There is no requirement in Article 6.3(c) of the SCM Agreement that\na panel follow a particular methodology\n926, much less a requirement that a panel adopt an approach\nthat involves subtracting the price suppressing effects of the repealed measure (in this case, the Step 2\npayments). We do not see why the Panel could not have analyzed the price suppressing effects of the\nremaining marketing loan and counter-cyclical payments instead of analyzing the effects of the bundle\nof price-contingent subsidies at issue in the origin al proceedings and then subtracting the impact of\nthe repeal of the Step 2 payments programme. In any event, even if the Panel did not precisely\nquantify the effect of the elimination of Step 2 payments, it did examine the amount of Step 2\npayments before their elimination, the impact of the elimination upon export volumes, and the likely\nincrease and decrease in marketing loan and counte r-cyclical payments resulting from the elimination\nof Step 2 payments.\n\n923According to data submitted by Brazil, the projected amount of marketing loan payments in\nMY 2006 was US$650 million based on USDA Budget Estimates, US$475 million based on data from the\nFAPRI, and US$757 million based on February 2007 USDA stochastic projections. (Panel Report, para. 10.25\n(footnotes omitted)) Brazil also submitted data on pr ojected counter-cyclical payments. Based on USDA\nBudget Estimates, allocated counter-cyclical payments to United States upland cotton producers were projected\nat US$715 million in MY 2006, US$516 million in MY 2007, and US$449 million in MY 2008, MY 2009, and\nMY 2010. Based on the July 2006 FAPRI Baseline Upda te for US Agricultural Mark ets, projected allocated\ncounter-cyclical payments were US$912 million in MY 2006, US$825 million in MY 2007, US$732 million in\nMY 2008, US$679 million in MY 2009, and US$686 million in MY 2010. (See Panel Report, para. 10.33\n(footnotes omitted))\n924See ibid., para. 10.239.\n925See United States' appellant's submission, para. 209.\n926See Appellate Body Report, US – Upland Cotton, para. 427.\n\n(f) Magnitude of the Subsidies\n442. The United States challenges the Panel's finding that, \"when considered in conjunction with\nother factors, the order of magnitude of the mark eting loan payments and counter-cyclical payments\nsupports a finding of significant price suppression, even when account is taken of the decline in the\namount of marketing loan payments projected for MY 2006.\" 927 According to the United States, this\nfinding is premised on the Panel's earlier conclusion that the struct ure, design, and operation of the\nmarketing loan and counter-cyclical payments had an \"important revenue-stabilizing effect\" on United\nStates farmers, and that the payments bridged \"the gap between costs of production and market\nrevenues of [United States] upland cotton producers.\" 928 Since the United States considers that the\nPanel's findings on the structure, design, and opera tion of the marketing loan and counter-cyclical\npayments, and on the payments' role in covering the alleged cost-revenue gap, are erroneous, it\nconsiders that \"the Panel's finding as to the magn itude of the marketing loan and counter-cyclical\npayments, which depends on those same findings, also fails as a matter of law.\"929\n443. We agree that the Panel linked the probative value of the magnitude of the subsidies, for\npurposes of the analysis of significant price suppressi on, to its findings on the structure, design, and\noperation of the subsidies and on the gap between costs of production and market revenues of United\nStates upland cotton producers.930 We have already found that the Panel did not err in its findings on\nthe structure, design, and operation of the marketi ng loan and counter-cyclical payments, including its\nfindings on the market-insulating effects of tho se payments, and on the gap between producers'\nrevenues and costs. 931 Therefore, given that the United States has not offered any additional\narguments that could substantiate its challenge of the Panel's findings on the magnitude of the\nsubsidies, we see no reason to disturb these findings.\n(g) Substantial Proportionate Influence on the World Market for Upland\nCotton\n444. The United States claims that the Panel erre d in finding that the United States exerts a\nsubstantial proportionate influence on the world mark et for upland cotton, because it overlooked how\nUnited States upland cotton competed with cotton from other sources 932 and the fact that the United\n\n928Ibid.\n929Ibid., para. 217.\n930See Panel Report, para. 10.111. The Panel explained that \"the relevance of the magnitude of the\nsubsidies in this connection must also be assessed in li ght of our analysis above of the structure, design and\noperation of the subsidies\".\n931See supra, Sections VII.E.4(b) and (c).\n932See United States' appellant's submission, para. 219.\n\nStates' shares of world production and exports of upland cotton have remained stable in recent\nyears.\n933\n445. The Panel found that, with 20.9 per cent of world upland cotton production and 39.8 per cent\nof world upland cotton exports in MY 2005, the Un ited States exerted a substantial proportionate\ninfluence on the world market for upland cotton, ev en taking into account the projected declines in\nthese shares in MY 2006. 934 The Panel referred to an analysis of a consultant retained by Brazil \"of\nthe functioning of the world market for upland cotton\". 935 In this analysis, the consultant indicated\nthat, \"because China is a 'relatively small exporter[] ', it has 'less of an impact on the discovery of\nworld cotton prices\". 936 The Panel also discussed the role of China in its brief non-attribution\nanalysis.\n446. We do not see a contradiction between the fact that United States shares of world production\nand exports of upland cotton have remained stable at consistently high levels between MY 2002 and\nMY 2007 and the Panel's findings of substantial pro portionate influence of the United States in the\nworld market for upland cotton. This is because stable high United States shares of world production\nand exports of upland cotton could be seen as evidence of the fact that the United States continued to\nexert a substantial proportionate influence in the pe riod examined by the Panel, just as it had during\nthe period examined by the original panel. We also observe that the Panel speci fically noted that this\nelement supported its finding of significant price suppression when \"analyzed in the light of the\ntotality of the evidence\". 937 Therefore, we do not consider that the Panel erred in finding that the\nUnited States exerts a substantial proportionate influence on the world market for upland cotton.938\nF. Conclusion\n447. For all the reasons stated above, the United States has not persuaded us that the Panel\nincorrectly interpreted the requirements of Article 6.3(c) of the SCM Agreement or erred in applying\nthat provision to the facts of the case. We also find that the Panel did not fail to comply with its duties\nunder Article 11 of the DSU to make an objective asse ssment of the matter before it, including an\nobjective assessment of the facts of the case. We therefore uphold the Panel's findings, in\nparagraphs 10.256 and 15.1(a) of th e Panel Report, that the United Stat es acts inconsistently with its\n\n933See United States' appellant's submission, para. 220.\n934See Panel Report, para. 10.58. For United States shares of production and exports in previous years,\nsee ibid., para. 10.56.\n935See ibid., footnote 279 to para. 10.58.\n936Brazil's appellee's submission, para. 930 (quoting D eclaration of Andrew Macdonald, attached as\nAnnex II to Brazil's first written submission to the Panel, para. 23).\n937Panel Report, para. 10.58.\n938See ibid.\n\nobligations under Articles 5(c) and 6.3(c) of the SCM Agreement in that the effect of marketing loan\nand counter-cyclical payments pr ovided to United States upland cotton producers pursuant to the\nFSRI Act of 2002 is significant price suppression, within the meaning of Article 6.3(c) of the SCM\nAgreement, in the world market for upland cotton c onstituting \"present\" serious prejudice to the\ninterests of Brazil, within the meaning of Article 5(c) of the SCM Agreement. In addition, we uphold\nthe Panel's consequential finding, in paragraphs 10.257 and 15.1(a) of the Panel Report, that \"by\nacting inconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement the United States has failed\nto comply with the DSB recommendations and ru lings\" and \"[s]pecifically, the United States has\nfailed to comply with its obligation under Article 7.8 of the SCM Agreement 'to take appropriate\nsteps to remove the adverse effects or ... withdraw the subsidy'.\"\nVIII. Findings and Conclusions\n448. For the reasons set out in this Report, the Appellate Body:\n(a) as regards the scope of these Article 21.5 proceedings:\n(i) upholds the Panel's finding, in paragraph 9.27 of the Panel Report, that\nBrazil's claims relating to export cred it guarantees for pig meat and poultry\nmeat are properly within the scope of these Article 21.5 proceedings.\nBecause the condition on which it is pr edicated has not been fulfilled, the\nAppellate Body does not find it necessary\n to consider Brazil's other appeal\nthat the Panel erred when it found that the measure that is the subject of\nBrazil's claims is not the revised GSM 102 programme itself; and\n(ii) upholds the Panel's finding, in paragraph 9.81 of the Panel Report, that\nBrazil's claims against marketing loan and counter-cyclical payments made\nby the United States after 21 September 2005 are properly within the scope of\nthese Article 21.5 proceedings. Because the condition on which it is\npredicated has not been fulfilled, the Appellate Body does not find it\nnecessary to consider Brazil's other appeal that the Panel erred in finding that\nthe original panel's conclusions and recommendations addressed only the\npayments made under the marketing lo an and counter-cyclical payments\nprogrammes, and not the programmes themselves;\n(b) as regards the revised GSM 102 export credit guarantee programme:\n\n(i) finds\n that the Panel failed to make an objective assessment of the matter,\nunder Article 11 of the DSU, because it dismissed the import of the\nre-estimates data submitted by the Un ited States on the basis of internally\ninconsistent reasoning. Conseque ntly, the Appellate Body reverses the\nPanel's intermediate finding, in paragraph 14.89 of the Panel Report, that \"the\ninitial subsidy estimates provide a strong indication that GSM 102 export\ncredit guarantees are provided against prem ia which are inadequate to cover\nthe long-term operating costs and losses of the GSM 102 programme\";\n(ii) upholds the Panel's finding, in paragra ph 14.131 of the Panel Report, that\n\"the GSM 102 programme is not design ed to cover its long term operating\ncosts and losses\";\n(iii) upholds, albeit for reasons that differ from those of the Panel, the Panel's\nconclusion, in paragraph 14.133 of the Panel Report, that \"the GSM 102\nexport credit guarantee programme constitu tes an 'export subsidy' because it\nis provided against premiums which are inadequate to cover its long term\noperating costs and losses under the terms of item (j) of the Illustrative List\".\nConsequently, upholds the Panel's finding, in paragraph 14.134 of the Panel\nReport, that GSM 102 export credit guarantees issued after 1 July 2005 are\nexport subsidies within the meaning of Article 3.1(a) of the SCM Agreement\nand Article 10.1 of the Agreement on Agriculture; and\n(iv) in the light of this, the following findings, in paragraphs 14.140, 14.149,\n14.150, 14.156, 14.157, and 15.1(c) of the Panel Report, also stand:\n- regarding export credit guarantees issued under the revised GSM 102\nprogramme after 1 July 2005 the United States acts inconsistently with\nArticle 10.1 of the Agreement on Agriculture by applying export subsidies\nin a manner which results in the circumvention of United States' export\nsubsidy commitments with respect to certain unscheduled products and\ncertain scheduled products, and as a resu lt acts inconsistently with Article 8\nof the Agreement on Agriculture;\n\n- regarding export credit guarantees issued under the revised GSM 102\nprogramme after 1 July 2005, the United States also acts inconsistently with\nArticles 3.1(a) and 3.2 of the SCM Agreement by providing export subsidies\nto unscheduled products and by prov iding export subsidies to scheduled\nproducts in excess of the commitments of the United States under the\nAgreement on Agriculture; and\n- by acting inconsistently with Articles 10.1 and 8 of the Agreement on\nAgriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the United\nStates has failed to comply with th e DSB recommendations and rulings.\nSpecifically, the United States has failed to bring its measures into\nconformity with the Agreement on Agriculture and has failed \"to withdraw\nthe subsidy without delay\"; and\n(c) as regards whether the effect of marketi ng loan and counter-cyclical payments is\nsignificant price suppression:\n(i) upholds\n the Panel's findings, in paragraphs 10.256, 10.257, and 15.1(a) of the\nPanel Report, that:\n- the United States acts inconsistently with its obligations under Articles 5(c)\nand 6.3(c) of the SCM Agreement in that the effect of marketing loan and\ncounter-cyclical payments provided to United States upland cotton producers\npursuant to the FSRI Act of 2002 is significant price suppression, within the\nmeaning of Article 6.3(c) of the SCM Agreement , in the world market for\nupland cotton, constituting \"present\" ser ious prejudice to the interests of\nBrazil within the meaning of Article 5(c) of the SCM Agreement; and\n- by acting inconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement,\nthe United States has failed to comply with the DSB's recommendations and\nrulings; specifically, the United States failed to comply with its obligation\nunder Article 7.8 of the SCM Agreement \"to take appropriate steps to\nremove the adverse effects or ... withdraw the subsidy\"; and\n\n(ii) finds\n that the Panel did not fail to make an objective assessment of the matter\nbefore it, as required by Article 11 of the DSU, in its analysis of Brazil's\nclaim that the effect of the marketing loan and counter-cyclical payments is\nsignificant price suppression.\n449. The Appellate Body recommends that the DSB request the United States to bring its\nmeasures, found in this Report, and in the Panel Repor t as modified by this Report, to be inconsistent\nwith the Agreement on Agriculture and the SCM Agreement , into conformity with its obligations\nunder those Agreements.\n\nSigned in the original in Geneva this 16th day of May 2008 by:\n\nLuiz Olavo Baptista\nPresiding Member\n\n _________________________ _________________________\n Jennifer Hillman David Unterhalter\n Member Member\n\nANNEX I\n\n19 February 2008\n (08-0733)\n Original: English\n\nRecourse to Article 21.5 of the DSU by Brazil\n\nNotification of an Appeal by the United States\nunder Article 16.4 and Article 17 of the Understanding on Rules\nand Procedures Governing the Settlement of Disputes (DSU),\nand under Rule 20(1) of the Working Procedures for Appellate Review\n\n The following notification, dated 12 February 2008, from the Delegation of the United States,\nis being circulated to Members.\n\nPursuant to Article 16 of the Understanding on Rules and Procedures Governing the\nSettlement of Disputes (\"DSU\") and Rule 20 of the Working Procedures for Appellate Review, the\nUnited States hereby notifies its decision to appeal to the Appellate Body certain issues of law\ncovered in the report of the panel in : Recourse to\nArticle 21.5 of the DSU by Brazil (WT/DS267/RW) (\"Panel Report\") a nd certain legal interpretations\ndeveloped by the panel in this dispute.\n\n1. The United States seeks review by the Appella te Body of the panel's finding that Brazil's\nclaims relating to GSM 102 export credit guarantees fo r exports of pig meat and poultry meat were\nwithin the scope of this proceeding under Article 21.5 of the DSU.\n1 This finding is in error and is\nbased on erroneous findings on issues of law and related legal interpretations.\n\n2. The United States seeks review by the Appella te Body of the panel's finding that Brazil's\nclaim that the United States failed to comply with its obligation under Article 7.8 of the Agreement on\nSubsidies and Countervailing Measures (\"SCM Agreement\") with respect to marketing loan payments\nand counter-cyclical payments made by the Unite d States after September 21, 2005 was properly\nbefore the panel.\n2 This finding is in error and is based on erroneous findings on issues of law and\nrelated legal interpretations.\n\n3. The United States seeks review by the Appellate Body of the panel's legal conclusion that as\nto GSM 102 export credit guarantees issued after July 1, 2005, the United States acted inconsistently\nwith Article 10.1 of the Agreement on Agriculture by applying export subsidies in a manner which\nresulted in the circumvention of U.S. export su bsidy commitments with respect to unscheduled\n\n1See, e.g., Panel Report, paras. 9.20-9.27.\n2See, e.g., Panel Report, paras. 9.75-9.81.\n\nproducts and certain scheduled prod ucts, and as a result acted incons istently with Article 8 of the\nAgreement on Agriculture.3 The United States also seeks review by the Appellate Body of the panel's\nrelated legal conclusion that the United States acted in consistently with Articles 3.1(a) and 3.2 of the\nSCM Agreement by providing export subsidies to unsche duled products and by providing export\nsubsidies to scheduled products in excess of U.S. commitments under the Agreement on Agriculture.4\nThese conclusions are in error and are based on erro neous findings on issues of law and related legal\ninterpretations.\n\n4. The United States requests the Appellate Body to find that the panel failed to make \"an\nobjective assessment of the matter before it, including an objective assessment of the facts of the case\nand the applicability of and conformity with the relevant covered agreements\" as required by\nArticle 11 of the DSU with respect to Brazil's claims that the GSM 102 export credit guarantees\nconstituted prohibited export subsidies. The pa nel's failure to undertake an objective assessment\nincludes, for example, the following:\n\n (a) The panel disregarded and misconstrued the import of the GSM 102 export credit\n guarantee budgetary re-estimates data submitted by the United States\n5;\n\n (b) When conducting its analysis under item (j) of the Illustrative List of Export\nSubsidies to the SCM Agreement, the panel relied upon assumptions not supported by\nevidence on the record\n6 and on inappropriate comparisons of fees.7\n\n5. The United States seeks review by the Appellate Body of the panel's legal conclusion that the\nUnited States failed to comply with the DSB's ruli ngs and recommendations relating to the original\npanel's findings of inconsistency with Articles 10.1 and 8 of the Agreement on Agriculture and\nArticles 3.1(a) and 3.2 of the SCM Agreement.8 This erroneous conclusi on is based on the panel's\nerroneous legal conclusions and failure to undertake an objec tive assessment, described in\nparagraphs 3-4 above.\n\n6. The United States seeks review by the Appella te Body of the panel's finding that the United\nStates acted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement in\nthat the effect of marketing loan and counter-c yclical payments provided to U.S. upland cotton\nproducers after September 21, 2005 was significant price suppression within the meaning of\nArticle 6.3(c) of the SCM Agreement in the world market for upland cotton constituting \"present\"\nserious prejudice to the interests of Brazil within the meaning of Article 5(c) of the SCM Agreement.\n9\nThis conclusion is in error and is based on err oneous findings on issues of law and related legal\ninterpretations.\n\n7. The United States requests the Appellate Body to find that the panel failed to make \"an\nobjective assessment of the matter before it, including an objective assessment of the facts of the case\nand the applicability of and conformity with the relevant covered agreements\" as required by\nArticle 11 of the DSU with respect to Brazil's claims of present serious prejudice. The panel's failure\nto undertake an objective assessment includes, for example, the following:\n\n3See, e.g. , Panel Report, paras. 14.89, 14.97, 14.110, 14.115, 14.120, 14.128-14.129, 14.131,\n14.133(a)-(c), 14.134, 14.140, 14.149, 15.1(c).\n4See, e.g., Panel Report, paras. 14.156, 15.1(c).\n5See, e.g., Panel Report, paras. 14.80-14.81.\n6See, e.g., Panel Report, paras. 14.101, 14.125, 14.129.\n7See, e.g., Panel Report, paras. 14.94-14.103, 14.124-14.128, 14.129-14.131.\n8See, e.g., Panel Report, paras. 14.150, 14.157, 15.1(c), 15.2.\n9See, e.g., Panel Report, paras. 10.50, 10.58, 10.104, 10.111, 10.196, 10.222, 10.231, 10.239, 10.243,\n10.247-10.256, 15.1(a).\n\n (a) The panel disregarded and misconstrue d evidence on the record concerning the\nstructure, design, and operation of marketing loan and counter-cyclical payments\n10;\n\n (b) The panel disregarded and misconstrued evidence on the record and its own finding\nthat the U.S. share of world upland cotton production and exports was stable over\nMY 2002-2005\n11;\n\n (c) The panel misconstrued the results of U.S. econometric modeling concerning the\neffect of U.S. marketing loan and counter-cyclical payments on the world price for\nupland cotton\n12;\n\n (d) The panel disregarded and misconstrue d evidence concerning the alleged gap\nbetween the costs of production and the revenues of U.S. upland cotton farmers\n13;\n\n (e) The panel disregarded evidence relevant to ensuring that the effect of other factors on\nupland cotton prices was not improperly a ttributed to U.S. marketing loan and\ncounter-cyclical payments.14\n\n8. The United States seeks review by the Appellate Body of the panel's legal conclusion that the\nUnited States failed to comply with the DSB's ru lings and recommendations related to the original\npanel's findings of inconsistenc y with Articles 5 and 6 of the SCM Agreement .\n15 This erroneous\nconclusion is based on the panel's erroneous legal conclusions and fa ilure to undertake an objective\nassessment, described in paragraphs 6-7 above.\n\n10See, e.g., Panel Report, paras. 10.61-10.82, 10.92-10.95.\n11See, e.g., Panel Report, paras. 10.127, 10.251.\n12See, e.g., Panel Report, paras. 10.221-10.222, 10.251.\n13See, e.g., Panel Report, paras. 10.176, 10.184, 10.195-10.196.\n15See, e.g., Panel Report, paras. 10.257, 15.1(a), 15.2-15.3.\n\nANNEX II\n\n29 February 2008\n (08-0923)\n Original: English\n\nRecourse to Article 21.5 of the DSU by Brazil\n\nNotification of an Other Appeal by Brazil\nunder Article 16.4 and Article 17 of the Understanding on Rules\nand Procedures Governing the Settlement of Disputes (DSU),\nand under Rule 23(1) of the Working Procedures for Appellate Review\n\n The following notification, dated 25 February 2008, from the Delegation of Brazil, is being\ncirculated to Members.\n\nBrazil appeals certain issues of law and lega l interpretations in the Panel Report in – Recourse to Article 21.5 of the DSU by Brazil.\n1\n\n2. Brazil's first appeal is contingent on the Appellate Body reversing the compliance Panel's\nfinding, in accordance with the United States' app eal, that payments made after 21 September 2005\npursuant to the Marketing Loan Payments (\"ML\") program and Counter-Cyclical Payments (\"CCP\")\nprogram were within the scope of this proceeding under Article 21.5 and, th erefore, properly before\nthe compliance Panel.\n2\n\n3. In that event, Brazil seeks reversal of the compliance Panel's finding that the DSB's\nrecommendations and rulings in the original pro ceedings, and the original panel's recommendations\nand conclusions, included only the ML and CCP pa yments, and not also the ML and CCP programs.\n3\nThis finding constitutes an error by the comp liance Panel under Article 21.5 of the DSU.\nAlternatively, in making this finding, the complianc e Panel failed to make an objective assessment of\nthe matter under Article 11 of the DSU.\n\n4. Brazil furthermore requests that the Appellate Body find:\n\n1WT/DS267/RW, circulated on 18 December 2007.\n2Panel Report, paras. 9.75 to 9.81, as challenged in the United States' Appellant's Submission,\nSection II.B, paras. 56 to 74.\n3Panel Report, paras. 9.44 to 9.55, in particular para. 9.47.\n\n(a) that the ML and CCP payments made after 21 September 2005 constitute measures\ntaken to comply with the DSB's recomme ndations and rulings in the original\nproceedings within the meaning of Article 21.5 of the DSU, because of the close\nconnection to the ML and CCP programs subject to those recommendations and\nrulings; or, alternatively\n\n(b) that the United States, through the continued use of the ML and CCP programs,\ncauses serious prejudice to Brazil's interests within the meaning of Articles 5(c)\nand 6.3(c) of the Agreement on Subsidies and Countervailing Measures.\n5. Second, in the event that the Appellate Body reverses, in accordance with the United States'\nappeal, the compliance Panel's finding that Brazil' s claims \"relating to export credit guarantees\n[\"ECGs\"] for exports of pig meat and poultry m eat\" were properly before the compliance Panel\n4,\nBrazil requests that the Appellate Body find that th e compliance Panel erred in rejecting Brazil's view\nthat \"the measure that is the subject of [Brazil's] claims is the amended [General Sales Manager\n(\"GSM\")] programme itself\".\n5 This finding is inconsistent with Article 21.5 of the DSU.\nAlternatively, in making this fi nding, the Panel failed to make an objective assessment of the matter\nunder Article 11 of the DSU. Brazil requests that th e Appellate Body find, instead, that the amended\nGSM program itself was the measure taken to comply for purposes of Article 21.5 of the DSU, was\nthe measure subject to Brazil's claims, and was properly before the compliance Panel.\n\n6. As part of this conditional appeal relating to ECGs, Brazil further requests that the Appellate\nBody find that the United States applies th e GSM 102 program in a manner that results in\ncircumvention of U.S. export subsidy commitment s with respect to pig meat and poultry meat,\ncontrary to Articles 10.1 and 8 of the Agreement on Agriculture, as well as to Articles 3.1(a) and 3.2\nof the SCM Agreement.\n\n4Panel Report, para. 9.27, as challenged in the United States' Appellant's Submission, Section II.A,\nparas. 33 to 55.\n5Panel Report, para. 9.25."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:33.831192"}}},{"rowIdx":3977,"cells":{"folder_number":{"kind":"string","value":"267"},"case_number":{"kind":"string","value":"267"},"original_filename":{"kind":"string","value":"DS267_SEQ79_Request_For_Arbitration_00.pdf"},"new_filename":{"kind":"string","value":"DS267_SEQ79_Request_For_Arbitration_00.pdf"},"doc_sequence":{"kind":"number","value":79,"string":"79"},"doc_type":{"kind":"string","value":"Request_For_Arbitration"},"doc_type_raw":{"kind":"string","value":"Request by the United States for Arbitration under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement"},"doc_class":{"kind":"string","value":"ARBITRATION"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON"},"date":{"kind":"string","value":"15 July 2005"},"header_codes":{"kind":"string","value":"WT/DS267/23"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Brazil']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand']"},"dispute_stage":{"kind":"string","value":"Mutually Agreed Solution"},"agreements_cited":{"kind":"string","value":"Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 30 October 2014\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Brazil.\nOn 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users and/or exporters of upland cotton, as well as legislation, regulations, statutory instruments and amendments thereto providing such subsidies (including export credits), grants, and any other assistance to the US producers, users and exporters of upland cotton (“US upland cotton industry”).\nBrazil contended that these measures were inconsistent with the obligations of the United States under the following provisions: Articles 5(c), 6.3(b), (c) and (d), 3.1(a) (including item (j) of the Illustrative List of Export Subsidies in Annex I), 3.1(b), and 3.2 of the SCM Agreement; Articles 3.3, 7.1, 8, 9.1 and 10.1 of the Agreement on Agriculture; and Article III:4 of GATT 1994. Brazil was of the view that the US statutes, regulations, and administrative procedures listed above were inconsistent with these provisions as such and as applied.\nOn 9 October and 11 October 2002, Zimbabwe and India, respectively, requested to join the consultations. On 14 October 2002, Argentina and Canada requested to join the consultations. The United States informed the DSB that it had accepted the requests of Argentina and India to join the consultations.\nOn 6 February 2003, Brazil requested the establishment of a panel. At its meeting on 19 February 2003, the DSB deferred the establishment of a panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Brazil, the DSB established a Panel at its meeting on 18 March 2003. Argentina, Canada, China, Chinese Taipei, the European Communities, India, Pakistan and Venezuela reserved their third-party rights to participate in the Panel’s proceedings.\nAt that meeting, the Chairman of the DSB announced that he continued to consult with Brazil and the United States on the issue of appointing a DSB representative to facilitate the information-gathering process, pursuant to the Annex V procedures under the SCM Agreement, which had been invoked by Brazil in its panel request. Following a communication from the United States, on 20 March 2003, Brazil indicated, in conformity with paragraph 1 of Annex V, that it considered the following third-county markets as relevant: Argentina, Bangladesh, Colombia, Germany, India, Indonesia, Italy, Portugal, Philippines, Slovenia, South Africa, South Korea, Switzerland, Thailand and Turkey.\nOn 24 March 2003, Benin reserved its third-party rights. On 25 March 2003, Australia reserved its third-party rights. On 26 March 2003, Paraguay reserved its third-party rights. On 28 March 2003, New Zealand reserved its third-party rights. On 4 April 2003, Chad reserved its third-party rights. On 9 May 2003, Brazil requested the Director-General to compose the panel. On 19 May 2003, the Director-General composed the panel.\nOn 17 November 2003, the Chairman of the panel informed the DSB that it would not be able to complete its work in six months due to the complexity of the matter and that the panel expected to issue its final report to the parties in May 2004.\nOn 8 September 2004, the panel report was circulated to Members. The panel found that:\nOn 18 October 2004, the United States notified its intention to appeal certain issues of law and legal interpretations developed by the panel. On 16 December 2004, the Chairman of the Appellate Body informed the DSB that in light of the numerous and complex issues raised in this dispute, the increased burden on the Appellate Body as well as the translation services, the intervening holiday period, and the fact that the Appellate Body expects to be considering two or three other appeals in the coming weeks, the Appellate Body would not be able to circulate its Report by, 17 December 2004. The Chairman stated that the Appellate Body estimated that the Appellate Body report would be circulated no later than 3 March 2005.\nOn 3 March 2005, the Appellate Body report was circulated to Members. The Appellate Body found inter alia as follows:\nA. As regards the applicability of the Peace Clause to this dispute, the Appellate Body:\nB. As regards serious prejudice, the Appellate Body:\nC. As regards user marketing (Step 2) payments, the Appellate Body:\nD. As regards export credit guarantee programs, the Appellate Body:\nAt its meeting on 21 March 2005, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report. The resulting DSB recommendations and rulings include the recommendation that the United States withdraw, by at the latest within six months of the date of adoption of the Panel report by the DSB or 1 July 2005 (whichever is earlier), the following prohibited subsidies: (i) the export credit guarantees under the GSM 102, GSM 103 and SCGP export credit guarantee programmes in respect of exports of upland cotton and other unscheduled agricultural products supported under the programmes, and in respect of one scheduled product (rice); (ii) Section 1207(a) of the Farm Security and Rural Investment (FSRI) Act of 2002 providing for user marketing (STEP2) payments to exporters of upland cotton; and (iii) Section 1207(a) of the FSRI Act of 2002 providing for user marketing (STEP2) payments to domestic users of upland cotton. As for the actionable subsidies the recommendation is that the United States takes appropriate steps to remove the adverse effects of certain subsidies or withdraw these subsidies within six months from the date of adoption of the Panel and Appellate Body reports, i.e. the compliance period expired on 21 September 2005.\n\nCompliance proceedings\nFollowing the suspension of the arbitration proceedings under Article 22.6 triggered by Brazil's request to take countermeasures with respect to the prohibited and actionable subsidies (see below), on 18 August 2006, Brazil requested the establishment of a compliance panel. At its meeting on 1 September 2006, the DSB deferred the establishment of a compliance panel. Further to a second request, at its meeting on 28 September 2006, the DSB agreed, if possible, to refer the matter raised by Brazil to the original panel. Argentina, Australia, Canada, China, the European Communities, India, Japan and New Zealand reserved their third party rights. Subsequently, Chad and Thailand reserved their third party rights. On 18 and 20 October 2006, Brazil and the United States respectively requested the Director-General to compose the compliance panel. On 25 October 2006, the Director-General composed the panel.\nOn 9 January 2007, the Chairman of the panel informed the DSB that given the particular circumstances of this case and the schedule adopted after consultations with parties to this dispute, it had not been possible for the panel to complete its work within the 90-day period as foreseen in Article 21.5. The panel expected to complete its work in July 2007.\nOn 18 December 2007, the compliance panel report was circulated to Members. The Panel found that with respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's finding of inconsistency with Articles 5 and 6 of the SCM Agreement:\nWith respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's findings of inconsistency with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the panel found:\nThe panel also considered that to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding were inconsistent with the objections of the United States under the covered agreements, these recommendations and rulings remain operative.\nOn 12 February 2008, the United States notified its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the panel. On 25 February 2008, Brazil notified its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the compliance panel report. On 11 April 2008, the Chairman of the Appellate Body informed the DSB that it would not be possible to circulate its report within 60 days in light of the numerous and complex issues raised in this appeal, and the increased burden on translation services. It estimated that the Appellate Body report would be issued no later than 2 June 2008.\nOn 2 June 2008, the Appellate Body report was circulated to Members.\nAs regards the scope of the Article 21.5 proceedings, the Appellate Body upheld the Panel's finding that Brazil's claims relating to export credit guarantees for pig meat and poultry meat are properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated had not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred when it found that the measure that is the subject of Brazil's claims is not the revised GSM 102 programme itself.\nThe Appellate Body also upheld the Panel's finding that Brazil's claims against marketing loan and counter-cyclical payments made by the United States after 21 September 2005 were properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated has not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred in finding that the original panel's conclusions and recommendations addressed only the payments made under the marketing loan and counter-cyclical payments programmes, and not the programmes themselves.\nAs regards the revised GSM 102 export credit guarantee programme, the Appellate Body found that the Panel failed to make an objective assessment of the matter, under Article 11 of the DSU, because it dismissed the import of the re-estimates data submitted by the United States on the basis of internally inconsistent reasoning. Consequently, the Appellate Body reversed the Panel's intermediate finding that “the initial subsidy estimates provide a strong indication that GSM 102 export credit guarantees are provided against premia which are inadequate to cover the long-term operating costs and losses of the GSM 102 programme”.\nThe Appellate Body upheld the Panel's finding that “the GSM 102 programme is not designed to cover its long term operating costs and losses” and, albeit for reasons that differ from those of the Panel, the Panel's conclusion that “the GSM 102 export credit guarantee programme constitutes an 'export subsidy' because it is provided against premiums which are inadequate to cover its long term operating costs and losses under the terms of item (j) of the Illustrative List”.\nConsequently, the Appellate Body upheld the Panel's finding that GSM 102 export credit guarantees issued after 1 July 2005 are export subsidies within the meaning of Article 3.1(a) of the SCM Agreement and Article 10.1 of the Agreement on Agriculture; and that regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005 the United States acts inconsistently with Article 10.1 of the Agreement on Agriculture by applying export subsidies in a manner which results in the circumvention of United States' export subsidy commitments with respect to certain unscheduled products and certain scheduled products, and as a result acts inconsistently with Article 8 of the Agreement on Agriculture. Regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005, the Appellate Body also found that the United States also acts inconsistently with Articles 3.1(a) and 3.2 of the SCM Agreement by providing export subsidies to unscheduled products and by providing export subsidies to scheduled products in excess of the commitments of the United States under the Agreement on Agriculture.\nThe Appellate Body further found that, by acting inconsistently with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the United States had failed to comply with the DSB recommendations and rulings and specifically, had failed to bring its measures into conformity with the Agreement on Agriculture and “to withdraw the subsidy without delay”.\nAs regards whether the effect of marketing loan and counter-cyclical payments is significant price suppression, the Appellate Body upheld the panel's findings that the United States acted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter-cyclical payments provided to United States upland cotton producers pursuant to the FSRI Act of 2002 is significant price suppression, within the meaning of Article 6.3(c) of the SCM Agreement, in the world market for upland cotton, constituting “present” serious prejudice to the interests of Brazil within the meaning of Article 5(c) of the SCM Agreement. The Appellate Body also found that, by acting inconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement, the United States had failed to comply with the DSB's recommendations and rulings and, specifically, failed to comply with its obligation under Article 7.8 of the SCM Agreement “to take appropriate steps to remove the adverse effects or ... withdraw the subsidy”.\nThe Appellate Body further found that the Panel did not fail to make an objective assessment of the matter before it, as required by Article 11 of the DSU, in its analysis of Brazil's claim that the effect of the marketing loan and counter-cyclical payments is significant price suppression.\nThe Appellate Body recommended that the DSB request the United States to bring its measures, found to be inconsistent with the Agreement on Agriculture and the SCM Agreement, into conformity with its obligations under those Agreements.\nAt its meeting on 20 June 2008, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 4 July 2005, prior to the initiation of the compliance proceedings (see above), and in respect of the “prohibited subsidies”, Brazil requested, the DSB for authorization to take appropriate countermeasures pursuant to Article 4.10 of the SCM Agreement and to suspend concessions or other obligations pursuant to Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 1 July 2005. Brazil stated it intended to take appropriate countermeasures in the form of the suspension of tariff concessions and related obligations under the GATT 1994 by imposing additional customs duties on a list of products imported from the United States, to be defined by Brazil. In addition, given that it considered that it was not practicable or effective to exclusively apply additional import duties and that it considered that the circumstances were serious enough, Brazil stated it may resort, to the extent necessary, to countermeasures in the form of suspension of certain obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the General Agreement on Trade in Services (GATS).\nWith regard to the prohibited subsidies, on 5 July 2005 the parties to the dispute jointly notified the DSB of “Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement”. On 14 July 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 4.11 of the SCM Agreement challenging the appropriateness of the countermeasures, the proposed level of suspension and asserting that the principles and procedures set forth in Article 22.3 of the DSU had not been followed. At its meeting on 15 July 2005, the DSB referred the matter raised by the United States to arbitration. On 17 August 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 6 October 2005, in respect of the “actionable subsidies” Brazil requested the DSB for authorization to suspend concessions or other obligations under Article 7.9 of the SCM Agreement and Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 21 September 2005. Brazil stated that in principle, these countermeasures would take the form of suspension of tariff concessions and related obligations under the GATT 1994 by means of the imposition of additional import duties on a list of products imported from the United States, to be defined by Brazil. In addition, Brazil contended that it was not practicable or effective to suspend concessions or other obligations exclusively with respect to the same sector/agreement as that in which the Panel and the Appellate Body have found the violations and that the circumstances are serious enough to justify the suspension of concessions or obligations under other covered agreements. Therefore it affirmed it may, to the extent necessary, resort to countermeasures in the form of suspension of certain obligations under the TRIPS Agreement and the GATS.\nOn 17 October 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement arguing that the countermeasures proposed are not commensurate with the degree and nature of the adverse effects determined to exist within the meaning of Article 7.9 of the SCM Agreement and that the level of suspension proposed is not equivalent to the level of nullification or impairment within the meaning of Article 22.7 of the DSU. With respect to Brazil's request for “cross-retaliation”, the United States claimed that the principles and procedures set forth in Article 22.3 of the DSU have not been followed. At its meeting on 18 October 2005, the DSB referred the matter raised by the United States to arbitration. On 21 November 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 25 August 2008, and following the completion of the compliance proceedings (see above), Brazil requested that the two arbitration proceedings be resumed. At the time that Brazil requested the resumption of the arbitration proceedings, two of the arbitrators had become unavailable to serve in these proceedings. On 1 October 2008, the parties agreed to the replacement arbitrators. On 31 August 2009, the two Decisions by the Arbitrator were circulated to Members.\nWith respect to the “prohibited subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.4 million for FY 2006, or, for subsequent years, an annual amount to be determined by applying a methodology described in the Decision of the Arbitrator. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “actionable subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.3 million annually. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “prohibited subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 4.10 of the SCM Agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nWith respect to the “actionable subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 7.9 of the SCM agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nOn 8 March 2010, Brazil notified the DSB that, starting on 7 April 2010, it would suspend the application to the United States of concessions or other obligations under the GATT 1994 in the form of increased import duties on certain products when they are imported from the United States. However on 30 April 2010, Brazil notified the DSB that it had decided to postpone the imposition of countermeasures vis-à-vis the United States indicating that no countermeasures would enter into force before 21 June 2010, since Brazil and the United States were engaged in a dialogue with a view to reaching a mutually satisfactory solution to the dispute.\n\nImplementation of adopted reports\nOn 25 August 2010, Brazil and the United States notified the DSB they had concluded a Framework for a Mutually Agreed Solution to the Cotton Dispute (Framework) which in itself does not constitute a mutually agreed solution to the dispute but sets out parameters for discussions on a solution with respect to domestic support programs for upland cotton in the United States, as well as a process of joint operation reviews as regards export credit guarantees under the program GSM-102. Brazil and the United States also agreed to hold consultations not less than four times a year, unless they agree otherwise, with the aim of obtaining convergence of views in respect of a solution to the Cotton dispute. The Framework also provides that, upon enactment of successor legislation to the US Food, Conservation and Energy Act of 2008, Brazil and the United States will consult with a view to determining whether a mutually agreed solution to the Cotton dispute has been reached. The joint communication also specified that as long as the Framework is in effect, Brazil will not impose the countermeasures authorized by the DSB.\nAt the DSB meeting on 23 October 2012, Brazil said that on 30 September 2012, the 2008 US Farm Bill had expired without the enactment of a successor legislation. However, taking into account that the current US agricultural support programs remained unchanged, Brazil had decided not to terminate the Memorandum of Understanding and the Framework Agreement and would thus not impose any countermeasures at this time.\nOn 16 October 2014, Brazil and the United States notified the DSB that, in accordance with Article 3.6 of the DSU, they had concluded a Memorandum of Understanding, and agreed that this dispute was terminated. As a result, no suspension of concessions or other obligations pursuant to the authorization previously granted by the DSB shall be applied and no further action shall be taken under Article 21.5 of the DSU based on a disagreement as to the existence or consistency of any measure taken to comply with the DSB recommendations and rulings."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON\n\nRequest by the United States for Arbitration under Article 22.6 of the DSU\n\nand Article 4.11 of the SCM Agreement\n\n The following communication, dated 14 July 2005, from the Delegation of the United States\nto the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 22.6 of the DSU and\nArticle 4.11 of the SCM Agreement.\n\n Regarding the dispute United States - Subsidies on Upland Cotton (WT/DS267), my\nauthorities have instructed me to inform you that, pursuant to Article 4.11 of the Agreement on\nSubsidies and Countervailing Measures (SCM Agreement) and Article 22.6 of the Understanding on\nRules and Procedures Governing the Settlement of Disputes (DSU), the United States of America\nobjects to the appropriateness of the countermeasure s and the level of suspension of concessions or\nother obligations proposed by Brazil in document In the view of the United States,\nthe countermeasures proposed are not appropriate within the meaning of Article 4.10 of the SCM\nAgreement. Further, the level of suspension proposed is not equivalent to th e level of nullification or\nimpairment within the meaning of Article 22.7 of the DSU.\n\n In addition, Brazil has requested authorizati on to suspend concessions or other obligations\nunder another covered agreement pursu ant to Article 22.3(c) of the DSU. Pursuant to Article 22.6 of\nthe DSU, the United States claims that the princi ples and procedures set forth in DSU Article 22.3\nhave not been followed.\n\n Accordingly, as required by Article 22.6 of the DSU (and consequently Article 4.11 of the\nSCM Agreement), \"the matter shall be referred to arbitration.\""},"processing_date":{"kind":"string","value":"2026-03-15T15:46:33.831749"}}},{"rowIdx":3978,"cells":{"folder_number":{"kind":"string","value":"267"},"case_number":{"kind":"string","value":"267"},"original_filename":{"kind":"string","value":"DS267_SEQ80_Request_For_Arbitration_01.pdf"},"new_filename":{"kind":"string","value":"DS267_SEQ80_Request_For_Arbitration_01.pdf"},"doc_sequence":{"kind":"number","value":80,"string":"80"},"doc_type":{"kind":"string","value":"Request_For_Arbitration"},"doc_type_raw":{"kind":"string","value":"Request by the United States for Arbitration under Article 22.6 of the DSU and Article 7.10 of the SCM Agreement"},"doc_class":{"kind":"string","value":"ARBITRATION"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON"},"date":{"kind":"string","value":"18 October 2005"},"header_codes":{"kind":"string","value":"WT/DS267/27"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Brazil']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand']"},"dispute_stage":{"kind":"string","value":"Mutually Agreed Solution"},"agreements_cited":{"kind":"string","value":"Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 30 October 2014\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Brazil.\nOn 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users and/or exporters of upland cotton, as well as legislation, regulations, statutory instruments and amendments thereto providing such subsidies (including export credits), grants, and any other assistance to the US producers, users and exporters of upland cotton (“US upland cotton industry”).\nBrazil contended that these measures were inconsistent with the obligations of the United States under the following provisions: Articles 5(c), 6.3(b), (c) and (d), 3.1(a) (including item (j) of the Illustrative List of Export Subsidies in Annex I), 3.1(b), and 3.2 of the SCM Agreement; Articles 3.3, 7.1, 8, 9.1 and 10.1 of the Agreement on Agriculture; and Article III:4 of GATT 1994. Brazil was of the view that the US statutes, regulations, and administrative procedures listed above were inconsistent with these provisions as such and as applied.\nOn 9 October and 11 October 2002, Zimbabwe and India, respectively, requested to join the consultations. On 14 October 2002, Argentina and Canada requested to join the consultations. The United States informed the DSB that it had accepted the requests of Argentina and India to join the consultations.\nOn 6 February 2003, Brazil requested the establishment of a panel. At its meeting on 19 February 2003, the DSB deferred the establishment of a panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Brazil, the DSB established a Panel at its meeting on 18 March 2003. Argentina, Canada, China, Chinese Taipei, the European Communities, India, Pakistan and Venezuela reserved their third-party rights to participate in the Panel’s proceedings.\nAt that meeting, the Chairman of the DSB announced that he continued to consult with Brazil and the United States on the issue of appointing a DSB representative to facilitate the information-gathering process, pursuant to the Annex V procedures under the SCM Agreement, which had been invoked by Brazil in its panel request. Following a communication from the United States, on 20 March 2003, Brazil indicated, in conformity with paragraph 1 of Annex V, that it considered the following third-county markets as relevant: Argentina, Bangladesh, Colombia, Germany, India, Indonesia, Italy, Portugal, Philippines, Slovenia, South Africa, South Korea, Switzerland, Thailand and Turkey.\nOn 24 March 2003, Benin reserved its third-party rights. On 25 March 2003, Australia reserved its third-party rights. On 26 March 2003, Paraguay reserved its third-party rights. On 28 March 2003, New Zealand reserved its third-party rights. On 4 April 2003, Chad reserved its third-party rights. On 9 May 2003, Brazil requested the Director-General to compose the panel. On 19 May 2003, the Director-General composed the panel.\nOn 17 November 2003, the Chairman of the panel informed the DSB that it would not be able to complete its work in six months due to the complexity of the matter and that the panel expected to issue its final report to the parties in May 2004.\nOn 8 September 2004, the panel report was circulated to Members. The panel found that:\nOn 18 October 2004, the United States notified its intention to appeal certain issues of law and legal interpretations developed by the panel. On 16 December 2004, the Chairman of the Appellate Body informed the DSB that in light of the numerous and complex issues raised in this dispute, the increased burden on the Appellate Body as well as the translation services, the intervening holiday period, and the fact that the Appellate Body expects to be considering two or three other appeals in the coming weeks, the Appellate Body would not be able to circulate its Report by, 17 December 2004. The Chairman stated that the Appellate Body estimated that the Appellate Body report would be circulated no later than 3 March 2005.\nOn 3 March 2005, the Appellate Body report was circulated to Members. The Appellate Body found inter alia as follows:\nA. As regards the applicability of the Peace Clause to this dispute, the Appellate Body:\nB. As regards serious prejudice, the Appellate Body:\nC. As regards user marketing (Step 2) payments, the Appellate Body:\nD. As regards export credit guarantee programs, the Appellate Body:\nAt its meeting on 21 March 2005, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report. The resulting DSB recommendations and rulings include the recommendation that the United States withdraw, by at the latest within six months of the date of adoption of the Panel report by the DSB or 1 July 2005 (whichever is earlier), the following prohibited subsidies: (i) the export credit guarantees under the GSM 102, GSM 103 and SCGP export credit guarantee programmes in respect of exports of upland cotton and other unscheduled agricultural products supported under the programmes, and in respect of one scheduled product (rice); (ii) Section 1207(a) of the Farm Security and Rural Investment (FSRI) Act of 2002 providing for user marketing (STEP2) payments to exporters of upland cotton; and (iii) Section 1207(a) of the FSRI Act of 2002 providing for user marketing (STEP2) payments to domestic users of upland cotton. As for the actionable subsidies the recommendation is that the United States takes appropriate steps to remove the adverse effects of certain subsidies or withdraw these subsidies within six months from the date of adoption of the Panel and Appellate Body reports, i.e. the compliance period expired on 21 September 2005.\n\nCompliance proceedings\nFollowing the suspension of the arbitration proceedings under Article 22.6 triggered by Brazil's request to take countermeasures with respect to the prohibited and actionable subsidies (see below), on 18 August 2006, Brazil requested the establishment of a compliance panel. At its meeting on 1 September 2006, the DSB deferred the establishment of a compliance panel. Further to a second request, at its meeting on 28 September 2006, the DSB agreed, if possible, to refer the matter raised by Brazil to the original panel. Argentina, Australia, Canada, China, the European Communities, India, Japan and New Zealand reserved their third party rights. Subsequently, Chad and Thailand reserved their third party rights. On 18 and 20 October 2006, Brazil and the United States respectively requested the Director-General to compose the compliance panel. On 25 October 2006, the Director-General composed the panel.\nOn 9 January 2007, the Chairman of the panel informed the DSB that given the particular circumstances of this case and the schedule adopted after consultations with parties to this dispute, it had not been possible for the panel to complete its work within the 90-day period as foreseen in Article 21.5. The panel expected to complete its work in July 2007.\nOn 18 December 2007, the compliance panel report was circulated to Members. The Panel found that with respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's finding of inconsistency with Articles 5 and 6 of the SCM Agreement:\nWith respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's findings of inconsistency with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the panel found:\nThe panel also considered that to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding were inconsistent with the objections of the United States under the covered agreements, these recommendations and rulings remain operative.\nOn 12 February 2008, the United States notified its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the panel. On 25 February 2008, Brazil notified its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the compliance panel report. On 11 April 2008, the Chairman of the Appellate Body informed the DSB that it would not be possible to circulate its report within 60 days in light of the numerous and complex issues raised in this appeal, and the increased burden on translation services. It estimated that the Appellate Body report would be issued no later than 2 June 2008.\nOn 2 June 2008, the Appellate Body report was circulated to Members.\nAs regards the scope of the Article 21.5 proceedings, the Appellate Body upheld the Panel's finding that Brazil's claims relating to export credit guarantees for pig meat and poultry meat are properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated had not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred when it found that the measure that is the subject of Brazil's claims is not the revised GSM 102 programme itself.\nThe Appellate Body also upheld the Panel's finding that Brazil's claims against marketing loan and counter-cyclical payments made by the United States after 21 September 2005 were properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated has not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred in finding that the original panel's conclusions and recommendations addressed only the payments made under the marketing loan and counter-cyclical payments programmes, and not the programmes themselves.\nAs regards the revised GSM 102 export credit guarantee programme, the Appellate Body found that the Panel failed to make an objective assessment of the matter, under Article 11 of the DSU, because it dismissed the import of the re-estimates data submitted by the United States on the basis of internally inconsistent reasoning. Consequently, the Appellate Body reversed the Panel's intermediate finding that “the initial subsidy estimates provide a strong indication that GSM 102 export credit guarantees are provided against premia which are inadequate to cover the long-term operating costs and losses of the GSM 102 programme”.\nThe Appellate Body upheld the Panel's finding that “the GSM 102 programme is not designed to cover its long term operating costs and losses” and, albeit for reasons that differ from those of the Panel, the Panel's conclusion that “the GSM 102 export credit guarantee programme constitutes an 'export subsidy' because it is provided against premiums which are inadequate to cover its long term operating costs and losses under the terms of item (j) of the Illustrative List”.\nConsequently, the Appellate Body upheld the Panel's finding that GSM 102 export credit guarantees issued after 1 July 2005 are export subsidies within the meaning of Article 3.1(a) of the SCM Agreement and Article 10.1 of the Agreement on Agriculture; and that regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005 the United States acts inconsistently with Article 10.1 of the Agreement on Agriculture by applying export subsidies in a manner which results in the circumvention of United States' export subsidy commitments with respect to certain unscheduled products and certain scheduled products, and as a result acts inconsistently with Article 8 of the Agreement on Agriculture. Regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005, the Appellate Body also found that the United States also acts inconsistently with Articles 3.1(a) and 3.2 of the SCM Agreement by providing export subsidies to unscheduled products and by providing export subsidies to scheduled products in excess of the commitments of the United States under the Agreement on Agriculture.\nThe Appellate Body further found that, by acting inconsistently with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the United States had failed to comply with the DSB recommendations and rulings and specifically, had failed to bring its measures into conformity with the Agreement on Agriculture and “to withdraw the subsidy without delay”.\nAs regards whether the effect of marketing loan and counter-cyclical payments is significant price suppression, the Appellate Body upheld the panel's findings that the United States acted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter-cyclical payments provided to United States upland cotton producers pursuant to the FSRI Act of 2002 is significant price suppression, within the meaning of Article 6.3(c) of the SCM Agreement, in the world market for upland cotton, constituting “present” serious prejudice to the interests of Brazil within the meaning of Article 5(c) of the SCM Agreement. The Appellate Body also found that, by acting inconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement, the United States had failed to comply with the DSB's recommendations and rulings and, specifically, failed to comply with its obligation under Article 7.8 of the SCM Agreement “to take appropriate steps to remove the adverse effects or ... withdraw the subsidy”.\nThe Appellate Body further found that the Panel did not fail to make an objective assessment of the matter before it, as required by Article 11 of the DSU, in its analysis of Brazil's claim that the effect of the marketing loan and counter-cyclical payments is significant price suppression.\nThe Appellate Body recommended that the DSB request the United States to bring its measures, found to be inconsistent with the Agreement on Agriculture and the SCM Agreement, into conformity with its obligations under those Agreements.\nAt its meeting on 20 June 2008, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 4 July 2005, prior to the initiation of the compliance proceedings (see above), and in respect of the “prohibited subsidies”, Brazil requested, the DSB for authorization to take appropriate countermeasures pursuant to Article 4.10 of the SCM Agreement and to suspend concessions or other obligations pursuant to Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 1 July 2005. Brazil stated it intended to take appropriate countermeasures in the form of the suspension of tariff concessions and related obligations under the GATT 1994 by imposing additional customs duties on a list of products imported from the United States, to be defined by Brazil. In addition, given that it considered that it was not practicable or effective to exclusively apply additional import duties and that it considered that the circumstances were serious enough, Brazil stated it may resort, to the extent necessary, to countermeasures in the form of suspension of certain obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the General Agreement on Trade in Services (GATS).\nWith regard to the prohibited subsidies, on 5 July 2005 the parties to the dispute jointly notified the DSB of “Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement”. On 14 July 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 4.11 of the SCM Agreement challenging the appropriateness of the countermeasures, the proposed level of suspension and asserting that the principles and procedures set forth in Article 22.3 of the DSU had not been followed. At its meeting on 15 July 2005, the DSB referred the matter raised by the United States to arbitration. On 17 August 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 6 October 2005, in respect of the “actionable subsidies” Brazil requested the DSB for authorization to suspend concessions or other obligations under Article 7.9 of the SCM Agreement and Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 21 September 2005. Brazil stated that in principle, these countermeasures would take the form of suspension of tariff concessions and related obligations under the GATT 1994 by means of the imposition of additional import duties on a list of products imported from the United States, to be defined by Brazil. In addition, Brazil contended that it was not practicable or effective to suspend concessions or other obligations exclusively with respect to the same sector/agreement as that in which the Panel and the Appellate Body have found the violations and that the circumstances are serious enough to justify the suspension of concessions or obligations under other covered agreements. Therefore it affirmed it may, to the extent necessary, resort to countermeasures in the form of suspension of certain obligations under the TRIPS Agreement and the GATS.\nOn 17 October 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement arguing that the countermeasures proposed are not commensurate with the degree and nature of the adverse effects determined to exist within the meaning of Article 7.9 of the SCM Agreement and that the level of suspension proposed is not equivalent to the level of nullification or impairment within the meaning of Article 22.7 of the DSU. With respect to Brazil's request for “cross-retaliation”, the United States claimed that the principles and procedures set forth in Article 22.3 of the DSU have not been followed. At its meeting on 18 October 2005, the DSB referred the matter raised by the United States to arbitration. On 21 November 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 25 August 2008, and following the completion of the compliance proceedings (see above), Brazil requested that the two arbitration proceedings be resumed. At the time that Brazil requested the resumption of the arbitration proceedings, two of the arbitrators had become unavailable to serve in these proceedings. On 1 October 2008, the parties agreed to the replacement arbitrators. On 31 August 2009, the two Decisions by the Arbitrator were circulated to Members.\nWith respect to the “prohibited subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.4 million for FY 2006, or, for subsequent years, an annual amount to be determined by applying a methodology described in the Decision of the Arbitrator. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “actionable subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.3 million annually. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “prohibited subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 4.10 of the SCM Agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nWith respect to the “actionable subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 7.9 of the SCM agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nOn 8 March 2010, Brazil notified the DSB that, starting on 7 April 2010, it would suspend the application to the United States of concessions or other obligations under the GATT 1994 in the form of increased import duties on certain products when they are imported from the United States. However on 30 April 2010, Brazil notified the DSB that it had decided to postpone the imposition of countermeasures vis-à-vis the United States indicating that no countermeasures would enter into force before 21 June 2010, since Brazil and the United States were engaged in a dialogue with a view to reaching a mutually satisfactory solution to the dispute.\n\nImplementation of adopted reports\nOn 25 August 2010, Brazil and the United States notified the DSB they had concluded a Framework for a Mutually Agreed Solution to the Cotton Dispute (Framework) which in itself does not constitute a mutually agreed solution to the dispute but sets out parameters for discussions on a solution with respect to domestic support programs for upland cotton in the United States, as well as a process of joint operation reviews as regards export credit guarantees under the program GSM-102. Brazil and the United States also agreed to hold consultations not less than four times a year, unless they agree otherwise, with the aim of obtaining convergence of views in respect of a solution to the Cotton dispute. The Framework also provides that, upon enactment of successor legislation to the US Food, Conservation and Energy Act of 2008, Brazil and the United States will consult with a view to determining whether a mutually agreed solution to the Cotton dispute has been reached. The joint communication also specified that as long as the Framework is in effect, Brazil will not impose the countermeasures authorized by the DSB.\nAt the DSB meeting on 23 October 2012, Brazil said that on 30 September 2012, the 2008 US Farm Bill had expired without the enactment of a successor legislation. However, taking into account that the current US agricultural support programs remained unchanged, Brazil had decided not to terminate the Memorandum of Understanding and the Framework Agreement and would thus not impose any countermeasures at this time.\nOn 16 October 2014, Brazil and the United States notified the DSB that, in accordance with Article 3.6 of the DSU, they had concluded a Memorandum of Understanding, and agreed that this dispute was terminated. As a result, no suspension of concessions or other obligations pursuant to the authorization previously granted by the DSB shall be applied and no further action shall be taken under Article 21.5 of the DSU based on a disagreement as to the existence or consistency of any measure taken to comply with the DSB recommendations and rulings."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON\n\nRequest by the United States for Arbitration under Article 22.6 of the DSU\n\nand Article 7.10 of the SCM Agreement\n\n The following communication, dated 17 Oc tober 2005, from the delegation of the\nUnited States to the Chairman of the Dispute Settleme nt Body, is circulated pursuant to Article 22. 6\nof the DSU and Article 7.10 of the SCM Agreement.\n\n Regarding the dispute (WT/DS267), my\nauthorities have instructed me to inform you that, pursuant to Article 22.6 of the Understanding on\nRules and Procedures Governing the Settlement of Disputes (DSU) and Article 7.10 of the Agreement\non Subsidies and Countervailing Measures (SCM Agreement), the United States of America objects\nto the level of suspension of concessions or othe r obligations and the countermeasures proposed by\nBrazil in document In the view of the United States, the countermeasures proposed\nare not commensurate with the degree and nature of the adverse effects determined to exist within the\nmeaning of Article 7.9 of the SCM Agreement. Fu rther, the level of suspension proposed is not\nequivalent to the level of nullification or impairment within the meaning of Article 22.7 of the DSU.\n\n In addition, Brazil has requested authorizati on to suspend concessions or other obligations\nunder other covered agreemen ts pursuant to Article 22.3(c) of the DSU. Pursuant to Article 22.6 of\nthe DSU, the United States claims that the princi ples and procedures set forth in DSU Article 22.3\nhave not been followed.\n\n Accordingly, as required by Article 22.6 of the DSU (and consequently Article 7.10 of the\nSCM Agreement), \"the matter shall be referred to arbitration\"."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:33.832240"}}},{"rowIdx":3979,"cells":{"folder_number":{"kind":"string","value":"267"},"case_number":{"kind":"string","value":"267"},"original_filename":{"kind":"string","value":"DS267_SEQ81_Arbitration_Award_00.pdf"},"new_filename":{"kind":"string","value":"DS267_SEQ81_Arbitration_Award_00.pdf"},"doc_sequence":{"kind":"number","value":81,"string":"81"},"doc_type":{"kind":"string","value":"Arbitration_Award"},"doc_type_raw":{"kind":"string","value":"Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement DECISION BY THE ARBITRATOR"},"doc_class":{"kind":"string","value":"ARBITRATION"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON"},"date":{"kind":"string","value":"31 August 2009"},"header_codes":{"kind":"string","value":"WT/DS267/ARB/1"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Brazil']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand']"},"dispute_stage":{"kind":"string","value":"Mutually Agreed Solution"},"agreements_cited":{"kind":"string","value":"Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 30 October 2014\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Brazil.\nOn 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users and/or exporters of upland cotton, as well as legislation, regulations, statutory instruments and amendments thereto providing such subsidies (including export credits), grants, and any other assistance to the US producers, users and exporters of upland cotton (“US upland cotton industry”).\nBrazil contended that these measures were inconsistent with the obligations of the United States under the following provisions: Articles 5(c), 6.3(b), (c) and (d), 3.1(a) (including item (j) of the Illustrative List of Export Subsidies in Annex I), 3.1(b), and 3.2 of the SCM Agreement; Articles 3.3, 7.1, 8, 9.1 and 10.1 of the Agreement on Agriculture; and Article III:4 of GATT 1994. Brazil was of the view that the US statutes, regulations, and administrative procedures listed above were inconsistent with these provisions as such and as applied.\nOn 9 October and 11 October 2002, Zimbabwe and India, respectively, requested to join the consultations. On 14 October 2002, Argentina and Canada requested to join the consultations. The United States informed the DSB that it had accepted the requests of Argentina and India to join the consultations.\nOn 6 February 2003, Brazil requested the establishment of a panel. At its meeting on 19 February 2003, the DSB deferred the establishment of a panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Brazil, the DSB established a Panel at its meeting on 18 March 2003. Argentina, Canada, China, Chinese Taipei, the European Communities, India, Pakistan and Venezuela reserved their third-party rights to participate in the Panel’s proceedings.\nAt that meeting, the Chairman of the DSB announced that he continued to consult with Brazil and the United States on the issue of appointing a DSB representative to facilitate the information-gathering process, pursuant to the Annex V procedures under the SCM Agreement, which had been invoked by Brazil in its panel request. Following a communication from the United States, on 20 March 2003, Brazil indicated, in conformity with paragraph 1 of Annex V, that it considered the following third-county markets as relevant: Argentina, Bangladesh, Colombia, Germany, India, Indonesia, Italy, Portugal, Philippines, Slovenia, South Africa, South Korea, Switzerland, Thailand and Turkey.\nOn 24 March 2003, Benin reserved its third-party rights. On 25 March 2003, Australia reserved its third-party rights. On 26 March 2003, Paraguay reserved its third-party rights. On 28 March 2003, New Zealand reserved its third-party rights. On 4 April 2003, Chad reserved its third-party rights. On 9 May 2003, Brazil requested the Director-General to compose the panel. On 19 May 2003, the Director-General composed the panel.\nOn 17 November 2003, the Chairman of the panel informed the DSB that it would not be able to complete its work in six months due to the complexity of the matter and that the panel expected to issue its final report to the parties in May 2004.\nOn 8 September 2004, the panel report was circulated to Members. The panel found that:\nOn 18 October 2004, the United States notified its intention to appeal certain issues of law and legal interpretations developed by the panel. On 16 December 2004, the Chairman of the Appellate Body informed the DSB that in light of the numerous and complex issues raised in this dispute, the increased burden on the Appellate Body as well as the translation services, the intervening holiday period, and the fact that the Appellate Body expects to be considering two or three other appeals in the coming weeks, the Appellate Body would not be able to circulate its Report by, 17 December 2004. The Chairman stated that the Appellate Body estimated that the Appellate Body report would be circulated no later than 3 March 2005.\nOn 3 March 2005, the Appellate Body report was circulated to Members. The Appellate Body found inter alia as follows:\nA. As regards the applicability of the Peace Clause to this dispute, the Appellate Body:\nB. As regards serious prejudice, the Appellate Body:\nC. As regards user marketing (Step 2) payments, the Appellate Body:\nD. As regards export credit guarantee programs, the Appellate Body:\nAt its meeting on 21 March 2005, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report. The resulting DSB recommendations and rulings include the recommendation that the United States withdraw, by at the latest within six months of the date of adoption of the Panel report by the DSB or 1 July 2005 (whichever is earlier), the following prohibited subsidies: (i) the export credit guarantees under the GSM 102, GSM 103 and SCGP export credit guarantee programmes in respect of exports of upland cotton and other unscheduled agricultural products supported under the programmes, and in respect of one scheduled product (rice); (ii) Section 1207(a) of the Farm Security and Rural Investment (FSRI) Act of 2002 providing for user marketing (STEP2) payments to exporters of upland cotton; and (iii) Section 1207(a) of the FSRI Act of 2002 providing for user marketing (STEP2) payments to domestic users of upland cotton. As for the actionable subsidies the recommendation is that the United States takes appropriate steps to remove the adverse effects of certain subsidies or withdraw these subsidies within six months from the date of adoption of the Panel and Appellate Body reports, i.e. the compliance period expired on 21 September 2005.\n\nCompliance proceedings\nFollowing the suspension of the arbitration proceedings under Article 22.6 triggered by Brazil's request to take countermeasures with respect to the prohibited and actionable subsidies (see below), on 18 August 2006, Brazil requested the establishment of a compliance panel. At its meeting on 1 September 2006, the DSB deferred the establishment of a compliance panel. Further to a second request, at its meeting on 28 September 2006, the DSB agreed, if possible, to refer the matter raised by Brazil to the original panel. Argentina, Australia, Canada, China, the European Communities, India, Japan and New Zealand reserved their third party rights. Subsequently, Chad and Thailand reserved their third party rights. On 18 and 20 October 2006, Brazil and the United States respectively requested the Director-General to compose the compliance panel. On 25 October 2006, the Director-General composed the panel.\nOn 9 January 2007, the Chairman of the panel informed the DSB that given the particular circumstances of this case and the schedule adopted after consultations with parties to this dispute, it had not been possible for the panel to complete its work within the 90-day period as foreseen in Article 21.5. The panel expected to complete its work in July 2007.\nOn 18 December 2007, the compliance panel report was circulated to Members. The Panel found that with respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's finding of inconsistency with Articles 5 and 6 of the SCM Agreement:\nWith respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's findings of inconsistency with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the panel found:\nThe panel also considered that to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding were inconsistent with the objections of the United States under the covered agreements, these recommendations and rulings remain operative.\nOn 12 February 2008, the United States notified its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the panel. On 25 February 2008, Brazil notified its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the compliance panel report. On 11 April 2008, the Chairman of the Appellate Body informed the DSB that it would not be possible to circulate its report within 60 days in light of the numerous and complex issues raised in this appeal, and the increased burden on translation services. It estimated that the Appellate Body report would be issued no later than 2 June 2008.\nOn 2 June 2008, the Appellate Body report was circulated to Members.\nAs regards the scope of the Article 21.5 proceedings, the Appellate Body upheld the Panel's finding that Brazil's claims relating to export credit guarantees for pig meat and poultry meat are properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated had not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred when it found that the measure that is the subject of Brazil's claims is not the revised GSM 102 programme itself.\nThe Appellate Body also upheld the Panel's finding that Brazil's claims against marketing loan and counter-cyclical payments made by the United States after 21 September 2005 were properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated has not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred in finding that the original panel's conclusions and recommendations addressed only the payments made under the marketing loan and counter-cyclical payments programmes, and not the programmes themselves.\nAs regards the revised GSM 102 export credit guarantee programme, the Appellate Body found that the Panel failed to make an objective assessment of the matter, under Article 11 of the DSU, because it dismissed the import of the re-estimates data submitted by the United States on the basis of internally inconsistent reasoning. Consequently, the Appellate Body reversed the Panel's intermediate finding that “the initial subsidy estimates provide a strong indication that GSM 102 export credit guarantees are provided against premia which are inadequate to cover the long-term operating costs and losses of the GSM 102 programme”.\nThe Appellate Body upheld the Panel's finding that “the GSM 102 programme is not designed to cover its long term operating costs and losses” and, albeit for reasons that differ from those of the Panel, the Panel's conclusion that “the GSM 102 export credit guarantee programme constitutes an 'export subsidy' because it is provided against premiums which are inadequate to cover its long term operating costs and losses under the terms of item (j) of the Illustrative List”.\nConsequently, the Appellate Body upheld the Panel's finding that GSM 102 export credit guarantees issued after 1 July 2005 are export subsidies within the meaning of Article 3.1(a) of the SCM Agreement and Article 10.1 of the Agreement on Agriculture; and that regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005 the United States acts inconsistently with Article 10.1 of the Agreement on Agriculture by applying export subsidies in a manner which results in the circumvention of United States' export subsidy commitments with respect to certain unscheduled products and certain scheduled products, and as a result acts inconsistently with Article 8 of the Agreement on Agriculture. Regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005, the Appellate Body also found that the United States also acts inconsistently with Articles 3.1(a) and 3.2 of the SCM Agreement by providing export subsidies to unscheduled products and by providing export subsidies to scheduled products in excess of the commitments of the United States under the Agreement on Agriculture.\nThe Appellate Body further found that, by acting inconsistently with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the United States had failed to comply with the DSB recommendations and rulings and specifically, had failed to bring its measures into conformity with the Agreement on Agriculture and “to withdraw the subsidy without delay”.\nAs regards whether the effect of marketing loan and counter-cyclical payments is significant price suppression, the Appellate Body upheld the panel's findings that the United States acted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter-cyclical payments provided to United States upland cotton producers pursuant to the FSRI Act of 2002 is significant price suppression, within the meaning of Article 6.3(c) of the SCM Agreement, in the world market for upland cotton, constituting “present” serious prejudice to the interests of Brazil within the meaning of Article 5(c) of the SCM Agreement. The Appellate Body also found that, by acting inconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement, the United States had failed to comply with the DSB's recommendations and rulings and, specifically, failed to comply with its obligation under Article 7.8 of the SCM Agreement “to take appropriate steps to remove the adverse effects or ... withdraw the subsidy”.\nThe Appellate Body further found that the Panel did not fail to make an objective assessment of the matter before it, as required by Article 11 of the DSU, in its analysis of Brazil's claim that the effect of the marketing loan and counter-cyclical payments is significant price suppression.\nThe Appellate Body recommended that the DSB request the United States to bring its measures, found to be inconsistent with the Agreement on Agriculture and the SCM Agreement, into conformity with its obligations under those Agreements.\nAt its meeting on 20 June 2008, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 4 July 2005, prior to the initiation of the compliance proceedings (see above), and in respect of the “prohibited subsidies”, Brazil requested, the DSB for authorization to take appropriate countermeasures pursuant to Article 4.10 of the SCM Agreement and to suspend concessions or other obligations pursuant to Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 1 July 2005. Brazil stated it intended to take appropriate countermeasures in the form of the suspension of tariff concessions and related obligations under the GATT 1994 by imposing additional customs duties on a list of products imported from the United States, to be defined by Brazil. In addition, given that it considered that it was not practicable or effective to exclusively apply additional import duties and that it considered that the circumstances were serious enough, Brazil stated it may resort, to the extent necessary, to countermeasures in the form of suspension of certain obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the General Agreement on Trade in Services (GATS).\nWith regard to the prohibited subsidies, on 5 July 2005 the parties to the dispute jointly notified the DSB of “Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement”. On 14 July 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 4.11 of the SCM Agreement challenging the appropriateness of the countermeasures, the proposed level of suspension and asserting that the principles and procedures set forth in Article 22.3 of the DSU had not been followed. At its meeting on 15 July 2005, the DSB referred the matter raised by the United States to arbitration. On 17 August 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 6 October 2005, in respect of the “actionable subsidies” Brazil requested the DSB for authorization to suspend concessions or other obligations under Article 7.9 of the SCM Agreement and Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 21 September 2005. Brazil stated that in principle, these countermeasures would take the form of suspension of tariff concessions and related obligations under the GATT 1994 by means of the imposition of additional import duties on a list of products imported from the United States, to be defined by Brazil. In addition, Brazil contended that it was not practicable or effective to suspend concessions or other obligations exclusively with respect to the same sector/agreement as that in which the Panel and the Appellate Body have found the violations and that the circumstances are serious enough to justify the suspension of concessions or obligations under other covered agreements. Therefore it affirmed it may, to the extent necessary, resort to countermeasures in the form of suspension of certain obligations under the TRIPS Agreement and the GATS.\nOn 17 October 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement arguing that the countermeasures proposed are not commensurate with the degree and nature of the adverse effects determined to exist within the meaning of Article 7.9 of the SCM Agreement and that the level of suspension proposed is not equivalent to the level of nullification or impairment within the meaning of Article 22.7 of the DSU. With respect to Brazil's request for “cross-retaliation”, the United States claimed that the principles and procedures set forth in Article 22.3 of the DSU have not been followed. At its meeting on 18 October 2005, the DSB referred the matter raised by the United States to arbitration. On 21 November 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 25 August 2008, and following the completion of the compliance proceedings (see above), Brazil requested that the two arbitration proceedings be resumed. At the time that Brazil requested the resumption of the arbitration proceedings, two of the arbitrators had become unavailable to serve in these proceedings. On 1 October 2008, the parties agreed to the replacement arbitrators. On 31 August 2009, the two Decisions by the Arbitrator were circulated to Members.\nWith respect to the “prohibited subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.4 million for FY 2006, or, for subsequent years, an annual amount to be determined by applying a methodology described in the Decision of the Arbitrator. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “actionable subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.3 million annually. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “prohibited subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 4.10 of the SCM Agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nWith respect to the “actionable subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 7.9 of the SCM agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nOn 8 March 2010, Brazil notified the DSB that, starting on 7 April 2010, it would suspend the application to the United States of concessions or other obligations under the GATT 1994 in the form of increased import duties on certain products when they are imported from the United States. However on 30 April 2010, Brazil notified the DSB that it had decided to postpone the imposition of countermeasures vis-à-vis the United States indicating that no countermeasures would enter into force before 21 June 2010, since Brazil and the United States were engaged in a dialogue with a view to reaching a mutually satisfactory solution to the dispute.\n\nImplementation of adopted reports\nOn 25 August 2010, Brazil and the United States notified the DSB they had concluded a Framework for a Mutually Agreed Solution to the Cotton Dispute (Framework) which in itself does not constitute a mutually agreed solution to the dispute but sets out parameters for discussions on a solution with respect to domestic support programs for upland cotton in the United States, as well as a process of joint operation reviews as regards export credit guarantees under the program GSM-102. Brazil and the United States also agreed to hold consultations not less than four times a year, unless they agree otherwise, with the aim of obtaining convergence of views in respect of a solution to the Cotton dispute. The Framework also provides that, upon enactment of successor legislation to the US Food, Conservation and Energy Act of 2008, Brazil and the United States will consult with a view to determining whether a mutually agreed solution to the Cotton dispute has been reached. The joint communication also specified that as long as the Framework is in effect, Brazil will not impose the countermeasures authorized by the DSB.\nAt the DSB meeting on 23 October 2012, Brazil said that on 30 September 2012, the 2008 US Farm Bill had expired without the enactment of a successor legislation. However, taking into account that the current US agricultural support programs remained unchanged, Brazil had decided not to terminate the Memorandum of Understanding and the Framework Agreement and would thus not impose any countermeasures at this time.\nOn 16 October 2014, Brazil and the United States notified the DSB that, in accordance with Article 3.6 of the DSU, they had concluded a Memorandum of Understanding, and agreed that this dispute was terminated. As a result, no suspension of concessions or other obligations pursuant to the authorization previously granted by the DSB shall be applied and no further action shall be taken under Article 21.5 of the DSU based on a disagreement as to the existence or consistency of any measure taken to comply with the DSB recommendations and rulings."},"page_count":{"kind":"number","value":152,"string":"152"},"clean_text":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON\n\nRecourse to Arbitration by the United States\nunder Article 22.6 of the DSU\nand Article 4.11 of the SCM Agreement\n\nDECISION BY THE ARBITRATOR\n\nI. INTRODUCTION\nA. INITIAL PROCEEDINGS\n1.1 On 21 March 2005, the Dispute Settlement Body (\"DSB\") adopted the Appellate Body report1\nand the report of the Panel in this case2, as modified by the Appellate Body.\n1.2 The Appellate Body upheld the conclusions of th e panel that the Step 2 payments made to\ndomestic users and those made to exporters were subsidies within the meaning of Article 3.1(b) of the\nSCM Agreement (in the case of the former) and Article 3.1(a) of the same Agreement (in the case of\nthe latter), and were prohibited by those provi sions respectively and granted and maintained\ninconsistently with Article 3 of that Agreement. The Appellate Body also upheld the Panel's findings\nthat the export credit guarantee programmes at i ssue, i.e. GSM 102, GSM 103 and SCGP, constituted\nper se export subsidies within the meaning of Item (j) of the Illustrative List of Export Subsidies in\nAnnex I of the SCM Agreement and therefore were subsidies incons istent with Article 3.1(a) and 3.2\nof the SCM Agreement. The Appellate Body also upheld the Panel's conclusion that the effect of\nmarketing loan programme payments, Step 2 paym ents, market loss assistance payments and counter-\ncyclical payments (the \"price-contingent subsid ies\") was significant price suppression in the same\nworld market within the meaning of Article 6.3 (c) of the SCM Agreement.3\n1.3 As recommended by the original panel under Article 4.7 of the SCM Agreement, the\ncompliance period for the prohibited subsidies expired on 1 July 2005. In accordance with Article 7.9\nof the SCM Agreement, the compliance period for the actiona ble subsidies expired on 21 September\n2005, six months after the date on which the DSB adopted the Appellate Body report.4\n1.4 On 30 June 2005, the United States Department of Agriculture (the \"USDA\") announced that\nthe United States Commodity Credit Corporation (the \"CCC\") would no longer accept applications for\nexport credit guarantees under the GSM 103 programme. 5 The USDA also announced that the CCC\nwould use a new fee structure for the GSM 102 and SCGP programmes.6\n1.5 In October 2005, the CCC ceased issuing export credit guarantees under the SCGP.7\n1.6 On 1 February 2006, United States Congress adopted legislation repealing the Step 2\npayments programme for upland cotton effective as of 1 August 2006.8\n\n1 Appellate Body Report, , WT/DS267/AB/R (hereafter the\n\"Appellate Body Report\").\n2 Panel Report, , WT/DS267/R (herea fter the \"Panel\nReport\").\n3 See Appellate Body Report, para. 763 (c), (d) and (e).\n4 See WT/DS267/21, WT/DS267/26.\n5 See Panel Report, para. 3.16 (referring to \"USDA announces changes to export credit guarantee\nprograms to comply with WTO findings\", USDA Fore ign Agricultural Service (FAS) Online News Release\nof 30 June 2005 (Exhibit Bra-502 submitted by Brazil to the Panel); and \"Notice to GSM-103 Program\nParticipants\", USDA FAS Program Announcement of 30 June 2005 (Exhibit Bra-503 submitted by Brazil to the\nPanel)).\n6 See Panel Report, para. 3.16.\n7 See ibid. (referring to United States' first written submission to the Panel, para. 20, and \"Summary of\nFY 2006 Export Credit Guarantee Programme Activity fo r GSM-102 as of close of business: 9/30/2006\"\n(Exhibit Bra-513 submitted by Brazil to the Panel)).\n8 See Panel Report, para. 3.7 (referring to Section 1103 of the Deficit Reduction Act of 2005, Public\nLaw No. 109-171 (Exhibit Bra-435 submitted by Brazil to the Panel)).\n\n1.7 On 18 August 2006, Brazil requested the establishm ent of a panel pursuant to Article 21.5 of\nthe Dispute Settlement Understanding (\"DSU\") concer ning the alleged failure of the United States to\nimplement the recommendations and rulings of the DSB. 9 At its meeting of 28 September 2006 the\nDSB decided, in accordance with Article 21.5 of the DSU, to refer this matter, if possible, to the\noriginal Panel. The compliance panel report was circulated to Members on 18 December 2007.\n1.8 With respect to the export credit guarantees issued under the revised GSM 102 programme\nafter 1 July 2005, the compliance panel found that the United States had failed to comply with the\nDSB recommendations and rulings by acting inc onsistently with Articles 10.1 and 8 of the Agreement\non Agriculture and Article 3.1(a) and 3.2 of the SCM Agreement:\n\"Regarding GSM 102 export credit guarantees issued after 1 July 2005 the\nUnited States acts inconsistently with Article 10.1 of the Agreement on Agriculture\nby applying export subsidies in a manner which results in the circumvention of\nUS export subsidy commitments with resp ect to certain unscheduled products and\ncertain scheduled products, and as a result act s inconsistently with Article 8 of the\nAgreement on Agriculture. Regarding GSM 102 export credit guarantees issued after\n1 July 2005 the United States also acts incons istently with Article 3.1(a) and 3.2 of\nthe SCM Agreement by providing export subsidies to unscheduled products and by\nproviding export subsidies to scheduled products in excess of the commitments of the\nUnited States under the Agreement on Agriculture . By acting inconsistently with\nArticles 10.1 and 8 of the Agreement on Agriculture and Article 3.1(a) and 3.2 of the\nSCM Agreement the United States has failed to comply with the DSB\nrecommendations and rulings. Specifically, the United States has failed to bring its\nmeasures into conformity with the Agreement on Agriculture and has failed 'to\nwithdraw the subsidy without delay'.\"\n10\n1.9 The compliance panel concluded that \"to th e extent that the measures taken by the\nUnited States to comply with the recommendations and rulings adopted by the DSB in the original\nproceeding are inconsistent with the obligations of the United States under the covered agreements,\nthese recommendations and rulings remain operative.\"11\n1.10 On 12 February 2008, the United States notified the DSB of its intention to appeal certain\nissues of law covered in the Report of the comp liance panel and certain legal interpretations\ndeveloped by the panel and filed a Notice of Appeal. 12 On 25 February 2008, Brazil notified the\nDSB, pursuant to Article 16.4 of the DSU, of its in tention to appeal certain issues of law covered in\nthe Report of the compliance panel and certain legal interpretations developed by the Panel and filed a\nNotice of Other Appeal.13\n1.11 The Appellate Body report was circulated on 2 June 2008. The Appellate Body upheld the\ncompliance panel's conclusions with respect to the marketing loan and counte r-cyclical payments as\nwell as the conclusions on the GSM 102 export credit guarantees issued under the revised GSM 102\nprogramme.14\n\n9 WT/DS267/30.\n10 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 15.1(c). (original footnotes omitted).\n11 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 15.2.\n12 WT/DS267/33.\n13 WT/DS267/34.\n14 Although the Appellate Body found that the compliance panel failed to make an objective\nassessment of the revised GSM 102 programme pursuant to item (j) of the Illustrative List by not considering\ncertain re-estimated data submitted by the United States , it also found that this did not affect the compliance\npanel's conclusion on the revised GSM 102 programme payments.\n\n1.12 The DSB adopted the Appellate Body report a nd the compliance panel report as modified by\nthe Appellate Body on 20 June 2008.\nB. REQUEST FOR ARBITRATION AND ARBITRATION PROCEEDINGS\n1.13 On 4 July 2005, Brazil notified the DSB of its \"Recourse to Article 4.10 of the\nSCM Agreement and Article 22.2 of the DSU\" with respect to the prohibited subsidies found to be\ninconsistent by the original Panel and the Appellate Body. 15 These prohibited subsidies were\nidentified as follows: (i) the export credit guarantees under the GSM 102, GSM 103 and SCGP\nexport credit guarantee programmes in respect of exports of upland cotton and other unscheduled\nagricultural products supported under the programmes, and in respect of one scheduled product (rice);\n(ii) Section 1207(a) of the Farm Security and Rura l Investment (FSRI) Act of 2002 providing for user\nmarketing (Step 2) payments to e xporters of upland cotton; and (iii ) Section 1207(a) of the FSRI Act\nof 2002 providing for user marketing (Step 2) pa yments to domestic users of upland cotton. Brazil\nrequested an authorization to take appropriate countermeasures in the amount corresponding: (i) to\nthe Step 2 payments made in the most recent concl uded marketing year; and (ii) to the total amount of\nexporter applications received under GSM 102, GSM 103, and SCGP fo r the most recent concluded\nfiscal year. Brazil also requested cross-sector susp ension of obligations under the TRIPS Agreement\nand the GATS pursuant to Article 22.3(c) of the DSU.\n1.14 On 5 July 2005, Brazil and the United States notified \"Agreed Procedures under Articles 21\nand 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement in the follow-up\nto the dispute\" (\"Agreed Procedures\") to the DSB.16\n1.15 On 14 July 2005, the United States notified the DSB of its objection \"to the appropriateness\nof the countermeasures and the level of suspension of concessions or other obligations proposed by\nBrazil\". The United States also claimed that the pr inciples and procedures set forth in Article 22.3(c)\nof the DSU for requesting cross-sector suspensi on of concessions and obli gations had not been\nfollowed by Brazil.17\n1.16 On 15 July 2005, at the meeting of the DSB, it was agreed that the matter raised by the\nUnited States in WT/DS267/23 was referred to arb itration as required by Article 22.6 of the DSU and\nArticle 4.11 of the SCM Agreement. The Arbitrator was constituted on 19 July 2005. It was\ncomposed of the members of the original Panel, namely Mr Darius Rosati as Chairman, and Mr Mario\nMatus and Mr Daniel Moulis as Members.18\n1.17 On 17 August 2005, the United States and Brazil jointly requested suspension of the\narbitration proceedings according to their \"Agr eed Procedures\" until Brazil might subsequently\nrequest the resumption or termination of the Arbitr ation. The Arbitrator suspended the arbitration\nproceedings on 18 August 2005.19\n1.18 On 6 October 2005, Brazil notified to the DSB its \"Recourse to Article 7.9 of the\nSCM Agreement and Article 22.2 of the DSU by Brazil\" with respect to the actionable subsidies found\nto be inconsistent by the original panel and th e Appellate Body. The subsidies in question were\nidentified as marketing loan programme payments, u ser marketing (Step 2) payments, market loss\nassistance payments and counter-cyclical paymen ts. Brazil requested the DSB to grant Brazil\nauthorization to take countermeasures in the annual amount of US$1.037 billion until the\n\n15 WT/DS267/21.\n16 See WT/DS267/22.\n17 See WT/DS267/23.\n18 See WT/DS267/24.\n19 WT/DS267/25.\n\nUnited States withdrew the relevant subsidies or re moved their adverse effects. Brazil also requested\ncross-sector suspension of obligations under the TRIPS Agreement and the GATS pursuant to\nArticle 22.3(c) of the DSU.20\n1.19 On 17 October 2005, the United States notified to the DSB its objection to the level of\nsuspension of concessions or other obligations a nd the countermeasures proposed by Brazil. The\nUnited States contended that the countermeasures proposed were not commensurate with the degree\nand nature of the adverse effects determined to exist within the meaning of Article 7.9 of the\nSCM Agreement. Further, the United States contended that the level of suspension proposed was not\nequivalent to the level of nullifica tion or impairment within the meaning of Article 22.7 of the DSU.\nThe United States also claimed that the principles a nd procedures set forth in Article 22.3(c) of the\nDSU had not been followed by Brazil in reques ting cross-sector suspension of concessions and\nobligations.21\n1.20 On 18 October 2005, at the meeting of the DSB, it was agreed that the matter raised by the\nUnited States was referred to arbitration. On 18 November 2005, the Arbitrator was constituted. It\nwas composed of the members of the original Panel, namely Mr Darius Rosati as Chairman, and\nMr Mario Matus and Mr Daniel Moulis as Members.\n22\n1.21 On 21 November 2005, Brazil and the United States jointly notified the Arbitrator of their\nrequest that the arbitration proceedings be suspende d until either party were to subsequently request\ntheir resumption. The Arbitrator suspended the arbitration proceedings on 7 December 2005.23\n1.22 On 25 August 2008, Brazil notified a request of resumption of these arbitration proceedings\n(in relation to prohibited subsidies) and also the resumption of the other arbitration proceedings (in\nrelation to actionable subsidies).24\n1.23 On 1 October 2008, due to the unavailability of two members of the Arbitrator upon\nresumption of the proceedings, the parties agreed on the following composition of the Arbitrator for\nboth proceedings:\n Mr Eduardo Pérez-Motta, as Chairman\n Mr Alan Matthews\n Mr Daniel Moulis 25\n\n1.24 An organizational meeting was held on 24 Oc tober 2008 to discuss the proposed working\nprocedures and timetables for both arbitration pr oceedings. The final working procedures and\ntimetables were sent to the parties on 29 October 2 008. Brazil requested a further extension of the\ndeadline for its written submission on 31 October 2008. The Arbitrator, after considering the\narguments of both parties in relation to Brazil's re quest, revised the timetables and sent them to the\nparties on 19 November 2008.\n1.25 On 31 October 2008, Brazil submitted its Met hodology Paper for the calculation of the\nproposed countermeasures. The United States pr ovided a written submission on 9 December 2008.\nBrazil provided its written submissi on on 13 January 2009. The Arbitr ator sent written questions to\n\n20 See WT/DS267/26.\n21 See WT/DS267/27.\n22 See WT/DS267/28.\n23 See WT/DS267/29.\n24 See WT/DS267/38, WT/DS267/39.\n25 See WT/DS267/24/Add.1, WT/DS267/28/Add.1.\n\nthe parties on 30 January 2009. The parties provided their replies to these questions on\n13 February 2009.\n1.26 The Arbitrator met with the parties on 3 March 20 09. After the meeting, the Arbitrator posed\nadditional written questions to the parties on 6 March 2009 and received their written responses on\n20 March 2009. The parties also provided th eir comments on each other's written responses to\nquestions from the Arbitrator on 31 March 2009. On 20 April 2009, the Arbitrator informed the\nparties that in light of the voluminous materials re ceived from parties after the meeting with parties,\nand also taking into account the time needed for tran slation of the reports into the other two working\nlanguages, the issuance date of the Arbitrator's Deci sion was delayed. The Arbitrator asked the\nparties an additional question on 11 June 2009. On 30 June and 5 August 2009, the Arbitrator\ninformed the parties of further delays in the ci rculation of the Decision. The Decision by the\nArbitrator was circulated on 31 August 2009.\nC. ORGANIZATION OF THE PROCEEDINGS AND PRESENTATION OF THE DECISION\n1.27 As described above, two separate arbitrati on proceedings were initiated pursuant to\nArticle 22.6 of the DSU in this dispute, one in re lation to the prohibited subsidies at issue in the\nunderlying proceedings, and the other in relation to the actionable subsidies. These proceedings were\nconducted in parallel and the same persons served as arbitrators in both proceedings. The parties\npresented single submissions in relation to both proceedings.\n1.28 The Arbitrator therefore sought the views of the parties whether it should issue a single\ndecision or two decisions for both proceedings and how it should treat the arguments presented in the\nparties' single submissions.\n1.29 The United States indicates that there are two arbitration requests and two arbitrations, and\nthat it therefore expects the Arbitrator to issue a separate decision for each of the two arbitrations.\nWith respect to the use of submissions, the United States indicates that the sections of the submissions\nthat are not clearly related to prohibited subsidies or to actionable subsidies may be relevant to either\nproceeding.26 Brazil on the other hand argues that the two proceedings should be harmonized as\nmuch as possible and considers that a single decision would be sufficient for the two arbitrations.\nAlso, Brazil has no objection to the Arbitrator taki ng into account arguments made in the entirety of\nBrazil's submissions for the purpose of rendering decisions in either proceeding.\n27\n1.30 With respect to the treatment of the parties' submissions, the Arbitrator notes that although\neach party submitted a single written submission, th e sections on prohibited subsidies are separate\nfrom the sections on actionable subsidies. It is therefore generally possible to distinguish the\narguments relating to the proposed countermeasures against the prohibited subsidies at issue, from\nthose relating to countermeasures against the actionable subsidies. In addition, some sections of the\nsubmissions, such as the introduction and the sections on cross-retaliation, may be relevant to both\nproceedings. The Arbitrator will therefore refer to such arguments in this Decision as appropriate.\n1.31 With respect to the presentation of its Decisi on, the Arbitrator notes that the United States\npresented two distinct objections to the two distinct requests for countermeasures presented by Brazil.\nAlthough the conduct of the two pr oceedings was harmonized and the parties both provided a single\nwritten submission covering both the prohibited and actionable subsidies at issue, the fact remains that\nthere are two arbitration proceedings, and that the proceedings against prohibited subsidies are based\non Article 4.10 of the SCM Agreement whereas the proceedings relating to the actionable subsidies in\nthe same dispute are based on Article 7.9 of the SCM Agreement. Under these circumstances, and in\n\n26 US responses to questions from the Arbitrator, question 2.\n27 Brazil's responses to questions from the Arbitrator, question 2.\n\nthe absence of an agreement of the parties on th e issuance of a single decision, the Arbitrator\nconsidered it appropriate to issue a separate decision with respect to each of the two proceedings.\nD. TREATMENT OF CONFIDENTIAL INFORMATION\n1.32 The United States designated one figure in dou ble brackets as confidential information in\nfootnote 204 of its written submission. Another fi gure in footnote 67 relating to its response to the\nArbitrator's question was designated in the same ma nner. It requests the Arbitrator to treat such\ndesignated information as confidential and not to be disclosed to the public. 28 In response to a\nquestion from the Arbitrator, Brazil argues that Article 18.2 of the DSU is sufficient to deal with the\nissue of treatment of confidential information during the proceedings.29\n1.33 The Arbitrator recalls that its Working Proce dures provide that \"[t]he deliberations of the\nArbitrator and the documents submitted to it shall be kept confidential. This is without prejudice to\nthe parties' disclosure of statements of their own positions to the public\". The Working Procedures of\nthe Arbitrator also provide that \"[t]he Arbitrator will follow the normal working procedures of the\nDSU where relevant and as adapted to the circumst ances of the present proceedings\". The parties did\nnot raise the issue of submission of confidential information during the organizational meeting.\nHowever, Article 18.2 of the DSU provides \"Me mbers shall treat as confidential information\nsubmitted by another Member to the panel or the Appellate Body which that Member has designated\nas confidential.\" The Arbitrator considers that th e same rule also applies to these arbitration\nproceedings. Therefore Members shall treat the information designated by the United States as\nconfidential, and are under an obligation not to discl ose it to anyone not involved in the proceedings.\nThe Arbitrator is also under an obligation not to disclose such confidential information in its\nDecisions. Ultimately, the Arbitrator did not find it necessary to refer to this information in its\nDecisions.\nII. OVERALL APPROACH OF THE ARBITRATOR\n2.1 The United States has initiated these proceedings pursuant to Article 22.6 of the DSU and\nArticle 4.11 of the SCM Agreement.\n2.2 Article 22.6 of the DSU provides in relevant part:\n\"When the situation described in paragraph 2 occurs, the DSB, upon request, shall\ngrant authorization to suspend concessions or other obligations within 30 days of the\nexpiry of the reasonable period of time unl ess the DSB decides by consensus to reject\nthe request. However, if the Member con cerned objects to the level of suspension\nproposed, or claims that the principles and procedures set forth in paragraph 3 have\nnot been followed where a complaining pa rty requested authorization to suspend\nconcessions or other obligations pursuant to pa ragraph 3(b) or (c), the matter shall be\nreferred to arbitration. Such arbitration sha ll be carried out by the original panel, if\nmembers are available, or by an arbitrat or appointed by the Director-General and\nshall be completed within 60 days after the date of expiry of the reasonable period of\ntime.\"\n2.3 With regard to countermeasures taken in r esponse to violations of Article 3.1 of the\nSCM Agreement, Article 4.11 of that Agreement provides the following mandate for the arbitrator:\n\n28 US responses to questions from the Arbitrator, question 1.\n29 Brazil's responses to questions from the Arbitrator, question 1.\n\n\"In the event a party to the dispute requests arbitration under paragraph 6 of\nArticle 22 of the Dispute Settlement Unde rstanding ('DSU'), the arbitrator shall\ndetermine whether the countermeasures are appropriate.\"10\n(original footnote) 10 This expression is not meant to allow countermeasures that would be\ndisproportionate in light of the fact that the subsidies dealt with under these provisions are\nprohibited.\n2.4 In this proceeding, the United States challeng es two distinct aspects of Brazil's proposed\ncountermeasures. The United States objects first to the level of suspension of concessions or other\nobligations and the countermeasures proposed by Brazil. In addition, the United States claims that the\nprinciples and procedures set forth in Article 22.3 of the DSU have not been followed by Brazil and\ntherefore the United States requests the Arbitrator to reject Brazil's request to suspend concessions\nwith respect to TRIPS and GATS. 30 We will therefore consider these two aspects in turn. In light of\nthe fact that our determination in relation to the level of the proposed countermeasures may have an\nimpact on our determination in relation to the form of countermeasures to be taken, we consider first\nthe level of the proposed countermeasures.\n2.5 Brazil's requested level of countermeasures, as e xpressed in its request to the DSB, involved\ntwo distinct amounts: an amount corresponding to \"t he Step 2 payments made in the most recent\nconcluded marketing year\" and an amount corres ponding to \"the total of exporter applications\nreceived under GSM 102, GSM 103, and SCGP for the most recent concluded fiscal year\".\n2.6 In its Methodology Paper, Brazil subsequent ly limited its request to: (i) one-time\ncountermeasures in relation to the Step 2 programme, in the amount of the disbursements made by the\nUnited States in Marketing Year (\"MY\") 2005, which is US$350 million in total 31, and (ii)\ncountermeasures proportionate to the annual amount of prohibited GSM 102 export credit guarantees\nissued for export transactions involving unscheduled products, rice, pig meat and poultry meat, which\namounts to US$1.294 billion for fiscal year (\"FY\") 2006. We therefore consider Brazil's requested\nlevel of countermeasures relating to these two measures in turn.\nIII. BRAZIL'S PROPOSED LEVEL OF COUNTERMEASURES IN RELATION TO\nSTEP 2\n3.1 In its request to the DSB, with respect to the Step 2 programme, Brazil indicated that it sought\ncountermeasures in an amount corresponding to the Step 2 payments made in the most recent\nconcluded marketing year.\n3.2 In its methodology paper, Brazil further expl ains that it seeks one-time countermeasures in\nrelation to the Step 2 programme, in the amount of the disbursements made by the United States in\nMarketing Year (\"MY\") 2005, wh ich is US$350 million in total.\n32 These countermeasures, Brazil\nexplains, relate to the payments made in the peri od from 1 July 2005, when the United States should\nhave withdrawn the subsidies at issue, to 30 July 2006, when the United States repealed the Step 2\nprogramme.\n3.3 The United States considers, however, that there is no longer any basis for Brazil to impose a\ncountermeasure based on past payments under Step 2 programmes because the Step 2 measure was\nterminated as of August 2006 and because the co mpliance panel did not make any findings on the\nStep 2 measure.33 The United States also argues that the DSU and the SCM Agreement require that no\n\n30 WT/DS267/23.\n33 US written submission, paras. 226-227.\n\ncountermeasure be imposed with respect to the Step 2 subsidy, because there is no disagreement that\nthe United States has complied with the rulings and recommendations of the DSB in relation to Step 2\npayments.34\n3.4 We must therefore consider first the legal basis for Brazil to seek \"one-time\" countermeasures\nin relation to the failure by the United States to comply with the recommendations and rulings of the\nDSB between 1 July 2005 and 31 July 2006, befo re considering the proposed level of such\ncountermeasures.\nA. IS BRAZIL ENTITLED TO SEEK \"ONE-TIME\" COUNTERMEASURES IN RELATION TO THE FAILURE\nBY THE UNITED STATES TO WITHDRAW THE STEP 2 PAYMENTS BETWEEN 1 JULY 2005 AND\n31 JULY 2006?\n1. Main arguments of the parties\n3.5 Brazil considers that Article 4.10 of the SCM Agreement provides conditions requiring the\nDSB to authorize countermeasures when \"the recomm endation of the DSB is not followed within the\ntime period specified by the panel\". The time period specified by the original panel was 1 July 2005.\nThe United States did not withdraw Step 2 until 31 July 2006. Therefore, Brazil argues that the DSB\nis under an obligation to author ize appropriate countermeasures according to Article 4.10 of the\nSCM Agreement.35 In Brazil's view, the only relevant fact is whether the United States had withdrawn\nthe subsidies by the end of the implementation period and the fact that the United States repealed the\nStep 2 programme after the end of the implementation period is not relevant. 36 S u c h a\ncountermeasure, in Brazil's view, is not a retroactive remedy.37\n3.6 The United States considers that by the time of the compliance panel's findings, Step 2\npayments had been eliminated by legislation 38 and that the DSU does not permit countermeasures to\nbe retroactively applied. 39 The United States points out that Brazil requested findings, during the\ncompliance panel proceedings, that there was no measure taken by the United States to comply with\nthe rulings of the DSB during the period between 22 September 2005 and 31 July 2006 since the\nStep 2 measure was not repealed during that period of time. However, the compliance panel declined\nto make rulings on this request, Therefore, the United States argues that since the compliance panel\nhas not made rulings on the Step 2 subsidy duri ng the period immediately before it was repealed,\nthere is no legal basis for Brazil to take countermeasures against the Step 2 subsidy.\n40\n3.7 The United States also argues that countermeasu res may be authorized only where a Member\nhas not come into compliance with the DSB recomm endations and rulings. Since the United States\nhas come into compliance today, there is no measu re, and no WTO inconsiste ncy, which could serve\nas the legal basis for a countermeasure with respect to Step 2.41\n3.8 Brazil considers the fact that the compliance pa nel did not make rulings on the Step 2 subsidy\nto be irrelevant. The original panel and Appellate Body reports already imposed a legal obligation on\nthe United States to withdraw the subsidy. Be cause the United States has not achieved substantive\n\n34 US responses to questions from the Arbitrator, question 57.\n35 Brazil's written submission, paras. 246-249.\n38 US responses to questions from Arbitrator, question 4, para. 19.\n39 US responses to questions from Arbitrator, question 57, para. 143.\n40 US oral statement, paras. 61-62.\n41 US comments to Brazil's responses to questions from the Arbitrator, question 107, paras. 119-120.\n\ncompliance, Brazil argues that it is entitled to take countermeasures in relation to the Step 2 subsidy\nbetween 1 July 2005 and 31 July 2006.42\n3.9 Brazil further argues that while the United States withdrew the Step 2 subsidy in\nAugust 2006, it replaced this subsid y with other prohibited subsidies in the 2008 Farm Bill. Brazil\nclaims that the 2008 Farm Bill replaced the export subsidy component of the Step 2 programme with\n\"additional marketing loan subsidies\" that co ntinued the competitiveness boost for US cotton\nexporters as had the Step 2 programme previous ly, and that it therefore constitutes a subsidy de facto\ncontingent upon export performance. Also, Brazil cl aims that the 2008 Farm Bill replaced the Step 2\nsubsidy for domestic cotton users with the \"Econom ic Adjustment Assistan ce to Users of Upland\nCotton\", which pays US textile mills 4 cents per pound of upland cotton used. Brazil considers that\nthis component of the subsidy is de facto contingent upon the use of domestic over imported cotton. 43\nBrazil argues that the enactment of the 2008 Farm Bill negated the compliance that the\nUnited States had originally achieved, and that th is factor needs to be taken into account by the\nArbitrator when considering the \"appropriateness\" of the one-time payment countermeasure proposed\nby Brazil against the Step 2 subsidy.44\n3.10 The United States points out that Brazil is not seeking a countermeasure for measures under\nthe 2008 Farm Bill since no findings of inconsiste ncy have been made with respect to this new\nlegislation, but that Brazil makes factual allegati ons about new programmes and asks the Arbitrator to\ngive certain weight to them in its decision-making. The United States considers that any analysis of\nthe new programmes would only be speculation, gi ven that no panel has examined these programmes\nand made findings on their WTO-inconsistency, a nd that Brazil has not pursued them in these\nproceedings. In the view of the United States, a request for the Arbitrator to consider the new\nprogrammes in the new legislation when cons idering the appropriateness of the proposed\ncountermeasure with respect to the now expired Step 2 subsidy is in essence a request for\ncountermeasures on these new programmes. Counter measures against these newly enacted measures\nwould be in contravention of Article 23 of the DSU, and would not have any basis in findings or\nrecommendations and rulings by the DSB.45\n3.11 The United States argues that a Member may only obtain countermeasures where there is a\nWTO inconsistency. Otherwise, there is nothing to counter. It contends that the fact the 2008 Farm\nBill was not considered by the compliance panel is a cr itical factor for the Arbitrator. In the view of\nthe United States, Brazil's request for the Arbitrator to consider the 2008 Fa rm Bill is inconsistent\nwith Article 23 of the DSU, because Brazil is \"seeking redress\" concerning the 2008 Farm Bill\nwithout having had recourse to the DSU.\n46\n3.12 Brazil has clarified that it is not seeking to take countermeasures against the replacement\ncomponents of Step 2 subsidy in the 2008 Farm B ill but, rather, is seeking a one-time countermeasure\nfor the past inconsistency during the 13-month period when the United States was not in\ncompliance.\n47 In response to a question by the Arbitrator , Brazil also clarifies that it does not request\nthe Arbitrator to make conclusions on whet her these new subsidies under the 2008 Farm Bill are\n\"measures taken to comply\" within the meaning of Article 21.5 of the DSU, nor to make rulings on\n\n42 Brazil responses to questions from the Arbitrator, question 11, paras. 137-139.\n43 Brazil's written submission, paras. 262-263.\n44 Brazil's written submission, paras. 277and 280.\n45 US comments to Brazil's responses to questions from the Arbitrator, question 108, paras. 121-123.\n46 US comments to Brazil's responses to questions from the Arbitrator, question 109, para. 124;\nquestion 110, para. 126.\n47 Brazil's responses to questions from the Arbitrator, question 108, para. 196.\n\nwhether they are prohibited subsidies within the meaning of Article 3 of the SCM Agreement. Such\nfindings, in Brazil's view, would not be within the mandate of the Arbitrator.48\n3.13 However, Brazil argues that the fact of these \"new subsidies\" can be considered by the\nArbitrator in deciding whether substantive complianc e has been achieved with respect to the Step 2\nsubsidy.49 It also argues that the Arb itrator can take into account the enactment of the 2008 Farm Bill\nin assessing the \"appropriateness of countermeasures\" and that this would be consistent with the\nCanada – Aircraft Credits and Guarantees arbitration decision, where the appropriate level of the\ncountermeasures was adjusted considering the fact that , at the time the arbitration took place, Canada\nhad not withdrawn the subsidy concerned.50\n3.14 Brazil further argues that, as the parties disagr ee whether there is substantive compliance at\npresent, Article 22.8 of the DSU does not preven t Brazil from taking countermeasures against the\nStep 2 subsidy for the period 1 July 2005-31 July 2006. 51 Brazil considers that Article 22.8 of the\nDSU does not apply in these proceedings, as it only ap plies to the time after concessions or other\nobligations have been suspended. Even if it does apply, Brazil argues that, presently, substantive\ncompliance has not been achieved, or that the inc onsistent measure has not been removed, and that\ntherefore a countermeasure is legally permitted. 52 Brazil relies on the concept of \"substantive\ncompliance\" used by the Appellate Body in the US – Continued Suspension dispute, to the effect that\nthere is no longer substantive compliance since th e enactment of the US 2008 Farm Bill, which\ncontains two replacement measures with the same effects as the repealed Step 2 measure. 53 Brazil\nconsiders that the phrase \"until such time\" in Article 22.8 of the DSU has been respected by Brazil in\nits one-time countermeasure request, because it has proposed countermeasures based on the amount of\nthe Step 2 payments made after the end of the im plementation period and before Step 2 was repealed\nand/or the subsidy was withdrawn.54\n3.15 The United States notes that Brazil requested a countermeasure based on the amount of \"the\nStep 2 payments made in the most recent conclu ded marketing year\" in its original request for\ncountermeasures.55 However, Brazil adopted a different one-time retroactive payment methodology\nduring the later proceedings of this arbitration. In the view of the United States, neither of these\napproaches can be used to calculate the \"appropriate countermeasures\" for Step 2, since Step 2 has\nbeen repealed.56\n2. Assessment by the Arbitrator\n3.16 The expressions \"Step 2\" and \"User Marketing St ep 2 payments\" refer to a special marketing\nloan provision for upland cotton that had been authorized since 1990 under successive legislation,\nincluding the FAIR Act of 1996 and the FSRI Act of 2002.57\n3.17 The original panel made the following findings, inter alia, with respect to Step 2 payments:\n\"(e) Concerning section 1207(a) of the FSRI Act of 2002 providing for user\nmarketing (Step 2) payments to exporters of upland cotton:\n\n48 Brazil's responses to questions from the Arbitrator, question 12, para. 141.\n49 Brazil's responses to questions from the Arbitrator, question 11, paras. 140-143.\n50 Brazil's responses to questions from the Arbitrator, question 108, paras. 197-199.\n51 Brazil's responses to questions from the Arbitrator, question 10, para. 136.\n52 Brazil's oral statement, paras. 104-108.\n53 Brazil responses to questions from the Arbitrator, question 10, paras. 134-135.\n55 WT/DS267/21.\n56 US comments to Brazil's responses to questions from the Arbitrator, question 106, paras. 117-118.\n57 Panel Report, paras. 7.209-7.211.\n\n…\n(iii) section 1207(a) of the FSRI Act of 2002 providing for user\nmarketing (Step 2) payments to exporters of upland cotton is an\nexport subsidy prohibited by Ar ticle 3.1(a) and 3.2 of the\nSCM Agreement.\n(f) concerning section 1207(a) of the FSRI Act of 2002 providing for user\nmarketing (Step 2) payments to domestic users of upland cotton: it is an import\nsubstitution subsidy prohibited by Article 3.1(b) and 3.2 of the SCM Agreement;\"\n58\n3.18 The Appellate Body upheld these conclusions of the original panel.59\n3.19 On 18 August 2006, Brazil requested the establishment of a compliance panel. In its request,\nBrazil indicated that \"[o]n 3 February 2006, the Un ited States Congress approved a bill that repeals\nthe Step 2 subsidy programme for upland cotton. The bill was signed into law on 8 February 2006,\nand took effect on 1 August 2006.\"60\n3.20 During the compliance proceedings, Brazil request ed the compliance panel to consider the\nfailure of the United States to take measures to remove the adverse effect or to withdraw, inter alia,\nthe Step 2 programme in the period be tween 22 September 2005 and 31 July 2006. 61 The compliance\npanel however declined to consider that failure. 62 Rather, the compliance panel considered the\nmeasures taken to comply as of the date of its est ablishment. On the date of establishment of the\ncompliance panel, the Step 2 subsidy had been re pealed. While the compliance panel analysed the\nimpact of the elimination of the Step 2 measures on the existence of significant price suppression in\nthe world market for cotton within the meaning of Article 6.3(c) of SCM Agreement, it made no\nseparate finding on the repealed Step 2 payments programme.\n63 Brazil did not appeal the compliance\npanel's decision not to consider the measures as th ey existed during the period between 22 September\n2005 and 31 July 2006.\n3.21 It is undisputed that the Step 2 programme, wh ich had been found to be inconsistent with\nArticle 3 of the SCM Agreement, had not been withdrawn as of the end of the implementation period.\nThis was the time at which Brazil presented its reque st for authorization to take countermeasures, in\nrelation to this and other prohibited subsidies in this dispute. However, the measure had been\nrepealed by the time that the compliance panel was established, and the compliance panel declined to\nmake any findings on it.\n3.22 In these proceedings, Brazil is seeking an author ization to take countermeasures specifically\nin relation to the period between the end of the co mpliance period and the repeal of the measure.\nBrazil has also claimed that \"new prohibited s ubsidies\" have recently been enacted by the\nUnited States, which effectively serve the same pur pose as the previous Step 2 payments. Brazil has\nmade it clear, however, that it is not seeking findings from this Arbitrator on the consistency of these\nnew measures, and also that it is not asking the Arbi trator to authorize countermeasures in relation to\nthe application of these new measures. Rather, Brazil is seeking an authorization to apply\ncountermeasures only in relation to past payments under the now repealed Step 2 programme.\n\n58 Panel Report, para. 8.1\n60 This US Bill is referred to as \"Deficit Reduction Act of 2005, US Public Law 109-171,\nSection 1103\", WT/DS267/30. This Act was reproduced in Exhibit Bra-435 during the compliance panel\nproceedings. See footnote 20 of the compliance panel report, WT/DS267/RW.\n61 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 9.56.\n62 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 9.71.\n63 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), paras. 10.228-10.239.\n\n3.23 The question before us is, therefore, whethe r Brazil is entitled to seek countermeasures in\nrelation to past payments under the Step 2 progra mme, notwithstanding the fact that it is undisputed\nthat this programme has been repealed and that payments have ceased under it, and that there has been\nno determination, in the context of the compliance proceedings, that the United States had failed to\ncomply with the relevant rulings and recommendations of the DSB in relation to this measure.\n3.24 In approaching this question, we find it useful to consider first the legal basis for Brazil's\nrequest at the time that it presented it. We will th en turn to the question of Brazil's entitlement to\npursue such authorization in the present circumstances.\n(a) Legal basis for Brazil's request for countermeasures in relation to Step 2 payments\n3.25 Article 22.1 of the DSU provides that:\n\"Compensation and the suspension of concessi ons or other obligations are temporary\nmeasures available in the event that the recommendations and rulings are not\nimplemented within a reasonable period of time.\"\n3.26 Article 22.2 of the DSU further provides that:\n\"If the Member concerned fails to bring the measure found to be inconsistent with a\ncovered agreement into compliance ther ewith or otherwise comply with the\nrecommendations and rulings within the r easonable period of time ..., such Member,\nshall, if so requested, and no later than the expiry of the reasonable period of time,\nenter into negotiations with any part y having invoked the dispute settlement\nprocedures, with a view to developing mutually acceptable compensation. If no\nsatisfactory compensation has been agreed within 20 days after the date of the\nreasonable period of time, any party having invoked the dispute settlement\nprocedures may request authorization from th e DSB to suspend the application to the\nMember concerned of concessions or other obligations under the covered agreement.\"\n3.27 Under the terms of these provisions, the suspen sion of concessions or other obligations is\navailable where there is non-compliance by the expiry of the reasonable period of time (\"[i]f the\nMember concerned fails to bring the measure found to be inconsistent with a covered agreement into\ncompliance therewith or otherwise comply with the recommendations and rulings within the\nreasonable period of time\") and if no compensation agreement is reached within 20 days after the\nexpiry of the reasonable period of time. In that situation, the original complaining Member may\nrequest authorization from the DSB to suspend c oncessions or other obligations owed to the\nrespondent under the covered agreements.\n3.28 In these proceedings, it is undisputed that the St ep 2 measure found to be inconsistent by the\noriginal panel was unchanged by the expiry of the r easonable period of time set by the original panel\non 1 July 2005. Brazil requested an authori zation to take countermeasures in relation to, inter alia,\nthe Step 2 payments, on 4 July 2005. The United States challenged Brazil's request and the matter\nwas therefore referred to arbitration.\n3.29 At the time when Brazil requested an authoriza tion to take countermeasures, and when these\narbitral proceedings were first initiated, ther e was therefore a legal basis for seeking such\nauthorization, to the extent that the Step 2 paymen ts had been found by the original panel, as upheld\nby the Appellate Body, to be inconsistent with the SCM Agreement, and it is undisputed that they had\nnot been withdrawn by the time Brazil made its request.\n\n3.30 In accordance with their \"Agreed Procedures\" in this case, the parties subsequently jointly\nrequested the suspension of the arbitration proceed ings on 17 August 2005. Brazil then requested the\nestablishment of a compliance panel on 18 August 2006. The Step 2 measure had been repealed on\n1 August 2006.\n3.31 The compliance panel was requested to make findings in relation to \"the three price-\ncontingent upland cotton subsidy programmes under the FSRI Act\" (including Step 2) in the period\nbetween 22 September 2005 and 31 July 2006. 64 The compliance panel however declined to make\nsuch findings. Rather, it found that:\n\"[I]t is not appropriate to make a finding on Brazil's claim that the United States\nfailed to take any measures to remove the adverse effects or to withdraw the three\nprice-contingent upland cotton subsid y programmes under the FSRI Act of 2002\nbetween 22 September 2005 and 31 July 2006 a nd that, as a consequence, measures\ntaken to comply with the adverse effects -related recommendations and rulings of the\nDSB did not exist in this period.\"65\n3.32 This finding was not appealed.\n3.33 Against this background, the question before th e Arbitrator is whether Brazil is entitled, in\nthese proceedings, to seek countermeasures in relati on to past payments under the Step 2 programme\nduring essentially the same period, namely between the end of the implementation period and the\nrepeal of the measure.\n(b) Whether Brazil is entitled to seek countermeasures in relation to past non-compliance with\nrulings relating to Step 2 payments\n3.34 The United States considers that, since the Step 2 Programme has been repealed, there is no\nlonger any legal basis for the authorization of count ermeasures with respect to past payments under\nthat programme.\n3.35 Brazil has indicated, and confirmed repeatedly in the course of these proceedings, that it is\nseeking \"one-time\" countermeasures in relation to th e Step 2 programme as it continued to apply in\nthe period immediately following the end of the implementation period and until its repeal, i.e. from\n1 July 2005 to 31 July 2006. In Brazil's view, \"the only relevant fact is whether by the end of the\nimplementation period, the United States had wit hdrawn the subsidies\" and the fact that the\nUnited States later repealed the programme is not relevant.\n66\n3.36 Brazil therefore considers that it is entitled to seek countermeasures with respect to a past\nperiod of non-compliance from the end of the im plementation period to a past point in time,\nregardless of subsequent developments, including the removal of the measure at issue.\n3.37 As we have seen above, Articles 22.1 and 22.2 of the DSU foresee that the entitlement to seek\ncountermeasures (or the suspension of concessions or other obligations, as expressed in these\nprovisions) arises when compliance with the rulings and recommendations of the DSB has not taken\n\n64 We note that Brazil's request in the context of the compliance panel proceedings was in relation to\nthe US measures under the FSRI Act of 2002 as \"price -contingent\" measures causing serious prejudice to the\ninterests of Brazil within the meaning of Article 5 of the SCM Agreement . In the original proceedings, the\nStep 2 payments had given rise to rulings under that provision, as actionable subsidies, and also to rulings under\nArticle 3 of the SCM Agreement , as a prohibited subsidy. Brazil therefore apparently did not seek specific\nrulings on Step 2 as a prohibited subsidy in the compliance proceedings.\n65 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 9.71.\n\nplace by the end of the implementation period. Th is is therefore the first moment at which\ncountermeasures become available, as remedies. To that extent, we agree with Brazil that the absence\nof implementation as of the end of the implementation period gives rise to an entitlement to seek\ncountermeasures. At the same time, these two provisions do not constitute the entirety of the\napplicable legal requirements in respect of su spension of concessions or other obligations (or\ncountermeasures).\n3.38 The suspension of concessions or other obligatio ns is a remedy of an exceptional character,\nthat allows the Member concerned to temporarily suspend its own obligations toward the responding\nparty under the covered agreements. This ex ceptional remedy is only available in limited\ncircumstances and for a limited time period. As observed by the Appellate Body on US – Continued\nSuspension, \"the authorization to suspend concessi ons is contingent and limited in time\".\n67 As also\nobserved by the Appellate Body, the authorizati on to suspend concessions is granted \"following a\nlong process of multilateral dispute settlement in wh ich relevant adjudicative bodies, as well as the\nDSB, render multilateral decisions at key stages of the process\".68\n3.39 In this dispute, following the initial proceedings, compliance proceedings took place, in which\nBrazil requested the compliance panel to make a de termination concerning the United States' failure\nto comply with the recommendations and rulings of the DSB in the period between 22 September\n2005 and 31 July 2006, i.e. the period between the end of the implementation period under Article 7.9\nand 7.10 of the SCM Agreement and the time of repeal of the Step 2 programme, prior to the panel's\nestablishment. However, as noted above, the panel d eclined to make such findings. In considering\nBrazil's request, the panel determined in particular that:\n\"Where a panel makes a finding under Article 21.5 of the DSU that a Member has not\ncomplied with the DSB recommendations and rulings in the original dispute, the\nconsequence of that finding is that the Me mber remains subject to obligations that\nflow from the recommendation issued in the original proceeding and is thus required\nto take steps to bring itself into complian ce with that recommendation. A finding by\nthe panel that the Member also failed to comply with the DSB recommendations and\nrulings in the original proceeding at an earlier point in time would have no additional\noperative value in terms of the nature of th e obligations of the Member in question.\nOn the other hand, if a panel under Article 21.5 finds that the Member has brought\nitself into compliance with the DSB recomme ndations and rulings as of the time of\nthe establishment of the panel, such finding logically would supersede and render\nirrelevant any finding that the Member was not in compliance with those\nrecommendations and rulings at an earlier point in time.\"\n69\n3.40 The compliance panel thus saw no useful purpose to findings that would address a past period\nof non-compliance, when the measure has been repealed and the Member concerned has brought itself\ninto compliance as of the compliance panel's establis hment. In considering Brazil's request, the panel\nalso specifically addressed an argument by Brazil to th e effect that such findings were relevant to the\nassessment of countermeasures in Article 7.9 and 7.10 of the SCM Agreement, and that it sought \"a\nmultilateral basis for the DSB to authorize counterme asures against the United St ates for its failure to\ntake any implementation measures by the date required in Article 7.9 of the SCM Agreement\".70 The\npanel, however, determined that:\n\n67 Appellate Body Report, US – Continued Suspension, para. 303.\n68 Appellate Body Report, US – Continued Suspension, para. 317.\n69 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 9.67.\n70 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 9.68.\n\n\"[W]hile a finding ... may be required to provide 'a multilateral basis' for DSB\nauthorization of countermeasures under Article 7.9 of the SCM Agreement, it does not\nlogically follow that such a panel must make a finding of non-compliance as of the\nend of the six-month period referred to in Article 7.9 of the SCM Agreement.\"\n71\n3.41 In light of these considerations, the panel f ound that it was \"not appropriate\" to make a\nfinding on Brazil's claim that the United States had fa iled to bring itself into compliance in relation to\nthe period of time between the expiry of the impl ementation period and the repeal of the measure,\nprior to the panel's establishment.\n3.42 There has therefore been no multilateral determin ation that the United States has failed to\ncomply with the recommendations and rulings of th e DSB in respect of Step 2, despite a specific\nrequest by Brazil to make such findings precisely with respect to the same past period of time in\nrelation to which it now seeks to be authorized to take countermeasures. We consider that this is an\nimportant aspect of the legal situation before us, which we must take into account in these\nproceedings.\n3.43 Furthermore, we note that, as Brazil has highli ghted consistently in these proceedings, the\npurpose of countermeasures under Article 4.10 of the SCM Agreement (and of suspension of\nconcessions or other obligations under the DSU) is to induce compliance. As expressed by the\narbitrator on EC – Bananas III (US) (Article 22.6 – EC):\n\"[T]he authorization to suspend concessions or other obligations is a temporary\nmeasure pending full implementation by the Members concerned. We agree with the\nUnited States that this temporary nature indicates that it is the purpose of\ncountermeasures to induce compliance.\"\n72 (emphasis added).\n3.44 Article 22.8 of the DSU further provides that:\n\"The suspension of concessions or other obligations shall be temporary and shall only\nbe applied until such time as the measure f ound to be inconsiste nt with a covered\nagreement has been removed, or the Member that must implement recommendations\nor rulings provides a solution to the nullifi cation or impairment of benefits, or a\nmutually satisfactory solution is reached.\"\n3.45 Brazil argues that Article 22.8 is not applicable to the circumstances of this case, because it\nconcerns the application of countermeasures, not th eir authorization. We agree that this provision\naddresses the time during which suspension of concessi ons or other obligations may be applied, once\nauthorized, rather than the conditions for the authorization per se . Nonetheless, this provision\nusefully informs our analysis of the legal basis and purpose of countermeasures. It confirms to us that\nthe suspension of concessions or other obligations, as a remedy, is available where compliance has not\nbeen achieved, and in order to induce such co mpliance. In other words, the entitlement to\ncountermeasures arises as of the end of the implementation period, if there has been no compliance by\nthat moment, and it continues to exist for so long as compliance has not been achieved in relation to\nthe measure at issue.\n3.46 Article 22.1 reinforces the importance of full implementation of recommendations of the\nDSB, in preference to compensation or the suspension of concessions or other obligations.\nArticle 22.1 provides that:\n\n71 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 9.68.\n72 Decision by the Arbitrators, EC – Bananas III (US) (Article 22.6 – EC), para. 6.3.\n\n\"Compensation and the suspension of concessi ons or other obligations are temporary\nmeasures available in the event that the recommendations and rulings are not\nimplemented within a reasonable period of time. However, neither compensation nor\nthe suspension of concessions or other oblig ations is preferred to full implementation\nof a recommendation to bring a measure into conformity with the covered\nagreements. Compensation is voluntary and, if granted, shall be consistent with the\ncovered agreements.\"\n3.47 Brazil considers, however, that countermeasur es can be authorized independently of the\nexistence of any current non-compliance, and that th e role of the Arbitrator is not to consider the\npurpose of a determination that it is required to make based on its mandate under Article 4.10\nand 4.11 of the SCM Agreement.73 In Brazil's view, \"the Arbitrator's role is limited to a determination\nof the amount of those countermeasures based on the fact that the United States had failed to\nwithdraw the Step 2 subsidy for a 13-month period\".74\n3.48 Brazil seeks a determination in relation to an amount of countermeasures covering \"the 13-\nmonth period when the United States was not in compliance\" (emphasis added). 75 Brazil has also\nmade it very clear that it \"is not seeking authorization for countermeasures covering the period since\nthe enactment of these new subsidies [i.e. the ne w subsidies Brazil alleges the United States has\nintroduced under the 2008 Farm Bill] in 2008\".76\n3.49 Brazil is therefore seeking an authorization to take countermeasures by reason of a past period\nof non-compliance, on the basis of a past measure wh ich has been repealed, and not in relation to a\ncontinuing period of non-compliance that would still be in existence today.\n3.50 In light of our determinations above that c ountermeasures are a temporary remedy available\nonly where compliance has not been achieved and with a view to inducing such compliance, and that\nfull implementation is preferred to the suspensi on of concessions or other obligations, we do not\nconsider that there would be a legitimate basis to such countermeasures as requested by Brazil in\nrelation to past payments made until the repeal of Step 2, in the absence of a multilateral\ndetermination of non-compliance in relation to such payments and independently of any continuing\nsituation of non-compliance.\n(c) Whether the \"new measures\" under the 2008 Farm Bill should be considered\n3.51 As observed above, Brazil has expressly not based its request for countermeasures in relation\nto Step 2 payments on any current situation of non-compliance. Brazi l's request is based exclusively\non non-compliance in the period between 1 July 2005 and 30 July 2006.\n3.52 Nonetheless, in response to the United States' ar guments that it had complied with the rulings\nand recommendations of the DSB with respect to th e Step 2 programme, Brazil has indicated that the\nUnited States has adopted \"new prohibited subs idies\" under the 2008 Farm Bill that \"effectively\nreplace\" Step 2.77 Brazil contends that since the enactment of the 2008 Farm Bill, the United States is\nno longer in substantive compliance. Howeve r, Brazil does not seek from the Arbitrator a\ndetermination of consistency of the 2008 Farm Bill per se with the SCM Agreement.\n\n73 Brazil's responses to questions from the Arbitrator, question 109, paras. 200-201.\n74 Brazil's responses to questions from the Arbitrator, question 109, para. 201.\n75 Brazil's responses to questions from the Arbitrator, question 108, para. 196.\n76 Brazil's responses to questions from the Arbitrator, question 108, para. 196.\n77 Brazil identifies specifically two components of the 2008 Farm Bill, namely, \"the additional market\nloan subsidies\" and \"the Economic Adjustment Assistance to Users of Upland Cotton\".\n\n3.53 Brazil \"does not request the Arbitrator [to] re ach any definitive conclusions as to whether\nthese subsidies are 'measures taken to comply' pursuant to Article 21.5 of the DSU or whether they are\nprohibited subsidies within the meaning of Article 3.1(a), or (b) of the SCM Agreement.\" Brazil\nconsiders that \"such a finding would not be within the mandate of the Arbitrator\". 78 Rather, Brazil\nrequests that the Arbitrator \"take into account th e existence of the new US measures and the facts\nsurrounding their enactment when determining the amount of appropriate countermeasures\".79\n3.54 Brazil invites the Arbitrator to consider the ex istence of these measures in the context of its\nassessment of whether the proposed countermeasures are \"appropriate\", as \"circumstances and actions\nof a subsidizing Member\". 80 Specifically, Brazil invites the Arbitrator to take into account inter alia\n\"whether these new Step 2 replacement measures are c onsistent with an intent to eliminate subsidies\nthat are both prohibited and geared toward s sustaining significant price suppression\". 81 Brazil\nbelieves that \"these are relevant questions to consider in determining the amount of one-time\ncountermeasures for the US lack of compliance\".82\n3.55 We understand Brazil to be requesting the Arbitrator to take into account the existence of the\nmeasures adopted under the 2008 Farm Bill as a factual circumstance that would be relevant in the\nassessment of the \"appropriateness\" of its proposed amount of countermeasures, and not as a legal\nbasis for these proposed countermeasur es. However, in light of our de termination above that there is\nno basis for Brazil's request for countermeasures in relation to a past period of non-compliance, we\nhave no basis on which to proceed with a determ ination whether Brazil's proposed countermeasures\nare \"appropriate\" within the meaning of Article 4.10 of the SCM Agreement. Brazil's request that we\ntake into account the 2008 Farm Bill in this determin ation is therefore without object and we need not\nconsider it further.\n3.56 We take note of the parties' arguments in rela tion to the consistency or inconsistency of the\nmeasures identified by Brazil contained in the 2008 Fa rm Bill. We also take note in this context of\nthe findings of the Appellate Body in US – Continued Suspension, as cited by Brazil, to the effect that\ncompliance with the DSB recommendations and rulings would not be considered to be achieved, if\nthe inconsistent measure is simply removed and subsequently replaced by another inconsistent\nmeasure. Specifically, the Appellate Body has interpreted the words \"the measure found to be\ninconsistent with a covered agreem ent has been removed\" in Article 22.8 of the DSU to mean that\n\"substantive compliance\" must have been achieved in relation to the removal of that measure:\n\"The issue that arises in this dispute, however, is whether an inconsistent measure\nshould be considered 'removed' when it is replaced by a new implementing measure.\nTaken literally, removal of the inconsis tent measure could mean that the\nimplementing Member has adopted an act th at formally repeals the inconsistent\nmeasure and replaces it with another measure , regardless of the content of the new\nmeasure and, in particular, of its comp liance with the DSB's recommendations and\nrulings. Such a literal interpretation of th e first condition in Article 22.8, however,\ndoes not comport with the other two conditions provided in that provision ...\nReading the first sentence of Article 22.8 as a whole, the 'removal' of 'the measure\nfound to be inconsistent' should be proper ly understood to require nothing less than\nsubstantive removal of the inconsistent measure. Substantive removal may be\nachieved by repealing the inconsistent measure. Where a WTO Member adopts an\n\n78 Brazil's responses to questions from the Arbitrator, question 12, para. 141.\n79 Brazil's responses to questions from the Arbitrator, question 111, para. 203.\n80 Brazil's responses to questions from the Arbitrator, question 108, para. 197.\n81 Brazil's responses to questions from the Arbitrator, question 108, para. 199.\n82 Brazil's responses to questions from the Arbitrator, question 109, para. 199.\n\nimplementing measure that replaces the inconsistent measure, the implementing\nmeasure must bring about substantive compli ance, that is, compliance with the DSB's\nrecommendations and rulings and consistency with the covered agreements ... .\"83\n3.57 The Arbitrator takes note of the fact that, in these proceedings, Brazil and the United States\nagreed that the Step 2 subsidy was repealed as of 1 August 2006 and that Brazil is not seeking\ncountermeasures covering the period since the enactme nt of these new subsidies in 2008. Brazil has\nindicated that it \"does not do so because there h as not been a multilateral determination of the\nWTO inconsistency of the new Step 2 replacement subsidies\". 84 We also note that Brazil does not\nseek such a determination from us.\n3.58 In response to a question from the Arbitrator, Br azil observes that \"it is Brazil's position that\nthe United States is no longer in substantive comp liance with the recommendations and rulings of the\nDSB, even if it was in compliance for a brief 23-month period – from 1 August 2006 through\n18 June 2008, after the repeal of the Step 2 subsidy\".\n85 Brazil considers that since the parties disagree\nwhether the United States is presently in substan tive compliance, \"DSU Article 22.8 does not operate\nto bar the suspension of concessions for the period 1 July 2005-31 July 2006\".86\n3.59 At the same time, Brazil \"emphasizes that it is not seeking countermeasures in this proceeding\ncovering the period after enactment of the 2008 Fa rm Bill containing the replacement measures for\nStep 2, or covering that 23-month period of tim e (1 August 2006 – 18 June 2008) in which the\nUnited States was in compliance with the recomme ndations and rulings of the DSB. Rather, the\nevidence and argument presented by Brazil is relevant to rebut the US assertions that there is no basis\nfor countermeasures covering the period of 1 July 2005-31 July 2006 because, allegedly, the\nUnited States would presently be in \"substantive compliance\" as required by Article 22.8 of the\nDSU.87\n3.60 These statements by Brazil confirm that the only period of non-compliance in respect of\nwhich Brazil seeks to apply countermeasures is the pe riod from 1 July 2005 to 31 July 2006, prior to\nthe repeal of Step 2. The legal situation arisi ng from the enactment of the new measures in the 2008\nFarm Bill has no bearing on the question of whether Br azil is entitled to seek to retaliate in relation to\nthis past period of non-compliance, and Brazil invokes it only to rebut the argument that the\nUnited States would presently be in compliance with the recommendations and rulings of the DSB.\nHowever, our view that countermeasures cannot be au thorized in relation to this past period of non-\ncompliance does not depend, and is not based, on a finding that the United States is presently in\ncompliance with the recommendations and rulings of the DSB.\n3.61 The question of whether or not the \"new measures\" under the 2008 Farm Bill represent\ncompliance with the recommendations of the DSB in re lation to the Step 2 measures is not before us.\nWe make no determinations with respect to the le gal status of the measures under the 2008 Farm Bill\nidentified by Brazil as Step 2 \"replacement\" measures.\n88\n3. Conclusion\n3.62 In light of our determinations above, we conclude that there is no legal basis for Brazil to seek\ncountermeasures in relation to the absence of compliance by the United States with the\n\n83 Appellate Body Report, US – Continued Suspension, paras. 304-305.\n84 Brazil's responses to questions from the Arbitrator, question 108, para. 196.\n85 Brazil's responses to questions from the Arbitrator, question 10, para. 135.\n86 Brazil's responses to questions from the Arbitrator, question 10, para. 136.\n87 Brazil's responses to questions from the Arbitrator, question 10, para. 136.\n88 The Arbitrator does not express any opinion about the ability of an arbitrator to rule on questions of\ncompliance.\n\nrecommendations and rulings of the DSB during the period from 1 July 2005 and 30 July 2006. We\nmake no determination as to the c onsistency or inconsistency of th e \"new measures\" applied by the\nUnited States under the 2008 Farm Bill and identifie d by Brazil as \"replaceme nt\" measures with the\nSCM Agreement, and note that Brazil does not seek an aut horization to take countermeasures against\nthose \"replacement\" measures.\nB. ASSESSMENT OF BRAZIL'S REQUESTED AMOUNT OF COUNTERMEASURES IN RELATION TO\nSTEP 2 PAYMENTS\n3.63 As noted above, Brazil seeks one-time counterme asures in relation to the Step 2 programme,\nin the amount of the disbursements made by the United States in Marketing Year (\"MY\") 2005, which\nis US$350 million in total.89\n3.64 In light of our conclusion in paragraph 3.62 abov e that there is no legal basis for this request,\nwe need not consider further the countermeasures requested by Brazil in relation to Step 2 payments.\nIV. BRAZIL'S PROPOSED LEVEL OF COUNTERMEASURES IN RELATION TO\nGSM 102\nA. BRAZIL'S REQUEST\n4.1 In its request pursuant to Article 4.10 of the SCM Agreement and Article 22.2 of the DSU,\nBrazil seeks an authorization to take appropriate co untermeasures in an amount that corresponds to\n\"the total of exporter applications received unde r GSM 102, 103, and SCGP for the most recent\nconcluded fiscal year\".90 In that request, Brazil estimated the value of this amount, together with the\namount for Step 2 payment, at a total of US$3 billion, using FY 2004 as reference.91\n4.2 In its Methodology Paper, Brazil advanced a different methodology for the amount of\nappropriate countermeasures to be determined, name ly \"a methodology to calculate countermeasures\nproportionate to the annual amount of prohibited GSM 102 export credit guarantees (\"ECGs\") issued\nfor export transactions involving unscheduled prod ucts, rice, pig meat and poultry meat. Applying\nthis methodology to data for FY 2006 results in countermeasures in the amount of\nUS$1.294 billion\".\n92\n4.3 In the course of the proceedings, the United St ates asked Brazil to clarify whether it was\nrequesting a fixed amount of annual countermeasures for prohibited subsidies, or a variable amount,\nand, in the event that Brazil was requesting a variable amount, in what manner the amount would\nvary. Brazil responded, as stated in an earlier res ponse to a question by the Arbitrator, that it had\n\"proposed a methodology to calculate IRS and add itionality, 'in light of' relevant GSM 102 data\ngenerated and maintained on a fiscal year basis\" . Brazil referred to the following response it had\nmade to a question from the Arbitrator: \"By virtue of the United States' failure to withdraw prohibited\nGSM 102 export subsidies, Brazil has proposed a formula for the determination of appropriate\ncountermeasures. In this response, therefore, Brazil explains its choice of FY 2006 data as a reference\nto illustrate the application of its formula.\"93\n4.4 The United States took note of Brazil's response, and stated that \"arbitrators have usually\nawarded a fixed annual amount for countermeasures, but some arbitrators have used a formula\", and\n\n90 WT/DS267/21.\n91 WT/DS267/21, footnote 1.\n93 Brazil's responses to questions from the Arbitrator , question 3, cited in its response to question 1\nfrom the United States.\n\nthat where they have used formula, the arbitrators have carefully explained in their awards the content\nof that formula, which would be necessary to permit both parties and the DSB to be aware of the\namount the arbitrators deemed justified under that relevant standard. 94 The United States therefore\nsubmitted that, for the sake of transparency, and to en sure that the countermeas ures in each year will\nbe \"appropriate\" and \"not disproportionate\", the Arbitrator's award should \"clearly set out any formula\nto be used in calculating countermeasures and the so urce of any information for input variables in the\nformula each year\". 95 The United States also requested that if the Arbitrator does not authorize a\nformula approach, this should also be made clear.\n4.5 The Arbitrator notes that Brazil's responses indicat e that it is seeking an authorization that\nwould be variable on an annual basis, depending on \"the total of exporter applications received under\nGSM 102 ... for the most recent concluded fiscal year\". The Arbitrator therefore understands Brazil's\nrequest to be for the Arbitrator to endorse not only the specific amount of countermeasures as it has\ncalculated it with reference to FY 2006, but also the formula through which this amount is calculated,\nsuch that it could be applied to the \"most r ecent fiscal year\" elapsed at the time of taking\ncountermeasures, in order to adjust on an annual b asis the amount of countermeasures to be applied.\nThe Arbitrator also notes that the United States does not dispute that it would be permissible for the\nlevel of appropriate countermeasures to be determined through a formula, provided that this formula\nwas sufficiently well defined so as to make it applicab le in a transparent and predictable manner. The\nArbitrator will therefore take these considerations into account in its determinations.\nB. M\nAIN ARGUMENTS OF THE PARTIES\n4.6 Brazil's methodology for the calculation of a ppropriate countermeasures with respect to\nGSM 102 payments, as explained in its Methodology Paper, encompasses two elements: (i) the\ninterest rate discounts secured by creditworthy and non-creditworthy foreign obligors on credits\nbacked by GSM 102 guarantees and (ii) the estimated additional export sales obtained by\nUS exporters as a result of these discounts.\n96 Brazil refers to the interest rate discounts as the \"interest\nrate subsidy\" and to the additional export sales obtained by creditworthy and non-creditworthy foreign\nobligors as \"marginal additionality\" and \"full additionality\" respectively.\n4.7 Brazil applies this methodology to its estimate of GSM 102 export credit guarantees in\nFY 2006 and arrives at an annual countermeasure of US$1.155 billion. This amount can be\nsubdivided into (i) interest rate subsidy amounti ng to US$237.4 million, (ii) marginal additionality\namounting to US$62.3 million, and (iii) full additionality amounting to US$855 million.\n4.8 Brazil explains that \"the amount of the subsid y must be based on the legal standard that\nvalues the subsidy in full, which incl udes all \"benefits\" conferred thereby\".97 Brazil indicated that the\nlegal benefit standard was that provided for under Article 1.1(b) of the SCM Agreement.98\n4.9 The United States observes that Article 4.10 of the SCM Agreement provides for\ncountermeasures that are \" 'appropriate' to th e prohibited subsidy finding of the panel\". 99 In the view\nof the United States, \"appropriate connotes th e relationship between countermeasures and the\nparticular circumstances of a given case\". 100 For the United States, \"the appropriate countermeasures\nare those that have a concrete basis in the specifi c findings adopted by the DSB\" and \"in this case, the\n\n94 US comments on Brazil's responses to questions from the United States, question 1, para. 2.\n95 US comments on Brazil's responses to questions from the United States, question 1, para. 4.\n99 US written submission, para. 24.\n100 US written submission, para. 24.\n\nadopted findings support only Brazil's theory that th ere was a net cost to the US Government. Both\nthe original panel and the compliance panel specifica lly refused to reach Brazi l's alternative theory\nthat there was a subsidy under Articles 1.1 and 3.1( a), namely a financial contribution that provided a\nbenefit based on export performance. As such, th e appropriate countermeasures are those that are\nbased on the net cost to the US Government. Any other countermeasures do not have their foundation\nin the specific circumstances of this case.\"101\n4.10 The United States further explains that previous ar bitrations have determined that, in the case\nof prohibited export subsidies, the amount of th e subsidy is a proper basis upon which appropriate\ncountermeasures may be calculated, and that, in this particular case, the appropriate methodology is to\nuse the amount of the subsidy as reflected in net cost to government.102\n4.11 The United States thus considers that the amount of countermeasures must be equal to the net\ncost to the US Government of the GSM 102 guarantee programme, because the DSB's\nrecommendations and rulings are based only on fi ndings that the United States conferred export\nsubsidies via GSM 102 because the programme opera ted at a net cost to the US Government. 103 It\noffers to calculate the extent of any prohibite d subsidy based on the net cost of the GSM 102\nguarantees to the US Government. In addition, the United States considers that \"a reduction must be\nmade\", as \"Brazil may only take such countermeasu res with respect to the impact of the alleged\nsubsidy on itself. If Brazil were permitted to take countermeasures for the entire amount of the\nsubsidy, it would create a conflict for other Memb ers who may have an interest in the GSM 102\nprogram\".104 The United States also claims that Brazil's methodology is based on \"numerous and\nincorrect assumptions\" that result in a figure higher than is appropriate under Article 4.10 of the DSU.\n4.12 Brazil responds that the cost-to-government sta ndard used by the compliance panel in the\nunderlying proceedings represented the lowest comm on denominator that the parties agreed would\nestablish the existence of a prohibited export subsidy. 105 In contrast, Brazil argues, an assessment of\n\"appropriate\" countermeasures based on the amount of the subsidy may not be based on a legal\nstandard that constitutes this lowest common denominat or. Brazil states that in this arbitration, the\nArbitrator must determine the amount of the US export subsidies, and although the existence of a\nsubsidy may be established using any relevant lega l standard, the amount of the subsidy must be\nbased on the legal standard that values not the lowest common denominator, but the subsidy in full.106\n4.13 Brazil further explains that the US position that \"appropriate countermeasures\" must be\nassessed by reference to a breakeven cost-to-gove rnment benchmark under item (j) is premised on\npartial implementation, through par tial withdrawal of the export subs idies, and thus is based on an\nincorrect interpretation of the term \"withdraw\". 107 In Brazil's view, the US position is also premised\non an incorrect interpretation of the term \"appropriate countermeasures\". Brazil, with reference to the\nAppellate Body's rulings in the US – Continued Suspension and Canada – Continued Suspension\ncases, considers that countermeasures would not serve as an \"appropriate\" alternative to full\nimplementation – nor encourage compliance – if they were based on a legal benchmark that involved\nless-than-full implementation.\n108 Brazil argues this because removal of the cost to the government of\nrunning the GSM 102 programme would not result in withdrawal of the subsidy constituted by the\nprogramme.\n\n101 US written submission, para. 25.\n102 US written submission, para. 28.\n103 US written submission, para. 16.\n104 US written submission, para. 107.\n\nC. MANDATE OF THE ARBITRATOR AND BURDEN OF PROOF\n4.14 We recall that Article 4.10 of the SCM Agreement provides as follows:\n\"In the event the recommendation of the DSB is not followed within the time-period\nspecified by the panel, which shall commence from the date of adoption of the panel's\nreport or the Appellate Body's report, the DSB shall grant authorization to the\ncomplaining Member to take appropriate 9 countermeasures, unless the DSB decides\nby consensus to reject the request.\"\n(original footnote ) 9 This expression is not meant to allow countermeasures that are\ndisproportionate in light of the fact that the subsidies dealt with under these provisions are\nprohibited.\n4.15 In addition, Article 4.11 of the SCM Agreement defines our mandate as follows:\n\"In the event a party to the dispute requests arbitration under paragraph 6 of\nArticle 22 of the Dispute Settlement Unde rstanding ('DSU'), the arbitrator shall\ndetermine whether the countermeasures are appropriate.10\"\n(original footnote ) 10 This expression is not meant to allow countermeasures that are\ndisproportionate in light of the fact that the subsidies dealt with under these provisions are\nprohibited.\n4.16 As noted by the arbitrator on US – FSC (Article 22.6 – US) , \"these two provisions\ncomplement each other, and the arbitrator's ma ndate in relation to countermeasures concerning\nprohibited subsidies under Article 4 of the SCM Agreement is defined, quite lo gically, with reference\nto the notion embodied in the underlying provision in Article 4.10\". Accordingly, \"the expression\n\"appropriate countermeasures\" defines what measur es can be authorized in case of non-compliance,\nand our mandate requires us to review whether, in proposing certain measures to take in application of\nthat provision, the prevailing Member has respected th e parameters of what is permissible under that\nprovision\".\n109\n4.17 In this case, we must therefore determine wh ether the countermeasures proposed by Brazil in\nrespect of the GSM 102 payments are \"appropriate\" within the meaning of Articles 4.10 and 4.11 of\nthe SCM Agreement. At this stage of our analysis, we c onsider this question exclusively from the\nperspective of the proposed level of countermeasures. We will consider the question of the form in\nwhich Brazil proposes to take these countermeasures in Section V below.\n4.18 The United States considers that Brazil's pr oposed countermeasures are not \"appropriate\"\nbecause the terms \"appropriate countermeasures\" in Article 4.10 of the SCM Agreement require the\ncountermeasures to be calculated, in the circumst ances of this case, on the basis of the cost to\ngovernment of the subsidies at issue, and not on the \"benefits\", as defined by Brazil in the context of\nthese proceedings. Brazil considers that this US position rests on an improper interpretation of the\nterms \"appropriate counterme asures\". We must therefore in the fi rst instance clarify the meaning of\nthe terms \"appropriate countermeasure s\" under Article 4.10 and 4.11 of the SCM Agreement, in order\nto assess whether the United States is correct in argu ing that the approach proposed by Brazil in this\ncase is inconsistent with the terms of these provisions. The United States has also challenged the\ndetails of the methodology and calculations th rough which Brazil arrives at its proposed\ncountermeasures.\n\n109 Decision of the Arbitrator, US – FSC (Article 22.6 – US), para. 4.3.\n\n4.19 The United States agrees that, as the party cha llenging the proposed countermeasures, it bears\nthe burden of demonstrating that the countermeasur es proposed by Brazil are not \"appropriate\" within\nthe meaning of Article 4.10 of the SCM Agreement.110\n4.20 The United States observes, however, that Braz il is obligated to provide the evidence to\nsupport the facts it advances in support of its argu ments and to provide the relevant facts for the\nArbitrator to fulfil its mandate.111\n4.21 We note that the arbitrator on Brazil – Aircraft (Article 22.6 – Brazil) found that the party\nobjecting to the proposed countermeasure bears the burden to establish a prima facie case or\npresumption that the countermeasures are not \"appr opriate\" within the meaning of Article 4.11 and\nthat it is then up to the party proposing the countermeasures to rebut that case or presumption.112 This\nallocation of the burden of proof has been confirme d in subsequent proceedings under Article 22.6 of\nthe DSU and Article 4.10 of the SCM Agreement.113\n4.22 We therefore find that the United States b ears the initial burden of establishing the\ncountermeasures are not \"appropriate\". If that initia l burden is discharged, Brazil will then have an\nopportunity of rebutting the conclusion that the countermeasures are not appropriate.\n4.23 This allocation of burden of proof does not a lleviate the burden on each party to establish the\nfacts that it alleges during the proceedings. As observed by the Arbitrator in US – FSC (Article 22.6 –\nUS), \"it is generally for each party asserting a fact, whether complainant or respondent, to provide\nproof thereof\".114 Accordingly, it is also for Brazil to pr ovide evidence in support of the facts that it\nadvances. The Arbitrator will consider all the evidence and arguments provided by both parties\n(United States and Brazil) to determine whether th e proposed countermeasures are \"appropriate\", in\nline with the principles we have set out concerning burden, and the evidence.\n4.24 The United States further considers that if it meets its burden of proof, and the\ncountermeasures as proposed by Brazil are found not to be appropriate, the Arbitrator is then not\nlimited to agreeing or disagreeing with an approach or a calculation that has been submitted by either\nof the parties. Rather, the Arbitrator's task is to determine, in the case of prohibited subsidies,\n\"appropriate countermeasures\". 115 Brazil also observes that, if the United States succeeds in\nestablishing that Brazil's formula does not meet the applicable legal standard, the Arbitrator can\nconsider adjustments to Brazil's formula, or if none are possible, alternative formulae. 116 Brazil\nfurther notes that, while the Arbitrator enjoys flex ibility to make adjustments to Brazil's formula,\nBrazil expects that in the interest of due process, the Arbitrator would offer the parties the opportunity\nto comment on any material departures it wishes to explore.117\n4.25 We agree that, in the event that we find that Brazil's proposed countermeasures are not\n\"appropriate\" within the meaning of Article 4.10 of the SCM Agreement, we would be required also to\ndetermine what would constitute \"a ppropriate\" countermeasures. This would enable the complaining\nparty to seek an authorization consis tent with our decision, as foreseen in Article 22.7 of the DSU. In\n\n110 US responses to questions from the Arbitrator, question 41, para. 49.\n111 US responses to questions from the Arbitrator, question 41, para. 50.\n112 See Decision by the Arbitrators, Brazil – Aircraft (Article 22.6 – Brazil), paras. 2.8-2.9.\n113 See Decisions by the Arbitrator, US – FSC (Article 22.6 – US) , para. 2.8 and Canada – Aircraft\nCredits and Guarantees, para. 2.5.\n114 Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 2.11.\n115 US responses to questions from the Arbitrator, question 70, para. 3.\n116 Brazil's responses to questions from the Arbitrator, question 70, para. 6.\n117 Brazil's responses to questions from the Arbitrator, question 70, para. 8. See also the US comments\n\norder to fulfil this part of our mandate, we may be required to adopt an approach or methodology that\ndiffers from those proposed by the parties.\n4.26 We now turn to a consideration of the terms of the applicable legal standard for the review of\nBrazil's countermeasures, before considering Brazil's proposed countermeasures in light of these\ndeterminations.\nD. T\nHE NOTION OF \"APPROPRIATE COUNTERMEASURES \" UNDER ARTICLE 4.10 OF THE\nSCM AGREEMENT\n4.27 We first turn to the interpretation of the term s \"appropriate countermeasures\", as contained in\nArticles 4.10 and 4.11 of the SCM Agreement.118\n4.28 As noted above, Article 4.10 of the SCM Agreement provides, with respect to prohibited\nsubsidies, that:\n\"[T]he DSB shall grant authorization to th e complaining Member to take appropriate 9\ncountermeasures ...\"\n(original footnote ) 9 This expression is not meant to allow countermeasures that are\ndisproportionate in light of the fact that the subsidies dealt with under these provisions are\nprohibited.\n4.29 The same terms are reflected in Article 4.11, which defines the mandate of the Arbitrator\nunder Article 22.6 of the DSU in relation to re quests for countermeasures concerning prohibited\nsubsidies.\n4.30 Article 4.10 of the SCM Agreement is a \"special or additional rule\" identified in Appendix 2\nof the DSU. Article 1.2 of the DSU provides that \"t o the extent that there is a difference between the\nrules and procedures of this Understanding and the special or additional rules and procedures set forth\nin Appendix 2, the special or additional rules and procedures in Appendix 2 shall prevail\".\n4.31 The terms of Article 4.10 of the SCM Agreement, as a \"special or additional rule and\nprocedure\", should be interpreted on their own terms. It is clear th at the terms may embody different\nrules, which would prevail in case of conflict. Nonetheless, Article 22.6 of the DSU remains relevant,\nas the general legal basis under which the proceedi ngs are conducted. Indeed, Article 4.11 of the\nSCM Agreement refers expressly to Article 22.6 of the DSU as the legal basis for arbitral proceedings\nconcerning countermeasures in relation to prohibited subsidies.\n4.32 We note that the terms of Article 4.10 of the SCM Agreement have been interpreted in three\nprevious cases, and we will refer to these rulings as appropriate. Nonetheless, given the centrality of\nthis question to our analysis, and in light also of the fact that the parties' different views as to Brazil's\nproposed countermeasures stem in part from diverg ing interpretations of the terms \"appropriate\ncountermeasures\", we find it necessary to clarify from the outset our interpretation of these terms.\n4.33 The terms of Article 4.10 of the SCM Agreement, like other provisions of the WTO covered\nagreements, should be interpreted in accordance with the customary rules of interpretation of public\ninternational law. In particular, as reflected in Article 31.1 of the Vienna Convention on the Law of\nTreaties (the \"Vienna Convention\"), \"a treaty shall be interpreted in good faith in accordance with the\nordinary meaning to be given to the terms of the tr eaty in their context and in the light of its object\n\n118 Throughout this Section of the Decision, re ference is made to the terms \"appropriate\ncountermeasures\" as containe d in Article 4.10 of the SCM Agreement. It is understood that these terms are\nassumed to have the same meaning also in Article 4.11 of the SCM Agreement.\n\nand purpose\". For the sake of clarity, it is useful to start the analysis with the terms of the provision\nfirst, and to then turn to its context, object and purpose.\n1. The terms \"appropriate countermeasures\" and the terms of footnote 9\n(a) \"countermeasures\"\n4.34 We note at the outset that the term \"counterm easures\" is used to designate retaliatory\nmeasures in the WTO Agreement only in the SCM Agreement. This contrasts with the terms of\nArticle 22 of the DSU, which refers to the \"sus pension of concessions or other obligations\".\nHowever, it is not argued by either party in these proceedings that the term \"countermeasures\" would\ndesignate, in the SCM Agreement, anything other than a temporary suspension of certain obligations,\nand this is what we understand the term to refer to.\n4.35 The prefix \"counter-\" can be defined as meaning \"against, in return\". 119 The Oxford English\nDictionary further cites the term \"counter-measure\" as an illustration of a situation in which this prefix\nis used to indicate something that is \"[d]one, directed, or acting against, in opposition to, as a\nrejoinder or reply to another thing of the same kind already made or in existence\". Another dictionary\ndefines the term \"countermeasure\" as an \"action or device designed to negate or offset another\".120\n4.36 Brazil draws attention to the fact that the te rm \"countermeasures\" refers to measures taken\n\"against\" something, to \"counteract\" something. In the context of Article 4.10 of the SCM Agreement,\nBrazil notes, the term refers to \"retaliatory action that counters a respondent's failure to \" withdraw\" a\n\"prohibited\" subsidy\".121 The United States appears to agree with this basic premise.122 In light of the\ndefinitions noted above, we also agree that \"count ermeasures\" are, in essence, measures taken to\n\"counteract\" something, and specifically, in the context of Article 4.10 of the SCM Agreement,\nmeasures taken to act against, or in response to, a failure to withdraw a prohibited subsidy within the\nrequired time period.\n4.37 In Brazil's view, the dictionary meanings of this term further indicate that it refers to\nretaliatory action that goes \"beyond the mere rebalancing of trade interests\". 123 The United States, on\nthe contrary, highlights that definitions of the term \"counter\" include notio ns of balance and of\nduplication, so that an appropriate countermeasu re would be one that would \"balance out the\ninconsistency or duplicate the loss of concessions resulting from the breach\".124\n4.38 We are not convinced that the use of the te rm \"countermeasures\" necessarily connotes, in and\nof itself, an intention to refer to retaliatory ac tion that \"goes beyond the mere rebalancing of trade\ninterests\"125, as Brazil suggests. As noted above, the term indicates that the action is taken in response\nto another, in order to \"counter\" it. This does not necessarily connote, in our view, an intention to \"go\nbeyond\" a rebalancing of trade interests. Indeed, we are not convinced that the dictionary meanings\nof the term, in and of themselves, provi de any compelling guidance as to the exact level of\ncountermeasures that may be permissible under Article 4.10 of the SCM Agreement. We note that the\nterm \"countermeasures\" is also used in Article 7.9 of the SCM Agreement, where the permissible level\nof countermeasures is defined with reference to the adverse effects of the violating measure.\n\n119 Oxford English Dictionary, at www.oed.com.\n120 Merriam Webster Dictionary, at www.merriamwebster.com.\n122 See US responses to questions from the Arbitrator, question 43, para. 56: \"the \"countermeasures\"\nare to \"counter the inconsistency with the SCM Agreement.\"\n124 US responses to questions from the Arbitrator, question 43, para. 56.\n\n4.39 Brazil also refers to the use of the term \"c ountermeasures\" in public international law, as\nreflected in the Draft Articles on State Responsibility of the International Law Commission (ILC)126,\nas an \"additional interpretative consideration\", to highlight that, \"under the ILC Articles,\ncountermeasures are taken with the goal of encouragin g – 'inducing' – the responsible State to comply\nwith its obligations, without making it impossible to comply, and without punishing the\nrespondent\".\n127\n4.40 We note that the term \"countermeasures\" is the general term used by the ILC in the context of\nits Draft Articles on State Responsibility , to designate temporary measures that injured States may\ntake in response to breaches of obligations under international law.128\n4.41 We agree that this term, as understood in public international law, may usefully inform our\nunderstanding of the same term, as used in the SCM Agreement.129 Indeed, we find that the term\n\"countermeasures\", in the SCM Agreement, describes measures that are in the nature of\ncountermeasures as defined in the ILC's Draft Articles on State Responsibility.\n4.42 At this stage of our analysis, we therefore find that the term \"countermeasures\" essentially\ncharacterizes the nature of the measures to be authorized, i.e. temporary measures that would\notherwise be contrary to obligations under the WT O Agreement and that are taken in response to a\nbreach of an obligation under the SCM Agreement. This is also consistent with the meaning of this\nterm in public international law as reflected in the ILC Articles on State Responsibility.\n4.43 As to the permissible level of countermeasures that may be authorized under Article 4.10 of\nthe SCM Agreement, this is, in our view, primarily define d through the term \"appropriate\" and the\nwording of footnote 9.\n(b) \"appropriate\"\n4.44 Article 4.10 of the SCM Agreement requires the countermeasures th at may be authorized in\nresponse to the absence of timely withdrawal of a prohi bited export subsidy to be \"appropriate\". This\nterm is in turn informed by footnote 9, which clarifies that \"this expression ['appropriate\ncountermeasures'] is not intended to allow countermeasu res that would be disproportionate in light of\n\n126 The International Law Commission was established by the UN General Assembly for the promotion\nof the progressive development of international law and its codification. The Commission adopted in 2001 a set\nof draft articles on responsibility of States for interna tionally wrongful acts consistin g of 59 articles as well as\ncommentaries thereto. The General Assembly, in re solution 56/83 of 12 December 2001, as recommended by\nthe Commission, took note of the articles on responsibility of States for internationally wrongful acts, the text of\nwhich was annexed to the resolution, commended them to the attention of Governments without prejudice to the\nquestion of their future adoption or other appropriate action. See http://www.un.org/law/ilc/.\n128 See http://untreaty.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf.\n129 We also note however that, by their own terms, the Articles of the ILC on State Responsibility do\nnot purport to prevail over any specific provisions relating to the areas it covers that would be contained in\nspecific legal instruments. We note in particular the following Commentary of the ILC:\n\nIn common with other chapters of these artic les, the provisions on countermeasures are\nresidual and may be excluded or modified by a special rule to the contrary (see article 55).\nThus, a treaty provision precluding the suspension of performance of an obligation under any\ncircumstances will exclude countermeasures with respect to the performance of the obligation.\nLikewise, a regime for dispute resolution to which States must resort in the event of a dispute,\nespecially if (as with the WTO dispute settlemen t system) it requires an authorization to take\nmeasures in the nature of countermeasures in response to a proven breach.\n\nthe fact that the subsidies at issue are prohibited\". We will first consider the term \"appropriate\",\nbefore turning to how it is informed by the terms of footnote 9.\n4.45 Dictionary definitions of the adjective \"appropria te\" include: \"Specially fitted or suitable,\nproper\"130 and \"especially suitable or compatible: fitting\".131 \"Fitting\", in turn, can be defined as \"of a\nkind appropriate to the situation\". The terms \"fit, suitable, meet, proper, appropriate, fitting, apt,\nhappy, felicitous\" are further identified as synonyms that mean \"right with respect to some end, need,\nuse, or circumstance\".132\n4.46 These definitions suggest that the adjective \"a ppropriate\" conveys the notion of something\nbeing \"adapted\" or \"suited\" to the particular situa tion at hand. This very general indication does not\nprovide explicit guidance as to the exact parameters that legitimately may be taken into account in\nassessing the \"appropriateness\" of countermeasures in the context of Article 4.10 of the\nSCM Agreement. Rather, the term suggests that countermeasures should be \"adapted\" to the particular\ncircumstances, and thus that there may be a de gree of legitimate variability in what may be\n\"appropriate\", depending on the circumstances of the case. To that extent, we agree with the\nUnited States that the term \"appropriate\" \"connotes the close relationship be tween countermeasures\nand the particular circumstances of a particular case\".\n133\n4.47 Brazil, for its part, likens the term \"appropriate\" to the term \"reasonable\", in that it \"similarly\ninvolves 'a degree of flexibility'\", and that \"the word requires the treaty interpreter to consider all of\nthe circumstances of a particular case in assessing whether the respondent has demonstrated that\nproposed countermeasures are inappropriate\". 134 Leaving aside for now the question of the burden to\nbe discharged by the responding Member in arbitral proceedings, we agree that the term \"appropriate\"\nsuggests that \"all of the circumstances of a part icular case\" should be taken into account in assessing\nthe \"appropriateness\" of proposed countermeasures, a nd that it also suggests a degree of flexibility in\nwhat might be considered \"appropriate\" in a given case.\n4.48 With these general considerations in mind, we must now determine what types of\nconsiderations may be relevant in assessing what might constitute \"appropriate\" countermeasures in\nthe circumstances of a particular case, as inferred from the terms as used in Article 4.10 of the\nSCM Agreement.\n4.49 The United States argues that the appropriate count ermeasures are those that have \"a concrete\nbasis in the specific findings adopted by the DSB\". In this case, in the United States' view, the\nappropriate countermeasures are those based on the net cost of government and \"any other\ncountermeasures do not have their foundation in the specific circumstances of this case\". 135 Brazil\nconsiders that \"in the absence of a prescribed standa rd, what is \"appropriate\" must be defined with\nrespect to the situation envisaged in Article 4 – namely the non-compliant Member's failure to\nwithdraw a prohibited subsidy\". 136 For Brazil, \"in assessing whet her proposed countermeasures are\n\"appropriate\", the treaty interpreter must take into account that they involve retaliatory action against,\nand in opposition to, the responding Member's failure to withdraw an act expressly characterized as\nper se prohibited\".137\n\n130 \"appropriate, ppl. a. and n.\", Oxford English Dictionary, at www.oed.com, definition 5.\n131 www.merriam-webster.com.\n132 www.merriam-webster.com.\n133 US written submission, para. 24.\n135 US written submission, para. 25.\n\n4.50 Brazil further argues that the appropriateness of the countermeasures must also be considered\nin light of the particular characteristics of the su bsidy to be withdrawn: its prohibited nature, its\namount, its terms and conditions of grant, its beneficial impact on the respondent's exports, and\nwhether it is still being granted despite th e DSB's recommendations and rulings requiring\nwithdrawal.138 Finally, Brazil considers that the circ umstances of the dispute also include the\nrespective situations of the prevailing and the non-compliant Member: 139 \"Countermeasures are\neconomic measures taken by one Member in response to another Member's failure to implement the\nDSB's recommendations and rulings. The individual and the relative situations of the two Members\nare, therefore, pertinent in assessing whether countermeasures are fitting and suitable in the\ncircumstances.\"140\n4.51 We agree that a number of the circumstances identified above may, a priori, be pertinent to\nan assessment of whether proposed countermeasures are \"appropriate\". However, we must consider\nfurther how the circumstances of a given case should be taken into account. For this purpose, we find\nit useful to consider the context in which countermeasures arise.\n4.52 The imposition of countermeasures provides temporary redress to the successful complaining\nMember for the situation arising from the continued violation of the covered agreements, pending full\nimplementation of recommendations a nd rulings of the DSB. As observed by the Appellate Body in\nUS – Continued Suspension, \"the suspension of concession[s] is the last resort available to a Member\nwho has successfully challenged the consistency with the covered agreements of another Member's\nmeasure\".141 This remedy is \"contingent and limited in time\".142\n4.53 The essence of the task of determining what might constitute \"appropr iate countermeasures\"\nunder Article 4.10 of the SCM Agreement is to seek to quantify the countermeasures that a\ncomplaining Member is entitled to take in response to the continued existence of a prohibited subsidy.\nThis response will take the form of a suspension of concessions or other obligations otherwise owed\nto the violating Member under the covered agreements. In other words, the complaining Member will\nbe authorized to take certain measures adversel y affecting the trade opportunities of the violating\nMember, in response to an illegal measure taken by that Member, which has adversely affected its\nown trade opportunities.\n4.54 These circumstances define importantly, in our view , the elements to be taken into account in\ndetermining what may constitute \"a ppropriate countermeasures\" in a given case. This question must\nnecessarily be understood with reference to the par ticular dispute at issue. The question is what\ncountermeasures will be \"appropriate\" for that complainant in the specific dispute at hand. This\nimplies that it is appropriate to take into account not only the existence of the violation in itself, but\nalso the specific circumstances that arise from the breach for the co mplaining party seeking to apply\ncountermeasures. This is consistent with the or dinary meaning of the term \"appropriate\", which\nimplies a degree of variability in the level of count ermeasures according to th e circumstances, rather\nthan a fixed quantum.\n4.55 As the arbitrator on US – FSC (Article 22.6 – US) noted, the existence of a prohibited export\nsubsidy granted and maintained inconsistently with the SCM Agreement \"has, in itself, the effect of\n\n139 Brazil explained later in response to a question from the Arbitrator that it had not taken these\nspecific aspects into account in its assessment of its proposed level of countermeasures, but rather in its\ndetermination of the form in which it would seek to re taliate. See Brazil's responses to Questions from the\nArbitrator, Question 16(b), para. 165.\n141 Appellate Body Report, US – Continued Suspension, para. 317.\n142 Appellate Body Report, US – Continued Suspension, para. 303.\n\nupsetting the rights and obligations between the par ties, irrespective of what might be, as a matter of\nfact, the actual trade effects on the complainant\".143\n4.56 In addition, the continued maintenance of a prohibited export subsidy is likely to have a trade-\ndistorting impact. It is in the very nature of an export subsidy that it is likely to distort trade in favour\nof the exporters of the subsidizing Member. Although such trade-distorting effects need not be\nestablished in order to find a violation of the relevant provisions of the SCM Agreement, it is precisely\nthe high likelihood of such trade-distorting effects arising from the granting of export subsidies that\nexplains their prohibition under the SCM Agreement.\n4.57 The actual economic consequences of the breach may vary significantly from case to case. In\nparticular, the trade-distorting impact of a prohibited export subsidy may vary depending on the\nnature and design of the subsidy as well as various other economic factors. The trade of other WTO\nMembers can be affected, and usually is affected, to varying degrees as a result of the granting and\nmaintenance of illegal subsidies. The extent to wh ich the complaining party is adversely affected by\nthe trade-distorting impact arising from the illegal subsidy may accordingly vary from case to case.\n4.58 The trade-distorting impact of the prohibited subsidy at issue on the complaining Member\neffectively reflects the manner in which the economi c position of the complaining party to the dispute\nhas been disrupted and harmed by the illegal measure. This provides a measure of the extent to which\nthe balance of rights and obligations between th e parties has been upset by the granting and\nmaintenance of the prohibited subsidy at issue. This is necessarily, in our view, a central\nconsideration in determining what may constitut e \"appropriate countermeasures\" to be applied\nbetween such two parties.\n4.59 We also note that this interpretation also tak es into account the \"partic ular characteristics of\nthe prohibited subsidy that should have been w ithdrawn, including terms and conditions\", which\nBrazil argues should be taken into account.\n144 The trade effects that arise from the subsidy directly\nreflect the manner in which the subsidy operates on the market, and therefore its particular\ncharacteristics.\n4.60 We further note that an interpretation that would not take due account of the extent to which\nthe complaining Member has been affected by the illegal measure would lead to the result that\ncountermeasures could in principle be identical, irre spective of whether the Member at issue has been\nsignificantly affected or not at all by the measure at issue. This would not be consistent, in our view,\nwith the ordinary meaning of the term \"appropriate \", which implies a degree of variability according\nto the circumstances. In our view, this would not be respected, if a situation where the complaining\nMember suffers significant trade-distorting impact as a result of the measure were a priori to be\nconsidered to be identical to a situation where it suffers no trade-distorting impact.\n4.61 Brazil emphasizes the fact that the prohibition of export subsidies is a per se prohibition that\ndoes not require a demonstration of adverse effects.\n145 It considers that it is the prohibited nature of\nthe subsidy rather than the harm to the complainant that is the focus of \"appropriate\" countermeasures\nunder Article 4.10 of the SCM agreement.146\n4.62 In our view, the fact that it is not necessary to determine the extent to which the complaining\nMember is adversely affected by a subsidy in orde r to find that such subsidy is prohibited does not\n\n143 See Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 5.23.\n144 Brazil's responses to questions from the Arbitrator, question 16(a), para. 164.\n145 See Brazil's written submission, para. 40.\n146 See Brazil's responses to questions from the Arbitrator, question 15, para. 158.\n\nimply that this question is not relevant to a dete rmination of the level of countermeasures that would\nbe \"appropriate\" for that complaining Member to apply in the circumstances of the case.\n4.63 The initiation of dispute settlement proceedings in relation to a prohibited subsidy is not\nconditioned on the demonstration, by the complainin g Member, of adverse trade effects (on itself or\non other Members). Under the terms of Article 4 of the SCM Agreement, \"whenever a Member has\nreason to believe that a prohibited subsidy is bei ng granted or maintained by another Member, such\nMember may request consultations with such other Member\". This does not imply, however, that the\nmanner in which the complaining party is affected by the breach is not relevant to dispute settlement\nproceedings, or that it should not be an importa nt consideration in determining the level of\ncountermeasures that may be applied by the complain ing Member, if the dispute reaches the stage of\nauthorizing such countermeasures.\n4.64 In fact, this distinction is found in dispute settlement proceedings under the DSU generally.\nThe notion of \"nullification or impairment of benefits\" accruing to Members under the covered\nagreements underlies the initiation and conduct of dispute settlement proceedings throughout the\nDSU, but a quantification of the level of nullification or impairment arising from a measure\ndetermined to be inconsistent w ith a covered agreement (in other words, the adverse impact arising\nfrom the inconsistent measure) only becomes necessar y at the stage of authorizing a suspension of\nconcessions or other obligations in case of non-compliance.\n4.65 Under the terms of Article 3.3 of the DSU:\n\"The prompt settlement of situations in wh ich a Member considers that any benefits\naccruing to it directly or indirectly under the covered agreements are being impaired\nby measures taken by another Member is es sential to the effective functioning of the\nWTO and the maintenance of a proper balan ce between the rights and obligations of\nMembers.\"\n4.66 Article 3.8 of the DSU further provides that when a violation has been determined to exist,\nthis is considered prima facie to constitute a case of nullification or impairment, so that \"there is\nnormally a presumption that a breach of the rules has an adverse impact on other Members parties to\nthat covered agreement\".\n147\n4.67 A demonstration of the level of nullification or impairment arising from the inconsistent\nmeasure for the complainant is therefore not a sep arate requirement to establish the existence of a\nviolation. This question only becomes relevant in the context of determination of the level of\ncountermeasures to be authorized in case of non- compliance, as such countermeasures are required\nnot to exceed the level of nullification or impairment, under Article 22.4 of the DSU.\n4.68 Under the terms of Article 30 of the SCM Agreement, both Article XXIII (which contains the\ninitial reference to nullification or impairment of benefits accruing to a Member as the basis for the\ninitiation of dispute settlement proceedings) and the DSU are applicable to dispute settlement\nproceedings under the SCM Agreement, except as otherwise specifically provided in that Agreement.\n4.69 We note in this respect the determination of the original panel in this case that:\n\"Under Article 3.8 of the DSU, in cases where there is an infringement of the\nobligations assumed under a covered agreemen t, the action is considered prima facie\nto constitute a case of nullification or impair ment. We conclude that, to the extent\n\n147 Article 3.8 of the DSU.\n\nthat the United States has acted inconsiste ntly with the covered agreements, it has\nnullified or impaired benefits accruing to Brazil under these agreements.\"148\n4.70 This makes it clear that the findings of violation in this dispute gave rise to a presumption that\nbenefits accruing to Brazil under the SCM Agreement have been nullified or impaired by the breach.\nThe question of the manner in which Brazil's in terests have been adversely affected by the\ninconsistent measure is therefore not absent fro m the initial stages of the proceedings, but the\nexistence of the breach is a sufficient consideration, at that stage, to conclude that Brazil's benefits\nunder the agreements have been nullified or impaired . In other words, it is assumed from the very\nexistence of the breach that Brazil's interests ar e adversely affected, but it is not necessary to quantify\nthis for the purposes of determining that a violation exists and recommending that the Member\nconcerned withdraw the inconsistent measure.\n4.71 However, when the dispute reaches the st age of authorizing countermeasures and of\nquantifying the level at which the complaining pa rty should be entitled to suspend concessions or\nother obligations otherwise owed to the responding Member, the question of the extent to which the\ninterests of the complaining Member have been af fected becomes directly pertinent. As observed\nabove, the extent to which the complaining Member has been adversely affected by the inconsistent\nmeasure provides a measure of the extent to which the balance of rights and obligations between the\ntwo parties has been upset by the offending measure.\n4.72 There is therefore no inconsistency between the fact that a prohibited subsidy is \" per se \"\nprohibited and our determination that the trade-dist orting impact of that measure on the complaining\nparty provides a basis from which to assess the a ppropriateness of proposed countermeasures in a\ngiven case. On the contrary, it seems to us that it follows logically from the sequence of procedural\nsteps leading to the authorization to suspend concess ions or other obligations that a consideration of\nthe manner in which the complaining Member is a dversely affected by the illegal measure, which\ndoes not need to play a central role in establishing the existence of a violation, would become a\ncentral consideration in assessing the level of countermeasures that such complaining Member would\nbe entitled to take in the absence of timely implementation.\n4.73 At this stage of the proceedings, it is the ve ry essence of the assessment to determine a level\nat which it would be \"appropriate\" for the comp laining party to adversely affect the trade\nopportunities of the violating Member through the suspension of certain obligations under the covered\nagreements. A consideration of the extent to whic h that complaining party has itself been adversely\naffected by the measure against which the counterm easures will be applied is manifestly pertinent to\nthis question.\n4.74 We fully recognize that Article 4.10 of the SCM Agreement is a special or additional rule that\nsets out a specific legal standard for the level of permissible countermeasures in cases relating to\nexport subsidies. We are therefore not limited by the terms of Article 22.4 of the DSU to a level of\ncountermeasures that would be \"equivalent to the le vel of nullification or impairment\". Rather, we\nmust consider the level of proposed countermeasure s on the basis of the legal standard contained in\nArticle 4.10 of the SCM Agreement, in terms of whether the proposed countermeasures are\n\"appropriate\" within the meaning of this provision.\n4.75 As we have observed above, it is the ordinary meaning of the term \"appropriate\" itself which\ncalls for attention to be given to the circumstances of the case and directs us to consider the trade-\ndistorting impact of the prohibited subsidy on th e complaining Member as a central aspect of these\ncircumstances. This does not mean, however, that th e legal standard contained in Article 4.10 of the\n\n148 Panel Report, para. 8.2.\n\nSCM Agreement is identical to that contained in Article 22.4 of the DSU. We recognize that there are\nsignificant differences between the two standards, which we will address in the next section.\n4.76 We find further confirmation for our interpre tation in the fact that, under GATT 1947, the\nterms \"appropriate in the circumstances\", which ar e used in Article XXIII of GATT to define the\npermissible suspension of concessions or other obliga tions, were interpreted ha ving regard to \"the\nequivalence to the impairment suffered\" by the complaining party as a result of the measures at issue:\n\"2. The Working Party was instructed by the CONTRACTING PARTIES to\ninvestigate the appropriateness of the measure which the Netherlands Government\nproposed to take, having regard to the equivalence to the impairment suffered by the\nNetherlands as a result of the United States restrictions.\n3. The Working Party felt that the appr opriateness of the measure envisaged by\nthe Netherlands Government should be cons idered from two points of view: in the\nfirst place, whether in the circumstances, the measure proposed was appropriate in\ncharacter, and secondly, whether the extent of the quantitative restriction proposed by\nthe Netherlands Government was reasonable, having regard to the impairment\nsuffered.\"149 (emphases added).\n4.77 In our view, this confirms that the term \"appr opriate\", in the context of a provision defining\nthe level of permissible countermeasures to be app lied by one Member against another in response to\na situation of continued violation, invites a consider ation of the level of impairment or injury suffered\nby the complaining Member as a result of the inconsistent measure.\n4.78 We further note the following observations of the arbitrator on EC – Bananas III (US)\n(Article 22.6 – EC):\n\"In our view, in light of the explicit refere nce in paragraphs 4 and 7 of Article 22 of\nthe DSU to the need to ensure the equivalence between the level of proposed\nsuspension and the level of the nullification or impairment suffered, the standard of\nappropriateness applied by the 1952 working party has lost its significance as a\nbenchmark for the authorization of the suspension of concessions under the DSU.\nHowever, we note that the ordinary meaning of ' appropriate', connoting 'specially\nsuitable, proper, fitting, attached or belonging to' 150, suggests a certain degree of\nrelation between the level of the proposed suspension and the level of nullification or\nimpairment, where as we stated above, the ordinary meaning of ' equivalent' implies a\nhigher degree of correspondence, identity or st ricter balance between the level of the\nproposed suspension and the level of nullifi cation or impairment. Therefore, we\nconclude that the benchmark of equivalence reflects a stricter standard of review for\nArbitrators acting pursuant to Article 22.7 of the WTO's DSU than the degree of\nscrutiny that the standard of appropriateness, as applied under the GATT of 1947\nwould have suggested.\"151 (emphasis added)\n4.79 We agree with the arbitrator in that di spute that \"the ordinary meaning of \" appropriate\",\nconnoting \"specially suitable, proper, fitting, attached or belonging to\" 152, suggests a certain degree of\n\n149 GATT Working Party Report, US – Suspension of Obligations.\n150 ( original footnote ) The New Shorter Oxford English Dictionary on Historic Principles (1993),\npage 103.\n151 Decision of the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), paras. 6.4 and 6.5.\n152 The New Shorter Oxford English Dictionary on Historic Principles (1993), p. 103.\n\nrelation between the level of the proposed suspensi on and the level of nullification or impairment\".\nWe also agree that, by contrast with the terms of Article 22.4 of the DSU, the term appropriate\nsuggests \"a certain degree of relation\" rather than exact identity between the two.\n4.80 With these determinations in mind, we must now consider what further guidance is provided\nby the terms of footnote 9 of the SCM Agreement, in order properly to understand the meaning of the\nexpression \"appropriate countermeasures\".\n(c) Footnote 9\n4.81 Footnote 9 of the SCM Agreement provides that:\n\"This expression is not meant to allow countermeasures that are disproportionate in\nlight of the fact that the subsidies dealt with under these provisions are prohibited.\"\n4.82 In Brazil's view, \"footnote 9 explains that the unlawful nature of the measure itself,\nirrespective of the effects that measure may have on a prevailing Member, informs the interpretation\nof the terms \"appropriate\" and not \"disproportionate\"; \"appropria te countermeasures\" counter a\nsubsidy that is unlawful in and of itself under the SCM Agreement and are not confined to countering\nonly the impact of that unlawful act on a prevailing Member\".\n153 Brazil considers that an assessment\nof proportionality under footnote 9 needs to take into account \"at the very least, all of the commercial\nand economic advantages that are conferred by a subsidy\".154\n4.83 The United States \"does not argue that a countermeasure is punitive every time it is even\nslightly greater than the adverse effects suffered by the complainant\". 155 However, it considers, at the\nsame time, that the requirement that the countermeasures not be \"disproportionate\" \"links this\nprovision to trade effects because the nullification or impairment caused by the measures (the metric\nused under Article 22 of the DSU) provides the b asis against which to judge whether the proposed\ncountermeasures are disproportionate.\" 156 The United States indicates that it \"has serious concerns\nwith those awards that would enable a Member to impose countermeasures in excess of the effect of\nthe subsidy on that Member\".157\n4.84 The terms \"not ... disproportionate in light of th e fact that the subsidies dealt with in these\nprovisions are prohibited\" either inform the mean ing of the expression \"appropriate countermeasures\"\nin Article 4.10, or qualify that meaning. Whether it \"informs\" or \"qualifies\" is ultimately a difference\nin perception which will not, in our view, affect our consideration of the expression.\n4.85 The very formulation of the footnote, i.e. \"this expression is not meant to allow\ncountermeasures that are disproportionate\" (emphasis added) indicates, in our view, that it serves to\nguard against an interpretation of the terms \"appropr iate countermeasures\" that would allow measures\nthat are \"disproportionate\". We therefore unders tand this proportionality requirement to be a\nprotection against excessive countermeasures. In other words, while the expression \"appropriate\ncountermeasures\" allows a degree of flexibility in assessing what may be \"appropriate\" in the\ncircumstances of a given case, this flexibility is not unbounded. As observed by the arbitrator on\nUS – FSC (Article 22.6 – US) , \"footnote 9 further confirms that, while the notion of \"appropriate\n\n153 Brazil's responses to questions from the Arbitrator, question 75, para. 36.\n154 Brazil's responses to questions from the Arbitrator, question 80, para. 53.\n155 US responses to questions from the Arbitrator, question 82, para. 24.\n156 US responses to questions from the Arbitrator, paras. 26 and 32.\n157 US responses to questions from the Arbitrator, question 90, para. 34.\n\ncountermeasures\" is intended to ensure sufficient fl exibility of response to a particular case, it is a\nflexibility that is distinctly bounded.\"158\n4.86 As noted earlier, countermeasures are an excepti onal, \"last resort\", remedy within the WTO\ndispute settlement system. Footnote 9, in our view, invites us to exercise caution and to ensure that\nthe response is \"measured\" and that the countermeas ures to be authorized do not result in a greater\ndisruption in the trade relations among Members and in the application of the WTO agreements than\nis warranted by the circumstances of the case at hand.\n4.87 This requirement confirms us in our view that countermeasures, in order to be \"appropriate\",\nshould bear some relationship to the extent to wh ich the complaining Member has suffered from the\ntrade-distorting impact of the illegal subsidy. Countermeasures are in essence trade-restrictive\nmeasures to be taken in response to a Member's application of a trade-distorting measure that has been\ndetermined to nullify or impair the benefits ac cruing to another Member. Countermeasures that\nwould ensure a relationship of proportionality between the extent to which the trade opportunities of\nthe Member applying the counterme asures has been affected and th e extent to which the trade\nopportunities of the violating Member will in turn be adversely affected would notionally restore the\nbalance of rights and obligations arising from the c overed agreements that has been upset between the\nparties. This would ensure a proper relationship between the level of the countermeasures and the\ncircumstances out of which the dispute arises.\n4.88 At the same time, we note that the terms \"not ... disproportionate\", like the term \"appropriate\",\ndo not require exact identity between the trade-dist orting impact of the measure and the level of\ncountermeasures to be authorized. The term \"appr opriate\" suggests a degree of flexibility, according\nto the circumstances, and the negative requirement that countermeasures \"not\" be \"disproportionate\"\nsimilarly suggests that a less than exact correspondence is sufficient.\n4.89 Although footnote 9 does not expressly state in relation to what the countermeasures should\nnot be \"disproportionate\", it indicates that the countermeasures should not be disproportionate \"in\nlight of the fact the subsidies dealt with under these provisions are prohibited\".\n4.90 As we have noted above, the existence of a pr ohibited subsidy which has not been withdrawn\nby the responding Member is the very reason for th e authorization of countermeasures. The question\nwe must consider is the relevance of the unlawful character of the subsidy, as such, to our assessment\nof the appropriateness of countermeasures under Article 4.10 of the SCM Agreement, in light of the\nterms of footnote 9. In this respect, we agree with the arbitrator on US – FSC (Article 22.6 – US) that:\n\"[T]his emphasis on the unlawful character of export subsidies invites ... a\nconsideration of the impact which this unl awful character may have, in itself. We\nnote in this respect that the maintenan ce of the unlawful measure by the Member\nconcerned – in violation of its obligations – has, in itself, the effect of upsetting the\nbalance of rights and obligations between th e parties, irrespective of what might be,\nas a matter of fact, the actual trade effect s on the complainant. We recall, in this\nregard, that the prohibition on export subsidies is a per se obligation, not itself\nconditioned on a trade effects test. Members are entitled to trade without other\nMembers resorting to export subsidies. In our view, the second part of the footnote\ndirects that this is in itself a required consideration when it comes to assessing\nwhether countermeasures are not disproportionate within the meaning of\nArticle 4.10.\"\n159\n\n158 Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 5.19.\n159 Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 5.23.\n\n4.91 We agree with this characterization of the second part of the footnote, which suggests that the\nprohibited nature of the subsidy at issue, in othe r words the existence of a breach of an obligation not\nto provide such subsidies, is a consideration to be taken into account in assessing the \"proportionality\"\nor lack of \"disproportion\" in the proposed countermeasures.\n4.92 In light of these determinations, we consider that countermeasures would be\n\"disproportionate\" if they were excessive, having rega rd to the extent to which the trade between the\nparties in dispute has been affected. In othe r words, countermeasures that do not have a proper\nrelationship to the extent to which the interests of the complaining Member have been adversely\naffected by the measure would be \"disproportionate\".\n4.93 At the same time, we bear in mind also that the footnote highlights \"the fact that the subsidies\ndealt with in these provisions are prohibited\", and in so doing asks us to take that factor into\nconsideration. This reminds us of the determinati on that the maintenance of the violating measure has\nhad the effect of upsetting the balance of rights and obligations between the parties.160\n4.94 In light of these considerations, we fi nd that, in considering whether proposed\ncountermeasures are \"appropriate\" and \"not ... dispropo rtionate\" within the meaning of Article 4.10, it\nis legitimate to give consideration also to the prohi bited nature of the subsidy, in itself. In this\ncontext, it is permissible that the assessment of the overall trade impact on the complaining Member\nnot be precise, nor that the countermeasure should be directly equivalent to that impact. The amount\nof the countermeasure must at least be within a range of permissibly \"appr opriate\" amounts, and its\nassessment can take into account a variety of fact ors which flow from the failure to withdraw the\nsubsidy and are relevant to the trade impact on th e complaining Member. Such a consideration would\ntherefore legitimately be an integral part of an assessment of whether pr oposed countermeasures are\n\"appropriate\" within the meaning of Article 4.10 of the SCM Agreement.\n2. The terms of Article 4.10 of the SCM Agreement in their context\n4.95 Article 4.10 of the SCM Agreement contains the legal standard for the level of\ncountermeasures in cases concerning prohibite d subsidies, while Article 7.9 of the SCM Agreement\ncontains the standard in relation to actionable s ubsidies, and Article 22.4 of the DSU contains the\nlegal standard for the level of suspension of con cessions or other obligations in relation to other\nWTO-inconsistent measures. These latter two provisions therefore provide the Arbitrator with useful\ncontext for understanding the terms of Article 4.10 of the SCM Agreement.\n4.96 Brazil notes that Article 4.10 and 4.11 of the SCM Agreement must be contrasted with\nArticle 22.4 of the DSU, which requires that action in response to non-compliance be \"equivalent to\nthe level of nullification or impairment\". 161 Brazil highlights that \"unlike the phrase 'equivalent to the\nlevel of nullification or impairment' in Article 22.4 of the DSU, the drafters did not prescribe a precise\nquantitative or qualitative benchmark for desi gning 'countermeasures' under Articles 4.10 and\nArticle 4.11\".162\n4.97 We agree that the term \"appropriate\", by contr ast to the terms \"equivalent to the level of\nnullification or impairment\", does not require us to engage in an exact exercise to work out the\ncorrespondence between the level of countermeasures to be authorized and a specific benchmark such\nas the level of nullification or impairment of benefits suffered by the complainant. We agree that this\ndifference in wording must be given meaning. The term \"appropriate\" in Article 4.10 of the\n\n160 See para. 4.55 above.\n\nSCM Agreement suggests a degree of flexibility and adaptation to the circumstances of the case that is\nnot found in Article 22.4 of the DSU.\n4.98 Similarly, within the context of the SCM Agreement, the terms of Article 4.10 contrast with\nthose of Article 7.9, which foresees, in rela tion to actionable subsidies, countermeasures\n\"commensurate with the degree and nature of the adve rse effects determined to exist\". Here too, the\nterms of Article 7.9, through this reference to the \"degree and nature of the adverse effects determined\nto exist\", point to a single specific benchmark as reference, and require the countermeasures to be\n\"commensurate\" with this benchmark, which is car efully defined in relation to the specific adverse\neffects that form the basis of the underlying fi ndings. These elements distinguish the terms of\nArticle 7.9 from the terms of Article 4.10. This difference can be understood in the broader context of\nthe SCM Agreement, where actionable subsidies may only be ch allenged to the extent that they result\nin certain enumerated adverse effects for other WT O Members. By contrast, prohibited subsidies are\nprohibited independently of any demonstration of adverse effects. In such cases, no specific \"adverse\neffects\" will have been \"determined to exist\" prior to the request for authorization to apply\ncountermeasures, and therefore there are none that could be referred to.\n4.99 The contrast between the formulations of Article 4.10 of the SCM Agreement and Article 22.4\nof the DSU and Article 7.9 of the SCM Agreement respectively is informative for the purposes of\nfurther clarifying the meaning of the terms \"appropriate countermeasures\" in their context.\n4.100 First, the different choice of terms, including within the SCM Agreement itself, highlights that\nthe lack of reference to a specific benchmark by which the level of countermeasures must be\nmeasured, and the flexibility that this affo rds, are specific to Article 4.10 of the SCM Agreement. A\nconscious decision has been made, in drafting the SCM Agreement and the DSU, to treat\ncountermeasures in relation to prohibited subsidies in a way that differs from other countermeasures.\n4.101 Secondly, we also note that the two specific benchmarks reflected in Article 22.4 of the DSU\nand Article 7.9 of the SCM Agreement both define the level of permissible countermeasures with\nexpress reference to the trade effects of the measure at issue, while Article 4.10 of the\nSCM Agreement does not. We see no reason to assume that the drafters, in choosing the more flexible\nterms \"appropriate countermeasures\", would have intended to endorse a more restrictive standard than\nthose reflected in the other two provisions em bodying other standards within the WTO Agreement\nfulfilling a comparable function. In particular, in li ght of the fact that, as highlighted by footnote 9,\n\"the subsidies dealt with under these provisions are prohibited\", it may be expected that the remedy\nforeseen with respect to such subsidies would be at least as encompassing as that foreseen with\nrespect to actionable subsidies that are not prohibite d but that have demonstrated adverse effects on\nother WTO Members.\n4.102 The notion of \"appropriate countermeasures\" must therefore, in our view, be understood to\npermit countermeasures that would at least reflect th e level of any adverse effects incurred by the\ncomplaining Member as a result of the granting and maintenance of the prohibited subsidy at issue.\nCountermeasures under Article 4.10 of the SCM Agreement would be \"appropriate \", and could not be\nconsidered to be \"disproportionate\" within the meani ng of that provision, if they were proportionate,\nor at least not disproportionate, to the adverse e ffects suffered by the complaining Member as a result\nof the prohibited subsidy at issue.\n4.103 Brazil highlights the specificities and the \"more st ringent\" character of the dispute settlement\nprovisions under the SCM Agreement for prohibited subsidies. 163 In Brazil's view, \"adopting a\nbenchmark tied to the \"economic disadvantage\" suffe red by a prevailing Member, or in other words,\nthe \"impact\" or \"effect\" of a prohibited subsidy on th at Member, would be fundamentally inconsistent\n\n163 See Brazil's written submission, para. 40.\n\nwith a proper interpretation of Articles 4.10 and 4.11 of the SCM Agreement\".164 In Brazil's view,\nthese provisions, unlike Article 22.4 of the DSU, do not limit countermeasures to the \"economic\ndisadvantage\" suffered by a complaining Me mber. Instead, the countermeasures must be\n\"appropriate\" and not \"disproportiona te\" in light of, for example, the nature of the prohibited\nsubsidy\".165\n4.104 We agree that \"appropriate countermeasures\" would entitle a complaining Member to\ncountermeasures that do not exactly reflect the adverse effects of the inconsistent measure on itself. It\nis clear also that the terms \"appropriate counter measures\" and footnote 9 contain no requirement of\nexact equivalence or \"commensurateness\" betw een such adverse effects and the level of\ncountermeasures. Furthermore, as we have de termined above, the terms of the footnote to\nArticle 4.10 of the SCM Agreement make it clear that it would be legitimate to specifically take into\naccount the prohibited nature of the subsidy, as such , in an assessment of th e permissible level of\ncountermeasures. At the same time, as we have determined above, we are not persuaded that this\nimplies that countermeasures under Article 4.10 of the SCM Agreement should bear no relationship to\nsuch effects, or could be \"disproportionate\" to th em, taking into account also the prohibited nature of\nthe subsidy.\n4.105 Both parties highlight the fact that Article 4.10, by contrast with Article 7.9 of the\nSCM Agreement, is concerned with subsidies that are prohi bited in themselves, so that it is that\nsubsidy itself, and not only its adverse effects, th at are of concern. Thus, Brazil argues that \"in\ndetermining whether proposed countermeasures are \"appropriate\", the prohibited nature of the subsidy\nis an important factor\". 166 Brazil emphasizes the fact that footnote 9 clarifies that the assessment of\n\"appropriate countermeasures\" and \"p roportionality\" is to be made \"i n light of\" the nature and legal\nstatus of the measure at issue. 167 Drawing also on footnote 9, the United States observes that\n\"'appropriate countermeasures' cannot be 'disproportionate' in light of the fact that the subsidies dealt\nwith are prohibited – in other words, it is not just the adverse effects caused by the subsidies that are\nof concern, as it is under Article 7. Rather, the subsidies themselves are of concern\".168\n4.106 In our view, the use of the term \"appropriate\" rather than a strict quantitative benchmark, the\nreference in footnote 9 to the prohibited status of th e subsidy at issue, as well as the contrast between\nthe terms of Article 4.10 of the SCM Agreement and other comparable provisions, confirm that\n\"appropriate countermeasures\" are not limited to a stri ct quantification of the adverse trade effects on\nthe complainant, and can take into account the entir ety of the situation at hand, including the gravity\nof the breach. 169 At the same time, we are not convinced that the absence of express reference in\nArticle 4.10 of the SCM Agreement to the level of nullification or impairment or to the adverse effects\narising from the prohibited subsidy necessarily implies th at considerations relating to the trade effects\nof the subsidy cease to be relevant in a determinati on of the level of countermeasures to be authorized\nunder Article 4.10 of the SCM Agreement. Rather, as we have determined above, we would expect\nthese considerations to be a central element of what is pertinent in an assessment of \"appropriateness\".\n\n164 Brazil's responses to questions from the Arbitrator, question 75, para. 34.\n165 Brazil's responses to questions from the Arbitrator, question 75, para. 35.\n167 Brazil's responses to additional questions from the Arbitrator, question 75, para. 36.\n168 US responses to questions from the Arbitrator, question 43, para. 55.\n169 Exactly calculating such effects is difficult, if not impo ssible, and is not what Article 4.10 calls for.\nA range of factors can be presented to an arbitrator, together with a number of calculation methods. The\narbitrator need not calculate direct equivalence, but instead may accept what th e arbitrator feels to be within the\nbounds of what is appropriate in the circumstances of the case. However, the legal approach must emanate from\nthe terms of the SCM Agreement, the economic principles applied must be logical and unified, and the claims\nconcerning the trade effects must be relevant and reasonable.\n\n4.107 We therefore read the difference in wording between Articles 4.10 of the SCM Agreement and\nArticle 22.4 of the DSU and Article 7.9 of the SCM Agreement respectively, and the use of the term\n\"appropriate\" in Article 4.10 of the SCM Agreement, to imply that an appropriate countermeasure is\nnot limited to exact equivalence with the level of its adverse trade effects on the complaining\nMember. Nonetheless, the considerations that ar e at the heart of determinations under these other\nprovisions are not irrelevant under Article 4.10 of the SCM Agreement. Rather, we read the terms of\nArticle 4.10 of the SCM Agreement as allowing greater flexibility in the context of countermeasures\ninvolving prohibited subsidies to take into account the specificities of the situation at hand, but always\nhaving regard to the impact of the illegal measure on the complaining Member.\n3. Object and purpose\n4.108 Brazil emphasizes that a purpose of countermeasures under Article 4.10 of the\nSCM Agreement is to induce compliance. In Brazil's vi ew, \"countermeasures are 'appropriate' and not\n'disproportionate' to the extent they provide [an] in centive [to reconsider its refusal to withdraw the\nsubsidy]\".170 The United States, for its part, considers that the objective of countermeasures is to\n\"rebalance rights and obligations\" and concludes th at the proportionality of countermeasures must be\nassessed having regard to the adverse effects of the measure on the complainant.\n4.109 We note that the objective of \"inducing complia nce\" in relation to retaliatory measures was\nfirst recognized in the context of proceedings un der Article 22.4 of the DSU. The arbitrator on EC –\nBananas III (US) (Article 22.6 – EC) thus found that:\n\"[T]he overall objective of compensation or the suspension of concessions or other\nobligations as described in Article 22.1:\n'Compensation and the suspension of concession or other obligations\nare temporary measures available in the event that the\nrecommendations or rulings are not implemented within a reasonable\nperiod of time. However, neither compensation nor the suspension of\nconcessions or other obligations is preferred to full implementation of\na recommendation to bring a measure into conformity with the\ncovered agreements. Compensation is voluntary and, if granted, shall\nbe consistent with the covered agreements.'\nAccordingly, the authorization to suspe nd concessions or other obligations is a\ntemporary measure pending full implementation by the Member concerned. We\nagree with the United States that this temporary nature indicates that it is the purpose\nof countermeasures to induce compliance. But this purpose does not mean that the\nDSB should grant authorization to suspend concessions beyond what is equivalent to\nthe level of nullification or impairment. In our view, there is nothing in Article 22.1\nof the DSU, let alone in paragraphs 4 and 7 of Article 22, that could be read as a\njustification for counter-measures of a punitive nature.\"\n171\n4.110 As the cited passage makes clear, the arbitrator in that dispute did not consider that the\nobjective of \"inducing compliance\" implied that this constituted the benchmark by which retaliatory\nmeasures may be quantified. Rather, the objective of inducing compliance defined the purpose of\nsuspension of concessions or other obligations, while the benchmark (in that case, Article 22.4 of the\nDSU) required that the level of suspension of concessions or other obligations should be in line with\nthe trade effects of the illegal measure on the complainant.\n\n170 Brazil's responses to questions from the Arbitrator, question 76, para. 41.\n171 Decision by the Arbitrators, EC – Bananas III (US) (Article 22.6 – EC), para. 6.3.\n\n4.111 This objective of suspension of concessions or other obligations under Article 22.4 of the\nDSU has been recently confirmed by the Appellate Body in US – Continued Suspension .172 P r i o r\narbitrators have also found that the objective of countermeasures under Article 4.10 of the\nSCM Agreement is to \"induce compliance\".\n173\n4.112 We agree that countermeasures under Article 4.10 of the SCM Agreement serve to \"induce\ncompliance\". However, it seems abundantly clear that this purpose does not, in and of itself,\ndistinguish Article 4.10 from the other comparable provisions in the WTO Agreement. \"Inducing\ncompliance\" appears rather to be the common pur pose of retaliation measures in the WTO dispute\nsettlement system, including in the context of Article 22.4 of the DSU. The fact that countermeasures\nunder Article 4.10 of the SCM Agreement serve to induce compliance does not in and of itself provide\nspecific indications as to the level of countermeasures that may be permissible under this provision.\n4.113 This distinction is also found under general rules of international law, as reflected in the ILC's\nArticles on State Responsibility, which have been referred to by Brazil in these proceedings.\nArticle 49 of these Draft Articles defines \"inducing compliance\" as the only legitimate object of\ncountermeasures, while a separate provision, Article 51, addresses the question of the permissible\nlevel of countermeasures, which is defined in relation to proportionalit y to the injury suffered, taking\ninto account the gravity of the breach.\n174\n4. Conclusion\n4.114 In conclusion, we have found that the terms \"appropriate countermeasures\", as informed by\nfootnote 9 of the SCM Agreement, entitle the complaining party to countermeasures that are suited to\nthe circumstances of the case. This can lead to a c ountermeasure being authorized at a level that is\nwithin the range of the trade-distorting impact that can fairly be said to arise for the complaining\nMember from the failure to withdraw the illegal measu re. We have also determined that footnote 9\nfurther invites us to ensure that the countermeasures to be authorized are not excessive, having regard\nto the extent to which the trade of the complain ing party has been affected, and taking into account\nalso the prohibited nature of the subsidy.\n4.115 Our interpretation, in our view, takes due account of the circumstances arising from the\ndispute at hand, including not only the prohibited nature of the subsidy at issue as such, but also the\nmanner in which that illegal measure adversely affects the interests of the complaining Member. We\nwish to emphasize that this in no way modifies the f act that the Member concerned is required by the\nrecommendations and rulings of the DSB to withdraw fully the subsidy at issue, which has been\ndetermined to be prohibited.\n4.116 It might be suggested that our Member-specific measurement of the trade-distorting impact of\nprohibited subsidies when assessing a countermeasure under Article 4.10 of the SCM Agreement\nlimits the extent of countermeasu res which can be imposed and du lls the effectiveness of such\nmeasures thereby making them less powerful for th e purpose of inducing compliance. However we\nare in no doubt that this is the correct interpretati on of Article 4.10, for all of the reasons we have\nmentioned. Whilst an authorized countermea sure addressing only the impacts on a complaining\nMember will always be of a lesser quantum than the one which would address the impacts on all\nMembers, this does not mean that authorized count ermeasures will not be effective or will not induce\ncompliance. The degree of the impact on the complaining Member might be quite significant, and the\n\n172 See Appellate Body Report, US – Continued Suspension, para. 309.\n173 See Decision by the Arbitrator, US – FSC (Article 22.6 – US) , para. 5.57; Decision by the\nArbitrator, Canada – Aircraft Credits and Guarantees (Article 22.6 – Canada), paras. 3.11 and 3.47.\n174 See http://untreaty.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf.\n\ncountermeasure itself might be quite powerful de pending on the trade relati onship of the parties\nconcerned.\n4.117 We also note that it is open to all Members who consider that their interests are affected by\nthe violating measure to initiate dispute settlement proceedings and ultimately, if the dispute should\nreach that stage, to seek \"appropriate\" count ermeasures that would take due account of the\ncircumstances in that dispute. We note in this respect the terms of Article 4.11 of the DSU, which\nprovides that a Member whose request to be joined in consultations initiated by another Member has\nbeen declined, and who considers that benefits accruing to it are being nullified or impaired, may\ninitiate its own consultations. We also note the possibility of several Members presenting multiple\ncomplaints about the same factual situation as for eseen in Article 9 of the DSU. In the event of\nmultiple complaints, the levels of \"appropriate\" countermeasures that could be attained would\naccordingly increase, thereby increasing the contri bution that the countermeasures can make to\n\"inducing compliance\".\nE. ASSESSMENT OF BRAZIL'S PROPOSED COUNTERMEASURES\n4.118 Having clarified the meaning of Article 4.10 of the SCM Agreement and what constitutes\n\"appropriate countermeasures\" under this provision, we now turn to an examination of the\ncountermeasures proposed by Brazil in relation to the GSM 102 programme.\n4.119 In approaching this determination, we reca ll our finding in paragraph 4.22 above that the\nburden rests on the United States to demonstrate th at the countermeasures proposed by Brazil are not\nappropriate. We also recall our findings in paragraph 4.107 above that the terms of Article 4.10 of the\nSCM Agreement allow a degree of flexibility in the appreciation of what may constitute \"appropriate\ncountermeasures\" within the meaning of Article 4. 10. We have also determined that the terms\n\"appropriate countermeasures\", as informed by footnote 9 of the SCM Agreement, entitle the\ncomplaining party to countermeasures that are suite d to the circumstances of the case, and that this\nmay at least counter the level of trade of the compla ining Member that is being adversely affected by\nthe illegal measure. We have also determined that th e footnote further invites us to ensure that the\ncountermeasures to be authorized are not excessive, ha ving regard to the extent to which the trade of\nthe complaining party has been affected, and taking into account also the prohibited nature of the\nsubsidy.\n4.120 With these determinations in mind, we now tu rn to a consideration of Brazil's proposed\ncountermeasures in relation to the GSM 102 programme.\n1. Main arguments of the parties\n4.121 Brazil describes its methodology for the calcu lation of its proposed countermeasures in\nrelation to the GSM 102 programme as a methodology to \"calculate countermeasures proportionate to\nthe annual amount of prohibited GSM 102 export credit guarantees issued for export transactions\ninvolving unscheduled products, rice, pig meat and poultry meat\". Brazil's methodology encompasses\ntwo elements: (i) the interest rate discounts secu red by creditworthy and non-creditworthy foreign\nobligors on credits backed by GSM 102 guarantees (\"in terest rate subsidy\" or IRS); and (ii)\nestimating the additional export sales obtained by US exporters as a result of these discounts 175\n(\"additionality\").\n4.122 Brazil has described this methodology as basi ng the amount of appropriate countermeasures\non the quantum of certain \"benefits\" flowing from prohibited GSM 102 subsidies. 176 I n B r a z i l ' s\n\n175 Brazil's written submission, para. 74 and Brazil's Methodology Paper, para. 5.\n176 Brazil's responses to questions from the Arbitrator, question 13, para. 145.\n\nwords, its methodology \"captures two distinct benefits conferred by GSM 102 ECGs – the preferential\ninterest rates granted to foreign purchasers of US goods and the additiona l exports generated by\nUS exporters as a result of the preferential financing enabled by the US Government guarantee\".177\n4.123 Brazil applies this methodology to its estimate of GSM 102 export credit guarantees in\nFY 2006 and arrives at annual countermeasures e qual to US$1.155 billion. This amount can be\nsubdivided into: (i) interest rate subsidy amounti ng to US$237.4 million, (ii) marginal additionality\namounting to US$62.3 million, and (iii) full additionality amounting to US$855 million.\n4.124 In the United States' view, Brazil's methodol ogy cumulates, without sufficient evidence,\n\"multiple alleged \"benefits\" (supposed interest rate subsidy and additional trade resulting from the\npurported interest rate subsidy)\". The United St ates argues that \"this collection of benefits is\nspeculative, and (particularly in li ght of the lack of evidence on add itionality and pass through) it is\nnot at all clear these are results of the \"wrongful act\" of the United States in providing the subsidy\".178\n4.125 The United States considers that the only basis for calculating appropriate countermeasures in\nthe circumstances of this case is the \"net cost to Government\". At the same time, the United States\nalso considers that this amount must then be adju sted to reflect the impact of the measure on Brazil. 179\nIn the United States' view:\n\"The amount of the subsidy may be used as a proxy for trade effects of the subsidy, in\nthe context of applying the special and additi onal rule of Article 4.11. However, both\nmethods to the amount of the subsidy put fo rward in this proceeding – the cost to\ngovernment approach previously used by the DSB and detailed by the United States\nand the erroneous benefits-plu s-additionality approach by Brazil – estimate the total\nsubsidy amount for the guarantees at issue fo r the entire program for the particular\nproducts at issue. Thus, both approaches result in an amount that serve as proxy for\nthe program's effects on the entire world, without regard for whether Brazil is\naffected by the subsidy.\nAccordingly, and consistent with the notion that a breach of WTO rules results in\nnullification or impairment of benefits accruing to a Member, a method of reducing\nthe total subsidy amount to only the portion affecting Brazil is necessary.\"180\n4.126 In effect, the United States asks the Arbitrator to use the amount of the subsidy as the\nprinciple that should be applied to working out th e quantum of the countermeasure; that the quantum\nis the net-cost to government; and that the net-cost then needs to be broken down further still so that\nthe only part of the net cost that is measured fo r the purposes of the quantum is that which affects\nBrazil. The United States therefore proposed a two- stage approach, first based on the \"amount of the\nsubsidy\" and then its \"trade effects\".\n2. Analysis by the Arbitrator\n4.127 Brazil has presented a methodology that it describes as intending to reflect the \"amount of the\nsubsidy\". The United States does not disagree with the choice of the \"amount of the subsidy\" as a\nstarting point for the calculations. However, it e ffectively considers that Brazil's approach to\ncalculating the amount of the subsidy is flawed. Specifically, it considers that Brazil's approach,\nwhich proceeds on the basis that the amount of th e subsidy should be based on the calculation of\n\n178 US responses to questions from the Arbitrator, question 43, para. 61.\n180 US responses to questions from the Arbitrator, question 104, paras. 86-87.\n\ncertain \"benefits\" arising from the GSM 102 programme , in fact cumulates various \"benefits\" in a\nspeculative manner. The United States also argue s that amounts claimed by Brazil are not, indeed,\n\"benefits\" under Article 1.1(b) of the SCM Agreement, contrary to Brazil's claim that they can be so\nconsidered. In the United States' view, the proper approach to a calculation of the \"amount of the\nsubsidy\" should be, instead, the \"net cost\" to th e US Government of granting the GSM 102 subsidies,\nbecause that is the legal basis on which the underlying findings in this case were made. Furthermore,\nthe United States considers that this amount should then be adjusted, in order to reflect only that part\nof the net cost which impacted on Brazil.\n4.128 We recall our earlier determination that our ma ndate requires us to consider whether the\ncountermeasures proposed by Brazil are \"appropriate \" within the meaning of Article 4.10 of the\nSCM Agreement. We also recall that the United States, as the party challenging these proposed\ncountermeasures, bears the burden of demonstrating that they are not appropriate. The starting point\nfor our analysis will be to explain the countermeasu res as proposed by Brazil. Having done that, we\nwill then consider the United States ' argument that Brazil's proposed \"benefits\" approach in fact does\nnot accurately reflect the \"amount of the subsidy\" as Brazil argues.\n4.129 Should we determine that the United St ates has established that Brazil's proposed\ncountermeasures as presented (or any element of th em) would not be \"appropr iate\", then we would\nneed to determine whether the United States proposal was itself \"appropriate\", or whether a different\nmethodology for that purpose is required to wo rk out what would constitute \"appropriate\ncountermeasures\" in the circumstances of this case.\n(a) Brazil's proposed \"benefits\" approach\n4.130 Brazil has described its methodology for calcu lating its proposed countermeasures as being\nbased on a calculation of the \"amount of the subsid y\". The United States does not disagree with this\napproach as a starting point for the calculation of proposed countermeasures, although it considers\nthat this amount should be sub sequently adjusted for the impact of the subsidy on Brazil alone.\nHowever, the United States also considers that Brazil's methodology for the calculation of the\n\"amount of the subsidy\" does not correctly reflect this amount.\n4.131 In addressing this issue, we find it useful to cl arify first the notion of \"amount of subsidy\"\nupon which both parties rely in their arguments as a basis for the calculation of \"appropriate\ncountermeasures\" under Article 4.10 of the SCM Agreement. We will then consider the US challenge\nto Brazil's proposed approach to the determination of the \"amount of the subsidy\".\n(i) The \"amount of the subsidy\" as a basis for the calculation of appropriate countermeasures\n4.132 In the three prior cases in which count ermeasures under Article 4.10 of the SCM Agreement\nhave been considered, the arbitrators had recourse to the \"amount of the subsidy\" as the basis for the\ncalculation of \"appropriate countermeasures\".181 This is also the principle on which Brazil purports to\ncalculate the level of \"appropriate countermeasu res\" in these proceedings. The United States, as\nalready noted above, does not disagree, as a matter of principle, with the use of the amount of the\nsubsidy as a starting point for the Arbitrator's analysis in this case.\n\n181 In Brazil – Aircraft (Article 22.6 – Brazil), the full payments made under the programme were used\na basis for the calculation. In US – FSC (Article 22.6 – US) , the calculation was based on the annual\nexpenditure by the US Government. Finally, in the Canada – Aircraft Credits and Guarantees (Article 22.6 –\nCanada) case, the amount of the subsidy was calculated on the basis of the benefit conferred by the loan, which\nwas found to correspond to \"the difference between the amount Air Wisconsin pays on the loan from EDC and\nthe amount Air Wisconsin would pay on a comparable commercial loan which that company could actually\nobtain on the market\" (Deci sion by the Arbitrator, Canada – Aircraft Credits and Guarantees (Article 22.6 –\nCanada), para. 3.60).\n\n4.133 The use of the \"amount of the subsidy\" in prior cases does not imply, however, that the\narbitrators in these earlier cases neces sarily considered that the \"amount of the subsidy\" was the only\nbasis on which \"appropriate countermeasures\" might have been calculated. In fact, as we understand\nit, the arbitrators in these cases took into account the fact that the legal standard embodied in\nArticle 4.10 of the SCM Agreement allows greater flexibility than those under Article 22.4 of the DSU\nor Article 7.9 of the SCM Agreement to tailor the countermeasures to the specific circumstances of the\ncase at hand, but did not exclude trade effects as a re levant consideration. In fact, in these decisions,\nsome form of consideration was given to the trade effects of the measure on the complaining\nMember.182 As the United States has acknowledged in these proceedings, \"while prior arbitrators\nconsidering requests for countermeasures for prohib ited subsidies have used an \"amount of the\nsubsidy\" approach, they also have acknowledged the \"trade effects\" approach\".183\n4.134 Subsidies may operate in a variety of ways, a nd, depending on the design of the subsidy, as\nwell as its actual operation on the market, the tr ade effects of the subsidy may be complex to\nestablish. This is well illustrated by the Canada – Aircraft Credits and Guarantees (Article 22.6 –\nCanada) and the US – FSC (Article 22.6 – US) cases. As we have observed above, the terms of\nArticle 4.10 of the SCM Agreement allow some flexibility in the manner in which \"appropriate\ncountermeasures\" might be calculated.\n4.135 This Arbitrator is not convinced, however, that an \"amount of subsidy\" approach, of itself and\nwithout adjustment, will always be consistent with the legal standard embodied in Article 4.10 of the\nSCM Agreement. Actually, we think that in most cases such an approach will not be \"appropriate\",\nnotwithstanding its convenience, from a calculation perspective, and its literal attraction, from a\n\"withdraw the subsidy\" perspective. As we ha ve determined above, a consideration of the\n\n182 In Brazil – Aircraft (Article 22.6 – Brazil), both parties suggested that the calculation could be based\non the amount of the subsidy. The arbitrator considered that this was \"appropriate\". The arbitrator however\nalso noted that it was of the view that \"a calculation ba sed on the level of nullification or impairment would, as\nsuggested by the calculation of Canada based on the harm caused to its industry, produce higher figures than one\nbased exclusively on the amount of the subsidy\" (Decision by the Arbitrators, Brazil – Aircraft (Article 22.6 –\nBrazil), para. 3.54.)\nIn US – FSC (Article 22.6 – US) , the requesting Member sought an authorization to take\ncountermeasures based on the amount expended by the subsidizing Member (the United States) in granting the\nsubsidy. The arbitrator, having previously dete rmined that the terms of Article 4.10 of the SCM Agreement did\nnot constrain countermeasures to trade effects, first considered the proposed countermeasures in relation to the\nprohibited subsidy, and considered that the counterm easures proposed by the European Communities could be\nconsidered \"appropriate\" within th e meaning of Article 4.10 of the SCM Agreement, \"on the basis of their\nrelation to the initial violating measure\". The arbitrator nonetheless then continued its analysis and considered\nthe proposed countermeasures on the basis of their relatio n to the trade effects of th e subsidy on the European\nCommunities, recalling its earlier findings that it had not interpreted Article 4.10 \"to preclude a Member from\ntaking countermeasures that are tailored to counter the ad verse effects it has suffered as a result of the illegal\nmeasure\" and that \"the expression 'appropriate counte rmeasures', in [its] view, would entitle the complaining\nMember to countermeasures which would at least counte r the injurious effect of the persisting illegal measure\non it.\"\nIn Canada – Aircraft Credits and Guarantees (Article 22.6 – Canada) , the Arbitrator first considered\nthe approach proposed by th e requesting Member (Brazil), based on th e adverse trade effects of the subsidy on\nBrazil on the basis of lost sales/competitive harm. It was only after determining that the assumptions underlying\nthe methodology proposed by the requesting Member were not valid and that this proposed methodology did not\njustify the level of countermeasures, that the arbitr ator turned to a calculation of the \"appropriate\"\ncountermeasures based on the amount of the subsidy. As we understand the ruling of the arbitrator in that case,\nit did not exclude, a priori, that a calculation based on the trade effects could be the basis for \"appropriate\ncountermeasures\". Rather, it is only because it was not persuaded that the actual cal culation of trade effects\nproposed by the requesting Member accurately reflected these trade effects, that it discarded the approach based\non trade effects as proposed by the requesting Member.\n183 US responses to questions from the Arbitrator, question 71, para. 5.\n\n\"appropriateness\" of countermeasures, and in partic ular the requirement for the countermeasures not\nto be \"disproportionate\", suggests that there should be a degree of relations hip between the level of\ncountermeasures and the trade-distorting impact of the measure on the complaining Member.\n4.136 As noted above, we do not exclude that, in particular circumstances, the complaining Member\ncould perhaps rightly claim that a countermeasu re in the amount of the subsidy would be\n\"appropriate\". However, in most cases, the trade- distorting impact of the subsidy on one or several\nother Members would not necessarily bear any particul ar relationship to the amount of the subsidy.\nAs observed by previous arbitrators, the amount of the subsidy may in fact be lower than its trade\neffects, and apportioning it would ordinarily exacerbate that likelihood.184 This amount therefore does\nnot seem to us to be a priori appropriate, nor is it necessarily propor tionate to the extent to which the\ntrade of the Member concerned is adversely aff ected. In these circumstances, it cannot be assumed\nthat the total amount of the subsidy is an appropriate measure of its trade effects, or even that it is\nnecessarily a relevant \"proxy\" for those effects.\n4.137 Complaining Members do have choices with resp ect to the amount of countermeasures they\nseek to impose, and it is the task of an arbitrat or to determine whether the choice leads to an\nappropriate outcome which is cons istent with the rights and obliga tions spelt out in the covered\nAgreements, the nature of the subsidy concerned a nd the remedy which is offered, and the balance\nstruck between the rights of all Members. We recall in this context our interpretation of\n\"appropriateness\" in the case of countermeasures agains t prohibited subsidies, in particular its less\nprecise quantitative constraints. In particular, we note our previous observation that a range of factors\ncan be presented to an arbitrator, together with a number of calculation methods. The arbitrator need\nnot calculate direct equivalence, but instead may accept what the arbitrator feels to be within the\nbounds of what is appropriate in the circumstance s of the case. The legal approach must emanate\nfrom the terms of the SCM Agreement, the economic principles applied must be logical and unified,\nand the claims concerning the trade effects must be relevant and reasonable.\n4.138 Notwithstanding these observations, in light of the fact that Brazil has proposed basing its\ncountermeasures on the principle that the amount of the subsidy is an \"appr opriate\" benchmark, and\nthat the United States does not challenge this as a st arting point for the calculation, we now examine\nBrazil's proposed methodology for the actual calculation of the amount of the GSM 102 subsidy.\n(ii) Brazil's \"benefits\" approach to the calculation of the \"amount of the subsidy\"\n4.139 Brazil purports to apply countermeasures on th e basis of the amount of the subsidy.\nAccording to Brazil, that amount comprises two subsidy \"benefits\" within the meaning of\nArticle 1.1(b) of the SCM Agreement:\n185 (i) the interest rate subsidies (\"IRS\") and (ii) the additional\nsales resulting from the GSM 102 payments.\n4.140 In response to a question from the Arbitrator, Brazil has explained that \"the amount of a\nsubsidy is the monetary value of the benefits, or in the Appellate Body's words, 'advantages',\nconferred by a financial contribution\" and that it \"proposes a formula that calculates the 'amount of\nthe subsidy', based on two distinct 'benefits' or 'adva ntages', from 'financial co ntributions' in the form\nof GSM 102 guarantees\". Thus, \"in these proceedings, Brazil's use of the term 'amount of the subsidy'\n\n184 See Decision by the Arbitrators, Brazil – Aircraft (Article 22.6 – Brazil) , para. 3.54: \"given that\nexport subsidies usually operate with a multiplying effect, (a given amount allows a company to make a number\nof sales, thus gaining a foothold in a given market with the possibility to expand and gain market shares), we are\nof the view that a calculation based on the level of nu llification or impairment would, as suggested by the\ncalculation of Canada based on the harm caused to its industry, produce higher figures than one based\nexclusively on the amount of the subsidy\". This passage is also cited by the arbitrator in US – FSC (Article 22.6\n– US), at footnote 88 of its Decision.\n\nis intended to be interchangeable with the cumu lative amount of these two advantages or 'benefits …\nconferred' by GSM 102 guarantees.\"186\n4.141 According to Brazil, \"using the terms of this provision\", the \"amount of the subsidy\" can be\ncalculated for the purposes of this case on the basis of the two \"benefits\" it identifies. 187 Brazil relies\non the interpretation of the notion of \"benefit\" under Article 1 of the SCM Agreement by the Appellate\nBody, and highlights in particular the fact that the Appellate Body has defined the term \"benefit\" as an\n\"advantage\" and that, in the words of the Appellate Body, \"there can be no \"benefit\" to the recipient\nunless the \"financial contribution\" makes the recipien t \"better off\" than it would otherwise have been,\nabsent any contribution\".188 Brazil concludes that the relevant question therefore is \"to what extent is\nthe recipient \"better off\" than it would have been absent the financial contribution?\"189\n4.142 Brazil considers that the two \"benefits\" that it identifies in relation to GSM 102 guarantees\nreflect advantages that the beneficiaries would not have secured in the marketplace in the absence of\nthe US Government's financial contribution. With r espect to the \"IRS\" component of its calculations,\nBrazil explains that \"through GSM 102 guarantees, discounted financing is provided, on terms that are\nbetter than could otherwise have been obtained. I ndeed, in some cases, no financing could have been\nobtained in the marketplace, because the foreign obligor is not creditworthy. These are valuable and\nmeasurable commercial and economic advantages that constitute a 'benefit'.\" 190 Brazil further\nexplains how the \"additionality\" component of its proposed countermeasures also constitutes a\n\"benefit\": \"through GSM 102 guarant ees, US exporters are able to export greater ('additional')\nquantities of agricultural commod ities than they would have exported in the absence of those\nguarantees. Again, these are valuable and measurable commercial and economic advantages that\nconstitute a 'benefit'.\"\n191\n4.143 The United States argues that Brazil's \"collection of benefits\" is \"speculative\" and that it is not\nat all clear these are the results of the \"wrongful act\" of the United States in providing the subsidy. 192\nThe United States notes that Brazil's arguments sugg est that any \"benefit\" that results from a subsidy\ncan be called a benefit. In the United States' view, \"for the purposes of this proceeding, it is necessary\nto be more precise because of the importance of these concepts in identifying a principle for an award\nof countermeasures. \"Benefits\" are those conferred by the governmental financial contribution. Other\nresults, such as trade effects, may occur. But th ese are not \"benefits\" within the meaning provided by\nthe SCM Agreement\".193\n4.144 The United States considers that what Brazil has described as \"benefits\" does not actually\nrepresent such \"benefits\" within the meaning of the SCM Agreement. We therefore consider whether\nthe two \"benefits\" described by Brazil in its me thodology for the calculation of the amount of the\nsubsidy do in fact constitute such \"benefits\" within the meaning of the SCM Agreement, as Brazil\nargues.\n4.145 Article 1.1 of the SCM Agreement defines the term \"subsidy\". 194 Under this provision, a\nsubsidy exists if there is a \"f inancial contribution by a government\" and \"a benefit is thereby\nconferred\" within the meaning of Article 1.1(b). The Appellate Body has clarified that benefit is\n\n186 Brazil's responses to questions from the Arbitrator, question 85, para. 74.\n187 Brazil's responses to questions from the Arbitrator, question 88, para. 97.\n188 Brazils' responses to questions from the Arbitrator, question 86, para. 76.\n189 Brazil's responses to questions from the Arbitrator, question 86, para. 77.\n190 Brazil's responses to questions from the Arbitrator, question 86, para. 78.\n191 Brazil's responses to questions from the Arbitrator, question 86, para. 79.\n192 US responses to questions from the Arbitrator, question 43, para. 61.\n193 US comments on Brazil's responses to questions from the Arbitrator, question 90, para. 68.\n194 Brazil's responses to questions from the Arbitrator, question 88, para. 97.\n\n\"identified by determining whether the recipient h as received a 'financial contribution' on terms more\nfavourable than those available to the recipient in the market\".195\n4.146 The parties disagree on the precise nature of the subsidization at issue in this proceeding.\nBrazil invites us to adopt a specific understanding of the term \"amount of the subsidy\" for the\npurposes of these proceedings, based on the notion of \"benefits\" contained in Article 1.1(b) of the\nSCM Agreement, and encompassing two distinct \"benefits \" in the form of the IRS and of\n\"additionality\". According to the United States, ther e is no basis for finding that any additional sales\nmade by US exporters constitute \"benefit\" w ithin the meaning of Article 1.1(b) of the\nSCM Agreement.\n4.147 The basic premise behind Brazil's argument is th at IRS and additionality are separate benefits\nconferred by the same financial contribution, i.e. the GSM 102 guarantee. 196 Benefit is established in\nthe first instance 197 by reference to the terms on which a fi nancial contribution is provided to the\nrecipient. This is consistent with the contex tual guidance afforded by Article 14 of the\nSCM Agreement, which provides guidelines for calculating the amount of a subsidy in terms of the\nbenefit to the recipient. The relevant financia l contribution in the present instance is the GSM 102\nloan guarantee. Consistent with the contextu al guidance afforded by Article 14(c) of the\nSCM Agreement, which deals specifically with loan guaran tees, Brazil says that the amount of benefit\nconferred by the GSM 102 loan guarantee is the \"difference between the amount that the firm\nreceiving the guarantee [i.e. the recipient] pays ... and the amount that the firm [i.e. the recipient]\nwould pay on a comparable commercial loan absent the government guarantee.\" We note that Brazil\ndetermined the amount of IRS by reference to \"the present value of the spread between (i) the interest\nrate at which those obligors would have been ab le to borrow in the absence of GSM 102 ECGs, and\n(ii) the subsidized interest rate enabled by those ECGs.\"\n198 In our view, this is broadly consistent with\nthe approach outlined in Article 14(c) of the SCM Agreement, in the sense that it calculates the\namount of interest rate subsidy to the recipient of the GSM 102 guarantee (noting that the recipient in\nthe first instance is a foreign obligor, and not a party in the United States itself).\n4.148 Having calculated the amount of benefit confe rred by the GSM 102 guarantees consistently\nwith Article 14(c) of the SCM Agreement, we do not see any other basis on which Brazil might\ncalculate some additional benefit conferred by those guarantees, as this term is defined for the\npurposes of Article 1.1 of the SCM Agreement. Since benefit is established in the first instance by\nreference to the recipient of a financial contribution, it is with regard to the recipient of the GSM 102\nguarantees, i.e. the foreign obligors, that the ex istence of any benefit conferred by the GSM 102\nguarantees must be established. Thus, having calcula ted the benefit conferred on the foreign obligors,\nBrazil has effectively exhausted the potential for establishing benefit conferred by those financial\ncontributions.\n199\n\n195 Appellate Body Report, Canada – Aircraft, para. 157.\n196 See, for example, para. 10 of Brazil's responses to questions (\"IRS and additionality are ... both\n\"benefit[s] ... conferred\" by a \"financial contribution\" in the form of a GSM 102 guarantee\").\n197 As discussed below, benefit may also be established, in the second instance, by virtue of the concept\nof \"pass-through\".\n199 Brazil has referred to the findings of the panel in Brazil – Aircraft (Article 21.5 – Canada II ) in\nsupport of its argument that GSM 102 guarantees confer an additional benefit on US exporters. That was a case\nin which the Brazilian Government provided export cred its through interest rate equalisation payments to\nentities financing exports of regional aircraft. Such pa yments enabled the lenders to offer better export credit\nterms than they would otherwise have been able to make available. Brazil relies in particular on the following\nextract from that panel's report:\n\"We note that PROEX III payments are made in support of export credits extended to the\npurchaser, and not to the producer, of Brazilian regional aircraft. In our view, however, to the\n\n4.149 Accordingly, we reject Brazil's argument that the additional sales resulting from the GSM 102\npayments constitute \"benefit\" within th e meaning of Article 1.1(b) of the SCM Agreement that should\nbe included within the amount of the GSM 102 guarantee subsidies in addition to the IRS benefit.\nAlthough such additional sales may ultimately be generated by GSM 102 guarantees, they are\nproperly viewed as trade effects that fall outside the definition of subsidy set forth in Article 1.1 of the\nSCM Agreement, and are not part of the \"amount of the subsidy\" for our purposes.\n4.150 In support of that proposition, we also note that both Article 1.1(a) and (b) cumulatively\ndefine what a \"subsidy\" is for the purposes of the SCM Agreement. It is not possible to determine that\na subsidy exists unless a financial c ontribution is made, being the criteri a referred to in Article 1.1(a).\nThus it is not enough for Brazil to argue that additiona lity is a \"benefit\" in order for it to be taken up\nin the calculation of the amount of the subsidy constituted by the GSM 102 guarantee. The Arbitrator\nnotes that the income from additional sales is not a financial contribution from a government (i.e. the\nUS Government), nor are foreign importers entrus ted or directed to make those payments (i.e.\npayments in respect of their purchases of products exported from the United States).\n4.151 Having determined that the basis upon which Brazil's methodology relies for the calculation\nof its countermeasures is more than the amount of the subsidy, because it considers \"benefits\" which\nextend outside the meaning of Article 1.1 of the SCM Agreement, we find that the United States has\nmet its burden of proof. The principle advanced by Brazil for the calculation of its proposed\ncountermeasures is flawed. Although advanced on an \"amount of subsidy\" basis, it also includes\nelements that do not constitute \"benefits\" within the meaning of Article 1.1(b) and instead reflects\n\nextent Canada can establish that PROEX III pa yments allow the purchas ers of a product to\nobtain export credits on terms more favourable than those available to them in the market, this\nwill, at a minimum, represent a prima facie cas e that the payments confer a benefit on the\nproducers of that product as well, as it lowers the cost of the product to their purchasers and\nthus makes their product more attractive relative to competing products.\" (Panel Report, Brazil\n– Aircraft (Article 21.5 – Canada II), footnote 42 (emphasis in original)).\nAlthough this extract does indeed refer to a benef it being conferred on producers, we do not consider\nthat, when viewed in its proper context, it provides any basis for finding that the additionality identified by\nBrazil constitutes \"benefit\" independent of, and additional to, the IRS benefit redounding to the foreign obligor.\nRather, Brazil – Aircraft (Article 21.5 – Canada II) concerns the case of benefit co nferred, in the first instance,\non the recipient of the financial contribution, \"passing through\", in the second instance, to other entities. Thus,\nprior to the abovementioned extract, the Brazil – Aircraft (Article 21.5 – Canada II) panel had noted that:\n\"As the SCM Agreement is an Annex 1A agreement on trade in goods, and as this case relates\nto alleged export subsidies in respect of a particular good -- Brazilian regional aircraft -- it is\nincumbent upon Canada to establish that the benefit derived from PROEX III payments is not\nretained exclusively by the lender but rather is passed through in some way to producers of\nregional aircraft.\"\n (Panel Report, Brazil – Aircraft (Article 21.5 – Canada II), footnote 41\n(emphasis added)).\nIn other words, because the SCM Agreement only imposes subsidy disciplines in respect of trade in\ngoods, and not trade in (financial) services, it was incu mbent on Canada \"to establish that the benefit derived\nfrom PROEX III payments is passed through in some way to producers of regional aircraft\" (emphasis added).\nIn this regard, the panel found that evidence that PROE X III payments \"allow the purchasers of a product to\nobtain export credits on terms more favourable than thos e available to them in the market ... will represent a\nprima facie case that the payments confer a benefit on the producers of that product as well ...\" (Panel Report,\nBrazil – Aircraft (Article 21.5 – Canada II), footnote 42 (emphasis in original)). This does not mean that the\nbenefit to the producers of regional aircraft was consider ed to be separate from, and in addition to, the benefit\nconferred in the first instance on the recipients of the financial contribution. Rather, the benefit conferred on the\nproducers was simply part of the benefit conferred in the first instance on the recipients of the financial\ncontribution that had passed-through, in the second instance, to the producers. In other words, the benefit\nconferred on the producers was fundamentally the same bene fit that had initially been conferred on the lenders,\nsimply viewed from a different perspective. Thus, although the IRS benefit conferred on foreign obligors might\nbe found to pass-through, in the second instance, to US exporters, the total amount of benefit conferred by the\nGSM 102 guarantees would not increase.\n\ncertain trade effects of the measure as well. Thus, even if we were convinced that the \"amount of the\nsubsidy\" approach was an a ppropriate benchmark for adjudgi ng the appropriateness of the\ncountermeasure sought by Brazil, we could not agree that Brazil's approach actually does measure that\namount, as a matter of legal principle.\n4.152 We also note that Brazil's principle does not ad mit of the need for the amount of the subsidy\nto be apportioned such that it only captures that pa rt of the subsidy which is responsible for the\nnullification or impairment felt by Brazil. If Brazil's \"benefits\"-based approach had been an\nappropriate starting point, we still would have had to determine whether the entirety of the \"amount of\nthe subsidy\" could be the amount of the counterme asure in circumstances where the impacts of the\nsubsidy were felt by more Members than only Brazil. Nonetheless we do not reach such a\ndetermination, either in considering whether th e United States has met its burden or in our own\nassessment of what can be \"appropriate\" in the circumstances of this case, and the point is moot.\n4.153 Accordingly, we find that the United States has discharged its burden of proving that the\ncountermeasure proposed by Brazil was inappropriate, in the way it was advanced to the Arbitrator.\nAccordingly we must now turn to the question of determining what would constitute a proper basis for\nthe calculation of \"appropriate countermeasures\" in this case. We consider first whether the\nalternative approach proposed by the United States is \"appropriate\".\n(b) The United States' proposed alternative \"net cost to government\" approach\n4.154 In this case, in the United St ates' view, the appropriate countermeasures are those based on\nthe net cost to government and \"any other c ountermeasures do not have their foundation in the\nspecific circumstances of this case\".200 At the same time, the United States considers that this amount\nshould then be adjusted to reflect the impact of the subsidy on Brazil only.\n4.155 The United States asserts that, because the origin al and compliance panel findings were based\nin relevant part on item (j) of the Illustrative List , that provision constitutes the only appropriate basis\nfor determining the amount of counter measures to be authorized. The United States contends that it\nwould not be appropriate to authorize countermeasures on the basis of the \"benefit\" standard proposed\nby Brazil.\n4.156 In the United States' view, this approach is consistent with that of the Appellate Body,\nbecause the underlying findings in this case were ba sed on item (j) of the Illustrative List of Export\nSubsidies under the SCM Agreement, and the Appellate Body has e xplained that \"the measure of\nvalue under item (j) is the overall cost to government, as the service provider, of providing the\nservice.\"\n201 The United States proposes to determine the \"cost to the Government\" of the GSM 102\nprogramme on the basis of the net present value approach followed by US Government agencies for\nall credit guarantee and direct loan programs.\n4.157 The United States refers to previous arbitrati ons in support of its proposition that the amount\nof the subsidy as reflected in its net cost to government is \"the\" appropr iate methodology for the\ndetermination of the quantum of \"appropriate c ountermeasures\" in this case. The United States\nexplains that \"previous arbitrations, several of which have also involved export financing or export\ncredits, have determined that, in the case of prohibi ted export subsidies the amount of the subsidy is a\nproper basis upon which \"appropriate countermeasures\" may be calculated. In this particular case, the\n\n200 US written submission, para. 25.\n201 US written submission, para. 26.\n\nappropriate methodology is to use the amount of the subsidy as reflected in net cost to\ngovernment.\"202\n4.158 For the reasons set forth below, we are unable to accept the United States' position.\n4.159 First, we note that, although the relevant findi ngs of the original and compliance panels were\nbased on item (j), the United States was actually found to be in violation of Article 3.1(a) of the\nSCM Agreement. Article 3.1(a) prohibits \"subsidies\" that are contingent on export performance. It is\nthe failure of the United States to withdraw such subsidies that has given rise to Brazil's right to\nimpose countermeasures. Furthermor e, the compliance panel agreed w ith the United States that the\ncost-to-government standard in item (j), and the be nefit standard in Article 1.1(b), were merely\n\"alternative arguments \" that could be examined in assessi ng whether the revised GSM 102\nprogramme constituted an export subsidy.203\n4.160 Secondly, item (j) was relied on in the origin al and compliance proceedings to determine the\nexistence of prohibited subsidies. It was not used to calculate the amount of those subsidies. In the\npresent case, the United States proposes item (j) as the only appropriate means of calculating the\namount of the GSM 102 subsidies. In our view, item (j) is not the only appropriate, or necessarily the\nmost appropriate, basis for doing so.\n4.161 Thirdly, we do not consider that there is any legitimate basis for us to accept the a contrario\ninterpretation of item (j) proposed by the United States. Item (j) is illustrative of a situation in which\nthe provision by governments of export credit guara ntee programmes constitutes an export subsidy.\nIn particular, item (j) specifies that export cred it guarantee programmes constitute export subsidies\nwhen premium rates are inadequate to cover the long-term operating costs and losses of the\nprogramme. It does not necessarily follow, though , that an export credit guarantee programme may\nnever constitute a (prohibited expor t) subsidy if the premium rates are adequate to cover long-term\noperating costs and losses. As a matter of law, it is possible that an item (j)-consistent export credit\nguarantee programme might still be found to confer a \"benefit\", on the basis of the standard set forth\nin Article 14(c) of the SCM Agreement.\n4.162 Finally, a related point is that amending the relevant premium rates to make GSM 102\nsubsidies consistent with item (j) will not necessarily ensure full withdrawal 204 of the prohibited\nexport subsidy. As noted above, the mere fact th at the GSM 102 is rendered consistent with item (j)\ndoes not exclude that the programme might neverthel ess continue to confer a \"benefit\" on the basis of\nthe standard set forth in Article 14(c). Sinc e Brazil would be entitled to continue to apply\ncountermeasures until the full benefit of the GSM 102 programme has been withdrawn, we do not\nconsider it appropriate to exclude consideration of the full amount of benefit when considering the\ninitial matter of the quantitative scope of such countermeasures.\n4.163 We therefore do not consider that the \"net cost to government\" approach proposed by the\nUnited States would provide a sound basis for the calculation of the \"amount of the subsidy\".\n\n202 US written submission, para. 28.\n203 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 14.51.\n204 In US – FSC (Article 21.5 – EC II), the Appellate Body confirmed fu ll withdrawal of the subsidy is\nrequired.:\n\"[The] recommendation under Article 4.7 remain s in effect until the Member concerned has\nfulfilled its obligation by fully withdrawing the prohibited subsidy. Where a Member\nwithdraws a prohibited subsidy only in part, it has failed to comply fully with its WTO\nobligation and the Article 4.7 recommendation con tinues to be in effect with respect to the\npart of the subsidy that has not been withdrawn. \"\n(Appellate Body Report, US – FSC (Article 21.5 – EC II), para. 83 (original emphasis)).\n\n4.164 In summary, at this stage of our analysis, we have determined that Brazil's methodology,\nwhich it describes as representing th e \"amount of the subsidy\" in the form of \"benefits\" within the\nmeaning of Article 1.1.(b) of the SCM Agreement, does not in fact represent such \"benefits\". We have\nalso determined that the United States proposed alte rnative calculation based on \"cost to government\"\nwould not constitute an appropriate basis for the ca lculation of the \"amount of the subsidy\" in the\ncircumstances of this case. We do not reach th e second stage of the approach advocated by the\nUnited States, which is to adjust the \"amount of the subsidy\", so as to reflect the effects of the subsidy\nonly on Brazil, and make no determination in that respect.\n4.165 Having thus determined that neither of the pa rties' proposed approaches is satisfactory, we\nmust consider further what would constitute \"appr opriate countermeasures\" in the circumstances of\nthis case. In approaching this determination, we consider that we are not bound by the approaches\npresented by the parties and are entitled, as n ecessary, to develop our own assessment and\nmethodology for the purposes of determining what would constitute \"appropriate countermeasures\".205\n4.166 Before we proceed with this assessment, however, we wish to make some general\nobservations on the approaches proposed by the parties in this case.\n4.167 Both parties have described their proposed approaches to the calculation of \"appropriate\"\ncountermeasures as being based on the \"amount of the subsidy\". Brazil considers that this amount is\nproperly reflected in the \"benefits\" of the IRS a nd \"additionality\", while the United States proposes to\nbase the countermeasures on the cost to the governme nt of the subsidy, and to then \"adjust\" it to\nreflect only the effects of the subsidy on Brazil.\n4.168 However, we are not persuaded that either party's approach was in fact purely based on the\n\"amount of the subsidy\". As we have determined above, Brazil's calculation of \"benefits\" includes\nnot only an amount that can be properly character ized as the \"benefit\" under Article 1.1 of the\nSCM Agreement (the IRS), but also an amount that may be more accurately described as reflecting the\n\"trade effects\" of the GSM 102 payments (additiona l sales having accrued to US exporters as a result\nof the GSM 102 payments). In fact, Brazil itself al so describes the two elements of its calculation as\nreflecting \"economic consequences\" of the GSM 102 paym ents. This is not the same, in our view, as\nthe \"amount of the subsidy\".\n4.169 The United States, for its part, proposes to use the amount of the subsidy as a starting point,\nbut considers that this should then be adjusted to reflect only the effects on Brazil. In response to a\nrequest for clarification from the Arbitrator, the Unite d States has explained that its approach is based\nboth on the \"amount of the subsidy\" and on the \"trade effects\" approach. The United States has also\nexplained that it uses the amount of the s ubsidy as a \"proxy\" for its trade effects.\n206 However, as we\nhave explained above, we see no pa rticular reason to assume that the amount of the subsidy would\nconstitute a relevant proxy for the total trade effects of the subsidy. As was noted by the arbitrator on\nUS – FSC (Article 22.6 – US) , \"the proxy approach proposed by the United States is based on no\nparticular economic rationale. It simply assumes a one-to-one correspondence of dollar of subsidy to\ndollar of trade impact. This is manifestly arbitrary.\"207\n4.170 In short, it seems to us that, while purporting to apply an approach based primarily on the\n\"amount of the subsidy\", both parties have in fact in corporated in their analysis elements that aim to\ncapture the trade effects of the measure, rather th an its \"amount\". Brazil addresses these effects in\nterms of quantifying the \"additional sales\" accruing to the United States as a result of the subsidy,\n\n205 See paras. 4.24 and 4.25 above.\n206 See US responses to questions from the Arbitrator, questions 104 and 105.\n207 Decision by the Arbitrator,US – FSC (Article 22.6 – US), para. 6.39.\n\nwhile the United States invites us to adjust the amount of the subsidy to capture only the impact of the\nsubsidy on Brazil.\n4.171 Both parties have therefore notionally relied on the notion of \"amount of the subsidy\" as a\nstarting point, but have de facto then proceeded to include a consideration of other elements. This\nconfirms us in our view that there is no particular basis for assuming, a priori, that the amount of the\nsubsidy alone adequately reflects the relevant circumstances, for the purposes of calculating\n\"appropriate\" countermeasures. The reference to the \"amount of the subsidy\" as the basis of an award\nin these conditions seems somewhat artificial to us, in the absence of a specific reason to approach the\nquestion in these terms in the dispute at hand. This also further comforts us in our view that a\nconsideration of the trade-distorting impact of the subsidy, which both parties have de facto relied on\nin their respective approaches (albeit in different forms), constitutes the most pertinent expression of\nthe consequences arising from the violation, for the purposes of quantifying \"appropriate\"\ncountermeasures.\n4.172 With these observations in mind, we now proceed with our own assessment of what may\nconstitute \"appropriate countermeasu res\" consistent with the requirements of Article 4.10 of the\nSCM Agreement, as we have interpreted it in Section IV.D above.\n(c) Approach of the Arbitrator\n4.173 In the event that we find that they are not cumulatively \"benefits\" within the meaning of\nArticle 1.1 of the SCM Agreement, Brazil considers that the IRS and \"additionality\" could nonetheless\nbe used together as the basis for the calculation, as \"distinctly measurable and valuable consequences\nof GSM 102 guarantees\". In Brazil's view, this would be appropriate \"in light of the nature and legal\nstatus of those guarantees\". Brazil suggests that, as well as being tailored to the specific\ncharacteristics of the GSM 102 programme, this approach may encourage the United States to\nreconsider its refusal to \"withdraw the subsidy\".\n208\n4.174 The United States considers that Brazil's s uggestion \"that an award could include both\namounts corresponding to the alleged amount of the subsidy and trade effects finds no support in\nprevious arbitrations. Arbitrator s have relied on the principle of \"trade effects\" or, in the case of\nprohibited subsidies, \"amount of the subsidy\" as th e basis for calculations. They have not added two\nsets of results of calculations as Brazil would do. Where arbitrators have considered two approaches,\nit has clearly been \"an 'either/or' choice\".209\n4.175 The United States argues that there would be no basis for adding the two elements of Brazil's\ncalculations as it suggests, i.e. the \"amount of the s ubsidy\" and its \"trade effects\". The United States\nobserves that \"Brazil's approach would permit both components to be included in an award because\nthey both may exist and be measured as a matter of economic theory.\" The United States observes\nthat \"the fact that different components may exis t is not a principle upon which the Arbitrator may\naward countermeasures. If that were the case, a party might accumulate multiple features of a subsidy\n(e.g. cost to government, benefit to the recipient, effects on exports) and include them all in the\ncalculation of countermeasures, without regard to whether they are 'appropriate' according to a\nprinciple such as 'amount of the subsidy' or 'trade effects'.\"\n210\n\n208 Brazil's responses to questions from the Arbitrator, question 71, para. 13.\n209 US comments on Brazil's responses to questions from the Arbitrator, question 71, para. 15.\n210 US comments on Brazil's responses to questions from the Arbitrator, question 72, para. 17.\n\n4.176 The United States also considers that to set an amount of countermeasures based on both\ncomponents would not be \"appropriate\" because that amount would be \"disproportionate\" to the level\nof nullification or impairment suffered by Brazil.211\n4.177 We agree that the amount of \"appropriate countermeasures\" may not be based simply on an\naddition of various economic values representing different aspects of the situation that would not have\nany particular underlying logic. Article 4.10 of the SCM Agreement both requires and allows\ncountermeasures to be appropriate to the circumstances at hand, and this may legitimately involve a\nconsideration of various aspects of these circumstance s. Nonetheless, there must be some principled\nand justifiable reason for basing the countermeasur es on a particular approach, in light of these\ncircumstances.\n4.178 We have determined in our inte rpretation of Article 4.10 of the SCM Agreement above that\nthe requirement that countermeasures not be \"dis proportionate\" cannot be e quated to a requirement\nthat these countermeasures be exactly equivalent to the level of nullification or impairment suffered\nby the complaining Member, and that the standard of \"appropriate countermeasures\" entails some\nadditional flexibility. Nonetheless, we are mindful that we are required, under Article 4.10 of the\nSCM Agreement, to ensure that the countermeasures are not \"disproportionate\" within the meaning of\nfootnote 9, and that this assessment should take into account the adverse effects of the subsidy on the\ntrade of the complaining Member, having regard also to the prohibited nature of the subsidy.\n4.179 In light of these considerations, we must determine whether, in the circumstances of this case,\nthere would be any particular rationale to usin g the IRS and \"additionality\" components of Brazil's\napproach as the basis for a determination of \"appropriate countermeasures\" as Brazil suggests.\n4.180 Brazil describes its calculations as representing \"distinctly measurable and valuable\nconsequences of GSM guarantees\", that could be the basis for an award of countermeasures. We do\nnot agree that \"valuable\" consequences of the gua rantees is a proper concept to apply, from Brazil's\nperspective, when attempting to work out the trad e distorting impacts of the guarantees. However the\nadvantages accruing to a subsidising Member may have a relationship to the trade distorting impacts\non other Members, and therefore in economic terms it is useful to analyse them more closely.\n4.181 We therefore consider whether the two elements of Brazil's calculation, i.e. the IRS and\n\"additionality\", may provide an appropriate starting poi nt for measuring the trade-distorting impact of\nthe GSM 102 programme, and thus provide a b asis for the calculation of \"appropriate\ncountermeasures\" consistent with the terms of Article 4.10 of the SCM Agreement, as we have\ninterpreted them in Section IV.D above.\n(i) The trade effects of the GSM 102 programme\n4.182 We recall our determinations above that the IRS can be properly characterized as the amount\nof the GSM 102 subsidy, while \"additionality\" refl ects rather its trade effects. Brazil divides\nadditionality, in turn, into full a dditionality (sales to non-creditworthy foreign obligors that simply\notherwise would not have been possible) and margin al additionality (sales to creditworthy borrowers\nwhere the IRS acts like a sales discount to foreign obligors).\n4.183 To elucidate the trade effects of the GSM 102 programme, we note that it operates as an\nexport subsidy albeit a targeted one: it is not a ge neralized subsidy on all US exports. Nonetheless,\nlike any export subsidy, it can be expected to aff ect both the volume of trade and the price at which\n\n211 US comments on Brazil's responses to questions from the Arbitrator, question 71, para. 16.\n\ntrade takes place. 212 The GSM 102 programme can potentially stimulate additional US exports and\ninfluence the price of those exports in the target markets. This illegally subsidized competition has\nadverse effects on producers and exporters in the rest of the world. The question before us is how to\nmeasure these adverse effects and whether the IRS and additionality concepts proposed by Brazil are\nhelpful in this respect. We first assess this ques tion in abstract terms before turning to the specific\ncircumstances of this case.\nTrade-distorting impact of GSM 102 on the volume of trade\n4.184 Brazil has defined additionality to mean \"additio nal economic activity for US exporters that\nwould not otherwise have occurred\". 213 Brazil allows that some US exports made with the support of\na prohibited GSM 102 export subsidy would have occu rred in the absence of the GSM 102 guarantee.\nIn response to a question from the Arbitrator, Br azil states that: \"Indeed for creditworthy foreign\nobligors, Brazil's additionality approach recognizes th at some US exports made with the support of a\nprohibited GSM 102 export subsidy would have occurred in the absence of the GSM 102\nguarantee\".214\n4.185 But this also implies that some of the exports would not have occurred in the absence of the\nexport credit guarantees. With respect to these other exports, there will be trade-distorting impacts on\nBrazil since the same economic forces would operate . A subsidy is conferred, which passes through\nto a lower effective sourcing price for US agricultural goods, resulting in trade-distorting impacts on\nproducers in the importing country or rest of the wo rld exporters selling to the importing country. In\nBrazil's view, the only difference is that, for the same amount of GSM 102 transactions, the trade-\ndistorting impact of the transaction will be smaller if the obligor is creditworthy because some of it\nwould have occurred in the absence of the subsidies.\n4.186 In fact, using its 'marginal additionality model', Brazil argues that all GSM-backed sales even\nto creditworthy foreign obligors are attributable to the IRS.\n215 The economic intuition behind this is\nBrazil's assumption that the demand curve facing US exporters with a small market share is\nessentially horizontal. Without the subsidy \"if the United States were to withdraw its GSM 102\nsubsidies …, US exporters would forfeit th eir price edge and, consequently, lose all GSM-backed\ntransactions to their worldwide competitors\"(emphasis added). 216 We review later whether we find\nthis a credible conclusion or not.\n4.187 We have considered the United States' argumen t that additionality means the net addition to\nworld demand as a result of the export credit guarantee subsidy. 217 In our view, a key problem with\nthe United States' definition is that it ignores increas ed US sales in the target markets due to trade\ndiversion.218 Therefore, for the purposes of our analysis, Brazil's definition of additionality as\n\n212 We judge it appropriate to assess the economic damage to a complainant by the potential amount\nand value of trade which might be affected by the policy intervention that is the subject of the complaint. We\nrecognize that economists also evaluate the impact of a policy measure in we lfare terms, i.e. in terms of how\nmuch better or worse off the policy makes the country under investigation. Trade effects arise in response to the\nreallocation of resources between alternative uses in response to a policy intervention. Since the\ncountermeasures to be authorized will be in terms of the suspension of a pa rticular amount of trade, we believe\nwe are justified in trying to calculate the allocation effects of the GSM 102 subsidies and not their welfare\neffects in assessing the appropriate level of countermeasures.\n214 Brazil's responses to questions from the Arbitrator, question 26, para. 311.\n215 Annex I to Brazil's written submission (\"Sumner-Sundaram Statement\"), paras. 1-2.\n216 Annex I to Brazil's written submission (\"Sumner-Sundaram Statement\"), para. 3.\n217 See especially Section II of Exhibit US-93.\n218 \"Any attempt to use additionality as a justificati on for export credits in a multilateral context must\nlimit the definition to only those cases where the expansio n in demand is global, with no reallocation in favour\n\nadditional US sales that would not otherwise have occurred is a more appropriate measure of the\nadverse consequences of the GSM programme. We concur with Brazil that GSM 102 subsidies\nenable transactions that simply would not otherwise have been possible.219\n4.188 Nonetheless, there are three issues in using Br azil's concept of additionality as a measure of\nthe trade-distorting impact of the GSM 102 pr ogramme on other countries which merit further\nconsideration. The first is the possibility that GS M-supported sales to a target market simply displace\ncommercial US exports to that market, implying th at these sales do not result in additional economic\nactivity for US exporters. Where \"net\" additiona l US sales are less than the gross value of\nGSM-backed transactions, then the adverse trad e effects on other countries are reduced. The\nUnited States points out that the theoretical absence of the GSM 102 programme would not\nnecessarily mean that the export transaction itself woul d not have occurred. It recalls that it is the\nforeign bank, not the importer, that is the recipient of the GSM 102 financing, and that in the absence\nof the programme importers coul d still shop around and obtain financ ing from a different bank, or\nindeed the same bank, to facilitate the transaction. 220 Brazil responds to this criticism by considering\ncreditworthy and non-creditworthy borrowers separat ely. In the case of creditworthy borrowers,\nBrazil accepts that, in principle, some displace ment of commercial US exports could occur and\nproposes its \"marginal additionality model\" to calculate this. We evaluate its use of this model below.\nIn the case of the non-creditworthy borrowers , it emphasizes the targeted nature of the\nGSM programme. It provides extensive documentati on of the statements by USDA and FAS and of\nregulations governing the GSM 102 programme. Under the rules of the scheme, export credit\nguarantees are only made available to finance exports that would not otherwise occur. Brazil says it is\nrelevant that the GSM regulations provide that \"the programs are operated in a manner intended not to\ninterfere with markets for cash sales\". 221 Because of these segmented markets, there is thus no\ninconsistency in observing US commercial and GSM exports to the same country. Where markets are\nsegmented, the Arbitrator accepts that it is reasonabl e to assume that it is not commercial US exports\nthat are displaced by GSM exports but rather third country exports and domestic production.\n4.189 Even if the GSM-supported sales to a particular market are indeed additional (i.e. they would\nnot have taken place in the absence of the prog ramme), a second criticism is that they may not\nrepresent additional US export sales if these sales are simply diverted from commercial US sales to\nanother market. We note that Brazil accepts this possi bility. It states: \"… it is reasonable to attempt\nto gain some insight about the magnitude of the offset caused by the indirect impact of GSM 102 on\nthe US exports destined for n on-eligible market segments\".\n222 Brazil goes on to provide a\nmethodology for doing this, but concludes \"that the o ffsetting displacement of commercial exports is\nlikely to be small\". 223 However, the calculation depends cr ucially on the figure assumed for the\ndomestic price increase in the United States as a result of GSM guarantees, and we have no firm\nevidence on the appropriate value for this.\n\nof one country. This definition omits those programmes which benefit a particular exporter partly at the expense\nof other countries' exports.\". (Exhibit US-92, p. 4, quoting the OECD study in Exhibit US-93, para. 42).\n219 Joint statement by Professor Daniel Sumner an d Rangarajan Sundaram regarding the United States'\ncritique of Brazil's approach to \"marginal additionality\", para. 9.\n220 US comments on Brazil's responses to questions from the Arbitrator, question 93, paras. 76-82.\n222 Brazil's responses to questions from the Arbitrator, question 92, para. 123.\n223 Brazil's responses to questions from the Arbitrator, question 92, para. 132. Using quite a high value\nfor the price effect of GSM export credit guarantees on US producer prices (0.5 per cent), it calculates a possible\nvalue for net additional US exports, it calculates that additional US exports for the ten commodities might\namount to US$870 million (if the price effect were smaller, this value would also be smaller). As the value of\nGSM transactions in 2006 was about US$1 billion, this would indeed suggest rather limited reshuffling of\nUS exports.\n\n4.190 In our view, however, it is not necessary to ta ke account of this effect when assessing the\ntrade-distorting effects of the prohibited subsidy. It may be true that, in some other markets, there is\nless competition from US commercial exports becau se these have been reallocated to supply the\nGSM markets. However, Brazil makes a strong rebuttal that it is not legitimate or consistent with\nWTO practice to offset trade-distorting impacts wh ich are found by some possible positive effects in\nother markets. The Arbitrator finds it useful to quo te Brazil in full on this point in its response to one\nof the questions from the Arbitrator:224\n\"One benefit that Brazil measures is the additional US trade flows generated by\nGSM 102. Other arbitrators have also measured trade flows, in particular in assessing\nthe value of the complainant's lost exports in quantifying nullification and\nimpairment. In these arbitrations, arbitrat ors have never taken into account the fact\nthat goods not exported to the respondent's market could have been diverted to\nalternative markets …. Thus, in previous arbitrations, the valuation of trade flows\naffected by WTO-inconsistent measures was not diminished by potentially mitigating\nfactors, such as opportunity costs. Brazil considers that this approach is correct.\"\n4.191 The third issue concerns the treatment of add itional demand in the target countries as a result\nof GSM-supported sales. Additional demand arises because of the price effect of the subsidized\nexports as discussed in the next section. The subsid ized exports lower domestic prices in the target\nmarkets and may lead to increased consumption as consumers move down the demand curve. It might\nbe argued that because this increased consumption is truly additional, the additional quantity does not\ncontribute to adverse effects on either domestic produ cers or third country exporters. In general, we\nbelieve that this additional consum ption (which will be a function of the size of the price effect and\nthe elasticity of demand) will be relatively small relative to the overall size of GSM 102 transactions\nin these markets, but to the extent that it occurs, Brazil's measure of additi onality will overstate the\ndisplacement of domestic production and exports due to the programme.\n4.192 Despite this caveat, if we focus on the trade-dist orting effects of the subsidy, we find that in\nthe target markets, there is displacement of bot h domestic production and th ird country exports by\nUS GSM-supported exports, and that this is broa dly what is captured by Brazil's calculation of\nadditionality. Bearing in mind the latitude we have as the Arbitrator to determine an \"appropriate\"\nlevel of countermeasures, and the f act that we are dealing with a prohibited subsidy, we have decided\nthat it is appropriate to use Brazil's measure of additionality as a measure of the market volume loss to\nother producers and exporters, while recognizing that it may be an overestimate of the actual loss.\nThe price effects of the GSM 102 programme\n4.193 In addition to these volume effects, there will also be price effect s in the target markets. We\nnote that, from the point of view of the United States , the increase in import demand as a result of the\nGSM export credit guarantee subsidy is represented by a shift in the import demand curve that it\nfaces, because it represents increased demand at the same world price. Here, it is useful to distinguish\nbetween the cost of the commodity to the importe r (the world price, ignoring freight and handling\ncharges) and the total cost of importing, which includes the cost of financing. 225 B e c a u s e o f t h e\ninterest rate subsidy, for creditworthy borrowers the total cost of importing may be lower as a result of\nthe guarantee ('sales discount'), even though there is no change to the world price of the commodity.\nFor uncreditworthy borrowers, the guarantee can lead to a relaxation of a credit or liquidity constraint\n\n224 Brazil's responses to questions from the Arbitrator, question 28, para. 366.\n225 This distinction is drawn in the US written submi ssion, para. 212. Brazil agrees with this and calls\nthe total cost of importing the \"effective sourcing price\" (Brazil's written submission, para. 217).\n\nwhich enables transactions that would not otherwise occur. 226 Both situations are appropriately\nrepresented as a shift in the import demand curve facing US exports.\n4.194 In the target market, however, there is a drop in price. The reason for this is that the subsidy\ndoes not alter the purchasing power nor relax any li quidity constraint among domestic consumers, nor\ndoes it affect the production costs of domestic producers, so there is no shift in either domestic supply\nor demand curves as a result of the GSM guarantee. Therefore, in order to absorb the additional sales,\nthere will be greater competition on the domestic market, domestic prices will drop, some third\ncountry exports will be squeezed out and domestic producers will be adversely affected even while\ndomestic consumers increase their quantity demanded.\n4.195 We recall that the design and operation of the GS M 102 subsidy is such that the recipient of\nthe IRS, i.e. the obligor, is a service provider, whose services serve to guarantee an export sales\ntransaction relating to certain goods. Ultimately, it is the export of those goods that is being\nfacilitated through the granting of the subsidy, and it is the trade in these goods that is affected by the\ngranting of the subsidy.\n4.196 The effect of the IRS is to lower the financing cost, and therefore the effective sourcing price,\nof US imports in the target markets. We note th at the GSM programme provides subsidized credit to\nforeign obligors who are in all cases banks. These banks pass on these favourable credit terms to the\nultimate purchasers of the US exports. If there is no change in the credit conditions facing the ultimate\npurchasers, there can be no additional US sales ( nor additionality in the US sense of additional\ndemand). The United States points out, correctly, that Brazil assumes 100 per cent pass-through of\nthe interest rate subsidy in its calculations.\n227 However, while it raises a doubt about the validity of\nthis assumption, it does not demonstrate conclusively that it is an unreasonable assumption to make.228\n4.197 Under particular circumstances, the revenue loss due to the price effect will be exactly equal\nto the IRS as defined by Brazil. The first require ment is that the export guarantee programme has no\neffect on the world market price. Both Braz il and the United States agree that the GSM 102\nprogramme does not affect the world market price. 229 The other requirements are that the\nGSM-supported sales substitute on a one-to-one basis for either domestic production or unsubsidized\nimports and that the supply curve of other suppli es and the demand curve are perfectly inelastic and\nnot responsive to price. In general, the price eff ect in the target market will be a function of the\nquantity of additional GSM-supported sales and of the elasticities of other supplies and domestic\ndemand. In particular, as the sum of the other supply and demand elasticities approaches infinity, the\nprice effect approaches zero.\n4.198 To accurately assess the price effect for each GSM-supported commodity in each target\nmarket would therefore require information on all the relevant domestic supply and demand\nelasticities as well as the share of GSM sales in total supplies on each market. As we have seen in\nother aspects of this dispute, these can be highly contested parameters. Bearing in mind the latitude\nwe have as the Arbitrator to determine an \"appropriat e\" level of countermeasures, and the fact that we\nare dealing with a prohibited subsidy, we have d ecided that it is appropriate to use the IRS as a\nmeasure of the global revenue loss to non-US producer s and exporters due to the price effect, while\nrecognizing that it may be an overestimate of the actual loss.\n\n226 Brazil notes that \"the GSM program operates solely in circumstances in which credit would not\notherwise be available to finance the export of US agricultural goods\" (Brazil's written submission, para. 208).\n227 It discusses the reasonableness of this assumption in Section IV of Exhibit US-92.\n228 Brazil provides a rebuttal of th e US argument in Annex 1 to its written submission (\"Summer-\nSundaram Statement\"), footnote 10.\n229 See paras. 4.259 and 4.263 of this Decision.\n\nApportionment\n4.199 In light of the above, the Arbitrator believes th at it is appropriate to use Brazil's methodology\nto calculate the trade-distorting impact of GSM 10 2 exports. However, given that we have also\ndetermined that countermeasures should be linked to, if not necessarily equivalent to, the trade-\ndistorting impact of the measure on Brazil, the amount of additionality and the IRS must be\napportioned to Brazil's share of the market.\n4.200 In apportioning the amount of additionality to Brazil's share of the market, we have to\ndistinguish between the trade-distorting impact that occurs in Brazil's domestic market as a result of\nthe GSM 102 transactions involving Brazilian obligors, and the trade-distorting impact that occurs in\nnon-Brazilian markets. Apportionment will be necessar y for those trade-distorting impacts that occur\nin non-Brazilian markets since the damage to Brazil's interest is linked to how large a share Brazil has\nof those markets. In this apportionment, the Arbitr ator has used Brazil's share of world exports of the\nGSM 102 products, which is on average 11.7 per cent (see Table 1).\n230 We have used Brazil's share of\nthe world export market of GSM 102 products rath er than its share of imports plus domestic\nproduction in the target countries. We use the world market rather than the target market share of\nGSM 102 products because of our belief that the ob served share of non-US imports in these countries\nhas been depressed by the existence of the GSM 1 02 subsidized competition and is thus not an\nappropriate coefficient to apply. We are also awar e that some of the adverse effects in the target\nmarkets would be absorbed by domestic producers ra ther than by non-US exporters such as Brazil.\nNonetheless, it is more likely that it is non-US imports that bear the brunt of the subsidised\ncompetition because they will be more sensitive to the price effects of the subsidy (since trade\nelasticities are typically larger in magnitude than demand and supply elasticities), and thus Brazil's\nshare of world exports is an appropriate indicator to use for the apportionment.\nTable 1: Brazil's Share of World Trade in GSM 102 Products\n1, 2006\n\nGSM 102 Product Brazil Exports 2 World Exports 3 Brazil Share\nCotton 341,275,226 9,280,297,827 3.7%\nOilseeds 5,689,902,478 21,519,800,311 26.4%\nProtein meals 2,440,792,339 16,945,389,808 14.4%\nFeed Grains 481,894,034 12,987,102,389 3.7%\nCorn Products (Starch) 8,781,310 406,633,699 2.2%\nHides/ Skins 2,693,441 4,257,484,051 0.1%\nTallow 19,710,974 3,606,485,104 0.5%\nRice 59,872,132 10,158,656,158 0.6%\n\n230 The share is based on data submitted by Brazil from UN Comtrade, which is contained in\nExhibit Bra-815, and additional data on world exports of GSM 102 products from the same source. The\nadditional data were extracted from UN Comtrade on 16 June 2009. The definition of GSM 102 products, in\nthe Harmonised System (HS), is taken from Exhibit Bra-814.\n\nGSM 102 Product Brazil Exports 2 World Exports 3 Brazil Share\nPoultry Meat 3,038,988,127 12,121,810,169 25.1%\nPig Meat 1,010,288,388 20,653,942,499 4.9%\nTOTAL 13,094,198,449 111,937,602,015 11.7%\nNotes:\n1. Definition of GSM 102 products, in the Harmonised System (HS), is from Exhibit Bra-814.\n2. Data sourced by Brazil from UN Comtrade and found in Exhibit Bra-815.\n3. Data sourced from UN Comtrade (extracted on 16 June 2009).\n\n4.201 However, no apportionment will be necessary for th e trade-distorting impact which occurs in\nBrazil's domestic market since the effect is felt in its entirety by its domestic producers or third\ncountry exporters. We accept that to the extent that some of the trade-distorting impacts are borne by\nthird country exporters, this procedure may overs tate the damage suffered by Brazil alone but we\nbelieve that the importance of third country exports to Brazil is small relative to the value of domestic\nproduction, and thus this is a reasonable latitude to take in defining \"appropriate countermeasures\".\n4.202 Similar to the case of full additionality and ma rginal additionality, the IRS provided to non-\nBrazilian obligors must also be apportioned while th e IRS that flows to Brazilian obligors will not be\nso apportioned.\n3. Calculations\n(a) Brazil's methodology\n4.203 Brazil's methodology involves determining the interest rate discounts secured by creditworthy\nand uncreditworthy foreign obligors on credits backed by GSM 102 guarantees and estimating the\nadditional export sales obtained by US exporters as a result of these discounts. Brazil refers to the\ninterest rate discounts as the \"interest rate subsidy\" and to the additional export sales generated by the\ninterest rate subsidy as \"additionality\". It distin guishes between the additional export sales that come\nabout through guarantees to creditwor thy and uncreditworthy foreign ob ligors, referring to the former\nas \"marginal additionality\" and to the latter as \"full additionality\".\n4.204 Using its methodology, Brazil arrives at est imated annual countermeasures equal to\nUS$1.122 billion. This amount ca n be subdivided into: (i) interest rate subsidy amounting to\nUS$211 million, (ii) marginal additionality amountin g to US$94 million, and (iii) full additionality\namounting to US$817 million.\n231\n4.205 The United States claims that Brazil's methodol ogy is based on \"numerous and incorrect\nassumptions\" that result in a figure higher th an is appropriate under Article 4.10 of the\nSCM Agreement. The particular problems, including genera l critiques and specific examples, that the\nUnited States finds with Brazil's methodology fo r calculating the interest rate subsidy, full\nadditionality, and marginal additionality are taken up in the succeeding sections.\n4.206 Prior to doing so, we note that Brazil had initia lly applied the methodology to its estimates of\nthe value of transactions supported by GSM 102 export credit guarantees on a foreign obligor-specific\nbasis, based on publicly available data. This w as because it did not have access to the internal USDA\ndata. Subsequently, however, and in response to a request from the Arbitrator, the United States\n\n231 Brazil's oral statement, para. 100 and Exhibit Bra-794.\n\nagreed to provide its data on GSM 102 export credit guarantees in FY 2006. 232 Brazil consequently\napplied its methodology for calculating the IRS and additionality to this data.233\n4.207 Secondly, Brazil's initial calculations did not consider whether the volumes and budgetary\noutlays of scheduled products exceeded their WT O export subsidy commitments. The United States\ncorrectly notes that circumvention of the US expor t subsidy commitments occu rs for these scheduled\nproducts only to the extent that the export subsid ies exceed the volumes and budgetary outlays set out\nin the US reduction commitments. 234 The United States argues that \"the finding that the GSM 102\nprogramme conferred an export subsidy extended to the programme as a whole, but any calculation of\nan amount of prohibited subsidy in this case must necessarily make allowance for permitted export\nsubsidies pertaining to scheduled products\". 235 Brazil has accepted this argument and adjusted its\ncalculations accordingly.236\n(i) Interest rate subsidy\n4.208 Brazil defines the interest rate subsidy as the pr esent value of the spread between the interest\nrate at which foreign obligors would have been able to borrow in the absence of GSM 102 export\ncredit guarantees and the subsidized interest rate enabled by those guarantees. Specifically, Brazil\ncalculates the subsidy by measuring, over the tenor of the guaranteed loan , the difference between a\nspecific borrower's discounted payment stream unde r the conditions secured with a GSM 102 export-\ncredit guarantee, and the counterfactual discounted payment stream that could have been secured\nwithout the GSM 102 export credit guarantee, net of programme fees.237\n4.209 Brazil applies the \"Ohlin formula\" to calculate the subsidy rate for each foreign obligor. The\nOhlin formula computes a borrower's present value of the interest rate difference owing to the terms\nof the GSM 102 loan guarantee, net of guarantee fees, using a counterfactual market interest rate as\nthe discount factor. 238 Brazil claims that the Ohlin formula is widely used for present value\ncalculations in agricultural economics.239 This is computed as follows:\nfGTr\na\nr\na\nr\nr\ngS\naTaG\n−\n⎟⎟\n⎟\n⎟\n⎟\n⎟\n⎟\n⎠\n⎞\n⎜⎜\n⎜\n⎜\n⎜\n⎜\n⎜\n⎝\n⎛\n−\n+\n−\n+\n−−= )(\n)1(\n1\n)1(\n1\n1*)1(*100\nwhere:\nS = subsidy rate, i.e., present value of the interest rate spread between guaranteed and market\nconditions;\nT = term of guarantee (in years), i.e., tenor or maturity;\nG = grace period (in years);\n\n232 US responses to questions from the Arbitrator, question 50, para. 100. See also Exhibit US-78.\n233 Brazil's oral statement, para. 100. See also Exhibit Bra-794.\n234 US written submission, para. 20.\n235 US written submissions, para. 86.\n236 Brazil written submission, para. 118. See also Exhibit Bra-794.\n239 Brazil's Methodology Paper, fn 13.\n\nf = exporter fee (in % of the GSM 102 export credit guarantee);\na = installments (in payments per year);\ng = interest rate (in %) with a GSM 102 export credit guarantee;\nr = annual discount rate (market interest rate, i.e., importers' risk-adjusted rate).\n\n4.210 As can be seen from the formula, this requir es Brazil to estimate the counterfactual market\ninterest rate that would have been demanded by commercial lenders from foreign obligors in the\nabsence of a GSM 102 export credit guarantee.\n4.211 In Brazil's methodology, the market interest rate is comprised of a risk-based premium and\nthe risk-free baseline interest rate which is based on the London Interbank Offered Rate (\"LIBOR\").240\nIt describes four intermediate steps to determining the market interest rate: (i) identify a methodology\nfor deriving market interest rates; (ii) sep arate creditworthy from non-creditworthy obligors,\n(iii) identify credit risk ratings for rated foreig n obligors and use a methodology to assign credit risk\nratings to unrated foreign obligors; and (iv) calculate the market interest rate to credit classes of\nborrowers.241\n4.212 According to Brazil, the methodology that it uses to calculate the market interest rate is one\nused by the United States Department of Comme rce (\"USDOC\") in countervailing duty proceedings.\nIt states that the USDOC approach proceeds from th e premise that a lender's expected return on all\nloans should be equal.242 This means that the market interest ra te will be greater the higher the risk of\nthe borrower. In addition, Brazil states that the approach requir es distinguishing between two risk\ngroups: creditworthy borrowers and uncreditworthy borrowers.243\n4.213 Wherever a foreign obligor has received a cred it rating, Brazil simply uses that rating to\nassign the obligor to the corresponding credit risk gr oup. However, not every foreign obligor has a\nrating from the credit-rating institutions. For unrated foreign obligors from countries in which at least\none CCC-approved obligor has been rated, Brazil treats unrated foreign obligors as being, on average,\none notch below the worst-rated obligor in that country. For foreign obligors from those countries in\nwhich not a single CCC-approved foreign obligor has received a credit rating, Brazil imputes credit\nratings.\n4.214 The imputation proceeds first by determining country-specific credit-risk averages for those\ncountries that host at least one rated foreign obl igor. Brazil compiles the average probability of\ndefault in each country by (i) adding up the defa ult probability of each rated and unrated foreign\nobligor and (ii) dividing the result by the tota l number of CCC-approved obligors for that country.\nThis average default probability is matched back to the relevant credit risk group on the numerical\ncredit scale of 1-18 to arrive at a country-specific average obligor credit risk.\n4.215 In a second step, Brazil estimates the default probability of foreign commercial banks in\nunrated-obligor countries, using information of specifi c commercial risk in countries that host at least\none rated foreign obligor. Brazil determines the credit risk differen tial between average rated-bank\nrisks and country risk for each country that has at l east one rated obligor. Brazil claims that the data\nshows that a rated bank is, on average, three credit -risk \"notches\" below the sovereign risk of the\ncountry in which it is domiciled. Consistent with its previous approach that, if evaluated, non-rated\n\nforeign obligors would on average receive a credit rating that is one notch below the worst-rated\nobligor in a country, Brazil treats unrated obligors in unrated countries as having a credit rating that is\nfour notches below sovereign risk.\n4.216 To separate uncreditworthy borrowers from cr editworthy borrowers, Brazil uses credit rating\ninformation from Fitch, Moody's and S&P found in Bankscope. Brazil explains that Bankscope is not\nitself a ratings agency, but combines data from different ratings agencies. 244 It uses this ratings\ninformation to rank companies and sovereign States along a scale of 18 steps, with a numeric ranking\nof one for the lowest credit risk and 18 for the high est credit risk. It uses as a threshold between\ncreditworthiness and uncreditworthiness a credit-rating of \"10\" on the 18-point numerical rating scale.\nBrazil classifies borrowers with a rating of 11 (co rresponding to credit ratings of BB+ or Ba1 on the\nscales of S&P and Moody's, respectively) or worse as uncreditworthy.\n4.217 Brazil justifies the use of this threshold by sta ting that borrowers with a rating of 11 or worse\nare usually referred to as \"below investment grade\". It states that the conventional threshold between\ncreditworthiness and uncreditworthiness is a credit- rating of ten on the 18-point numerical rating\nscale. It claims that Moody's distinguishes between \"investment grade\" and \"non-investment\" (\"junk\",\nor \"speculative\") grade and uses a numerical rating of ten as the threshold.245\n4.218 Brazil uses this information to calculate the mark et interest rate that will be assigned to the\ndifferent credit classes of borrowers. This market inte rest rate is made up of a risk-free interest rate\nand a risk premium. For FY 2006, Brazil uses a risk -free interest rate of 5.18 per cent. In Brazil's\nmethodology, the risk premium depends on the probab ilities of default of the foreign obligors. Brazil\ntakes the cumulative default probabilities from a Moody's study of corporate historical default rates of\ncorporate bond issuers in the period 1983-2005. Brazil subdivides the group of creditworthy obligors\nto reflect the credit risk of each individual cred itworthy borrower. Instead of imputing the same\nmarket interest rate for all creditworthy borrowers , Brazil breaks down creditworthy obligors into ten\nseparate groups to reflect the actual credit risk of each individual creditworthy borrower. However,\nfor those obligors that it classifies as uncreditwor thy, Brazil applies a si ngle default probability\ncorresponding to the group with a rating of 18.\n4.219 The result of applying Brazil's methodology is an estimate of the interest rate subsidy of\nUS$211 million for FY 2006. The estimated subsidy ra te by obligor ranges from a low of 0 per cent\n(for the Korean banks) to a high of 29.24 per cent for a Mexican obligor, with a weighted average\n(with the share by each obligor of the total value of GSM 102 transactions as weights) of 21.2 per cent\nfor all obligors.\nArguments of the parties\n\n4.220 The United States claims that Brazil's methodol ogy for imputing risk to foreign obligors\nomits a reasonable inquiry into the obligors and r esults in exaggerated estimates of risk. The\nUnited States objects to the reliance solely on ratings from credit rating agencies as the basis for\nclassifying the riskiness of various foreign obligors. It also calls into question Brazil's method for\nassigning ratings to unrated foreign obligors. As a result of these incorrect imputations of risk, it\nclaims that this makes the interest rate subsid y estimate, and calculations of marginal and full\nadditionality, far too high. The United States goes on to cite examples of foreign banks, which were\nclassified as uncreditworthy by Brazil's methodolog y (a numerical rating worse than 10), but which\nwere able to secure credit in ordinary credit markets.246\n\n245 Brazil's Methodology Paper, fn 35.\n246 US written submission, paras. 151-153.\n\n4.221 The United States disputes Brazil's claim that it was following the USDOC methodology to\ncalculate the interest rate subsidy. Instead, the United States alleges that Brazil had misconstrued and\nmisapplied the USDOC approach. According to the United States, the Department of Commerce\napplies the expected return formula to construct a counterfactual market interest rate only if the\nparticular firm under examination is first determined to be \"uncred itworthy\" after a detailed analysis\nof financial statements.247 The Department of Commerce's defin ition of \"uncreditworthy borrower\" is\nnot all borrowers with less than an investment -grade credit rating but is a borrower that the\nDepartment determines, after a detailed analysis of the borrower's financial health and ability to\nservice debt obligations, cannot secure financin g from conventional commercial sources. The\nDepartment's creditworthiness determination is based on a number of factors, including the receipt of\nany commercial long-term loans, the present and past fi nancial health of the firm, the firm's ability to\nmeet its costs and fixed financial obligations, and evidence of the firm's future financial position.\n248\n4.222 In contrast, the United States says that Brazil has made no attempt to discern any comparable\ncommercial loans taken out by any of the obligor s during the relevant time period, nor has it\nattempted to consider national average interest rate s in its assertion that obligors are uncreditworthy.\nInstead, Brazil assumes that any borrower with a numer ic rating of ten or wor se is uncreditworthy.\nBut, according to the United States, the set of borrowers who cannot secure financing from\nconventional commercial sources is fundamentally different from the set of borrowers who can secure\nfinancing from conventional commercial sources, but just not at investment-grade rates. The\nborrowers in the latter set are creditworthy by definition; they are just not investment-grade\ncreditworthy.249 It states that Brazil's own written submission recognizes that \"non-investment grade\"\nor \"speculative grade\" is not synonymous with \"unc reditworthy\" and that capital markets therefore do\nnot ascribe the same meaning of absolute uncre ditworthiness as Brazil to a credit rating worse\nthan ten.250\n4.223 Finally, the United States claims that its re view of the academic literature on export credit\nguarantees show that Brazil's methodology is not su pportable. While Brazil's methodology relies on\nan interest rate subsidy of more than 20 per cent, the range of possible interest rate subsidies in the\nliterature described in Exhibit US-92 starts at nearly zero and has a maximum of less than\neleven per cent.251\n4.224 Brazil defends its method for imputing risks to the foreign obligors who made use of\nGSM 102 export credit guarantees in FY 2006. It not es that the United States offers no criticism of\nthe Ohlin equation and has itself employed the formula. 252 It justifies its use of information from\ncredit rating agencies – Fitch, Moody's and S&P – to determine the credit quality of individual foreign\nobligors. These are rating agencies which are r ecognized by the US Securities and Exchange\nCommission as Nationally Recognized Statistical Rating Organizations. 253 In forming their opinions\nof the credit quality of a particular obligor, the cr edit rating agencies employ analysts and models to\nassess the obligor's financial condition, operating performance, funding sources, asset quality, risk\nmanagement strategies, and policies.254\n4.225 Brazil maintains that the assumptions informing its assignment of ratings (i) to unrated\nobligors in \"rated-obligor countries\" and (ii) to unrated obligors in \"unrated-obligor countries\" are\n\n247 US written submission, para. 157.\n248 US responses to questions from the Arbitrators, question 53, para. 128.\n249 US responses to questions from the Arbitrators, question 53, para. 128.\n250 US responses to questions from the Arbitrators, question 51, para. 107.\n251 Exhibit US-92.\n253 Brazil's written submission, fn 126.\n254 Brazil's responses to questions from the Arbitrator, question 25, para. 271.\n\njustified. Brazil argues that ratings are solicited by the banks themselves. A strong bank would like\nits financial strength to be made pub lic or signalled to the investor and creditor populations at large.\nIf a bank chooses not to use a credible quality-signa lling device when one is available, a prudent\ncreditor, in gauging credit risk, will treat that bank as less creditworthy than a bank that has chosen to\nso signal. Since it will not know why the unrated ba nk has decided not to secure a rating, the prudent\ncreditor will assume the worst: that the unrated ba nk fears it would receive a disadvantageous credit-\nrating vis-à-vis its competitors. Under these circum stances, its use of a single notch differential\nbetween unrated banks and the worst-rated CCC- approved bank in a country does not lead to\ncountermeasures that are inappropriate or disproportionate. 255 It also defends its approach to the\nsituation in which an unrated obligor is from a country in which there are no rated CCC-approved\nforeign obligors. In this case, the obligor is rate d four \"notches\" below the sovereign but this arises\nfrom taking what Brazil describes as \"objective steps\".256\n4.226 Brazil explains its choice of the numerical rati ng of ten to distinguish between creditworthy\nand uncreditworthy obligors as a practice that is widely applied in the capital markets. 257 Brazil cites\nliterature provided by the ratings agencies, Fitch, Moody's and S&P, which purport to show how the\nagencies distinguish between \"inv estment grade\" from \"speculative grade\" bonds and other debt\nsecurities.258 Brazil explains that the term \"investment gr ade\" historically referred to bonds and other\ndebt securities that bank regulators and market par ticipants viewed as suitable investments for\nfinancial institutions. Now the term is broadly used to describe issuers and issues with relatively high\nlevels of creditworthiness and credit quality. In contrast, the term \"non-investment grade,\" or\n\"speculative grade,\" generally refers to debt secur ities where the issuer curre ntly has the ability to\nrepay but faces significant uncertainties, such as adverse business or financial circumstances that\ncould affect credit risk. 259 Based on these references, Brazil determines that \"investment grade\"\nwould refer to numerical ratings of ten or bette r and that \"speculative grade\" would correspond to\nnumerical ratings of 11 and worse.\n4.227 Brazil rejects the charge that it is misapplying the USDOC methodology. First, it argues that\nthe fact that the USDOC applies its methodology for calculating a counterfactual market interest rate\nonly for uncreditworthy foreign obligors does not establish that using the methodology for\ncreditworthy obligors leads to inappropriate and disproportionate countermeasures.260\n4.228 Second, it objects to the United States' argumen t that Brazil should have used some element\nof the USDOC methodology to make assessments of creditworthiness of foreign obligors based on a\ndetailed analysis of financial statements and on wh ether the obligor could have secured loans without\ngovernment guarantees. It provides several reasons fo r this. First, employing financial information\nfrom the balance sheets of the borrowing financial in stitution will not reveal whether that borrower\nhas been able to secure credit that is comparable to GSM 102. 261 Brazil describes credit under the\nGSM 102 programme as US-dollar denominated, un secured, and long-term with maturities of\n3 years.262 It claimed to have analysed 24 examples give n by the United States and showed that for\nnone of the applicable examples could a truly comparable loan be found. 263 Second, Brazil argues\nthat the ability to secure a single lo an does not make an uncreditworthy obligor creditworthy. It cites\nthe USDOC itself as stating that the fact that a resp ondent has taken out a single commercial loan is\n\n258 Brazil's written submission, fn 152.\n259 Brazil's written submission, fn 152.\n261 Statement by Professor Rangarajan K. Sundaram concerning GSM 102, Exhibit Bra-793, para. 43.\n262 Statement by Professor Rangarajan K. Sundaram concerning GSM 102, Exhibit Bra-793, para. 42.\n263 Statement by Professor Rangarajan K. Sundaram concerning GSM 102, Exhibit Bra-793, para. 58.\n\nnot dispositive evidence that the firm was creditworthy. 264 Finally, unlike an investigating authority in\na US countervailing duty proceeding which may have the power to demand information from\nrespondents to enable a review of their individual borrowings (as well as the power to adopt adverse\ninferences if its requests are not complied with), Br azil says it does not have the ability to secure the\nrelevant information from foreign obligors in preparing its methodology.265\n4.229 At the same time Brazil claims that its approach is flexible and that the Arbitrator can make\nappropriate adjustments to the calculation of the interest rate subsidy.266 The method by which market\ninterest rates facing creditworthy borrowers are dete rmined can be adjusted if reliable interest-rate\ninformation is available from a different sour ce. The threshold for distinguishing between\ncreditworthy and uncreditworthy obligors can be ad justed, for example, choosing a threshold of\n14 instead of ten. Unrated borrowers can be rate d on par with the worst-rated CCC-approved bank in\nthe country. Finally, the method could be adjusted, if necessary, to include a \"scaling\" of the full\nadditionality calculation, so as to adjust the imp act of the creditworthiness assessment for unrated\nobligors assigned a credit rating at or inferior to 11.267\n4.230 Finally, Brazil disputes the conclusions reached by the United States regarding the empirical\nliterature on interest rate subsidy. First, it sugg ests that the United States is comparing \"apples and\noranges\". Brazil's interest rate subsidy analys is concerns data from a single and recent year\n(FY 2006), while the studies cited by the United States use very different time periods, most\nterminating by the mid-1990s.268 It claims that using a different time period fundamentally drives the\nresults, because the risk-free interest rate varied c onsiderably over the last three decades. Moreover,\nBrazil's interest rate subsidy calculations are made at an obligor-specific level, whereas all of the\nstudies cited by the United States use sovereign-level in formation. Brazil's application of its interest\nrate methodology to FY 2006 data concerns obli gors in 17 countries, while two studies reviewed by\nthe United States deal with only five and six import ma rkets, respectively. Second, Brazil claims that\nthe United States is mistaken in its assertion that no previous study has found subsidy rates of the\nmagnitude of Brazil's. As counterexamples, it ci tes five studies that find interest rate subsidy\nestimates comparable to or greater than what it calculates.269\nAnalysis by the Arbitrator\n4.231 We begin our analysis by reiterating that the in terest rate subsidy is an approximation of the\nprice effects of the GSM 102 export credit guarant ees. Our purpose in establishing, with some\nprecision, the magnitude of the IRS is to allow us to ascertain the size of the price effects of the export\ncredit guarantees in Brazilian and non-Brazilian markets for GSM 102 products.\n4.232 Under Brazil's methodology, the interest rate subsidy is calculated as the difference between\nthe CCC rate and a counterfactual market interest, ta king into account the different tenor of the loans\nand the fees charged. The loans guaranteed by GSM 102 vary in maturity. For the 91 obligors in\nBrazil's sample, 55 have loan maturities of three y ears; 25 obligors have average loan maturities of\ntwo years; and 11 have average loan maturities of one year. This means that the different payment\nstreams have to be made comparable, i.e., discounted to their present value, and for this Brazil uses\nthe Ohlin formula. The Arbitrat or notes that while the United States objects to many aspects of\nBrazil's methodology for calculating the interest rate subsidy, it does not criticize the Ohlin formula.\n\n266 Statement by Professor Rangarajan K. Sundaram concerning GSM 102, Exhibit Bra-793, para. 49.\n267 Brazil's responses to questions from the Arbitrator, question 25, para. 291.\n268 Brazil's responses to questions from the Arbitrator, question 94, para. 159.\n269 Brazil's responses to questions from the Arbitrator, question 94, para. 164.\n\n4.233 Brazil's methodology requires calculating the count erfactual market interest rate that the\nborrower would have had to pay a private lender in the absence of GSM 102. This requires Brazil to\nfind a method for determining the credit risk of various foreign obligors since the counterfactual\nmarket interest will vary with the riskiness of the bor rower. This feature of the credit market follows\nfrom rational behaviour by lenders who will need to charge higher risk borrowers a higher interest\nrate to compensate for the risk that the lender has to bear. More precisely, the risk-neutral lender will\nprice credit to each borrower so that the expected return made on each borrower or loan is equal. This\npricing rule is a necessary requirement for the lender to maximize his expected profits. This rule also\nunderlies the USDOC method for determining the count erfactual market interest rate, although it is\napplied only to those obligors that the USDOC dete rmines to be uncreditworthy. The United States\nhas in fact taken Brazil to task for applying the USDOC method also to creditworthy obligors. But\nthe pricing rule has a far general application than that since it will be followed by expected profit\nmaximizing lenders. The Arbitrator therefore agrees with Brazil that there is no reason why the\nUSDOC method for determining the counterfactual market interest rate cannot be applied to\ncreditworthy obligors.\n4.234 For the Arbitrator, the key question in relation to Brazil's methodology for calculating the\ninterest rate subsidy is whether its imputation of risk to foreign obligors is accurate and therefore\nleads to the correct estimate of the interest rate subsidy.\n4.235 To a large extent, Brazil's methodology for impu ting risk relies on the credit ratings available\nfrom international credit ratings agencies – Fitch, Moody's and S&P. Out of the 91 obligors included\nin Brazil's calculations, 56 have ratings from international credit rating agencies. The Arbitrator notes\nthat Fitch, Moody's and S&P are established credit ratings firms that are relied upon by credit markets\nfor assessing the riskiness of debtors. Issuers of de bt pay for the services of these agencies to rate\ntheir creditworthiness. The Arbitrator finds a great advantage in this approach since the assignment of\nrisks to foreign obligors relies on the decisions made by third-party specialists who are in the business\nof determining the riskiness of debt issuers.\n4.236 The United States has argued for an approach that determines the riskiness of foreign obligors\nbased on a detailed analysis of financial statemen ts and on whether the obligor could have secured\nloans without government guarantees. This argument a ppears to be directed at the issue of how to\ndistinguish uncreditworthy from creditworthy obligors, an issue to which the Arbitr ator turns to later.\nBut the argument could as well be applied to th e more general question of how to determine the\ncounterfactual market interest rate. Brazil's expert has testified to the difficulty of obtaining the\ninformation needed to conduct this assessment from ba lance sheet or financial statements of financial\ninstitutions.270 The Arbitrator concurs with this evalua tion. The loans taken out by the financial\ninstitution need to be comparab le to that available under GSM 102, namely, dollar-denominated,\nunsecured and long-term. Only then can the interest rate on those loans serve as a market benchmark\nfor the loans obtained with a GSM 102 guarantee. But there does not appear to be a way in which this\ncould be done systematically for all the obligor s in Brazil's sample based on publicly available\nfinancial information.\n4.237 Not all the assignment of the credit risk of fore ign obligors is taken from the ratings agencies.\nOut of the 91 obligors included in Brazil's calculati ons, only 56 have ratings from international credit\nrating agencies while 36 are unrated. But in order for Brazil to undertake the interest rate subsidy\ncalculation, ratings for these obligors must be impu ted. The approach outlined by Brazil requires\njudgements to be made. As described earlier, fo r countries where at least one CCC-approved obligor\nwas rated (rated-obligor countries), Brazil adopts a decision rule which assigns unrated obligors a\nranking equal to one notch below the worst rated ob ligors in the country. This affects 35 of the\n\n270 Statement by Professor Rangarajan K. Sundaram concerning GSM 102, Exhibit Bra-793,\nparas. 41-44 and Appendix to the Exhibit.\n\n36 unrated obligors. For obligors in countries in which no CCC-approved foreign obligor was rated\n(unrated-obligor countries), Brazil's decision rule assigns a rating that is four notches below the\nsovereign rating. This affects only one unrated obligor from Peru.\n4.238 The Arbitrator concurs with Brazil's explanation for these decision rules. In the Arbitrator's\nview, a credit rating is a \"signalling\" device for the obligor to credibly signal its credit quality to the\nmarket. If the obligor chooses not to do so, when the signalling device is available, it would be\nprudent to treat that obligor as less creditworthy than other obligors serving the same marketplace that\nhave chosen to obtain a rating. Thus, the decision rule adopted by Brazil for \"rated-obligor countries\"\nof assigning a credit rating that is one notch than the worst rated obligors in that country is both\nreasonable and prudent. With respect to obligors in unrated-obligor countries, the Arbitrator views\nthis step as an extension of the approach taken by Brazil with respect to obligors in rated-obligor\ncountries. Brazil asks: what is the average diffe rence in credit rating between the sovereign and the\nworst rated obligor in rated-obligor countries? Th e answer turns out to be equal to three credit\nratings. Since unrated foreign obligors would on av erage receive a credit rating that is one notch\nbelow the worst-rated obligor in a country, Brazil treats unrated obligors in unrated countries as\nhaving a credit rating that is four notches below sovereign risk.\n4.239 The second major issue arising from the imputation of risk is the classification of the obligors\ninto creditworthy and uncreditworthy borrowers. The Arbitrator notes that this differentiation of the\nborrowers is also made in the USDOC methodology. What concerns the Arbitrator is whether the\ncredit rating threshold chosen by Brazil to differe ntiate creditworthy from uncreditworthy obligors is\nthe right one. Brazil defends this threshold level of creditworthiness by claiming that international\ncredit rating agencies distinguish between \"investment grade\" and \"non-investment\" grade. This\nwould imply a numerical rating of ten as the th reshold between creditworthy and uncreditworthy\nborrowers.\n4.240 But based on the description provided by Brazil, and as the United States has also pointed\nout\n271, non-investment grade refers to \"debt securities where the issuer curren tly has the ability to\nrepay but faces significant uncertainties, such as adverse business or financial circumstances that\ncould affect credit risk.\" 272 The description certainly does not app ear to be synonymous with Brazil's\ncharacterization of uncreditworthy obligors as \"those borrowers that could not otherwise have secured\ncredit at market at all\" 273 or as \"those foreign obligors that w ould not have been able to secure\ncomparable credit – that is, a 24-36 month, non-co llateralized loan in foreign currency – in the\nabsence of a GSM 102 guarantee\". 274 Another way of reflecting on the appropriateness of this\nthreshold is to consider the default probabilities cal culated by Moody's for bo rrowers with different\ncredit risk ratings (see Table 2). These default probabilities are an important component of Brazil's\nmethod for calculating the counterfactual market inte rest rate. For borrowers with a numerical rating\nof 11 (who will be classified as uncreditworthy if Brazi l's threshold of ten is adopted), the three-year\ndefault probability is 3.567 per cent. (The analys is could be applied to the two-year and one-year\ndefault probabilities as well but loans with three-year maturities are the most common.) This means\nthat over the three-year life of the loan, there is a one in 28 chances that the borrower will default. In\ncontrast, the default probability for the worst rated borrowers (those with a numerical rating of 18) is\n43.498 per cent. This implies that over the three- year life of a loan taken out by these borrowers,\nthere is a one in two chances that they will default. In the Arbitrator's view, this is a significant\ndifference in default probabilities. Adopting a threshol d of ten will likely lead to too high an estimate\nof the interest rate subsidy since Brazil's methodol ogy requires obligors with ratings of 11 and worse\nto be assigned default probabilities equal to the worst rated obligor.\n\n271 US responses to questions from the Arbitrators, question 96, para. 41.\n272 Brazil's written submission, fn. 152.\n274 Brazil's comments on US responses to questions from the Arbitrator, question 96, para. 120.\n\nTable 2: Cumulative Default probabilities (Moody's)275\n\nRating Cumulative Default Probabilities\nLetter Numerical 1-Year 2-Year 3-Year\nAAA 1 0.000 0.000 0.000\nAA+ 2 0.000 0.000 0.000\nAA 3 0.000 0.011 0.048\nAA- 4 0.019 0.040 0.078\nA+ 5 0.003 0.091 0.241\nA 6 0.026 0.082 0.224\nA- 7 0.037 0.175 0.358\nBBB+ 8 0.166 0.449 0.794\nBBB 9 0.161 0.466 0.883\nBBB- 10 0.335 0.965 1.680\nBB+ 11 0.753 2.006 3.567\nBB 12 0.780 2.297 4.309\nBB- 13 2.069 5.749 10.151\nB+ 14 3.223 8.701 14.360\nB 15 5.457 12.511 18.535\nB- 16 10.460 19.782 28.532\nCCC+ 17 20.982 33.367 43.498\nCCC-C 18 20.982 33.367 43.498\nSource: Exhibit 36 of Hamilton, David, Praveen Varma, Sharon Ou, and\nRichard Conato, \"Moody's Special Comment on Default and Recovery\nRates of Corporate Bond Issuers, 1920-2005\", released January 2006,\nrevised March 2006 (Exhibit Bra-699 (Moody's special report (Hamilton,\nVarma, Ou, Conator 2006))).\n\n4.241 To ensure that the imputation of risk does not lead to an inflated estimate of the interest rate\nsubsidy, the Arbitrator has decided to change th e threshold to 14. The Arbitrator notes that a\nborrower rated one notch lower than this thre shold has a three-year default probability of\n18.535 per cent. This translates into about a 1 in 5 chances of a default over a period of three years,\nwhich is appreciably closer to that of the worst ra ted borrowers. In making this change, the Arbitrator\nnotes that Brazil has in several instances emphasized the flexibility of its methodology, which would\nallow the Arbitrator to modify certain of the assump tions to values that the Arbitrator considers more\nappropriate.276 This change results in 52 of the 91 foreign obligors being deemed creditworthy,\ncompared to just ten of the 91 foreign obligors when the threshold was ten.\n4.242 Finally, the Arbitrator turns to the economic literature on estimates of the interest rate subsidy\ncited by Brazil and the United States. The United States claims that this literature does not support\nthe calculation of the interest rate subsidy by Brazil since its survey of the literature suggests that the\ninterest rate subsidy ranges between 0 and 11 per cen t. Brazil has disputed the relevance of these\nstudies to its estimates arguing that they cover diff erent periods in time, different credit guarantee\nprogrammes and are not calculated at the obligor leve l. For its part, Brazil cites five studies that it\nclaims arrive at estimates of the interest rate s ubsidy equal to or greater than what it estimates for\nGSM 102.277 However, the United States also disputes the relevance of these studies since they cover\n\n275 Table 2 is taken from Exhibit Bra-794.\n276 Statement by Professor Rangarajan K. Sundaram concerning GSM 102, Exhibit Bra-793, para. 57.\n277 Brazil's responses to questions from the Arbitrator, question 94, para. 164.\n\ndifferent periods in time, some of the programme s evaluated are not credit guarantee programmes and\nsome do not employ the Ohlin formula.278\n4.243 In the Arbitrator's assessment, the review of the literature conducted by the parties while\ninformative is not determinative of the specific question before the Arbitrator, which is whether\nBrazil's methodology for calculating the interest rate subsidy results in an inflated estimate of the\ninterest rate subsidy. The main difficulty of draw ing any firm conclusion from the literature review is\nthe \"apples and oranges\" comparison, which both parties have in fact highlighted. The studies cited\nby the parties use different methods for calculating the interest rate subsidy; they have been conducted\nat different periods of time; they cover different countries, different product sectors, and different\nguarantee programmes.\n4.244 Given that the price effect (as reflected, for the purposes of our calculations, in the interest\nrate subsidy) is part of the trade-distorting im pact on Brazil, based on the principles set out in\nparagraphs 4.193 to 4.198 above, and based on our analysis of the arguments and evidence provided\nby the parties regarding Brazil's methodology for calcu lating the interest rate subsidy, we determine\nthat the trade-distorting impact to Brazilian producers and exporters as reflected in the IRS amounts to\nUS$25.27 million\n. It is comprised of two parts. The first part, equalling US$12.64 million,\nrepresents those impacts in the Brazilian domestic ma rket. In addition, we determine that there are\ntrade-distorting impacts in non-Brazilian markets, worth US$108 million, as a result of the export\ncredit gurantees received by non-Brazilian obligors. However, only a certain share of that amount\nrepresents trade-distorting impacts on Brazil. Cons equently, this second amount must be apportioned\nusing Brazil's share of world trade in GSM 102 prod ucts, which was 11.7 per cent in year 2006. This\nleads to an additional estimate of trade-distorti ng impact on Brazil of US$12.63 million. The detailed\ncalculations are shown in Annex 1.\n(ii) Full additionality\n4.245 Brazil claims that GSM 102 export credit guarantees confer a particular advantage on\nUS exporters in that it generates additional expor ts for the United States that would not otherwise\nhave occurred.\n279 Brazil clarifies that this could result from new demand or come from diversion from\nsellers in other markets. The sales that Brazil's method does not account for are those US exports that\nwould have occurred even without the GSM 102 export credit guarantees.280\n4.246 This additionality is of two forms: full a dditionality accruing to uncreditworthy obligors and\nmarginal additionality which accrues to creditworthy obligors. 281 With respect to those foreign\nobligors that it has classified as uncreditworthy, Brazil claims that credit could not have been obtained\nwithout GSM 102 at any viable price; thus, export transactions would not have occurred in the\nabsence of GSM 102. For uncreditworthy borrowe rs, economic activity occurs due solely to\nGSM 102. So, whenever a GSM 102 export cred it guarantees is extended to uncreditworthy\nborrowers, the entire volume of the exports constitut es the advantage conferred on US exporters. Full\nadditionality is hence calculated as the entire value of GSM 102-backed transactions involving\nuncreditworthy foreign obligors. 282 Brazil estimates the amount of full additionality in FY 2006 at\nUS$817 million based on its numerical threshold of 10.\n4.247 Brazil agrees that the relevant additionality be nefit to be considered is that of \"net\nadditionality\". A calculation of net additionalit y accounts for the negative revenue effect that\n\n278 US comments on Brazil's responses to questions from the Arbitrator, question 94, paras. 89-91.\n280 Statement by Professor Daniel Sumner concerning GSM 102, Exhibit Bra-797, para. 3.\n\nGSM 102 subsidies have on those US commercial exports that are not eligible for GSM 102. 283\nBecause the rate of the IRS is relatively large and the market share of the GSM 102-backed exports is\nvery small as compared to other exports, Brazil's methodology finds that, if the GSM 102 subsidy\nwere withdrawn, the United States, for most products and in most foreign obligor markets, would lose\nall the exports that had formerly been made under GSM 102.\n284\nArguments of the parties\n4.248 The United States contends that the notion of full additionality as presented by Brazil is\n\"entirely speculative\". In its view, it would account fo r an additional, indirect element to the interest\nrate subsidy that Brazil asserts is the first component for countermeasures.285\n4.249 Furthermore, full additionality hinges entirely on Brazil's determination of uncreditworthiness\nwhich the United States has argued relies on a \"fatally flawed\" calculation of interest rate subsidy,\nparticularly with respect to treatment of uncreditworthy obligors.286\n4.250 Based on its view of the economic literature, the United States argues that there is no support\nfor the claim that exports would not occur in the absence of GSM 102 guarantees. It argues that a\nuseful perspective for thinking about additionality is whether the export credit guarantee is able to\nexpand global demand for the product that is the subject of the subsidy.\n287\n4.251 Brazil defends full additionality by referring to the design and application of the GSM 102\nprogramme. It refers to statements by USDA and FAS, which operates GSM 102 in cooperation with\nthe CCC, that it alleges confirms that GSM 102 is used to facilitate credit for the purchase of\nUS exports, in instances where a foreign obligor, without a GSM 102 export credit guarantee, could\nnot secure financing at all.\n288 It claims that US regulations expressly provide that the GSM 102\nprogramme operates solely in circumstances in wh ich credit would not otherwise be available to\nfinance the export of US agricultural goods. 289 Specifically, it claims that the regulations provide that\nGSM 102 operates \"in cases where credit is necessary to increase or maintain US exports to a foreign\nmarket and where US financial institutions woul d be unwilling to provide financing without CCC's\nguarantee.\"290 Hence, in its view calculating full additionality for GSM 102-supported exports\ninvolving uncreditworthy foreign obligors is wholly consistent with the way in which USDA and FAS\nhave characterized the programme in their regulations and elsewhere.291\n4.252 With respect to the empirical studies cited by the United States, Brazil claims that these\nstudies have empirical flaws and provide limited gui dance about the precise magnitude of impacts of\nGSM 102 subsidies on US exports. Further, Brazil professes that some of the econometric analysis\npresented actually supports Brazil's positions.\n292 For example, Brazil quotes an extract from one of\nthese studies cited by the United States to the effect \"that a 1 per cent increase in the interest rate\nsubsidy from a GSM 102 guarantee results in a 3 per cent increase in US export value\".293\n\n283 Brazil's responses to questions from the Arbitrator, question 92, para. 121.\n284 Brazil's responses to questions from the Arbitrator, question 92, para. 120.\n285 US written submission, para. 197.\n286 US written submission, para. 196.\n287 Exhibit US-92.\n290 Brazil's responses to questions from the Arbitrator, question 25, para. 275.\n292 Statement by Professor Daniel Sumner concerning GSM 102, Exhibit Bra-797, para. 17.\n293 Statement by Professor Daniel Sumner concerning GSM 102, Exhibit Bra-797, para. 20.\n\nAnalysis by the Arbitrator\n4.253 In the Arbitrator's judgement, part of the trade-distorting impact of GSM 102 supported\nexports is its displacement of Brazilian production in its home mark et and Brazilian exports in third\ncountry markets. While full additionality is not an equivalent measure of this displacement effect\narising from export credit guarantees issued to uncreditworthy obligors, it is not an inappropriate basis\nfor calculating this effect. Again, to the extent that we can make the calculation of full additionality\nmore precise, the closer we can arrive at the amount of Brazilian production and exports that are\ndisplaced by the export credit guarantees.\n4.254 The Arbitrator has determined that the thres hold level for uncreditworthy obligors is 14 so\nthat those obligors with ratings worse than 14 are deemed uncreditworthy. Out of the 91 obligors\nwith GSM 102 transactions in FY 2006, 39 will be classified as uncreditworthy based on this\nthreshold. This group represents 43 per cent of the to tal number of obligors. Collectively, this group\naccounts for a similar percentage of all GSM 102 tran sactions in FY 2006. The interest rate subsidy\nfor uncreditworthy obligors is 24.3 per cent. Th is means that absent th e GSM 102 export credit\nguarantees, uncreditworthy foreign obligors would ha ve been charged an average of 24.3 per cent\nmore by the market.\n4.255 The Arbitrator therefore determines that the displacement effect on Brazilian production and\nexports of export credit guarantees issued to uncre ditworthy obligors, and for which we use full\nadditionality as an approximation, amounts to US$80.8 million\n. This is comprised of two parts. The\nfirst is the displacement effect in Brazil's dome stic market which amounts to US$36.3 million. The\nsecond part is the trade-distorting impacts in no n-Brazilian markets worth US$380.6 million. But\nonly a share of that amount represents displacement of Brazilian exports and so must be apportioned\nto Brazil's share of world trade in GSM 102 products, which was 11.7 per cent in 2006. This\napportioned amount is equal to US$44.5 million. The detailed calculations are shown in Annex 2.\n(iii) Marginal additionality\n4.256 With respect to creditworthy obligors, Brazil estimates the additionality from\nGSM 102-subsidized transactions by applying a \"but -for\" counterfactual that calculates the reduction\nin sales volume in a given fiscal year that US exporters would have incurred if the United States had\nwithdrawn the GSM 102 programme.294\n4.257 Brazil relies on a formal model to calculate the amount of marginal additionality. It uses a\npartial equilibrium linear displacement model of impo rt demand and export supply, specified in linear\ndifference form, to simulate the relative effects of the withdrawal of the GSM 102-induced interest\nrate subsidy on US exports, relative to a situation in which GSM 102-related interest rate subsidies are\nin place. This actual situation is then compared with the counterfactual in which GSM 102 for all\nrelevant commodities are permanently withdrawn. The methodology considers three markets, the\nUnited States, an import market which benefits fro m the GSM 102 interest subsidies and the rest of\nthe world. Brazil's calculation of marginal additionality results in estimated benefits of\nUS$93.8 million to US exporters.\n\nArguments of the parties\n4.258 The United States brings two arguments to bear on the marginal additionality calculations by\nBrazil.\n4.259 First, it argues that the methodology assumes that the subsidy from the export credit guarantee\nwill pass through completely to the world price. 295 It questions the justification for the assumption\nthat as a result of GSM 102 guarantees, importers w ill be able to purchase these products at the world\nprice minus the full subsidy. It argues that the proposition that the price of the relevant commodity\nexport under a GSM 102 programme is affected at a ll by the export credit guarantee is not supported\nby economic research.296\n4.260 It notes that the total cost of an import can be seen as a sum of the price of the commodity\nplus the financing cost. It acknowledges that the fi nancing cost may be reduced by the export credit\nguarantee because the guarantee is assumed to provide fo r an interest rate that is lower than what the\nimporter could have received in the market without the guarantee. The total cost of importing may\nthen be lower as a result of the guarantee, but that is due entirely to the interest rate subsidy, not to a\nchange in the price of the commodity.297\n4.261 Second, the United States criticizes the formal model used by Brazil to calculate marginal\nadditionally. It questions what it implies is an ad hoc step employed by Brazil to adjust the results of\nits formal model. The United States points to a part of Brazil's model (Equation E now modified by\nBrazil to Equation E') which calculates additiona l US exports as a result of GSM 102 export credit\nguarantees. Brazil assumes that additional US e xports can range between 0-100 per cent of the\namount of GSM 102 transactions. But Brazil's simulati ons are such that the results are always greater\nthan 100 per cent.298 In the view of the United States, this outcome means that the model overstates\nthe effects of GSM 102 on US exports. It claims that eventually Brazil i gnores the simulation result\nand caps the elasticity to one (100 per cent).299\n4.262 Also related to its criticism of the formal mode l, the United States questions the value of the\ncotton elasticities used by Brazil in the marginal add itionality analysis. It points out that these are\ndifferent from the elasticities used in the cotton model 300 to analyse the adverse effects of marketing\nloans and countercyclical payments. 301 It argues that the elasticities employed may be appropriate in\nthe context of basic supply and demand responses to small changes in volumes and prices but not in\nscenarios where Brazil is assuming the full pass-through of the GSM 102 interest rate subsidy to the\nUS export price with sometimes large price swings.302\n4.263 Brazil has advanced a defence of its methods ag ainst the criticism of the United States. It\nrejects the first criticism of the United States that it assumes a 100 per cent pass through of the interest\nrate subsidy to world prices. Brazil clarifies that in fact it assumes that world markets for the\nagricultural commodities at issue are highly competitive, and the demand curve facing US exporters is\nhorizontal.303 In its view, exporters worldwide, including US exporters, are, \"price takers\" so that\nthere is no substantial pass through.\n\n295 US written submission, para. 211.\n296 US written submission, para. 212.\n297 US written submission, para. 212.\n298 US written submission, para. 215.\n299 US written submission, para. 217.\n300 Brazil's Methodology Paper, paras. 72-139 and Exhibit Bra-704.\n301 US written submission, paras. 222-223.\n302 US written submission, para. 221.\n\n4.264 It argues that the basis for US exports of the subsidized commodities in the target markets lies\nin the effective price rebate afforded to forei gn obligors in the form of GSM 102 interest rate\nsubsidies.304 Brazil distinguishes between what it te rms \"effective sourcing prices\" and \"world\nprices\". It defines the effective sourcing price as the \"cost of the commodity plus the interest costs in\nfinancing the purchase\". 305 It claims that the interest rate subsidy from GSM 102 export credit\nguarantees effectively lowers effective sourcing prices but the world prices of the commodities in\nquestion are not substantially affected by GSM 102 subsidies.306\n4.265 Brazil claims that it is not ignoring its ow n simulation results when it places a cap on the\nadditional US exports that arise from GSM 102 guarantees. 307 Brazil explains that it formulates\nequation (E'), as a \"but-for\" methodology that effectively asks: \"What is the fraction of each\nGSM 102-backed transaction to a specific foreign obligor that the US exporter would forego if the\nUnited States were to withdraw its prohibited GSM 102 export subsidies in a given fiscal year?\"\n308\nTo yield relevant results, it contends that the fa ctor must lie between zero and 100 per cent of the\nGSM 102-backed transaction value, which explains the cap of 100 per cent. Brazil explains that it\nthen applies a standard partial-equilibrium displacem ent model, specified in linear difference form, to\nfind reliable estimates for the adjustment factor th at is to be used as input into equation (E').\n309 I t\nargues that the results of that approximation, if left uncapped, answers an entirely different\ncounterfactual than that posed in its equation E'. Brazil claims it is not asking how a specific obligor\ngenerally reacts to changes in effective sourcing pric es offered by the United States, but rather how it\ndoes so for the limited transactions made under GSM 102. 310 Since, logically, not more than the\nentire fraction (100 per cent) of each GSM 102-subsidized US sale can be foregone due to an\nelimination of the sales discount facilitated by the interest rate subsidy, Brazil maintains that a\n100 per cent cap is necessary to answer meaningfully the question before the Arbitrator.\n4.266 Finally, Brazil defends its choice of the elasticity values by arguing that they must be\ncalibrated to suit the policy scenario at issue.\n311 It claims that in its marginal additionality analysis,\nwithdrawal of GSM 102 subsidies affects a small fr action of total US export transactions for a range\nof crops. In its view, this scenario requires a set of supply and demand responses that are tailored to\npolicy shocks which are not significant enough to sh ift US domestic or world prices, and thus too\nsmall to cause large-scale supply or demand responses in the United States and elsewhere.\n312 I n\ncontrast, it considers the relevant counterfactua l underlying the cotton simulation model in the\nactionable subsidies case to require supply and de mand elasticities that reflect a large, permanent\nwithdrawal of US marketing loans and countercyclical payments for upland cotton, while other\nprogramme crops remained eligible for subsidies.\n313\nAnalysis by the Arbitrator\n4.267 In our analysis of full additionality, we made clear that we saw it as an approximation of the\ndisplacement of Brazilian production and exports because of export credit guarantees issued to\n\n304 Brazil's written submission, Annex I (Joint Statement by Professor Daniel Sumner and Rangarajan\nSundaram), para. 2.\n305 Brazil's written submission, Annex I (Joint Statement by Professor Daniel Sumner and Rangarajan\nSundaram), para. 28.\n307 Brazil's written submission, Annex I (Joint Statement by Professor Daniel Sumner and Rangarajan\nSundaram), para. 39.\n\nuncreditworthy obligors. Similarly, we note that while marginal additionality is not an equivalent\nmeasure of the displacement effect on Brazilian pr oduction and exports from export credit guarantees\nissued this time to creditworthy obligors, it is not an inappropriate basis for calculating this effect.\nFurthermore, to the extent that we can make th e calculation of marginal additionality more precise,\nthe nearer we shall be to determining the am ount of Brazilian production and exports that are\ndisplaced by the export credit guarantees.\n4.268 On the issue of the pass through, we reiterate our concurrence with Brazil's position that the\ninterest rate subsidy obtained by obligors reduces the combined purchase price of US agricultural\nexports. We have explained our reasoning in the previous sub-section (see paragraph 4.193).\n4.269 The United States' criticism of th e elasticities used in Brazil's marginal additionality model is\nbasically a claim that Brazil is \"cherry picking\" the elasticities. Brazil's argument that different policy\nsimulations call for different elasticities could lend itself easily to the United States' interpretation.\nBut even if one accepts Brazil's argument that different policy simulations call for different\nelasticities, the introduction of a cap in Brazil's marginal additionality model raises a significant\nconcern about its internal consiste ncy. To consider this matter mo re carefully, the Arbitrator has\nconducted a set of exercises using the model.\n4.270 For the first exercise, the Arbitrator requested Brazil to use its marginal additionality model\nwithout the cap to calculate the amount of additiona l US exports arising from interest rate subsidies\nreceived by obligors deemed creditworthy by Brazil. 314 The Arbitrator recalls that based on the\nthreshold of ten adopted by Brazil for distin guishing between creditwor thy and uncreditworthy\nobligors, Brazil's methodology finds only ten obligors creditworthy. Of these only three obligors (two\nfrom Panama and one from Trinidad and Tobago) ha ve positive interest rate subsidies. The other\nseven Korean obligors have been found not to enjoy any interest rate subsidies from GSM 102. For\nthe three obligors, Brazil confirms that without the cap, its marginal additionality calculations yield\nlarge multiples of the GSM 102 transaction value and the obligor-specific IRS.\n315 In other words,\neven if the obligors had been cl assified by Brazil's methodology as creditworthy, the application of\nthe marginal additionality model without the cap generated additionality that exceeded the amount\nthat would have been calculated if they had been classified as uncreditworthy.\n4.271 Another way of looking at this is simply to take summary statistics of the uncapped\nelasticities calculated by Brazil's marginal additionality model. 316 Excluding the seven Korean\nobligors, the uncapped elasticities range from a minimum of 6.17 to a maximum of 107 million. The\nsimple (weighted) average of the uncapped elasticities is 3.4 million.\n4.272 For the second exercise, the Arbitrator consider ed the other seven obligors (all of whom are\nKorean banks) deemed creditworthy by Brazil's meth odology. Brazil had further determined that the\nreceipt of GSM 102 export credit guarantees by these seven obligors involved no interest rate subsidy.\nThat is, Brazil's methodology concluded that these seven obligors could have obtained financing at\nthe risk-free market rate even without the GSM 102 guarantees. Because no interest rate subsidy was\ninvolved, the methodology showed that there wa s no marginal additionality for these obligors.\nImports of US agricultural goods into the Republic of Korea would have taken place even in the\nabsence of GSM 102 export credit guarantees.\n4.273 The second exercise conducted by the Arbitrat or involved ascertaining how much of an\ninterest rate subsidy would be needed in the case of these Korean obligors for Brazil's methodology to\ngenerate additionality. This exercise allows Brazil' s cap to be maintained. If the introduction of a\n\n314 Questions from the Arbitrator, question 30.\n315 Brazil's responses to questions from the Arbitrator, question 30, para. 389.\n316 See Worksheet \"'Marg add. rate 2006\" of Exhibit Bra-794.\n\nsmall interest rate subsidy results in a sudden change in the result s so that full additionality ensues,\nthen it calls Brazil's marginal additionality model into further question. Furthermore, the smaller the\ninterest rate subsidy required to generate additionality, the more su spect the model becomes. This\nsecond exercise showed that even a very small interest rate subsidy equal to 1/10 305 basis points 317\nproduced full additionality for the Korean obligors. The quantity 10 305 is one followed by 306 zeros.\nIts reciprocal, 1/10305, is therefore an \"infinitesimally\" small number.\n4.274 Brazil's marginal additionality model appears to generate inflated results, with large multiples\nresulting from the first exercise with the cap removed, and with infinitesimally small interest rate\nsubsidies required to generate additionality in the second exerci se with the cap maintained.\nNevertheless, the Arbitrator is of the view that, ev en in the case of creditworthy obligors, the interest\nrate subsidy they receive lead to trade-distor ting impacts on Brazilian producers and exporters that\nmust be accounted for. While they are not necess arily equal to the value of GSM 102 transactions,\nthey are also not zero.\n4.275 To determine this amount, we begin by noting th at the riskiness of even creditworthy obligors\nwill have a bearing on the magnitude of the marginal additionality from GSM 102 transactions\nentered into by creditworthy obligors. In the ab sence of the GSM 102 programme, the more risky an\nobligor is (the closer its rating is to the threshold of 14) the smaller the amount of trade financing of\nUS agricultural goods that it would have been involve d in, all things being equal. The less risky the\nobligor, the greater the likelihood that it woul d have been financing the same amount of\nUS agricultural exports even in the absence of the programme.\n4.276 Building on this notion, we employ the data on cumulative default probabilities that have\nbeen provided by Brazil. Recall that we have determined that obligors rated 15 and worse are\nuncreditworthy, which implies a dditionality equal to the entire value of the GSM 102 transactions\nthey enter into. We shall assume that the only a fraction of the GSM 102 transaction that is entered\ninto by a creditworthy obligor, which receives an interest rate subsidy, represents additionality.\n318\nMore specifically, we shall assume that this frac tion, for a creditworthy obligor with a numerical\nrating of i and an average loan maturity of n, is equal to the ratio of default probabilities of a\ncreditworthy obligor and of an obligor rated 15. More formally:\n (1) n\nn\nin\ni\nD\ndt = , i =1, ..., 14 and n = 1, 2, 3\n\nwhere:\n\nn\nit is the proportion of the GSM 102 transaction invo lving a creditworthy obligor with a numerical\nrating of i and an average loan of maturity n that results in additionality;\n\nn\nid is the cumulative default probability of a creditw orthy obligor with a rating of i and an average\nloan maturity n; and\n\nnD is the cumulative default probability of an ob ligor with a rating of 15 for an average loan\nmaturity n.\n\n317 One basis point is equal to 0.01 per cent (one hundredth of a per cent).\n318 It should be noted that, based on Brazil's IRS methodology, seven of the creditworthy obligors do\nnot receive any interest rate subsidy. Thus, equation (1) does not apply to them.\n\n4.277 Based on this, we determine that the displace ment effect on Brazilian production and exports\nof export credit guarantees issued to creditwort hy obligors, and for which we use marginal\nadditionality as an approximation, amounts to US$41.3 million. Again, this can be decomposed into\nthe trade-distorting impact in Brazil's domes tic market and in non-Brazilian markets. The\ndisplacement of Brazilian production because of GSM 102 transactions involving creditworthy\nBrazilian obligors amounts to US$18.7 million. The trade-distorting impact in non-Brazilian markets\nas a result of the transactions of creditworthy, non-Brazilian obligors amounts to US$193 million.\nHowever, only a certain share of that represents di splacement of Brazilian exports. In keeping with\nour framework of analysis, the second amount must be apportioned to Brazil's share of world trade in\nGSM 102 products, which was 11.7 per cent in 2006. The trade-distorting impact to Brazil in non-\nBrazilian markets therefore equals US$22.6 million. The detailed calculations are shown in Annex 3.\n(iv) Conclusion\n4.278 The Arbitrator determines that the amount of US$1.122 billion proposed by Brazil will not\nresult in appropriate countermeasure s. The Arbitrator has consequently made modifications to the\ncalculation of the interest rate subsidy and additio nality in order to more accurately calculate the\ntrade-distorting impact of the GSM 102 programme on Brazil. Based on these modifications and in\nthe light of other determinations above, we find that the amount of countermeasures which can be\nauthorized as being appropriate, based on the amount of GSM 102 transactions in FY 2006, is\nUS$147.4 million\n\n4.279 The Arbitrator has taken note of Brazil's request for an amount of countermeasures\nauthorization that would be variable on an annu al basis, depending on \"the total of exporter\napplications received under GSM 102 ... for the most recent concluded fiscal year\". The Arbitrator\nhas also noted that the United States does not disput e that it would be permissible for the level of\nappropriate countermeasures to be determined thro ugh a formula, provided that this formula was\nsufficiently well defined so as to make it applicable in a transparent and predictable manner. We have\ntherefore decided to authorize an amount of count ermeasures that would be variable on an annual\nbasis and that would depend on, among other things , the total amount of GSM 102 transactions in the\nmost recent concluded fiscal year. The terms of this variable amount of countermeasures are\ncontained in Annex 4.\nV. BRAZIL'S REQUEST TO APPLY COUNTERMEASURES UNDER THE\nTRIPS AGREEMENT AND THE GATS\n5.1 In its request to the DSB, Brazil requests au thorization to suspend concessions or other\nobligations in the annual amount of approximate ly US$3 billion with respect to the prohibited\nsubsidies at issue in this dispute. In its view, given the amount, it is neither practicable nor effective\nfor Brazil to suspend concessions only on imports of US goods and the circumstances are serious\nenough to justify the suspension of concession or obl igations under other covered agreements. Brazil\ntherefore proposed to suspend obligations under GATT 1994, and also under the GATS and\nTRIPS Agreement under Article 22.3(c) of the DSU.319\n5.2 The United States challenges this request, arguing that Brazil had not followed the procedures\nand principles of Article 22.3 of the DSU. The United States argues that given the size and diversity\nof the Brazilian economy, Brazil cannot justify and demonstrate its claim that applying\ncountermeasures with respect to goods is not practicable or effective. 320 In these proceedings,\nhowever, Brazil argued that the provisions of Artic le 22.3 of the DSU do not apply, and that its\nrequest must be considered on the basis of Article 4.10 of the SCM Agreement only.\n\n319 WT/DS267/21.\n320 US written submission, paras. 318-319.\n\n5.3 In light of the parties' disagreement as to the applicable legal standard for this part of our\nassessment, we must first consider whether the principles and procedures of Article 22.3 of the DSU\napply, before we can proceed with an assessment of Brazil's request on the basis of the applicable\nlegal standard.\nA. DO THE PRINCIPLES AND PROCEDURES OF ARTICLE 22.3 OF THE DSU APPLY TO BRAZIL'S\nREQUEST?\n1. Arguments of the parties321\n5.4 Brazil argues in its Methodology Paper that th e countermeasures proposed by Brazil, which\ninclude the suspension of concessions or other obliga tions not only with respect to trade in goods but\nalso under TRIPS and GATS, are \"appropriate\" and \"c ommensurate with the degree and nature of the\nadverse effects determined to exist\", within the meaning of Articles 4.10 and 7.9 of the\nSCM Agreement. Brazil argues that the countermeasures it proposes, both in their quantitative and in\ntheir qualitative aspects, must be assessed solely ag ainst the requirements of Articles 4.10 and 7.9 of\nthe SCM Agreement.322 Brazil considers that these are the only standards against which the\ncountermeasures must be assessed.323\n5.5 Brazil also argues that the United States, as th e party objecting to the proposed requests for\ncountermeasures bears the burden of proving that th e type of the countermeasures proposed by Brazil\nis such as to render them not \"appropriate\" in the meaning of Article 4.10 of the SCM Agreement.\nLikewise, with respect to the actionable subsidies, Brazil argues that the United States has the burden\nof proving that the type of the countermeasures pr oposed by Brazil is such as to render them not\n\"commensurate with the degree and nature of the a dverse effects determined to exist\" as required by\nArticle 7.9 of the SCM Agreement. Brazil argues that the United States failed to discharge its burden\nsince it merely asserts that DSU Article 22.3 applies to the SCM Agreement. In Brazil's view,\nArticles 4.10 and 7.9 of the SCM Agreement provide for countermeasures that are different from those\navailable under the DSU.324\n5.6 Brazil argues that Articles 4.10 and 7.9 of the SCM Agreement provide for \"countermeasures\"\nand such countermeasures can well encompass the suspension of concessions or obligations under\nsectors or agreements other that in which a violation was found. 325 Citing Article 49 of the Draft\nArticles on Responsibility of States for Internationally Wrongful Acts , Brazil argues that the purpose\nof a \"countermeasure\" as stated in that article is to induce the offending state to comply with its\nobligations. Therefore, Brazil advocates that there is nothing in public international law to support the\nnotion that a countermeasure has to be taken in the same area or under the same agreement in which a\nviolation is found.326 Brazil is of the view that Articles 4.10 and 7.9 are \"special or additional rules\"\nwithin the meaning of Article 1.2 of the DSU, a nd that they address both the level and the type of\ncountermeasures that may be imposed by the original complaining Member in sharp contrast to\nArticle 22.4 and 22.3 of the DSU. 327 Brazil contends that the Arb itrator should apply the standards\n\n321 In this section, the arguments of the parties are reflected as they were presented by the parties in\ntheir submissions, i.e. with reference both to the prohi bited subsidies addressed in this Decision and to the\nactionable subsidies addressed in the separate Decision in WT/DS267/ARB/2. In the subsequent assessment by\nthe Arbitrator in section 2 below, only the arguments relating to the prohibited subsidies at issue in these\nproceedings are addressed.\n324 Brazil's written submission, paras. 452-453.\n326 Brazil's written submission, paras. 458-459.\n327 Brazil's written submission, paras. 464-465.\n\nunder the SCM Agreement, not the principles and procedures under Article 22.3 of the DSU. 328 The\nmandate of the Arbitrator is solely to determ ine whether countermeasures are \"appropriate\" or\n\"commensurate\".329\n5.7 With respect to the issue whether SCM Agreement and Article 22.3 of the DSU can be read as\ncomplementing each other, Brazil argues that \"if a special or additional rule or procedure does not\nprovide additional requirements that are to be met together with the corresponding provisions of the\nDSU – so as to effectively complement them without negatively affecti ng their legal integrity – the\ntwo sets of provisions cannot be applied together.\" Brazil continues to argue that if they cannot be\napplied together it is because there is a differe nce between them. In such case, Brazil argues the\nspecial or additional rule or procedure must prevail over the corresponding DSU provisions.330\n5.8 Brazil considers that Article 22.3 of the DS U establishes a legal standard based on the\nconsideration by the Member concerned of the practicability and effectiveness of suspension of\nconcessions and sets out a number of elements that have to be considered, whereas Articles 4.10\nand 7.9 of the SCM Agreement contain no restrictions on the type of countermeasures that may be\ntaken. Articles 4.10 and 7.9 of the SCM Agreement grant to the Member concerned a margin of\nappreciation that is broader than the one reflecte d in the requirements of Article 22.3 of the DSU.\nThey cannot be applied together.331\n5.9 The United States argues that DSU discip lines concerning suspension of concessions,\nincluding Article 22.3, apply to the SCM Agreement.332 In its view, the fact that the SCM Agreement\ndoes not provide for rules relating to cross-sector suspension of concessions independent of DSU\nArticle 22.3, when special rules for other i ssues were carved out, suggests the disciplines on\ncross-sector suspension of concessions remain securely tied to the existing DSU rules and\nprocedures.333\n5.10 The United States also argues that Brazil itself explicitly invoked Article 22.3 of the DSU in\nits request for countermeasures for prohibited subsidi es and in its request for actionable subsidies.\nTherefore, in the United States' view, Brazil has act ually conceded that its requests are subject to\nArticle 22.3 of the DSU. The United States also argues that the fact that Article 22.3(g) cross-\nreferences the agreements to which it applies, including the SCM Agreement, also indicates that\nArticle 22.3 of the DSU applies to requests for countermeasures under the SCM Agreement.334\n5.11 The United States argues that given the general ru le for suspension of concessions within the\nsame sector under the DSU and the absence of any rule to the contrary in Articles 4.10 and 7.9 of the\nSCM Agreement, there is no conflict in applying both the SCM Agreement and Article 22.3 of the\nDSU. Thus, the better interpretation – and one that allows Articles 4.10 and 7.9 of the\nSCM Agreement to be applied in a complementary fashi on with Article 22.3 of the DSU – is that\nArticles 4.10 and 7.9 deal with the amount of count ermeasures, while Article 22.3 of the DSU sets\nforth rules for determining when countermeasures can be applied on a cross-sector basis. To the\nextent there is conflict between them, it is in re gard to the assessment of quantity, or the amount, of\nthe suspension of concessions. With regard to \"t ype\" or \"form\", the United States argues that the\nsilence of the SCM Agreement as to cross-agreement or cross-sec tor countermeasures mean that there\n\n330 Brazil's responses to questions from the Arbitrator, question 40, para. 460.\n331 Brazil's responses to questions from the Arbitrator, question 40, paras. 461-462.\n332 US written submission, para. 320.\n333 US written submission, para. 323.\n334 US oral statement, para. 67.\n\nis no \"difference\" in the meaning of Article 1.2 of the DSU that would require ignoring the carefully\narticulated, hierarchical test under Article 22.3.335\n2. Assessment by the Arbitrator\n5.12 The question before us relates to the definiti on of our mandate, as well as to the substantive\nlegal standard that is applicable to the imposition of cross-retaliation under the SCM Agreement. Both\naspects are closely related, in that the nature an d scope of our mandate is logically tied to the\napplicable substantive requirements, the application of which we must review.\n5.13 The parties essentially disagree about the extent to which the provisions of Article 22.3 of the\nDSU, which set out specific principles and procedur es for the authorization of cross-retaliation in\ndispute settlement proceedings under the DSU, ar e applicable in the context of proceedings\nconcerning prohibited subsidies under the SCM Agreement, which contains specific provisions\nrelating to countermeasures.\n5.14 As a starting point, we need to consider the terms of the relevant provisions of the\nSCM Agreement and of the DSU. We recall that Article 4.10 of the SCM Agreement specifically\naddresses the question of the coun termeasures that may be author ized in relation to prohibited\nsubsidies, and Article 4.10 addresses the mandate of the arbitrator in relation to such countermeasures,\nin the event that an arbitration is requested unde r Article 22.6 of the DSU in relation to prohibited\nsubsidies. Article 4.10 requires countermeasures in relation to prohibited subsidies to be\n\"appropriate\", and footnote 9 further informs this expression. Article 4.11, in turn, provides that, in\nthe event that a party to the dispute requests arb itration under paragraph 6 of Article 22 of the DSU,\nthe arbitrator shall determine whether the countermeasures are \"appropriate\".\n5.15 Article 22.6 of the DSU, in turn, provides that:\n\"When the situation described in paragraph 2 occurs, the DSB, upon request, shall\ngrant authorization to suspend concessions or other obligations within 30 days of the\nexpiry of the reasonable period of time unl ess the DSB decides by consensus to reject\nthe request. However, if the member con cerned objects to the level of suspension\nproposed, or claims that the principles and procedures set forth in paragraph 3 have\nnot been followed where a complaining part y has requested authorization to suspend\nconcessions or other obligations pursuant to pa ragraph 3(b) or (c), the matter shall be\nreferred to arbitration.\"\n5.16 Paragraphs 10 and 11 of Article 4 of the SCM Agreement constitute \"special or additional\nrules\" under Appendix 2 of the DSU. In accordance w ith Article 1.2 of the DSU, \"to the extent that\nthere is a difference between the rules and pro cedures of this understanding and the special or\nadditional rules and procedures set forth in Appendix 2, the special or additional rules and procedures\nin Appendix 2 shall prevail\".\n5.17 The Appellate Body has clarified the circumstances in which such a \"difference\" would exist:\n\"[I]t is only where the provisions of the DS U and the special or additional rules and\nprocedures of a covered agreement cannot be read as complementing each other that\nthe special or additional provisions are to prevail. A special or additional provision\nshould only be found to prevail over a provision of the DSU in a situation where\nadherence to the one provision will lead to a violation of the other provision, that is,\nin the case of a conflict between them. An interpreter must, therefore, identify an\n\n335 US responses to questions from the Arbitrator, question 67, para. 185.\n\ninconsistency or a difference between a provision of the DSU and a special or\nadditional provision of a covered agreement before concluding that the latter prevails\nand that the provision of the DSU does not apply.\"336\n5.18 The question before us in this case is whethe r Article 22.3 of the DSU and Article 4.10 and\n4.11 of the SCM Agreement can be read as complementing each other, or whether adherence to the\nprinciples and procedures contained in Article 22.3 of the DSU would lead to a violation of\nArticle 4.10 or 4.11 of the SCM Agreement, such that there is a conflict between the two provisions.\nIn other words, we must clarify whether the special or additional rules of Ar ticle 4.10 and 4.11 of the\nSCM Agreement constitute the entirety of the applicable rules relating to the type and level of\ncountermeasures that may be authorized in relation to prohibited subsidies, or whether the principles\nand procedures of Article 22.3 of the DSU and these provisions may be read as complementing each\nother in defining the rules applicab le to the suspension of concessions or other obligations in relation\nto prohibited subsidies.\n5.19 We first note that paragraphs 10 and 11 of Ar ticle 4, and more generally the provisions of\nArticle 4 of the SCM Agreement concerning \"remedies\", are closely tied to the terms and procedures\nof the DSU itself. Indeed, the arbitration that is addressed in Article 4.11, which defines the mandate\nof the arbitrator with reference to the terms of Article 4.10, is defined as an arbitration requested\n\"under paragraph 6 of Article 22 of the DSU\". It is clear from the use of this cross-reference, that the\narbitral proceedings at issue, even though they are in relation to prohibited subsidies under the\nSCM Agreement, are initiated under Article 22.6 of the DS U. The primary legal basis for such\nproceedings is therefore Article 22.6 of the DSU, as well as Article 4.10 of the SCM Agreement.\n5.20 Under the terms of Article 22.6 of the DSU, the Member concerned may challenge two\ndistinct aspects of a request for authorization to suspend concessions or other obligations. The\nMember concerned may object to \"the level of su spension proposed\", or it may \"claim that the\nprinciples and procedures set forth in paragraph 3 (of Article 22) have not been followed\" where a\ncomplaining party has requested authorization to su spend concessions or other obligations pursuant to\nparagraph 3(b) or (c). If either of these two clai ms is made, then \"the matter shall be referred to\narbitration\". The reference to an arbitration requ ested \"under paragraph 6 of Article 22 of the DSU\"\nin Article 4.11 of the SCM Agreement, therefore, on its face, refers to the existence of (1) an objection\nto the \"level of suspension proposed\" and/or (2 ) a claim that the principles and procedures of\nArticle 22.3 of the DSU have not been followed, which are to be referred to arbitration.\n5.21 In the case of an arbitration carried out under th e DSU alone, the mandate of the arbitrator is\nfurther defined in Article 22.7, which provides in its first sentence that \"the arbitrator acting pursuant\nto paragraph 6 shall not examine the nature of th e concessions or other obligations to be suspended\nbut shall determine whether the leve l of such suspension is equivalent to the level of nullification or\nimpairment\". This is in line with the terms of Article 22.4, which provides that the level of the\nsuspension shall be \"equivalent to the level of nulli fication or impairment\". This is comparable, in\nstructure, to the terms of Article 4.11 of the SCM Agreement, which provides that the arbitrator \"shall\ndetermine whether the countermeasures are appropria te\", which is in line with the terms of\nArticle 4.10, which provides that the DSB sha ll grant authorization to take \"appropriate\"\ncountermeasures.\n5.22 The provisions of Article 22.7 of the DSU and Article 4.11 of the SCM Agreement differ, in\nthat Article 22.7 of the DSU further articulates that , if the matter referred to the arbitrator includes a\nclaim that the principles and procedures have not b een followed, the arbitrator shall examine that\nclaim, whereas Article 4.11 of the SCM Agreement contains no exact equivalent. The question\ntherefore arises as to how the mandate of the arbitr ator should be understood in a situation where a\n\n336 Appellate Body Report, Guatemala – Cement I, para. 65.\n\nclaim that the principles and procedures of Article 22.3 of the DSU have not been followed is referred\nto arbitration in accordance with Article 22.6 of the DSU, in relation to prohibited subsidies.\n5.23 In order to give useful meaning to all the terms of the treaty, including those of Article 22.3 of\nthe DSU and the reference to Article 22.6 of the DSU in Article 4.11 of the SCM Agreement, we must\na priori read the terms of that provision as envisaging that the principles and procedures of\nArticle 22.3 of the DSU apply, including in cases re lating to prohibited subsidies, and that a claim\nmay be made in relation to these principles and pro cedures. In accordance with the principle that the\nspecial or additional rules listed in Appendix 2 of the DSU would only prevail in the event of a\n\"difference\" (i.e. if it were not possible to apply bo th simultaneously), it is only in the event that we\ndetermine that there is a conflict or incompatib ility between such a reading and the terms of\nArticle 4.11 of the SCM Agreement, that we should conclude otherwise.\n5.24 It appears to us that such a conflict or inco mpatibility would arise between the application of\nthe principles and procedures in Article 22.3 of the DSU and the terms of Article 4.10 and 4.11 of the\nSCM Agreement only if the terms \"appropriate countermeasure s\" in these provisions are interpreted to\ndefine not only the permissible le vel of countermeasures in the case of prohibited subsidies, but also\nthe type of countermeasures that may be authorized, so that the principles and procedures of\nArticle 22.3 of the DSU would be inoperative in cases relating to prohibited subsidies.\n5.25 We are not persuaded that this is the case. As was discussed in detail in Section IV.D above,\nit is undisputed that the expression \"appropriate co untermeasures\" defines the permissible level of\ncountermeasures in relation to prohibited subsidies. In our view, it does not do more than that. The\nterm \"appropriate\", as informed by footnote 9, whic h clarifies that this expression is not meant to\nallow countermeasures that would be \"disproportionate\", necessarily addresses the level of suspension\nthat may be authorized. This is suggested by th e use of the term \"disproportionate\", which can only\nbe understood with reference to the level of countermeasures. By contrast, it is not clear that these\nterms provide any guidance as to the type of countermeasures that may be authorized.\n5.26 In light of the level of detail in which the matt er of cross-sectoral retaliation is addressed in\nthe DSU, one would have expected the drafters of the SCM Agreement to provide express guidance to\nthis effect, if they had intended to address diffe rently the question of the type of permissible\ncountermeasures, as well as their level. In fact, th is would have been especially necessary in light of\nthe fact that Article 22.6 of the DSU, which is expressly referred to in Article 4.11 of the\nSCM Agreement, foresees that a challenge to proposed susp ension of concessions or other obligations\nmay be based either on the level of suspension proposed, or on a claim \"that the principles or\nprocedures of paragraph 3 (of Article 22 of the DSU) have not been followed\".\n5.27 While the expression \"the level of proposed suspension\" does not in itself prejudge the\nstandard upon which such \"level\" might be review ed, and thus allows th is standard to differ\ndepending on the type of measure at issue, the reference to the \"principles and procedures\" of\nArticle 22.3 of the DSU leaves no doubt as to the relevant legal standard. This part of the reference to\nArticle 22.6 of the DSU in Article 4.11 of the SCM Agreement would have to be read out of the\nprovision in order to conclude that the principl es and procedures of Article 22.3 of the DSU do not\napply in the context of proceedings relating to prohibited subsidies. In light of our analysis above, we\nsee no basis to do so. We also note that, as treaty inte rpreters, we are required to \"read all applicable\nprovisions of a treaty in a way that gives meaning to all of them, harmoniously\". 337 The only manner\nin which we can give full meaning to all the term s of the treaty harmoniously in this context is to\nunderstand the terms of Artic le 4.10 and 4.11 of the SCM Agreement as meaning that the mandate of\nthe arbitrator as defined in Article 4.11 of the SCM Agreement relates to the determination of the level\n\n337 See for example Appellate Body Report, Canada – Dairy , para. 133, and Appellate Body Report,\nUS – Upland Cotton, para. 549.\n\nof countermeasures, while the terms of the arbitr ator's mandate in relation to a claim that the\nprocedures and principles of Article 22.3 of the DSU have not been followed are contained in\nArticle 22.6 of the DSU.\n5.28 This interpretation is also consistent, in our view, with the context in which these provisions\narise. The various paragraphs under Article 4 of the SCM Agreement may not be read in isolation\nfrom the DSU. Rather, we understand the terms of Article 4 of the SCM Agreement as providing\nspecific additional rules on specifi c aspects of dispute settlement proceedings relating to prohibited\nsubsidies, which replace the equivalent rules of the DSU only to the extent that they differ from and\nare incompatible with such rules.\n5.29 In Article 4.11 of the SCM Agreement, it was not necessary for the drafters to clarify that, in\nrelation to a claim that the principles and proce dures of Article 22.3 have not been followed, the\narbitrator would review that claim, since the terms of Article 22.7 of the DSU, which generally define\nthe terms under which an arbitration under Article 22.6 is to be carried out, already address this point.\nOnly to the extent that the mandate of the arbitrator differed from that set forth in Article 22.7 of the\nDSU, was it necessary to explicitly define it in Article 4.11 of the SCM Agreement, in order to ensure\nthat the mandate of the arbitrator in relation to the proposed level of countermeasures would be\nconsistent with the manner in which the perm issible level of countermeasures is defined in\nArticle 4.10 of the SCM Agreement for prohibited subsidies. Indeed, Article 22.7 of the DSU sets out\na number of other aspects relating to arbitration pr oceedings pursuant to Ar ticle 22.6 of the DSU,\nwhich are not replicated in Article 4.11 of the SCM Agreement, but which nonetheless are clearly\nrelevant and applicable to such proceedings. In particular, the last two sentences of Article 22.7\nprovide that:\n\"The parties shall accept the arbitrator's decision as final and the parties concerned\nshall not seek a second arbitration. The DS B shall be informed promptly of the\ndecision of the arbitrator and shall, upon request, grant authorization to suspend\nconcessions or other obligations where the re quest is consistent with the decision of\nthe arbitrator, unless the DSB decides by consensus to reject the request.\"\nThese important provisions are clearly relevant to arbitral proceedings in relation to prohibited\nsubsidies under the SCM Agreement.\n\n5.30 Finally, we consider that our interpretation is faithful also to the object and purpose of dispute\nsettlement proceedings in the WTO and to their integrated nature. Th e DSU provides the common\nframework under which dispute settlement proceedings are initiated in the WTO, and brings together\nall the covered Agreements. This is the overall framework in which the question of the possibility of\nseeking suspension of obligations under another sector , or another covered Agreement than that under\nwhich the violation has been found, arises, and this is logically addressed in the context of the DSU.\n5.31 We are mindful that we must give full meaning to all the terms of the treaty, including the\nspecial or additional rules identified in Appendix 2, and that such special or additional rules may\nlegitimately prevail over any relevant DSU rules and procedures. However, we are not persuaded that\nthere is a conflict, such that the principles a nd procedures of Article 22.3 of the DSU would be\ninapplicable in the case of disputes relating to prohibited subsidies under the SCM Agreement.\n5.32\n In light of all the above, we conclude that th e principles and procedures of Article 22.3 of the\nDSU apply to the claim before us and that we must review the United States' claim that these\nprinciples and procedures have not been followed by Brazil.\n\nB. MANDATE OF THE ARBITRATOR AND BURDEN OF PROOF\n5.33 Having determined that the principles and pro cedures of Article 22.3 of the DSU apply to\nBrazil's request and that we are required to revi ew the United States' claim that Brazil has not\nfollowed these principles and procedures, we need to clarify further what our mandate is, in relation to\nthis claim, and what burden of proof applies to it.\n1. Main arguments of the parties\n5.34 The United States considers that the drafter' s intention was that suspending concessions\nacross sectors and agreements was the exception rather than the rule. In the United States' view,\nArticle 22.3 establishes a hierarchy of suspension: Members must first try to suspend concessions\nwithin the same sector, and if that is not practicab le or effective, can then request permission to\nsuspend in a different sector. This distincti on is important in the GATS and TRIPS Agreements\nwhere there are multiple sectors, but does not apply with respect to goods. The bar for suspending\nconcessions under other agreements is higher still. The United States adds that not only does the\nsuspension within the agreement have to be neither practicable nor effective, but the violation must be\nserious enough to warrant cross-agreement suspension.338\n5.35 The United States further considers that the discip lines of Article 22.3 are an integral part of\nthe dispute resolution process a nd the rebalancing of concessions. The United States cites the\nstatement of the arbitrator on EC – Bananas III (US) (Article 22.6 – EC) , that \"the basic rationale of\nthese disciplines is to ensure that the suspension of concessions or other obligations across sectors or\nacross agreements (beyond those sectors or agreem ents under which a panel or the Appellate Body\nhas found violations) remains the exception and do es not become the rule\". The United States\ntherefore considers it necessary for the Arbitrat or to determine whether Brazil has objectively\nfollowed these procedures. The United States also cont ends that Brazil is entitled to a certain margin\nof appreciation in making this de termination, but the Arbitrator also has an oblig ation to judge\nwhether Brazil has objectively reviewed the facts and has reached a plausible conclusion.339\n5.36 The United States argues that for a party to request cross-agreement suspension of\nconcessions, it must find that:\n(a) it is not practicable or effective to susp end concessions or other obligations with\nrespect to other sectors under the same agreement; and\n(b) that the circumstances are serious enough to warrant cross-agreement suspension of\nconcessions.\n5.37 It considers that, when analysing these requirement s, the party must take into account: (i) the\ntrade in the sector or under the agreement under which the panel or Appellate Body has found a\nviolation or other nullification or impairment, and the importance of such tr ade to that party, and\n(ii) the broader economic elements related to the nullification or impairment and the broader\neconomic consequences of the suspension of concessions or other obligations. The complaining party\nmust further explain how it has reached the c onclusion that cross-agreement suspension of\nconcessions is warranted.340\n5.38 Brazil notes the arbitrator's \"plausib ility\" standard as enunciated in the US – Gambling\n(Article 22.6 – US) arbitration. This standard calls for an objective assessment of the facts and a\n\n338 US written submission, para. 325.\n339 US written submission, para. 326.\n340 US written submission, para. 327.\n\nplausible conclusion on the issue of whether it is \"pr acticable or effective\" to seek countermeasures in\nthe same sector and on whether th e circumstances are serious enough. 341 Brazil considers, however,\nthat the Arbitrator should be limited to examining wh ether Brazil has in fact considered the principles\nset forth in Article 22.3 of the DSU, not whether Brazil's considerations are plausible. 342 Brazil notes\nthe United States position, in the DSB meeting on the adoption of the EC – Bananas III (US)\n(Article 22.6 – EC) arbitration report, that arbitrators are not supposed to \"second guess\" the\nconclusions reached by the Member who considers that it is not practicable or effective to suspend\nconcessions or other obligations under the same agre ement, and that the circumstances are serious\nenough within the meaning of Article 22.3.343\n5.39 Brazil also argues that the United States bears the burden of proving that Brazil has not\nfollowed the principles laid out in Article 22.3, sp ecifically, (i) that it is both \"practicable\" and\n\"effective\" for Brazil to suspend concessions only in the goods sector, or (ii) that the circumstances\nare not \"serious enough\" to justify applying coun termeasures under another covered agreement. With\nrespect to Article 22.3(d), Brazil argues that the United States has to prove that in selecting\ncountermeasures, Brazil did not take into account the elements indicated in items (d)(i) and (ii).344\n2. Approach of the Arbitrator\n5.40 Article 22.3 sets out certain principles and pro cedures to be followed by a complaining party\nseeking to suspend concessions, as to the sector(s) an d/or covered agreement in which the suspension\ncan take place, which the United States claims that Brazil did not follow.\n5.41 We recall our earlier determination that these principles and procedures apply to Brazil's\nrequest, and that Article 22.7 of the DSU provides th e basis for our mandate to review this claim.\nArticle 22.7 provides that \"if the matter referred to arbitration includes a claim that the principles and\nprocedures set forth in paragraph 3 have not been fo llowed, the arbitrator shall examine that claim\"\nand that \"[i]n the event the arbitrator determines that those principles and procedures have not been\nfollowed, the complaining party shall apply them consistent with paragraph 3\".\n5.42 We are therefore required to examine the United States' claim that Brazil has not followed the\nprinciples and procedures of Article 22.3 of the DSU.\n5.43 As a general principle, Article 22.3(a) of th e DSU provides that suspension of concessions or\nother obligations should first be sought in the same sector as that in which a violation was found.\nArticle 22.3 provides in relevant part that:\n\"In considering what concessions or other obligations to suspend, the complaining\nparty shall apply the following principles and procedures:\n(a) the general principle is that the complaining party should\nfirst seek to suspend concessions or other obligations with\nrespect to the same sector(s) as that in which the panel or\nAppellate Body has found a violation or other nullification or\nimpairment.\"\n\n5.44 Subparagraphs (b) and (c) of Article 22.3 furthe r specify the principles and procedures to be\nfollowed by a complaining party wishing to seek su spension in another sector, or another agreement,\nthan that in which a violation was found:\n\"(b) if that party considers that it is not practicable or effective for it to suspend\nconcessions or other obligations with respect to the same sector(s), it may\nseek to suspend concessions or other obligations in other sectors under the\nsame agreement;\n(c) if that party considers that it is not practicable or effective to suspend\nconcessions or other obligations with respect to other sectors under the same\nagreement, and that the circumstances are serious enough, it may seek to\nsuspend concessions or other obligations under another covered agreement.\"\n5.45 In addition, subparagraph (d) of Article 22.3 provides that:\n\"(d) in applying the above principles, that party shall take into account:\n(i) the trade in the sector or under the agreement under which\nthe panel or the Appellate Body has found a violation or\nother nullification or impairment, and the importance of such\ntrade to that party;\n(ii) the broader economic elements related to the nullification or\nimpairment and the broader ec onomic consequences of the\nsuspension of concessions or other obligations.\"\n5.46 Two prior arbitrators have considered the mandate of the arbitrator set out in Article 22.7 of\nthe DSU with respect to the principles and procedures set forth in Article 22.3, and we find it useful to\nrefer to their findings in clarifying the terms of our own mandate.\n5.47 The arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) , in determining the scope\nof its authority to review the principles and procedures relating to requests for suspension of\nconcessions or other obligations under subparagraphs (b) and/or (c), cons idered that \"the fact that the\npowers of arbitrators under subparagraphs (b)-(c) ar e explicitly provided for in Article 22.6 implies\na fortiori that the authority of Arbitrators includes th e power to review whether the principles and\nprocedures set forth in these subparagraphs have be en followed by the Member seeking authorization\nfor suspension\".\n345\n5.48 The arbitrator also considered the terms of Ar ticle 22.3, including the fact that a certain\nmargin of appreciation is left to the complaining part y in arriving at conclusions in respect of certain\nfactual elements (i.e. \"if that party considers\" in subparagraphs (b) and (c)) as well as the fact that the\nparty concerned is required to apply th e principles of Article 22.3 (i.e. \" shall apply the following\nprinciples and procedures\" in the introductory clause of Article 22.3). On the basis of that textual\nanalysis, the arbitrator determined that:\n\"[T]he margin of review by the Arbitrat ors implies the authority to broadly judge\nwhether the complaining party in ques tion has considered the necessary facts\nobjectively and whether, on the basis of these facts, it could plausibly arrive at the\nconclusion that it was not practicable or eff ective to seek suspen sion within the same\n\n345 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 50.\n\nsector under the same agreements, or only under another agreement provided that the\ncircumstances were serious enough.\"346\n5.49 The arbitrator in that dispute also considered more broadly the terms of Article 22.3 and noted\nthat \"these provisions imply a sequence of steps towards WTO-consistent suspension of concessions\nor other obligations which respects both a margin of appreciation for the complaining party as well as\na margin of review by Arbitrators, if a request for suspension under Article 22.2 is challenged under\nArticle 22.6\".347\n5.50 Like the arbitrator on US – Gambling (Article 22.6 – US), we agree with these determinations.\nWe agree that the principles and procedures set fort h in Article 22.3 of the DSU, which require the\ncomplaining party to make certain determinati ons, imply \"a margin of appreciation\" for the\ncomplaining party in making these determinations. At the same time, Article 22.3 sets out specific\nprinciples and procedures that the complaining party must follow, and we understand the role of the\narbitrator acting pursuant to Article 22.7 of the DSU to involve a review of whether those principles\nand procedures have been followed. It would not be sufficient for a complaining party to have\nconsidered those principles and procedures solely fro m the viewpoint of being able to say that it did\nso. The consideration must be a substantive a nd reasoned one, and a claim to be entitled to impose\ncountermeasures outside the relevant sector, and then outside the relevant agreement, must arise from\nthat consideration.\n5.51 We also agree with the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) that this\nmandate includes a determination of \"whether the complaining party in question has considered the\nnecessary facts objectively\" and also \"whether, on the b asis of these facts, it could plausibly arrive at\nthe conclusion that it was not practicable or effec tive to seek suspension within the same sector under\nthe same agreements, or only unde r another agreement provided that the circumstances were serious\nenough\".\n5.52 In addition, should we determine that Brazil has not followed these procedures or principles,\nwe believe it to be both necessary and appropriate fo r us to articulate how the analysis could properly\ntake place to the extent necessary to ensure that Brazil is in a position to apply these procedures and\nprinciples \"consistent with paragr aph 3\" and present a request \"cons istent with the decision of the\narbitrator\" in a subsequent phase of these disput e settlement proceedings, as foreseen in Article 22.7\nof the DSU.\n5.53 We note in this respect that Article 22.7 provides in relevant part that:\n\"[I]f the matter referred to arbitration includes a claim that the principles and\nprocedures set forth in paragraph 3 have not been followed, the arbitrator shall\nexamine that claim. In the event the arbitrator determines that those principles and\nprocedures have not been followed, the complaining party shall apply them consistent\nwith paragraph 3. The parties shall accept the arbitrator's decision as final and the\nparties concerned shall not seek a second arbitration. The DSB shall be informed\npromptly of the decision of the arbitrator and shall upon request, grant authorization\nto suspend concessions or other obligations where the request is consistent with the\ndecision of the arbitrator, unless the DSB decides by consensus to reject the request.\"\n(emphasis added)\n5.54 This approach is consistent with the objectiv e of prompt and positive settlement of disputes.\nThis approach is also consistent with the prac tice of arbitrators acting under Article 4.10 of the\n\n346 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 52.\n347 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 55.\n\nSCM Agreement and/or Article 22.6 of the DSU, of proceeding with a calculation of the permissible\nlevel of countermeasures in the event that they find the proposed countermeasures not to be in\naccordance with the applicable legal standard.348\n5.55 In terms of burden of proof, we consider that it is for the United States, as the party\nchallenging Brazil's determinations , to demonstrate that Brazil has not followed the principles and\nprocedures of Article 22.3 of the DSU. At the same time, it is essential that Brazil provides us with\nexplanations on how it made this dete rmination, in order for us to be in a position to review it, and to\ndetermine whether Brazil has, in making its de terminations, \"considered the necessary facts\nobjectively\" and whether it could plausibly reach the conclusions that it did.\n5.56 The United States also asks the Arbitrator to indicate in its decision, if necessary, the\nmaximum amount up to which Brazi l would be permitted to impose cross-agreement suspension of\nconcessions.349 The United States requests the Arbitrator to issue separate awards, one in relation to\nthe prohibited subsidies and one concerning actionabl e subsidies so that, in case the United States\nbrings one subsidy into compliance with the DSB recommendations and rulings before it is able to\ncomply with the other, the separate awards provide a legal basis to ensure that countermeasures are\nstill consistent with the legal standards of the SCM Agreement and the DSU in that situation.350\n5.57 We first recall that two separate decisions are being issued, one in relation to the prohibited\nsubsidies (this Decision) and one concerning ac tionable subsidies (in WT/DS267/ARB/2), as the\nUnited States requests.351\n5.58 We agree that, to the extent that we might determine that Brazil may impose part of the\nproposed countermeasures in another sector or agre ement, we would need to indicate clearly the\namount of countermeasures in respect of which it would be entitled to suspend concessions or other\nobligations in such other sector or agreement.\n5.59 We do not consider it necessary, however, to determine in this Decision what our conclusion\nmight have been, in the event that the United States s hould, at some future point in time, comply with\nthe DSB's recommendations and rulings in rela tion to the measures covered by the other\nproceedings.352 This is a hypothetical matter on which it would not be appropriate for us to speculate.\nRather, we base our assessment on the situation as it ex ists at the time of our determination, which\nincludes the fact that the United States has not comp lied with two separate asp ects of the underlying\nrecommendations and rulings in this dispute and that this gives rise to an entitlement for Brazil to take\ncountermeasures in relation to both aspects.\n5.60 At the same time, we recall that our determinations in these proceedings relate only to Brazil's\nrequest in relation to the prohibited subsidies at issue. Our determinations on Brazil's request for\ncross-retaliation take into account the factual ci rcumstances arising from the separate proceedings\nrelating to the actionable subsidies also ruled on in the underlying proceedings, but no entitlement\narises from this Decision for Brazil to take countermeasures in relation to such subsidies.\n\n348 See for example Decision by the Arbitrators, EC – Hormones (US) (Article 22.6 – EC), para. 12.\n349 US responses to questions from the Arbitrator, question 134, para. 165.\n350 US comments on Brazil's responses to questions from the Arbitrator, question 134, para. 171.\n351 See Section I.C above, at paras. 1.27-1.31.\n352 See WT/DS267/ARB/2.\n\nC. BRAZIL'S DETERMINATION THAT IT IS NOT PRACTICABLE OR EFFECTIVE TO TAKE\nCOUNTERMEASURES WHOLLY IN TRADE IN GOODS AND THAT THE CIRCUMSTANCES ARE\nSERIOUS ENOUGH\n1. The principles and procedures of Article 22.3 of the DSU\n5.61 Article 22.3 of the DSU, as we have observed earlier, foresees certain \"procedures and\nprinciples\" to be followed by the complaining pa rty, in order to seek to suspend concessions in\nanother sector or another agreement than that in which the violation was found.\n5.62 As observed by the arbitrator on US – Gambling (Article 22.6 – US):\n\" '[T]hese provisions imply a sequence of steps towards WTO-consistent suspension\nof concessions or other obligations'. 353 In other words, as Antigua has expressed it,\nArticle 22.3 of the DSU provides a 'hierarchy' of remedies that a complaining party\nmust follow in determining in which sector s or under which agreements suspension\nof concessions or other obligations can be sought, namely (1) seek to suspend in the\nsame sector in the same agreement, (2) seek to suspend within the same agreement\nand (3) seek to suspend under another agreement.\"354\n5.63 In this case, the initial violation was found in relation to trade in goods, and this is the \"sector\"\n(as defined in subparagraph (g) of Article 22.3) in which Brazil woul d normally be expected to apply\ncountermeasures under subparagraph (a). Subparagr aph (b) affords the possibility of seeking to\nsuspend concessions or other obligations \"in othe r sectors under the same agreement\". For the\npurposes of this provision, all the agreements on tr ade in goods contained in Annex 1A of the WTO\nAgreement \"taken as a whole\" are considered to be an \"agreement\", and a sector is defined, with\nrespect to goods, as \"all goods\".\n5.64 Therefore, recourse to subparagraph (b) would in principle allow Brazil to seek to suspend\nconcessions or other obligations in all goods, under the Agreements on trade in goods. Brazil seeks to\napply countermeasures under the TRIPS and GATS Agre ement. This would constitute suspension of\nconcession or other obligations \"under another agreem ent\" within the meaning of subparagraph (c) of\nArticle 22.3.\n5.65 Accordingly, Brazil will have followed the principles and procedures of Article 22.3 if it has\ndetermined, in accordance with the terms of subparagraph (c), that :\n(a) \"it is not practicable or effective\" to seek suspension under the same agreement (i.e.\nunder the agreements on trade in goods); and\n(b) \"the circumstances were serious enough\".\n5.66 In addition, in applying these principles, Braz il is required to have taken into account the\nfactors identified in subparagraph (d) of Article 22.3.\n5.67 As we have determined above , our mandate is to review whether, in making these\ndeterminations, Brazil has considered the necessar y facts objectively and whether, on the basis of\nthese facts, it could plausibly arrive at the conclusi on that it was not practicable or effective to seek\nsuspension under the same agreement and that the circumstances were serious enough. In order to\n\n353 (original footnote) Decision by the arbitrators, EC – Bananas III, (request by Ecuador), para. 55.\n354 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.19.\n\nconduct this assessment, we must first clarify the te rms of these requirements, as well as the role of\nthe elements referred to in subparagraph (d).\n5.68 At the outset, we note that the two requirements within subparagraph (c) are cumulative,\ni.e. the complaining Member must consider that \"it is not practicable or effective\" to seek suspension\nof concessions or other obligati ons under the same agreement and that \"the circumstances are serious\nenough\". The additional requireme nt, under subparagraph (d), to take into account certain\nconsiderations, further qualifies the manner in whic h the principles contained in subparagraph (c) are\nto be applied.\n(a) First requirement under subparagra ph (c): a determination that it is \"not practicable or\neffective\" to suspend concessions or other oblig ations with respect to other sectors under the\nsame agreement\n5.69 In order to seek to suspend concessions or ot her obligations under another agreement, the\ncomplaining party must in the first instance consider that it is \"not practicable or effective\" to seek\nsuspension under the same agreement. Brazil c onsiders that it does not need to meet both the\n\"practicable\" and \"effective\" criteria, and that it is sufficient to satisfy one of the two conditions.355\n5.70 We agree that the wording of the provision imp lies that the complaining party may consider\neither that it is \"not practicable\" or that it is \"not effective\" to seek suspension under the same\nagreement, and that it need not conclude that same-agreement suspension is both \"not practicable\" and\n\"not effective\", in order to reach the conclusion that it is \"not practicable or effective\".356\n(i) \"practicable\"\n5.71 In Brazil's view, the standard of \"practicability \" under Article 22.3 refers to the availability\nfor application in practice of the suspen sion of concessions only in the goods sector. 357 In Brazil's\nview, \"practicability\" refers to whether susp ension in the same sector or agreement is available for\napplication in practice, as well as suited for being used in a particular case . If it is not a real option\nor it is not suited to be used in the circumstances, it will be not practicable. 358 This is how the\narbitrators on EC – Bananas III and US – Gambling understood this term, and we agree with this\ndetermination.\n5.72 As Brazil describes it, and as the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 –\nEC) put it, a consideration of whether suspension in a given sector or agreement is \"practicable\"\nrelates primarily to whether it is actually \"available in practice\" to the complaining party. We find the\nexample used by the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) helpful in\nclarifying the types of considerations that may be pertinent in such a determination:\n\"To give an obvious example, suspension of commitments in service sub-sectors or in\nrespect of modes of service supply which a particular complaining party has not\nbound in its GATS schedule is not available for application in practice and thus\ncannot be considered as practicable.\"\n359\n5.73 There may be a range of situations in wh ich the suspension of concessions or other\nobligations in relation to a certain sector or agreemen t is not \"available in practice\". In our view, the\n\n355 Brazil's responses to questions from the Arbitrator, question 8, para. 127.\n356 See Decisions by the Arbitrator, US – Gambling (Article 22.6 – US) , para. 4.29 and EC – Bananas\n358 Brazil's responses to questions from the Arbitrator, question 8, para. 126.\n359 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 71.\n\nessence of a consideration of \"practicability\" of susp ension is that it relates to its actual availability\nand feasibility. The impracticability could be either a legal one, as postulated in the example given in\nEC – Bananas III (Ecuador ) (Article 22.6 – EC) , or a factual one, such as might arise if the\ncountermeasure exceeds the total amount of the trade available to be countered.\n(ii) \"effective\"\n5.74 Citing the EC – Bananas III (Ecuador) (Article 22.6 – EC) arbitrator, Brazil argues that the\n\"effectiveness\" standard encourages the offending st ate to comply with WTO obligations, in other\nwords, to induce compliance 360 and allows the party seeking suspensi on to ensure that the impact of\nthat suspension is strong and has the desired result, namely to induce compliance. Brazil considers\nthat \"the countermeasures that are best tailored to provide such a response are those that can maximize\nthe likelihood of compliance\".361\n5.75 In the United States' view, the likelihood of compliance is not a factor that the DSU provides\nin assessing the appropriate level or nature of the countermeasure. 362 The United States considers that\nthe DSU authorizes rebalancing of trade concessions in case a Member does not comply with its trade\nobligations. While the ultimate political goal of the DSU is to promote compliance, the legal\nstandards for assessing countermeasures are the effects of nullification and impairment and these are\ntwo separate issues in the United States' view.\n363\n5.76 The United States considers that the word \"eff ective\" means that a Member should not be\nprevented from imposing countermeasures of the intende d weight as a result of the limitation of those\ncountermeasures to the same sector/agreement. The in tended \"weight\" is what is authorized based on\nthe applicable standard, including where special or additional rules apply. Thus, a Member should be\nable to take the \"appropriate\" amount of countermeasures with respect to prohibited subsidies and, for\nsubsidies causing adverse effects, a Member should be able to take countermeasures commensurate\nwith those effects.364\n5.77 Dictionary definitions of the term \"effective\" include \"producing a decided, decisive, or\ndesired effect\"365 and \"powerful in effect; producin g a notable effect; effectual\". 366 The arbitrator on\nEC – Bananas III (Ecuador) (Article 22.6 – EC) relied on comparable definitions to conclude that\n\"the thrust of this criterion empowers the party seeki ng suspension to ensure th at the impact of that\nsuspension is strong and has the desired result, name ly to induce compliance with DSB rulings within\na reasonable period of time\". 367 That arbitrator further elaborat ed on the types of circumstances in\nwhich a complaining party might consider that su spension in a given sector or agreement would not\nbe \"effective\":\n\"One may ask whether this objective [of i nducing compliance] may ever be achieved\nin a situation where a great imbalance in terms of trade volume and economic power\nexists between the complaining party seek ing suspension and the other party which\nhas failed to bring WTO-inconsistent meas ures into compliance with WTO law. In\nsuch a case, and in situations where the complaining party is highly dependent on\nimports from the other party, it may happen that the suspension of certain concessions\n\n360 Brazil's written submission, para. 511. EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 72.\n362 US written submission, para. 337.\n363 US written submission, paras. 339 and 341.\n364 US responses to questions from the Arbitrator, question 137, para. 177.\n365 In Merriam-Webster Online Dictionary . Retrieved 4 June 2009, from http://www.merriam-\nwebster.com/dictionary/effective.\n366 Oxford English Dictionary, at www.oed.com.\n367 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 72.\n\nor certain other obligations entails mo re harmful effects for the party seeking\nsuspension than for the other party. 29 In these circumstances, a consideration by the\ncomplaining party in which sector or under which agreement suspension may be\nexpected to be least harmful to itsel f would seem sufficient for us to find a\nconsideration by the complaining party of th e effectiveness criterion to be consistent\nwith the requirement to follow the principles and procedures set forth in\nArticle 22.3.\"\n368\n(original footnote) 29 Of course, suspension of concessions or other obligations is always\nlikely to be harmful to a certain, limited extent also for the complaining party requesting\nauthorization by the DSB.\n5.78 We do not share the view of the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC)\nthat a consideration by the comp laining party of the sector or ag reement in which suspension would\nbe \"least harmful\" to itself would necessarily be pertin ent. As we read the terms of subparagraphs (b)\nand (c), a consideration of the \"effectiveness\" cr iterion under these provisions involves an assessment\nof the effectiveness – or lack thereof – of suspension in the same sector or under the same agreement ,\nrather than an assessment of the relative effectiven ess of such suspension, as compared to suspension\nin another sector or agreement. In other words, the procedures and principles under Article 22.3 do\nnot entitle a complaining party to freely choose the most effective sector or agreement under which to\nseek suspension. Rather, it entitles the complaining pa rty to move out of the same sector or same\nagreement, where it considers that suspension in that sector or agreement is not \"practicable or\neffective\".\n5.79 We agree with the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC), however,\nthat the question of whether \"the suspension of certa in concessions or certain other obligations entails\nmore harmful effects for the party seeking suspension than for the other party\" would be pertinent to a\nconsideration of the \"effectiveness\" of the said suspension. Indeed, as the arbitrator on EC – Bananas\nIII (Ecuador) (Article 22.6 – EC) notes, there may be situations in which, for example, the\ncomplaining party is heavily dependent on imports from the other party, to such an extent that it may\ncause more harm to itself than it would to the other party, if it were to suspend concessions or other\nobligations in relation to these imports. In such a situation, where the complaining party would cause\nitself disproportionate harm, such that it would in fact be unable to use the authorization, there would\nbe a basis for concluding that such suspension would not be \"effective\".\n5.80 It may well be that the suspension of concessions or other obligations \"i s always likely to be\nharmful to a certain, limited extent also for the co mplaining party\" applying it. However, this does\nnot, in our view, imply that a consideration of su ch harm may not be relevant for the purposes of\nassessing the \"effectiveness\" of suspension in a gi ven sector or agreement. In foreseeing that the\ncomplaining party may consider that same-sector or same-agreement suspension is \"not practicable or\neffective\", the drafters of the DSU have preci sely acknowledged and recognized the possibility of\ncircumstances in which suspension of certain obligations would not be effective, and they have sought\nto allow the complaining party the possibility of ensuring that it nonetheless has at its disposal an\neffective remedy in such circumstances, i.e. a re medy that may produce its intended effects. This\nincludes, in our view, situations in which the harm that may arise from same-sector or same-\nagreement suspension would be so significant for the complaining party as to deter it from having\nrecourse to it.\n5.81 This is consistent with the objective of inducin g compliance, in that this provision seeks to\nensure that the complaining party will be in a po sition to actually have recourse to the authorized\nremedy, and thus enable it to contribute to induci ng compliance, as is its legitimate purpose. At the\n\n368 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 73.\n\nsame time, we agree with the United States that the \"likelihood of compliance\", as such, is not at issue\nin this determination. Rather, what is at issue is the ability of the complaining party to make effective\nuse of the awarded countermeasures in order to induce such compliance.\n(b) The second element under subparagraph (c): a de termination that \"the circumstances are\nserious enough\"\n5.82 As noted by the arbitrator on US – Gambling (Article 22.6 – US) , the text of Article 22.3(c)\nprovides no specific guidance on how the terms \"the circumstances are serious enough\" are to be\nunderstood. The elements of subparagraph (d) do, however, provide useful guidance in this respect.\n5.83 We therefore consider that the trade at issue, and its importance to the complaining party, as\nwell as the broader economic elemen ts relating to the nullification or impairment and the economic\nconsequences of the suspension, may all be re levant in assessing whether the \"circumstances are\nserious enough\" in a given case.\n5.84 At the same time, we consider that these terms inherently imply a degree of flexibility in\nassessing what \"circumstances\" may be pertinent in a given case, so that these may not be the only\nrelevant considerations in such an assessment. We agree, in this respect, with the following\ndeterminations of the arbitrator on US – Gambling (Article 22.6 – US):\n\"We also consider, more generally, that this aspect of the determination, which relates\nto \"circumstances\", is of necessity an as sessment to be made on a case-by-case basis,\nand that the circumstances that are relevant may vary from case to case. We note\nhowever, that these circumstances should be serious \"enough\", which suggests that it\nis only when the circumstances reach a certain degree or level of importance, that\nthey can be considered to be serious enough.\"\n369\n(c) The elements under subparagraph (d) of Article 22.3\n5.85 Subparagraph (d) of Article 22.3 directs the complaining party to take into account two\nspecific considerations, in applying the principles under the previous subparagraphs:\n(a) the trade in the sector or under the agreem ent under which the panel or the Appellate\nBody has found a violation or other nullifi cation or impairment , and the importance\nof such trade to [the complaining] party; and\n(b) the broader economic elements related to the nullificati on or impairment and the\nbroader economic consequences of the suspension of concessions or other\nobligations.\n5.86 The first element, the \"trade in the sector or under the agreement under which the panel or the\nAppellate Body has found a violation\" is to be understood with reference to the definitions of the\nterms \"sector\" and \"agreement\" contained in subparagr aph (g) of Article 22.3. As the arbitrator on\nUS – Gambling (Article 22.6 – US) observed:\n\"[I]n order to determine whether suspension is practicable or effective in a certain\nsector, it is appropriate to take into account all the trade in that sector and its\nimportance to the complaining party. This also appears to us consistent with the\n\n369 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.108.\n\npurpose of this provision, which is to provi de certain objective parameters to guide\nthe conduct of such determination.\"370\n5.87 In the circumstances of this case, this means that what is to be taken into account is \"the\ntrade\" in all goods under the trade in goods agreem ent, that is, trade in goods generally, and its\nimportance to Brazil.\n5.88 The second consideration required to be taken into account is the \"broader economic elements\nrelated to the nullification or impairment\" and the \"broader economic consequences of the suspension.\nWe agree with the determinations of the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 –\nEC), as endorsed also by the arbitrator on US – Gambling (Article 22.6 – US), that:\n\"The fact that the former criterion relates to 'nullification or impairment' indicates in\nour view that this factor primarily concer ns 'broader economic elements' relating to\nthe Member suffering such nullification or impairment, i.e. in this case Ecuador.\nWe believe, however, that the fact that the latter criterion relates to the suspension of\nconcessions or other obligations is not necessarily an indication that \"broader\neconomic consequences\" relate exclusively to the party which was found not to be in\ncompliance with WTO law, i.e. in this case the European Communities. As noted\nabove, the suspension of concessions may not on ly affect the party retaliated against,\nit may also entail, at least to some extent, adverse effects for the complaining party\nseeking suspension, especially where a great imbalance in terms of trade volumes and\neconomic power exists betw een the two parties such as in this case where the\ndifferences between Ecuador and the European Communities in regard to the size of\ntheir economies and the level of socio-economic development are substantial.\"371\n5.89 Accordingly, the \"broader economic elements related to the nullification or impairment\" to be\ntaken into account in this case are those relating to the nullification or impairment arising for Brazil\nfrom the subsidies at issue, while the broader economic consequences of the suspension may include a\nconsideration of the economic consequences of the suspension both for Brazil and for the\nUnited States.\n5.90 The terms of subparagraph (d), which require these elements to be taken into account in\napplying the principles of subparagraph (c), make it clear that an assessment of whether same-sector\nor same-agreement suspension is \"not practicable or effective\" and of whether \"the circumstances are\nserious enough\" may legitimately, and indeed should, take into consideration not only the trade to\nwhich the suspension would apply, but also the economic consequences arising from the suspension.\n5.91 With these considerations in mind, we now turn to consider whether a plausible determination\nthat it is not practicable or effective to suspend ob ligations in trade in goods alone could be made in\nthis case, and that the circumstances are serious enough, so that an authorization to suspend\nconcessions or other obligations also under the TRIPS Agreement and the GATS could be given.\n2. Factual assumptions\n5.92 As we have found above, our mandate requires us to consider whether Brazil has followed the\nprocedures and principles of Article 22.3 of the DSU, in determining that it is not practicable or\n\n370 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.34.\n371 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), paras. 85-86. See also\nDecision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.35.\n\neffective to suspend concessions in trade in goods and in the agreements of Annex 1A and that the\ncircumstances are serious enough.\n5.93 In making its determinations, Brazil assumed that the countermeasures would be in the\namount that it had requested, namely, a total of US$1.644 billion in relation to the prohibited\nsubsidies at issue in these proceedings (Step 2 pl us GSM 102). We have determined, however, that\ncountermeasures in an amount of US$147.4 million annually372 would be \"appropriate\" in this case.\n5.94 In addition, our determination in these proceed ings takes place against the background of\nanother arbitration proceeding concerning actiona ble subsidies, in which Brazil had requested\ncountermeasures in the amount of US$1.037 billion annuall y. The arbitrator in those proceedings has\ndetermined that countermeasures in the amount of US$147.3 million would be \"commensurate with\nthe degree and nature of the adverse effects determined to exist\" within the meaning of Article 7.9 of\nthe SCM Agreement.373\n5.95 These circumstances raise two questions for our consideration. First, we must consider\nwhether, for the purposes of our assessment, we mu st take into account the cumulated amount of\ncountermeasures resulting from both proceedings or only the amount arising from this Decision.\nSecondly, we must consider what are the implications of the fact that Brazil has assumed, in making\nits determination, an amount of countermeasures si gnificantly in excess of the amount that has been\ndetermined to be permissible.\n(a) Whether it is appropriate to consider the cu mulated amount of countermeasures arising from\nboth proceedings\n5.96 Although the arbitral proceedings relating to the prohibited and actionable subsidies\nrespectively were conducted in parallel, they relate to different aspects of the DSB's findings in this\ndispute and are legally distinct. In both cases, Br azil has requested an authorization to apply the\nproposed countermeasures in the form of suspen sion of obligations under the GATS and the TRIPS\nAgreement, as well as under trade in goods. The ques tion therefore arises as to the extent to which\nthe Arbitrator in these proceedings must take into ac count the determinations of the arbitrator in the\nother proceedings, in assessing whether Brazil h as followed the principles and procedures of\nArticle 22.3 of the DSU.\n5.97 Brazil considers that the amount of counterm easures on prohibited subsidies and the amount\nof countermeasures for actionable subsidies should be cumulated in considering whether suspension\nof concessions or obligations in the goods sector is practicable or effective. Brazil observes that the\ntotal amount of countermeasures is part of the objective reality in which the Member operates and in\nwhich it undertakes its consideration of the prac ticability or effectiveness of the countermeasures\nunder Article 22.3 of the DSU.\n374\n5.98 The United States argues that, since the Arbitrator should issue two separate reports to reflect\nthe two separate arbitration proceedings, sep arate assessments of Brazil's requests for\ncountermeasures under the GATS and the TRIPS Agreement would be needed. 375 However, the\nUnited States also considers that the Arbitrator in each proceeding may consider the circumstances of\nthe other proceeding. Consequently, the Arbitrator in one proceeding may take account of\ncountermeasures awarded in the other proceeding in determining if the total of the countermeasures in\n\n372 We recall that this is not a fixed amount, so it may vary over time. However, at this stage of our\nanalysis, we find it appropriate to rely on the amount that we have calculated in relation to FY 2006.\n373 See WT/DS267/ARB/2, para. 4.195.\n374 Brazil's responses to questions from the Arbitrator, question 9, para. 133.\n375 US responses to questions from the Arbitrator, question 9, para. 47.\n\nthe two proceedings together would justify suspending concessions under another sector or\nagreement.376\n5.99 We first take note of the parties' agreement th at, even in the context of separate assessments\nunder the two proceedings, the Arbitrator in each pr oceeding would be entitled, in the circumstances\nof this case, to take account of the amount of countermeasures awarded in the other proceedings.\n5.100 The determinations arising from this Decision are only in relation to the countermeasures\nconcerning the subsidies covered by these proceedi ngs, namely Brazil's proposals in relation to the\nStep 2 and GSM 102 payments. At the same time, we agree that it is appropriate for us to take into\naccount the amount of countermeasures to which Braz il is entitled to under the other proceedings. As\nBrazil has expressed it, the amount of countermeasures determined in the other proceedings is \"part of\nthe objective reality in which the Member opera tes\". We assume that both amounts would be\napplicable at the same time and that the two amounts of countermeasures would potentially be applied\ncumulatively by Brazil. This circumstance may ha ve an impact on an assessment of whether it is\n\"practicable or effective\" to seek countermeasures in the same sector or the same agreement and\nwhether \"the circumstances are serious enough\". As observed above, the parties agree that we can\nadopt a cumulative approach in this case.377\n5.101 We will therefore take into account the cumula ted level of countermeasures arising from both\ndecisions, which amounts to US$294.7 million annually, in reviewing whether Brazil has followed the\nprinciples and procedures of Article 22.3 of the DS U in determining that it is not practicable or\neffective to seek to suspend concessions or other ob ligations in trade in go ods alone and that the\ncircumstances are serious enough.\n(b) Implications of the difference between the le vel of countermeasures requested by Brazil and\nthe level determined to be permissible\n5.102 The amount of the countermeasure is a central aspect, possibly the most critically important\naspect, of the consideration required to be undert aken by a complaining Member in following the\nprinciples and procedures of Article 22.3 of the DSU.\n5.103 In these proceedings, Brazil has assumed, in applying the procedures and principles of\nArticle 22.3, that it would be entitled to a to tal amount of countermeasures in the amount of\nUS$2.681 billion (US$1.644 billion in relation to the prohibited subsidies plus US$1.037 billion in\nrelation to the actionable subsidies). However, as we have determined a bove, the cumulated amount\nof countermeasures to which Brazil is entitled to is US$294.7 million.\n5.104 In this case, the amount of countermeasures that we have determined to be permissible is\nsignificantly lower than the amount assumed by Brazil in its request, and this fact alone compels a\nfinding that the complaining party has not followed the principles and procedures of Article 22.3. We\nmust therefore find that in adopting the assumption of a total of US$2.681 billion of countermeasures\nas the central \"fact\" underlying its consideration of Article 22.3, it did not properly consider, or cannot\nbe taken to have properly considered, \"the necessar y facts objectively\". Consequently, it cannot have\nproperly applied the princi ples and procedures of Article 22.3 on the basis of these facts. Therefore\nour finding must be that Brazil has not followed the principles and procedures as laid out in that\nArticle.\n5.105 It is not possible to go \"back in time\" for Braz il to rectify its request for the purposes of these\nproceedings, taking into account our determina tion relating to the permissible amount of\n\n376 US responses to questions from the Arbitrator, question 9, para. 48.\n377 See para. 5.94.\n\ncountermeasures.378 However, Brazil will have the right to present a request for countermeasures to\nthe DSB at the level determined in this Decision. Thus it would be both unreasonable and\nuninstructive to say nothing more about the way in which the principles and procedures should be\napplied to the lower countermeasure calculated by the Arbitrator.\n5.106 We recall in this context our determination in paragraph 5.52 above that, should we determine\nthat Brazil has not followed these procedures or pr inciples, we should articulate how the analysis\ncould properly take place to the extent necessary to en sure that Brazil is in a position to apply these\nprocedures and principles \"consistent with paragra ph 3\" and present a request \"consistent with the\ndecision of the arbitrator\" in a subsequent phase of these dispute settlement proceedings, as foreseen\nin Article 22.7 of the DSU.\n5.107 In light of these considerations, and notwithst anding our determination that Brazil has not\nfollowed the principles and procedures of Article 22.3 because it based its determination on an\namount of countermeasures which is significantly in excess of the amount we have authorized, we\nthus now proceed to describe how, in our view, Artic le 22.3 should be applied in the context of a\ncountermeasure in the amount of US$294.7 million.\n5.108 In conducting this analysis, we will take into consideration the elements and arguments that\nhave been presented to us by Brazil and the Unite d States in these proceedings. We recognize that\nBrazil applied these arguments to a significantly larg er amount of countermeasures. What we aim to\ndetermine in our examination of this issue, is whether the considerations that Brazil has brought\nforward to explain why it considered that it is not practicable or effective to suspend concessions or\nother obligations solely in trade in goods to th e level that it assumed it w as entitled to, would justify\nthe same conclusion when applied to the level of co untermeasures that we have determined would be\n\"appropriate\".\n3. Whether it is practicable or effective for Brazil to suspend concessions in trade in goods\n5.109 Although Brazil considers that the countermeasures must be assessed exclusively against the\nrequirements of Article 4.10 of the SCM Agreement, Brazil claims that it has, in any event, followed\nthe principles and procedures of Article 22.3 of the DSU. Specifically, Brazil considers that it is not\npracticable or effective to suspend concessions or other obligations exclusively under trade in goods,\nand that the circumstances are serious enough to justify suspension of concessions or other obligations\nunder TRIPS and GATS.\n379 Brazil also argues that it considered the elements under Article 22.3(d) of\nthe DSU.380\n5.110 The United States argues that the text of the DSU does not explicitly define what\ncountermeasures are \"practicable or effective\", but th e negotiators were clear in their intention that\nthis be a high bar. Brazil does not reach this bar. In the United States' view, Brazil advances a claim\nfor cross-agreement and sector suspension of con cessions that is contrary to the Article 22.3\ndisciplines.381 The United States therefore requests the Arbitr ator to reject Brazil's request to suspend\nconcessions with respect to TRIPS and GATS for the reason that Brazil does not meet the\nrequirements of Article 22.3.\n382\n\n378 This is not to say that a Member could not base its consideration on a range of possible\ncountermeasure amounts, in order to come before an arbitrator in Article 22.6 proceedings and validly say that it\ndid use a range of assumed facts, and arrived at the same or different outcomes in relation to cross-retaliation.\nIn these proceedings that did not happen.\n381 US written submission, para. 329.\n382 US written submission, para. 342.\n\n(a) Main arguments of the parties\n5.111 Brazil states that it does not consider it adequa te to suspend concessions \"by creating barriers\nto Brazilian imports of US goods and thereby imposing additional costs on the Brazilian economy in\ngeneral.\"383\n5.112 The United States considers that this claim runs head long into the thoughtful and purposeful\ndesign of the DSU system. According to the United States, the treaty negotiators specifically created\na system where Members had to first resort to suspension of concessions within the relevant\nagreement. Suspension of concessions with respec t to goods always entails creating barriers to\nanother Member's goods and thereb y imposing additional costs on the sanctioning state's economy.\nThe United States argues that the negotiators of the DSU were well aware that suspension of\nconcessions with respect to goods would be pain ful for both the sanctioned government and the\nsanctioning government.384 In the United States' view, if the me re fact of additional costs on Brazil's\ndomestic economy were sufficient for suspension of c oncessions in the same sector to be not practical\nor effective, it could be argued th at any and all violations with re spect to goods would warrant cross-\nagreement suspension of concessions. The United Stat es argues that this approach is not compatible\nwith the fact that designers of the DSU chose to impose disciplines on suspension of concessions.385\n5.113 The United States considers that it can demonstrate that Brazil can effectively and practicably\nsuspend concessions with respect to goods, and that any request by Brazil to suspend concessions\nacross sectors or across agreements is not a reas onable and objective assessment of the conditions\nestablished by Article 22.3.386 The United States points out that Brazil imports a sufficient amount of\ngoods from the United States to provide practicab le and effective suspension of concessions.\nBetween 2005-2007, Brazil importe d between US$15.3 billion to US$24.6 billion annually in\nUS goods.387 In consumer goods, excluding food a nd automotive goods, Brazil imported between\nUS$1.125 billion and US$1.676 billion annually in the same time period. Including food and\nautomotive goods in the consumer goods categor y, the level of imports jumps to between\nUS$1.826 billion and US$2.717 billion annually.\n5.114 According to the United States, the level of bilateral trade between the United States and\nBrazil is thus sufficient to provide for suspensi on of concessions with respect to goods alone.\nMoreover, given Brazil's large and diverse ec onomy and the actual level of nullification and\nimpairment incurred by the US policies at issu e, suspension in consumer goods alone should be\neffective and practicable. 388 In the United States' view, the ec onomic size and the diversity of the\neconomy makes it possible for Brazil to suspend con cessions in the goods sector without resort to\nexceptional cross-sector countermeasures. 389 In the past, Brazil has proposed suspension of\nconcessions in the amount of US$3.36 billion only in the goods sector in the Canada – Aircraft\nCredits and Guarantees (Article 22.6 – Canada) dispute. In the United States' view, it is difficult to\nunderstand why it was practicable and effective to suspend concessions in the goods sector in that\ndispute while Brazil considers it is not practicable or effective to suspend concessions in the goods\nsector in this case.390\n\n384 US written submission, para. 329.\n385 US written submission, para. 330.\n386 US written submission , para. 335.\n387 Exhibit US-62, US-ITC Export Data to Brazil.\n388 US written submission, para. 336. The Arbitrator takes note that these US arguments are made in\nthe context of Brazil's requested amount of countermeasur es, i.e., US$1.644 billion, for prohibited subsidies\nand US$ 1.037 billion for actionable subsidies respectively.\n389 US responses to questions from the Arbitrator, question 135, paras. 168-170.\n390 US oral statement, para. 71.\n\n5.115 Citing the EC – Bananas III (Ecuador) (Article 22.6 – EC) arbitration, the United States\nargues that if a developing country, even one with a relatively small and undiversified economy such\nas Ecuador, has sufficient bilateral trade in consumer goods to impose suspension of concessions, then\nit must do so. Only where the government lacks the capacity to suspend concessions in the same\nagreement does the DSU permit the cross agreement suspension of concessions.391\n5.116 Brazil explains that it would not be feasible or reasonable to apply countermeasures on capital\ngoods, intermediate goods and other essential inputs to the Brazilian economy, which it says comprise\n95 per cent of Brazil's imports from the United States . The costs involved in switching suppliers are\nnormally prohibitive for capital goods and intermediate goods. In addition to prices, decisions on the\npurchase of capital or intermediate goods are conditioned by several factors that severely constrain the\nability of producers to switch suppliers. These f actors include: (i) long-term contracts cannot be\nterminated easily or without heavy pecuniary penalties; (ii) capital goods in particular are tailor-made\nto respond to the specific needs of the producer and are ordered many months or even years in\nadvance; (iii) in most industries, inputs must have the exact technical specifications that match the\nrequirements of the machinery in place. These specifications will be di fferent depending on the\nbrand, origin, age etc. of the machinery that equips assembly lines. As a result, theoretically similar\nproducts are not substitutable; (iv) intellectual property protection and intra-company trade determine\npurchase decisions and curb the ability of producers to change suppliers.\n392\n5.117 Moreover, Brazil says that its imports of c onsumer goods from the United States amount to\nUS$1.27 billion. Of that amount, almost US$1.1 b illion, or 86 per cent, correspond to medical and\neducational supplies, food, automotive goods and arms, sectors where, according to Brazil, any\nraising of barriers would entail serious and unreasonable costs to the Brazilian economy.393 In Brazil's\nview, the profile of Brazilian imports of consum er goods from the United States leaves very little\nroom of manoeuvre for Brazil to adopt countermeasures that target such goods.394\n5.118 However, Brazil also considers that of the US$1.27 billion of annual imports of consumer\ngoods from the United States (in 2007), approximately US$28.5 million, or 2.2 per cent, can be\nconsidered as luxury goods, in relation to which, arguably, the imposition of countermeasures would\nnot be disproportionately costly to Brazil. In Brazil's view, these luxury goods are consumed by a\nvery small share of Brazil's population and an increa se in the costs of their importation is likely to\ngenerate limited impacts on the Brazilian economy in general.\n395\n5.119 The United States observes that Brazil has failed to explain why, given the availability of\nalternative sources of supply, the suspension of co ncessions in the goods sector is not practicable or\neffective. Rather, the United States argues, Braz il simply takes a broad category of goods out of\nconsideration based on mere assertion. 396 The United States considers that the goods sector is \"all\ngoods\", and that while it may be appropriate to ex amine the negative impact on particular goods that\nare necessities, where goods are not necessities or wh ere alternative sources of supply are available,\nthere is no basis to assert that suspension of concessions for those goods is not practicable or\neffective.397\n5.120 Brazil considers that the United States bears th e burden of proving that it is practicable and\neffective for Brazil to change suppliers when ta king countermeasures in the goods sector alone, and\n\n391 US written submission, para. 333.\n392 Brazil's responses to questions from the Arbitrator, question 140, para. 334.\n393 Brazil's responses to questions from the Arbitrator, question 140, para. 336.\n396 US responses to questions from the Arbitrator, question 135, para. 171.\n397 US responses to questions from the Arbitrator, question 135, para. 166.\n\nthat merely identifying that alternative sources of supply exist for some products is not sufficient. 398\nIn this regard, Brazil considers that the United St ates failed to demonstrate that countermeasures in\nthe goods sector alone is \"practicable\" and \"effective\".399\n5.121 Brazil considers that the crucial question is not whether alternative sources of supply exist,\nbut whether it would be feasible and sensible for Braz il, in practice, to force its economic agents to\nswitch to other suppliers. Such analysis would ha ve to take into account, among other factors, the\nUS share in Brazil's total imports; the price levels of alternative suppliers; technical specifications and\nproduct differentiation; intellectual property and in tra-company trade restrictions; and the economic,\nwelfare and inflationary costs resulting from the disruption of production and supply chains. 400 Brazil\nconsiders that the burden is on the United States to explain why and how the US imports can be\nreplaced by imports from other sources, so that it is practicable for Brazil to take countermeasures\nonly in the goods sector.401\n5.122 The United States comments that Brazil focuses on an even narrower scope of products than\nthe arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) did. In that dispute, the arbitrator\nlooked at the category of consumer goods because the suspension of concessions on these goods could\nnot cause any direct adverse effects on Ecuador's domestic manufacturing and processing industries.\nThe United States says that there is no reason to ex clude such end use products as \"books\" and \"food\"\n(which Brazil indicates as necessity commodities) fr om the products for applying countermeasures.\nAlso, the United States considers that the potential co st of changing suppliers is not unusual, but an\nexpected result of suspension of concessions. The United States' main point is that Brazil is not\nconstrained to the narrow range of choices of goods as it suggests given that it is one of the world's\nlargest economies and it has many sources of supply.402\n5.123 Brazil further argues that within the very lim ited scope of consumer goods that Brazil has to\ntarget, the costs and welfare-reducing effects resulting from the adoption of countermeasures\nexclusively in that sector would render such an a lternative not practicable. In Brazil's view, the\nadditional costs generated by these measures would a dd to inflationary pressures – at a time when\nincreasing prices have pointed to a worrying inflationary scenario – and would limit access of\nBrazilian consumers to these impor ted goods, negatively affecting Brazil's economy and the welfare\nof its population.\n403\n5.124 Furthermore, in Brazil's view, any measures that are contrary to the objectives of a developing\ncountry to ensure steady and sustainable development; to pursue high growth rates; to fight poverty;\nand to promote the increased welfare of its popul ation within a stable macroeconomic environment\nwill necessarily be costly and impracticable by definition.\n404 Brazil also contends that the\nsignificantly unbalanced nature of the trade relati ons between Brazil and the United States, and the\nconsiderable economic differences between the tw o countries, render the suspension of concessions\nand other obligations under trade in goods alone ne ither practicable nor effective as a response to the\nUnited States' failure to comply with its obligations.405\n\n398 Brazil's responses to questions from the Arbitrator, question 140, para. 337.\n399 Brazil's responses to questions from the Arbitrator, question 140, para. 349.\n400 Brazil's responses to questions from the Arbitrator, question 140, para. 337.\n401 Brazil's comments on US responses to questions from the Arbitrator, question 135, para. 394.\n402 US comments on Brazil's responses to questions from the Arbitrator, question 140, paras. 179-181.\n403 Brazil's written submission, paras. 517-519.\n\n5.125 In Brazil's view, countermeasures that are simply most likely to add to those costs and effects\nare not practicable, as the Brazilian Government does not consider that they could be employed in\npractice.406\n5.126 Brazil also considers that countermeasures restri cted solely to trade in goods may not have\nsufficient political influence to press for the United St ates' withdrawal of the billions in US dollars\nannually paid subsidies or to remove their adverse effects. Therefore, such countermeasures are not\n\"effective\" for the purpose of encouraging compliance.407\n5.127 Brazil submits that, at the very least, it \"could plausibly arrive at the conclusion that it was not\npracticable or effective for it to suspend con cessions and other obligations\" in respect of the\nimportation of goods alone.408 Brazil reiterates that, besides being authorized to take countermeasures\nunder trade in goods, it needs to have the option to suspend concessions or other obligations under\nTRIPS and GATS. In this regard, Brazil is seeking to take countermeasures that \"produce the greatest\nlikelihood of compliance with minimal damage to its own economy\", as commented by the United\nStates itself in a DSB meeting adopting the arbitration report in EC – Bananas III (Ecuador)\n(Article 22.6 – EC).409\n(b) Analysis by the Arbitrator\n5.128 We recall our determination above that Braz il cannot be taken to have applied a proper\nconsideration of the principles and procedures of Article 22.3, because the amount of the\ncountermeasure it assumed was much greater than the countermeasure determined by the Arbitrator.\nNonetheless we have proceeded further, to give gui dance whether, on the basis of the level of the\ncountermeasures authorized under this Decision, and in the circumstances of the trade between the\ntwo Members involved, an objective and plausible conclusion could be reached that it is \"not\npracticable or effective\" to seek suspension in tr ade in goods alone and that \"the circumstances are\nserious enough\".\n5.129 We also recall that, as we have explained in our preliminary observations above, we will take\ninto account in our review of Brazil's determinati ons the amount of countermeasures that we have\ndetermined that Brazil is entitled to, in relation to the ML and CCPs (US$147.3 million), as well as\nthe amount of countermeasures determined to be \"app ropriate\" in the separate proceedings relating to\nthe prohibited subsidies at issue in the underlying dispute (US$147.4 million). The total amount of\ncountermeasures in relation to which we cons ider Brazil's determinations is therefore\nUS$294.7 million.\n(i) Initial observations\n5.130 Brazil observes at the outset that it would not be adequate to suspend concessions \"by\ncreating barriers to Brazilian imports of US goods and thereby imposing additional costs on the\nBrazilian economy in general\". The United States responds that suspension of concessions with\nrespect to goods always entails creating barrier s to another Member's goods and thereby imposing\nadditional costs on the sanctioning state's economy, and that the DSU negotiators were \"well aware\nthat suspension of concessions with respect to goods would be painful for both the sanctioned\ngovernment and the sanctioning government\". If the me re fact of additional cost on Brazil's domestic\neconomy were sufficient for suspensi on of concessions in the same sector not to be practical or\n\n409 Brazil's written submission, para. 527; WT/DSB/M/78, paras. 44-45.\n\neffective, the United States observes, then it could be argued that \"any and all violations with respect\nto goods would warrant cross-retaliation\".\n5.131 We agree with the United States that \"the mere fact of additional cost on Brazil's domestic\neconomy\" would not be sufficient, in and of itself, to conclude that suspension of concessions or other\nobligations is \"not practicable or effective\" within the meaning of Article 22.3 of the DSU. To the\nextent that the imposition of a barrier to trade on certain imports inherently generates economic costs\non the Member imposing them, the suspension of co ncessions on trade in goods may always have the\npotential to cause some harm to the economy of th e Member imposing the barriers. To assume that\nthis inherently would justify recourse to cross-re taliation would amount to reading out of Article 22.3\nthe principle contained in subparagraph (a). Rather , subparagraphs (b) and (c ) of Article 22.3 set out\nthe specific circumstances in wh ich a complaining Member may be entitled to seek to suspend\nconcessions in another sector or another agreement, whatever the sector in which the violation was\nfound.\n5.132 At the same time, as we have observed in our analysis of the terms \"not practicable or\neffective\" above, it is quite possible that the pot ential costs associated with the suspension of\nconcessions or other obligations in a given sector or under a certain agreement would precisely be of\nsuch an extent and magnitude that such suspension is \"not practicable or effective\". The fact that\nsubparagraph (d) requires a consideration of the \"b roader economic consequences of the suspension\"\nfurther confirms, in our view, that it is appropriate and legitimate for the complaining party to take\ninto account the potential costs that may be associated with the suspension, and not simply the legal\nfeasibility of that suspension, in a determination of whether it is \"practicable or effective\".\n5.133 In short, a consideration of the economic costs associated with the suspension is legitimate,\nbut it is not just any economic costs associated with the suspension of concessions or other obligations\nin a given sector or agreement that would justify a conclusion that such suspension would be \"not\npracticable or effective\". Rather, the costs at issue would have to be of such extent and magnitude as\nto render the suspension \"not practicable or effective\".\n5.134 In these proceedings, Brazil has provided general explanations as to the profile of its trade\nwith the United States, which in its view affect its ability to suspend concessi ons or other obligations\nin trade in goods, as well as specific explanations wh y it considers that it would not be practicable or\neffective to seek to suspend obligations with respect to certain categories of imports of goods from the\nUnited States, so that the range of imports that it can actually target is very limited. Finally, Brazil\nalso argues that, even within the range of produc ts that it could target, suspension would not be\n\"practicable or effective\", for various reasons. We consider these three aspects in turn.\n(ii) Overall profile of US imports of goods to Brazil\n5.135 Brazil argues that there is a great imbalance of trade between Brazil and the United States,\nand that its imports account for only a small sh are 1.7 per cent (or US$18.7 billion) of total\nUS exports (US$1.16 trillion) Hence an increase in tariffs imposed on this trade would not\nsufficiently affect the United States and therefore w ould be an ineffective response to the continued\nviolation of its obligations in this dispute.410\n5.136 In Brazil's view, it would be much easier for the United States to redirect 1.7 per cent of its\nexports to other destinations than for Brazil to fi nd suitable alternative sources for its imports. Brazil\nis much more dependent on imports from the Un ited States. Brazil indicates that among the top\n20 products in the list of Brazil's imports from th e United States, the United States accounts for more\nthan 50 per cent of total Brazilian imports in 12 cases, and greater than 90 per cent of Brazilian\n\n410 Brazil written submission, para. 514.\n\nimports in five of these products. 411 Brazil also presented an exhibit showing that out of the\n30 HS chapters in value of imports that represen ts 96 per cent of total Brazil's imports from the\nUnited States in 2007, the US share was above 10 pe r cent in 26 cases. This share was higher than\n20 per cent in 20 cases and above 30 per cent in eight cases.412\n5.137 The United States responds that the difference be tween the percentage of US imports into\nBrazil and the percentage of Brazil's imports into th e United States is not the question. The question\nis whether, within trade from the Un ited States that does occur, it would be practicable or effective to\nimpose countermeasures in goods. The United Stat es considers that Brazil, in fashioning its\ncountermeasures, could take into account the difficu lty of finding substitute goods from other sources\n(e.g., focusing on luxury goods to the extent possibl e, where increased costs would have little impact,\nand then exploring other goods wher e substitute goods are available). 413 Given the size and diversity\nof the Brazilian economy, and the availability of goods from other countries or from Brazil itself,\nBrazil has many tools at its disposal to apply countermeasures within the goods sector.414\n5.138 The United States further observes that Brazil is an important market for the United States,\nwhich exported between US$15.3 a nd US$24.6 billion annually to Br azil between 2005 and 2007. If\nBrazil suspends concessions in the goods sector, it would deprive the United States of access to the\nimportant Brazilian market. At a time of economic ch allenges, loss of this large market would lead to\na serious economic cost.415\n5.139 We take note of the fact that the total annua l value of trade in goods from the United States\nrepresents more than 15 per cent of Brazilian impor ts overall, and that this represents less than\n2 per cent of total US exports of goods. We are no t persuaded, however, that this \"imbalance\" that\nBrazil describes in its trade in goods from the Unite d States would in itself be a sufficient basis to\nconclude that a suspension of c oncessions or other obligations in re lation to such goods would be \"an\nineffective response\", as Brazil argues. In order to arrive at the conclusion that suspension in a given\nsector or agreement is not \"practicable or effectiv e\", a more detailed consideration of the possibilities\nfor suspension of concessions or obligations within the range of imports that could potentially be\ntargeted is appropriate, especially where the total level of imports is not insignificant and greatly\nexceeds the level of permissible countermeasures to which the complaining party is entitled.\n5.140 We note that the total value of Brazil's impor ts of goods from the United States, as estimated\nby Brazil, is US$18.7 billion. The United States estimates these imports at between US$15.3 and\nUS$24.6 billion annually. Brazil's estimation of th e value of its total imports of goods from the\nUnited States is therefore within the range cited by the United States.\n5.141 These figures suggest that, in principle, Braz il has at its disposal a total value of\nUS$18.7 billion of US exports that could potentially be subjected to suspension of concessions or\nother obligations. The question we must now c onsider is whether Brazil could plausibly have\nconsidered that, from those imports, it is not practic able or effective to suspend concessions or other\nobligations under the agreements on trade in goods alone, to a level of US$294.7 million. We are\naware that Brazil, in making its determination, w as assuming that it would be entitled to a total level\nof suspension significantly in excess of this figure an d we have already outlined why it is that we are\nreviewing the application of the principles and pr ocedure of Article 22.3 despite that supervening\nobstacle to Brazil's claim in the circumstances of this case (i.e. that it did not actually undertake the\nconsideration that it would have had to have done in order to argue its position before the Arbitrator).\n\n413 US responses to questions from the Arbitrator, question 68, paras. 202-203.\n414 US responses to questions from the Arbitrator, question 68, para. 206.\n415 US oral statement, para. 69.\n\n5.142 We recall our determination above that whether suspension in a given sector or agreement is\n\"practicable\" essentially relates to whether it is availa ble or feasible in practice. This question is in\npart answered by a consideration of the total leve l of trade, to which suspension of concessions or\nother obligations could be applied. To the extent th at the total level of imports from the United States\nexceeds the total value of imports to which suspen sion could apply, such suspension is at least\navailable in principle. We also recall our determin ation that whether suspension in a given sector or\nagreement is \"effective\" relates more directly to the question of whether the complaining party could\neffectively make use of the authorization, and that this may in particular depend on the extent to\nwhich that party would cause itself significant harm in suspending concessions on the imports\nconcerned, to such an extent that the suspension would not be effective.\n5.143 Bearing in mind these general considerations, we now consider Brazil's arguments to the\neffect that it only has, in fact, limited scope to seek suspension in relation to its imports of goods from\nthe United States.\n(iii) Detailed profile of US imports to Brazil and ava ilability of suspension in relation to various\ncategories of imports\n5.144 Among its US$18.7 billion of annual imports from the United States, Brazil indicates that\n95 per cent is composed of imports of intermed iate goods, capital goods, and other essential inputs\ninto Brazil's economy. Brazil argues that the costs involved in switching suppliers are normally\nprohibitive for capital goods and intermediate goods. Brazil further argues that, of the\nUS$1.27 billion of annual imports of consumer goods from the United States, almost US$1.1 billion,\nor 86 per cent, correspond to medical and educa tional supplies, food, automotive goods and arms,\nsectors where any raising of barriers would enta il serious and unreasonable costs to the Brazilian\neconomy.\n416 We consider in turn Brazil's determinatio n relating to capital, intermediate and other\ninput goods, and its determination in relation to consumer goods.\nCapital goods, intermediate goods and other goods constituting inputs into Brazil's economy\n5.145 Brazil observes that in addition to prices, decisi ons on the purchase of capital or intermediate\ngoods are conditioned by several factors that sever ely constrain the ability of producers to switch\nsuppliers, including long-term cont racts that cannot be terminated easily or without heavy pecuniary\npenalties, the fact that capital goods in particular are tailor-made to respond to the specific needs of\nthe producer and are ordered many months or even year s in advance, the fact that in most industries,\ninputs must have the exact technical specifications that match the requirements of the machinery in\nplace, as well as the fact that intellectual prope rty protection and intra-company trade determine\npurchase decisions and curb the ability of producers to change suppliers.417\n5.146 The United States does not specifically comment on Brazil's assessment that suspension of\nconcessions in relation to capital, intermediate or other input goods would not be practicable or\neffective. The United States generally considers, however, that Brazil takes a broad category of goods\nout of consideration based on mere assertion, and th at \"while it may be appropriate to examine the\nnegative impact on particular goods that are ne cessities, where goods are not necessities or where\nalternative sources of supply are available, there is no basis to assert that suspension of concessions\nfor those goods is not practicable or effective\".\n5.147 We note that the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) considered a\ncomparable argument in relation to \"primary goods and investment goods\". In approaching this\nquestion, the arbitrator made the following assumption:\n\n416 Brazil's responses to questions from the Arbitrator, question 140, para. 336.\n417 Brazil's responses to questions from the Arbitrator, question 140, para. 334.\n\n\"[W]e presume that the suspension of c oncessions on imports by Ecuador from the\nEuropean Communities of those types of goods and the imposition of additional\ntariffs would increase the cost of domestic production in the absence of alternative\nsources of supply at a similar price\".418\n5.148 The arbitrator in that dispute then cons idered whether the European Communities had\nprovided sufficient information and evidence to dem onstrate that alternative sources of supply existed\nfor these products at a similar price. It ultimatel y concluded that the European Communities had not\nsucceeded in rebutting Ecuador's argument that switching to other than EC sources of supply would\ninvolve transitional costs of adjusting to those sources of supply, which Ecuador considered were\nrelatively significant for it as a developing country.\n5.149 We first note, as the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) did in\nrelation to \"primary goods and investment goods\", that suspension of concessions in relation to\ncapital, intermediate or other input goods, which constitute direct inputs into domestic production, has\nthe potential to be damaging to economic operato rs domestically. We also note the arguments\npresented by Brazil to explain why, in relation to such goods specifically, it may be especially\ndifficult to have recourse to alternative suppliers without significantly upsetting the supply chain.\n5.150 We see merit in this argument particularly in relation to capital and intermediate goods,\nalthough we consider it may have less force in re lation to primary goods which are more homogenous\nin character. It could be expected that a signi ficant proportion of imports of goods constituting inputs\nfor manufacturing or processing are in the form of such primary goods, for which alternative sources\nof supply may be more readily available than for certain other more differentiated products.419\n5.151 However, the United States has not specifically addressed this question or attempted to rebut\nBrazil's arguments by identifying such imports. Although the United States has presented a number\nof examples of products in relation to which Brazil could, in the view of the United States, easily find\nalternative suppliers, none of these examples appear to relate to capital, inte rmediate or input goods\n(except arguably computers, discussed below). 420 We also note the acknowledgement, by the United\nStates, that it could be appropriate to consider the negative impact of suspension of concessions in\nrelation to goods that are \"necessities\".\n5.152 There remains a question of definition of the scope of capital goods, as far as computers are\nconcerned. Brazil considers that computers, in relation to which the United States argues that Brazil\nhas the opportunity to import from other sources than the United States, are capital goods, in relation\nto which it would be harmful to retaliate. The United States has not specifically responded to this\nassertion. The United States has also not indicated what level of imports computers represent.421\n5.153 In light of the elements presented to us, a nd in the absence of any sufficiently specific\nargument of the United States to the effect that suspension in relation to capital goods, intermediate\n\n418 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 91.\n419 We note, in this context, that with respect to agricultural goods specifica lly, Brazil's experts state\nthat: \"Agricultural goods are largely undifferentiated, relatively homogeneous and therefore highly fungible.\"\n(Annex 1 to Brazil's written submission (the \"Sumner-Sundarm Statement\", para. 8).\n420 See US oral statement, paragraph 70. The Unite d States identifies the fo llowing product categories\nas examples of goods for which alte rnative sources of supply can be found easily: passenger cars, antibiotics,\ncomputers, salmon. See also Brazil's responses to questions from the Arbitrator, question 140, para. 344.\n421 We note in this respect that Exhibit US-109, presented by the United States for the purposes of\nillustrating the US share of imports to Brazil in various product categories, was contested by Brazil, who stated\nthat this table was in fact erroneous and represented th e share of that HS chapter in Brazil's imports from the\nUnited States, rather than the US share in Brazil's total imports. See Brazil's oral statement, paras. 122-123. The\nUnited States did not present alternative figures.\n\ngoods or other inputs into the Brazilian economy would be practicable or effective, we accept, for the\npurposes of our determination, Brazil's position that it would not be practicable or effective to seek to\nsuspend concessions or other obligat ions in relation to imports of capital, intermediate and other\nessential inputs into Brazil's economy.\nConsumer goods\n5.154 Brazil further argues that, of the US$1.27 billi on of annual imports of consumer goods from\nthe United States, almost US$1.1 billion, or 86 per cent, correspond to medical and educational\nsupplies, food, automotive goods and arms, sectors wh ere any raising of barriers would entail serious\nand unreasonable costs to the Brazilian economy.422\n5.155 The United States provides different figures for Brazilian imports of consumer goods from the\nUnited States. It states that, including food a nd automotive goods in the consumer goods category,\nBrazil imported between US$1.826 billion and US$2.717 billion annually from the United States\nbetween 2005-2007.423 Excluding food and automotive goods, the United States estimates that Brazil\nimported between US$1.125 billion and US$1.676 billi on in consumer goods annually in the same\ntime period. In the United States' view, given Brazi l's large and diverse economy and the actual level\nof nullification and impairment incurred by the US policies at issue, suspension in consumer goods\nalone should be effective and practicable.424\n5.156 Neither party provides an explanation for th e significant differences in values that they\npresent concerning Brazil's imports of consumer goods from the United States. Apart from the fact\nthat Brazil uses import data and the United States relies on export data, the most likely explanation for\nthe difference is that the parties do not have the same definition of consumer goods. However, it is\nnot possible to confirm this since the United States has provided only an aggregate figure and does not\nprovide a listing of the individual tariffs lines (as Br azil does) of what it cons iders to be consumer\ngoods.\n425\n5.157 In light of these elements, and given that th e United States has not explained why Brazil's\nclassification of consumer goods would be incorrect and provides no detailed list of its own, the\nArbitrator assumes, for the purposes of its analysis, that Brazil's figures in respect of consumer goods\n(as found in Exhibit Bra-754) reflect an adequate classification of such goods (see Table 3). At the\nsame time, we take note of the fact that there is a very significant difference between the two sets of\nfigures presented, and that Brazil's total figure for imports of consumer goods from the United States\nis more than 50 per cent lower than those presente d by the United States, for the same categories of\nproducts.\n5.158 This means that, in principle, assuming that Braz il's figures are accurate, it has at its disposal\na total value of at least US$1.127 billion worth of US imports of consumer goods to which suspension\nof concessions or other obligations could in principle be applied.\n\n422 Brazil's responses to questions from the Arbitrator, question 140, para. 336.\n423 US written submission, para. 336 and Exhibit US-62.\n424 US written submission, para 336.\n425 The only specific product category, the classification of which the parties have discussed, is\n\"computers\". In response to an argument that Brazil has alternative sources of supply for computers, Brazil has\nresponded that computers are \"capital goods\", in relation to which it would not be appropriate to suspend\nobligations. It is therefore possible that the United States classifies computers as \"consumer goods\", while\nBrazil has classified them as \"capital goods\". However, we are not in a position to determine what impact this\ndifference in classification has, in the absence of fu rther information on the level of Brazilian imports of\ncomputers from the United States.\n\n5.159 We also note at the outset the followi ng observations of the arbitrator on EC – Bananas III\n(Ecuador) (Article 22.6 – EC):\n\"Suspension of concessions with respect to consumer goods cannot cause any direct\nadverse effects on Ecuador's domestic manufacturing and processing industries. Thus\nEcuador's main argument with respec t to investment goods and primary goods\nreferred to above cannot apply with respect to consumer goods. It is also true that\nresulting price increases resulting from the suspension of concessions on consumer\ngoods could cause welfare losses to end-c onsumers in the country suspending\nconcessions.\"426\n5.160 Similarly, in these proceedings, it cannot be assu med that the types of economic costs that we\nhave accepted would be likely to arise as a result of a suspension affecting capital goods, intermediate\ngoods and other goods constituting inputs into Brazi l's economy would be e qually relevant to\nconsumer products. While some welfare costs to end-consumers might arise in the event that the\nsuspension leads to price increases, this would only o ccur if no alternative substitute is available at a\ncomparable price.\n5.161 In light of the fact that the value of Br azil's annual imports of consumer goods from the\nUnited States (at least US$1.273 billion) significan tly exceeds the total level of countermeasures that\nit is entitled to take (US$294.7 million), it would th erefore in principle be possible for Brazil to\nsuspend concessions or other obligations entirely in relation to imports of consumer goods from the\nUnited States.\n5.162 However, Brazil suggests that, out of the US $1.273 billion of consumer goods that it imports\nfrom the United States, a total of only US$182.8 million would potentially be available for suspension\nof concessions or other obligations, once the sectors where raising of barriers would entail \"serious\nand unreasonable costs to the Brazilian economy\" are deducted.\nTable 3: Total Consumer Goods imports from the United States\n\n(in US$millions) 2007\nTotal Consumer Goods Imports from the United States 1,273.1 (=)\nTag* Description\nMedical Medicines and other medical or safety products 909.5 (-)\nFood Food Products 88.7 (-)\nBooks Books, teaching material and related products 28.9 (-)\nArms Arms and ammunition 0.6 (-)\nAutos Automobiles and related goods 62.6 (-)\nTotal minus selected groups of products 182.8 (=)\nSource: Exhibit Bra-754\n\n5.163 The United States considers, however, that Braz il has simply taken broad categories of goods\nout of consideration based on mere assertion, and that, while it may be appropriate to examine the\nnegative impact on particular goods that are ne cessities, where goods are not necessities or where\nalternative sources of supply are available, there is no basis to assert that suspension of concessions\nfor those goods is not practicable or effective. The United States observes that Brazil's economy is\nsufficiently diversified, that it could easily turn to other sources of supply, and that the key question is\nwhether alternative sources of supply exist.\n\n426 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 100.\n\n5.164 Brazil considers that the crucial question is not whether alternative sources of supply exist,\nbut whether it would be \"feasible and sensible for Braz il, in practice, to force its economic agents to\nswitch to other suppliers\". Brazil identifies a number of considerations that would be relevant to such\nan assessment: \"the US share in Brazil's total im ports; the price levels of alternative suppliers;\ntechnical specifications and product differentiati on; intellectual property and intra-company trade\nrestrictions; and the economic, welfare and inflat ionary costs resulting from the disruption of\nproduction and supply chains\".427\n5.165 We agree that the question of whether suspensi on of concessions or other obligations is\n\"practicable or effective\" is not strictly limited to whether alternative sources of supply exist, but\ninvolves a broader consideration of whether it would be feasible, in practice, for Brazil to require its\neconomic agents to switch to other operators, taking into account the ra nge of factors that may have a\nbearing on this question.\n5.166 Bearing this general observation in mind, we now consider Brazil's arguments to the effect\nthat suspension of concessions or other obligati ons on imports of medica l and food products, books,\narms and automobiles would entail \"serious and un reasonable costs\". In doing so, we recall that\nBrazil accepts that in relation to \"other\" cons umer goods, the costs of suspension would not be\nexcessive. This represents an amount of US$182.8 million of imports of consumer goods from the\nUnited States, in relation to which it is undisputed th at it would be practicable or effective to suspend\nconcessions or other obligations. The margin betw een this figure and the amount of authorized\ncountermeasures is small, in relative terms.\n5.167 The first category of consumer goods for which Br azil considers that the costs of suspension\nconcessions would be \"serious and unreasonable\" is \" medicines and other medical or safety\nproducts.\" This category, according to Brazil, represents a value of US$909.5 million in annual\nimports (2007).428 The United States observes that medical sterilizers exported by Brazil exceed the\nimported amount from the United States in 2007 (U S$4.6 million in exports, US$1.5 million in\nimports). The United States further notes that both China and Korea exported about twice as much\nantibiotics into Brazil as the United States in 20 08, by value, and that China and Korea both\nsubstantially increased their share of exports to Brazil from the prior year (19.4 per cent to 33 per cent\nfor China and 13 per cent to 31 per cent for South Korea). Brazil responds that a \"big share\" of\npurchases of antibiotics is made by the Ministry of Health after arduous price negotiations and\nfollowing the rules of public procurement. Theref ore, Brazil argues, finding other suppliers is not\neasy, and there are sometimes no alternatives at all. Moreover, Brazil argues, increasing the costs of\nhealth care provision will affect the welfare of the people.\n5.168 We see merit in Brazil's argument with respect to the specificities of the market and\npurchasing practices for certain pharmaceutical produc ts, which may make it difficult to freely switch\nsuppliers with respect to such products. We also note that, even within a given category of medicines,\nsuch as \"antibiotics\", products are not necessarily freely interchangeable. Brazil has not provided\nexact indications, however, as to what proportion of its imports of \"medicines and other medical or\nsafety products\" is subject to such purchasing practi ces or requirements, such that would allow us to\nascertain what proportion of such imports would be a dversely affected in the event of a suspension of\nconcessions in this sector.\n429\n\n427 Brazil's responses to questions from the Arbitrator, question 140, para. 337.\n428 See Exhibit Bra-754, reproduced above as Table 3.\n429 We observe that even within this sub-category of consumer go ods, there are items where the\nUS share of imports is less than 20 per cent. If one adds up the value of these imports of medical goods, where\nthe US share was below 20 per cent in 2007, the total amounted to US$193.7 million. The import share is not\nthe only relevant consideration in evaluating the ease of sourcing alternative supplies, as domestic producers\n\n5.169 Brazil also excludes imports in the \"food\" and \"books\" categories from the range of consumer\nproducts that could be considered for suspension of concessions. The United States considers that\nthere is no reason to exclude such end use pr oducts from the range of products to which\ncountermeasures could be applied.\n5.170 With respect to food products, where US imports represent a total value of US$88.7 million,\nthe United States notes for example that US$1.8 million of sugarless chewing gum is imported. The\nUnited States also indicates that under the \"food\" category, US$10.071 million of pears and quinces\nwere imported from the United States in 2007, but imports from Argentina jumped from\nUS$73 million in 2007 to US$98 million in 2008. Brazil argues that more Brazilians have sufficient\nincome today to buy food items than before and that such social and economic development should be\npreserved at all costs. However, Brazil accepts that certain items classified as food, could be\nconsidered luxury products, though the amount and value of such products is rather limited.\n5.171 Brazil therefore essentially argu es that, except for a limited range of foods that can be\nconsidered as luxury products, food products as a whole should not be targeted because \"more\nBrazilians have sufficient income\" than in the p ast to buy food and this should be preserved.\nNaturally, if the suspension of concessions or othe r obligations were to deprive consumers of the\nopportunity to purchase food, it could legitimately be concluded that such suspension would not be\n\"practicable or effective\". However, this would only be the case if there was no opportunity to source\nthe same or substitutable goods from other domestic or imported sources. Brazil has not explained,\nhowever, why this would be the case with respect to the entire category of food products.\n430\n5.172 With respect to books, for which it estimates the total value of imports from the United States\nat US$28.9 million, Brazil observes that increased ta riffs would be highly detrimental to the policy\ngoal of increased access to education and the improvement of education standards. Also,\nArticle 150 VI (d) of the Federal Constitution exempts printed publications from import taxes, so that\nit is not practicable to take countermeasure on books . We note that books, almost by definition, are\ntotally differentiated products, such that it may not be possible to assume that one title could easily be\nsubstituted for another. However, we also note that many books have a primarily entertainment rather\nthan educational purpose.\n5.173 Brazil also considers that the automotive sector (for which imports from the United States\namount to US$62.6 million annually) should not be targeted. The United States observes that it\naccounts for less than 2 per cent of imports to Br azil of passenger cars in 2007-2008, and that auto\nparts, similarly, range from about 6 to about 8 per cent. Brazil responds that many limitations,\nincluding intra-company restrictions, apply to auto parts, making it virtually impossible or extremely\ncostly for this industry to change suppliers. With respect to passenger cars, the main characteristic of\ntrade in this sector, Brazil argues, is intra-comp any trade. Countermeasures on cars of \"General\nMotor do Brasil\", and \"Ford do Brasil\", for exampl e, are unlikely to be well received by these\nsubsidiaries and will affect their operations in Br azil. Moreover, imports of vehicles from the\nUnited States rely on long-established networks of authorized retailers and maintenance services,\nwhich make it virtually impossible for importers to easily switch suppliers. In addition, Brazil\nobserves, car sales in Brazil fell more than 40 pe r cent in December 2008, and given the present crisis\n\nmay also be potential suppliers. However, neither party has given us information on the US share of the market\nincluding domestic products.\n430 We note that Brazil's imports of food from the United States in 2007 accounted for only 10 per cent\nof its entire imports of food. Adding up the value of those food imports where the US share was below\n20 per cent in 2007 gives an amount of US$33.2 million. As noted above, the impot share is not the only\nrelevant consideration in evaluating the ease of sourcing alternative supplies, as domestic producers may also be\npotential suppliers. However, neither party has given us information on the US share of the market including\ndomestic products.\n\naffecting the car industry worldwide, the Brazilia n Government has adopted several measures to\nimprove the car market conditions including reduc ing the rates of federal tax on industrialized\nproducts. Brazil considers that it is therefore not viable to adopt measures that will distort the car\nmarket and prevent consumers from reaping the bene fits of such incentives. Finally, Brazil notes that\nit wishes to maintain the conditions of competiti on and prices prevailing in Brazilian car market. 431\nWe note that the US share of Brazil's imports in the automotive sector is only 2 per cent, which\nsuggests that only limited competitive pressure could be exerted through such imports. However, we\nsee merit in Brazil's arguments relating to the struct ure of trade in the automotive sector being such\nthat a suspension could be harmful to Brazilian subs idiaries importing the cars. We also agree that\nauto parts from different manufacturers are not necessar ily substitutable for each other. In light of\nthese elements and in the absence of specific ar guments from the United States disputing Brazil's\ndescription of the situation on the automotive market in Brazil, we accept Brazil's position that\nsuspension in this sector would entail \"serious and unreasonable costs\".\n5.174 In the arms category (annual value of imports from the United States estimated at\nUS$0.6 million), the United States observes that Braz il has not indicated the extent to which these\nimported goods are to be used by the police, military , or others in the public service. In response,\nBrazil indicated that \"a very high percentage\" of imports are to be used by the police or military and\nthe level of imports of these products is very low as shown by Exhibit Bra-754. 432 This very general\nindication, however, expressed only in terms of \"a very high percentage\" does not allow us to\nascertain exactly what amount of imports would fall into this category. The total annual value of\nimports from the United States is in any event very small.\n5.175 The United States also observes that exports of computers from China to Brazil continue to\noutpace those from the United States, at 36.7 per cent in 2008 compared to 18.5 per cent. Brazil\nconsiders, however, that computers are in the category of \"capital goods\", and that it would be\nunreasonable and very costly to impose additi onal hurdles on the importation of information\ntechnology products, as increased costs of informat ion technology products would have widespread\neffects on the whole economic structure and would have a direct negative impact on the welfare of\nBrazil's population.\n433 Since the United States has not sufficiently rebutted Brazil's classification of\nconsumer goods, we do not consider the treatment of computers under this category.\nConclusion\n5.176 Overall, in light of the above, we are not convi nced that Brazil could plausibly conclude that\nsuspension of concessions or other obligations woul d entail \"serious and unreasonable costs\" in the\nentirety of these various sectors. At best, Brazil ha s plausibly explained why suspension in relation to\nsome imports within these categories of consumer goods might not be practicable or effective.\n5.177 We are therefore not convinced that Brazil c ould plausibly determine, on the basis of the\nelements presented to us in these proceedings, that it is not practicable or effective to seek to suspend\nconcessions or other obligations in relation to the entirety of the broad range of consumer products\nthat it proposes to exclude from consideration, in particular in the areas where the US share of imports\nis relatively small.\n5.178 In light of the elements presented to us as discussed above, we can accept Brazil's\ndeterminations, on the whole, in re lation to books and the automotive sector. However, in relation to\nthe categories of medical products, food and arms, we are not persuaded that Brazil could plausibly\n\n431 Brazil's responses to questions from the Arbitrator, question 140, paras. 345-347.\n432 Brazil's comments on US responses to questions from the Arbitrator, question 135, paras. 395-397.\n433 Brazil's responses to questions from the Arbitrator, question 140, paras. 342-344.\n\ndetermine, on the basis of the elements that it has presented to us alone, that suspension would entail\n\"serious and unreasonable costs\" in relation to the entire range of products in these sectors.\n5.179 We find it useful, in this context, to consider the extent to which it may be expected that\nBrazil would in fact have alternative sources of supply at its disposal for these remaining product\ncategories, as a further indication of whether Brazil could plausibly determine that it is not practicable\nor effective to suspend concessions or other obligations on such imports.\n5.180 We recognize that within the broad categori es of \"medicines\" and \"food\", certain products\nmay not be readily substitutable. In particular, we recognize that some medicines, including those\nthat are subject to proprietary rights, may need to be sourced from a specific supplier. We also recall\nour determination above that we see merit in Braz il's argument that certain medicines, such as\nantibiotics, are sourced through public procurement in such a manner that a change in supplier may be\nimpracticable. We also note, however, that medical products and food, as a whole and taken together,\nrepresent the vast majority of Brazil's consumer goods imports from the United States and that they\nboth contain a very broad range of products. Th e category \"[m]edicines and other medical or safety\nproducts\" thus include, for example, items such as \"[t]ooth brushes, incl. dental-plate brushes\". 434 In\nthese circumstances, we find that the US share of imports in these product categories as a whole may\nprovide a useful indicator of the likelihood of other sources of supply being available, and thus of the\nlevel of substitutability on the market, for these product categories.\n5.181 While there is no exact mathematical precision to this determination, we consider that, for the\npurposes of our assessment in these proceedings, a US share of imports of 20 per cent constitutes a\nreasonable threshold by which to estimate the extent to which Brazil may be able to find alternative\nsources of supply for these three remaining categories of consumer goods imports. This does not take\ninto account the fact that the actual market shar e of US products might be smaller if domestic\ncompetition were to be included also, but we have not been provided any figures that would have\nallowed us to estimate that. In selecting this indi cative threshold, we also bear in mind our earlier\ndeterminations in relation to other categories of imports. In particular, we recall that we have\naccepted Brazil's broad assertion that all capital goods , intermediate goods and other inputs to the\nBrazilian economy should be excluded from considera tion. We have also accepted Brazil's overall\nclassification of consumer goods, including the excl usion of computers from this category. At the\nsame time, in future arbitrations of this nature , a Member arguing against the plausibility of another\nMember's determination of the practicality and e ffectiveness of taking countermeasures only within\nthe goods sector might present a more detailed and sci entific rebuttal of the determination made by\nthat other Member. In applying a benchmark of 20 per cent, this Arbitrator is not intending to signal\nthat this is the appropriate percentage to use in this kind of analysis in all cases.\n5.182 The table below (Table 4) reflects the results of this assessment. It calculates the amount of\nBrazil's imports of consumer goods from the Un ited States that could be the subject of\ncountermeasures. It is based on data at the 8-digi t level of the tariff headings within the relevant\nconsumer good categories, as reflec ted in Brazil's own submission.\n435 The calculations proceed as\nfollows. First, it excludes the value of imports of books and autos from the United States reflecting\nBrazil's determination that suspension of con cessions in these sectors would entail \"serious and\nunreasonable costs\". Second, it includes imports of \"other\" consumer goods, which amount to\nUS$182.8 million, reflecting Brazil's acceptance that in relation to \"other\" consumer goods, the costs\nof suspension would not be excessive. Finally, for food, pharmaceutical products and arms, it\nincludes only the import value of those tariff lines wher e the US share in Brazil's imports is less than\n20 per cent. For illustrative purposes, the table also includes the results of the same calculation for a\n10 per cent and 30 per cent threshold.\n\n434 Tariff line 9603.21.00, Exhibit Bra-823.\n435 Exhibit Bra-823.\n\nTable 4: Amount of Brazil's imports of consumer goods from the United States\nthat could be the subject of countermeasures\n(Millions of dollars)\n\nThreshold Applicable to Food, Medical Products and Arms\nItem\n10% 20% 30%\n – Food $11.0 $33.2 $48.8\n – Medical products $15.3 $193.7 $333.1\n – Arms $0.0 $0.0 $0.0\n\n – Books $0.0* $0.0* $0.0*\n – Autos $0.0* $0.0* $0.0*\n\n – Others $182.8** $182.8** $182.8**\nAll Consumer goods $209.1 $409.7 $564.6\n\n * In respect of Books and Autos, no amount is included, to take into account our determination that we\naccept Brazil's position that suspension in these sectors would entail \"serious and unreasonable costs\".\n\n ** In respect of the \"Others\" category, the total amount of imports from the United States is included,\nas Brazil accepts that suspension in these sectors would not entail \"serious and unreasonable costs\".\n\n Sources: Exhibit Bra-754 and Exhibit Bra-823.\n\n5.183 Using the 20 per cent benchmark for the shar e of the US imports (and not taking into\nconsideration the availability of dom estic products that also can substitu te imports), the results of this\ncalculation suggest that, even if we were to assume that Brazil would choose not to suspend\nconcessions in any category of imports of capital go ods, intermediate goods and other inputs into its\neconomy, and that it would also not suspend concess ions in books or the automotive sector, it would\nstill have at its disposal imports of other consumer goods from the United States amounting to a total\nvalue of at least US$409.7 million, from which to su spend concessions or other obligations. This\nwould therefore still leave a value of US imports of consumer goods significantly in excess of\nUS$294.7 million, to which suspension could be applied.436\n5.184 We also recall that, of these US$409.7 m illion of consumer goods imports from the\nUnited States, Brazil itself concedes that the costs would not be \"serious and unreasonable\", up to a\nlevel of US$182.8 million. This means that Brazil would only in fact need to find an additional\namount of imports of other goods from the United States to a total value of US$112.1 million to\nwhich to apply the suspension of concessions or othe r obligations, in order to apply the full level of\nsuspension that it is entitled to, on imports of goods from the United States.\n5.185 We further observe that the above calculation is made on the basis of the arguments and\ninformation provided by the parties. For the purposes of the calculation, we have accepted Brazil's\n\n436 We also note that Brazil accepts that suspension of concessions in relation to certain items that\ncould be considered luxury products, amounting to a total of US$28 million, would probably not lead to\nexcessive costs on the Brazilian economy. This amount may partially overlap with other categories, so we have\nnot added it to the figures considered in this section.\n\ndeterminations in relation to capital goods, intermediate goods and other inputs into the economy, and\nalso in relation to various categories of consumer goods. However, our analysis does not imply that\nBrazil necessarily has to retaliate in the categories in question. It would in fact remain entitled to\napply the suspension to any imports of goods that it chooses to target for suspension. Keeping in\nmind that the overall amount of imports from the Un ited States to Brazil is US$18.7 billion, and that\nimports of consumer goods alone represent at least US$1.273 billion in total, we are confident that, on\nthe basis of what was put before us in these proceedings and at current levels, Brazil has at its disposal\na sufficient level and variety of imports from the United States, to which it could apply the suspension\nthat it is entitled to, without incurring \"serious or unreasonable costs\" to its economy.\n(iv) General considerations\n5.186 Even in relation to the range of imports in re lation to which Brazil considers that it could in\nprinciple be practicable to retaliate (which it estimates at US$182.8 million) 437, Brazil also argues that\nsuch suspension would not be practicable or effective, due to its potential adverse welfare effects in an\ninflationary environment and also because any meas ures contrary to Brazil's development objectives\nshould be avoided. Brazil also generally argues th at the trade imbalance between the parties would\nrender such suspension ineffective. We therefore now consider these aspects.\nGeneral economic and welfare costs\n5.187 Brazil considers that \"within the very limited scope of consumer goods that it has to target,\nthe costs and welfare-reducing effects resulting fro m the adoption of counter measures exclusively in\nthat sector would render such an alternative not practicable\".\n5.188 As we have observed in para graph 5.133 above, a consideration of the economic costs\nassociated with the suspension is legitimate, but it is not just any economic costs associated with the\nsuspension of concessions or other obligations in a given sector or agreement that would justify a\nconclusion that such suspension would be \"not practi cable or effective\". Rather, the costs at issue\nwould have to be of such extent and magnitude as to render the suspension \"not practicable or\neffective\". We have also already considered in detail Brazil's specific arguments relating to the\neconomic and welfare costs of the suspension of concessions and other obligations on various\ncategories of US imports. Even considering cons umer goods alone, our determinations above suggest\nthat, at current levels, Brazil has at its disposal a total value of at least US$409.7 million of imports of\ngoods from the United States, to which it could apply a suspension.\n5.189 This confirms to us that, in principle, Brazil has at its disposal sufficient imports of goods\nfrom the United States and elsewhere in order to allow it to suspend concessions on a total value of\nUS$294.7 million of imports from the United States without incurring significant costs to its\neconomy. We further emphasize that nothing w ould compel Brazil to apply the suspension of\nconcessions or other obligations \"exclusively in that sector\". As we have observed in paragraph 5.185\nabove, Brazil would be entitled to apply the suspensi on to any imports of US goods that it chooses to\ntarget for suspension. As we also observed above, keeping in mind that the overall amount of imports\nfrom the United States to Brazil is of US$18.7 billi on, and that imports of consumer goods alone\nrepresent at least US$1.273 billion, we are confident th at, on the basis of what was put before us in\nthese proceedings and at current levels, Brazil has at its disposal a sufficient level and variety of\nimports from the United States, to which it could apply the suspension that it is entitled to, without\nincurring \"serious or unreasonable costs\" to its economy.\n\n437 Based on Exhibit Bra-754.\n\nInflationary pressure\n5.190 Brazil also argues that the adoption of counter measures exclusively in the small range of\nconsumer goods that it has to target would add to inflationary pressures at a time when increasing\nprices have pointed to \"a worrying inflationary scenario\" and would limit access of Brazilian\nconsumers to these imported goods, negatively affec ting Brazil's economy and the welfare of its\npopulation.\n438\n5.191 As evidence of the threat of inflation, Brazil, points out that all its price monitoring agencies\nhave recorded rising inflation in 2008, whichever measuring standard is used. As an example, it\nclaims that the annualized change in the Broad C onsumer Price Index (IPCA), which is used as the\nstandard inflation index by the Brazilian Central Bank, reached 5.9 per cent in 2008. 439 Brazil\ncontends that this surpassed the inflation target of 4.5 per cent set by the Central Bank.\n5.192 As a result of these strong inflationary pressures, it claims that the Brazilian Central Bank has\nbeen compelled to consistently raise basic interest rates since the beginning of 2008. After four\nconsecutive increases, yearly basi c interest rates reached 13.75 per cent in September 2008, making\nBrazil one of the countries with the highest real interest rates in the world.440\n5.193 The United States does not dispute that there are co sts, including the risk of inflation, from\nimposing countermeasures on merchandise goods. But it argues that countermeasures are by\ndefinition counter to WTO disciplines. Furthermore, given the size and diversity of Brazil's economy,\nand the availability of goods from other sources or from Brazil itself, it claims that Brazil has many\ntools at its disposal to apply countermeasures within the goods sector.441\n5.194 Brazil has provided sufficient evidence to show that the threat of inflation seriously concerns\nBrazilian policymakers. The United States has not dis puted the magnitude of the inflation rate in the\ncountry nor of the successive steps taken by the Ce ntral Bank to increase the interest rate. However,\nwe believe that while the risk of price incr eases from applying countermeasures on merchandise\ngoods exist, it does not rise to a level where Br azil has no room to apply countermeasures on\nmerchandise goods.\n5.195 The size of the countermeasures, at current le vels, is not large relative to the value of\nconsumer goods imports from the United States. We also note that the inflation index is based on\ndomestic consumption, which is made up predominantly of dom estically-produced goods. This\nsuggests that countermeasures on merchandise goods imports may only have a limited impact on\ninflation given the composition of the basket of good s that enter into the calculation of the inflation\nindex.\nDevelopment objectives, imbalance in trade relations and political influence\n5.196 Brazil further argues that any measures that are contrary to the objectives of a developing\ncountry to ensure steady and sustainable developmen t will necessarily be costly and impracticable by\ndefinition, and that the significantly unbalanced na ture of the trade relations between Brazil and the\nUnited States, and the considerable economic di fferences between the tw o countries, render the\nsuspension of concessions and other obligations un der trade in goods alone neither practicable nor\neffective as a response to the US failure to comply with its obligations.\n\n441 US responses to questions from the Arbitrators, question 68, para. 206.\n\n5.197 Finally, Brazil also argues that suspension in the area of trade in goods alone may not have\nsufficient political influence to press for the United States' withdrawal of the billions of dollars it pays\nannually in subsidies or to remove their adverse effe cts, and that, therefore, they are not \"effective\"\nfor the purpose of encouraging compliance.\n5.198 We agree that a complaining Member seeking to suspend concessions or other obligations\nshould not be required to act against its own intere sts in applying such suspension. However, our\nfindings above suggest to us that Brazil has at its disposal a sufficient range of imports of goods,\nincluding consumer goods, from the United States, so as to enable it to suspend concessions in the\narea of trade in goods alone, without causing itself such economic harm as to render such suspension\n\"not practicable or effective\". In the absence of other specific detailed arguments as to why such\nsuspension would otherwise adversely affect Brazil's interests, we conclude that, on the basis of the\nelements presented to us and at current levels, Br azil could not conclude that suspension in trade in\ngoods alone would not be \"practicable or effec tive\". Further, Brazil's insistence that its\ncountermeasures must have \"sufficient political infl uence\" from the perspective of the United States\nto press for the withdrawal of the subsidies and the removal of their adverse effects is misplaced.\n\"Effectiveness\" relates to the ability of a Member to have recourse to the authorized remedy, such that\nit can serve to induce compliance. However, the pr eference of a Member for a particular type of\ncountermeasure, because it would constitute a more powerful form of persuasion in a political sense,\nis not a relevant consideration for an arbitrator in these proceedings.\n5.199 Our conclusion is not modified by the \"signifi cantly unbalanced nature of the trade relations\nbetween Brazil and the United States\". As we have observed above, the elements presented to us do\nnot suggest that Brazil's dependence on US imports is such that it could not find at least\nUS$294.7 million worth of imports of goods from the United States in relation to which it would have\nsufficient alternative domestic or imported sour ces of supply at its disposal, so as to suspend\nconcessions effectively. In addition, the fact that exports to Brazil only represent a very small\nproportion of US exports generally does not, in itsel f, necessarily imply that countermeasures applied\nto some of these goods would not be \"effective\" for the purposes of inducing compliance. It would be\nup to Brazil to identify those US exports in relation to which it would apply the suspension, and to do\nthis in a manner that would make such measures as effective as possible within the limits of the\npermissible level of countermeasures. In light of th e fact that the total value of imports to Brazil from\nthe United States, at current levels, significantly ex ceeds the level of permissible countermeasures, we\nsee no reason to assume that this would not provide a sufficient margin or discretion for Brazil to\ntarget accordingly the specific products to which suspension would be applied.\n(v) Overall conclusion\n5.200 In light of all the above, we conclude that, on th e basis of the elements presented to us and at\ncurrent levels, Brazil could not plausibly have reac hed the conclusion that it is not practicable or\neffective to suspend concessions or other obligations in trade in goods alone, even if it had considered\nthe \"necessary facts\", i.e. taking into account a level of permissible countermeasures not exceeding\nUS$294.7 million.\n5.201 We recall, however, that the level of counter measures that we have determined to be\npermissible in these proceedings is variable. We ha ve based our determinations above on the level of\ncountermeasures as calculated on the basis of FY 2006 and on the basis of Brazil's imports of\nconsumer goods in the year 2007. Given the volume and composition of Brazil's imports of consumer\ngoods in the year 2007, we determined that there was at least US$409.7 million worth of Brazil's\nimports of consumer goods from the United States that could be the subject of countermeasures\n(\"threshold\"). However, in the event that the level of countermeasures that Brazil would be entitled to\n\nin a given year 442 should increase to a level that would ex ceed this threshold, updated for the same\nyear in a manner described in Section V.C.6 below to account for the change in Brazil's total imports\nfrom the United States, then, we find that it woul d be concluded, on the basis of the elements\npresented to us, that the suspension of concessions or obligations applied to trade in goods alone\nwould not be \"practicable or effective\" within the meaning of Article 22.3(c) of the DSU.\n5.202 In light of this determination, we must cons ider further Brazil's determination that \"the\ncircumstances are serious enough\" within the mean ing of Article 22.3 and its consideration of the\nelements of subparagraph (d) of Article 22.3.\n4. Whether \"the circumstances are serious enough\"\n(a) Main arguments of the parties\n5.203 Brazil says that, with respect to prohibited s ubsidies, the granting or maintenance of such\nsubsidies constitutes in itself, at the very least, a strong indication that \"circumstances are serious\nenough\". In addition, the seriousness of the breach in the present case is compounded by the specific\ncharacteristics of the subsidy at issue. Th e GSM 102 programme and the guarantees granted\nthereunder constitute recurrent export subsidies, granted year after year in connection with billions of\ndollars in agricultural exports in violation of US WTO obligations. Brazil notes that these subsidies\nhave been granted since 1981 and have been dist orting international markets on a continuous and\ncumulative basis for the whole period covered by this dispute (from 1999 up to 2009). The statutory\nframework of the programme ensures that it is of fered continuously and requires that billions of\ndollars in guarantees be made available every year. Brazil argues that the subsidies are particularly\npernicious in light of their stated objective and pe rformance measure, to open high risk markets to US\ncommodities and establish the dominance of US exporters by means of prohibited export subsidies, to\nthe detriment of competing exporters. In a single day, on 6 October 2008, the USDA received\napplications for ECGs worth US$3.5 billion. Acco rding to a director of CoBank, this enormous\namount of applications is a result of \"the credit markets seizing up\".\n443\n5.204 With respect to the actionable subsidies, Br azil considers that the sheer amount of the\nsubsidies granted under the ML and CCP progra mmes, which have been found to cause adverse\neffects in the form of significant price suppression in the world market; the repeated refusal of the\nUnited States to comply, since 2005, with the ruli ngs and recommendations adopted by the DSB; and\nthe concrete expectation, confirme d in the 2008 Farm Bill, that the same design and structure for the\ngranting of the same subsidies will be maintain ed in the future also demonstrate that the\ncircumstances are serious enough to justify the types of countermeasures proposed by Brazil.444\n5.205 Brazil says that these subsidies provide a pern icious predictability for US producers and\nexporters – who may take for granted that they will enjoy an artificial competitive advantage vis-à-vis\nother competitors every year – and for producers of the other Members – who have their production\nand investment decisions negatively affected in the long term by the chilling effect caused by the\npermanent availability of the US subsidies. Braz il argues that these subsidies constitute a structural\nelement of the world markets for the wide range of products they support, and that the current credit\ncrisis only heightens their distorting effects. Producers and exporters all over the world, who are\nstruggling to find credit for their operations, have to compete with US producers and exporters that\nare cushioned from the effects of the crisis by the unlawful subsidies, as the US$5.5 billion worth of\n\n442 It is understood that this amount is to be calcu lated taking into account the entirety of the level of\ncountermeasures that Brazil is entitled to at that point in time, arising both from the application of the formula\nidentified in paragraph 6.5(a) and from the Decision by the Arbitrator contained in WT/DS267/ARB/2.\n\nECGs under the GSM 102 available in FY 2008 strikingly reminds us. In Brazil's view, these features\nrender the circumstances certainly no less than serious enough.445\n5.206 In Brazil's view, the fact that the United St ates has revived in the 2008 Farm Bill, under a\nslightly different disguise, the only subsidy it had eliminated as part of its implementation of the\nrecommendations and rulings of the DSB in the pr esent case – the \"Step 2\" programme – constitutes\nadditional indication that the circumstances are serious enough.446\n5.207 The United States argues that \"'circumstances ar e serious enough' may refer to the potential\nconsequences for the Member of suspending concessi ons in the same sector and agreement, or the\npotential consequences of forgoing the right to suspend concessions\". 447 In the circumstances of this\ndispute, where Brazil's proposal for countermeasur es does not substantiate any adverse effect on\nBrazil from the measure at issue, it is not clear, in the United States' view, what consequences these\nwould be or whether they would be serious at all. 448 In the United States' view, Brazil's agricultural\nsector, and its cotton producers in particular, have been effective competitors worldwide even with the\nexistence of GSM 102, marketing loan payments and countercyclical payments and without any\ncountermeasures, and Brazil's cotton exports have reached record levels in recent years.449\n5.208 Brazil responds that the United States' erroneous legal analysis first equates the meaning of\n\"circumstances\" with that of \"potential conseque nces\" and then moves on to argue that \"potential\nconsequences\" means trade damage to Brazil. In Brazil's view, however, there is no legal basis to\nargue that in selecting the type of countermeasures Brazil must show \"any adverse effect on Brazil\nfrom the measures at issue\" to enab le an assessment of whether circ umstances are serious enough. In\nany event, Brazil argues, as regards actionable subs idies, the existence of adverse effects of the\nmeasures at issue has already been determined by two panels and the Appellate Body. Brazil notes\nthat with respect to the GSM 102 subsidies, the tw o panels and the Appellate Body found that they\nconstitute prohibited subsidies – arguably the most egregious violation of WTO disciplines, as can be\ninferred from the special rules applicable to them – and that they should have been withdrawn without\ndelay. Hence, Brazil argues, even under the US flawed and convoluted logic, circumstances would be\nserious enough because the consequences of maintaini ng the subsidies in place could not be anything\nless than serious, as is made clear by the findings, rulings and recommendations of the panels and the\nAppellate Body in this dispute.450\n5.209 Brazil considers that Article 22.3(c) of the DSU can encompass the impact on Brazil of\napplying countermeasures under trade in goods alone, as well as broader circumstances which\nsurround Brazil's consideration of retaliatory action ag ainst the United States' failure to comply with\nthe DSB's recommendations and rulings in this disp ute, such as the demonstrated lack of willingness\nof the United States to comply.451\n5.210 In the view of the United States, the circum stances surrounding potential countermeasures in\nservices and intellectual property are also a factor . Brazil has not detailed how it might impose such\ncountermeasures; and in fact it is not obligated to do so at this time. Effectively, the United States\nargues, if Brazil is authorized to impose c ountermeasures under these other Agreements it would\n\n447 US responses to questions from the Arbitrator, question 136, para. 174.\n448 US responses to questions from the Arbitrator, question 136, para. 174.\n449 US responses to questions from the Arbitrator, question 136, para. 175.\n450 Brazil's comments on US responses to questions from the Arbitrator, question 136, paras. 401-402.\n451 Brazil's comments on US responses to questions from the Arbitrator, question 136, para. 403.\n\ncause an additional layer of uncertainty fo r these sectors, with potentially devastating\nconsequences.452\n5.211 Brazil welcomes the United States' acknowledgement that Brazil \"is not obligated\" to detail\nhow it might impose countermeasures with respect to services and intellectual property rights. 453\nBrazil also notes that the United States, by refe rring to \"potentially devastating consequences\", 454\nseems to agree with Brazil's view that count ermeasures under the TRIPS Agreement and the GATS\nwould be much more effective within the meaning of Article 22.3 of the DSU than countermeasures\nunder trade in goods alone.455\n(b) Analysis by the Arbitrator\n5.212 Under Article 22.3(c) of the DSU, in order for suspension of obligations to be permissible, the\ncomplaining party is required to have determined that \"the circumstances are serious enough\", in\naddition to having determined that suspension unde r the same agreement is \"not practicable or\neffective\".\n5.213 We recall our determination in paragraph 5.84 above that an assessment of whether \"the\ncircumstances are serious enough\" is necessarily a case-by-case assessment depending on the specific\ncircumstances of the case.\n5.214 The United States argues that \"'circumstances ar e serious enough' may refer to the potential\nconsequences for the Member of suspending concessi ons in the same sector and agreement, or the\npotential consequences of forgoing the right to suspend concessions\". 456 In Brazil's view,\nArticle 22.3(c) of the DSU can encompass the impact on Brazil of applying countermeasures under\ntrade in goods alone, as well as broader circum stances which surround Brazil's consideration of\nretaliatory action against the United States' failure to comply with the DSB's recommendations and\nrulings in this dispute, such as the demonstrated lack of willingness of the United States to comply.\n5.215 As we have determined in paragraph 5.83 a bove, an assessment of whether circumstances are\n\"serious enough\" would legitimately include a c onsideration of the elements identified in\nsubparagraph (d) of Article 22.3, namely the trade in the sector in which a violation has been found\nand its importance to the complaining party (in th is case, trade in goods, including trade in cotton and\nother products affected by the measures at issue), as well as \"the broader economic elements related to\nthe nullification or impairment and the broader ec onomic consequences of the suspension\". At the\nsame time, the assessment is not limited to these factors, and may include other elements, depending\non the specific \"circumstances\" of the case. We ther efore agree with Brazil that a determination of\nwhether \"the circumstances are serious enough\" may in principle encompass both the impact on Brazil\nof applying countermeasures under trade in goods (i.e . \"the broader economic consequences of the\nsuspension\") and \"broader circumst ances which surround Brazil's consid eration of retaliatory action\"\nagainst the US failure to comply with the DSB's recommendations and rulings.\n5.216 Brazil considers that a number of elements rende r the circumstances \"serious enough\" in this\ncase, including the granting or maintenance by the United States of the prohibited subsidies, the\nfourfold increase in the transactions supported by the GSM 102 programme in 2009; the continued\ngranting of actionable subsidies and the enactment of 2008 Farm Bill. In Brazil's view, these facts\nshow that the United States has no intention of complying with the DSB recommendations and\n\n452 US responses to questions from the Arbitrators, question 136, para. 176.\n453 US response to questions from the Arbitrators, question 136, para. 176.\n454 US response to questions from the Arbitrators, question 136, para. 176.\n455 Brazil's comments on US responses to questions from the Arbitrator, question 136, para. 399.\n456 US responses to questions from the Arbitrator, question 136, para. 174.\n\nrulings. Brazil further argues that the design and struct ure of the subsidies at issue is such as to create\n\"an artificial competitive advantage for US operators vis-à-vis other competitors every year\" to the\ndetriment of producers of other Members \"who ha ve their production and investment decisions\nnegatively affected in the long term by the chilling effect caused by the permanent availability of the\nUS subsidies\". Brazil argues that these subsidies constitute \"a structural element of the world markets\nfor the wide range of products they support\", and that the current credit crisis only heightens their\ndistorting effects. Brazil further considers that th e conditions that render the circumstances \"serious\nenough\" also include the potential effects on Braz il if countermeasures are confined to the goods\nsector, which will lead to disproportionate costs to the Brazilian economy and to the welfare of its\npopulation.\n457\n5.217 In our view, Brazil's determination that the circumstances are serious enough within the\nmeaning of Article 22.3(c) of the DSU is reasonable in light of the circumstances of the case.\n5.218 In this regard, we recall some salient aspects of the findings of the original and compliance\npanels and of the Appellate Body in relation to the subsidies concerned:\n\"As we have just indicated, several of the United States subsidies are directly linked\nto world prices for upland cotton, thereby numbing the response of United States\nproducers to production adjustment decisions when prices are low . We have readily\navailable information on the record showing us that the price-contingent subsidies in\nquestion involve very large amounts of Un ited States government money benefiting\nUnited States upland cotton. In our view, the collective operation of these subsidies\nwas akin to a very large, counter cyclical, deficiency payment laced with additional\nenhancements. We believe that the structure, design and operation, particularly of the\nprice-contingent subsidies, constitutes st rong evidence supporting a finding of price\nsuppression.\"458 (emphasis added)\n\"Given that in most recent years actual mark et prices have been lower than expected\nmarket prices at the time of planting and th at the adjusted world price has been below\nthe marketing loan rate, the Panel considers that it is reasonable to conclude that the\nfact that US cotton producers know that th ey will receive marketing loan payments\nwhenever the adjusted world price is below the marketing loan rate continues to be an\nimportant factor affecting the level of acreag e planted to cotton (and thus the level of\nproduction), even when, as in MY 2006, the expected market price for upland cotton\nat the time of planting is higher than the ma rketing loan rate. The Panel also notes in\nthis regard that accordi ng to FAPRI and USDA data, the projected amount of\nmarketing loan payments in MY 2006 is very significant. \"459 (emphasis added,\nfootnote omitted)\n\"First, we recall that the original panel noted that the CCC has access to funds from\nthe US Treasury and benefits from the fu ll faith and credit of the US Government.\nThis is still the case, and were the GSM 102 programme to incur massive losses, it\nwould have access to additional funds from the US Treasury .\"460 (emphasis added,\nfootnote omitted)\n\"The Panel considers, in light of the appr oach taken by the pa nel and Appellate Body\nin the original proceeding, that in determining whether the magnitude of the subsidies\n\n457 Brazil's comments on US responses to questions from the Arbitrator, question 136, paras. 404-405.\n459 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.81.\n460 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 14.110.\n\nat issue in this proceeding supports a findi ng that the effect of these subsidies is\nsignificant price suppression, it is necessary to examine this factor in relation to other\nfactors. Thus, the relevance of the magnitude of the subsidies in this connection must\nalso be assessed in light of our analysis above of the structure, design and operation\nof the subsidies. We recall, in this re spect, our conclusion regarding the important\nrevenue-stabilizing effect of these mandatory, price-contingent subsidies. In the latter\nregard, the evidence before us indicates th at marketing loan and counter-cyclical\npayments play a significant role in stabilizing the revenues of US upland cotton\nproducers. The share of marketing loan payments and counter-cyclical payments in\ntotal revenues of US upland cotton producers was 35 per cent in MY 2004 and 27 per\ncent in MY 2005.\"\n461 (emphasis added, footnotes omitted)\n\"Table 6B shows market revenue from cotton lint, total costs (less ginning costs) and\nthe difference between market revenue a nd total costs on a per acre basis in MY\n2002-2006. Over the period examined, US cotton producers' market revenue\nexceeded total costs of production twice, in MY 2003, when cotton prices were at\ntheir highest since MY 1997, and also in the year immediately following that. In\nother marketing years, total costs of pr oduction exceeded market revenue, at times by\nvery huge margins. In MY 2002, for example, total costs exceeded market revenue\nby 84 per cent. Data provided by Brazil for MY 2006 suggests that total costs will\ncontinue to exceed market revenue. The gap is expected to be about 56.25 dollar per\nacre, which would be equivalent to about 14.7 percent of US cotton producers' market\nrevenue in that marketing year. Cumulated over the five marketing years 2002-2006,\nUS cotton farmers' costs of production have exceeded market revenues by an average\nof 227.49 dollars per acre.\"\n462 (emphases added)\n\"In conclusion, the Panel finds that there exists a significant gap between the total\ncosts of production of US upland cotton producers and their market revenue. The\nPanel considers that this gap between costs and revenue, when analyzed in\nconjunction with the magnitude of the mark eting loan and counter-cyclical subsidies\nand their importance as a share of the revenue of US cotton producers, supports the\nproposition that the marketing loan and counter-cyclical payments are an important\nfactor affecting the economic viability of US upland cotton farming . The Panel\ntherefore also considers that without these subsidies the level of US upland cotton\nacreage and production would be considerably lower.\" 463 (emphasis added, footnotes\nomitted)\n\"We do not see a contradiction between the fact that United States shares of world\nproduction and exports of upland cotton have remained stable at consistently high\nlevels between MY 2002 a nd MY 2007 and the Panel's findings of substantial\nproportionate influence of the United States in the world market for upland cotton.\nThis is because stable high United States shares of world production and exports of\nupland cotton could be seen as evidence of the fact that the United States continued to\nexert a substantial proportionate influence in the period examined by the Panel, just\nas it had during the period examined by the original panel. We also observe that the\nPanel specifically noted that this element supported its finding of significant price\nsuppression when \"analysed in the light of the totality of the evidence\". Therefore, we\ndo not consider that the Panel erred in finding that the United States exerts a\n\n461 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.111.\n462 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.190.\n463 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.196.\n\nsubstantial proportionate influence on the world market for upland cotton .\"464\n(emphasis added, footnotes omitted)\n5.219 We are not persuaded that, as Brazil argues, the very granting of the subsidies at issue would\nbe sufficient to conclude that the circumstances are \"s erious enough\". It is inherent in the situation at\nhand that a violation has taken place and that comp liance has not been achieved in a timely manner.\nThis circumstance alone, which is common to all ca ses in which suspension of obligations is sought\nunder the DSU, would not in our view justify the conclusion that the circumstances are \"serious\nenough\". However, we agree with Brazil that the specific design and structur e of the subsidies at\nissue, as they have been maintained over a signifi cant period of time, is such as to have created an\nartificial and persisting competitive advantage for US producers over all other operators, and that this\nhas a significant trade-distorting impact, not just on the US domestic market, but on the world market\nin these products.\n5.220 The United States responds that Brazil has in fact remained very competitive in the\nagricultural sector, including cotton, even w ith the US subsidies in place and without\ncountermeasures. We are not persuaded, however, th at this consideration alters the essence of the\nsituation. The fact that Brazil may have remain ed competitive in spite of the trade-distorting\nconditions arising from the granting and maintenanc e of the subsidies at issue does not in essence\nmodify the fact that these subsidies have a trade- distorting impact on the world market for cotton and\nthe other products affected by them. Given the st ructure and design of the programmes at issue, and\nin light of the time period over which they have been in place, these distortions are virtually, as Brazil\nputs it, a \"structural\" element of the world market for the affected products, including cotton, as long\nas they remain available. Our earlier determin ations in relation to the level of permissible\ncountermeasures suggest that these trade-distorting e ffects are not insignificant, including on Brazil.\nFurthermore, these impacts are felt not only on the US market but on other markets for the products at\nissue. In addition, as Brazil observes, in times of credit crisis, this trade-distorting impact will be\nfurther amplified, at least in so far as the GSM 102 programme is concerned. These considerations, in\nour view, support the conclusion that \"the circumstances are serious enough\".\n5.221 In addition, Brazil observes that the dispropor tionate adverse impact of the suspension of\nconcessions or other obligations on its economy, if a pplied only to trade in goods, also contributes to\nthe \"circumstances\" being \"serious enough\". We agree that this may also be a relevant consideration\nin such determination.\n465 We have considered extensively Brazil's arguments concerning the potential\nadverse impact on its economy of a suspension applie d to trade in goods alone, in reviewing whether\nit is \"practicable or effective\" for Brazil to seek su spension in trade in goods alone. In this context,\nwe concluded that, to the extent that the level of countermeasures that Brazil would be entitled to take\nwould exceed a certain threshold, such suspension would be \"not practicable or effective\". These\nconsiderations also inform the determination of whether \"the ci rcumstances\" would be \"serious\nenough\" to justify cross-agreement suspension. If the threshold were reached, such that suspension of\nconcessions or other obligations under the same sect or or agreement would not be practicable or\neffective for Brazil, this would also directly contri bute to the circumstances being \"serious enough\" to\njustify recourse to suspension under another agreement.\n5.222 In light of all the above, and on the basis of the elements pr esented to us, we find that Brazil\ncould reasonably determine that \"the circumstan ces are serious enough\" within the meaning of\nArticle 22.3(c) of the DSU.\n\n464 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 446.\n465 We note in this respect the observation of the arbitrator on US – Gambling that the circumstances\nthat justified a determination that \"the circumstances ar e serious enough\" in that case could be \"directly related\nto the practicability and effectiveness of suspension under the agreement in which the violation was found (in\nthat case, the GATS). See Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.115.\n\n5.223 In light of our determinations in the previ ous section above, we note that the two conditions\nforeseen in Article 22.3(c), i.e. a determination th at \"it is not practicable or effective\" to seek\nsuspension under the same agreement and a determination that \"the circumstances are serious enough\"\nwould only be met simultaneously in this case when ever the threshold identified in paragraph 5.201\nabove would be exceeded.\n5.224 The United States has suggested that the potential implications of a suspension of obligations\nunder the TRIPS Agreement is also a consideration to be taken into account, in light of the \"layer of\nuncertainty\" that may arise from such suspensi on in the sectors concerned and the \"potentially\ndevastating consequences\" of such suspension. We recognize that there may be legitimate\nconsiderations to which the complaining Member should be attentive in applying any suspension of\nobligations under the TRIPS Agreement. 466 We are not persuaded, however, that this is a relevant\nconsideration for us to take into account in revi ewing the question of whether the \"circumstances are\nserious enough\" to justify suspension of obligations u nder that agreement. We first note that there is\nno general hierarchy in the DSU as between susp ension in various sectors or under various WTO\nAgreements, such that we should assume that a suspension of obligations under the TRIPS Agreement\nwould be inherently more detrimental to the respond ing Member than another. The only hierarchy to\nbe found in the DSU in this respect is relative to the sector and agreement in which the violation has\nbeen found (thus, in a case involving a TRIPS viola tion, same-sector suspension would have to be\nsought first under the TRIPS Agreement). We also not e that the level of suspension authorized will be\nthe same whatever sector or agreement it may apply to. We further note that, as the United States\nitself has observed in these proceedings, Brazil is not ob ligated at this time to explain in detail how it\nmight impose such countermeasures. This question is , in our view, beyond the scope of this enquiry,\nand it is not for us to speculate how a suspensi on of certain obligations under the TRIPS Agreement\nmight be applied by Brazil or to assume that it wo uld have more detrimental consequences than a\nsuspension in another sector or agreement. In fact the United States itself does not explain what\n\"devastating consequences\" it is referring to.\n5.225 We make no determination in relation to th e United States' willingness or unwillingness to\ncomply with the recommendations and rulings at issue. We assume that the United States intends in\ngood faith to promptly comply with these recommendati ons and rulings. We have also not based our\nfindings on Brazil's arguments relating to the adopti on of the 2008 Farm Bill, as such, in relation to\nwhich we have made no specific determinations.\n5. Brazil's consideration of the elements under subparagraph (d) of Article 22.3\n5.226 Subparagraph (d) of Article 22.3 of the DSU requires the complaining party to \"take into\naccount\", in applying the principles of subparagraphs (a) to (c), two elements:\n\"(i) the trade in the sector or under the ag reement under which the panel or Appellate\nBody has found a violation or other nullifi cation or impairment , and the importance\nof that trade to [the complaining] party\n(ii) the broader economic elem ents related to the nullification or impairment and the\nbroader economic consequences of the suspension of concessions or other\nobligations\".\n5.227 As we have determined in Section V.C.1(c) above, in the circumstan ces of this case, this\nmeans that what is to be taken into account is \"the trade\" in all goods under the trade in goods\nagreement, that is, trade in goods generally, and its importance to Brazil, as well as \"the broader\neconomic elements\" relating to the nullification or impairment arising for Brazil from the subsidies at\n\n466 See para. 5.233.\n\nissue and the broader economic consequences of th e suspension, including a consideration of the\neconomic consequences of the suspension.\n5.228 As we have discussed extensively in the pr eceding sections above, Brazil's determinations\nthat it was not practicable or effective for it to seek to suspend obligations in trade in goods alone and\nthat the circumstances are serious enough, were based importantly on a consideration of the\nimportance to its economy of its trade in goods with the United States, and of the potential\nconsequences of the proposed suspension, which it considers would be disproportionately detrimental\nto its economy if applied solely to trade in goods. In addition, Brazil has also taken into account the\neconomic impact of the measures on the market of the products affected by the measures at issue.\n5.229 In light of these elements, we are satisfied th at Brazil has taken into account the relevant\nelements under subparagraph (d) of Article 22.3 in accordance with the requirements of that\nprovision.\n6. Conclusion\n5.230 In light of our determinations above, we find that in the event that the level of\ncountermeasures that Brazil would be entitled to in a given year 467 should increase to a level that\nwould exceed the threshold identified in paragraph 5.201 above, updated for the same year in a\nmanner described in the next paragraph to account for the change in Brazil's total imports from the\nUnited States, then Brazil would be entitled to suspend certain obligations under the TRIPS\nAgreement and/or the GATS as identified in its request pursuant to Article 4.10 of the\nSCM Agreement and Article 22.2 of the DSU 468, with respect to any amount of permissible\n\n467 It is understood that this amount is to be calcu lated taking into account the entirety of the level of\ncountermeasures that Brazil is entitled to at that point in time, arising both from the application of the formula\nidentified in paragraph 6.5(a) and from the Decision by the Arbitrator contained in WT/DS267/ARB/2.\n468 See WT/DS267/21. Brazil identifies the following obligations in its request:\n\nWith respect to the TRIPS Agreement:\n\n\"The following sections of Part II of the Ag reement on Trade-Related Aspects of Intellectual\nProperty Rights:\n\n Section 1: Copyright and related rights\n Section 2: Trademarks\n Section 4: Industrial designs\n Section 5: Patents\n Section 7: Protection of undisclosed information.\"\n\nWith respect to the GATS:\n\n\"horizontal and/or sectoral concessions and obligations for all sectors contained in Brazil's\nSchedule of Specific Commitments (GATS/SC/13) under the General Agreement on Trade in\nServices. Those sectors are:\n\n 1. Business Services\n 2. Communication Services\n 3. Construction and Related Engineering Services\n 4. Distribution Services\n 7. Financial Services\n 9. Tourism and Travel Related Services\n 11. Transport Services\"\n\ncountermeasures applied in excess of that figure. In any subsequent year where the level of\ncountermeasures that Brazil would be entitled to falls below this threshold, updated to account for the\nchange in Brazil's total imports from the Unite d States, Brazil would be entitled to suspend\nconcessions or other obligations only in trade in goods.\n5.231 As stated in the previous paragraph, in or der to determine whether suspension of certain\nobligations under the TRIPS Agreement or the GATS is permissible in a given year, the threshold\nshould be updated to account for the change in Br azil's total imports from the United States. For\nyear 2008, for example, the updated amount of the threshold would be equal to US$409.7 million\nmultiplied by (1 + g 2008), where g 2008 is the percentage change in the value of Brazil's total imports\nfrom the United States between the years 2007 and 2008, or in the absence of the trade data for years\n2007 and 2008, the percentage change in the value of Brazil's total imports from the United States\nbased on the last available annual trade statistics. 469 In general, the following difference equation and\ninitial condition shall determine the updated amount of the threshold:\n (2) )1(* 11 ++ += ttt gTT , T 2007 = US$409.7 million\nwhere:\nTt+1=threshold value in year t+1;\nTt =threshold value in year t;\ngt+1 = percentage change in the value of Brazil's to tal imports from the United States between the\nyears t and t+1, or in the absence of the trade data for years t and t + 1, the percentage change in the\nvalue of Brazil's total imports from the United States based on the last available annual trade\nstatistics.\n5.232 The \"same\" year shall mean that the amount of countermeasures, calculated based on\nGSM 102 transactions in, for example, fiscal year 2008 (1 October 2007 to 30 September 2008) and\nthe fixed amount from the Decision by the Arbitrator contained in WT/DS267/ARB/2, shall be\ncompared to the value of the threshold in year 2008 (1 January 2008 to 31 December 2008).\n5.233 In light of our determination that Brazil, ma y, in application of the above, be entitled to\nsuspend certain obligations under the TRIPS Agreement and the GATS, we note the remarks made by\nthe arbitrators on EC – Bananas III (Ecuador) (Article 22.6 – EC), with respect to the suspension of\nobligations under the TRIPS Agreement470, which were also noted by the arbitrator on US – Gambling\n(Article 22.6 – US) .471 We consider these remarks to be releva nt also to this case, in that the same\nconsiderations will be pertinent to the manner in which Brazil might implement a suspension of its\nobligations under the TRIPS Agreement in this case.\n5.234 In light of the fact that the level and form of permissible countermeasures may vary over time,\nwe urge Brazil, if and when it submits a revised request for authorization to suspend concessions or\nother obligations to the DSB in accordance with this Decision, to be as specific as possible about the\nterms of the measures to be adopted, so as to promote transparency and predictability in this process.\n\n469 Brazil shall use UN Comtrade data for the purpose of calculating the percentage change of its total\nimports from the United States.\n470 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC) , Section V,\nparas. 139-165.\n471 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 5.11.\n\n5.235 We also take note of the undertaking by Br azil in its request under Article 4.10 of the\nSCM Agreement and Article 22.2 of the DSU, that:\n\"Every year, Brazil will notify to the DSB th e amount and the form of the suspension\nof concessions and other obligations in the light of data concerning the operation of\nthe identified programmes in the most recent concluded marketing and fiscal year, as\napplicable.\"472\n5.236 Finally, like previous arbitrators 473, we also note that the United States may have recourse to\nthe appropriate dispute settlement procedures in the event that it considers that the level of\nconcessions or other obligations suspended by Br azil exceeds the level of countermeasures we have\ndetermined to be \"appropriate\" in this case.\nVI. CONCLUSIONS AND AWARD\n6.1 For the reasons set out above, the Arbitrator de termines that the annual level of \"appropriate\ncountermeasures\" in relation to the GSM 102 payments is as described in pa ragraphs 4.231-4.244,\n4.253-4.255 and 4.267-4.277 above (also see Annex 4 ). For FY 2006, this amounts to\nUS$147.4 million.\n6.2 We have also determined that Brazil has not followed the principles and procedures of\nArticle 22.3 of the DSU in determining that it is not practicable or effective to suspend concessions or\nother obligations in trade in goods and that, at cu rrent levels, it could not ha ve plausibly determined\nthat it is not practicable or effective to suspend c oncessions or other obligations in trade in all goods\nunder the Agreements contained in Annex 1A of the WTO Agreement. We have also found,\nhowever, that, in the event that the level of countermeasures that Brazil would be entitled to in a given\nyear474 should increase to a level that would exceed a threshold, as identified in paragraph 5.201\nabove, updated for the same year in a manner described in paragraphs 5.231-5.232 to account for the\nchange in Brazil's total imports from the United Stat es, then, it could be reasonably concluded that it\nis not practicable or effective for Brazil to susp end concessions or other obligations on trade in goods\nalone. We have also determined that the ci rcumstances are serious enough and that Brazil has\ncomplied with the requirements of subparagraph (d) of Article 22.3.\n6.3 In light of these findings, we find that Brazil w ould be entitled to suspend certain obligations\nunder the TRIPS Agreement and/or the GATS, w ith respect to any amount of permissible\ncountermeasures applied in excess of the threshold identified in paragraph 5.201 above, updated for\nthe same year in a manner described in paragraphs 5.231-5.232 to account for the change in Brazil's\ntotal imports from the United States. In any subse quent year where the level of countermeasures that\nBrazil would be entitled to falls below this threshol d, updated to account for the change in Brazil's\ntotal imports from the United States, Brazil woul d be entitled to suspend concessions or other\nobligations only in trade in goods.\n6.4 We have also found that, in determining whether the level of countermeasures that Brazil\nwould be entitled to has increased to an amount th at would allow it to suspend certain obligations\nunder the TRIPS Agreement and/or the GATS, the data in Table 4 shall be updated to reflect the\namount of imports in the same year, as described in paragraph 5.232 above.\n\n472 WT/DS267/21.\n473 Decisions by the Arbitrators, EC – Hormones (US) (Article 22.6 – EC), para. 82; US – 1916 Act\n(EC) (Article 22.6 – US ), para. 9.2; US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), para. 4.27;\nand US – Gambling (Article 22.6 – US), para. 5.12.\n474 It is understood that this amount is to be calcu lated taking into account the entirety of the level of\ncountermeasures that Brazil is entitled to at that point in time, arising both from the application of the formula\nidentified in paragraph 6.5(a) and from the Decision by the Arbitrator contained in WT/DS267/ARB/2.\n\n6.5 Accordingly, the Arbitrator determines that:\n(a) Brazil may request authorization from th e DSB to suspend concessions or other\nobligations under the Agreements on trade in goods in Annex 1A, at a level not to\nexceed the value of US$147.4 million for FY 2006, or, for subsequent years, an\nannual amount to be determined by applying the methodology described in Annex 4.\n(b) In the event that the total level of counter measures that Brazil would be entitled to in\na given year\n475 should increase to a level that would exceed the threshold described in\nparagraph 5.201, updated to account for the change in Brazil's total imports from the\nUnited States, then, Brazil would also be entitled to seek to suspend certain\nobligations under the TRIPS Agreement and/or the GATS, as identified in\nfootnote 468, with respect to any amount of permissible countermeasures applied in\nexcess of that figure.\n\nANNEX 1\n\nTrade-distorting impact (price effect)\n(Millions of dollars)\n1. in Brazil's domestic market $12.64\n2. in non-Brazilian markets $12.63\nTotal $25.27\n\nExports of GSM 102 products\n(Billions of dollars)\n Year 2006\nBrazil 13.1\nWorld 111.9\nShare 11.7%\nSources: Exhibit Bra-815 and UN Comtrade.\n\nIRS by individual average obligor\nCountry/Obligor\nECGs\nissued by\ncountry/\nobligor in\nFY 2006\nTransaction\nvalue\nsecured by\nECGs in FY\n2006\nObligor\nrating\n(average\nover all\nobligors for\ncountry)\nMaturity of\nthe credit\nCumulative\ndefault\nprobability\nBenchmark\ninterest rate\nPayments\nper year\nCCC risk-\nbased fee\nSubsidy rate\nS (Ohlin\nformula)\nInterest rate\nsubsidy\n(IRS)\n (mUSD) (mUSD) (numerical) (years) (%) (%) (%) (%) (mUSD$)\nJamaica\nBank of Nova Scotia Jamaica\nLtd., Jamaica 4.80 4.894 16 1 20.982 33.11 2 0.924 16.20 0.793\nCapital Credit Merchant Bank\nLtd 4.90 5.000 16 3 43.498 27.23 1 0.924 29.05 1.453\nTrinidad & Tobago\nRBTT Bank Limited, T&T 28.57 29.155 10 3 1.68 5.78 1 0.637 0.45 0.131\nCosta Rica\nBanco BAC San Jose, Costa\nRica 0.94 0.960 12 3 4.309 6.74 1 0.688 2.11 0.020\nBanco BCT, Costa Rica 3.83 3.909 13 3 10.151 9.00 1 0.688 5.94 0.232\nBanco Cuscatlan de Costa\nRica, Costa Rica 2.94 3.000 13 3 10.151 9.00 1 0.688 5.94 0.178\nBanco HSBC, Costa Rica 1.32 1.344 13 3 10.151 9.00 1 0.688 5.94 0.080\nBanco Improsa S.A. 2.29 2.341 13 3 10.151 9.00 1 0.688 5.94 0.139\nEl Salvador\nBanco Agricola, El Salvador 0.19 0.193 12 3 4.309 6.74 2 0.799 1.70 0.003\nBanco de America Central\n(BAC), El Salvador 5.13 5.232 13 3 10.151 9.00 1 0.799 5.83 0.305\nBanco Uno S.A., El Salvador 1.67 1.701 13 3 10.151 9.00 1 0.799 5.83 0.099\nBanco HSBC, El Salvador 10.75 10.973 12 3 4.309 6.74 1 0.799 2.00 0.219\nGuatemala\nBanco Agromercantil de\nGuatemala, Guatemala 2.81 2.871 14 1 3.223 8.68 2 0.799 1.68 0.048\nBanco de la Republica,\nGuatemala 1.61 1.643 14 3 14.36 10.76 2 0.799 7.71 0.127\nBanco G and T Continental,\nS.A., Guatemala 2.62 2.672 13 3 10.151 9.00 1 0.799 5.83 0.156\nBanco Industrial,\nS.A.,Guatemala 10.48 10.697 13 3 10.151 9.00 1 0.799 5.83 0.624\n\nCountry/Obligor\nECGs\nissued by\ncountry/\nobligor in\nFY 2006\nTransaction\nvalue\nsecured by\nECGs in FY\n2006\nObligor\nrating\n(average\nover all\nobligors for\ncountry)\nMaturity of\nthe credit\nCumulative\ndefault\nprobability\nBenchmark\ninterest rate\nPayments\nper year\nCCC risk-\nbased fee\nSubsidy rate\nS (Ohlin\nformula)\nInterest rate\nsubsidy\n(IRS)\n (mUSD) (mUSD) (numerical) (years) (%) (%) (%) (%) (mUSD$)\nBanco Reformador,\nGuatemala 2.00 2.041 14 3 14.36 10.76 1 0.799 8.64 0.176\nBanco SCI 0.45 0.459 14 1 3.223 8.68 1 0.799 2.42 0.011\nPanama\nBAC International Bank, Inc.,\nPanama 22.50 22.959 10 3 1.68 5.78 1 0.799 0.29 0.066\nBanco Aliado, Panama 4.30 4.385 13 3 10.151 9.00 1 0.799 5.83 0.256\nBanco Cuscatlan de Panama\n(Formerly Banca\nPanamericano) 3.83 3.910 13 3 10.151 9.00 1 0.799 5.83 0.228\nBanco General, Panama 40.81 41.646 10 3 1.68 5.78 1 0.799 0.29 0.119\nGlobal Bank Corporation,\nPanama 10.38 10.588 13 3 10.151 9.00 1 0.799 5.83 0.618\nMulti Credit Bank, Inc.,\nPanama 9.22 9.405 13 3 10.151 9.00 1 0.799 5.83 0.549\nPrimer Banco del Istmo\n(BANISTMO), Panama 39.28 40.078 11 3 3.567 6.46 1 0.799 1.51 0.606\nKazakhstan\nAlliance Bank, Kazakstan 37.60 38.370 13 2 5.749 8.34 2 0.747 2.90 1.111\nBank Caspian, Kazakstan 13.51 13.787 14 2 8.701 10.08 2 0.747 4.81 0.663\nBank CenterCredit, Kazakstan 0.46 0.467 13 1 2.069 7.40 2 0.747 0.84 0.004\nNurbank, Kazakstan 9.17 9.355 15 2 33.367 28.85 2 0.747 22.05 2.063\nTemirbank, Kazakstan 2.69 2.741 16 2 33.367 28.85 2 0.747 22.05 0.605\nUkraine\nBank Forum, Ukraine 9.87 10.073 16 2 33.367 28.85 2 0.806 21.99 2.215\nBank Nadra, OJSC, Ukraine 11.77 12.008 16 2 33.367 28.85 2 0.806 21.99 2.641\nUkrsotsbank, Ukraine 13.98 14.261 16 2 33.367 28.85 2 0.806 21.99 3.136\nFinance and Credit Bank 7.35 7.505 15 2 33.367 28.85 2 0.806 21.99 1.650\nJSC Vseukrainsky\nAktsionerny Bank-VA Bank 6.44 6.567 16 2 33.367 28.85 2 0.806 21.99 1.444\n\nCountry/Obligor\nECGs\nissued by\ncountry/\nobligor in\nFY 2006\nTransaction\nvalue\nsecured by\nECGs in FY\n2006\nObligor\nrating\n(average\nover all\nobligors for\ncountry)\nMaturity of\nthe credit\nCumulative\ndefault\nprobability\nBenchmark\ninterest rate\nPayments\nper year\nCCC risk-\nbased fee\nSubsidy rate\nS (Ohlin\nformula)\nInterest rate\nsubsidy\n(IRS)\n (mUSD) (mUSD) (numerical) (years) (%) (%) (%) (%) (mUSD$)\nMexico\nMonex Financiera, S.A. de\nC.V. 2.94 3.000 12 3 4.309 6.74 1 0.637 2.16 0.065\nRussia\nAbsolut Bank, Russia 3.06 3.125 16 2 33.367 28.85 2 0.747 22.05 0.689\nB.I.N. Bank, Russia 25.67 26.194 16 2 33.367 28.85 2 0.747 22.05 5.776\nFar Eastern Bank, Russia 9.47 9.662 18 2 33.367 28.85 2 0.747 22.05 2.131\nInternational Bank of St.\nPetersburg, Russia 3.96 4.045 17 2 33.367 28.85 2 0.747 22.05 0.892\nInternational Industrial Bank\n(IIB), Russia 42.57 43.442 15 2 33.367 28.85 2 0.747 22.05 9.580\nNOMOS Bank, Russia 34.04 34.734 15 2 33.367 28.85 2 0.747 22.05 7.660\nMDM Bank, Russia 38.42 39.207 14 2 8.701 10.08 2 0.747 4.81 1.885\nOrgresbank, Russia 7.44 7.593 16 2 33.367 28.85 2 0.747 22.05 1.674\nProbusinessbank, Russia 1.84 1.876 16 2 33.367 28.85 2 0.747 22.05 0.414\nRosEvrobank, Russia 12.13 12.377 18 2 33.367 28.85 2 0.747 22.05 2.729\nUralSib Bank (formerly Ural\nSiberian Bank), Russia 6.07 6.191 15 2 33.367 28.85 2 0.747 22.05 1.365\nZAO Raiffeisenbank 9.37 9.561 18 2 33.367 28.85 2 0.747 22.05 2.108\nBrazil\nBanco BBM S.A., Brazil 26.07 26.606 17 3 43.498 27.23 1 0.799 29.18 7.763\nBanco BMC, Brazil 4.41 4.500 16 3 43.498 27.23 1 0.799 29.18 1.313\nBanco Bradesco, Brazil 2.88 2.940 13 3 10.151 9.00 1 0.799 5.83 0.171\nBanco do Estado de Sao Paulo\n(BANESPA), Brazil 5.11 5.210 17 3 43.498 27.23 1 0.799 29.18 1.520\nBanco Fibra, Brazil 11.93 12.170 14 3 14.36 10.76 1 0.799 8.64 1.051\nBanco Industrial E Comercial\n(BICBanco), Brazil 11.32 11.550 13 3 10.151 9.00 1 0.799 5.83 0.674\nUniao de Bancos Brasileiros\n(Unibanco), Brazil 2.43 2.475 13 3 10.151 9.00 1 0.799 5.83 0.144\n\nCountry/Obligor\nECGs\nissued by\ncountry/\nobligor in\nFY 2006\nTransaction\nvalue\nsecured by\nECGs in FY\n2006\nObligor\nrating\n(average\nover all\nobligors for\ncountry)\nMaturity of\nthe credit\nCumulative\ndefault\nprobability\nBenchmark\ninterest rate\nPayments\nper year\nCCC risk-\nbased fee\nSubsidy rate\nS (Ohlin\nformula)\nInterest rate\nsubsidy\n(IRS)\n (mUSD) (mUSD) (numerical) (years) (%) (%) (%) (%) (mUSD$)\nColombia\nBanco Colpatria Red\nMultibanca, Colombia 9.78 9.977 13 3 10.151 9.00 1 0.688 5.94 0.593\nBanColombia, Colombia 15.11 15.414 12 3 4.309 6.74 1 0.688 2.11 0.325\nPeru\nBanco Financiero del Peru,\nPeru 3.74 3.820 15 3 43.498 27.23 1 0.924 29.05 1.110\nPhilippines\nAllied Bank, Philippines 9.57 9.767 17 1 20.982 33.11 1 0.799 20.18 1.971\nDevelopment Bank of the\nPhilippines, Philippines 31.06 31.692 13 3 10.151 9.00 1 0.799 5.83 1.849\nExport and Industry Bank,\nPhilippines 6.45 6.580 17 1 20.982 33.11 1 0.799 20.18 1.328\nPhilippine Bank of\nCommunications, Philippines 10.35 10.564 17 1 20.982 33.11 1 0.799 20.18 2.132\nRizal Commercial Bank,\nPhilippines 22.32 22.776 15 3 43.498 27.23 1 0.799 29.18 6.646\nUnited Coconut Planter Bank,\nPhilippines 16.40 16.730 17 1 20.982 33.11 1 0.799 20.18 3.377\nSouth Korea\nHana Bank 1.91 1.953 8 1 0.166 5.35 2 0.637 0.00 0.000\nKookmin Bank 11.50 11.737 7 1 0.037 5.22 2 0.637 0.00 0.000\nKorea Development Bank 14.10 14.388 7 3 0.358 5.31 1 0.637 0.00 0.000\nKorea Exchange Bank 4.15 4.230 9 2 0.466 5.43 2 0.637 0.00 0.000\nNational Agricultural\nCooperative Federation 1.54 1.571 7 1 0.037 5.22 2 0.637 0.00 0.000\nShinhan Bank 30.53 31.148 8 2 0.449 5.42 2 0.637 0.00 0.000\nWoori Bank 21.48 21.919 9 2 0.466 5.43 2 0.637 0.00 0.000\nRomania\nCredit Europe Bank\n(Romania) SA 1.82 1.859 14 3 14.36 10.76 2 0.799 7.71 0.143\n\nCountry/Obligor\nECGs\nissued by\ncountry/\nobligor in\nFY 2006\nTransaction\nvalue\nsecured by\nECGs in FY\n2006\nObligor\nrating\n(average\nover all\nobligors for\ncountry)\nMaturity of\nthe credit\nCumulative\ndefault\nprobability\nBenchmark\ninterest rate\nPayments\nper year\nCCC risk-\nbased fee\nSubsidy rate\nS (Ohlin\nformula)\nInterest rate\nsubsidy\n(IRS)\n (mUSD) (mUSD) (numerical) (years) (%) (%) (%) (%) (mUSD$)\nTurkey\nAkbank 2.66 2.718 13 3 10.151 9.00 1 0.799 5.83 0.159\nAsya Katilim Bankasi AS 14.22 14.511 15 3 43.498 27.23 1 0.799 29.18 4.234\nBank Pozitif Kredi ve\nKalkinma Bankasi 3.43 3.499 17 3 43.498 27.23 1 0.799 29.18 1.021\nDenizbank, Turkey 3.61 3.681 13 3 10.151 9.00 1 0.799 5.83 0.215\nFortis Bank A.S, Turkey 6.44 6.576 17 3 43.498 27.23 1 0.799 29.18 1.919\nFinansbank, Turkey 15.30 15.614 13 3 10.151 9.00 1 0.799 5.83 0.911\nGaranti Bankasi, Turkey 29.03 29.621 13 3 10.151 9.00 1 0.799 5.83 1.728\nGSD Yatrim Bankasi 2.28 2.327 17 3 43.498 27.23 1 0.799 29.18 0.679\nHalkbank 10.88 11.100 13 3 10.151 9.00 1 0.799 5.83 0.648\nHSBC Bank A. S., Subsidiary 1.47 1.505 12 2 2.297 6.41 1 0.799 0.90 0.014\nIs Bankasi, Turkey 11.71 11.951 13 3 10.151 9.00 1 0.799 5.83 0.697\nSekerbank 3.37 3.439 16 3 43.498 27.23 1 0.799 29.18 1.004\nTekfenbank 4.96 5.064 17 3 43.498 27.23 1 0.799 29.18 1.478\nTekstilbank 8.57 8.747 15 3 43.498 27.23 1 0.799 29.18 2.552\nTurk Ekonomi Bankasi 10.31 10.518 13 3 10.151 9.00 1 0.799 5.83 0.614\nVakiflar Bankasi 11.74 11.983 13 3 10.151 9.00 1 0.799 5.83 0.699\nYapi Ve Kredi Bankasi,\nTurkey 10.29 10.500 15 3 43.498 27.23 1 0.799 29.18 3.064\nING Bank A.S. 23.17 23.644 17 3 43.498 27.23 1 0.799 29.18 6.899\nTurklandbank 0.85 0.867 17 3 43.498 27.23 2 0.799 27.13 0.235\nTotal 977.69 997.64 120.62\n\nANNEX 2\n\nTrade-distorting impact (displacement effect of uncreditworthy obligors)\n(Millions of dollars)\n1. in Brazil's domestic market $36.32\n2. in non-Brazilian markets $44.52\nTotal $80.84\n\nExports of GSM 102 products\n(Billions of dollars)\n Year 2006\nBrazil 13.1\nWorld 111.9\nShare 11.7%\nSources: Exhibit Bra-815 and UN Comtrade.\n\nFull additionality by individual average obligor\nCountry/Obligor Obligor rating ECGs issued by\ncountry/obligor in FY 2006\nTransaction value secured by\nECGs in FY 2006\nFull additionality (applicable\nsolely to credit groups \"15\"\nand worse)\n (numerical) (mUSD) (mUSD) (in USD million)\nJamaica\nBank of Nova Scotia Jamaica Ltd., Jamaica 16 4.796 4.894 4.894\nCapital Credit Merchant Bank Ltd 16 4.900 5.000 5.000\nTrinidad & Tobago\nRBTT Bank Limited, T&T 10 28.572 29.155 0.000\nCosta Rica\nBanco BAC San Jose, Costa Rica 12 0.941 0.960 0.000\nBanco BCT, Costa Rica 13 3.831 3.909 0.000\nBanco Cuscatlan de Costa Rica, Costa Rica 13 2.940 3.000 0.000\nBanco HSBC, Costa Rica 13 1.317 1.344 0.000\nBanco Improsa S.A. 13 2.295 2.341 0.000\nEl Salvador\nBanco Agricola, El Salvador 12 0.189 0.193 0.000\nBanco de America Central (BAC), El Salvador 13 5.127 5.232 0.000\nBanco Uno S.A., El Salvador 13 1.667 1.701 0.000\nBanco HSBC, El Salvador 12 10.753 10.973 0.000\nGuatemala\nBanco Agromercantil de Guatemala, Guatemala 14 2.813 2.871 0.000\nBanco G and T Continental, S.A., Guatemala 13 2.618 2.672 0.000\nBanco Industrial, S.A.,Guatemala 13 10.483 10.697 0.000\nBanco Reformador, Guatemala 14 2.000 2.041 0.000\nBanco SCI 14 0.450 0.459 0.000\nPanama\nBAC International Bank, Inc., Panama 10 22.499 22.959 0.000\nBanco Aliado, Panama 13 4.297 4.385 0.000\nBanco Cuscatlan de Panama (Formerly Banca\nPanamericano) 13 3.832 3.910 0.000\nBanco General, Panama 10 40.813 41.646 0.000\nGlobal Bank Corporation, Panama 13 10.376 10.588 0.000\nMulti Credit Bank, Inc., Panama 13 9.217 9.405 0.000\nPrimer Banco del Istmo (BANISTMO), Panama 11 39.277 40.078 0.000\n\nCountry/Obligor Obligor rating ECGs issued by\ncountry/obligor in FY 2006\nTransaction value secured by\nECGs in FY 2006\nFull additionality (applicable\nsolely to credit groups \"15\"\nand worse)\n (numerical) (mUSD) (mUSD) (in USD million)\nKazakhstan\nAlliance Bank, Kazakstan 13 37.603 38.370 0.000\nBank Caspian, Kazakstan 14 13.511 13.787 0.000\nBank CenterCredit, Kazakstan 13 0.457 0.467 0.000\nNurbank, Kazakstan 15 9.168 9.355 9.355\nTemirbank, Kazakstan 16 2.686 2.741 2.741\nUkraine\nBank Forum, Ukraine 16 9.872 10.073 10.073\nBank Nadra, OJSC, Ukraine 16 11.767 12.008 12.008\nUkrsotsbank, Ukraine 16 13.976 14.261 14.261\nFinance and Credit Bank 15 7.354 7.505 7.505\nJSC Vseukrainsky Aktsionerny Bank-VA Bank 16 6.435 6.567 6.567\nMexico\nMonex Financiera, S.A. de C.V. 12 2.940 3.000 0.000\nRussia\nAbsolut Bank, Russia 16 3.063 3.125 3.125\nB.I.N. Bank, Russia 16 25.670 26.194 26.194\nFar Eastern Bank, Russia 18 9.469 9.662 9.662\nInternational Bank of St. Petersburg, Russia 17 3.964 4.045 4.045\nInternational Industrial Bank (IIB), Russia 15 42.573 43.442 43.442\nNOMOS Bank, Russia 15 34.040 34.734 34.734\nMDM Bank, Russia 14 38.423 39.207 0.000\nOrgresbank, Russia 16 7.442 7.593 7.593\nProbusinessbank, Russia 16 1.839 1.876 1.876\nRosEvrobank, Russia 18 12.129 12.377 12.377\nUralSib Bank (formerly Ural Siberian Bank), Russia 15 6.068 6.191 6.191\nZAO Raiffeisenbank 18 9.370 9.561 9.561\n\nCountry/Obligor Obligor rating ECGs issued by\ncountry/obligor in FY 2006\nTransaction value secured by\nECGs in FY 2006\nFull additionality (applicable\nsolely to credit groups \"15\"\nand worse)\n (numerical) (mUSD) (mUSD) (in USD million)\nBrazil\nBanco BBM S.A., Brazil 17 26.074 26.606 26.606\nBanco BMC, Brazil 16 4.410 4.500 4.500\nBanco Bradesco, Brazil 13 2.881 2.940 0.000\nBanco do Estado de Sao Paulo (BANESPA), Brazil 17 5.105 5.210 5.210\nBanco Fibra, Brazil 14 11.927 12.170 0.000\nBanco Industrial E Comercial (BICBanco), Brazil 13 11.319 11.550 0.000\nUniao de Bancos Brasileiros (Unibanco), Brazil 13 2.426 2.475 0.000\nColombia\nBanco Colpatria Red Multibanca, Colombia 13 9.778 9.977 0.000\nBanColombia, Colombia 12 15.106 15.414 0.000\nPeru\nPhilippines\nAllied Bank, Philippines 17 9.571 9.767 9.767\nDevelopment Bank of the Philippines, Philippines 13 31.058 31.692 0.000\nExport and Industry Bank, Philippines 17 6.449 6.580 6.580\nPhilippine Bank of Communications, Philippines 17 10.353 10.564 10.564\nRizal Commercial Bank, Philippines 15 22.321 22.776 22.776\nUnited Coconut Planter Bank, Philippines 17 16.395 16.730 16.730\nSouth Korea\nHana Bank 8 1.914 1.953 0.000\nKookmin Bank 7 11.502 11.737 0.000\nKorea Development Bank 7 14.101 14.388 0.000\nKorea Exchange Bank 9 4.146 4.230 0.000\nNational Agricultural Cooperative Federation 7 1.539 1.571 0.000\nShinhan Bank 8 30.525 31.148 0.000\nWoori Bank 9 21.481 21.919 0.000\nRomania\nCredit Europe Bank (Romania) SA 14 1.822 1.859 0.000\n\nCountry/Obligor Obligor rating ECGs issued by\ncountry/obligor in FY 2006\nTransaction value secured by\nECGs in FY 2006\nFull additionality (applicable\nsolely to credit groups \"15\"\nand worse)\n (numerical) (mUSD) (mUSD) (in USD million)\nTurkey\nAkbank 13 2.664 2.718 0.000\nAsya Katilim Bankasi AS 15 14.221 14.511 14.511\nBank Pozitif Kredi ve Kalkinma Bankasi 17 3.429 3.499 3.499\nDenizbank, Turkey 13 3.608 3.681 0.000\nFortis Bank A.S, Turkey 17 6.445 6.576 6.576\nFinansbank, Turkey 13 15.302 15.614 0.000\nGaranti Bankasi, Turkey 13 29.029 29.621 0.000\nGSD Yatrim Bankasi 17 2.280 2.327 2.327\nHalkbank 13 10.878 11.100 0.000\nHSBC Bank A. S., Subsidiary 12 1.474 1.505 0.000\nIs Bankasi, Turkey 13 11.712 11.951 0.000\nSekerbank 16 3.371 3.439 3.439\nTekfenbank 17 4.963 5.064 5.064\nTekstilbank 15 8.572 8.747 8.747\nTurk Ekonomi Bankasi 13 10.308 10.518 0.000\nVakiflar Bankasi 13 11.743 11.983 0.000\nYapi Ve Kredi Bankasi, Turkey 15 10.290 10.500 10.500\nING Bank A.S. 17 23.171 23.644 23.644\nTurklandbank 17 0.850 0.867 0.867\nTotal 977.692 997.645 416.933\n\nANNEX 3\n\nTrade-distorting impact (displacement effect of creditworthy obligors)\n(Millions of dollars)\n1. in Brazil's domestic market $18.72\n2. in non-Brazilian markets $22.57\nTotal $41.29\n\nExports of GSM 102 products\n(Billions of dollars)\n Year 2006\nBrazil 13.1\nWorld 111.9\nShare 11.7%\nSources: Exhibit Bra-815 and UN Comtrade.\n\nMarginal additionality by individual average obligor\nCountry/Obligor\nECGs issued\nby\ncountry/oblig\nor in FY 2006\nTransaction\nvalue secured\nby ECGs in FY\n2006\nObligor\nrating\n(average over\nall obligors\nfor country)\nMaturity\nof the\ncredit\nCumulative\ndefault\nprobability\nCreditowrthy\nObligor\nIRS is\nPositive di\nn Dn ti\nn Marginal\nAdditionality\n (mUSD) (mUSD) (numerical) (years) (%)\nJamaica\nBank of Nova Scotia\nJamaica Ltd., Jamaica 4.80 4.894 16 1 20.982 0 1\nCapital Credit Merchant\nBank Ltd 4.90 5.000 16 3 43.498 0 1\nTrinidad & Tobago\nRBTT Bank Limited, T&T 28.57 29.155 10 3 1.68 1 1 1.68 18.54 0.09 2.64\nCosta Rica\nBanco BAC San Jose, Costa\nRica 0.94 0.960 12 3 4.309 1 1 4.31 18.54 0.23 0.22\nBanco BCT, Costa Rica 3.83 3.909 13 3 10.151 1 1 10.15 18.54 0.55 2.14\nBanco Cuscatlan de Costa\nRica, Costa Rica 2.94 3.000 13 3 10.151 1 1 10.15 18.54 0.55 1.64\nBanco HSBC, Costa Rica 1.32 1.344 13 3 10.151 1 1 10.15 18.54 0.55 0.74\nBanco Improsa S.A. 2.29 2.341 13 3 10.151 1 1 10.15 18.54 0.55 1.28\nEl Salvador\nBanco Agricola, El Salvador 0.19 0.193 12 3 4.309 1 1 4.31 18.54 0.23 0.04\nBanco de America Central\n(BAC), El Salvador 5.13 5.232 13 3 10.151 1 1 10.15 18.54 0.55 2.87\nSalvador 1.67 1.701 13 3 10.151 1 1 10.15 18.54 0.55 0.93\nBanco HSBC, El Salvador 10.75 10.973 12 3 4.309 1 1 4.31 18.54 0.23 2.55\nGuatemala\nBanco Agromercantil de\nGuatemala, Guatemala 2.81 2.871 14 1 3.223 1 1 3.22 5.46 0.59 1.70\nBanco de la Republica,\nGuatemala 1.61 1.643 14 3 14.36 1 1 14.36 18.54 0.77 1.27\nBanco G and T Continental,\nS.A., Guatemala 2.62 2.672 13 3 10.151 1 1 10.15 18.54 0.55 1.46\nBanco Industrial,\nS.A.,Guatemala 10.48 10.697 13 3 10.151 1 1 10.15 18.54 0.55 5.86\nBanco Reformador,\nGuatemala 2.00 2.041 14 3 14.36 1 1 14.36 18.54 0.77 1.58\nBanco SCI 0.45 0.459 14 1 3.223 1 1 3.22 5.46 0.59 0.27\n\nPage 138 Country/Obligor\nECGs issued\nby\ncountry/oblig\nor in FY 2006\nTransaction\nvalue secured\nby ECGs in FY\n2006\nObligor\nrating\n(average over\nall obligors\nfor country)\nMaturity\nof the\ncredit\nCumulative\ndefault\nprobability\nCreditowrthy\nObligor\nIRS is\nPositive di\nn Dn ti\nn Marginal\nAdditionality\n (mUSD) (mUSD) (numerical) (years) (%)\nPanama\nBAC International Bank,\nInc., Panama 22.50 22.959 10 3 1.68 1 1 1.68 18.54 0.09 2.08\nBanco Aliado, Panama 4.30 4.385 13 3 10.151 1 1 10.15 18.54 0.55 2.40\nBanco Cuscatlan de Panama\n(Formerly Banca\nPanamericano) 3.83 3.910 13 3 10.151 1 1 10.15 18.54 0.55 2.14\nBanco General, Panama 40.81 41.646 10 3 1.68 1 1 1.68 18.54 0.09 3.77\nGlobal Bank Corporation,\nPanama 10.38 10.588 13 3 10.151 1 1 10.15 18.54 0.55 5.80\nMulti Credit Bank, Inc.,\nPanama 9.22 9.405 13 3 10.151 1 1 10.15 18.54 0.55 5.15\nPrimer Banco del Istmo\n(BANISTMO), Panama 39.28 40.078 11 3 3.567 1 1 3.57 18.54 0.19 7.71\nKazakhstan\nAlliance Bank, Kazakstan 37.60 38.370 13 2 5.749 1 1 5.75 12.51 0.46 17.63\nBank Caspian, Kazakstan 13.51 13.787 14 2 8.701 1 1 8.70 12.51 0.70 9.59\nBank CenterCredit,\nKazakstan 0.46 0.467 13 1 2.069 1 1 2.07 5.46 0.38 0.18\nNurbank, Kazakstan 9.17 9.355 15 2 33.367 0 1\nTemirbank, Kazakstan 2.69 2.741 16 2 33.367 0 1\nUkraine\nBank Forum, Ukraine 9.87 10.073 16 2 33.367 0 1\nBank Nadra, OJSC, Ukraine 11.77 12.008 16 2 33.367 0 1\nUkrsotsbank, Ukraine 13.98 14.261 16 2 33.367 0 1\nFinance and Credit Bank 7.35 7.505 15 2 33.367 0 1\nJSC Vseukrainsky\nAktsionerny Bank-VA Bank 6.44 6.567 16 2 33.367 0 1\nMexico\nMonex Financiera, S.A. de\nC.V. 2.94 3.000 12 3 4.309 1 1 4.31 18.54 0.23 0.70\n\nCountry/Obligor\nECGs issued\nby\ncountry/oblig\nor in FY 2006\nTransaction\nvalue secured\nby ECGs in FY\n2006\nObligor\nrating\n(average over\nall obligors\nfor country)\nMaturity\nof the\ncredit\nCumulative\ndefault\nprobability\nCreditowrthy\nObligor\nIRS is\nPositive di\nn Dn ti\nn Marginal\nAdditionality\n (mUSD) (mUSD) (numerical) (years) (%)\nRussia\nAbsolut Bank, Russia 3.06 3.125 16 2 33.367 0 1\nB.I.N. Bank, Russia 25.67 26.194 16 2 33.367 0 1\nFar Eastern Bank, Russia 9.47 9.662 18 2 33.367 0 1\nInternational Bank of\nSt. Petersburg, Russia 3.96 4.045 17 2 33.367 0 1\nInternational Industrial Bank\n(IIB), Russia 42.57 43.442 15 2 33.367 0 1\nNOMOS Bank, Russia 34.04 34.734 15 2 33.367 0 1\nMDM Bank, Russia 38.42 39.207 14 2 8.701 1 1 8.70 12.51 0.70 27.27\nOrgresbank, Russia 7.44 7.593 16 2 33.367 0 1\nProbusinessbank, Russia 1.84 1.876 16 2 33.367 0 1\nRosEvrobank, Russia 12.13 12.377 18 2 33.367 0 1\nUralSib Bank (formerly Ural\nSiberian Bank), Russia 6.07 6.191 15 2 33.367 0 1\nZAO Raiffeisenbank 9.37 9.561 18 2 33.367 0 1\nBrazil\nBanco BBM S.A., Brazil 26.07 26.606 17 3 43.498 0 1\nBanco BMC, Brazil 4.41 4.500 16 3 43.498 0 1\nBanco Bradesco, Brazil 2.88 2.940 13 3 10.151 1 1 10.15 18.54 0.55 1.61\nBanco do Estado de Sao\nPaulo (BANESPA), Brazil 5.11 5.210 17 3 43.498 0 1\nBanco Fibra, Brazil 11.93 12.170 14 3 14.36 1 1 14.36 18.54 0.77 9.43\nBanco Industrial E\nComercial (BICBanco),\nBrazil 11.32 11.550 13 3 10.151 1 1 10.15 18.54 0.55 6.33\nUniao de Bancos Brasileiros\n(Unibanco), Brazil 2.43 2.475 13 3 10.151 1 1 10.15 18.54 0.55 1.36\nColombia\nBanco Colpatria Red\nMultibanca, Colombia 9.78 9.977 13 3 10.151 1 1 10.15 18.54 0.55 5.46\nBanColombia, Colombia 15.11 15.414 12 3 4.309 1 1 4.31 18.54 0.23 3.58\nPeru\nBanco Financiero del Peru,\nPeru 3.74 3.820 15 3 43.498 0 1\n\nPage 140 Country/Obligor\nECGs issued\nby\ncountry/oblig\nor in FY 2006\nTransaction\nvalue secured\nby ECGs in FY\n2006\nObligor\nrating\n(average over\nall obligors\nfor country)\nMaturity\nof the\ncredit\nCumulative\ndefault\nprobability\nCreditowrthy\nObligor\nIRS is\nPositive di\nn Dn ti\nn Marginal\nAdditionality\n (mUSD) (mUSD) (numerical) (years) (%)\nPhilippines\nAllied Bank, Philippines 9.57 9.767 17 1 20.982 0 1\nDevelopment Bank of the\nPhilippines, Philippines 31.06 31.692 13 3 10.151 1 1 10.15 18.54 0.55 17.36\nExport and Industry Bank,\nPhilippines 6.45 6.580 17 1 20.982 0 1\nPhilippine Bank of\nCommunications,\nPhilippines 10.35 10.564 17 1 20.982 0 1\nRizal Commercial Bank,\nPhilippines 22.32 22.776 15 3 43.498 0 1\nUnited Coconut Planter\nBank, Philippines 16.40 16.730 17 1 20.982 0 1\nSouth Korea\nHana Bank 1.91 1.953 8 1 0.166 1 0\nKookmin Bank 11.50 11.737 7 1 0.037 1 0\nKorea Development Bank 14.10 14.388 7 3 0.358 1 0\nKorea Exchange Bank 4.15 4.230 9 2 0.466 1 0\nNational Agricultural\nCooperative Federation 1.54 1.571 7 1 0.037 1 0\nShinhan Bank 30.53 31.148 8 2 0.449 1 0\nWoori Bank 21.48 21.919 9 2 0.466 1 0\nRomania\nCredit Europe Bank\n(Romania) SA 1.82 1.859 14 3 14.36 1 1 14.36 18.54 0.77 1.44\n\nCountry/Obligor\nECGs issued\nby\ncountry/oblig\nor in FY 2006\nTransaction\nvalue secured\nby ECGs in FY\n2006\nObligor\nrating\n(average over\nall obligors\nfor country)\nMaturity\nof the\ncredit\nCumulative\ndefault\nprobability\nCreditowrthy\nObligor\nIRS is\nPositive di\nn Dn ti\nn Marginal\nAdditionality\n (mUSD) (mUSD) (numerical) (years) (%)\nTurkey\nAkbank 2.66 2.718 13 3 10.151 1 1 10.15 18.54 0.55 1.49\nAsya Katilim Bankasi AS 14.22 14.511 15 3 43.498 0 1\nBank Pozitif Kredi ve\nKalkinma Bankasi 3.43 3.499 17 3 43.498 0 1\nDenizbank, Turkey 3.61 3.681 13 3 10.151 1 1 10.15 18.54 0.55 2.02\nFortis Bank A.S, Turkey 6.44 6.576 17 3 43.498 0 1\nFinansbank, Turkey 15.30 15.614 13 3 10.151 1 1 10.15 18.54 0.55 8.55\nGaranti Bankasi, Turkey 29.03 29.621 13 3 10.151 1 1 10.15 18.54 0.55 16.22\nGSD Yatrim Bankasi 2.28 2.327 17 3 43.498 0 1\nHalkbank 10.88 11.100 13 3 10.151 1 1 10.15 18.54 0.55 6.08\nHSBC Bank A. S.,\nSubsidiary 1.47 1.505 12 2 2.297 1 1 2.30 12.51 0.18 0.28\nIs Bankasi, Turkey 11.71 11.951 13 3 10.151 1 1 10.15 18.54 0.55 6.55\nSekerbank 3.37 3.439 16 3 43.498 0 1\nTekfenbank 4.96 5.064 17 3 43.498 0 1\nTekstilbank 8.57 8.747 15 3 43.498 0 1\nTurk Ekonomi Bankasi 10.31 10.518 13 3 10.151 1 1 10.15 18.54 0.55 5.76\nVakiflar Bankasi 11.74 11.983 13 3 10.151 1 1 10.15 18.54 0.55 6.56\nYapi Ve Kredi Bankasi,\nTurkey 10.29 10.500 15 3 43.498 0 1\nING Bank A.S. 23.17 23.644 17 3 43.498 0 1\nTurklandbank 0.85 0.867 17 3 43.498 0 1\nTotal 977.69 997.64 211.69\n\nCumulative Default probabilities (Moody's)\nRating Cumulative Default Probabilities\nLetter Numerical 1-Year 2-Year 3-Year\nAAA 1 0.000 0.000 0.000\nAA+ 2 0.000 0.000 0.000\nAA 3 0.000 0.011 0.048\nAA- 4 0.019 0.040 0.078\nA+ 5 0.003 0.091 0.241\nA 6 0.026 0.082 0.224\nA- 7 0.037 0.175 0.358\nBBB+ 8 0.166 0.449 0.794\nBBB 9 0.161 0.466 0.883\nBBB- 10 0.335 0.965 1.680\nBB+ 11 0.753 2.006 3.567\nBB 12 0.780 2.297 4.309\nBB- 13 2.069 5.749 10.151\nB+ 14 3.223 8.701 14.360\nB 15 5.457 12.511 18.535\nB- 16 10.460 19.782 28.532\nCCC+ 17 20.982 33.367 43.498\nCCC-C 18 20.982 33.367 43.498\nSource: Exhibit Bra-794\n\nANNEX 4\n\nFORMULA FOR CALCULATING ANNUAL COUNTERMEASURES\n\n1. This Annex explains the formula to be used to calculate the amount of countermeasures that\nBrazil is authorized to take on an annual basis a nd describes the data required to apply it. At the\noutset it should be made clear that the Arbitrat or could have chosen the methodology used in\nAnnexes 1, 2 and 3 of this Decision. This methodology required calculating the price and\ndisplacement effects of the e xport credit guarantees. However, given the complexity of the\nmethodology and the likely need to periodically upd ate the information on which it was based (risk-\nfree interest rate, default probabilities, credit risk ratings of obligors, etc.), the Arbitrator was aware of\nthe potential risk of disputes between the parties. As a consequence, the Arbitrator has modified the\nmethodology in a way that substantially reduces this risk. While the current formula is a\nsimplification, it hews to the principle that countermeasures should be appropriate and not\ndisproportionate by making the size of future countermeasures depend on the magnitude of GSM 102\ntransactions and Brazil's share of world exports in GSM 102 products.\n\n2. The amount of countermeasures shall depe nd on the transaction value secured by GSM 102\nexport credit guarantees obtained by Brazilian and non-Brazilian obligors, Brazil's share of world\nexports of GSM 102 products (corn products, cotton, feed grains, hides and skins, oilseeds, pig meat,\npoultry meat, protein feed, rice, and tallow) and a set of parameters. This is expressed in the\nfollowing equation:\n\n (1)\n))(()(1\nNB\ntt\nB\ntt GSMshareGSMCM βα +=+\n\nwhere:\n\n1+tCM is the amount of countermeasures in year t +1 that Brazil is authorized to apply;\nB\ntGSM is the transaction value secured by GSM 102 ex port credit guarantees in fiscal year t obtained\nby Brazilian obligors (adjusted for US export subsidy commitments);\nNB\ntGSM is the transaction value secured by GSM 102 export credit guarantees in fiscal year t\nobtained by non-Brazilian obligors (adjusted for US export subsidy commitments);\ntshare is Brazil's share of world exports of GSM 102 products in calendar year t;\nα is the parameter that relates the transaction value secured by GSM 102 export credit guarantees\nobtained by Brazilian obligors to their trade-distorting impact on Brazil; and\nβ is the parameter that relates the transaction value secured by GSM 102 export credit guarantees\nobtained by non-Brazilian obligors to their trade-di storting impact on Braz il (apportioned to Brazil's\nshare of world exports of GSM 102 products).\n\n3. The values of the parameters α and β are derived from data on GSM 102 transactions in\nFY 2006 and the calculated trade distorting impacts on Brazil of those guarantees. They result in\nvalues of the parameters: α = 1.033947 and β = 0.731148.1\n\n1 The transaction value secured by GSM 102 export credit guarantees obtained by Brazilian obligors\nwas US$65.45 million while the trade-distorting impact on Brazil attributable to th e export credit guarantees\nwas US$67.67 million. This produces a value of α equal to 1.033947. The transaction value secured by\nGSM 102 export credit guarantees obtained by non-Br azilian obligors was US$932.19 million, Brazil's world\n\n4. The transaction value secured by GSM 102 export credit guarantees is defined as the amount\nof GSM 102 transactions divided by the factor 0.98.2\n\n5. The United States shall provide the most recent fiscal year data on GSM 102 transactions.\nThe data on GSM 102 transactions by commodity and by obligor shall be supplied in the exact format\n(and software) as Exhibit US-78. Should the United States not be able to provide the most recent\nfiscal year data on GSM 102 transactions, Brazil shall use the data from the last available fiscal year.\n\n6. The formula shall be applied to scheduled pr oducts (pig meat, poultry meat and rice) only to\nthe extent that the export subsidies provided to volu mes of exports of the products are in excess of US\nquantity or budgetary outlay reduction commitments. This shall require a deduction to be made to the\ntransaction value secured by GSM 102 export credit guara ntees issued for a particular fiscal year, so\nthat only export subsidies that exceed US WTO commitments are included. To determine the\nreduction, the United States' quantity reduction commi tment for pig meat, poultry meat and rice shall\nbe multiplied by the US export prices of the thr ee scheduled commodities. The United States shall\nprovide the most recent data on US e xport prices of the scheduled products. 3 Should the United\nStates not be able to provide this inform ation, Brazil shall use US export unit values 4 of the scheduled\nproducts based on data obtained from the UN Commodity Trade Statistics Database (Comtrade).\n\n7. The trade data to be used to calculate Brazil's share of world exports of GSM 102 products\nshall be obtained from UN Comtrade. Brazil sh all use the harmonised system codes of GSM 102\nproducts in Exhibit Bra-814 for this purpose. Brazil shall ensure that the period covered by the trade\ndata corresponds to the fiscal year of the GSM 102 da ta, i.e. if GSM 102 data of fiscal year 2008 is\nused, trade data of calendar year 2008 shall be employed.\n\nmarket share of GSM 102 products was 11.7 per cent, whil e the trade-distorting impact on Brazil attributable to\nthe export credit guarantees was US$79.73 million. This produces a value of β equal to = 0.731148.\n2 Under the GSM 102 programme, the transaction risk is divided 98:2 between the Commodity Credit\nCorporation and the exporter, i.e., 98 per cent of the tr ansaction is backed by the CCC via the export credit\nguarantees, while the exporter bears the risk on the remaining two per cent of the transaction. Thus, the total\nvalue of US exports that could be secured by the GSM 102 transaction is greater by a factor of 1/(0.98).\n3 The period covered by the data on US export pr ices must correspond to the fiscal year of the\nGSM 102 data, i.e. if GSM 102 data of fiscal year 2008 is used, data on US export prices for calendar year 2008\nshall be employed\n4 The US export unit value of a scheduled product i is defined as UV i = V i/Qi, where UV i is the US\nexport unit value of scheduled product i, V i is the total dollar value of US exports of scheduled product i and Q i\nis the total volume of US exports of scheduled product i. Brazil shall use the harmonised system codes of the\nscheduled products in Exhibit Bra-814 for the purpose of calculating the US export unit values."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:33.924049"}}},{"rowIdx":3980,"cells":{"folder_number":{"kind":"string","value":"267"},"case_number":{"kind":"string","value":"267"},"original_filename":{"kind":"string","value":"DS267_SEQ82_Arbitration_Award_01.pdf"},"new_filename":{"kind":"string","value":"DS267_SEQ82_Arbitration_Award_01.pdf"},"doc_sequence":{"kind":"number","value":82,"string":"82"},"doc_type":{"kind":"string","value":"Arbitration_Award"},"doc_type_raw":{"kind":"string","value":"Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 7.10 of the SCM Agreement DECISION BY THE ARBITRATOR"},"doc_class":{"kind":"string","value":"ARBITRATION"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON"},"date":{"kind":"string","value":"31 August 2009"},"header_codes":{"kind":"string","value":"WT/DS267/ARB/2"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Brazil']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand']"},"dispute_stage":{"kind":"string","value":"Mutually Agreed Solution"},"agreements_cited":{"kind":"string","value":"Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 30 October 2014\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Brazil.\nOn 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users and/or exporters of upland cotton, as well as legislation, regulations, statutory instruments and amendments thereto providing such subsidies (including export credits), grants, and any other assistance to the US producers, users and exporters of upland cotton (“US upland cotton industry”).\nBrazil contended that these measures were inconsistent with the obligations of the United States under the following provisions: Articles 5(c), 6.3(b), (c) and (d), 3.1(a) (including item (j) of the Illustrative List of Export Subsidies in Annex I), 3.1(b), and 3.2 of the SCM Agreement; Articles 3.3, 7.1, 8, 9.1 and 10.1 of the Agreement on Agriculture; and Article III:4 of GATT 1994. Brazil was of the view that the US statutes, regulations, and administrative procedures listed above were inconsistent with these provisions as such and as applied.\nOn 9 October and 11 October 2002, Zimbabwe and India, respectively, requested to join the consultations. On 14 October 2002, Argentina and Canada requested to join the consultations. The United States informed the DSB that it had accepted the requests of Argentina and India to join the consultations.\nOn 6 February 2003, Brazil requested the establishment of a panel. At its meeting on 19 February 2003, the DSB deferred the establishment of a panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Brazil, the DSB established a Panel at its meeting on 18 March 2003. Argentina, Canada, China, Chinese Taipei, the European Communities, India, Pakistan and Venezuela reserved their third-party rights to participate in the Panel’s proceedings.\nAt that meeting, the Chairman of the DSB announced that he continued to consult with Brazil and the United States on the issue of appointing a DSB representative to facilitate the information-gathering process, pursuant to the Annex V procedures under the SCM Agreement, which had been invoked by Brazil in its panel request. Following a communication from the United States, on 20 March 2003, Brazil indicated, in conformity with paragraph 1 of Annex V, that it considered the following third-county markets as relevant: Argentina, Bangladesh, Colombia, Germany, India, Indonesia, Italy, Portugal, Philippines, Slovenia, South Africa, South Korea, Switzerland, Thailand and Turkey.\nOn 24 March 2003, Benin reserved its third-party rights. On 25 March 2003, Australia reserved its third-party rights. On 26 March 2003, Paraguay reserved its third-party rights. On 28 March 2003, New Zealand reserved its third-party rights. On 4 April 2003, Chad reserved its third-party rights. On 9 May 2003, Brazil requested the Director-General to compose the panel. On 19 May 2003, the Director-General composed the panel.\nOn 17 November 2003, the Chairman of the panel informed the DSB that it would not be able to complete its work in six months due to the complexity of the matter and that the panel expected to issue its final report to the parties in May 2004.\nOn 8 September 2004, the panel report was circulated to Members. The panel found that:\nOn 18 October 2004, the United States notified its intention to appeal certain issues of law and legal interpretations developed by the panel. On 16 December 2004, the Chairman of the Appellate Body informed the DSB that in light of the numerous and complex issues raised in this dispute, the increased burden on the Appellate Body as well as the translation services, the intervening holiday period, and the fact that the Appellate Body expects to be considering two or three other appeals in the coming weeks, the Appellate Body would not be able to circulate its Report by, 17 December 2004. The Chairman stated that the Appellate Body estimated that the Appellate Body report would be circulated no later than 3 March 2005.\nOn 3 March 2005, the Appellate Body report was circulated to Members. The Appellate Body found inter alia as follows:\nA. As regards the applicability of the Peace Clause to this dispute, the Appellate Body:\nB. As regards serious prejudice, the Appellate Body:\nC. As regards user marketing (Step 2) payments, the Appellate Body:\nD. As regards export credit guarantee programs, the Appellate Body:\nAt its meeting on 21 March 2005, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report. The resulting DSB recommendations and rulings include the recommendation that the United States withdraw, by at the latest within six months of the date of adoption of the Panel report by the DSB or 1 July 2005 (whichever is earlier), the following prohibited subsidies: (i) the export credit guarantees under the GSM 102, GSM 103 and SCGP export credit guarantee programmes in respect of exports of upland cotton and other unscheduled agricultural products supported under the programmes, and in respect of one scheduled product (rice); (ii) Section 1207(a) of the Farm Security and Rural Investment (FSRI) Act of 2002 providing for user marketing (STEP2) payments to exporters of upland cotton; and (iii) Section 1207(a) of the FSRI Act of 2002 providing for user marketing (STEP2) payments to domestic users of upland cotton. As for the actionable subsidies the recommendation is that the United States takes appropriate steps to remove the adverse effects of certain subsidies or withdraw these subsidies within six months from the date of adoption of the Panel and Appellate Body reports, i.e. the compliance period expired on 21 September 2005.\n\nCompliance proceedings\nFollowing the suspension of the arbitration proceedings under Article 22.6 triggered by Brazil's request to take countermeasures with respect to the prohibited and actionable subsidies (see below), on 18 August 2006, Brazil requested the establishment of a compliance panel. At its meeting on 1 September 2006, the DSB deferred the establishment of a compliance panel. Further to a second request, at its meeting on 28 September 2006, the DSB agreed, if possible, to refer the matter raised by Brazil to the original panel. Argentina, Australia, Canada, China, the European Communities, India, Japan and New Zealand reserved their third party rights. Subsequently, Chad and Thailand reserved their third party rights. On 18 and 20 October 2006, Brazil and the United States respectively requested the Director-General to compose the compliance panel. On 25 October 2006, the Director-General composed the panel.\nOn 9 January 2007, the Chairman of the panel informed the DSB that given the particular circumstances of this case and the schedule adopted after consultations with parties to this dispute, it had not been possible for the panel to complete its work within the 90-day period as foreseen in Article 21.5. The panel expected to complete its work in July 2007.\nOn 18 December 2007, the compliance panel report was circulated to Members. The Panel found that with respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's finding of inconsistency with Articles 5 and 6 of the SCM Agreement:\nWith respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's findings of inconsistency with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the panel found:\nThe panel also considered that to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding were inconsistent with the objections of the United States under the covered agreements, these recommendations and rulings remain operative.\nOn 12 February 2008, the United States notified its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the panel. On 25 February 2008, Brazil notified its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the compliance panel report. On 11 April 2008, the Chairman of the Appellate Body informed the DSB that it would not be possible to circulate its report within 60 days in light of the numerous and complex issues raised in this appeal, and the increased burden on translation services. It estimated that the Appellate Body report would be issued no later than 2 June 2008.\nOn 2 June 2008, the Appellate Body report was circulated to Members.\nAs regards the scope of the Article 21.5 proceedings, the Appellate Body upheld the Panel's finding that Brazil's claims relating to export credit guarantees for pig meat and poultry meat are properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated had not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred when it found that the measure that is the subject of Brazil's claims is not the revised GSM 102 programme itself.\nThe Appellate Body also upheld the Panel's finding that Brazil's claims against marketing loan and counter-cyclical payments made by the United States after 21 September 2005 were properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated has not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred in finding that the original panel's conclusions and recommendations addressed only the payments made under the marketing loan and counter-cyclical payments programmes, and not the programmes themselves.\nAs regards the revised GSM 102 export credit guarantee programme, the Appellate Body found that the Panel failed to make an objective assessment of the matter, under Article 11 of the DSU, because it dismissed the import of the re-estimates data submitted by the United States on the basis of internally inconsistent reasoning. Consequently, the Appellate Body reversed the Panel's intermediate finding that “the initial subsidy estimates provide a strong indication that GSM 102 export credit guarantees are provided against premia which are inadequate to cover the long-term operating costs and losses of the GSM 102 programme”.\nThe Appellate Body upheld the Panel's finding that “the GSM 102 programme is not designed to cover its long term operating costs and losses” and, albeit for reasons that differ from those of the Panel, the Panel's conclusion that “the GSM 102 export credit guarantee programme constitutes an 'export subsidy' because it is provided against premiums which are inadequate to cover its long term operating costs and losses under the terms of item (j) of the Illustrative List”.\nConsequently, the Appellate Body upheld the Panel's finding that GSM 102 export credit guarantees issued after 1 July 2005 are export subsidies within the meaning of Article 3.1(a) of the SCM Agreement and Article 10.1 of the Agreement on Agriculture; and that regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005 the United States acts inconsistently with Article 10.1 of the Agreement on Agriculture by applying export subsidies in a manner which results in the circumvention of United States' export subsidy commitments with respect to certain unscheduled products and certain scheduled products, and as a result acts inconsistently with Article 8 of the Agreement on Agriculture. Regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005, the Appellate Body also found that the United States also acts inconsistently with Articles 3.1(a) and 3.2 of the SCM Agreement by providing export subsidies to unscheduled products and by providing export subsidies to scheduled products in excess of the commitments of the United States under the Agreement on Agriculture.\nThe Appellate Body further found that, by acting inconsistently with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the United States had failed to comply with the DSB recommendations and rulings and specifically, had failed to bring its measures into conformity with the Agreement on Agriculture and “to withdraw the subsidy without delay”.\nAs regards whether the effect of marketing loan and counter-cyclical payments is significant price suppression, the Appellate Body upheld the panel's findings that the United States acted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter-cyclical payments provided to United States upland cotton producers pursuant to the FSRI Act of 2002 is significant price suppression, within the meaning of Article 6.3(c) of the SCM Agreement, in the world market for upland cotton, constituting “present” serious prejudice to the interests of Brazil within the meaning of Article 5(c) of the SCM Agreement. The Appellate Body also found that, by acting inconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement, the United States had failed to comply with the DSB's recommendations and rulings and, specifically, failed to comply with its obligation under Article 7.8 of the SCM Agreement “to take appropriate steps to remove the adverse effects or ... withdraw the subsidy”.\nThe Appellate Body further found that the Panel did not fail to make an objective assessment of the matter before it, as required by Article 11 of the DSU, in its analysis of Brazil's claim that the effect of the marketing loan and counter-cyclical payments is significant price suppression.\nThe Appellate Body recommended that the DSB request the United States to bring its measures, found to be inconsistent with the Agreement on Agriculture and the SCM Agreement, into conformity with its obligations under those Agreements.\nAt its meeting on 20 June 2008, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 4 July 2005, prior to the initiation of the compliance proceedings (see above), and in respect of the “prohibited subsidies”, Brazil requested, the DSB for authorization to take appropriate countermeasures pursuant to Article 4.10 of the SCM Agreement and to suspend concessions or other obligations pursuant to Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 1 July 2005. Brazil stated it intended to take appropriate countermeasures in the form of the suspension of tariff concessions and related obligations under the GATT 1994 by imposing additional customs duties on a list of products imported from the United States, to be defined by Brazil. In addition, given that it considered that it was not practicable or effective to exclusively apply additional import duties and that it considered that the circumstances were serious enough, Brazil stated it may resort, to the extent necessary, to countermeasures in the form of suspension of certain obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the General Agreement on Trade in Services (GATS).\nWith regard to the prohibited subsidies, on 5 July 2005 the parties to the dispute jointly notified the DSB of “Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement”. On 14 July 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 4.11 of the SCM Agreement challenging the appropriateness of the countermeasures, the proposed level of suspension and asserting that the principles and procedures set forth in Article 22.3 of the DSU had not been followed. At its meeting on 15 July 2005, the DSB referred the matter raised by the United States to arbitration. On 17 August 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 6 October 2005, in respect of the “actionable subsidies” Brazil requested the DSB for authorization to suspend concessions or other obligations under Article 7.9 of the SCM Agreement and Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 21 September 2005. Brazil stated that in principle, these countermeasures would take the form of suspension of tariff concessions and related obligations under the GATT 1994 by means of the imposition of additional import duties on a list of products imported from the United States, to be defined by Brazil. In addition, Brazil contended that it was not practicable or effective to suspend concessions or other obligations exclusively with respect to the same sector/agreement as that in which the Panel and the Appellate Body have found the violations and that the circumstances are serious enough to justify the suspension of concessions or obligations under other covered agreements. Therefore it affirmed it may, to the extent necessary, resort to countermeasures in the form of suspension of certain obligations under the TRIPS Agreement and the GATS.\nOn 17 October 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement arguing that the countermeasures proposed are not commensurate with the degree and nature of the adverse effects determined to exist within the meaning of Article 7.9 of the SCM Agreement and that the level of suspension proposed is not equivalent to the level of nullification or impairment within the meaning of Article 22.7 of the DSU. With respect to Brazil's request for “cross-retaliation”, the United States claimed that the principles and procedures set forth in Article 22.3 of the DSU have not been followed. At its meeting on 18 October 2005, the DSB referred the matter raised by the United States to arbitration. On 21 November 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 25 August 2008, and following the completion of the compliance proceedings (see above), Brazil requested that the two arbitration proceedings be resumed. At the time that Brazil requested the resumption of the arbitration proceedings, two of the arbitrators had become unavailable to serve in these proceedings. On 1 October 2008, the parties agreed to the replacement arbitrators. On 31 August 2009, the two Decisions by the Arbitrator were circulated to Members.\nWith respect to the “prohibited subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.4 million for FY 2006, or, for subsequent years, an annual amount to be determined by applying a methodology described in the Decision of the Arbitrator. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “actionable subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.3 million annually. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “prohibited subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 4.10 of the SCM Agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nWith respect to the “actionable subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 7.9 of the SCM agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nOn 8 March 2010, Brazil notified the DSB that, starting on 7 April 2010, it would suspend the application to the United States of concessions or other obligations under the GATT 1994 in the form of increased import duties on certain products when they are imported from the United States. However on 30 April 2010, Brazil notified the DSB that it had decided to postpone the imposition of countermeasures vis-à-vis the United States indicating that no countermeasures would enter into force before 21 June 2010, since Brazil and the United States were engaged in a dialogue with a view to reaching a mutually satisfactory solution to the dispute.\n\nImplementation of adopted reports\nOn 25 August 2010, Brazil and the United States notified the DSB they had concluded a Framework for a Mutually Agreed Solution to the Cotton Dispute (Framework) which in itself does not constitute a mutually agreed solution to the dispute but sets out parameters for discussions on a solution with respect to domestic support programs for upland cotton in the United States, as well as a process of joint operation reviews as regards export credit guarantees under the program GSM-102. Brazil and the United States also agreed to hold consultations not less than four times a year, unless they agree otherwise, with the aim of obtaining convergence of views in respect of a solution to the Cotton dispute. The Framework also provides that, upon enactment of successor legislation to the US Food, Conservation and Energy Act of 2008, Brazil and the United States will consult with a view to determining whether a mutually agreed solution to the Cotton dispute has been reached. The joint communication also specified that as long as the Framework is in effect, Brazil will not impose the countermeasures authorized by the DSB.\nAt the DSB meeting on 23 October 2012, Brazil said that on 30 September 2012, the 2008 US Farm Bill had expired without the enactment of a successor legislation. However, taking into account that the current US agricultural support programs remained unchanged, Brazil had decided not to terminate the Memorandum of Understanding and the Framework Agreement and would thus not impose any countermeasures at this time.\nOn 16 October 2014, Brazil and the United States notified the DSB that, in accordance with Article 3.6 of the DSU, they had concluded a Memorandum of Understanding, and agreed that this dispute was terminated. As a result, no suspension of concessions or other obligations pursuant to the authorization previously granted by the DSB shall be applied and no further action shall be taken under Article 21.5 of the DSU based on a disagreement as to the existence or consistency of any measure taken to comply with the DSB recommendations and rulings."},"page_count":{"kind":"number","value":132,"string":"132"},"clean_text":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON\n\nRecourse to Arbitration by the United States\nunder Article 22.6 of the DSU\nand Article 7.10 of the SCM Agreement\n\nDECISION BY THE ARBITRATOR\n\nI. INTRODUCTION\nA. INITIAL PROCEEDINGS\n1.1 On 21 March 2005, the Dispute Settlement Body (\"DSB\") adopted the Appellate Body report1\nand the report of the Panel in this case2, as modified by the Appellate Body.\n1.2 The Appellate Body upheld the conclusions of th e panel that the Step 2 payments made to\ndomestic users and those made to exporters were subsidies within the meaning of Article 3.1(b) of the\nSCM Agreement (in the case of the former) and Article 3.1(a) of the same Agreement (in the case of\nthe latter), and were prohibited by those provi sions respectively and granted and maintained\ninconsistently with Article 3 of that Agreement. The Appellate Body also upheld the Panel's findings\nthat the export credit guarantee programmes at i ssue, i.e. GSM 102, GSM 103 and SCGP, constituted\nper se export subsidies within the meaning of Item (j) of the Illustrative List of Export Subsidies in\nAnnex I of the SCM Agreement and therefore were subsidies incons istent with Article 3.1(a) and 3.2\nof the SCM Agreement. The Appellate Body also upheld the Panel's conclusion that the effect of\nmarketing loan programme payments, Step 2 paym ents, market loss assistance payments and counter-\ncyclical payments (the \"price-contingent subsid ies\") was significant price suppression in the same\nworld market within the meaning of Article 6.3 (c) of the SCM Agreement.3\n1.3 As recommended by the original panel under Article 4.7 of the SCM Agreement, the\ncompliance period for the prohibited subsidies expired on 1 July 2005. In accordance with Article 7.9\nof the SCM Agreement, the compliance period for the actionabl e subsidies expired on 21 September\n2005, six months after the date on which the DSB adopted the Appellate Body report.4\n1.4 On 30 June 2005, the United States Department of Agriculture (the \"USDA\") announced that\nthe United States Commodity Credit Corporation (the \"CCC\") would no longer accept applications for\nexport credit guarantees under the GSM 103 programme. 5 The USDA also announced that the CCC\nwould use a new fee structure for the GSM 102 and SCGP programmes.6\n1.5 In October 2005, the CCC ceased issuing export credit guarantees under the SCGP.7\n1.6 On 1 February 2006, United States Congress adopted legislation repealing the Step 2\npayments programme for upland cotton effective as of 1 August 2006.8\n\n1 Appellate Body Report, , WT/DS267/AB/R (hereafter the\n\"Appellate Body Report\").\n2 Panel Report, , WT/DS267/R (herea fter the \"Panel\nReport\").\n3 See Appellate Body Report, para. 763 (c), (d) and (e).\n4 See WT/DS267/21, WT/DS267/26.\n5 See Panel Report, para. 3.16 (referring to \"USDA announces changes to export credit guarantee\nprograms to comply with WTO findings\", USDA Fore ign Agricultural Service (FAS) Online News Release\nof 30 June 2005 (Exhibit Bra-502 submitted by Brazil to the Panel); and \"Notice to GSM-103 Program\nParticipants\", USDA FAS Program Announcement of 30 June 2005 (Exhibit Bra-503 submitted by Brazil to the\nPanel)).\n6 See Panel Report, para. 3.16.\n7 See ibid. (referring to United States' first written submission to the Panel, para. 20, and \"Summary of\nFY 2006 Export Credit Guarantee Programme Activity for GSM-102 as of close of business: 9/30/2006\"\n(Exhibit Bra-513 submitted by Brazil to the Panel)).\n8 See Panel Report, para. 3.7 (referring to Section 1103 of the Deficit Reduction Act of 2005, Public\nLaw No. 109-171 (Exhibit Bra-435 submitted by Brazil to the Panel)).\n\n1.7 On 18 August 2006, Brazil requested the establishm ent of a panel pursuant to Article 21.5 of\nthe Dispute Settlement Understanding (\"DSU\") concer ning the alleged failure of the United States to\nimplement the recommendations and rulings of the DSB. 9 At its meeting of 28 September 2006 the\nDSB decided, in accordance with Article 21.5 of the DSU, to refer this matter, if possible, to the\noriginal Panel. The compliance panel report was circulated to Members on 18 December 2007.\n1.8 With respect to the marketing loan and c ounter-cyclical payments, the compliance panel\nfound that the United States failed to comply with the DSB recommendations by acting inconsistently\nwith Articles 5(c) and 6.3(c) of the SCM Agreement:\n\"The United States acts inconsistently w ith its obligations under Articles 5(c)\nand 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter-\ncyclical payments provided to US upland cotton producers pursuant to the FSRI Act\nof 2002 is significant price suppression within the meaning of Article 6.3(c) of the\nSCM Agreement in the world market for upland co tton constituting 'present' serious\nprejudice to the interests of Brazil within the meaning of Article 5(c) of the\nSCM Agreement. B y acting inconsistently with Artic les 5(c) and 6.3(c) of the\nSCM Agreement the United States has failed to comply with the DSB\nrecommendations and rulings. Specifically, the United States has failed to comply\nwith its obligation under Article 7.8 of the SCM Agreement 'to take appropriate steps\nto remove the adverse effects or ... withdraw the subsidy'.\"\n10\n1.9 The compliance panel concluded that \"to th e extent that the measures taken by the\nUnited States to comply with the recommendations and rulings adopted by the DSB in the original\nproceeding are inconsistent with the obligations of the United States under the covered agreements,\nthese recommendations and rulings remain operative.\"11\n1.10 On 12 February 2008, the United States notified the DSB of its intention to appeal certain\nissues of law covered in the Report of the comp liance panel and certain legal interpretations\ndeveloped by the panel and filed a Notice of Appeal. 12 On 25 February 2008, Brazil notified the\nDSB, pursuant to Article 16.4 of the DSU, of its in tention to appeal certain issues of law covered in\nthe Report of the compliance panel and certain legal interpretations developed by the Panel and filed a\nNotice of Other Appeal.13\n1.11 The Appellate Body report was circulated on 2 June 2008. The Appellate Body upheld the\ncompliance panel's conclusions with respect to the marketing loan and counte r-cyclical payments as\nwell as the conclusions on the GSM 102 export credit guarantees issued under the revised GSM 102\nprogramme.14\n1.12 The DSB adopted the Appellate Body report a nd the compliance panel report as modified by\nthe Appellate Body on 20 June 2008.\n\n9 WT/DS267/30.\n10 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 15.1(a).\n11 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 15.2.\n12 WT/DS267/33.\n13 WT/DS267/34 .\n14 Although the Appellate Body found that the compliance panel failed to make an objective\nassessment of the revised GSM 102 programme pursuant to item (j) of the Illustrative List by not considering\ncertain re-estimated data submitted by the United States , it also found that this did not affect the compliance\npanel's conclusion on the revised GSM 102 programme payments.\n\nB. REQUEST FOR ARBITRATION AND ARBITRATION PROCEEDINGS\n1.13 On 4 July 2005, Brazil notified the DSB of its \"Recourse to Article 4.10 of the\nSCM Agreement and Article 22.2 of the DSU\" with respect to the prohibited subsidies found to be\ninconsistent by the original Panel and the Appellate Body. 15 These prohibited subsidies were\nidentified as follows: (i) the export credit guarantees under the GSM 102, GSM 103 and SCGP\nexport credit guarantee programmes in respect of exports of upland cotton and other unscheduled\nagricultural products supported under the programmes, and in respect of one scheduled product (rice);\n(ii) Section 1207(a) of the Farm Security and Rura l Investment (FSRI) Act of 2002 providing for user\nmarketing (Step 2) payments to exporters of upla nd cotton; and (iii) Section 1207(a) of the FSRI Act\nof 2002 providing for user marketing (Step 2) pa yments to domestic users of upland cotton. Brazil\nrequested an authorization to take appropriate countermeasures in the amount corresponding: (i) to\nthe Step 2 payments made in the most recent concl uded marketing year; and (ii) to the total amount of\nexporter applications received un der GSM 102, GSM 103, and SCGP for the most recent concluded\nfiscal year. Brazil also requested cross-sector susp ension of obligations under the TRIPS Agreement\nand the GATS pursuant to Article 22.3(c) of the DSU.\n1.14 On 5 July 2005, Brazil and the United States notified \"Agreed Procedures under Articles 21\nand 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement in the follow-up\nto the dispute\" (\"Agreed Procedures\") to the DSB.\n16\n1.15 On 14 July 2005, the United States notified the DSB of its objection \"to the appropriateness\nof the countermeasures and the level of suspension of concessions or other obligations proposed by\nBrazil\". The United States also claimed that the pr inciples and procedures set forth in Article 22.3(c)\nof the DSU for requesting cross-sector suspensi on of concessions and obli gations had not been\nfollowed by Brazil.17\n1.16 On 15 July 2005, at the meeting of the DSB, it was agreed that the matter raised by the\nUnited States in WT/DS267/23 was referred to arb itration as required by Article 22.6 of the DSU and\nArticle 4.11 of the SCM Agreement. The Arbitrator was constituted on 19 July 2005. It was\ncomposed of the members of the original Panel, namely Mr Darius Rosati as Chairman, and Mr Mario\nMatus and Mr Daniel Moulis as Members.\n18\n1.17 On 17 August 2005, the United States and Brazil jointly requested suspension of the\narbitration proceedings according to their \"Agr eed Procedures\" until Brazil might subsequently\nrequest the resumption or termination of the Arbitr ation. The Arbitrator suspended the arbitration\nproceedings on 18 August 2005.19\n1.18 On 6 October 2005, Brazil notified to the DSB its \"Recourse to Article 7.9 of the\nSCM Agreement and Article 22.2 of the DSU by Brazil\" with respect to the actionable subsidies found\nto be inconsistent by the original panel and th e Appellate Body. The subsidies in question were\nidentified as marketing loan programme payments, u ser marketing (Step 2) payments, market loss\nassistance payments and counter-cyclical paymen ts. Brazil requested the DSB to grant Brazil\nauthorization to take countermeasures in the annual amount of US$1.037 billion until the\nUnited States withdrew the relevant subsidies or re moved their adverse effects. Brazil also requested\n\n15 WT/DS267/21.\n16 See WT/DS267/22.\n17 See WT/DS267/23.\n18 See WT/DS267/24.\n19 WT/DS267/25.\n\ncross-sector suspension of obligations under the TRIPS Agreement and the GATS pursuant to\nArticle 22.3(c) of the DSU.20\n1.19 On 17 October 2005, the United States notified to the DSB its objection to the level of\nsuspension of concessions or other obligations a nd the countermeasures proposed by Brazil. The\nUnited States contended that the countermeasures proposed were not commensurate with the degree\nand nature of the adverse effects determined to exist within the meaning of Article 7.9 of the\nSCM Agreement. Further, the United States contended that the level of suspension proposed was not\nequivalent to the level of nullifica tion or impairment within the meaning of Article 22.7 of the DSU.\nThe United States also claimed that the principles a nd procedures set forth in Article 22.3(c) of the\nDSU had not been followed by Brazil in reques ting cross-sector suspension of concessions and\nobligations.21\n1.20 On 18 October 2005, at the meeting of the DSB, it was agreed that the matter raised by the\nUnited States was referred to arbitration. On 18 November 2005, the Arbitrator was constituted. It\nwas composed of the members of the original Panel, namely Mr Darius Rosati as Chairman, and\nMr Mario Matus and Mr Daniel Moulis as Members.\n22\n1.21 On 21 November 2005, Brazil and the United States jointly notified the Arbitrator of their\nrequest that the arbitration proceedings be suspende d until either party were to subsequently request\ntheir resumption. The Arbitrator suspended the arbitration proceedings on 7 December 2005.23\n1.22 On 25 August 2008, Brazil notified a request of resumption of these arbitration proceedings\n(in relation to actionable subsidies) and also the resumption of the other arbitration proceedings (in\nrelation to prohibited subsidies).24\n1.23 On 1 October 2008, due to the unavailability of two members of the Arbitrator upon\nresumption of the proceedings, the parties agreed on the following composition of the Arbitrator for\nboth proceedings:\n Mr Eduardo Pérez-Motta, as Chairman\n Mr Alan Matthews\n Mr Daniel Moulis 25\n\n1.24 An organizational meeting was held on 24 Oc tober 2008 to discuss the proposed working\nprocedures and timetables for both arbitration pr oceedings. The final working procedures and\ntimetables were sent to the parties on 29 October 2 008. Brazil requested a further extension of the\ndeadline for its written submission on 31 October 2008. The Arbitrator, after considering the\narguments of both parties in relation to Brazil's re quest, revised the timetables and sent them to the\nparties on 19 November 2008.\n1.25 On 31 October 2008, Brazil submitted its Met hodology Paper for the calculation of the\nproposed countermeasures. The United States pr ovided a written submission on 9 December 2008.\nBrazil provided its written submissi on on 13 January 2009. The Arbitr ator sent written questions to\nthe parties on 30 January 2009. The parties provided their replies to these questions on\n13 February 2009.\n\n20 See WT/DS267/26.\n21 See WT/DS267/27.\n22 See WT/DS267/28.\n23 See WT/DS267/29.\n24 See WT/DS267/38, WT/DS267/39.\n25 See WT/DS267/24/Add.1, WT/DS267/28/Add.1.\n\n1.26 The Arbitrator met with the parties on 3 March 20 09. After the meeting, the Arbitrator posed\nadditional written questions to the parties on 6 March 2009 and received their written responses on\n20 March 2009. The parties also provided th eir comments on each other's written responses to\nquestions from the Arbitrator on 31 March 2009. On 20 April 2009, the Arbitrator informed the\nparties that in light of the voluminous materials re ceived from parties after the meeting with parties,\nand also taking into account the time needed for tran slation of the reports into the other two working\nlanguages, the issuance date of the Arbitrator's Deci sion was delayed. The Arbitrator asked the\nparties an additional question on 11 June 2009. On 30 June and 5 August 2009, the Arbitrator\ninformed the parties of further delays in the ci rculation of the Decision. The Decision by the\nArbitrator was circulated on 31 August 2009.\nC. O\nRGANIZATION OF THE PROCEEDINGS AND PRESENTATION OF THE DECISION\n1.27 As described above, two separate arbitrati on proceedings were initiated pursuant to\nArticle 22.6 of the DSU in this dispute, one in re lation to the prohibited subsidies at issue in the\nunderlying proceedings, and the other in relation to the actionable subsidies. These proceedings were\nconducted in parallel and the same persons served as arbitrators in both proceedings. The parties\npresented single submissions in relation to both proceedings.\n1.28 The Arbitrator therefore sought the views of the parties whether it should issue a single\ndecision or two decisions for both proceedings and how it should treat the arguments presented in the\nparties' single submissions.\n1.29 The United States indicates that there are two arbitration requests and two arbitrations, and\nthat it therefore expects the Arbitrator to issue a separate decision for each of the two arbitrations.\nWith respect to the use of submissions, the United States indicates that the sections of the submissions\nthat are not clearly related to prohibited subsidies or to actionable subsidies may be relevant to either\nproceeding.26 Brazil on the other hand argues that the two proceedings should be harmonized as\nmuch as possible and considers that a single decision would be sufficient for the two arbitrations.\nAlso, Brazil has no objection to the Arbitrator taki ng into account arguments made in the entirety of\nBrazil's submissions for the purpose of rendering decisions in either proceeding.\n27\n1.30 With respect to the treatment of the parties' submissions, the Arbitrator notes that although\neach party submitted a single written submission, th e sections on prohibited subsidies are separate\nfrom the sections on actionable subsidies. It is therefore generally possible to distinguish the\narguments relating to the proposed countermeasures against the prohibited subsidies at issue, from\nthose relating to countermeasures against the actionable subsidies. In addition, some sections of the\nsubmissions, such as the introduction and the sections on cross-retaliation, may be relevant to both\nproceedings. The Arbitrator will therefore refer to such arguments in this Decision as appropriate.\n1.31 With respect to the presentation of its Decisi on, the Arbitrator notes that the United States\npresented two distinct objections to the two distinct requests for countermeasures presented by Brazil.\nAlthough the conduct of the two pr oceedings was harmonized and the parties both provided a single\nwritten submission covering both the prohibited and actionable subsidies at issue, the fact remains that\nthere are two arbitration proceedings, and that the proceedings against prohibited subsidies are based\non Article 4.10 of the SCM Agreement whereas the proceedings relating to the actionable subsidies in\nthe same dispute are based on Article 7.9 of the SCM Agreement. Under these circumstances, and in\nthe absence of an agreement of the parties on th e issuance of a single decision, the Arbitrator\nconsidered it appropriate to issue a separate decision with respect to each of the two proceedings.\n\n26 US responses to questions from Arbitrator, question 2.\n27 Brazil's responses to questions from the Arbitrator, question 2.\n\nII. OVERALL APPROACH OF THE ARBITRATOR\n2.1 The United States has initiated these proceedings pursuant to Article 22.6 of the DSU and\nArticle 7.10 of the SCM Agreement.\n2.2 Article 22.6 of the DSU provides in relevant part:\n\"When the situation described in paragraph 2 occurs, the DSB, upon request, shall\ngrant authorization to suspend concessions or other obligations within 30 days of the\nexpiry of the reasonable period of time unl ess the DSB decides by consensus to reject\nthe request. However, if the Member con cerned objects to the level of suspension\nproposed, or claims that the principles and procedures set forth in paragraph 3 have\nnot been followed where a complaining pa rty requested authorization to suspend\nconcessions or other obligations pursuant to pa ragraph 3(b) or (c), the matter shall be\nreferred to arbitration. Such arbitration sha ll be carried out by the original panel, if\nmembers are available, or by an arbitrat or appointed by the Director-General and\nshall be completed within 60 days after the date of expiry of the reasonable period of\ntime.\"\n2.3 With regard to countermeasures taken in respon se to actionable subsidies under Part III of the\nSCM Agreement, however, Article 7.10 of that Agreement provides the following mandate for the\narbitrator:\n\"In the event that a party to the dispute requests arbitration under paragraph 6 of\nArticle 22 of the DSU, the arbitrator sha ll determine whether the countermeasures are\ncommensurate with the degree and nature of the adverse effects determined to exist.\"\n2.4 In this proceeding, the United States challeng es two distinct aspects of Brazil's proposed\ncountermeasures. The United States objects first to the level of suspension of concessions or other\nobligations and the countermeasures proposed by Brazil. In addition, the United States claims that the\nprinciples and procedures set forth in DSU Article 22.3 have not been followed by Brazil and\ntherefore the United States requests the Arbitrator to reject Brazil's request to suspend concessions\nwith respect to TRIPS and GATS.\n28 We will therefore consider these two aspects in turn. In light of\nthe fact that our determination in relation to the level of the proposed countermeasures may have an\nimpact on our determination in relation to the form of countermeasures to be taken, we consider first\nthe level of the proposed countermeasures.\n2.5 As a preliminary matter, however, we must consider whether changes that have taken place in\nthe legal basis for the granting of ML and CCPs a ffect Brazil's entitlement to seek countermeasures n\nrelation to these payments.\nIII. PRELIMINARY ISSUE: DO CHANGES IN THE LEGAL BASIS OF THE\nMARKETING LOAN AND COUNTERCYCLICAL PAYMENTS AFFECT BRAZIL'S\nENTITLEMENT TO TAKE COUNTERMEASURES?\n3.1 The United States argues that ML and CCP s ubsidies under the Farm Security and Rural\nInvestment Act of 2002 (\"2002 Farm Bill\") will no longe r be made, so that there is no longer a legal\nbasis for authorizing countermeasures, since the measures have been withdrawn with the expiry of the\n\n28 WT/DS267/23.\n\n2002 Farm Bill. 29 We must therefore consider, as a preliminary matter, whether this circumstance\naffects Brazil's entitlement to seek countermeasures in relation to these payments.\nA. ARGUMENTS OF THE PARTIES\n3.2 The United States argues that the marketing loan and counter-cyclical payments challenged\nby Brazil during both the original and compliance panel proceedings were payments authorized by the\n2002 Farm Bill. Given that the 2002 Farm Bill has e xpired, the United States argues that the subsidy\nhas been withdrawn and that, as a result, there is no longer a basis to authorize countermeasures with\nrespect to these payments. In addition, the United States considers that the condition under\nArticle 22.8 of the DSU that the suspension shall onl y be applied until the rem oval of the inconsistent\nmeasure has been met, and therefore no countermeasure can be authorized now.30\n3.3 Brazil considers that there is no factual basis for the United States to claim that the ML and\nCCP subsidies have \"expired\". In Brazil's view, not hing in the 2008 Farm Bill that repealed the 2002\nFarm Bill materially changed either the ML programme or the CCP programme as it applies to cotton.\nBrazil observes that the United States makes no assertions that the substance of ML and CCP\nsubsidies has been changed in the 2008 Farm Bill. Nor could it, in Brazil's view, as demonstrated by\nUSDA's \"Side-By-Side\" comparison of the provisions of the 2002 and 2008 Farm Bills.31\n3.4 Brazil indicates that USDA states that the 2008 Farm Bill \"[c]ontinues nonrecourse\ncommodity loans with marketing loan provisions fo r 2008-12 crops\", including cotton, and \"[r]etains\neligibility provisions\" that existed in the 2002 Farm Bill. Brazil claims that Section 1202(a)(6) of the\n2008 Farm Bill continues the same loan rate of US$0.52 cents pe r pound that was applicable under\nthe 2002 Farm Bill. Similarly, with respect to th e counter-cyclical payment program, Brazil cites the\nrelevant excerpt from USDA's \"Side-By-Side\" as confirming the unchanged continuation of that\nprogramme in the 2008 Farm Bill.32\n3.5 Brazil argues that despite the technical change in the legal basis for ML and CCP subsidies,\nthe United States continues to provide them \"under the same conditions and criteria as the marketing\nloan payments and counter-cyclical payments\" subject to the origin al and compliance panels' findings\nof present serious prejudice. That is, the Unite d States cannot escape its implementation obligation\nsimply through the technical change of replaci ng one measure – ML and CCP subsidies under the\n2002 Farm Bill – by another measure – ML and CCP subsidies under the 2008 Farm Bill.\n3.6 Citing the Appellate Body's statement in US – Continued Suspension , Brazil argues that\nunless and until the United States has achieved \"subst antive compliance\" with the recommendations\nand rulings by eliminating or withdrawing all of the adverse effects – including the threat of\ncontinuing future adverse effects – Brazil has the right to pursue countermeasures commensurate with\nthe degree and nature of the adverse effects determined to exist.\n3.7 In response to a question from the Arbitrator , the United States argues that Brazil uses a\ncomparison of the provisions of the 2002 and 2008 Fa rm Bills to show that the change \"did not\nreduce, or otherwise impact in any significant way\" marketing loan or countercyclical payments for\ncotton. But, in the United States' view, the 2008 Fa rm Bill has only recently been put into effect, and\nthat it is difficult to make any such conclusion on the basis of actual data. Therefore the United States\nclaims that Brazil's conclusion is only speculation that reflects Brazil's assumptions regarding how the\nmarketing loan and countercyclical payments will be made in the future. The United States says that,\n\n29 US written submission, paras. 235 and 236.\n30 US written submission, paras. 235-238.\n31 See Brazil's written submission, para. 438.\n\nover time, the marketing loan and countercyclical pa yments will be affected by many factors other\nthan the Farm Bill, including farmers' decisions in the United States and worldwide, the state of\nindustries that use cotton as an input, etc. In additi on, the United States claims that even if future\npayments were certain, the effects of those payments on price would still be a matter of speculation.33\nB. ASSESSMENT BY THE ARBITRATOR\n3.8 The Arbitrator takes note of the parties' ag reement that the 2002 Farm Bill has expired and\nthat the 2008 Farm Bill has been enacted as of 3 January 2008. 34 The issue before the Arbitrator is\nthat the United States claims that the 2002 Farm Bill under which ML and CCPs have been made has\nexpired and these subsidies have been withdrawn, and that, therefore, there is no longer a basis to\nauthorize countermeasures with respect to these payments.\n3.9 We first note that, as a result of the origin al proceedings, the DSB recommended that the\nUnited States withdraw the ML and CCPs or remove their adverse effects. The compliance panel then\nfound that the United States had failed to comply with the DSB recommendations with respect to\nthese measures by acting inconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement:\n\"The United States acts inconsistently w ith its obligations under Articles 5(c)\nand 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter-\ncyclical payments provided to US upland cotton producers pursuant to the Farm Bill\nof 2002 is significant price suppression within the meaning of Article 6.3(c) of the\nSCM Agreement in the world market for upland co tton constituting 'present' serious\nprejudice to the interests of Brazil within the meaning of Article 5(c) of the\nSCM Agreement. By acting inconsistently with Artic les 5(c) and 6.3(c) of the\nSCM Agreement the United States has failed to comply with the DSB\nrecommendations and rulings. Specifically, the United States has failed to comply\nwith its obligation under Article 7.8 of the SCM Agreement 'to take appropriate steps\nto remove the adverse effects or ... withdraw the subsidy'.\"\n35\n3.10 These conclusions were upheld by the Appella te Body, and the reports of the compliance\npanel and of the Appellate Body were adopted on 20 June 2008.\n3.11 A multilateral determination has therefore b een made, in the context of compliance\nproceedings initiated under Article 21.5 of the DSU, that the United States has failed to comply with\nthe recommendations and rulings of the DSB with re spect to the ML and CCPs. As we understand it,\nthe United States is in essence requesting us to find that this determination is no longer pertinent,\nbecause the legal basis upon which the payments at issue were made at the time of the ruling no\nlonger exists.\n3.12 As an Arbitrator acting under Article 22.6 of the DSU and Article 7.10 of the DSU, our task is\nto review, under the applicable legal standard, th e countermeasures proposed by Brazil in relation to\nthe ML and CCPs, following the determination of n on-compliance that has been made in relation to\nthem. As the Appellate Body noted in US – Continued Suspension , \"the authorization to suspend\nconcessions is ... granted following a long process of multilateral dispute settlement in which relevant\nadjudicative bodies, as well as the DSB, render multila teral decisions at key stages of the process\" 36,\nwhich may include compliance proceedings, followed by an arbitration to determine the level of\nsuspension of concessions.\n\n33 US responses to questions from the Arbitrator, question 64, para. 164.\n34 Exhibit Bra-735.\n35 WT/DS267/RW, para. 15.1(a).\n36 Appellate Body Report, US – Continued Suspension, para. 317.\n\n3.13 In this case, the compliance panel determined that \"the effect of marketing loan and counter-\ncyclical payments provided to US upland cott on producers pursuant to the FSRI Act of 2002 is\nsignificant price suppression within the meaning of Article 6.3(c) of the SCM Agreement in the world\nmarket for upland cotton constituting 'present' serious prejudice to the interests of Brazil within the\nmeaning of Article 5(c) of the SCM Agreement\" and that the United States had therefore failed to\ncomply with the recommendations and rulings of the DSB.37\n3.14 It is, in our view, appropriate for us, as arb itrators acting under Article 22.6 of the DSU, to\ntake into account this determination made in the context of compliance proceedings under Article 21.5\nof the DSU and to assume a priori, on that basis, that the United States has not complied with the\nrelevant recommendations and rulings of the DSB.\n3.15 At the same time, we note that panels, incl uding compliance panels, have the discretion to\ntake into account a modification or a repeal of the measure before them subsequent to their\nestablishment. We note in particular the following ruling by the Appellate Body in EC – Bananas III\n(Article 21.5 – Ecuador II) in relation to the jurisdiction of compliance panels:\n\"We thus consider it to be within the discr etion of the panel to decide how it takes\ninto account subsequent modifications or a repeal of the measure at issue.\nAccordingly, panels have made findings on expired measures in some cases and\ndeclined to do so in others, depending on the particularities of the disputes before\nthem.\"38\n3.16 In these proceedings, the United States argues that because the legal basis of the initial\nmeasures has ceased to exist, it has complied with the DSB's recommendations and rulings since the\nrulings of the DSB, and since the referral of the matter before us to arbitration, and requests us to take\nthis circumstance into consideration.\n3.17 We note that it is normally not the task of arbitrators acting under Article 22.6 of the DSU to\nreview whether compliance has been achieved or no t, as arbitral proceedings under this provision\nassume that there has been no compliance, and th is will normally have been determined through\ncompliance proceedings under Article 21.5 of the DSU, as was the case here.\n3.18 However, even assuming that we may be entitled, as Arbitrator acting under Article 22.6 of\nthe DSU and Article 7.9 of the SCM Agreement, to make a determination whether the United States\nhas in fact come into compliance with the r ecommendations and rulings of the DSB since the\nadoption of the compliance reports, we are not pers uaded that the United States has demonstrated to\nus that it has complied with the relevant recommendations and rulings of the DSB.\n3.19 We note that \"compliance\" with the recommendations and rulings of the DSB must be\nunderstood to refer to \"substantive compliance\". As was recently stated by the Appellate Body in\nUS – Continued Suspension:\n\"The requirements in Article 21.5 to examine whether compliance measures exist and\nwhether the measures taken to comply are consistent with the covered agreements\nalso suggest that substantive compliance is required, rather than formal removal of\nthe inconsistent measure.\"39\n\n37 See Panel Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 10.255. See also Appellate\nBody Report, US – Upland Cotton (Article 21.5 – Brazil), para. 448(c).\n38 Appellate Body Report, EC – Bananas III (Article 21.5 – Ecuador II), para. 270.\n39 Appellate Body Report, US – Continued Suspension, para. 308.\n\n3.20 It is clear, therefore, that a mere formal removal of the inconsistent measure would not\nnecessarily mean that compliance has been achieve d, if \"substantive compliance\" has not been\nachieved.\n3.21 Both the original and compliance panels exam ined the ML and CCPs in the context of the\n2002 Farm Bill. Brazil does not dispute that the 200 2 Farm Bill has expired, but it observes that the\n2008 Farm Bill now provides a continuation of the mark eting loan programme at the same rate as that\nprovided by the 2002 Farm Bill and that the counte r-cyclical payments provisions provided in 2002\nFarm Bill are retained in the 2008 Farm Bill.\n3.22 Brazil has in particular presented a \"side-by -side\" comparison between the 2002 and 2008\nFarm Bills, posted on the website of the USDA. 40 (see Annex 1) From this comparison table, it is\nclear that the main features of the CCP as original ly provided in 2002 FSRI Act have been retained in\nthe 2008 Farm Bill. In fact, Section 1104 of both the 2002 FSRI Act and the 2008 Farm Bill\nprovides: \"(a) ... for each of the ... crop year fo r each covered commodity, the Secretary shall make\ncounter-cyclical payments to producers on farms for which payments yields and base acres are\nestablished with respect to the covered commodity if the Secretary determines that the effective price\nfor the covered commodity is less than the target price for the covered commodity\". Therefore, the\nsubstance of the provisions on CCP as original ly provided in the 2 002 FSRI Act has been\nincorporated in the 2008 Farm Bill. It is also noteworthy from Section 1104 of both Bills that the\ntarget prices for the selected commodities are also unchanged. The only change is the inclusion of\nadditional commodities.\n41\n3.23 Similarly, a reading of both the 2002 Farm Bill and the 2008 Farm Bill also reveals that the\nprovisions on ML in the 2002 Farm Bill were retain ed in the 2008 Farm Bill. These main provisions\ninclude Sections 1201and 1202, 1203 and 1204 of the Bills.\n3.24 Section 1201 concerns \"Availability of non r ecourse marketing assistance loans for loan\ncommodities\" in both Farm Bills. This provision includes detailed rules on \"Availability\", \"Terms and\nconditions\", \"Eligible production\" and \"Compliance with conserva tion and wetland requirements\".\nThe only difference is that under the \"Availab ility\" item, the 2002 Farm Bill provided for an\napplication period from 2002 to 2007, whereas the 2008 Farm Bill provides for an application period\nfrom 2008 to 2012. Section 1202 of both Farm Bills provides \"Loan Rates for non recourse\nmarketing assistance loans\", in which the rates fo r most of the products are unchanged (e.g., cotton:\n0.52 cents), and a few rates have been slightly ad justed. Section 1203 of both Farm Bills provides a\n\"Term of Loan\" of 9 month duration. Section 1204 of the two Bills provides an identical \"Repayment\nof Loans\" mechanism.\n3.25 Therefore, from the wording of the relevant se ctions of the two Bills, we consider that the\nlegal basis for the \"marketing loan measure\" is uncha nged. In other words, the substance of the rules\nthat the original panel and the Appellate Body found not to be in compliance with the\nSCM Agreement, and which the compliance panel and the Appellate Body found not to have been\nwithdrawn, have been retained. The new legislat ive instrument in which they are found has not\nwrought any substantive changes to their nature, in terms of their \"structure, design and operation\".\n42\n3.26 The United States has not challenged Brazil's assertion that the relevant provisions under the\n2008 Farm Bill are essentially the same as under the 2002 Farm Bill, and it has not provided any\nindication as to why the same payments might not continue under the 2008 Farm Bill.\n\n40 Exhibit Bra-752 (2008 Farm Bill Side-By-Side, USDA,\nhttp://www.ers.usda.gov/FarmBill/2008/Titles/TitleIcommodities.htm) (accessed December 2008).\n41 See 2002 FSRI Act, Exhibit Bra-29, 2008 Farm Bill , Exhibit Bra-735.\n42 See Panel Report, para. 7.1289.\n\n3.27 The United States argues, however, that becau se the 2008 Farm Bill only recently came into\neffect, it is difficult to make any conclusion on the basis of actual data to the effect that payments\nwould continue at the same level under the 2008 Farm Bill, so that this conclusion is only speculation\nthat reflects Brazil's assumptions regarding how the marketing loan and countercyclical payments will\nbe made in the future.\n3.28 These elements suggest that the United States in fact recognizes that ML and CCPs may\ncontinue to be granted under the 2008 Farm Bill, althoug h it considers that the amount of payments\nthat might be made under the 2008 Farm Bill is still un certain, in light of its recent entry into force.\nTo the extent that the 2002 Farm Bill has been terminated, but h as been replaced with another Bill\nproviding for essentially the same measures that were found to be inconsistent as they applied under\nthe original legal instrument, this would not provide a basis upon which to conclude that the\nUnited States has complied with the recommendations and rulings relating to these measures. Rather,\nit would need to be established that the inconsistenc ies that were the object of the rulings have been\nremedied. As the Appellate Body expressed it, \"s ubstantive compliance is required, rather than\nformal removal of the inconsistent measure\" in order to achieve full implementation of the DSB's\nrecommendations and rulings. 43 Nor can any uncertainty about what might happen in the future\ndissuade this Arbitrator from assessing the adverse eff ects determined to exist in relation to a measure\nwhich did exist and which, on the facts, continues to exist.44\n3.29 In the circumstances of this case, the elements before us suggest that, although the legal basis\nfor the granting of ML and CCPs has been modified, such payments continue to be offered and may\ncontinue to be made under a new legal basis. We have not been provided with any indication that the\npayments that may be made under the 2008 Farm Bill would be of a different nature than those that\ngave rise to the rulings at issue. On the contrary , it seems the United States does not dispute that such\npayments may occur.\n3.30 To the extent that we might be entitled to revi ew, in the context of these proceedings whether\ncompliance has been achieved, we would therefore not have a sufficient basis to conclude, in light of\nthe elements before us, that it has been.\n3.31 Furthermore, we note that the findings in the underlying proceedings related to the different\ntypes of payments at issue, rather than to the 2002 Farm Bill as such. The compliance panel explicitly\nstates that \"the [original] panel did not state that it had found that, in additio n to subsidies paid in\nMY 1999-2002, the Farm Bill itself was inc onsistent with Articles 5 and 6 of the SCM Agreement\".45\nRather, it is the payments under this Bill that were the measures at issue.\n3.32 In light of these elements, the Arbitrator c oncludes that the United States has failed to\nestablish that there is no longer any legal basis fo r Brazil to seek countermeasures in relation to the\nML and CCPs.\n3.33 We must therefore now consider whether Br azil's proposed level of countermeasures is\n\"commensurate with the degree and nature of the a dverse effects determined to exist\", in accordance\nwith Article 7.9 of the SCM Agreement. For this purpose, we must first clarify the meaning of these\nterms.\n\n43 See Appellate Body Report, US – Continued Suspension, para. 308.\n44 We note in this respect that wherever the level of countermeasures is determined in the form of a\nfixed amount to be applied on an annual basis, it is inhe rent in this approach that this amount will not exactly\ntrack the future evolution of the situation in consideratio n of the actual level of payments to occur in the future\nunder the subsidies at issue. Yet, the United States takes no issue with this approach as a matter of principle.\nThe fact that the actual level of future payments under the programs may be uncertain to date cannot in itself be\nan obstacle to calculating a level of countermeasures to be applied.\n45 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 9.49.\n\nIV. ASSESSMENT OF BRAZIL'S PROPOSED LEVEL OF COUNTERMEASURES\nA. MAIN ARGUMENTS OF THE PARTIES\n4.1 In its request to the DSB, Brazil requested authorization to take countermeasures in the annual\namount of US$1.037 billion until such time as the United States withdraws or removes the adverse\neffects of certain price-contingent subsidies de termined to have caused significant price suppression\nin the world upland cotton market. These subsidie s included marketing loan programme payments,\nuser marketing (Step 2) payments, market loss assistance payments and counter-cyclical payments.\n4.2 In its Methodology Paper, Br azil further explained that suppressed prices on the world cotton\nmarket have two types of negative consequences for farmers worldwide: income losses on actual\nproduction (\"sales value effects\") and a replacement of foreign supply by US production on the world\nmarket (\"reduced production effects\"). To quantify these effects, Brazil relies on a partial equilibrium\nmodel already referred to in the compliance pro ceedings, the \"Sumner model\". By Brazil's own\ndescription, \"the issue that the economic model addre sses is the magnitude of the impact that specific\nUS cotton subsidies have on quantities supplied and on world market prices for cotton\".\n46\n4.3 Brazil quantifies the adverse effects of these subs idies to cotton farmers in the rest of the\nworld, based on Marketing Year (MY) 2005. Brazil estimates that world market prices were\nsuppressed by 10.75 per cent in MY 2005. It estimates that the subsidies caused US cotton production\nto be 18.8 per cent higher than it would otherwise ha ve been but for the subsidies, and that this\nincreased production boosted imports by approximately 24 per cent in the same year. Brazil further\nestimates that the subsidies have led to a re placement of foreign cotton supply amounting to\n2.2 per cent of actual production. On this basis, Brazil concludes that \"adverse effects in MY 2005\namounts to US$3.335 billion, consisting of US$2. 73 billion in sales value effects and US$605 million\nin reduced production effects\".\n47 However, Brazil limits its request for countermeasures to an amount\nof US$1.037 billion, in line with its original request.\n4.4 The United States considers that the requested countermeasures \"far exceed what would be\ncommensurate with the adverse effects determined to exist\". 48 The United States first notes that the\ncurrent conditions for US cotton producers provide guidance for the effects of US cotton support\npayments, and that since the 2006 marketing year, the US cotton sector has experienced a significant\ncontraction in production, exports and domestic use. According to the United States, total cotton\nharvested area for the United States is forecasted at only 7.8 million acres in 2008, the lowest in\n25 years49, and that US shares of exports and world production in 2008 will reflect several years of\ndecline, with US production in that year being 43 per cent below the 2005 crop. The United States\nnotes that Brazilian cotton production trended up in 2007 and that Brazil's exports were expected to\nreach a record in 2008.\n4.5 The United States further identifies a number of \"legal, economic and conceptual errors\" in\nBrazil's calculations. Specifically, the United Stat es identifies the following errors: (i) the decision\nnot to limit the calculations to only the effects of the programs on Brazil; (ii) flawed choices for key\nparameters in the model; (iii) the isolation of data to a single year; and (iv) the failure to limit the\nproposed countermeasures to the portion of the effect s of the payments that result in the finding of\ninconsistency with the SCM Agreement. Brazil disagrees with each of these arguments.\n\n48 US written submission, Section IV, para. 229 ff.\n49 US written submission, para. 231.\n\nB. MANDATE OF THE ARBITRATOR AND BURDEN OF PROOF\n4.6 We recall that Article 7.9 of the SCM Agreement provides that:\n\"In the event that the Member has not take n appropriate steps to remove the adverse\neffects of the subsidy or withdraw the subs idy within six months from the date when\nthe DSB adopts the panel report or the Appellate Body report, and in the absence of\nagreement on compensation, the DSB shall grant authorization to the complaining\nMember to take countermeasures, commensur ate with the degree and nature of the\nadverse effects determined to exist, unless the DSB decides by consensus to reject the\nrequest.\"\n4.7 In addition, Article 7.10 of the same Agreemen t defines the mandate of the arbitrator as\nfollows:\n\"In the event that a party to the dispute requests arbitration under paragraph 6 of\nArticle 22 of the DSU, the arbitrator sha ll determine whether the countermeasures are\ncommensurate with the degree and nature of the adverse effects determined to exist.\"\n4.8 In these proceedings, we are therefore called upon to determine whether the countermeasures\nproposed by Brazil in relation to the marke ting loans and countercyclical payments are\n\"commensurate with the degree and nature of the a dverse effects determined to exist\" within the\nmeaning of Article 7.9 of the SCM Agreement. The United States identifies a number of \"errors\" in\nBrazil's request, including legal errors.\n4.9 The United States agrees that, as the party cha llenging the proposed countermeasures, it\nbears the burden of demonstrating that th e countermeasures proposed by Brazil are not\n\"commensurate with the degree and nature of the a dverse effects determined to exist\" within the\nmeaning of Article 7.9 of the SCM Agreement.50\n4.10 The United States observes, however, that Braz il is obligated to provide the evidence to\nsupport its arguments and to provide the relevant facts for the Arbitrator to fulfil its mandate.51\n4.11 The basis for these proceedings is a challenge initiated by the United States in relation to\nBrazil's request to be authorized by the DSB to take countermeasures in relation to certain\ninconsistent measures. These circumstances are anal ogous to the situation in arbitral proceedings\ninitiated under Article 22.6 of the DSU alone, and in arbitral proceedings initiated under Article 22.6\nof the DSU and Article 4.10 of the SCM Agreement in relation to prohibited subsidies.\n4.12 In the context of proceedings under Article 4.11 of the SCM Agreement and Article 22.6 of\nthe DSU, arbitrators have consistently determ ined that the party objecting to the proposed\ncountermeasure bears the burden to establish a prima facie case or presumption that the\ncountermeasures are not \"appropriate\" within the meani ng of Article 4.11 and that it is then up to the\nparty proposing the countermeasures to rebut such presumption.\n52\n4.13 The same approach applies, in our view, to proceedings under Article 22.6 of the DSU and\nArticle 7.10 of the SCM Agreement. We therefore find that the United States bears the initial burden\nof establishing the countermeasures are not \"commens urate with the degree and nature of the adverse\neffects determined to exist\" and that Brazil bears the burden of rebutting such conclusions.\n\n50 US responses to questions from the Arbitrator, question 41, para. 49.\n51 US responses to questions from the Arbitrator, question 41, para. 50.\n52 See Decision of the Arbitrator, Brazil – Aircraft (Article 22.6 – Brazil), paras. 2.8-2.9.\n\n4.14 The Arbitrator is also of the view that this allocation of burden of proof does not alleviate the\nburden on each party to establish the facts that it a lleges during the proceedings. As observed by the\narbitrator on US – FSC (Article 22.6 – EC) , \"it is generally for each party asserting a fact, whether\ncomplainant or respondent, to provide proof thereof\". 53 Accordingly, it is also for Brazil to provide\nevidence in support of the facts that it advances. The Arbitrator will consider all the evidence and\narguments provided by both parties (United States and Brazil) to determine whether the proposed\ncountermeasures are \"commensurate with the degree a nd nature of the adverse effects determined to\nexist\".\n4.15 The United States further considers that once the burden of proof has been met, the Arbitrator\nis not limited to agreeing or disagreeing with the parti es. Rather, the Arbitrator's task is to determine,\nin the case of actionable subsidies, countermeasures \"commensurate with the degree and nature of the\nadverse effects determined to exist\". 54 Brazil also observes that, if the United States succeeds in\nestablishing that Brazil's formula does not meet the applicable legal standard, the Arbitrator can\nconsider adjustments to Brazil's formula, or if none are possible, alternative formulae. 55 Brazil further\nnotes that, while the Arbitrator enjoys flexibility to make adjustments to Brazil's formula, Brazil\nexpects that in the interest of due process, the Arbitrator would offer the parties the opportunity to\ncomment on any material departures it wishes to explore.\n56\n4.16 We agree that, in the event that we find that Brazil's proposed countermeasures are not\ncommensurate with the degree and nature of the adve rse effects determined to exist, we would be\nrequired also to determine what would constitute such countermeasures. This would enable the\ncomplaining party to seek an authorization consistent with our decision, as foreseen in Article 22.7 of\nthe DSU. In order to fulfil this part of our ma ndate, we may be required to adopt an approach or\nmethodology that differs from those proposed by the parties.\n4.17 We now turn to a consideration of the terms of the applicable legal standard for the review of\nBrazil's countermeasures, before considering Brazil's proposed countermeasures in light of these\ndeterminations.\nC. C\nOUNTERMEASURES \"COMMENSURATE WITH THE DEGREE AND NATURE OF THE ADVERSE\nEFFECTS DETERMINED TO EXIST\" (ARTICLE 7.9 AND 7.10 OF THE SCM AGREEMENT)\n4.18 Paragraphs 9 and 10 of Article 7 of the SCM Agreement are \"special or additional rules and\nprocedures\" identified in Appendix 2 of the DSU. 57 Article 1.2 of the DSU provides that \"to the\nextent that there is a difference between the ru les and procedures of this Understanding and the\nspecial or additional rules and procedures set forth in Appendix 2, the special or additional rules and\nprocedures in Appendix 2 shall prevail\".\n4.19 The terms of Article 7.9 of the SCM Agreement, as a \"special or additional rule and\nprocedure\", should be interpreted on their own terms. It is clear that they may embody different rules,\nwhich would prevail in case of conflict. Nonetheless, Article 22.6 of the DSU remains relevant, as the\ngeneral legal basis under which the proceedings are conducted. Indeed, Article 7.9 of the\n\n53 Decision of the Arbitrator, US – FSC (Article 22.6 – US), para. 2.11.\n54 US responses to questions from the Arbitrator, question 70, para. 3.\n55 Brazil's responses to questions from the Arbitrator, question 70, para. 6.\n56 Brazil's responses to questions from the Arbitrator, question 70, para. 8. See also the US comments\n57 Throughout this section of the report, we will refer to the terms \"commensurate with the degree and\nnature of the adverse effects determined to exist\" in Article 7.9 of the SCM Agreement. This reference should\nbe understood to refer also to the same terms in Article 7.10 of the SCM Agreement. We assume that these\nterms have the same meaning in both provisions.\n\nSCM Agreement refers expressly to Article 22.6 of the DSU as the legal basis for arbitral proceedings\nrelating to countermeasures in relation to actionable subsidies.\n4.20 In accordance with the terms of Article 3.2 of the DSU, the terms of Article 7.9 of the\nSCM Agreement should be interpreted in accordance with the customary rules of interpretation of\npublic international law, as reflected in particular in Articles 31 and 32 of the Vienna Convention on\nthe Law of Treaties (\"Vienna Convent ion\"). In particular, as reflect ed in Article 31.1 of the Vienna\nConvention, \"a treaty shall be inte rpreted in good faith in accordance w ith the ordinary meaning to be\ngiven to the terms of the treaty in their context and in the light of its object and purpose\".\n4.21 For the sake of clarity, it is useful to start the analysis with the terms of the provisions first,\nand to then turn to their context and object and purpose.\n1. The terms of Article 7.9 of the SCM Agreement\n4.22 With respect to countermeasures in relation to actionable subsidies, Article 7.9 of the\nSCM Agreement provides that:\n\"[T]he DSB shall grant authorisation to the complaining Member to take\ncountermeasures, commensurate with the degree and nature of the adverse effects\ndetermined to exist ...\"\n4.23 This text therefore comprises three elements:\n(a) \"countermeasures\";\n(b) \"commensurate with the degree and nature\" and\n(c) \"the adverse effects determined to exist\".\nWe consider the meaning of these elements in turn.\n\n(a) \"countermeasures\"\n4.24 We note at the outset that the term \"counterm easures\" is used to designate retaliatory\nmeasures in the WTO Agreement only in the SCM Agreement. This contrasts with the terms of\nArticle 22 of the DSU, which refers to the \"sus pension of concessions or other obligations\".\nHowever, it is not argued by either party in these proceedings that the term \"countermeasures\" would\ndesignate, in the SCM Agreement, anything other than a temporary suspension of certain obligations,\nand this is what we understand this term to refer to.\n4.25 The prefix \"counter-\" can be defined as meaning \"against, in return\".\n58 The Oxford English\nDictionary further cites the term \"counter-measure\" as an illustration of a situation in which this prefix\nis used to indicate something that is \"[d]one, directed, or acting against, in opposition to, as a\nrejoinder or reply to another thing of the same kind already made or in existence\". Another dictionary\ndefines the term \"countermeasure\" as an \"action or device designed to negate or offset another\".59\n4.26 Brazil draws attention to the fact that the te rm \"countermeasures\" refers to measures taken\n\"against\" something, to \"counteract\" something. In the context of Article 7.9 of the SCM Agreement,\nBrazil notes, the term refers to \"affirmative action taken against the responding Member's failure to\n\n58 Oxford English Dictionary, at www.oed.com.\n59 Merriam Webster Dictionary, at www.merriamwebster.com.\n\nremove the adverse effects of a subsidy or to withdraw that subsidy, as required by Article 7.8\".60 The\nUnited States seems to essentially agree with this basic premise. 61 In light of the definitions\nhighlighted above, we also agree that \"counter measures\" are, in essen ce, measures taken to\n\"counteract\" something, and specifically, in the context of Article 7.9 of the SCM Agreement,\nmeasures taken to act against, or in response to, a failure to remove the adverse effects of, or\nwithdraw, an actionable subsidy within the required time period.\n4.27 In Brazil's view, the dictionary meanings of this term further indicate that it refers to\nretaliatory action that goes \"beyond the me re rebalancing of trade interests\".\n62 The United States, on\nthe contrary, highlights that definitions of the term \"counter\" include notions of \"balance\" and\n\"duplicate\", so that an appropriate countermeasu re would be one that would \"balance out the\ninconsistency or duplicate the loss of concessions resulting from the breach\".63\n4.28 We are not convinced that the use of the te rm \"countermeasures\" necessarily connotes, in and\nof itself, an intention to refer to retaliatory ac tion that \"goes beyond the mere rebalancing of trade\ninterests\"64, as Brazil suggests. As noted above, the term indicates that the action is taken in response\nto another, in order to \"counter\" it. This does not necessarily connote, in our view, an intention to \"go\nbeyond\" a rebalancing of trade interests. Indeed, we are not convinced that the dictionary meanings\nof the term, in and of themselves, provi de any compelling guidance as to the exact level of\ncountermeasures that may be permissible under Article 7.9 of the SCM Agreement. We also note that\nthe term \"countermeasures\" is similarly used in Article 4.10 of the SCM Agreement, where the\npermissible level of countermeasures is defined differently, in terms of \"appropriateness\".\n4.29 Brazil also refers to the use of the term \"c ountermeasures\" in public international law, as\nreflected in the Articles on State Responsib ility of the International Law Commission (ILC) 65, as an\n\"additional interpretative considera tion\", to highlight that, \"under the ILC Articles, countermeasures\nare taken with the goal of encouraging – 'induci ng' – the responsible State to comply with its\nobligations, without making it impossible to comply, and without punishing the respondent.\"66\n4.30 We note that the term \"countermeasures\" is the general term used by the ILC in the context of\nits Articles on State Responsibility to designate te mporary measures that injured States may take in\nresponse to breaches of obligations under international law. 67 This has been noted by arbitrators in\nthe context of interpreting Article 4.10 of the SCM Agreement.68\n\n61 See US responses to questions from the Arbitrator, question 43, para. 56: \"the \"countermeasures\" are\nto \"counter the inconsistency with the SCM Agreement.\"\n63 US responses to questions from the Arbitrator, question 43, para. 56.\n65 The International Law Commission was established by the UN General Assembly for the promotion\nof the progressive development of international law and its codification. The Commission adopted in 2001 a set\nof draft articles on responsibility of States for interna tionally wrongful acts consistin g of 59 articles as well as\ncommentaries thereto. The General Assembly, in re solution 56/83 of 12 December 2001, as recommended by\nthe Commission, took note of the articles on responsibility of States for internationally wrongful acts, the text of\nwhich was annexed to the resolution, commended them to the attention of Governments without prejudice to the\nquestion of their future adoption or other appropriate action. See http://www.un.org/law/ilc/.\n67 See http://untreaty.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf.\n68 See Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 5.58.\n\n4.31 We agree that this term, as understood in public international law, may usefully inform our\nunderstanding of the same term as used in the SCM Agreement.69 Indeed, we find that the term\n\"countermeasures\", in the SCM Agreement, describes measures that are in the nature of\ncountermeasures as defined in the ILC's Articles on State Responsibility.\n4.32 At this stage of our analysis, we therefore find that the term \"countermeasures\" essentially\ncharacterizes the nature of the measures to be authorized, i.e. temporary measures that would\notherwise be contrary to obligations under the re levant WTO Agreement(s) and that are taken in\nresponse to a breach of an obligation under the SCM Agreement. This is also consistent with the\nmeaning of this term in public international law as reflected in the ILC Articles on State\nResponsibility.\n4.33 As to the permissible level of countermeasures that may be authorized under Article 7.9 of the\nSCM Agreement, that Article provides specific instruction, through the terms \"commensurate with the\ndegree and nature of the adverse effects determined to exist\". We now consider these terms.\n(b) \"commensurate with the degree and nature of the adverse effects determined to exist\"\n4.34 The expression \"commensurate with the degree and nature of the adverse effects determined\nto exist\" contains two elements: the term \"comme nsurate\" and the \"degree and nature of the adverse\neffects determined to exist\". We consider these elements successively.\n(i) \"commensurate\"\n4.35 Brazil notes that dictionary definitions of th e term \"commensurate\" point to a notion of\n\"correspondence\" in \"extent, magnitude or degree\" as well as to \"proportion\" and that this term\ndefines \"a particular relationship between two th ings, in this case \"countermeasures\" on the one hand,\nand \"the degree and nature of the adverse effects determined to exist\", on the other\".70\n4.36 Dictionary definitions of this term include: \"e qual in measure or extent: coextensive\" and\n\"corresponding in size, extent, amount, or degree: proportionate\"71, \"of equal extent, coextensive\".72\n4.37 In light of these elements, we agree that the term \"commensurate\" essentially connotes a\n\"correspondence\" between two elements. In the c ontext of Article 7.9, the \"correspondence\" is\nbetween the countermeasures and the \"degree and nature of the adverse effects determined to exist\".\n4.38 Brazil also highlights that this term \"does not connote equality, but adequacy, congruity,\nharmony, and proportion. These words, which ca rry both qualitative and quantitative dimensions,\n\n69 We also note however that, by their own terms, the Articles of the ILC on State Responsibility do not\npurport to prevail over any specific provisions relating to the areas it covers that would be contained in specific\nlegal instruments. We note in particular the following Commentary of the ILC:\n\n\"In common with other chapters of these artic les, the provisions on countermeasures are\nresidual and may be excluded or modified by a special rule to the contrary (see article 55).\nThus, a treaty provision precluding the suspension of performance of an obligation under any\ncircumstances will exclude countermeasures with respect to the performance of the obligation.\nLikewise, a regime for dispute resolution to which States must resort in the event of a dispute,\nespecially if (as with the WTO dispute settlemen t system) it requires an authorization to take\nmeasures in the nature of countermeasures in response to a proven breach.\"\n\n71 Merriam Webster Dictionary online, at www.merriam-webster.com\n72 Shorter Oxford English Dictionary, p. 459.\n\nshow that countermeasures are not defined with th e precision of equality, but more broadly in both\nqualitative and quantitative terms\".73\n4.39 We agree that the term \"commensurate\" does not suggest that exact or precise equality is\nrequired, between the two elements to be compared , i.e. in this case, the proposed countermeasures\nand the \"degree and nature of the adverse effects dete rmined to exist\". To that extent, we agree that\nthe term \"commensurate\" connotes a less precise degree of equivalence than exact numerical\ncorrespondence. Nonetheless, the term \"commensurat e\" does indicate, in our view, a relationship of\ncorrespondence and proportionality between the two elemen ts, and not merely a relationship of\n\"adequacy\" or \"harmony\" as suggested by Brazil. We do not exclude that this correspondence may be\nqualitative as well as quantitative. The exact nature of the correspondence at issue will further be\ninformed by the identification of what exactly the proposed countermeasures are required to be\n\"commensurate\" with. This is defined through the terms \"the degree and nature of the adverse effects\ndetermined to exist\".\n(ii) The \"degree and nature\" of the adverse effects\n4.40 The text of Article 7.9 refers to the \"degree and nature\" of the adverse effects rather than their\n\"level\" or \"magnitude\". Brazil highlights in this respect the difference with the terms of Article 22.4\nof the DSU, which requires \"equivalence\" in the \"lev el\" of nullification or impairment suffered by the\ncomplaining Member. Brazil invites the Arbitrator to approach the determin ation with reference to\nthe notion of \"reasonableness\" and points to a finding by the Appellate Body in the context of another\nprovision, to the effect that \"reasonableness\" implies a degree of flexibility that involves a\nconsideration of the specific circumstances of the case.74\n4.41 We agree that the reference to both the \"degree\" and the \"n ature\" of the adverse effects\ndetermined to exist suggests that the correspondence that is required to exist, between the proposed\ncountermeasures and the \"degree and nature of th e adverse effects\", may encompass both quantitative\nand qualitative elements. The \"degree\" of the ef fects could be understood as a quantitative element,\nwhereas the reference to the \"nature\" of the a dverse effects seems to point to something more\nqualitative.\n4.42 In this respect, both parties suggest that the \"nature\" of the adverse effects may be understood\nin the context of the various types of adverse e ffects that may arise under Articles 5 and 6 of the\nSCM Agreement. Brazil notes that the \"nature\" of the a dverse effects determined to exist will vary\nfrom case to case, and could involve a range of types of effects, depending on the specific\nsubparagraph of Article 5 or 6 at issue.\n75 The United States also observes that \"the nature of the\nadverse effects can be understood on the basis of the findings in the particular dispute\".76\n4.43 We agree that the reference to the \"nature\" of the adverse effects may be understood to refer\nto the different \"types\" of adverse effects that are foreseen in Articles 5 and 6, and that this therefore\ninvites a consideration of the specific type of \"adver se effects\" that have been determined to exist as a\nresult of the specific measure in relation to which countermeasures are being requested. These effects\ncould manifest themselves in a variety of ways, each reflecting a specific type of trade distortion.\n4.44 Brazil also notes that the \"degree\" of adverse effects refers to the \"extent or scope\" of the\nadverse effects \"in terms of their intensity or capacity or potential for causing disruption of markets or\n\n74 See Brazil's written submission, para. 57.\n76 US responses to questions from the Arbitrator, question 66, para. 175.\n\ntrading relationships\".77 Brazil also observes that there may be a correlation between the \"nature\" and\n\"degree\" of the adverse effects, in that \"the broade r the scope of the nature of the adverse effects, the\nmore likely the \"degree\" of adverse effects will be more severe in terms of actual or potential market\ndisruption\".78\n4.45 The United States, for its part, considers that th e reference to the \"degree and nature\" of the\nadverse effects \"is a reminder that countermeasures s hould fit only that part of the subsidy that is\ninconsistent\". The United States also argues th at the language of Article 7.9 ensures that\ncountermeasures are limited to \"what is necessary to address the adverse effects of the subsidies\", and\nnot more. The United States considers that anything above that \"would be punitive\". The\nUnited States thus concludes that \"the Arbitrators must be satisfied that the countermeasure does not\nexceed what would be sufficient to respond to that part of the effects of the actionable subsidies that\nhas been found to cause significant price suppression and adverse effects on Brazil\".\n79\n4.46 We understand these arguments of the parties as essentially drawing attention to the\npermissible scope of what may be taken into account in assessing the \"commensurateness\" of the\nproposed countermeasures in relation to the \"degree and nature\" of the adverse effects determined to\nexist in the specific case at hand. The United States ' arguments essentially highlight the fact that the\nproposed countermeasures may not exceed the scope of the findings, as they relate only to those\nadverse effects that have been determined to exist in the specific case at hand, and that this is the only\nbasis for the findings in relation to the subsidy at issue. Brazil's arguments, on the other hand, point to\nthe fact that the full extent of the degree and nature of these adverse effects must be taken into\naccount.\n4.47 We agree in principle with both of these pr opositions. In assessing the \"commensurateness\"\nof the proposed countermeasures to the \"degree and natu re\" of the adverse effects determined to exist,\nwe are entitled to take into account fully the \"d egree and nature\" of these adverse effects as they\npresent themselves in the case at hand, but we are not permitted to do more than that. In other words,\nthe \"degree and nature\" of the adverse effects dete rmined to exist in the case at hand constitute the\nentirety of what we may and must consider in assessing the \"commensurateness\" of the proposed\ncountermeasures in that case.\n4.48 The parties disagree as to what exactly this imp lies in the circumstances of this case. We will\nconsider this question in Secti on IV.D.1 below in the context of our assessment of Brazil's proposed\ncountermeasures in this case. We now turn to th e final element of the terms of Article 7.9, the\n\"adverse effects determined to exist\".\n(iii) The \"adverse effects determined to exist\"\n4.49 Brazil observes that the term \"adverse effects dete rmined to exist\" sends the treaty interpreter\nback to the precise findings on adverse effects made by the panels and the Appellate Body as these\nconstitute the \"adverse effects determined to exist\". We agree.\n4.50 The expression \"adverse effects determined to exist\" refers us to the specific \"adverse effects\"\nwithin the meaning of Articles 5 and 6 of the SCM Agreement that form the basis of the underlying\nfindings in the case at hand.\n\n79 US written submission, para. 300.\n\n4.51 We note in this respect that Article 5 of the SCM Agreement identifies three categories of\n\"adverse effects to the interests of other Members\", that \"no Member should cause, through the use of\nany subsidy referred to in paragraphs 1 and 2 of Article 1\". These are:\n(a) injury to the domestic industry of another Member;\n(b) nullification or impairment of benefits accruing directly or indirectly to other\nMembers under GATT 1994 in particular the benefits of concessions bound under\nArticle II of GATT 1994;\n(c) serious prejudice to the interests of another Member.\"\n4.52 Article 7.1 further provides the possibility fo r any WTO Member to request consultations\nwith another Member, whenever it has reason to belie ve that \"any subsidy referred to in Article 1,\ngranted or maintained by another Member, results in injury to its domestic industry, nullification or\nimpairment or serious prejudice\".\n4.53 In principle, therefore, the \"adverse effects determined to exist\" in the underlying proceedings\nultimately leading to a request for countermeasures under Article 7.9 of the SCM Agreement may be\nin the form of injury to the domestic industry of a Member, nullification or impairment, or serious\nprejudice to the interests of another Member.\n2. Context\n4.54 A number of provisions within the SCM Agreement provide useful context for the\ninterpretation of Article 7.9. As noted above, the notion of \"adverse effects\" and the definition of the\nvarious types of adverse effects under Articles 5 a nd 6 of the Agreement shed light on the expression\n\"degree and nature of the adverse effects determined to exist\".\n4.55 Article 4.10 of the SCM Agreement and Article 22.4 of the DSU also provide useful context\nfor a proper understanding of this provision. Article 4.10 of the SCM Agreement provides the legal\nstandard for countermeasures in relation to pr ohibited subsidies. Under that provision,\ncountermeasures in relation to prohibited subs idies must be \"appropriate\", and \"not …\ndisproportionate in light of the fact the subsidi es dealt with under these provisions are prohibited\".\nThe clear difference in the wordi ng of both provisions within the SCM Agreement confirms to us that\nthe terms of Article 7.9, which expressly refer to the \"degree and nature of the adverse effects\ndetermined to exist\", are intended to closely tailor, in all cases, the countermeasures to the legal basis\nfor the underlying findings. We also note that there is no suggestion, in Article 7.9, that there would\nbe any flexibility to take into account any consider ations other than the \"degree and nature of the\nadverse effects determined to exist\". This can be understood to reflect the specificity of the legal\nbasis on which findings arise in relation to ac tionable subsidies, which are not prohibited per se. The\nscope of potential countermeasures is accordingly limited in scope, to the \"degree and nature\" of those\neffects of the subsidy that are the basis for the successful challenge.\n4.56 These elements confirm our understanding of the meaning of the terms of Article 7.9, as we\nhave determined it so far on the basis of the terms of the provision.\n3. Object and purpose\n4.57 The question of the objective of retaliatory me asures in the WTO has been addressed in the\ncontext of proceedings under Article 22.4 of the DSU. The arbitrator on EC – Bananas III (US)\n(Article 22.6 – EC) thus found that:\n\n\"[T]he overall objective of compensation or the suspension of concessions or other\nobligations as described in Article 22.1:\n'Compensation and the suspension of concession or other obligations\nare temporary measures available in the event that the\nrecommendations or rulings are not implemented within a reasonable\nperiod of time. However, neither compensation nor the suspension of\nconcessions or other obligations is preferred to full implementation of\na recommendation to bring a measure into conformity with the\ncovered agreements. Compensation is voluntary and, if granted, shall\nbe consistent with the covered agreements.'\nAccordingly, the authorization to suspe nd concessions or other obligations is a\ntemporary measure pending full implementation by the Member concerned. We\nagree with the United States that this temporary nature indicates that it is the purpose\nof countermeasures to induce compliance. But this purpose does not mean that the\nDSB should grant authorization to suspend concessions beyond what is equivalent to\nthe level of nullification or impairment. In our view, there is nothing in Article 22.1\nof the DSU, let alone in paragraphs 4 and 7 of Article 22, that could be read as a\njustification for counter-measures of a punitive nature.\"\n4.58 This objective of suspension of concessions or other obligations under Article 22.4 of the\nDSU has been recently confirmed by the Appellate Body in US – Continued Suspension.\n80 Arbitrators\nhave also found that the objective of countermeasures under Article 4.10 of the SCM Agreement is to\n\"induce compliance\".81\n4.59 We see no reason to assume that c ountermeasures under Article 7.9 of the SCM Agreement\nwould serve a different purpose. The authorizatio n of countermeasures in relation to actionable\nsubsidies arises in circumstances comparable to t hose relating to countermeasures under Article 4.10\nof the SCM Agreement or Article 22.4 of the DSU, i.e. in a situation where the responding Member\nhas failed to comply with the recommendations and ru lings of the DSB in the prescribed time period.\nAs under Article 22.4 of the DSU and Article 4.10 of the SCM Agreement, countermeasures under\nArticle 7.9 of the SCM Agreement constitute temporary measures ta ken in response to a continued\nbreach of the obligations of the Member concerned, and pending full compliance with the\nrecommendations and rulings of the DSB. We consider, therefore, that countermeasures under\nArticle 7.9 of the SCM Agreement also serve to \"induce compliance\".\n4.60 However, we do not consider that this purpose in and of itself provides specific indications as\nto the level of countermeasures that may be permissible unde r this provision. Indeed, this purpose is\ncommon to all three legal bases for countermeasure s or suspension of obligations under the WTO\nAgreements, each of which defines the permissibl e level of countermeasures in relation to the\nmeasures that it relates to. In the case of countermeasures relati ng to actionable subsidies under the\nSCM Agreement, the permissible level of countermeasures is defined, as we have seen above, through\nthe terms \"commensurate with the degree and nature of the adverse effects determined to exist\".\n4.61 We note that this distinction is also found under general rules of international law, as reflected\nin the ILC's Articles on State Responsibility, wh ich have been referred to by Brazil in these\nproceedings. Article 49 of these Articles defines \"inducing compliance\" as the only legitimate object\n\n80 See Appellate Body Report, US – Continued Suspension, para. 309.\n81 See Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 5.57; Decision by the Arbitrator,\nCanada – Aircraft Credits and Guarantees (Article 22.6 – Canada) , paras. 3.47-3.48; Decision by the\nArbitrator, Brazil – Aircraft (Article 22.6 – Brazil), paras. 3.44, 3.54, 3.57 and 3.58.\n\nof countermeasures, while a separate provision, Ar ticle 51, addresses the question of the permissible\nlevel of countermeasures, which is defined in relation to proportionalit y to the injury suffered, taking\ninto account the gravity of the breach.82\n4.62 Finally, we note that the terms of Article 7.9 of the SCM Agreement, which refer exclusively\nto the \"degree and nature of the adverse effects de termined to exist\", do not suggest that there would\nbe any basis for increasing their level, in a subj ective sense, to specifically take into account a\nsuperadded objective of inducing compliance. We are not empowered to \"adjust\" the level of\ncountermeasures beyond what these terms allow, in our assessment of the level of countermeasures to\nbe authorized. Such an adjustment would go beyond the stated correspondence between the\ncountermeasure and the degree and nature of th e adverse effects. The objective of inducing\ncompliance must be seen to arise from the ability of a Member to obtain an authorization, and not\nfrom an exaggeration of its permitted amount.\nD. ASSESSMENT OF BRAZIL'S PROPOSED COUNTERMEASURES\n4.63 Brazil has proposed countermeasu res in the amount of US$1.037 billion in relation to the\nmarketing loan and countercyclical payments. This amount is based on certain assumptions which\nBrazil argues should be adopted in their calculation, a number of which the United States disagrees\nwith. In addition to that, the United States disagrees with Brazil's actual calculations. We therefore\nconsider the underlying assumptions in Brazil's appr oach which are disputed by the United States,\nbefore turning to the calculation of the proposed countermeasures.\n1. Should the level of countermeasures be limited to the adverse effects suffered by Brazil?\n4.64 Brazil's counterfactual simulation involves a calcu lation of the global impact of eliminating\nmarketing loans and countercyclical payments. Th e result of the simulation is the sum of (i) the\nincome losses on actual cotton production due to supp ressed world market prices and (ii) the value of\nthe cotton production foregone by otherwise competitiv e farmers in the rest of the world due to\nsuppressed world market prices. These income losses and the value of the cotton production foregone\nwere incurred not only by Brazilian farmers but also by other non-US producers.\n4.65 The United States argues that because the findings in this case concern serious prejudice to\nBrazil alone, it is necessary to separate the effects on Brazil in particular from the worldwide effects.83\nThe allowed countermeasures should be equal only to (i) the sum of the income losses on actual\nBrazilian cotton production due to suppressed world market prices and (ii) the value of the cotton\nproduction foregone by Brazilian farmers due to suppressed world market prices.\n4.66 We must therefore consider whether the pr oposed countermeasures may legitimately include\na calculation of the effects of the \"global impact\" of eliminating the subsidies at issue, as argued by\nBrazil, or whether they should be limited to the adverse impact of the subsidy on Brazil alone.\n(a) Arguments of the parties\n4.67 Brazil's request seeks to quantify the entirety of the adverse effects of the ML and CCP\nsubsidies on the world cotton market, on the assumption that this is the basis on which the finding of\n\"adverse effects\" was made in the underlying proceedings.\n4.68 In the view of the United States, the DSB' s recommendations and rulings were based on a\nfinding of \"present\" serious prejudice to the interests of Brazil within the meaning of Article 5(c) of\n\n82 See http://untreaty.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf.\n83 US written submission, para. 308.\n\nthe SCM Agreement and Brazil's inclusion of the alleged effects of the payments on the entire world\nexceeds what is permissible. In the United States' view, the type of \"adverse effects\" relied on by\nBrazil in the underlying proceedings in this case is \"serious prejudice to the interests of another\nMember\", so that the only relevant effects are tho se on Brazil, and those are the adverse effects that\nare relevant here. The United States explains that the panel looked at the \"world price\" in determining\nwhether there was price suppression as a result of the US measures, and agrees that price effects on\nthe world market would affect Brazil. But, the Unit ed States argues, in the final analysis the enquiry\nfocused on the existence of serious prejudice to the in terests of Brazil, and the use of a world price (to\nestablish price suppression) does not mean that the finding of serious prejudice concerned the entire\nworld. In the United States' view, a recalculation of the effects of the measures on Brazil alone leads\nto a figure of US$30.4 million (or US$134.3 million, without corrections to Brazil's model).\n84\n4.69 Brazil responds that the countermeasures must be commensurate with the significant price\nsuppression determined to exist in the world market for cotton. 85 Brazil argues that in the underlying\nrulings, both in the initial and compliance proceed ings, the Panels and the Appellate Body found\n\"adverse effects to the interests of Brazil in the form of significant price suppression in the world\nmarket for cotton\" 86, and that in this dispute, the adverse e ffects determinations relate to the very\nexistence of a suppressed world market. Brazil consid ers that the United States is reading Article 7.9\nof the SCM Agreement out of the Agreement in effectively seekin g to equate the standard it contains\nwith the standard in Article 22.4 of the DSU, which provides for equivalence to the level of\nnullification or impairment (suffered by the complain ing party). In Brazil's view, the legal standard\nunder Article 7.9 of the SCM Agreement is more flexible than the DSU and can provide for\ncountermeasures on a broader scale than equivalence with nullification or impairment.\n4.70 The United States notes that Article 6.3 of the SCM Agreement defines four types of \"subsidy\neffects\" that may constitute serious prejudice to the interests of a complaining Member. The\nUnited States considers that Brazil's interpretation of these provisions would read each in isolation\nfrom the governing provisions of Article 5 and from othe r elements of Article 6. In the United States'\nview, \"when Article 6.3 is interpre ted in context, it is evident that the effect on the complaining\nMember is the concern for all types of subsidy effect described therein\".87\n(b) Analysis by the Arbitrator\n4.71 Brazil analyses the findings of the original and compliance panels as confirmed by the\nAppellate Body in relation to the \"adverse effects de termined to exist\", to support its argument that\nthese effects encompass price suppression on the world cotton market. Brazil highlights the fact that\nthese findings were based on Article 6.3(c) of the SCM Agreement, which relates to \"price\nsuppression\" on the market, and that the relevant ma rket in the panel's findings in this case was the\nworld market. Brazil draws attention to statements by the original and compliance panels that \"the\neffect of [the ML and CCP payments] is signifi cant price suppression on the world market\" and that\nthe determination of the effect of the subsidies at issue was made in relatio n to the world market.\nBrazil does not dispute that the serious prejudice find ing relates to the interest of Brazil but it argues\nthat such serious prejudice is precisely constituted by price suppression on the world market.\n4.72 The United States, by contrast, draws attention to the fact that these rulings must be seen in\ntheir proper context, and that, in particular, the various subparagra phs under Article 6.3 (including\nsubparagraph (c)), must be read in the context of Article 5, which refers to \"adverse effects to the\ninterests of other Members\" and of subparagraph (c ) of the same provision, which defines the notion\n\n84 US written submission, para. 245.\n85 Brazil's written submission, paras. 289-330.\n87 US responses to questions from the Arbitrator, question 115, para. 96.\n\nof \"serious prejudice\" with reference to \"the inte rests of another Member\". In this regard the\nUnited States points out that the chapeau to Article 6.3 specifically refers to serious prejudice \"in the\nsense of paragraph (c) of Article 5\".\n4.73 In order to address this issue, we find it useful to consider the specific findings of \"adverse\neffects\" at issue in this case as well as the broader legal context in which these findings arise, in order\nto clarify what the \"degree and nature of the a dverse effects determined to exist\" are in the\ncircumstances of this case.\n4.74 As we have noted above, Article 5 of the SCM Agreement identifies three types of \"adverse\neffects to the interests of other Members\" arisi ng from subsidies, that Members should not cause.\nThese are (a) injury to the domestic industry of another Member, (b) nullification or impairment of\nbenefits accruing to other Members, and (c) \"serious prejudice to the interests of another Member\".\n4.75 We note, at this stage of our analysis, that the expression \"adverse effects\" is defined with\nreference to \"the interests of other Members\". We also note that the specific type of \"adverse effect\"\nthat is at issue in the circumstan ces of this case, \"serious prejudice\", is also defined specifically with\nreference to the interest of \"another Member\". It is clear therefore that the notion of \"adverse effects\"\nwithin the meaning of Article 5 and the notion of \"serious prejudice\" are both inherently and by\ndefinition tied to the manner in which they affect th e interests of other WTO Members. In the case of\n\"serious prejudice\", this is even defined more spec ifically in relation to the interests of \"another\nMember\", rather than all Members.\n4.76 Article 6 further elaborates on the circumstance s in which \"serious prejudice\" within the\nmeaning of Article 5(c), i.e. \"serious prejudice to the interests of another Member\", may arise. In this\ncase, the findings in the underlying proceedings are based on subparagraph (c) of Article 6.3, which\nprovides that \"serious prejudice\" may arise in any case where:\n\"[T]he effect of the subsidy is a significant price undercutting by the subsidized\nproduct as compared with the price of a like product of another Member in the same\nmarket or significant price suppression, price depression or lost sales in the same\nmarket.\"\n4.77 Specifically, the findings of the panel and the Appellate Body in this case were based on a\ndetermination that the subsidies at issue caused \"s ignificant price suppression\" within the meaning of\nthis provision, on the world market for cotton.\n4.78 Brazil considers that, since these findings relate to the existence of a \"significant price\nsuppression\" on the world market, the entirety of the effects of this price suppression on that market,\nin other words the worldwide impact of the pri ce suppression, must be the basis for the award of\ncountermeasures in relation to these \"adverse effects\". In Brazil's view, this would reflect the \"degree\nand nature\" of the findings of \"adverse effects\" in the circumstances of this case.\n4.79 Brazil draws our attention in particular to the fact that the various subparagraphs under\nArticle 6.3 define differently in each case the circumstances in which \"serious prejudice\" may be\nconsidered to arise. Brazil highlights the fact that subparagraph (c) of this provision, unlike\nsubparagraphs (a) and (b), does not expressly refer to the specific effect on another Member as the\nbasis for the existence of \"serious prejudice\".\n88 The United States agrees that each of the provisions\nof Article 6.3 \"take a different approach, reflecting the particular type of serious prejudice to which it\npertains\".89 In the United States' view, however, Articl e 6.3(c) \"guides the fact-finder to the trade\n\n88 See Brazil's oral statement, paras. 51 ff.\n89 US responses to questions from the Arbitrator, question 115, para. 98.\n\nrelationship between the complaining Member and th e subsidizing Member, so that any decision will\nbe based on the effects of the subsidies on the comp laining Member. Those effects can be of price\nundercutting of the non-subsidized product \"in the same market\" or of price suppression, price\ndepression, or \"lost sales\" in the same market\" that is, the market in which the products of the\nsubsidizing Member and the complaining Member compete\".90\n4.80 We agree with the United States that, even if subparagraph (c) of Article 6.3 does not\nexpressly refer to the impact of the type of serious prejudice at issue \"on the complaining Member\",\nnonetheless the essence of this type of adverse effect is that it causes serious prejudice \"to the interests\nof another Member\" as defined in Article 5, item (c). In the circumstances of this case, that \"other\nMember\" is Brazil.\n4.81 An examination of the terms of the underlying fi ndings in this dispute also provides useful\nguidance as to their nature. As is highlighted by Brazil, the underlying findings are based on a\ndetermination that the subsidies at issue caused \"significant price suppression\" on the world upland\ncotton market. Although a determination of the ex istence of \"significant price suppression\" on the\nworld market may not, as such, involve or require a specific evaluation of the impact of such price\nsuppression on Brazil, this does not mean that a consid eration of this impact was irrelevant to the\npanel's ultimate finding that such price suppression constituted \"serious prejudice to the interests of\nBrazil\". In fact, the original panel specifically explained why it considered that a price suppression on\nthe world market would inevitably affect Brazil:\n\"We also find that developments on the world upland cotton market price would\ninevitably affect prices in other markets where Brazil and the United States may\ncompete, due to the nature of the world prices in question, and the relative proportion\nof that market enjoyed by the United States and Brazil. All individual sales of upland\ncotton by Brazil and the United States in any domestic market in which both were\npresent would occur against this backdrop.\"\n91\n4.82 The Appellate Body referred to th is determination, to confirm that \"it was not necessary, in\nthese circumstances, for the Panel to proceed to a separate analysis of the prices of Brazilian upland\ncotton in the world market\". 92 Had the impact on Brazil of the price suppression at issue been\nirrelevant to the determination, it would not even have been necessary to explain how price\nsuppression on the world market impacted on Brazil.\n4.83 The original panel also considered in some detail the question of what may constitute \"serious\nprejudice\" to the interests of another Member. In this context, the panel found that:\n\"[A]t the very least, given the subject-matter covered by the SCM Agreement –\ngovernment subsidies in respect of goods – th e effects-based situations identified in\nthe subparagraphs of Article 6.3, and the re ference in the chapeau of Article 6.3 to\nserious prejudice 'in the sense of' Article 5(c), we believe that such 'serious prejudice'\nmay involve the effects of subsidies on th e complaining Member's trade in a given\nproduct. That is, it addresses the volumes and prices and flows of such trade, which\nmay, by logical extension, affect a producing Member's domestic production of that\nproduct. We, therefore, consider that a detrimental impact on a complaining\nMember's production of, and/or trade in, th e product concerned may fall within the\nconcept of 'prejudice' in Article 5(c) of the SCM Agreement.\n\n90 US responses to questions from the Arbitrator, question 115, para. 99.\n91 Panel Report, para. 7.1313.\n92 Appellate Body Report, para. 417.\n\nMoreover, the prejudice must be 'serious'. In one of its ordinary meanings, 'serious'\nmeans 'important' and 'not slight or neglig ible'. Thus, the prejudice in terms of the\neffect on Brazil's production of, and/or trade in, upland cotton must be such as to\naffect Brazil's production of cotton, to a degree that is 'important', not slight or\nnegligible, or meaningful.\nWe recall our conclusion that the price suppression is 'significant'. We note,\nmoreover, Brazil has submitted ev idence to substantiate its assertions that here is a\nclose relationship between movements of Brazilian prices and movements in the\nA-index and that Brazilian producers have suffered from the suppressed price trends\nin the Brazilian market and in Brazilian export markets, including in terms of\nBrazilian producers having reduced production and investment.\"\n93\n4.84 These elements suggest to us that, even if the na ture of the adverse effects determined to exist\nin this case is a \"significant price suppression\" on the world cotton market, the conclusion that such\nprice suppression constitutes serious prejudice \"to the interests of Brazil\" was not reached in\nabstraction of the impact of this price suppression on Brazil. On the contrary, the panel specifically\nexplains how this price suppression affects Brazil as a producer and exporter of upland cotton.\n4.85 This is further confirmed, in our view, by the terms of Article 7.1 of the SCM Agreement,\nwhich sets out the basis upon which Members may initiate proceedings in relation to actionable\nsubsidies. This provision foresees that a Member may request consultations with another Member\nwhenever it has reason to believe that any subsidy re ferred to in Article 1, granted or maintained by\nanother Member, \"results in injury to its domestic industry, nullification or impairment or serious\nprejudice\" (emphasis added). The terms of this provi sion suggest to us that the very basis for the\ninitiation of proceedings relating to actionable subsid ies is the fact that the complaining Member has\nreason to believe that the measure concerned affects its own interests.\n4.86 The original panel, in considering an argument by Brazil that other WTO Members had\nsuffered serious prejudice as a result of the US subsidies, made a comparable observation:\n\"The text of Article 7.2 of the SCM Agreement makes it clear that the dispute\nsettlement procedures set forth in Article 7 of the SCM Agreement may only be\ninvoked by a Member where that Member be lieves that it has itself suffered serious\nprejudice as a result of the subsidization. Fr om this, the only logical inference is that\nthe serious prejudice under examination by a WTO panel is the serious prejudice\nexperienced by the complaining Member.\"94\n4.87 The panel then finds further support for its conc lusion in the terms of Articles 5 and 6 of the\nSCM Agreement. Further to its examination of these provisions, and in light also of the terms of\nArticle 10 of the DSU in relation to the interests of third parties in dispute settlement procedures, the\npanel concluded that \"in examini ng Brazil's allegations … that it has suffered serious prejudice to its\ninterests within the meaning of Article 5(c), we take full account of the interests of all Members\", and\nit indicates that it has taken into account serious prejudice allegations of other Members:\n\"[T]o the extent these constitute evidentiary su pport of the effect of the subsidy borne\nby Brazil as a Member whose producers are involved in the production and trade in\n\n93 Panel Report, paras. 7.1392-7.1394.\n94 Panel Report, para. 7.1403.\n\nupland cotton in the world market. However, we have not based our decision on any\nalleged serious prejudice caused to them.\"95\n4.88 These findings confirm us in our conclusion that, even if the \"significant price suppression\"\ndetermined to exist was in relation to the world market, the finding in essence relates to the interests\nof Brazil and reflects \"serious prejudice\" to the interests of Brazil specifically. As we have seen\nabove, this determination was in fact not entirely de tached from a consideration of the effects of this\nprice suppression on Brazil specifically. On the co ntrary, the panel took care to explain how the\nexistence of significant price suppression on the world market affected Brazil's production and trade\nin upland cotton.\n4.89 These considerations must, in our view, info rm and guide our understanding of what the\nexpression \"degree and nature of the adverse effect s determined to exist\" means in this case.\nSpecifically, we consider that it is the very nature of the findings at issue that they relate to the\nadverse effects of the subsidies at issue on Brazil. This in turn implies that the scope of the \"degree\nand nature\" of these adverse effects must be unders tood in this light. We therefore understand the\n\"degree and nature of the adverse effects\", in the ci rcumstances of this case, to refer to the extent to\nwhich Brazil is affected by the price suppression on the world cotton market caused by the ML and\nCCPs that has been determined to exist in th e underlying proceedings. The provisions of the\nSCM Agreement as we have interpreted them, and the finding s of the Panel and the Appellate Body in\nthe original proceedings, make it clear to the Arbitrator that these were the \"adverse affects\ndetermined to exist\".\n4.90 We find it important, however, to emphasize in this context that, contrary to what Brazil\nargues, such an interpretation does not \"render inu tile the implementation obligations for findings of\nworldwide adverse effects\".\n96 The obligation of the United States in terms of implementation remains\nto remove the adverse effects determined to exist (or withdraw the subsidy). This is a distinct\nquestion from the question of the quantum of count ermeasures that Brazil is entitled to seek, as the\ncomplaining Member whose interests are adversely a ffected by the existence of this significant price\nsuppression, such that these countermeasures would be \"commensurate with the nature and degree of\nthe adverse effects (to the interests of Brazil) determined to exist\" in this case.\n4.91 The fact that the remedies available to Brazil must be commensurate with the degree and\nnature of the adverse effects in relation to its own interests does not alter the scope of what the\nUnited States might be required to do in order to re move such adverse effects. In particular, it does\nnot modify the fact that the source of the advers e effects determined to exist in this case is the\nexistence of \"significant price suppression\" on the world market, and that this is what the\nUnited States must address in removing the adverse effects at issue. This is comparable, mutatis\nmutandis, to the situation that arises in the case of a vi olation, for example, of Article XI of the\nGATT 1994 through an import ban, in which the sc ope of the permissible countermeasures is a\nfunction of the level of nullification or impairment of benefits accruing to the complaining Member,\nbut this does not modify in any way the nature of the implementation requirements that may arise\nfrom the rulings for the Member concerned (for example, through the removal of the WTO-\ninconsistent import ban).\n4.92 In conclusion, in determining whether Brazi l's proposed countermeasures are \"commensurate\nwith the degree and nature of the adverse effects dete rmined to exist\", we must consider whether they\nare commensurate with the impact on Brazil of the price suppression resulting from the granting of\nML and CCPs on the world cotton market.\n\n95 Panel Report, para. 7.1415.\n\n2. Should the level of countermeasures be adjusted to account for a threshold of\n\"significant\" price suppression?\n4.93 Brazil's counterfactual assumes a complete wit hdrawal of the ML and CCP subsidies. The\nUnited States, however, considers that the counterm easures \"should fit only that part of the subsidy\nthat is inconsistent, and, to the extent quantiti es are compared, the Arbitrator should compare the\nproposed countermeasures with the part of th e subsidy causing the price suppression over the\n\"significant\" threshold, not the effect of the entire subsidy.\"97\n(a) Arguments of the parties\n4.94 The United States contends that the Arbitrator should make a downward adjustment to the\nmeasure of total effects in order to meet the legal standard under Article 7.10 of the SCM Agreement.\nThe United States acknowledges that the precise amount of the deduction is difficult to determine but\nit believes this to be nonetheless critical.\n4.95 The parties were requested to provide a quan titative threshold of significance. Brazil has\nstated that \"it would not consider any price suppression, however small, as significant as long as it is\ngreater than zero\"\n98 but did not propose a specific threshol d. The United States responded that it\ncannot propose an exact threshold as to what dis tinguishes \"significant\" price suppression from price\nsuppression in this particular dispute.99\n4.96 Instead, both parties have stressed the nature of the product, the world market for cotton and\nthe behaviour of the price itself. For Brazil, upland cotton is a homogeneous product whose sales are\nprice sensitive. 100 It is a basic and widely traded commod ity so that a relatively small decrease or\nsuppression of prices could be significant. 101 It also argues that there ar e continuing effects from past\nmarketing loans and countercyclical payments which are significant in and of themselves.102\n4.97 The United States claims that the price of upl and cotton is highly variable, with frequent\nswings of substantial degree. It claims that an analysis of cotton price variability over 1980 to 2003\nshows that annual cotton price variability for the entir e period is in range of 18 to 20 per cent. It\nargues that strong or frequent fluctuations in price would themselves tend to cut against a finding that\nany alleged suppression is \"significant\", especially if the variability frequently brings the price of the\nproduct to a level at which the alleged suppression (judged in light of that price) no longer exists.103\n(b) Analysis by the Arbitrator\n4.98 The question before us is whether the Arbitr ator should, in assessing the level of Brazil's\nproposed countermeasures, aim to capture only th at portion of the price suppression on the world\ncotton market resulting from the ML and CCPs that re nders it \"significant\", or whether the entirety of\nthis price suppression may be taken into account.\n4.99 We find it useful to start our analysis of th is question with a reference to the underlying\nfindings, through which the existence of \"significan t price suppression\" under Article 6.3(c) of the\nSCM Agreement was established.\n\n97 US written submission, para. 298.\n98 Brazil's responses to questions from the Arbitrator, question 38, para. 445.\n99 US responses to questions from the Arbitrators, question 132, para. 159.\n100 Brazil's comments on US responses to questions from the Arbitrator, question 122, para. 299.\n101 Brazil's responses to questions from the Arbitrator, question 36, para. 404.\n102 Brazil's responses to questions from the Arbitrator, question 36, para. 432.\n103 US responses to questions from the Arbitrators, question 132, para. 160.\n\n4.100 The original panel considered the meaning of the term \"significant\" in the expression\n\"significant price suppression\" under Article 6.3(c) and determined that \"it is the degree of price\nsuppression or depression itself that must be \"signifi cant (i.e. important, notable or consequential)\" 104\nunder this provision. The panel further consider ed how the \"significance\" of a price suppression\nmight be assessed, including in the context of the world cotton market:\n\"The 'significance' of any degree of pri ce suppression may vary from case to case,\ndepending upon the factual circumstances, and may not solely depend upon a given\nlevel of numeric significance. Other consider ations, including the nature of the 'same\nmarket' and the product under consideration may also enter into such an assessment,\nas appropriate in a given case.\nWe cannot believe that what may be significant in a market for upland cotton would\nnecessarily also be applicable or relevant to a market for a very different product. We\nconsider that, for a basic and widely tr aded commodity, such as upland cotton, a\nrelatively small decrease or suppression of prices could be significant because, for\nexample, profit margins may ordinarily be narrow, product homogeneity means that\nsales are price sensitive or b ecause of the sheer size of the market in terms of the\namount of revenue involved in large volumes traded on the markets experiencing the\nprice suppression.\"105\n4.101 The panel then considered the relative magnitude of the United States production and exports,\nthe overall price trends in the world market and the mandatory nature of the subsidies in question and\nwell as the available evidence of the order of magn itude of the subsidy, to conclude that it was\n\"certainly not, by any means, looking at an insignificant or unimportant world price phenomenon\".106\n4.102 The panel therefore did not find it necessary to specifically quantify the degree of\n\"significance\" of the price suppression at issue in order to determine that \"significant price\nsuppression\" existed. Nor did it suggest that its findi ng was limited to a certain \"portion\" of the price\nsuppression that had been determined to exist on th e world cotton market. Rather, it considered the\nelements before it, and determined that the price suppression at issue, i.e. the price suppression caused\nby the subsidies under consideration on the world cott on market, was \"significant\". In so doing, the\npanel noted that the \"significance\" of any degree of price suppression \"may not solely depend upon a\ngiven level of numeric significance\" and that \"[o]th er considerations, including the nature of the\n\"same market\" and the product unde r consideration, may also en ter into such an assessment\"\n107 and\nthat in the case of cotton, in light of the characte ristics of the product and the market, \"a relatively\nsmall decrease or suppression of prices could be significant\".108\n4.103 The compliance panel concurred with the orig inal panel's understanding of the term\n\"significant\" in \"significant price suppression\" in Article 6.3(c) and specifically cites the panel's\nconclusion in relation to the degree of price suppressi on that might be considered \"significant\" with\nrespect to upland cotton, as cited in paragraph 4.100 above.\n109\n4.104 In light of these elements, we do not consider that it is necessary, for the purposes of\nassessing the impact of this \"significant price s uppression\", to exclude in the calculation of the\nadverse effects a portion of the price increase said to be below an alleged threshold of \"significance\".\n\n104 Panel Report, para. 7.1328.\n105 Panel Report, paras. 7.1329-7.1330.\n106 Panel Report, para. 7.1332.\n107 Panel Report, para. 7.1329.\n108 Panel Report, para. 7.1330.\n109 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.50.\n\nThe threshold of \"significance\" is set in order to ascertain whether the price suppression at issue is\nsufficiently \"important, notable or consequential\", as the original panel put it, to fall within the scope\nof Article 6.3(c) and form the basis of a findi ng of \"serious prejudice\" under Article 6 of the\nSCM Agreement. Once it is determined that the price suppression is significant, and therefore that it is\nwithin the scope of the provision, then it is the entir ety of that existing \"significant price suppression\"\nthat is the basis for the determination of \"serious prejudice\".\n4.105 To adjust the level of price suppression downw ards, for the purposes of estimating the level\nof countermeasures that Brazil is entitled to, would m ean that we would not in fact take into account\nthe entirety of the situation that has given rise to th e findings, namely the fact that a certain degree of\nprice suppression exists on the world cotton market, that has been found to be \"significant\". It is not\nfor us to second-guess what alternative lower leve l of price suppression on the world cotton market\nmight have been found not to be \"significant\" in the ci rcumstances of this case. In fact, in light of the\noriginal panel's determination that the \"significance\" of a certain price suppression may not \"solely\ndepend upon a given level of numeric significance\" , we cannot even assume that a purely quantitative\nthreshold would appropriately reflect such \"signifi cance\". Indeed, the United States itself, although it\nconsiders such an adjustment to be \"critical\", d eclined to propose a specific quantitative threshold by\nwhich \"significance\" might be accounted for.\n4.106 The Arbitrator therefore concludes that it is not required, for the purposes of estimating the\neffects of the significant price suppression determined to exist on the world cotton market, to adjust\ndownwards the degree of this price suppres sion for \"significance\" (or, more correctly,\n\"insignificance\").\n4.107 We also note that this is comparable, in concep tual terms, with the practice under the relevant\nWTO agreements in relation to the imposition of safeguards, or countervailing duties, or under the\nAnti-Dumping Agreement in relation to the imposition of anti-dumping duties reflecting the entirety of\nthe dumping margin, where such margin is more than de minimis.\n110 In our view, this is conceptually\nsimilar to the reasoning we are applying to the dete rmination of the \"degree and nature of the adverse\neffects determined to exist\". Once the existe nce of \"significant price suppression\" has been\nestablished, it is legitimate to take into account the entirety of the price suppression caused by the\nmeasures at issue on the world cotton market in assessing its impact on Brazil. A de minimis , or\n\"insignificant\", amount of that price suppression is not to be ignored in terms of the \"remedy\" which,\nin our case, is the countermeasure.\n3. Choice of reference period\n4.108 Brazil quantifies the adverse effects of marke ting loans and countercyclical payments based\non a counterfactual, assessing how much higher wo rld market prices for cotton would have been\npursuant to a complete withdrawal of marketing loans and countercyclical payments in MY 2005.\nThe United States considers this period not to be re presentative in light of more recent evolutions on\n\n110 For example, in a safeguards case, when setting the level of the duty sufficient to eliminate a serious\ninjury, the Member applying the duty would be entitled to impose a duty reflecting the entirety of the injury, and\nwould not be expected to impose a duty that would for example permit injury that might be material but falls\nshort of a \"serious\" level. Similarl y, when considering import volumes for the application of anti-dumping or\ncountervailing duties, it woul d not be expected that an \"initial\" amount of supp ly up to the negligibility\nthreshold would be exempted from application of a measure for a non-negligible supplier. Furthermore, under\nthe Anti-Dumping Agreement , a margin of dumping which is less than 2 per cent is said to be de minimis .\nDumping that is determined to be lower than this threshold will result in immediate termination of the\ninvestigation. However, if the dumping margin is found to equal or exceed this threshold, and the investigating\nauthorities subsequently find that all other grounds for imposing an anti-dumping duty are present, the duty can\nbe set as high as the entirety of the dumping margin. There is no requirement to reduce the anti-dumping duty\nby the amount of the de minimis threshold.\n\nthe market and proposes instead that a three-year period covering MY 2005-07 be used to calculate\nthe amount of countermeasures to which Brazil is entitled.\n(a) Arguments of the parties\n4.109 The United States argues that the task of the Arbitrator is to determine the amount of\ncountermeasures permitted based on the findings of th e compliance panel and that, in this case, the\nArbitrator will be making its dete rmination over three years after the end of the reasonable period. In\nits view, it \"makes sense that the Arbitrators use ac tual data of the period following the end of the\nreasonable period to provide more information about the likely harm to Brazil\".\n4.110 Brazil objects to the argument that the Arbitrator should determine the amount of\ncountermeasures based on the findings of the compli ance panel. It maintains that allowing a non-\ncompliant Member to rely on its own failure to comply in order to limit the amount of\ncountermeasures is inconsistent with the Article 7.9 and 7.10 of the SCM Agreement and Article 22 of\nthe DSU. These provisions do not allow a non-complia nt Member to extend a reference period long\npast the end of the implementation period to limit the scope of countermeasures.\n4.111 The United States further contends that using a single year – MY 2005 – for an agricultural\nproduct that has volatile prices is not representative of the potential effects in future to Brazil.\n111 The\nUnited States has presented data of the A-i ndex from MY 1971 through MY 2007 to illustrate\nhistorical movements in world cotton prices. It argues that the A-index for MY 2007 is in line with\nhistorical A-index values while the period MY 1999-MY 2002 represents a period in which the\nA-index is extremely low from a historical perspective. Given that prices vary from year to year, the\nUnited States advocates the averaging of three years to smooth out the ups and downs to provide a\nmiddle ground instead of relying on any single year.\n112\n4.112 Brazil notes that the question before the Arbitr ator is whether the level of countermeasures\nproposed by Brazil is commensurate with the degree and nature of the adverse effects at the end of the\nperiod for implementation – and not whether the le vel of countermeasures is \"representative of\npotential effects going forward\".113 It then challenges the United States' assertion that MY 2005 is not\nrepresentative of the \"potential effects going forward to Brazil\" and that the average of MY 2005 to\n2007 is more representative. It provides data that shows prices, and hence in its view, effects in\nMY 2005 that were close to the average of the nine-year period since 1999, the first year covered by\nthe findings of the original panel. As such, it finds MY 2005 to be representative of the per-unit\namount of marketing loans and countercyclical payments over the nine-year period and hence, of their\neffects. In contrast, it says that prices in MY 2007 were abnormally high, and in fact, are the highest\nof the decade. As a result, it maintains that ta king an average that includes MY 2007 prices is not\n\"representative\", and understates the amount of the subsidy and the adverse effects caused.\n114\n4.113 Finally, Brazil argues that past arbitrators have used the approach that it is proposing in this\ndispute, i.e. using the year straddling the end of the implementation period. It claims that past\narbitrations have stressed that compliance must be assessed at the time of expiry of the\nimplementation period. It further claims that arb itrators have used reference periods longer than one\nyear only in cases involving subsidies provided for an order of large capital goods to be delivered over\na number of years.\n\n111 US written submission, para. 277.\n112 US responses to questions from the Arbitrator, question 60, para. 153.\n113 Brazil written submission, para. 374.\n114 Brazil written submission, para. 376.\n\n4.114 The United States observes that prior arbitrations do not suggest a narrow one-year analysis.\nIn terms of taking into account more recent data, it claims that arbitrators have taken into account\ncurrent conditions – including evaluation of changes to policies at issue. The United States notes that\narbitrators have also taken approaches that use multi-year time horizons, whether in projections of\nseveral years for a subsidy or in the use of formulas.\n115\n(b) Analysis by the Arbitrator\n4.115 Brazil has based its calculation of the amount of countermeasures that it seeks in relation to\nthe ML and CCPs on MY 2005, and justifies the choice of that period as the year \"straddling\" the end\nof the implementation period. The United States argu es that this is not \"representative\", and that a\nmulti-year reference period should be used.\n4.116 The question we must consider here is whether the specific period proposed by Brazil is such\nthat it would not lead to an estimation of the adverse effects at issue that would be \"commensurate\nwith the degree and nature\" of those adverse effects. We recall in this respect the fact that the burden\nrests on the United States to demonstrate that Brazil's proposed countermeasures do not meet this\nstandard. In order to prevail in its argument, th e United States must therefore persuade us not only\nthat there may be alternatives to the choice of MY 2005 as the period of reference, but rather that the\nuse of MY 2005 as period of reference would l ead to countermeasures that would not be\n\"commensurate\" within the meaning of Article 7.9. The United States has not convinced us that this\nwould be the case.\n4.117 We recognize that price fluctuations on the world upland cotton market may affect the\ncalculation of the adverse effects of the ML and CCP subsidies at issue over time. Indeed, there may\nbe a number of economic or other factors that woul d affect the evolution over time of the impact of\nthe subsidies at issue, and we do not exclude th at there may have been different permissible\napproaches to the choice of period of reference fo r the purposes of such calculations. In a situation\nwhere a fixed annual amount of countermeasures is dete rmined, that will be applied in the future and\nfor an undetermined period of time, there is necessar ily an inherent uncertainty as to how closely the\nsaid amount will represent the actual continued adver se effects of the measure over time. What we\nmust ensure, however, is that there is a legitima te basis for assuming that the chosen period of\nreference may lead to a reasonable estimation of these effects.\n4.118 In the circumstances of this case, we find th at the choice of MY 2005, which represents the\nfirst moment at which the United States should have come into compliance with the recommendations\nand rulings at issue by removing the adverse effect s of the subsidies or withdrawing them, is in\nprinciple legitimate. We note that the end of th e implementation period has been chosen as period of\nreference in arbitrations under Article 22.6 of the DSU previously.\n116 We also find that the elements\nbefore us do not persuade us th at this period would be \"unrepresentative\", as the United States\nsuggests. In fact, Brazil's analysis of cotton pr ices (the Adjusted World price, the A-index and\nUS farm price) shows that prices in MY 2005 were more representative, in the sense that they were\nclose to the average of the nine-year period since MY 1999, than prices over the three-year period\nproposed by the United States. We concur with th e significance attached by Brazil to this nine-year\nperiod since MY 1999 was the first year covered by the findings of the original panel .117 While the\n\n115 US written submission, para. 278.\n116 Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 2.15.\n117 See Panel Report, para. 7.1416: \"In conclusion, in light of all of these considerations, we find that\nthe effect of the mandatory, price contingent United States subsidies at issue – that is, marketing loan\nprogramme payments, user marketing (Step 2) payments and MLA payments and CCP payments – is significant\nprice suppression in the same world market for upland cotton in the period MY 1999-2002 within the meaning\nof Articles 6.3(c) and 5(c) of the SCM Agreement.\"\n\nmost recent market evolutions may suggest rising pri ces, we have little basis to assume that this most\nrecent trend represents a sustained medium or long- term trajectory of the market given that cotton\nprices vary considerably from year to year, a pattern that both parties have attested to and\ndocumented.\n4.119 In light of these elements, we conclude that the United States has not demonstrated that the\nreference period proposed by Brazil for the calculati on of its proposed countermeasures is inadequate,\nand we accept the use of MY 2005 as period of reference for the calculations.\n4. Calculations\n(a) Introduction\n4.120 Brazil calculates the amount of adverse e ffects on rest of the world producers from\nUS marketing loans and countercyclical payments to be US$3.335 billion, although it only requests\ncountermeasures equal to US$1.037 billion annually in line with its original request to the DSB. The\nadverse effects are comprised of two parts. The fi rst is the income losses by rest of the world\nproducers on actual cotton productio n in MY 2005 due to suppressed world market prices (\"sales\nvalue effect\") which Brazil calculates amounts to US$2.73 billion. The second is the value of the\ncotton production foregone by otherwise competi tive producers in the rest of the world due to\nsuppressed world market prices (\"reduced production effects\") which Brazil calculates at\nUS$604.7 million.\n4.121 The United States argues that Brazil's methodolo gy or approach to the calculations suffers\nfrom serious defects so that it shoul d be rejected by the Arbitrator. It describes these defects as:\n(i) the decision not to limit the calculations of adverse effect to only the effects of US programmes on\nBrazil; (ii) the choices for key parameters (elast icities, coupling factor and indicator of price\nexpectations) in the model; (iii) Brazil's use of data for a single year (MY 2005), which the\nUnited States argues is not representative of the fl uctuation of marketing loan and countercyclical\npayments and their effects; and (iv) Brazil's failure to limit the proposed countermeasures to the\nportion of the effects of the marketing loan and co unter-cyclical payments that resulted in the finding\nof inconsistency with the SCM Agreement.\n118\n4.122 Employing the same economic simulation model submitted by Brazil but employing a\ndifferent set of parameters and reference period, it calculates the \"total effects\" of marketing loans and\ncountercyclical payments on Brazil to average no more US$30.4 million annually. The United States\nconfines its calculation only to the adverse effects on Brazil and excludes the adverse effects on other\ncountries. Finally, it argues that the allowable countermeasures will have to be lowered further\ndepending on the chosen threshold for \"significant\" price suppression. For the United States, only\nprice suppression that breaches this threshold of being significant can be authorized for\ncountermeasures.\n4.123 Some of the issues raised by the United St ates which concern limiting the calculations of\nadverse effect to only the effects of US programmes on Brazil, limiting the proposed countermeasures\nto the portion of the effects of the marketing loan and counter-cyclical payments that result in the\nfinding of inconsistency with the SCM Agreement and the choice of the reference period have already\nbeen considered and decided upon by the Arbitrator (see Section IV.D.1-3 above). The Arbitrator\nnow takes up the other remaining issues.\n\n118 US written submission, para. 239.\n\n(b) Brazil's methodology and model\n4.124 Brazil's methodology entails simulating a counterfactual scenario involving the permanent\nand anticipated removal of US cotton marketing lo ans and countercyclical payments. This policy\nchange moves the world market of cotton to a ne w equilibrium with a new world market price and\nnew supply and demand quantities. 119 Based on this counterfactual scenario, Brazil calculates the\npercentage change in the world market price, cott on production in the United States and in the rest of\nthe world relative to the baseline scenario where these US cotton subsidies are in place. Brazil uses\nthe change in the world market price to establis h the amount of price suppression. According to\nBrazil, the suppressed price in the world market for cotton in turn has two related negative\nconsequences for cotton farmers worldwide. First, actual world production is valued at a lower price\nthereby resulting in income loss for farmers in the rest of the world. Second, the lower world price\nreduces the incentive to produce more cotton in the rest of the world, and so leads to foregone\nrevenues from cotton production. 120 For Brazil, the sum of these two effects represents the adverse\neffects of the US subsidies.\n4.125 To conduct this counterfactual simulation, Br azil employs what it describes as a traditional\ndemand and supply log-linear displacement model th at calculates percentage changes from an initial\nbaseline equilibrium in which all US cotton subsidies are in place. 121 The model considers two\nregions, the United States and the rest of the worl d. Brazil constructs s upply and demand functions\nfor cotton in the United States and the rest of the world. The world market for cotton is assumed to be\nin initial equilibrium (at which the world market price for cotton equates world demand and supply\nfor that commodity) in which all US cotton subsidies are in place. 122 In characterizing its model,\nBrazil observes that it had been considered by the compliance Panel and the Appellate Body, and both\nrelied on its results. 123 It further notes that the United States had even used the model for its\nalternative calculations.124\n(i) Arguments of the United States\n4.126 The United States identifies what it claims are a number of problems with Brazil's model,\npointing to Brazil's choice of certain parameters such as United States and rest-of the-world demand\nand supply elasticities; the coupling factor for coun ter-cyclical payments; and the indicator of price\nexpectations.125 While these are not the only problems th at the United States finds with Brazil's\nmethodology, they are the ones that it highlights and for which it provides alternatives that could be\nused to calculate the amount of allowable countermeasures.126\n4.127 In responding to Brazil's claim that the co mpliance panel had relied on the model, the\nUnited States emphasizes that the compliance pane l only needed to determine whether the price\nsuppression indicated by the model was \"significant\". However, the nature of the question before the\nArbitrator makes the issues it has ra ised about the model more \"sensitive\" at this stage of the dispute.\nIt believes that the task of determining countermeasu res under the legal standard of Article 7.9 of the\nSCM Agreement requires that the parameters in the model be correct.\n\n125 US written submission, para. 251.\n126 The United States has resubmitted 'Annex I: A Review of the Simulation Analysis Presented by\nDr. Sumner' which contains a more detailed critique of Br azil's model. The document was originally submitted\nto the compliance panel.\n\n(ii) Analysis by the Arbitrator\n4.128 Brazil's calculation of adverse effects from US marketing loans and countercyclical payments\ncan be graphically represented by Figure 1. It represents the supply curve of a cotton producing\ncountry in the rest of the world. With US subsidies in place, the world price is at OP and quantity\nproduced in the country at OQ. Without the US subsidies, the world price would be at the higher\nlevel OP' and cotton producers in the country would have responded by producing more cotton,\nrepresented here by OQ'.\nFigure 1: Adverse Effects on Producers in the Rest of the World\n\n4.129 The area A in Figure 1 is what Brazil terms the \"sales value effect\" while the sum of the\nareas B and C is what it terms the \"reduced production effects\". The Arbitrator notes that the\nUnited States has not disputed Brazil's decomposition of the adverse effects from the actionable\nsubsidies into this sales value and reduced productio n effects. An alternative way of characterizing\nthese effects can be provided using standard economic concepts. The sales value effect is the increase\nin producer surplus that farmers in the rest of the world would have received based on their current\noutput of cotton had world prices been at the coun terfactual (no subsidies) level. The reduced\nproduction effects are made up of two parts: the pr oducer surplus from the additional production QQ'\n(area B) and the opportunity cost of the resources ne eded to produce the additional cotton (area C).\nThe Arbitrator notes that if one were only inter ested in measuring how US cotton subsidies have\nreduced producer welfare in the rest of the world, then this would be represented by the loss in\nproducer surplus (sum of areas A and B). This is because those resources used to produce QQ' of\ncotton would have found employment elsewhere an d consequently, there would have been no loss\nassociated with those resources to the rest of the world. However, the Arbitrator understands that\nadverse effects may have a wider meaning than prod ucer surplus and that Brazil's economic analysis\nof adverse effects is consistent with the language of Article 6.3(c) of the SCM Agreement, particularly\nin its reference to \"lost sales\".\n4.130 On the subject of the model proposed by Brazil, the Arbitrator determines that, for the reasons\nprovided below, Brazil's log-linear displacement model can be used to estimate the amount of\ncountermeasures that Brazil is entitled to for the fail ure of the United States to comply with the DSB\nruling to remove the adverse effects of its marketing loans and countercyclical payments (or withdraw\nthe subsidies).\n4.131 First, the United States has stated that with th e corrections it proposes, Brazil's model while\nfar from perfect could be used to estimate what it terms the \"total effects\" from the removal of\nPrice\nQuantity\nSupply curve\nA\nC\nB\nA = Sales value\neffect\nB + C = Reduced\nproduction effect\nQQ ’\nP\nP’\n\nmarketing loans and countercyclical payments.127 It is understood of course that from these estimated\n\"total effects\", the United States will require additio nal reductions so that they are commensurate with\nthe adverse effects and further that they are limited only to the adverse effects on Brazil.\n4.132 Second, the United States has in fact employed the model, using its own set of parameters and\nreference period, to calculate what the United Stat es believes is the amount of countermeasures Brazil\nis entitled to. Further, the United States does not provide its own simulation model which could be\nemployed to calculate the amount of countermeasures.128\n4.133 Finally, Brazil's model was submitted to the compliance panel which had used the simulations\nof the model to support its finding of non-complian ce by the United States. While the Arbitrator\nagrees with the United States that the model was on ly used by the compliance panel to determine\nwhether the price suppression caused by US cotton subsidies was \"significant\" and not to ascertain the\nexact magnitude of allowable countermeasures, its use by the panel nevertheless provides the\nArbitrator with greater confidence than if the model were being submitted to it for the first time.\n4.134 Needless to say, the model requires a set of parameters and inputs, such as the demand and\nsupply elasticities, the value of the coupling factor, and an indicator of expected market prices, in\norder to be able to calculate the amount of adverse effects from US marketing loans and\ncountercyclical payments. The choices for these pa rameters and inputs are the subject of numerous\ndisagreements between the parties. The Arbitrator turns to each of these issues in turn.\n(c) Elasticities used in the model\n(i) Long-run vs. short-run analysis\n4.135 Brazil contends that a short-run economic analysis is what is required in calculating the\namount of countermeasures given that a non-complia nt Member must impl ement adverse effects\nfindings within six months. In Brazil's view, a Member whose subsidies are determined to cause\nadverse effects must, within the short period of six months, withdraw those s ubsidies or remove their\nadverse effects. Consequently, a short-term assessment is required.\n129\n4.136 Brazil explains that its choice of values for the demand and supply elasticities reflects the\nnature of the policy change that is being simulated. The policy scenario involves a large, anticipated,\npermanent removal of marketing loans and countercy clical payments for cotton in MY 2005 holding\nall other potential parameters constant.130 It explains that the elasticities chosen for this counterfactual\nreflect the rational and expeditious reaction of US farmers to the policy change and the somewhat\nmuted initial reactions of farmers in the rest of the world.131\nArguments of the United States\n4.137 The United States believes that the correct way to conduct the economic modelling of the\nimpact of the removal of marketing loans and count ercyclical payments is to use long-run elasticities\nto allow for full adjustment to policy change. 132 It contends that the most appropriate method of\nensuring that non-compliance no longer affects decisi on-making by market participants is to utilize\n\n127 US responses to questions from the Arbitrator, question 62, para. 159.\n128 US responses to questions from the Arbitrator, question 62, para. 159.\n132 US oral statement, para. 11.\n\nlong-run elasticities. In its view, long-run elasticities reflect a situation in which all actors fully adjust\nto the policy change, thereby removing any influences of the non-compliance.133\n4.138 It claims that the proper question is what th e price of upland cotton would be in the absence\nof marketing loan and countercyclical payments, not how producers and purchasers react before they\nhave time to adjust to the lack of these payments. 134 It is because of the need for the modelling to\nshow what the counterfactual situation looks like that a short-term, reactive approach is not\nappropriate. Thus, the number of months permitted for adjustment, per se, is not the relevant factor.\nIn its mind, what is critical is that the counte rfactual modelling shows full adjustment so that the\nsituation with marketing loan and countercyclical payments can be compared to the situation\nwithout.135\n4.139 The United States criticizes the choice of elasticities of Brazil, claiming that in spite of\nBrazil's assertion that it is applying a short-run an alysis, the elasticities chosen are \"some type of\nhybrid of short run and long run.\"136 It believes that this choice of elasticities dramatically inflates the\neffects of the US cotton subsidies.137 In its view Brazil's choice for the US supply elasticity suggests a\ncomplete, long-run response to the change in subsi dy payments and shows up in the model as a large\nchange in US supply. By contrast, it believes other elements of the model – US demand elasticity and\nrest-of-world supply and demand elasticities – are lower, showing less responsiveness, as would occur\nin a short-run period before there is a full response to a change. Thus, in its view the magnitude of the\nother responses represented by these other elasticities, which would mitigate the effect of the change\nin US production on price, is lower. As an example, it notes that if US producers decrease\nproduction, but others increase production, the price effect of the change in US production is less.138\n4.140 The United States argues that if Brazil's counterfactual simulation assumes complete,\npermanent removal of marketing loan and counter -cyclical payments, and adjustment of cotton\nproduction to that change, this is consistent with a long-run scenario . In this case, the United States\nproposes that all the values of the elasticities be taken from the UNCTAD-FAO Agricultural Trade\nPolicy Simulation Model (ATPSM). Employing the elasticities in that model and other assumptions\nabout the reference period, the coupling factor and pr ice expectations, it estimates the \"total effects\"\nof marketing loans and countercyclical payments on Brazil to average no more than US$30.4 million\nannually.\nArguments of Brazil\n\n4.141 Brazil disputes the arguments of the United States that a long-run analysis is required. In its\nview, the United States' argument for a long-term approach would bypass the requirement that\nimplementation take place within six months, implying that a non-compliant Member can take a long-\nterm approach to achieving compliance.\n4.142 In addition, Brazil argues that the SCM Agreement (Article 7.9 and 7.10) requires that\ncountermeasures responding to a failure to implemen t be \"commensurate with the degree and nature\nof the adverse effects determined to exist\". In its view, this means that countermeasures should be\ncalculated on the basis of the entirety of the adver se effects existing in MY 2005, which are the sum\nof the effects of the subsidies that US cotton fa rmers anticipated receiving in MY 2005, and of\n\n133 US written submission, para. 254.\n134 US responses to questions from the Arbitrator, question 119, para. 109.\n135 US responses to questions from the Arbitrator, question 119, para. 110.\n136 US written submission, para. 255.\n137 US written submission, para. 256.\n138 US written submission, para. 256.\n\ncontinuing effects in MY 2005 from subsidies received in previous years. 139 Consequently, it\ncontends that it is not permissible to consider so lely the change between (i) actual cotton prices and\nquantities in the reference period and (ii) counte rfactual long-term cotton prices and quantities absent\nsolely the subsidies anticipated in the reference period.140\n4.143 Furthermore, Brazil asserts that even if an assessment of the long-term effects of the subsidies\nat issue is adopted, the use of long-run elasticities as proposed by the United States would be flawed\nsince market participants' full adjustments will take time. Under the short-term approach adopted by\nBrazil, the amount of adverse effect s removed in year one is measured. At that point there remain,\nhowever, some continuing effects that will only di ssipate from the market in subsequent years,\nresulting in a new market equilibrium at some point in the future. Thus, implementing a long-term\napproach requires summing up the adverse effects existing in each year of the dynamic adjustment\nprocess until the new market equilibrium is achieve d. In other words, implementing a long-term\napproach properly requires using Brazil's short- term adjustment as the starting point and adding\nadditional effects in subsequent years. In its view, the United States' approach only compares the\nstarting and end point in this dynamic adjustment process, and ignores large portions of the adverse\neffects caused throughout the adjustment process.141\nAnalysis by the Arbitrator\n4.144 The parties disagree on whether the counterfactual simulation requires a short-run or a long-\nrun analysis. In the context of the argumentation of the parties, the concepts of short-run and long-run\nrelate to the process of economic adjustment ar ising from the exogenous change in the economic\nenvironment. The long-run essentially refers to a situation where all adjustments by producers,\nconsumers, and owners of factors of production to the given change have been completed and the\nmarket has settled down to a (long-run) equilibrium. The short-run refers to a situation, which could\nbe one of (short-run) equilibrium, where the pro cess of adjustment by producers, consumers and\nowners of factors of production has not been fully co mpleted. This less than complete adjustment in\nthe economy may be the result of certain rigidities in the market or simply that it takes time for\nproducers to re-allocate resources.\n4.145 To make this discussion more concrete, we rela te these concepts to the specific matters under\nconsideration in this case. The exogenous change re ferred to in the previous paragraph would be the\nelimination of marketing loans and countercyclical payments. Given that Brazil assumes a large\nbehavioural response by US cotton farmers to this policy change, the lack of complete adjustment\narises partly in the rest of the world, and partly in domestic US demand for cotton. Brazil has argued\nthat there may be incomplete price transmission of the policy change to foreign growers of cotton. 142\nIt has also suggested that foreign farmers lack the expertise or sophistication, have limited access to\ninformation, and face other constraints that typi cally afflict farmers from developing and least\ndeveloped countries thus making immedi ate production responses more difficult. 143 Furthermore,\nBrazil has claimed that there are continuing adverse e ffects from past subsidies that need to be taken\ninto account. It points out for example that lower cotton prices, which are the result of the actionable\nsubsidies, have resulted in lower investme nt levels by rest of the world producers.\n144 L o we r t h a n\noptimal investments result in relatively higher pr oduction costs, reducing present production levels.\nAs a result of these rigidities and continuing adver se effects, foreign growers of cotton will not be\nable to immediately increase their plantings of cotton. Farmers in the rest of the world, who have the\n\n139 Brazil's responses to questions from the Arbitrator, question 119, para. 245.\n140 Brazil's responses to questions from the Arbitrator, question 119, para. 247.\n144 Brazil's responses to questions from the Arbitrator, question 119, para. 263.\n\nfeasibility to shift to cotton, may not immediately ma ke the change if the in crease in cotton price is\nnot transmitted fully or if they do not believe the el imination of subsidies is permanent. Even if they\ndo begin to cultivate more cotton, past low levels of investments will mean low productivity.\n4.146 The existence of such rigidities and continui ng effects means that the adverse effects of\nmarketing loans and countercyclical payments are correspondingly greater. Producers in the rest of\nthe world are not able to immediately and fully prof it from the increase in the world price of cotton or\nfrom increased production of cotton despite the el imination of the subsidies. Using long-run\nelasticities, which assumes that all adjustments have been completed (or that there are no adjustment\ncosts), will underestimate the adverse effects of the measures. The rationale for the application of a\nshort-run analysis, and consequently of short-run elasticities, is not because of the need to capture\neach step of the adjustment pr ocess but because the incompleteness of adjustment implies greater\ncosts on producers in the rest of the world.\n4.147 We believe that the United States' argument for a long-run analysis may be more appropriate\nin cases where there are no adjustme nt costs. In this case it can fairly be said that these adjustment\nfactors are due in part to the existence of the subs idies themselves. The United States is required to\nwithdraw the subsidies or remove the adverse effect s within six months. It has done neither. Brazil\nhas established a plausible case that it will take time for consumers and producers to fully adjust to the\nremoval of marketing loans and countercyclical paym ents. As we have noted in our analysis, this\nmeans that producers in the rest of the world would continue to experience the adverse effects of the\nsubsidies even after they have been removed. Since the calculated countermeasures must be\n\"commensurate with the degree and nature of the adve rse effects determined to exist\", the Arbitrator\nbelieves that the economic modelling must account for these rigidities. This makes a short-run\nanalysis, and the use of short-run elasticities, not inappropriate for the economic modelling.\n(ii) Values of the elasticities\nUS supply elasticity\n\n4.148 The elasticity of supply measures the responsiveness of production to a change in price. The\nhigher this elasticity, the greater the percentage in crease in cotton supply for any given change in the\nworld price of cotton.\n4.149 Brazil's model uses a supply elasticity of 0.8. It justifies this choice as a reflection of the\nanticipations of US cotton farmers, as well as the na ture of the expected short-term policy shock at\nissue, which will be a persistent, large-scale reduc tion of cotton subsidi es while other non-cotton\nsubsidies remain in place. 145 Given that the counterfactual scenario at issue involves a large and\npermanent loss of revenue to only US cotton farm ers, it believes that those farmers will necessarily\nadjust faster and more significantly than farmers reacting to temporary and transient reductions in\nrevenue.146 It contends that this is unlike the policy simulations usually considered in computable\ngeneral equilibrium models which involve an ac ross-the-board removal of all farm subsidies. 147 In\nBrazil's view, with US cotton farmers' revenues expected to decline dramatically following the\nwithdrawal of marketing loans and countercyclical payments, they will have strong and immediate\nincentives to switch to alternative crops because there is nothing to gain (and much to lose) from\ndeferring a production reaction.148\n\n4.150 The United States disagrees that a value of 0.8 for the US supply elasticity correctly reflects a\nshort-run analysis; rather such a value is in fact a long-run supply elasticity. In its view, Brazil's\ncharacterization of the policy counterfactual as a large and permanent loss of revenue to\nUS producers, and the possibility of US producers taking the significant step of exiting cotton farming\naltogether in response to the United States' withdrawal of subsidies, are events usually associated with\na long-run scenario.\n149 It emphasizes that Brazil's assumption that US producers would be able to\nfully adjust to the permanent change in US polic y within the terms of the model implies a long-run\nperspective.\nROW supply elasticity\n4.151 Brazil's model employs a value of 0.2 for the rest of the world supply elasticity. Brazil claims\nthat the rest of the world supply elasticity mu st necessarily be smaller in magnitude than the\nUS supply elasticity. This is because of the adap tation by rest of the world producers to a policy\nshock that is: (i) indirect, (ii) relatively small co mpared to the revenue loss faced by US producers,\nand (iii) in the opposite direction from that faced by US producers. It claims that transmissions of\nworld market price movements into local price changes in local currencies relevant for non-\nUS farmers can be slow and incomp lete due to barriers such as market institutions, centralized crop\nmarketing, government policies, limited info rmation, and high per-unit transport costs. 150 Further, it\ncontends that lagged price adjustments, the lack of expertise or sophistication, restricted access to\ninformation, as well as other constraints affecting especially developing and least developed country\nfarmers make immediate production responses more difficult.151\n4.152 While the United States acknowledges that price changes may not fully be transmitted in the\nshort-run, it believes that this is less the case in th e long-run and, that in any event, it does not mean\nthat producers in the rest of the world never fully ad just to policy change. It claims that in some\ncountries where farmers typically wo rk on small farms and additional la nd is available, such as India\nand Pakistan, farmers will likely adjust to such changes in policy without delay.\n4.153 It also disputes Brazil's claim that foreign su ppliers would be slow to respond because they\nwould be unable to distinguish whether the change in prices was a temporary market condition or a\nchange in US policy. The United States belie ves this argument lacks any foundation given the\ncontinuous press coverage and major cotton pr oducing states' focus on the impacts of the\nUS programmes.\nDemand elasticities\n4.154 The elasticity of demand measures the responsiven ess of consumption to a change in price.\nThe higher this elasticity, the greater the percen tage increase in cotton demand for any given\npercentage change in the world price of cotton.\n4.155 Brazil's model employs a value of -0.2 for the US and ROW elasticities of demand for cotton.\nBrazil claims that cotton demand is mainly determ ined by end consumers and that their demand is\nrelatively inelastic with respect to changes in co tton prices for a number of reasons. First, Brazil\nclaims that consumers have a preference for cotton over synthetic fabrics. Second, it asserts that the\ncost of raw cotton only makes up a small share of the final price of textile products. Thus, it\nconcludes that consumers worldwid e respond little to changes in the price of raw cotton, since the\nimpact of such changes on the relative price of reta il textile products is limited. As for demand from\n\n149 US written submission, para. 258.\n\ncotton mills, it claims that this is characterized by inelastic demand, not least because mill technology\nfavours the use of particular fibres.\n4.156 Brazil contends that the values of the elasticitie s are conservative relative to recent studies in\nagricultural economics and consistent with the em pirical and econometric literature. Comparing the\nchosen values with other studies or models, it maintain s that they are equal to the weighted average of\nthe demand elasticities in the Iowa State CARD inte rnational cotton model, twice the magnitude of\nthe demand elasticity parameter used by Goreux, and four times the magnitude of the demand\nelasticity parameter used by ICAC in their studies.\n4.157 The United States disputes Brazil's claim that cotton demand is mainly determined by final\nconsumers. It argues that actual demand for cotton is at the mill, where the cost of cotton accounts for\nnearly 70 per cent of mill production costs. Additiona lly, it asserts that it is the mills that decide the\nmix of fibres in producing yarn and therefore the mix is affected by relative prices of available fibres.\n4.158 The United States objects to Brazil's choice of US and ROW demand elasticities as being near\nthe lower bound of that found in the literature on studies looking at impact of the removal of\nUS cotton programmes. It judges the premise of ve ry inelastic demand as being doubtful even in the\nshort-run. And in the long-run, it argues that cotton mills will adjust their use of cotton even more. In\nthe light of the type of significant shock that Brazi l posits in its counterfact ual, the United States\nbelieves such adjustment would be expected. And it points to the changes that the global financial\ncrisis and economic slowdown have caused with the demand for cotton demand declining\nsignificantly.\n4.159 It also contends that if a short-run analysis is to be employed, cotton stocks must be accounted\nfor. It claims Brazil's model does not account fo r stocks and one method to incorporate stocks is\nthrough adjusting the demand elasticity.152\nAnalysis by the Arbitrator\n4.160 Brazil has proposed a set of elasticities to conduct its counterfactual analysis (see Table 1).\nAlthough the United States has argued for the appropr iateness of a long-run analysis and the use of\nlong-run elasticities, it has also proposed an alternativ e set of values of short-run elasticities based on\nthe FAPRI model.\nTable 1: Values of short-run elasticities proposed for simulating the removal\nof marketing loans and countercyclical payments\n\nParameter Brazil United States\nUS cotton supply elasticity 0.80 0.21\nROW cotton supply elasticity 0.20 0.33\nUS demand elasticity -0.20 -0.82\nROW demand elasticity -0.20 -0.39\n\n4.161 In the Arbitrator's view, Brazil needs to show th at there is support to be found in the research\nliterature for the values of the US and ROW el asticities that it has proposed to employ in the\nsimulations. The Arbitrator had requested both parti es to review this literature for estimates of cotton\n\n152 US comments on Brazil's responses to questions from the Arbitrator, question 121, para. 156.\n\ndemand and supply elasticities and both parties have provided their reviews to the Arbitrator. 153 The\nArbitrator has assembled part of this information in Tables 2A-D which show the values of the short-\nrun elasticities from the economic literature. In their response to the Arbitrator, the parties sometimes\ndid not indicate whether the elasticity was short-r un or not. What appears in Tables 2A-D are only\nthose values explicitly described as short-run by the parties.\nTable 2A: Survey of values of short-run US supply elasticities\n\nAuthor Value of Elasticity US Region Supply Response\n0.18 Delta Acreage\n0.11 Southeastern Acreage\nFAPRI\n0.237 South Plains Acreage\n0.586 Southeast and Delta Acreage response Lin\n2.282 South Plains Acreage response\n0.9 Southeast and Delta Acreage response Adams\n0.797 South Plains Acreage response\nMeyer 0 US (National) Area harvested\n0.18 Delta Acreage response\n0.16 Southeast Acreage response\n0.31 Southwest Irrigated Acreage response\n0.37 Southwest Dryland Acreage response\nPan, Mohanty et al\n0.42 West Acreage response\nCARD (Babcock) 0.21 US (National) -\n\nTable 2B: Survey of values of short-run ROW supply elasticities\n\nAuthor Value of Elasticity Region Supply Response\nMeyer 0.01 Rest of world Area harvested\n0.1 Rest of world Acreage response Pan, Mohanty et al\n0.54 Rest of world Acreage response\nOrden, Salam, Dewina,\nNazli and Minot 0.3 Pakistan -\nBabcock et al 0.2 Rest of world -\nFang and Babcock 0.2 Rest of world -\nFAPRI 0.33 Rest of world -\n\n153 Brazil's responses to questions from the Arbitrator, question 5, paras 15-83 and US responses to\nquestions from the Arbitrator, question 5, paras. 22-30.\n\nTable 2C: Survey of values of short-run US demand elasticities\n\nAuthor Value of Elasticity Demand by\nMeyer -0.256 Mills\nBabcock et al -0.82 -\nFAPRI -0.82 -\n\nTable 2D: Survey of values of short-run ROW demand elasticities\n\nAuthor Value of Elasticity Demand by\nBabcock et al -0.2 -\nFang and Babcock -0.2 -\nFAPRI -0.39 -\nSources: Brazil's responses to questions from the Arbitrator, question 5, paras. 15-83 and US responses to the\nquestions from the Arbitrator, question 5, paras. 22-30.\n\n4.162 Tables 2A-D provide support for Brazil's proposed elasticity values, although the Arbitrator is\nof the view that this is not by any means overwhe lming. The US supply elasticity adopted by Brazil\nis in the upper end of the distribution. There is far less literature on cotton demand elasticities and the\nestimates shown in Tables 2A-D tend to take the competing values claimed by the parties.\n• US Supply Elasticity: The lowest estimate is provided by Meyer with a value of zero.\nThe largest values are from the studies by Ad ams (0.8 to 0.9) and by Lin (0.59 and\n2.28) which provide support for Brazil's choice. The FAPRI, Pan, Mohanty et al and\nBabcock et al studies have elasticities that, averaged at the national level, will range\nbetween 0.2 and 0.25.\n\n• ROW Supply Elasticity: The elasticities range from near zero (Meyer) to 0.54 (Pan,\nMohanty, et al). Two studies (Babcock et al and Fang and Babcock) use Brazil's\nvalue of 0.2.\n\n• US Demand Elasticity: Three studies are reported in Table 2C with only the Meyer\nstudy providing support for Brazil's proposed value of -0.2. However, we note that\nthis estimate is of mill demand, which was the subject of much of the US criticism\nagainst Brazil's proposed value.\n\n• ROW Demand Elasticity: Only three studies are reported in Table 2D and two of\nthem (Babcock et al and Fang and Babcock) use identical values as Brazil.\n\n4.163 On the basis of the Arbitrator's determination th at a short-run analysis is appropriate for the\neconomic modelling and the finding, based on the review of the literature provided by the parties, that\neconometric estimates and other modellers have em ployed the elasticity values proposed by Brazil,\nthe Arbitrator determines that the values proposed by Brazil are available and not unsuitable to be\nused in the economic modelling.\n(d) Coupling factor\n4.164 Brazil's model assigns to each cotton subsidy programme a \"coupling factor\" which indicates\nthe degree of production incentive that a particular programme has on US cotton farmers relative to\nrevenue from the market. Unlike marketing loan s ubsidies, which are based on current production,\n\ncountercyclical payments are paid on the basis of a farm's historical base area and historical\nprogramme yield. This suggests that payments under the programme will give less of a production\nincentive than marketing loans. While Brazil uses a coupling factor of one for marketing loans, it\nemploys a coupling factor of 0.4 for countercyclical payments.\n(i) Arguments of the United States\n4.165 The United States disagrees with Brazil's choice of 0.4 for the coupling factor. The\nUnited States proposes to follow what it states is \"the FAPRI approach of modelling these payments\nwith a coupling factor of 0.25.\"154\n4.166 The United States disputes the claims made by Brazil that countercyclical payments allow\nUS cotton farmers to take on greater business risk and that such payments provide US cotton farmers\nadditional income that can be used to get commerc ial credit for further productive investments. The\nUnited States claims that Brazil's claim would ap ply to any additional income that these farmers\nreceived, whether it be income support not tied to production or off-farm income.\n4.167 The United States disagrees with Brazil's claims that farmers expect that payment acres would\nbe updated in the next farm bill resulting in them pl anting cotton now to ensure larger acreage for the\nnext farm bill. It argues that the original panel st ated that there was no evidence before it regarding\nfarmers' expectations relating to base updating, a nd the Appellate Body agreed with the panel's\ndetermination not to find such expectations. It also notes that the compliance panel had the\nunderstanding that the issue of base acreage updating w as not before it. Further, it claims that with\nthe enactment on 18 June 2008 (eff ective 22 May 2008) of the \"2008 Farm Bill\", farmers would have\nno basis for an expectation of cotton base updating today.\n4.168 The United States contends that data on planting show that farmers holding cotton base acres\nwidely plant crops other than cotton and as such ar e inconsistent with Brazil's argument that legal\nrestrictions on land use under the FSRI Act of 2002 undermine farmers' flexibility to switch to\nalternative crops. It also points to the shift in the production on farms holding cotton base acres.\nWhen faced with relative prices that favoured the planting of another crop, when agronomic\nconditions are favourable, it states that US cotton producers have responded in a significant way.\n4.169 The United States has referred to three new studies on the production effects of\ncountercyclical payments published since the comp liance panel proceedings. It acknowledges that as\nwas the case with the studies submitted during the compliance panel proceedings, none of the new\npapers deal directly with the impact of counter cyclical payments for cotton on production. The\nUnited States argues that studies nevertheless show that countercyclical paym ents have a relatively\nsmall production impact. 155 It adds that as with many studies about decoupled payments, where\nauthors find positive production effects, such effects are small, difficult to quantify, and subject to\nmany qualifiers.156 Table 3 summarizes the United States' analysis of these studies.\n\n154 US written submission, para. 274.\n155 US responses to questions from the Arbitrator, question 6, para. 31.\n156 US responses to questions from the Arbitrator, question 6, para. 38.\n\nTable 3: US analysis of studies about countercyclical payments\n\nStudy US Analysis\nBhaskar and Beghin study This is a survey of research on decoupled payments, including\ncountercyclical payments. The United States then cites the\nconclusions from several studies reviewed in this paper that\nspecifically examined countercyclical payments. It states that the\npaper by Anton and Le Mouel shows a small risk reducing effect\nfrom countercyclical payments. It claims that the paper by Makki,\nJohnson and Somwaru shows larger production effects but this is\nbecause of certain assumptions, especially about base updating,\nwhich have not materialized thus throwing doubt on the conclusions.\nIt contends that the paper by Beckman and Wailes suggests very\nhigh production effects for rice but the United States argues that\nthere are significant problems with the estimations for\ncountercyclical payments that call into question the validity of these\nresults.\nAnderson, Coble and Miller study The United States quot es the abstract of the paper which states that:\n\"This research evaluates whether the introduction of countercyclical\npayments creates an incentive for program crop producers to hedge\nthe expected government payment using futures and/or options.\nResults indicate that some level of countercyclical payment hedging\nis optimal for risk-averse decision makers. However, optimal hedge\nratios depend on planting time expectations of marketing year\naverage price as well as on what cr op, if any, has been planted on\ncountercyclical payment base acres. These results suggest that the\nability to hedge may make these payments more decoupled but also\nillustrate the distortion of producer behaviour induced by farm\nprograms.\"\nCoble, Miller and Hudson study This study reports analysis of the subjective expectations of\nproducers for base updating and an analysis of the effect these\nexpectations have on producer willingness to accept a buyout of the\nright to update. The United States quotes one passage from the\nstudy which it believes has some bearing on this subject:\n\"Interestingly, more producers think countercyclical payment rates\nwill decline than believe marketing loan rates will decline. As a\nreviewer noted, producers may percei ve the loan program with its\nlink to production to be a more essential program than a program\ndecoupled from production, and ther efore believe it less likely to be\neliminated.\"\n\n4.170 The United States has also reviewed the Beckman and Wailes study analysed by Brazil. The\nUnited States claims that countercy clical payments for rice have b een erratic and variable, and in\nsome years zero.157 Since Brazil dismisses some studies offered by the United States that use data for\ncommodities such as corn and wheat (the study by Anton and Le Mouel), stating that they are not\nrelevant because these products have not regular ly received countercyclical payments, then the\nUnited States argues that the Beckman and Wailes study should be similarly dismissed.\n\n157 US responses to questions from the Arbitrator, question 130, para. 150.\n\n(ii) Arguments of Brazil\n4.171 In response to the criticisms of the United States, Brazil provides an analysis of how\ncountercyclical payments can increase production. It contends that countercyclical payments increase\nfarmers' wealth, reducing risk aversi on and increasing the planting of cotton. 158 It believes that the\npresence of countercyclical payments allows credit-constrained farmers to finance investments in\nland, equipment, and in the purchase of fa rm inputs, making production more efficient.\n159 It claims\nthat farmers may be willing to produce more output since countercyclical payments, which vary with\nthe market price, reduce revenue risk. 160 It professes that countercyclical payments contribute to\ncovering fixed costs, allowing marginal farmers to avoid exiting cotton production.161\n4.172 The possibility that base yields and base acres, which determine the amount of CCP subsidies,\nwould be updated in the 2008 Farm Bill is another factor cited by Brazil as supporting the choice of a\ncoupling factor of 0.4. It argues that if farmer s believe that future payments are based on current\nproduction, because of the possibility of updating base acres, they may increase the current production\nof those crops for which they expect to receive future payments. 162 Brazil admits that this updating\ndid not materialize with the 2008 Farm Bill but it claims that this is beside the point as what matters\nfor current production is whether farmers expected base updating to occur.\n163\n4.173 Brazil has also responded to the review of the literature on the production effects of\ncountercyclical payments provided by the United States. 164 Table 4 summarizes its analysis of the\nstudies.\nTable 4: Brazil's analysis of studies about countercyclical payments\n\nStudy Brazil's Analysis\nBeckman and Wailes study Brazil claims that the authors find significant production-enhancing\neffects of countercyclical payments for rice, which is the only crop\nother than cotton which has recei ved significant countercyclical\npayments. It states that two models were run with the second model\nfinding that \"as [per hundredweight] counter-cyclical payments\nincrease a dollar for the year, ar ea harvested increases 956.29\nthousand acres.\" It characterizes th is result as significant since this\nacreage represents almost one thir d of US rice production. The\nimplied coupling factor in this study is greater than 1.0.\nAnton and Le Mouel study This study suggests that risk-reducing effects of countercyclical\npayments for sorghum, corn and wh eat are small. However, Brazil\nargues that all three of thes e crops have received little or no\ncountercyclical payments prior to the date of the study (year 2004).\nThus in its view, the results of this study are not relevant to the issue\nof the cotton CCP coupling factor.\n\n163 Brazil's written submission, paras. 416-417.\n164 Statement by Professor Daniel Sumner concerning adverse effects under Article 7.9 of the\nSCM Agreement, Exhibit Bra-803, paras. 27-32.\n\nStudy Brazil's Analysis\nMakki, Johnson and Somwaru study The study analyses the effects of countercyclical payments on\nincome variability for Minnesota farms. Brazil states that Minnesota\ngrows primarily corn and wheat, but no cotton. Brazil suggests that\nthe results of the study indicate th at farmers may increase acreage of\ncrops with higher CCP ra tes, especially if base updating is allowed,\nas it was under the 2002 FSRI Act.\nCoble, Miller and Hudson study Brazil describes the study as indicating that cotton farmers\nanticipated a significant chance of an update of the CCP subsidy\nbase acres and yields and, based on that anticipation, in fact,\nincreased their plantings and production.\nAnderson, Coble and Miller study Brazil concludes that the study finds a strong incentive to plant the\ncotton base crop implying significant supply effects from the CCP\nsubsidy.\n\n4.174 Based on this analysis, Brazil concludes that contrary to the United States response to the\nArbitrator's questions, the economic studies cite d by the United States lend support to a coupling\nfactor of 0.4 for cotton. 165 Furthermore, Brazil asserts that the weight of the economic literature\ncontinues to confirm significant supply effects from countercyclical payments for cotton.166\n(iii) Analysis by the Arbitrator\n4.175 The Arbitrator understands that there is no di spute between Brazil and the United States that\ncountercyclical payments can have a production effect . There are a number of possible ways that the\npayments can affect production. Since countercyclical payments vary inversely with the market price\nof cotton, they have the effect of stabilizing reve nues and reducing the risk to cotton farmers. The\npayments can alleviate credit constraints enabling mo re purchases of inputs. The availability of the\npayments would have allowed farm ers to cover fixed costs and may have allowed more farmers to\ncontinue with cotton farming. To the extent that farmers anticipated the possibility of updating base\nacres, it would have provided an incentive to in crease plantings. These have been described in\nBrazil's recapitulation of previous decisions made by the original panel, the compliance panel and the\nAppellate Body.\n4.176 The fact that the United States proposes to use a coupling factor of 0.25 and not zero attests to\nits view that the payments have a production effe ct. Where the parties disagree is how large the\nproduction effects of the payments are. But even here , it does not appear that they are too far apart.\nThe United States believes that a dollar of countercy clical payment to US cotton producers generates\na production incentive equivalent to an increase in the market price by 25 cents while Brazil believes\nit generates a production incentive equivalent to a 40 cent rise in the market price of cotton.\n4.177 The Arbitrator notes that unlike the demand and su pply elasticities that are also the subject of\ndisagreement between the parties, there is hardly any econometric literature that estimates the value of\nthe \"coupling\" factor for countercyclical cotton payments. The Arbitrators did ask the parties to\nreview any new economic research on the production effects of countercyclical payments that had\nappeared since the compliance pane l. Both Brazil and the United States have done so. These do not\ndirectly provide estimates of the coupling factor for cotton, but in examining empirically how much\n\n165 Statement by Professor Daniel Sumner concerning adverse effects under Article 7.9 of the\n166 Statement by Professor Daniel Sumner concerning adverse effects under Article 7.9 of the\n\nthe production effects of these payments are, they have an important bearing on the question before\nthe Arbitrator.\n4.178 The Arbitrator does not necessarily disagree w ith the assessment of the United States that\nthese studies do not allow a conclusive assessment to be made about the exact magnitude of the\ncoupling factor.167 The studies have been done for different crops, using different data sources, and\ndifferent methods and assumptions.168 For every study that finds a la rge production effect, one is able\nto offer another study that finds a negligible eff ect. For one crop where one finds a given production\neffect, whether small or large, it is always possi ble to provide some mitigating circumstance why the\nresults can or cannot be applied to cotton. But ther e is certainly a theoretical presumption, shared by\nboth Brazil and the United States, that the payments affect production decisions. Furthermore, and as\nBrazil has pointed out, the review of the economic literature suggest that countercyclical payments not\nonly have production effects but, under certain ci rcumstances, can have substantial production\neffects.\n169 Accordingly, the Arbitrator determines th at a value of 0.4 for the coupling factor as\nproposed by Brazil is within the range found in the relevant literature and is not inappropriate.\n(e) Price expectations\n4.179 As both Brazil and the United States have expl ained, cotton farmers typically make their\nplanting decisions around late winter and early sp ring (Brazil claims it is in February while the\nUnited States claims that it is in April). But mo st cotton is marketed in December so how much\ncotton farmers will plant depends on what they believe cotton prices will be in December. The\nsimulation model employed by Brazil therefore requires some indicator of farmers' expectations about\nthe market price. Brazil uses the one-year lag of farm gate prices as its indicator of farmers' market\nprice expectations. It claims that this approach is standard procedure in the modelling literature.\n170\n4.180 Since marketing loans and countercyclical payments vary with cotton prices, farmer's\nexpectations of market prices also trigger expecta tions how much of these subsidies they will receive.\nIn Brazil's model, the expected revenue per unit of cotton then is made up of the expected market\nprice and what Brazil terms the expected \"effective per-unit revenue received from government\nsubsidies\".\n171 As Brazil describes it, this second term is not simply the per-unit revenue from\ngovernment subsidies to US cotton farmers but reflects the degree to which these subsidies provide an\nincentive for production relative to th e incentive created by market prices. 172 F i n a l l y , B r a z i l\ncalculates the effective per-unit revenue received from government subsidies as the product of the\nper-unit government support from all subsidies and the overall coupling factor, the weighted average\nof all production incentives yielded by all subsidies.173\n(i) Arguments of the United States\n4.181 The United States argues that Brazil provides no evidence that farmers make their planting\ndecisions based on last year's market prices. The United States believes that the futures price provides\nfor a better measure of price expectations than the previous year's market price. In its view, the\nfutures price incorporates the latest information av ailable and is the result of market participants'\nviews. It contends that the use of futures pri ces employ data from a real-world market in which\n\n167 US responses to questions from the Arbitrator, question 130, para. 152.\n168 US responses to questions from the Arbitrator, question 130, para. 150.\n169 Brazil's comments on US responses to questions from the Arbitrator, question 130, para. 357.\n170 Brazil's Methodology Paper, para. 112 and footnote 131.\n\neconomic actors, such as farmers and merchants, come together and engage in market price\ndiscovery.174\n4.182 For the relevant value of the futures price, the United States used the average for January-\nMarch futures for December delivery. To derive the expected annual farm price, it also deducted\n5 cents from this average. The United States explai ns that this deduction is necessary to adjust the\nfutures price to the particular quality of a grower 's cotton and to include costs for delivery to the\ngrower's geographic location. While the futures ma rket is the best barometer of the value of the\ncotton, that price corresponds to a particular quality and location. 175 It claims that data from 2001\nthrough 2007 show that the basis, defined as New York December futures minus average farm price,\nfor the months of October-December average between 4 and 5 cents consistently regardless of the\nperiod to generate the average.176\n(ii) Arguments of Brazil\n4.183 Brazil has indicated that it has no strong genera l preference for using the lagged price or the\nfutures price in the simulation. It acknowledges th at both futures market prices and lagged prices are\nprone to similar errors as predictors for prices a nd subsidy revenues in the upcoming marketing year.\nIn some years and in times of rapid and significant market changes, it states that past prices may be a\npoor reflection of prices for the following season. In that case, it believes that futures market prices\nmight be a more appropriate indicator for measuring farmers' price and subsidy expectations. It points\nout that for MY 2005, choosing between the two does not result in any substantial difference in price\neffects simulated by its model. Thus it recognizes that there is no substantive difference in results\nbetween using futures market prices or lagged prices as the basis for price expectations.177\n4.184 However, it disputes the manner in which the Un ited States has made adjustments to futures\nprices, which involves deducting a 5 cents basis from the futures market price to derive the expected\nseason average US farm price. Brazil argues that the root mean square error of a simple regression of\nthe futures market price is – as it must be – lower th an the root mean square error of an additive basis\napproach to using the futures market price. Thus, a priori, it believes there is a strong reason to prefer\nthe regression approach. 178 Furthermore, it claims that there ar e flaws in the US calculations leading\nto the 5 cent basis. If only the adju stment for quality and location were relevant, it contends that this\nwould involve calculating the basis between (i) the average December quote of the December contract\nand (ii) the December price received by farmers. But Brazil points out that the United States has\nincluded data from October and November which it argues distorts the calculation. Using an\nalternative set of publicly available data, and a different time period than that selected by the\nUnited States, it arrives at a basis of 7.5 cents.179\n4.185 In Brazil's view, the result of the 5 cent deduc tion made by the United States to the futures\nprice is to introduce an upward bias in the expect ed market price and a significant understating of the\nsubsidy payments. 180 Also, Brazil claims that the alternative simulation performed by the\nUnited States using Brazil's model and u tilizing future prices was improperly done. 181 Together, it\n\n174 US written submission, para. 275.\n175 US responses to questions from the Arbitrator, question 131, para. 154.\n176 US responses to questions from the Arbitrator, question 131, para. 155.\n177 Statement by Professor Daniel Sumner concerning adverse effects under Article 7.9 of the\n178 Brazil's comments on US responses to questions from the Arbitrator, question 131, para. 368.\n179 Brazil's comments on US responses to questions from the Arbitrator, question 131, para. 372.\n180 Statement by Professor Daniel Sumner concerning adverse effects under Article 7.9 of the\n181 Statement by Professor Daniel Sumner concerning adverse effects under Article 7.9 of the\n\ncontends that these biases would lead to a signi ficant decline in the calculated amount of price\nsuppression.182\n(iii) Analysis by the Arbitrator\n4.186 Both parties have acknowledged that there are various indicators and methods that can be\nused to estimate farmers' market price expectations, including futures prices and lagged prices. Brazil\nhas in fact even stated that it has no strong general preference for using the lagged price or the futures\nprice in the simulation.\n4.187 The Arbitrator requested the parties to provide calculations of the root mean square error\n(RMSE) of forecasts using either the lagged price or the futures price. They were also requested to\nprovide the data used in the calculations. The root mean square error is a statistic that is often used to\njudge how well a particular indicator performs in forecasting some variable. 183 The lower the RMSE,\nthe better the indicator is as a tool for forecasting the variable of interest. Brazil provided data\ncovering the period from 1960 to 2005 but data on Fe bruary futures for D ecember deliveries are\navailable only from 1975 onwards. The United States submitted data from 1985 to 2007 using\naverage January to March futures prices for December deliveries.\n4.188 The results of the calculations of the root m ean square error of the forecasts are shown in\nTable 5. The parties have used two types of indicator s. One is simply the variable itself (lagged farm\nprice or futures price). The second is the fitted value of the variable based on a regression of the farm\nprice on either the lagged price or the futures pri ce. To make the results comparable, two periods\nhave been chosen corresponding to the futures pr ice data submitted by the parties: 1975-2005 and\n1985-2007. The data and calculations are shown in Annex 1.\n4.189 The table shows that farmers will obtain better forecasts (in terms of lower RMSE) if they use\nthe fitted value of the futures price, whether Febr uary futures or the average of January to March\nfutures prices. In general, the root mean square e rror of the fitted futures price is lower than that of\nthe fitted lagged price, although the difference is not particularly large.\n4.190 Furthermore, the lagged price is not observed by farmers when they make their planting\ndecisions in February-April.\n184 The cotton marketing year starts from 1 August of the calendar year\nand ends on 31 July of the following year. So to ta ke an example, the 2008 marketing year covers the\nperiod 1 August 2008 to 31 July 2009. The lagg ed price will be the average cotton price of\n1 August 2007 to 31 July 2008. Thus, when farmer s begin planting in February-April 2008, they will\nnot have yet observed the lagged price. The lagged price actually contains information that extends\nseveral months beyond the period when farmers make their planting decisions. In contrast, the futures\nprice is known to farmers when they make their planting decisions in February-April.\n\n182 Statement by Professor Daniel Sumner concerning adverse effects under Article 7.9 of the\n183 The root mean square error (RMSE) is defined as: () kTppRMSE\nT\ni\ne\nttt −−= ∑\n=\n−\n1\n2\n1 . Here\ntp is the price of cotton at time t and e\ntt p1− is the forecast of the cotton price, with the expectations formed one\nperiod before at t-1. T is the total number of marketing years and k is the number of regressors, including the\nconstant term.\n184 US responses to questions from the Arbitrator, question 61, para. 155.\n\nTable 5: Root measure square error (RMSE) of various indicators of cotton price expectations\n\nIndicator of expectations RMSE\nPeriod: 1975-2005\nLagged farm price 10.58\nFebruary futures 11.64\nRegression on lagged farm price 9.16\nRegression on February futures 8.81\nPeriod: 1985-2007\nLagged farm price 10.46\nJan-March futures 11.08\nRegression on lagged farm price 9.52\nRegression on Jan-March futures 9.21\nSources: Exhibit Bra-770; US responses to questions from the Arbitrator, question 7, para. 39.\n\n4.191 Given that the root mean square error of the fitte d futures price is lower than that of the fitted\nlagged price, and that when farmers make their pl anting decision in February-April they would have\nobserved the futures price but not the lagged price (t he price of the previous marketing year), the\nArbitrator resolves that the futures price better represents farmers' expectation of the price of cotton.\n4.192 In implementing this change in the calculations , the Arbitrator has utilized Brazil's Annex I\nsubmission to the compliance panel. 185 This contains the results of Brazil's regression approach to\ndetermining the expected price as well as the price contingent payments (Step 2, marketing loans and\ncountercyclical payments). The results of the Arb itrator's own analysis of various indicators of\nmarket price expectations strongly support the regression-based approach, since it produces the lowest\nroot mean square error. Deducting a constant basis from the futures prices will not change the\nconclusion. As Brazil has observed, the root mean square error of a simple regression of the futures\nmarket price will be lower than the root mean square error of an additive basis approach to using the\nfutures market price. The Arbitrator has also used the updated data provided by Brazil in\nWorksheet 6 of Exhibit Bra-704. In so doing, the Ar bitrator has imposed the constraint that expected\nCCP payments should not be higher than 13.73 cents per pound.186\n(f) Conclusions\n4.193 On the basis of these determinations, and previous findings made in Section IV.D.3 of this\nDecision about the reference period (MY 2005), the Ar bitrator has rerun Brazil's model. Expected\nprices as well as subsidy payments were based on regressions on futures prices. For MY 2005, the\nArbitrator calculates that the world price w ould have been higher by 9.38 per cent but for\nUS marketing loans and countercyclical payments. The adverse effects on the rest of the world from\nUS marketing loans and countercyclical payments in MY 2005 amounted to US$2.905 billion. This\nis comprised of sales value effects of US $2.384 billion and reduced production effects of\nUS$521.5 million.\n\n185 Annex I, Brazil's first written submission to the Panel, :\nRecourse by Brazil to Article 21.5 of the DSU.\n186 Countercyclical payments are pa id whenever the effective price of the commodity falls below the\ntarget price, which is fixed by the FSRI Act of 2002 at 72.4 cents per pound for upland cotton. The effective\nprice for cotton is the sum of the direct payment rate (6.67 cents per pound), plus the higher of the national\naverage farm price for the marketing year or the loan rate (52 cents per pound). More precisely,\nCCPCotton = 72.4 – (6.67 + Max (national average farm price, 52)). Thus countercyclical payments for cotton\ncannot exceed 13.73 cents per pound. This maximum is triggered whenever the national average farm price\nfalls below 52 cents per pound. See also footnote 12 of Statement by Professor Daniel Sumner concerning\nadverse effects under Article 7.9 of the SCM Agreement.\n\n4.194 In Section IV.D.2 above, the Arbitrator furt her determined that once the existence of\n\"significant price suppression\" has been established, it is legitimate to take into account the entirety of\nthe price suppression caused by th e measures at issue on the world cotton market in assessing its\nimpact on Brazil. Accordingly, the level of count ermeasures should not be limited to those adverse\neffects that render the subsidy actionable under the SCM Agreement. Thus, the amount of\nUS$2.905 billion which was determined to be the amount of adverse effects to the rest of the world\nfrom US marketing loans and countercyclical payments need not be revised downwards.\n4.195 However, the Arbitrator has also determined that this amount needs to be apportioned to\nBrazil (Section IV.D.1). Brazil's share of cotton production in the rest of the world was 5.1 per cent\nin MY 2005. 187 After making this apportionment, the Arbitrator therefore finds that the amount of\ncountermeasures that are commensurate with the degr ee and nature of the adverse effects determined\nto exist is US$147,314,091 (US$147.3 million) . The detailed calculations and data appear in\nAnnex 2.188\nV. BRAZIL'S REQUEST TO APPLY COUNTERMEASURES UNDER THE\nTRIPS AGREEMENT AND THE GATS\n5.1 In its request to the DSB, Brazil requests au thorization to suspend concessions or other\nobligations in the annual amount of US$1.037 billion with respect to cer tain actionable subsidies. In\nits view, given the amount, it is neither practicab le nor effective for Brazil to suspend concessions\nonly on imports of US goods and the circumstances are serious enough to justify the suspension of\nconcession or obligations under other covered agreem ents. Brazil therefore proposed to suspend\nobligations under GATT 1994, and also unde r the GATS and the TRIPS Agreement under\nArticle 22.3(c) of the DSU.189\n5.2 The United States challenges this request, arguing that Brazil had not followed the procedures\nand principles of Article 22.3 of the DSU. The United States argues that given the size and diversity\nof the Brazilian economy, Brazil cannot justify and demonstrate its claim that applying\ncountermeasures with respect to goods is not practicable or effective. 190 In these proceedings,\nhowever, Brazil argued that the provisions of Artic le 22.3 of the DSU do not apply, and that its\nrequest must be considered on the basis of Article 7.9 of the SCM Agreement only.\n5.3 In light of the parties' disagreement as to the applicable legal standard for this part of our\nassessment, we must first consider whether the principles and procedures of Article 22.3 of the DSU\napply, before we can proceed with an assessment of Brazil's request on the basis of the applicable\nlegal standard.\n\n187 The market share is calculated from data in Exhibit US-68, Worksheet \"Production\".\n188 Annex 2 is based on Exhibit Bra-704. Worksheets 6 and 7 of Annex 2 have been substantially\nrevised as futures prices (or regression s thereof) are used as the basis for expectations of the market price and\nsubsidy payments. They are derived from Exhibit Bra-17 (Annex I), which was originally submitted to the\ncompliance panel.\n189 WT/DS267/26.\n190 US written submission, paras. 318-319.\n\nA. DO THE PRINCIPLES AND PROCEDURES OF ARTICLE 22.3 OF THE DSU APPLY TO BRAZIL'S\nREQUEST?\n1. Arguments of the parties191\n5.4 Brazil argues in its Methodology Paper that th e countermeasures proposed by Brazil, which\ninclude the suspension of concessions or other obliga tions not only with respect to trade in goods but\nalso under TRIPS and GATS, are \"appropriate\" and \"c ommensurate with the degree and nature of the\nadverse effects determined to exist\", within the meaning of Articles 4.10 and 7.9 of the\nSCM Agreement. Brazil argues that the countermeasures it proposes, both in their quantitative and in\ntheir qualitative aspects, must be assessed solely ag ainst the requirements of Articles 4.10 and 7.9 of\nthe SCM Agreement.192 Brazil considers that these are the only standards against which the\ncountermeasures must be assessed.193\n5.5 Brazil also argues that the United States, as th e party objecting to the proposed requests for\ncountermeasures bears the burden of proving that th e type of the countermeasures proposed by Brazil\nis such as to render them not \"appropriate\" in the meaning of Article 4.10 of the SCM Agreement.\nLikewise, with respect to the actionable subsidies, Brazil argues that the United States has the burden\nof proving that the type of the countermeasures pr oposed by Brazil is such as to render them not\n\"commensurate with the degree and nature of the a dverse effects determined to exist\" as required by\nArticle 7.9 of the SCM Agreement. Brazil argues that the United States failed to discharge its burden\nsince it merely asserts that DSU Article 22.3 applies to the SCM Agreement. In Brazil's view,\nArticles 4.10 and 7.9 of the SCM Agreement provide for countermeasures that are different from those\navailable under the DSU.194\n5.6 Brazil argues that Articles 4.10 and 7.9 of the SCM Agreement provide for \"countermeasures\"\nand such countermeasures can well encompass the suspension of concessions or obligations under\nsectors or agreements other that in which a violation was found. 195 Citing Article 49 of the Draft\nArticles on Responsibility of States for Internationally Wrongful Acts , Brazil argues that the purpose\nof a \"countermeasure\" as stated in that article is to induce the offending state to comply with its\nobligations. Therefore, Brazil advocates that there is nothing in public international law to support the\nnotion that a countermeasure has to be taken in the same area or under the same agreement in which a\nviolation is found.196 Brazil is of the view that Articles 4.10 and 7.9 are \"special or additional rules\"\nwithin the meaning of Article 1.2 of the DSU, a nd that they address both the level and the type of\ncountermeasures that may be imposed by the original complaining Member in sharp contrast to\nArticle 22.4 and 22.3 of the DSU.\n197 Brazil contends that the Arb itrator should apply the standards\nunder the SCM Agreement, not the principles and procedures under Article 22.3 of the DSU. 198 The\nmandate of the Arbitrator is solely to determ ine whether countermeasures are \"appropriate\" or\n\"commensurate\".199\n\n191 In this section, the arguments of the parties are reflected as they were presented by the parties in\ntheir submissions, i.e. with reference both to the actio nable subsidies addressed in this Decision and to the\nprohibited subsidies addressed in the separate Decision in WT/DS267/ARB/1. In the subsequent assessment by\nthe Arbitrator in section 2 below, only the arguments relating to the actionable subsidies at issue in these\nproceedings are addressed.\n194 Brazil's written submission, paras. 452-453.\n196 Brazil's written submission, paras. 458-459.\n197 Brazil's written submission, paras. 464-465.\n\n5.7 With respect to the issue whether SCM Agreement and Article 22.3 of the DSU can be read as\ncomplementing each other, Brazil argues that \"if a special or additional rule or procedure does not\nprovide additional requirements that are to be met together with the corresponding provisions of the\nDSU – so as to effectively complement them without negatively affecti ng their legal integrity – the\ntwo sets of provisions cannot be applied together.\" Brazil continues to argue that if they cannot be\napplied together it is because there is a differe nce between them. In such case, Brazil argues the\nspecial or additional rule or procedure must prevail over the corresponding DSU provisions.200\n5.8 Brazil considers that Article 22.3 of the DS U establishes a legal standard based on the\nconsideration by the Member concerned of the practicability and effectiveness of suspension of\nconcessions and sets out a number of elements that have to be considered, whereas Articles 4.10\nand 7.9 of the SCM Agreement contain no restrictions on the type of countermeasures that may be\ntaken. Articles 4.10 and 7.9 of the SCM Agreement grant to the Member concerned a margin of\nappreciation that is broader than the one reflecte d in the requirements of Article 22.3 of the DSU.\nThey cannot be applied together.\n201\n5.9 The United States argues that DSU discip lines concerning suspension of concessions,\nincluding Article 22.3, apply to the SCM Agreement.202 In its view, the fact that the SCM Agreement\ndoes not provide for rules relating to cross-sector suspension of concessions independent of DSU\nArticle 22.3, when special rules for other i ssues were carved out, suggests the disciplines on\ncross-sector suspension of concessions remain securely tied to the existing DSU rules and\nprocedures.203\n5.10 The United States also argues that Brazil itself explicitly invoked Article 22.3 of the DSU in\nits request for countermeasures for prohibited subsidi es and in its request for actionable subsidies.\nTherefore, in the United States' view, Brazil has act ually conceded that its requests are subject to\nArticle 22.3 of the DSU. The United States also argues that the fact that Article 22.3(g) cross-\nreferences the agreements to which it applies, including the SCM Agreement, also indicates that\nArticle 22.3 of the DSU applies to requests for countermeasures under the SCM Agreement.204\n5.11 The United States argues that given the general ru le for suspension of concessions within the\nsame sector under the DSU and the absence of any rule to the contrary in Articles 4.10 and 7.9 of the\nSCM Agreement, there is no conflict in applying both the SCM Agreement and Article 22.3 of the\nDSU. Thus, the better interpretation – and one that allows Articles 4.10 and 7.9 of the\nSCM Agreement to be applied in a complementary fashi on with Article 22.3 of the DSU – is that\nArticles 4.10 and 7.9 deal with the amount of count ermeasures, while Article 22.3 of the DSU sets\nforth rules for determining when countermeasures can be applied on a cross-sector basis. To the\nextent there is conflict between them, it is in re gard to the assessment of quantity, or the amount, of\nthe suspension of concessions. With regard to \"t ype\" or \"form\", the United States argues that the\nsilence of the SCM Agreement as to cross-agreement or cross-sec tor countermeasures mean that there\nis no \"difference\" in the meaning of Article 1.2 of the DSU that would require ignoring the carefully\narticulated, hierarchical test under Article 22.3.205\n\n200 Brazil's responses to questions from the Arbitrator, question 40, para. 460.\n201 Brazil's responses to questions from the Arbitrator, question 40, paras. 461-462.\n202 US written submission, para. 320.\n203 US written submission, para. 323.\n204 US oral statement, para. 67.\n205 US responses to questions from the Arbitrator, question 67, para. 185.\n\n2. Assessment by the Arbitrator\n5.12 The question before us relates to the definiti on of our mandate, as well as to the substantive\nlegal standard that is applicable to the imposition of cross-retaliation under the SCM Agreement. Both\naspects are closely related, in that the nature an d scope of our mandate is logically tied to the\napplicable substantive requirements, the application of which we must review.\n5.13 The parties essentially disagree as to the extent to which the provisions of Article 22.3 of the\nDSU, which set out specific principles and procedur es for the authorization of cross-retaliation in\ndispute settlement proceedings under the DSU, ar e applicable in the context of proceedings\nconcerning actionable subsidies under the SCM Agreement, which contains specific provisions\nrelating to countermeasures.\n5.14 As a starting point, we need to consider the terms of the relevant provisions of the\nSCM Agreement and of the DSU. We recall that Article 7.9 of the SCM Agreement specifically\naddresses the question of the coun termeasures that may be authorized in relation to actionable\nsubsidies, and Article 7.10 addresses the mandate of the arbitrator in relation to such countermeasures,\nin the event that an arbitration is requested unde r Article 22.6 of the DSU in relation to actionable\nsubsidies. Article 7.9 requires countermeasure s in relation to actionable subsidies to be\n\"commensurate with the degree and nature of the adverse effects determined to exist\". Article 7.10, in\nturn, provides that, in the event that a party to the dispute requests arbitration under paragraph 6 of\nArticle 22 of the DSU, the arbitrator shall dete rmine whether the countermeasures are \"commensurate\nwith the degree and nature of the adverse effects determined to exist\".\n5.15 Article 22.6 of the DSU, in turn, provides that:\n\"When the situation described in paragraph 2 occurs, the DSB, upon request, shall\ngrant authorization to suspend concessions or other obligations within 30 days of the\nexpiry of the reasonable period of time unl ess the DSB decides by consensus to reject\nthe request. However, if the member con cerned objects to the level of suspension\nproposed, or claims that the principles and procedures set forth in paragraph 3 have\nnot been followed where a complaining part y has requested authorization to suspend\nconcessions or other obligations pursuant to pa ragraph 3(b) or (c), the matter shall be\nreferred to arbitration.\"\n5.16 Paragraphs 9 and 10 of Article 7 of the SCM Agreement constitute \"special or additional\nrules\" under Appendix 2 of the DSU. In accordance w ith Article 1.2 of the DSU, \"to the extent that\nthere is a difference between the rules and pro cedures of this understanding and the special or\nadditional rules and procedures set forth in Appendix 2, the special or additional rules and procedures\nin Appendix 2 shall prevail\".\n5.17 The Appellate Body has clarified the circumstances in which such a \"difference\" would exist:\n\"[I]t is only where the provisions of the DS U and the special or additional rules and\nprocedures of a covered agreement cannot be read as complementing each other that\nthe special or additional provisions are to prevail. A special or additional provision\nshould only be found to prevail over a provision of the DSU in a situation where\nadherence to the one provision will lead to a violation of the other provision, that is,\nin the case of a conflict between them. An interpreter must, therefore, identify an\ninconsistency or a difference between a provision of the DSU and a special or\n\nadditional provision of a covered agreement before concluding that the latter prevails\nand that the provision of the DSU does not apply.\"206\n5.18 The question before us in this case is whethe r Article 22.3 of the DS U and Article 7.9 and\n7.10 of the SCM Agreement can be read as complementing each other, or whether adherence to the\nprinciples and procedures contained in Article 22.3 of the DSU would lead to a violation of\nArticle 7.9 or 7.10 of the SCM Agreement, such that there is a conflict between the two provisions. In\nother words, we must clarify whether the special or additional rules of Article 7.9 and 7.10 of the\nSCM Agreement constitute the entirety of the applicable rules relating to the type and level of\ncountermeasures that may be authorized in relation to actionable subsidies, or whether the principles\nand procedures of Article 22.3 of the DSU and these provisions may be read as complementing each\nother in defining the rules applicab le to the suspension of concessions or other obligations in relation\nto actionable subsidies.\n5.19 We first note that paragraphs 9 and 10 of Ar ticle 7, and more generally the provisions of\nArticle 7 of the SCM Agreement concerning \"remedies\", are closely tied to the terms and procedures\nof the DSU itself. Indeed, the arbitration that is addressed in Article 7.10, which defines the mandate\nof the arbitrator with reference to the terms of Article 7.9, is defined as an arbitration requested \"under\nparagraph 6 of Article 22 of the DSU\". It is clear fro m the use of this cross-reference, that the arbitral\nproceedings at issue, even though they are in relation to actionable subsidies under the\nSCM Agreement, are initiated under Article 22.6 of the DSU. The legal basis for such proceedings is\ntherefore Article 22.6 of the DSU, as well as Article 7.10 of the SCM Agreement.\n5.20 Under the terms of Article 22.6 of the DSU, the Member concerned may challenge two\ndistinct aspects of a request for authorization to suspend concessions or other obligations. The\nMember concerned may object to \"the level of su spension proposed\", or it may \"claim that the\nprinciples and procedures set forth in paragraph 3 (of Article 22) have not been followed\" where a\ncomplaining party has requested authorization to su spend concessions or other obligations pursuant to\nparagraph 3(b) or (c). If either of these two clai ms is made, then \"the matter shall be referred to\narbitration\". The reference to an arbitration requ ested \"under paragraph 6 of Article 22 of the DSU\"\nin Article 7.10 of the SCM Agreement, therefore, on its face, refers to the existence of (i) an objection\nto the \"level of suspension proposed\" and/or ( ii) a claim that the principles and procedures of\nArticle 22.3 of the DSU have not been followed, which are to be referred to arbitration.\n5.21 In the case of an arbitration carried out under th e DSU alone, the mandate of the arbitrator is\nfurther defined in Article 22.7, which provides in its first sentence that \"the arbitrator acting pursuant\nto paragraph 6 shall not examine the nature of th e concessions or other obligations to be suspended\nbut shall determine whether the leve l of such suspension is equivalent to the level of nullification or\nimpairment\". This is in line with the terms of Article 22.4, which provides that the level of the\nsuspension shall be \"equivalent to the level of nulli fication or impairment\". This is comparable, in\nstructure, to the terms of Article 7.10 of the SCM Agreement, which provides that the arbitrator \"shall\ndetermine whether the countermeasures are commensur ate with the degree and nature of the adverse\neffects determined to exist\", in line with the term s of Article 7.9, which provides that the DSB shall\ngrant authorization to take countermeasures \"commens urate with the degree and nature of the adverse\neffects determined to exist\".\n5.22 The provisions of Article 22.7 of the DSU and Article 7.10 of the SCM Agreement\n differ, in\nthat Article 22.7 of the DSU further articulates that , if the matter referred to the arbitrator includes a\nclaim that the principles and procedures have not b een followed, the arbitrator shall examine that\nclaim, whereas Article 7.10 of the SCM Agreement contains no exact equivalent. The question\ntherefore arises as to how the mandate of the arbitr ator should be understood in a situation where a\n\n206 Appellate Body Report, Guatemala – Cement I, para. 65.\n\nclaim that the principles and procedures of Article 22.3 of the DSU have not been followed is referred\nto arbitration in accordance with Article 22.6 of the DSU, in relation to actionable subsidies.\n5.23 In order to give useful meaning to all the terms of the treaty, including those of Article 22.3 of\nthe DSU and the reference to Article 22.6 of the DSU in Article 7.10 of the SCM Agreement, we must\na priori read the terms of that provision as envisaging that the principles and procedures of\nArticle 22.3 of the DSU apply, including in cases re lating to actionable subsidies, and that a claim\nmay be made in relation to these principles and pro cedures. In accordance with the principle that the\nspecial or additional rules listed in Appendix 2 of the DSU would only prevail in the event of a\n\"difference\" (i.e. if it were not possible to apply bo th simultaneously), it is only in the event that we\ndetermine that there is a conflict or incompatib ility between such a reading and the terms of\nArticle 7.10 of the SCM Agreement, that we should conclude otherwise.\n5.24 It appears to us that such a conflict or inco mpatibility would arise between the application of\nthe principles and procedures in Article 22.3 of the DSU and the terms of Article 7.9 and 7.10 of the\nSCM Agreement only if the terms \"countermeasures commensur ate with the degree and nature of the\nadverse effects determined to exist\" in these pr ovisions are interpreted to define not only the\npermissible level of countermeasures in the case of actionable subsidies, but also the type of\ncountermeasures that may be authorized, so that th e principles and procedures of Article 22.3 of the\nDSU would be inoperative in cases relating to actionable subsidies.\n5.25 We are not persuaded that this is the case. As was discussed in detail in Section IV.C above it\nis undisputed that the expression \"countermeasures co mmensurate with the degree and nature of the\nadverse effects determined to exist\" defines the permissible level of countermeasures in relation to\nactionable subsidies. In our view, it does not do mo re than that. The notion of \"commensurateness\"\nclearly connotes a certain correspondence\" in the le vel or measurement of the countermeasures. By\ncontrast, it is not clear that these terms provide any guidance as to the type of countermeasures that\nmay be authorized.\n5.26 In light of the level of detail in which the matt er of cross-sectoral retaliation is addressed in\nthe DSU, one would have expected the drafters of the SCM Agreement to provide express guidance to\nthis effect, if they had intended to address diffe rently the question of the type of permissible\ncountermeasures, as well as their level. In fact, th is would have been especially necessary in light of\nthe fact that Article 22.6 of the DSU, which is expressly referred to in Article 7.10 of the\nSCM Agreement, foresees that a challenge to proposed susp ension of concessions or other obligations\nmay be based either on the level of suspension proposed, or on a claim \"that the principles or\nprocedures of paragraph 3 (of Article 22 of the DSU) have not been followed\".\n5.27 While the expression \"the level of proposed suspension\" does not in itself prejudge the\nstandard upon which such \"level\" might be review ed, and thus allows th is standard to differ\ndepending on the type of measure at issue, the reference to the \"principles and procedures\" of\nArticle 22.3 of the DSU leaves no doubt as to the relevant legal standard. This part of the reference to\nArticle 22.6 of the DSU in Article 7.10 of the SCM Agreement would have to be read out of the\nprovision in order to conclude that the principl es and procedures of Article 22.3 of the DSU do not\napply in the context of proceedings relating to actiona ble subsidies. In light of our analysis above, we\nsee no basis to do so. We also note that, as treaty inte rpreters, we are required to \"read all applicable\nprovisions of a treaty in a way that gives meaning to all of them, harmoniously\". 207 The only manner\nin which we can give full meaning to all the term s of the treaty harmoniously in this context is to\nunderstand the terms of Article 7.9 and 7.10 of the SCM Agreement as meaning that the mandate of\nthe arbitrator as defined in Article 7.10 of the SCM Agreement relates to the determination of the level\n\n207 See for example Appellate Body Report, Canada – Dairy , para. 133, and Appellate Body Report,\nUS – Upland Cotton, para. 549.\n\nof countermeasures, while the terms of the arbitr ator's mandate in relation to a claim that the\nprocedures and principles of Article 22.3 of the DSU have not been followed is contained in\nArticle 22.6 of the DSU.\n5.28 This interpretation is also consistent, in our view, with the context in which these provisions\narise. The various paragraphs under Article 7 of the SCM Agreement may not be read in isolation\nfrom the DSU. Rather, we understand the terms of Article 7 of the SCM Agreement as providing\nspecific additional rules on specifi c aspects of dispute settlement proceedings relating to actionable\nsubsidies, which replace the equivalent rules of the DSU only to the extent that they differ from and\nare incompatible with such rules.\n5.29 In Article 7.10 of the SCM Agreement, it was not necessary for the drafters to clarify that, in\nrelation to a claim that the principles and proce dures of Article 22.3 have not been followed, the\narbitrator would review that claim, since the terms of Article 22.7 of the DSU, which generally define\nthe terms under which an arbitration under Article 22.6 is to be carried out, already address this point.\nOnly to the extent that the mandate of the arbitrator differed from that set forth in Article 22.7 of the\nDSU, was it necessary to explicitly define it in Article 7.10 of the SCM Agreement, in order to ensure\nthat the mandate of the arbitrator in relation to the proposed level of countermeasures would be\nconsistent with the manner in which the permissible level of countermeasures is defined in Article 7.9\nof the SCM Agreement for actionable subsidies. Indeed, Article 22.7 of the DSU sets out a number of\nother aspects relating to arbitration proceedings pur suant to Article 22.6 of the DSU, which are not\nreplicated in Article 7.10 of the SCM Agreement, but which nonetheless are clearly relevant and\napplicable to such proceedings. In particular, the last two sentences of Article 22.7 provide that:\n\"The parties shall accept the arbitrator's decision as final and the parties concerned\nshall not seek a second arbitration. The DS B shall be informed promptly of the\ndecision of the arbitrator and shall, upon request, grant authorization to suspend\nconcessions or other obligations where the re quest is consistent with the decision of\nthe arbitrator, unless the DSB decides by consensus to reject the request.\"\nThese important provisions are clearly relevant to arbitral proceedings in relation to actionable\nsubsidies under the SCM Agreement.\n\n5.30 Finally, we consider that our interpretation is faithful also to the object and purpose of dispute\nsettlement proceedings in the WTO and to their integrated nature. Th e DSU provides the common\nframework under which dispute settlement proceedings are initiated in the WTO, and brings together\nall the covered Agreements. This is the overall framework in which the question of the possibility of\nseeking suspension of obligations under another sector , or another covered Agreement than that under\nwhich the violation has been found, arises, and this is logically addressed in the context of the DSU.\n5.31 We are mindful that we must give full meaning to all the terms of the treaty, including the\nspecial or additional rules identified in Appendix 2, and that such special or additional rules may\nlegitimately prevail over any relevant DSU rules and procedures. However, we are not persuaded that\nthere is a conflict, such that the principles a nd procedures of Article 22.3 of the DSU would be\ninapplicable in the case of disputes relating to actionable subsidies under the SCM Agreement.\n5.32 In light of all the above, we conclude that th e principles and procedures of Article 22.3 of the\nDSU apply to the claim before us and that we must review the United States' claim that these\nprinciples and procedures have not been followed by Brazil.\n\nB. MANDATE OF THE ARBITRATOR AND BURDEN OF PROOF\n5.33 Having determined that the principles and pro cedures of Article 22.3 of the DSU apply to\nBrazil's request and that we are required to revi ew the United States' claim that Brazil has not\nfollowed these principles and procedures, we need to clarify further what our mandate is, in relation to\nthis claim, and what burden of proof applies to it.\n1. Main arguments of the parties\n5.34 The United States considers that the drafter' s intention was that suspending concessions\nacross sectors and agreements was the exception rather than the rule. In the United States' view,\nArticle 22.3 establishes a hierarchy of suspension: Members must first try to suspend concessions\nwithin the same sector, and if that is not practicab le or effective, can then request permission to\nsuspend in a different sector. This distincti on is important in the GATS and TRIPS Agreements\nwhere there are multiple sectors, but does not apply with respect to goods. The bar for suspending\nconcessions under other agreements is higher still. The United States adds that not only does the\nsuspension within the agreement have to be neither practicable nor effective, but the violation must be\nserious enough to warrant cross-agreement suspension.208\n5.35 The United States further considers that the discip lines of Article 22.3 are an integral part of\nthe dispute resolution process a nd the rebalancing of concessions. The United States cites the\nstatement of the arbitrator on EC – Bananas III (US) (Article 22.6 – EC) , that \"the basic rationale of\nthese disciplines is to ensure that the suspension of concessions or other obligations across sectors or\nacross agreements (beyond those sectors or agreem ents under which a panel or the Appellate Body\nhas found violations) remains the exception and do es not become the rule\". The United States\ntherefore considers it necessary for the Arbitrat or to determine whether Brazil has objectively\nfollowed these procedures. The United States also cont ends that Brazil is entitled to a certain margin\nof appreciation in making this de termination, but the Arbitrator also has an oblig ation to judge\nwhether Brazil has objectively reviewed the facts and has reached a plausible conclusion.209\n5.36 The United States argues that for a party to request cross-agreement suspension of\nconcessions, it must find that:\n(a) it is not practicable or effective to susp end concessions or other obligations with\nrespect to other sectors under the same agreement; and\n(b) that the circumstances are serious enough to warrant cross-agreement suspension of\nconcessions.\n5.37 It considers that, when analysing these requirement s, the party must take into account: (i) the\ntrade in the sector or under the agreement under which the panel or Appellate Body has found a\nviolation or other nullification or impairment, and the importance of such tr ade to that party, and\n(ii) the broader economic elements related to the nullification or impairment and the broader\neconomic consequences of the suspension of concessions or other obligations. The complaining party\nmust further explain how it has reached the c onclusion that cross-agreement suspension of\nconcessions is warranted.210\n5.38 Brazil notes the arbitrator's \"plausib ility\" standard as enunciated in the US – Gambling\n(Article 22.6 – US) arbitration. This standard calls for an objective assessment of the facts and a\n\n208 US written submission, para. 325.\n209 US written submission, para. 326.\n210 US written submission, para. 327.\n\nplausible conclusion on the issue of whether it is \"pr acticable or effective\" to seek countermeasures in\nthe same sector and on whether th e circumstances are serious enough. 211 Brazil considers, however,\nthat the Arbitrator should be limited to examining wh ether Brazil has in fact considered the principles\nset forth in Article 22.3 of the DSU, not whether Brazil's considerations are plausible. 212 Brazil notes\nthe United States position, in the DSB meeting on the adoption of the EC – Bananas III (US)\n(Article 22.6 – EC) arbitration report, that arbitrators are not supposed to \"second guess\" the\nconclusions reached by the Member who considers that it is not practicable or effective to suspend\nconcessions or other obligations under the same agre ement, and that the circumstances are serious\nenough within the meaning of Article 22.3.213\n5.39 Brazil also argues that the United States bears the burden of proving that Brazil has not\nfollowed the principles laid out in Article 22.3, sp ecifically, (i) that it is both \"practicable\" and\n\"effective\" for Brazil to suspend concessions only in the goods sector, or (ii) that the circumstances\nare not \"serious enough\" to justify applying coun termeasures under another covered agreement. With\nrespect to Article 22.3(d), Brazil argues that the United States has to prove that in selecting\ncountermeasures, Brazil did not take into account the elements indicated in items (d)(i) and (ii).214\n2. Approach of the Arbitrator\n5.40 Article 22.3 sets out certain principles and pro cedures to be followed by a complaining party\nseeking to suspend concessions, as to the sector(s) an d/or covered agreement in which the suspension\ncan take place, which the United States claims that Brazil did not follow.\n5.41 We recall our earlier determination that these principles and procedures apply to Brazil's\nrequest, and that Article 22.7 of the DSU provides th e basis for our mandate to review this claim.\nArticle 22.7 provides that \"if the matter referred to arbitration includes a claim that the principles and\nprocedures set forth in paragraph 3 have not been fo llowed, the arbitrator shall examine that claim\"\nand that \"[i]n the event the arbitrator determines that those principles and procedures have not been\nfollowed, the complaining party shall apply them consistent with paragraph 3\".\n5.42 We are therefore required to examine the United States' claim that Brazil has not followed the\nprinciples and procedures of Article 22.3 of the DSU.\n5.43 As a general principle, Article 22.3(a) of th e DSU provides that suspension of concessions or\nother obligations should first be sought in the same sector as that in which a violation was found.\nArticle 22.3 provides in relevant part that:\n\"In considering what concessions or other obligations to suspend, the complaining\nparty shall apply the following principles and procedures:\n(a) the general principle is that the complaining party should\nfirst seek to suspend concessions or other obligations with\nrespect to the same sector(s) as that in which the panel or\nAppellate Body has found a violation or other nullification or\nimpairment.\"\n\n5.44 Subparagraphs (b) and (c) of Article 22.3 furthe r specify the principles and procedures to be\nfollowed by a complaining party wishing to seek su spension in another sector, or another agreement,\nthan that in which a violation was found:\n\"(b) if that party considers that it is not practicable or effective for it to suspend\nconcessions or other obligations with respect to the same sector(s), it may\nseek to suspend concessions or other obligations in other sectors under the\nsame agreement;\n(c) if that party considers that it is not practicable or effective to suspend\nconcessions or other obligations with respect to other sectors under the same\nagreement, and that the circumstances are serious enough, it may seek to\nsuspend concessions or other obligations under another covered agreement.\"\n5.45 In addition, subparagraph (d) of Article 22.3 provides that:\n\"(d) in applying the above principles, that party shall take into account:\n(i) the trade in the sector or under the agreement under which\nthe panel or the Appellate Body has found a violation or\nother nullification or impairment, and the importance of such\ntrade to that party;\n(ii) the broader economic elements related to the nullification or\nimpairment and the broader ec onomic consequences of the\nsuspension of concessions or other obligations.\"\n5.46 Two prior arbitrators have considered the mandate of the arbitrator set out in Article 22.7 of\nthe DSU with respect to the principles and procedures set forth in Article 22.3, and we find it useful to\nrefer to their findings in clarifying the terms of our own mandate.\n5.47 The arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) , in determining the scope\nof its authority to review the principles and procedures relating to requests for suspension of\nconcessions or other obligations under subparagraphs (b) and/or (c), cons idered that \"the fact that the\npowers of arbitrators under subparagraphs (b)-(c) ar e explicitly provided for in Article 22.6 implies\na fortiori that the authority of Arbitrators includes th e power to review whether the principles and\nprocedures set forth in these subparagraphs have be en followed by the Member seeking authorization\nfor suspension\".\n215\n5.48 The arbitrator also considered the terms of Ar ticle 22.3, including the fact that a certain\nmargin of appreciation is left to the complaining part y in arriving at conclusions in respect of certain\nfactual elements (i.e. \"if that party considers\" in subparagraphs (b) and (c)) as well as the fact that the\nparty concerned is required to apply th e principles of Article 22.3 (i.e. \" shall apply the following\nprinciples and procedures\" in the introductory clause of Article 22.3). On the basis of that textual\nanalysis, the arbitrator determined that:\n\"[T]he margin of review by the Arbitrat ors implies the authority to broadly judge\nwhether the complaining party in ques tion has considered the necessary facts\nobjectively and whether, on the basis of these facts, it could plausibly arrive at the\nconclusion that it was not practicable or eff ective to seek suspen sion within the same\n\n215 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 50.\n\nsector under the same agreements, or only under another agreement provided that the\ncircumstances were serious enough.\"216\n5.49 The arbitrator in that dispute also considered more broadly the terms of Article 22.3 and noted\nthat \"these provisions imply a sequence of steps towards WTO-consistent suspension of concessions\nor other obligations which respects both a margin of appreciation for the complaining party as well as\na margin of review by Arbitrators, if a request for suspension under Article 22.2 is challenged under\nArticle 22.6\".217\n5.50 Like the arbitrator on US – Gambling (Article 22.6 – US), we agree with these determinations.\nWe agree that the principles and procedures set fort h in Article 22.3 of the DSU, which require the\ncomplaining party to make certain determinati ons, imply \"a margin of appreciation\" for the\ncomplaining party in making these determinations. At the same time, Article 22.3 sets out specific\nprinciples and procedures that the complaining party must follow, and we understand the role of the\narbitrator acting pursuant to Article 22.7 of the DSU to involve a review of whether those principles\nand procedures have been followed. It would not be sufficient for a complaining party to have\nconsidered those principles and procedures solely fro m the viewpoint of being able to say that it did\nso. The consideration must be a substantive a nd reasoned one, and a claim to be entitled to impose\ncountermeasures outside the relevant sector, and then outside the relevant agreement, must arise from\nthat consideration.\n5.51 We also agree with the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) that this\nmandate includes a determination of \"whether the complaining party in question has considered the\nnecessary facts objectively\" and also \"whether, on the b asis of these facts, it could plausibly arrive at\nthe conclusion that it was not practicable or effec tive to seek suspension within the same sector under\nthe same agreements, or only unde r another agreement provided that the circumstances were serious\nenough\".\n5.52 In addition, should we determine that Brazil has not followed these procedures or principles,\nwe believe it to be both necessary and appropriate fo r us to articulate how the analysis could properly\ntake place to the extent necessary to ensure that Brazil is in a position to apply these procedures and\nprinciples \"consistent with paragr aph 3\" and present a request \"cons istent with the decision of the\narbitrator\" in a subsequent phase of these disput e settlement proceedings, as foreseen in Article 22.7\nof the DSU.\n5.53 We note in this respect that Article 22.7 provides in relevant part that:\n\"[I]f the matter referred to arbitration includes a claim that the principles and\nprocedures set forth in paragraph 3 have not been followed, the arbitrator shall\nexamine that claim. In the event the arbitrator determines that those principles and\nprocedures have not been followed, the complaining party shall apply them consistent\nwith paragraph 3. The parties shall accept the arbitrator's decision as final and the\nparties concerned shall not seek a second arbitration. The DSB shall be informed\npromptly of the decision of the arbitrator and shall upon request, grant authorization\nto suspend concessions or other obligations where the request is consistent with the\ndecision of the arbitrator, unless the DSB decides by consensus to reject the request.\"\n(emphasis added)\n5.54 This approach is consistent with the objectiv e of prompt and positive settlement of disputes.\nThis approach is also consistent with the prac tice of arbitrators acting under Article 4.10 of the\n\n216 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 52.\n217 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 55.\n\nSCM Agreement and/or Article 22.6 of the DSU, of proceeding with a calculation of the permissible\nlevel of countermeasures in the event that they find the proposed countermeasures not to be in\naccordance with the applicable legal standard.218\n5.55 In terms of burden of proof, we consider that it is for the United States, as the party\nchallenging Brazil's determinations , to demonstrate that Brazil has not followed the principles and\nprocedures of Article 22.3 of the DSU. At the same time, it is essential that Brazil provides us with\nexplanations on how it made this dete rmination, in order for us to be in a position to review it, and to\ndetermine whether Brazil has, in making its de terminations, \"considered the necessary facts\nobjectively\" and whether it could plausibly reach the conclusions that it did.\n5.56 The United States also asks the Arbitrator to indicate in its decision, if necessary, the\nmaximum amount up to which Brazi l would be permitted to impose cross-agreement suspension of\nconcessions.219 The United States requests the Arbitrator to issue separate awards, one in relation to\nthe prohibited subsidies and one concerning actionabl e subsidies so that, in case the United States\nbrings one subsidy into compliance with the DSB recommendations and rulings before it is able to\ncomply with the other, the separate awards provide a legal basis to ensure that countermeasures are\nstill consistent with the legal standards of the SCM Agreement and the DSU in that situation.220\n5.57 We first recall that two separate decisions are being issued, one in relation to the prohibited\nsubsidies221 and one concerning actionable subsidies (this Decision), as the United States requests.222\n5.58 We agree that, to the extent that we might determine that Brazil may impose part of the\nproposed countermeasures in another sector or agre ement, we would need to indicate clearly the\namount of countermeasures in respect of which it would be entitled to suspend concessions or other\nobligations in such other sector or agreement.\n5.59 We do not consider it necessary, however, to determine in this Decision what our conclusion\nmight have been, in the event that the United States s hould, at some future point in time, comply with\nthe DSB's recommendations and rulings in rela tion to the measures covered by the other\nproceedings.223 This is a hypothetical matter on which it would not be appropriate for us to speculate.\nRather, we base our assessment on the situation as it ex ists at the time of our determination, which\nincludes the fact that the United States has not comp lied with two separate asp ects of the underlying\nrecommendations and rulings in this dispute and that this gives rise to an entitlement for Brazil to take\ncountermeasures in relation to both aspects.\n5.60 At the same time, we recall that our determinations in these proceedings relate only to Brazil's\nrequest in relation to the actionable subsidies at issue. Our determinations on Brazil's request for\ncross-retaliation take into account the factual ci rcumstances arising from the separate proceedings\nrelating to the prohibited subsidies also ruled on in the underlying proceedings, but no entitlement\narises from this Decision for Brazil to take countermeasures in relation to such subsidies.\n\n218 See for example Decision by the Arbitrators, EC – Hormones (US) (Article 22.6 – EC), para. 12.\n219 US responses to questions from the Arbitrator, question 134, para. 165.\n220 US comments on Brazil's responses to questions from the Arbitrator, question 134, para. 171.\n221 See WT/DS267/ARB/1.\n222 See Section I.C above, at paras. 1.27-1.31.\n223 See WT/DS267/ARB/1.\n\nC. BRAZIL'S DETERMINATION THAT IT IS NOT PRACTICABLE OR EFFECTIVE TO TAKE\nCOUNTERMEASURES WHOLLY IN TRADE IN GOODS\n1. The principles and procedures of Article 22.3 of the DSU\n5.61 Article 22.3 of the DSU, as we have observed earlier, foresees certain \"procedures and\nprinciples\" to be followed by the complaining pa rty, in order to seek to suspend concessions in\nanother sector or another agreement than that in which the violation was found.\n5.62 As observed by the arbitrator on US – Gambling (Article 22.6 – US):\n\" '[T]hese provisions imply a sequence of steps towards WTO-consistent suspension\nof concessions or other obligations'. 224 In other words, as Antigua has expressed it,\nArticle 22.3 of the DSU provides a 'hierarchy' of remedies that a complaining party\nmust follow in determining in which sector s or under which agreements suspension\nof concessions or other obligations can be sought, namely (1) seek to suspend in the\nsame sector in the same agreement, (2) seek to suspend within the same agreement\nand (3) seek to suspend under another agreement.\"225\n5.63 In this case, the initial violation was found in relation to trade in goods, and this is the \"sector\"\n(as defined in subparagraph (g) of Article 22.3) in which Brazil woul d normally be expected to apply\ncountermeasures under subparagraph (a). Subparagr aph (b) affords the possibility of seeking to\nsuspend concessions or other obligations \"in othe r sectors under the same agreement\". For the\npurposes of this provision, all the agreements on tr ade in goods contained in Annex 1A of the WTO\nAgreement \"taken as a whole\" are considered to be an \"agreement\", and a sector is defined, with\nrespect to goods, as \"all goods\".\n5.64 Therefore, recourse to subparagraph (b) would in principle allow Brazil to seek to suspend\nconcessions or other obligations in all goods, under the Agreements on trade in goods. Brazil seeks to\napply countermeasures under the TRIPS and GATS Agre ement. This would constitute suspension of\nconcession or other obligations \"under another agreem ent\" within the meaning of subparagraph (c) of\nArticle 22.3.\n5.65 Accordingly, Brazil will have followed the principles and procedures of Article 22.3 if it has\ndetermined, in accordance with the terms of subparagraph (c), that:\n(a) \"it is not practicable or effective\" to seek suspension under the same agreement (i.e.\nunder the agreements on trade in goods); and\n(b) \"the circumstances were serious enough\".\n5.66 In addition, in applying these principles, Braz il is required to have taken into account the\nfactors identified in subparagraph (d) of Article 22.3.\n5.67 As we have determined above , our mandate is to review whether, in making these\ndeterminations, Brazil has considered the necessar y facts objectively and whether, on the basis of\nthese facts, it could plausibly arrive at the conclusi on that it was not practicable or effective to seek\nsuspension under the same agreement and that the circumstances were serious enough. In order to\nconduct this assessment, we must first clarify the te rms of these requirements, as well as the role of\nthe elements referred to in subparagraph (d).\n\n224 (original footnote) Decision by the arbitrators, EC – Bananas III, (request by Ecuador), para. 55.\n225 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.19.\n\n5.68 At the outset, we note that the two requirements within subparagraph (c) are cumulative,\ni.e. the complaining Member must consider that \"it is not practicable or effective\" to seek suspension\nof concessions or other obligati ons under the same agreement and that \"the circumstances are serious\nenough\". The additional requireme nt, under subparagraph (d), to take into account certain\nconsiderations, further qualifies the manner in whic h the principles contained in subparagraph (c) are\nto be applied.\n(a) First requirement under subparagra ph (c): a determination that it is \"not practicable or\neffective\" to suspend concessions or other oblig ations with respect to other sectors under the\nsame agreement\n5.69 In order to seek to suspend concessions or ot her obligations under another agreement, the\ncomplaining party must in the first instance consider that it is \"not practicable or effective\" to seek\nsuspension under the same agreement. Brazil c onsiders that it does not need to meet both the\n\"practicable\" and \"effective\" criteria, and that it is sufficient to satisfy one of the two conditions.226\n5.70 We agree that the wording of the provision imp lies that the complaining party may consider\neither that it is \"not practicable\" or that it is \"not effective\" to seek suspension under the same\nagreement, and that it need not conclude that same-agreement suspension is both \"not practicable\" and\n\"not effective\", in order to reach the conclusion that it is \"not practicable or effective\".227\n(i) \"practicable\"\n5.71 In Brazil's view, the standard of \"practicability \" under Article 22.3 refers to the availability\nfor application in practice of the suspen sion of concessions only in the goods sector. 228 In Brazil's\nview, \"practicability\" refers to whether susp ension in the same sector or agreement is available for\napplication in practice, as well as suited for being used in a particular case . If it is not a real option\nor it is not suited to be used in the circumstances, it will be not practicable. 229 This is how the\narbitrators on EC – Bananas III and US – Gambling understood this term, and we agree with this\ndetermination.\n5.72 As Brazil describes it, and as the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 –\nEC) put it, a consideration of whether suspension in a given sector or agreement is \"practicable\"\nrelates primarily to whether it is actually \"available in practice\" to the complaining party. We find the\nexample used by the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) helpful in\nclarifying the types of considerations that may be pertinent in such a determination:\n\"To give an obvious example, suspension of commitments in service sub-sectors or in\nrespect of modes of service supply which a particular complaining party has not\nbound in its GATS schedule is not available for application in practice and thus\ncannot be considered as practicable.\"230\n5.73 There may be a range of situations in wh ich the suspension of concessions or other\nobligations in relation to a certain sector or agreemen t is not \"available in practice\". In our view, the\nessence of a consideration of \"practicability\" of susp ension is that it relates to its actual availability\nand feasibility. The impracticability could be either a legal one, as postulated in the example given in\n\n226 Brazil's responses to questions from the Arbitrator, question 8, para. 127.\n227 See Decisions by the Arbitrator, US – Gambling (Article 22.6 – US) , para. 4.29 and EC – Bananas\n229 Brazil's responses to questions from the Arbitrator, question 8, para. 126.\n230 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 71.\n\nEC – Bananas III (Ecuador ) (Article 22.6 – EC) , or a factual one, such as might arise if the\ncountermeasure exceeds the total amount of the trade available to be countered.\n(ii) \"effective\"\n5.74 Citing the EC – Bananas III (Ecuador) (Article 22.6 – EC) arbitrator, Brazil argues that the\n\"effectiveness\" standard encourages the offending st ate to comply with WTO obligations, in other\nwords, to induce compliance 231 and allows the party seeking suspensi on to ensure that the impact of\nthat suspension is strong and has the desired result, namely to induce compliance. Brazil considers\nthat \"the countermeasures that are best tailored to provide such a response are those that can maximize\nthe likelihood of compliance\".232\n5.75 In the United States' view, the likelihood of compliance is not a factor that the DSU provides\nin assessing the appropriate level or nature of the countermeasure. 233 The United States considers that\nthe DSU authorizes rebalancing of trade concessions in case a Member does not comply with its trade\nobligations. While the ultimate political goal of the DSU is to promote compliance, the legal\nstandards for assessing countermeasures are the effects of nullification and impairment and these are\ntwo separate issues in the United States' view.\n234\n5.76 The United States considers that the word \"eff ective\" means that a Member should not be\nprevented from imposing countermeasures of the intende d weight as a result of the limitation of those\ncountermeasures to the same sector/agreement. The in tended \"weight\" is what is authorized based on\nthe applicable standard, including where special or additional rules apply. Thus, a Member should be\nable to take the \"appropriate\" amount of countermeasures with respect to prohibited subsidies and, for\nsubsidies causing adverse effects, a Member should be able to take countermeasures commensurate\nwith those effects.235\n5.77 Dictionary definitions of the term \"effective\" include \"producing a decided, decisive, or\ndesired effect\"236 and \"powerful in effect; producin g a notable effect; effectual\". 237 The arbitrator on\nEC – Bananas III (Ecuador) (Article 22.6 – EC) relied on comparable definitions to conclude that\n\"the thrust of this criterion empowers the party seeki ng suspension to ensure th at the impact of that\nsuspension is strong and has the desired result, name ly to induce compliance with DSB rulings within\na reasonable period of time\". 238 That arbitrator further elaborat ed on the types of circumstances in\nwhich a complaining party might consider that su spension in a given sector or agreement would not\nbe \"effective\":\n\"One may ask whether this objective [of i nducing compliance] may ever be achieved\nin a situation where a great imbalance in terms of trade volume and economic power\nexists between the complaining party seek ing suspension and the other party which\nhas failed to bring WTO-inconsistent meas ures into compliance with WTO law. In\nsuch a case, and in situations where the complaining party is highly dependent on\nimports from the other party, it may happen that the suspension of certain concessions\nor certain other obligations entails mo re harmful effects for the party seeking\nsuspension than for the other party. 29 In these circumstances, a consideration by the\n\n231 Brazil's written submission, para. 511. EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 72.\n233 US written submission, para. 337.\n234 US written submission, paras. 339 and 341.\n235 US responses to questions from the Arbitrator, question 137, para. 177.\n236 In Merriam-Webster Online Dictionary . Retrieved 4 June 2009, from http://www.merriam-\nwebster.com/dictionary/effective.\n237 Oxford English Dictionary, at www.oed.com.\n238 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 72.\n\ncomplaining party in which sector or under which agreement suspension may be\nexpected to be least harmful to itsel f would seem sufficient for us to find a\nconsideration by the complaining party of th e effectiveness criterion to be consistent\nwith the requirement to follow the principles and procedures set forth in\nArticle 22.3.\"239\n(original footnote) 29 Of course, suspension of concessions or other obligations is always\nlikely to be harmful to a certain, limited extent also for the complaining party requesting\nauthorization by the DSB.\n5.78 We do not share the view of the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC)\nthat a consideration by the comp laining party of the sector or ag reement in which suspension would\nbe \"least harmful\" to itself would necessarily be pertin ent. As we read the terms of subparagraphs (b)\nand (c), a consideration of the \"effectiveness\" cr iterion under these provisions involves an assessment\nof the effectiveness – or lack thereof – of suspension in the same sector or under the same agreement ,\nrather than an assessment of the relative effectiven ess of such suspension, as compared to suspension\nin another sector or agreement. In other words, the procedures and principles under Article 22.3 do\nnot entitle a complaining party to freely choose the most effective sector or agreement under which to\nseek suspension. Rather, it entitles the complaining pa rty to move out of the same sector or same\nagreement, where it considers that suspension in that sector or agreement is not \"practicable or\neffective\".\n5.79 We agree with the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC), however,\nthat the question of whether \"the suspension of certa in concessions or certain other obligations entails\nmore harmful effects for the party seeking suspension than for the other party\" would be pertinent to a\nconsideration of the \"effectiveness\" of the said suspension. Indeed, as the arbitrator on EC – Bananas\nIII (Ecuador) (Article 22.6 – EC) notes, there may be situations in which, for example, the\ncomplaining party is heavily dependent on imports from the other party, to such an extent that it may\ncause more harm to itself than it would to the other party, if it were to suspend concessions or other\nobligations in relation to these imports. In such a situation, where the complaining party would cause\nitself disproportionate harm, such that it would in fact be unable to use the authorization, there would\nbe a basis for concluding that such suspension would not be \"effective\".\n5.80 It may well be that the suspension of concessions or other obligations \"i s always likely to be\nharmful to a certain, limited extent also for the co mplaining party\" applying it. However, this does\nnot, in our view, imply that a consideration of su ch harm may not be relevant for the purposes of\nassessing the \"effectiveness\" of suspension in a gi ven sector or agreement. In foreseeing that the\ncomplaining party may consider that same-sector or same-agreement suspension is \"not practicable or\neffective\", the drafters of the DSU have preci sely acknowledged and recognized the possibility of\ncircumstances in which suspension of certain obligations would not be effective, and they have sought\nto allow the complaining party the possibility of ensuring that it nonetheless has at its disposal an\neffective remedy in such circumstances, i.e. a re medy that may produce its intended effects. This\nincludes, in our view, situations in which the harm that may arise from same-sector or same-\nagreement suspension would be so significant for the complaining party as to deter it from having\nrecourse to it.\n5.81 This is consistent with the objective of inducin g compliance, in that this provision seeks to\nensure that the complaining party will be in a po sition to actually have recourse to the authorized\nremedy, and thus enable it to contribute to induci ng compliance, as is its legitimate purpose. At the\nsame time, we agree with the United States that the \"likelihood of compliance\", as such, is not at issue\n\n239 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 73.\n\nin this determination. Rather, what is at issue is the ability of the complaining party to make effective\nuse of the awarded countermeasures in order to induce such compliance.\n(b) The second element under subparagraph (c): a de termination that \"the circumstances are\nserious enough\"\n5.82 As noted by the arbitrator on US – Gambling (Article 22.6 – US) , the text of Article 22.3(c)\nprovides no specific guidance on how the terms \"the circumstances are serious enough\" are to be\nunderstood. The elements of subparagraph (d) do, however, provide useful guidance in this respect.\n5.83 We therefore consider that the trade at issue, and its importance to the complaining party, as\nwell as the broader economic elemen ts relating to the nullification or impairment and the economic\nconsequences of the suspension, may all be re levant in assessing whether the \"circumstances are\nserious enough\" in a given case.\n5.84 At the same time, we consider that these terms inherently imply a degree of flexibility in\nassessing what \"circumstances\" may be pertinent in a given case, so that these may not be the only\nrelevant considerations in such an assessment. We agree, in this respect, with the following\ndeterminations of the arbitrator on US – Gambling (Article 22.6 – US):\n\"We also consider, more generally, that this aspect of the determination, which relates\nto \"circumstances\", is of necessity an as sessment to be made on a case-by-case basis,\nand that the circumstances that are relevant may vary from case to case. We note\nhowever, that these circumstances should be serious \"enough\", which suggests that it\nis only when the circumstances reach a certain degree or level of importance, that\nthey can be considered to be serious enough.\"\n240\n(c) The elements under subparagraph (d) of Article 22.3\n5.85 Subparagraph (d) of Article 22.3 directs the complaining party to take into account two\nspecific considerations, in applying the principles under the previous subparagraphs:\n(a) the trade in the sector or under the agreem ent under which the panel or the Appellate\nBody has found a violation or other nullifi cation or impairment , and the importance\nof such trade to [the complaining] party; and\n(b) the broader economic elements related to the nullificati on or impairment and the\nbroader economic consequences of the suspension of concessions or other\nobligations.\n5.86 The first element, the \"trade in the sector or under the agreement under which the panel or the\nAppellate Body has found a violation\" is to be understood with reference to the definitions of the\nterms \"sector\" and \"agreement\" contained in subparagr aph (g) of Article 22.3. As the arbitrator on\nUS – Gambling (Article 22.6 – US) observed:\n\"[I]n order to determine whether suspension is practicable or effective in a certain\nsector, it is appropriate to take into account all the trade in that sector and its\nimportance to the complaining party. This also appears to us consistent with the\n\n240 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.108.\n\npurpose of this provision, which is to provi de certain objective parameters to guide\nthe conduct of such determination.\"241\n5.87 In the circumstances of this case, this means that what is to be taken into account is \"the\ntrade\" in all goods under the trade in goods agreem ent, that is, trade in goods generally, and its\nimportance to Brazil.\n5.88 The second consideration required to be taken into account is the \"broader economic elements\nrelated to the nullification or impairment\" and the \"broader economic consequences of the suspension.\nWe agree with the determinations of the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 –\nEC), as endorsed also by the arbitrator on US – Gambling (Article 22.6 – US), that:\n\"The fact that the former criterion relates to 'nullification or impairment' indicates in\nour view that this factor primarily concer ns 'broader economic elements' relating to\nthe Member suffering such nullification or impairment, i.e. in this case Ecuador.\nWe believe, however, that the fact that the latter criterion relates to the suspension of\nconcessions or other obligations is not necessarily an indication that \"broader\neconomic consequences\" relate exclusively to the party which was found not to be in\ncompliance with WTO law, i.e. in this case the European Communities. As noted\nabove, the suspension of concessions may not on ly affect the party retaliated against,\nit may also entail, at least to some extent, adverse effects for the complaining party\nseeking suspension, especially where a great imbalance in terms of trade volumes and\neconomic power exists betw een the two parties such as in this case where the\ndifferences between Ecuador and the European Communities in regard to the size of\ntheir economies and the level of socio-economic development are substantial.\"242\n5.89 Accordingly, the \"broader economic elements related to the nullification or impairment\" to be\ntaken into account in this case are those relating to the nullification or impairment arising for Brazil\nfrom the subsidies at issue, while the broader economic consequences of the suspension may include a\nconsideration of the economic consequences of the suspension both for Brazil and for the\nUnited States.\n5.90 The terms of subparagraph (d), which require these elements to be taken into account in\napplying the principles of subparagraph (c), make it clear that an assessment of whether same-sector\nor same-agreement suspension is \"not practicable or effective\" and of whether \"the circumstances are\nserious enough\" may legitimately, and indeed should, take into consideration not only the trade to\nwhich the suspension would apply, but also the economic consequences arising from the suspension.\n5.91 With these considerations in mind, we now turn to consider whether a plausible determination\nthat it is not practicable or effective to suspend ob ligations in trade in goods alone could be made in\nthis case, and that the circumstances are serious enough, so that an authorization to suspend\nconcessions or other obligations also under the TRIPS Agreement and the GATS could be given.\n2. Factual assumptions\n5.92 As we have found above, our mandate requires us to consider whether Brazil has followed the\nprocedures and principles of Article 22.3 of the DSU, in determining that it is not practicable or\n\n241 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.34.\n242 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), paras. 85-86. See also\nDecision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.35.\n\neffective to suspend concessions in trade in goods and in the agreements of Annex 1A and that the\ncircumstances are serious enough.\n5.93 In making its determinations, Brazil assumed that the countermeasures would be in the\namount that it had requested, namely, a total of US$1.037 billion in relation to the actionable\nsubsidies at issue in these proceedings (ML a nd CCPs). We have determined, however, that\ncountermeasures in an amount of US$147.3 millio n annually would be \"c ommensurate with the\ndegree and nature of the adverse effects determined to exist\" in this case.\n5.94 In addition, our determination in these proceed ings takes place against the background of\nanother arbitration proceeding c oncerning prohibited subsidies, in which Brazil had requested\ncountermeasures in the amount of US$1.294 billi on annually for the GSM 102 programme and\nUS$350 million for the Step 2 programme. The arbitrat or in those proceedings has determined that\ncountermeasures in the amount of US$147.4 million 243 would be \"appropriate\" within the meaning of\nArticle 4.10 of the SCM Agreement.244\n5.95 These circumstances raise two questions for our consideration. First, we must consider\nwhether, for the purposes of our assessment, we mu st take into account the cumulated amount of\ncountermeasures resulting from both proceedings or only the amount arising from this Decision.\nSecondly, we must consider what are the implications of the fact that Brazil has assumed, in making\nits determination, an amount of countermeasures si gnificantly in excess of the amount that has been\ndetermined to be permissible.\n(a) Whether it is appropriate to consider the cu mulated amount of countermeasures arising from\nboth proceedings\n5.96 Although the arbitral proceedings relating to the prohibited and actionable subsidies\nrespectively were conducted in parallel, they relate to different aspects of the DSB's findings in this\ndispute and are legally distinct. In both cases, Br azil has requested an authorization to apply the\nproposed countermeasures in the form of suspen sion of obligations under the GATS and the TRIPS\nAgreement, as well as under trade in goods. The ques tion therefore arises as to the extent to which\nthe Arbitrator in these proceedings must take into ac count the determinations of the arbitrator in the\nother proceedings, in assessing whether Brazil h as followed the principles and procedures of\nArticle 22.3 of the DSU.\n5.97 Brazil considers that the amount of counterm easures on prohibited subsidies and the amount\nof countermeasures for actionable subsidies should be cumulated in considering whether suspension\nof concessions or obligations in the goods sector is practicable or effective. Brazil observes that the\ntotal amount of countermeasures is part of the objective reality in which the Member operates and in\nwhich it undertakes its consideration of the prac ticability or effectiveness of the countermeasures\nunder Article 22.3 of the DSU.\n245\n5.98 The United States argues that, since the Arbitrator should issue two separate reports to reflect\nthe two separate arbitration proceedings, sep arate assessments of Brazil's requests for\ncountermeasures under the GATS and the TRIPS Agreement would be needed. 246 However, the\nUnited States also considers that the Arbitrator in each proceeding may consider the circumstances of\nthe other proceeding. Consequently, the Arbitrator in one proceeding may take account of\n\n243 We note that this is not a fixed amount, so it may vary over time. However, at this stage of our\nanalysis, we find it appropriate to rely on the amount that has been calculated in relation to FY 2006.\n244 See WT/DS267/ARB/1, para. 4.278.\n245 Brazil's responses to questions from the Arbitrator, question 9, para. 133.\n246 US responses to questions from the Arbitrator, question 9, para. 47.\n\ncountermeasures awarded in the other proceeding in determining if the total of the countermeasures in\nthe two proceedings together would justify suspending concessions under another sector or\nagreement.247\n5.99 We first take note of the parties' agreement th at, even in the context of separate assessments\nunder the two proceedings, the Arbitrator in each pr oceeding would be entitled, in the circumstances\nof this case, to take account of the amount of countermeasures awarded in the other proceedings.\n5.100 The determinations arising from this Decision are only in relation to the countermeasures\nconcerning the subsidies covered by these proceedi ngs, namely Brazil's proposals in relation to the\nmarketing loan and countercyclical payments. At the same time, we agree that it is appropriate for us\nto take into account the amount of countermeasur es to which Brazil is entitled to under the other\nproceedings. As Brazil has expressed it, the amou nt of countermeasures determined in the other\nproceedings is \"part of the objective reality in wh ich the Member operates\". We assume that both\namounts would be applicable at the same time a nd that the two amounts of countermeasures would\npotentially be applied cumulatively by Brazil. This circumstance may have an impact on an\nassessment of whether it is \"practicable or effective\" to seek countermeasures in the same sector or the\nsame agreement and whether \"the circumstances are serious enough\". As observed above, the parties\nagree that we can adopt a cumulative approach in this case.248\n5.101 We will therefore take into account the cumula ted level of countermeasures arising from both\ndecisions, which amounts to US$294.7 million annually, in reviewing whether Brazil has followed the\nprinciples and procedures of Article 22.3 of the DS U in determining that it is not practicable or\neffective to seek to suspend concessions or other ob ligations in trade in go ods alone and that the\ncircumstances are serious enough.\n(b) Implications of the difference between the le vel of countermeasures requested by Brazil and\nthe level determined to be permissible\n5.102 The amount of the countermeasure is a central aspect, possibly the most critically important\naspect, of the consideration required to be undert aken by a complaining Member in following the\nprinciples and procedures of Article 22.3 of the DSU.\n5.103 In these proceedings, Brazil has assumed, in applying the procedures and principles of\nArticle 22.3, that it would be entitled to a to tal amount of countermeasures in the amount of\nUS$2.681 billion (US$1.644 billion in relation to the prohibited subsidies plus US$1.037 billion in\nrelation to the actionable subsidies). However, as we have determined a bove, the cumulated amount\nof countermeasures to which Brazil is entitled to is US$294.7 million.\n5.104 In this case, the amount of countermeasures that we have determined to be permissible is\nsignificantly lower than the amount assumed by Brazil in its request, and this fact alone compels a\nfinding that the complaining party has not followed the principles and procedures of Article 22.3. We\nmust therefore find that in adopting the assumption of a total of US$2.681 billion of countermeasures\nas the central \"fact\" underlying its consideration of Article 22.3, it did not properly consider, or cannot\nbe taken to have properly considered, \"the necessar y facts objectively\". Consequently, it cannot have\nproperly applied the princi ples and procedures of Article 22.3 on the basis of these facts. Therefore\nour finding must be that Brazil has not followed the principles and procedures as laid out in that\nArticle.\n\n247 US responses to questions from the Arbitrator, question 9, para. 48.\n248 See para. 5.99.\n\n5.105 It is not possible to go \"back in time\" for Braz il to rectify its request for the purposes of these\nproceedings, taking into account our determina tion relating to the permissible amount of\ncountermeasures.249 However, Brazil will have the right to present a request for countermeasures to\nthe DSB at the level determined in this Decision. Thus it would be both unreasonable and\nuninstructive to say nothing more about the way in which the principles and procedures should be\napplied to the lower countermeasure calculated by the Arbitrator.\n5.106 We recall in this context our determination in paragraph 5.52 above that, should we determine\nthat Brazil has not followed these procedures or pr inciples, we should articulate how the analysis\ncould properly take place to the extent necessary to en sure that Brazil is in a position to apply these\nprocedures and principles \"consistent with paragra ph 3\" and present a request \"consistent with the\ndecision of the arbitrator\" in a subsequent phase of these dispute settlement proceedings, as foreseen\nin Article 22.7 of the DSU.\n5.107 In light of these considerations, and notwithst anding our determination that Brazil has not\nfollowed the principles and procedures of Article 22.3 because it based its determination on an\namount of countermeasures which is significantly in excess of the amount we have authorized, we\nthus now proceed to describe how, in our view, Artic le 22.3 should be applied in the context of a\ncountermeasure in the amount of US$294.7 million.\n5.108 In conducting this analysis, we will take into consideration the elements and arguments that\nhave been presented to us by Brazil and the Unite d States in these proceedings. We recognize that\nBrazil applied these arguments to a significantly larg er amount of countermeasures. What we aim to\ndetermine in our examination of this issue, is whether the considerations that Brazil has brought\nforward to explain why it considered that it is not practicable or effective to suspend concessions or\nother obligations solely in trade in goods to th e level that it assumed it w as entitled to, would justify\nthe same conclusion when applied to the level of co untermeasures that we have determined would be\n\"commensurate with the degree and nature of the adverse effects determined to exist\".\n3. Whether it is practicable or effective for Brazil to suspend concessions in trade in goods\n5.109 Although Brazil considers that the countermeasures must be assessed exclusively against the\nrequirements of Article 7.9 of the SCM Agreement, Brazil claims that it h as, in any event, followed\nthe principles and procedures of Article 22.3 of the DSU. Specifically, Brazil considers that it is not\npracticable or effective to suspend concessions or other obligations exclusively under trade in goods,\nand that the circumstances are serious enough to justify suspension of concessions or other obligations\nunder TRIPS and GATS.\n250 Brazil also argues that it considered the elements under Article 22.3(d) of\nthe DSU.251\n5.110 The United States argues that the text of the DSU does not explicitly define what\ncountermeasures are \"practicable or effective\", but th e negotiators were clear in their intention that\nthis be a high bar. Brazil does not reach this bar. In the United States' view, Brazil advances a claim\nfor cross-agreement and sector suspension of con cessions that is contrary to the Article 22.3\ndisciplines.252 The United States therefore requests the Arbitr ator to reject Brazil's request to suspend\n\n249 This is not to say that a Member could not base its consideration on a range of possible\ncountermeasure amounts, in order to come before an arbitrator in Article 22.6 proceedings and validly say that it\ndid use a range of assumed facts, and arrived at the same or different outcomes in relation to cross-retaliation.\nIn these proceedings that did not happen.\n252 US written submission, para. 329.\n\nconcessions with respect to TRIPS and GATS for the reason that Brazil does not meet the\nrequirements of Article 22.3.253\n(a) Main arguments of the parties\n5.111 Brazil states that it does not consider it adequa te to suspend concessions \"by creating barriers\nto Brazilian imports of US goods and thereby imposing additional costs on the Brazilian economy in\ngeneral.\"254\n5.112 The United States considers that this claim runs head long into the thoughtful and purposeful\ndesign of the DSU system. According to the United States, the treaty negotiators specifically created\na system where Members had to first resort to suspension of concessions within the relevant\nagreement. Suspension of concessions with respec t to goods always entails creating barriers to\nanother Member's goods and thereb y imposing additional costs on the sanctioning state's economy.\nThe United States argues that the negotiators of the DSU were well aware that suspension of\nconcessions with respect to goods would be pain ful for both the sanctioned government and the\nsanctioning government.255 In the United States' view, if the me re fact of additional costs on Brazil's\ndomestic economy were sufficient for suspension of c oncessions in the same sector to be not practical\nor effective, it could be argued th at any and all violations with re spect to goods would warrant cross-\nagreement suspension of concessions. The United Stat es argues that this approach is not compatible\nwith the fact that designers of the DSU chose to impose disciplines on suspension of concessions.256\n5.113 The United States considers that it can demonstrate that Brazil can effectively and practicably\nsuspend concessions with respect to goods, and that any request by Brazil to suspend concessions\nacross sectors or across agreements is not a reas onable and objective assessment of the conditions\nestablished by Article 22.3.257 The United States points out that Brazil imports a sufficient amount of\ngoods from the United States to provide practicab le and effective suspension of concessions.\nBetween 2005-2007, Brazil importe d between US$15.3 billion to US$24.6 billion annually in\nUS goods.258 In consumer goods, excluding food a nd automotive goods, Brazil imported between\nUS$1.125 billion and US$1.676 billion annually in the same time period. Including food and\nautomotive goods in the consumer goods categor y, the level of imports jumps to between\nUS$1.826 billion and US$2.717 billion annually.\n5.114 According to the United States, the level of bilateral trade between the United States and\nBrazil is thus sufficient to provide for suspensi on of concessions with respect to goods alone.\nMoreover, given Brazil's large and diverse ec onomy and the actual level of nullification and\nimpairment incurred by the US policies at issu e, suspension in consumer goods alone should be\neffective and practicable. 259 In the United States' view, the ec onomic size and the diversity of the\neconomy makes it possible for Brazil to suspend con cessions in the goods sector without resort to\nexceptional cross-sector countermeasures. 260 In the past, Brazil has proposed suspension of\nconcessions in the amount of US$3.36 billion only in the goods sector in the Canada – Aircraft\nCredits and Guarantees (Article 22.6 – Canada) dispute. In the United States' view, it is difficult to\nunderstand why it was practicable and effective to suspend concessions in the goods sector in that\n\n253 US written submission, para. 342.\n255 US written submission, para. 329.\n256 US written submission, para. 330.\n257 US written submission , para. 335.\n258 Exhibit US-62, US-ITC Export Data to Brazil.\n259 US written submission, para. 336. The Arbitrator takes note that these US arguments are made in\nthe context of Brazil's requested amount of countermeasures, i.e., US$1.644 billion, for prohibited subsidies and\nUS$1.037 billion for actionable subsidies respectively.\n260 US responses to questions from the Arbitrator, question 135, paras. 168-170.\n\ndispute while Brazil considers it is not practicable or effective to suspend concessions in the goods\nsector in this case.261\n5.115 Citing the EC – Bananas III (Ecuador) (Article 22.6 – EC) arbitration, the United States\nargues that if a developing country, even one with a relatively small and undiversified economy such\nas Ecuador, has sufficient bilateral trade in consumer goods to impose suspension of concessions, then\nit must do so. Only where the government lacks the capacity to suspend concessions in the same\nagreement does the DSU permit the cross agreement suspension of concessions.262\n5.116 Brazil explains that it would not be feasible or reasonable to apply countermeasures on capital\ngoods, intermediate goods and other essential inputs to the Brazilian economy, which it says comprise\n95 per cent of Brazil's imports from the United States . The costs involved in switching suppliers are\nnormally prohibitive for capital goods and intermediate goods. In addition to prices, decisions on the\npurchase of capital or intermediate goods are conditioned by several factors that severely constrain the\nability of producers to switch suppliers. These f actors include: (i) long-term contracts cannot be\nterminated easily or without heavy pecuniary penalties; (ii) capital goods in particular are tailor-made\nto respond to the specific needs of the producer and are ordered many months or even years in\nadvance; (iii) in most industries, inputs must have the exact technical specifications that match the\nrequirements of the machinery in place. These specifications will be di fferent depending on the\nbrand, origin, age etc. of the machinery that equips assembly lines. As a result, theoretically similar\nproducts are not substitutable; (iv) intellectual property protection and intra-company trade determine\npurchase decisions and curb the ability of producers to change suppliers.\n263\n5.117 Moreover, Brazil says that its imports of c onsumer goods from the United States amount to\nUS$1.27 billion. Of that amount, almost US$1.1 b illion, or 86 per cent, correspond to medical and\neducational supplies, food, automotive goods and arms, sectors where, according to Brazil, any\nraising of barriers would entail serious and unreasonable costs to the Brazilian economy.264 In Brazil's\nview, the profile of Brazilian imports of consum er goods from the United States leaves very little\nroom of manoeuvre for Brazil to adopt countermeasures that target such goods.265\n5.118 However, Brazil also considers that of the US$1.27 billion of annual imports of consumer\ngoods from the United States (in 2007), approximately US$28.5 million, or 2.2 per cent, can be\nconsidered as luxury goods, in relation to which, arguably, the imposition of countermeasures would\nnot be disproportionately costly to Brazil. In Brazil's view, these luxury goods are consumed by a\nvery small share of Brazil's population and an increa se in the costs of their importation is likely to\ngenerate limited impacts on the Brazilian economy in general.266\n5.119 The United States observes that Brazil has failed to explain why, given the availability of\nalternative sources of supply, the suspension of co ncessions in the goods sector is not practicable or\neffective. Rather, the United States argues, Braz il simply takes a broad category of goods out of\nconsideration based on mere assertion. 267 The United States considers that the goods sector is \"all\ngoods\", and that while it may be appropriate to ex amine the negative impact on particular goods that\nare necessities, where goods are not necessities or wh ere alternative sources of supply are available,\n\n261 US oral statement, para. 71.\n262 US written submission, para. 333.\n263 Brazil's responses to questions from the Arbitrator, question 140, para. 334.\n264 Brazil's responses to questions from the Arbitrator, question 140, para. 336.\n267 US responses to questions from the Arbitrator, question 135, para. 171.\n\nthere is no basis to assert that suspension of concessions for those goods is not practicable or\neffective.268\n5.120 Brazil considers that the United States bears th e burden of proving that it is practicable and\neffective for Brazil to change suppliers when ta king countermeasures in the goods sector alone, and\nthat merely identifying that alternative sources of supply exist for some products is not sufficient. 269\nIn this regard, Brazil considers that the United St ates failed to demonstrate that countermeasures in\nthe goods sector alone is \"practicable\" and \"effective\".270\n5.121 Brazil considers that the crucial question is not whether alternative sources of supply exist,\nbut whether it would be feasible and sensible for Braz il, in practice, to force its economic agents to\nswitch to other suppliers. Such analysis would ha ve to take into account, among other factors, the\nUS share in Brazil's total imports; the price levels of alternative suppliers; technical specifications and\nproduct differentiation; intellectual property and in tra-company trade restrictions; and the economic,\nwelfare and inflationary costs resulting from the disruption of production and supply chains. 271 Brazil\nconsiders that the burden is on the United States to explain why and how the US imports can be\nreplaced by imports from other sources, so that it is practicable for Brazil to take countermeasures\nonly in the goods sector.272\n5.122 The United States comments that Brazil focuses on an even narrower scope of products than\nthe arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) did. In that dispute, the arbitrator\nlooked at the category of consumer goods because the suspension of concessions on these goods could\nnot cause any direct adverse effects on Ecuador's domestic manufacturing and processing industries.\nThe United States says that there is no reason to ex clude such end use products as \"books\" and \"food\"\n(which Brazil indicates as necessity commodities) fr om the products for applying countermeasures.\nAlso, the United States considers that the potential co st of changing suppliers is not unusual, but an\nexpected result of suspension of concessions. The United States' main point is that Brazil is not\nconstrained to the narrow range of choices of goods as it suggests given that it is one of the world's\nlargest economies and it has many sources of supply.273\n5.123 Brazil further argues that within the very lim ited scope of consumer goods that Brazil has to\ntarget, the costs and welfare-reducing effects resulting from the adoption of countermeasures\nexclusively in that sector would render such an a lternative not practicable. In Brazil's view, the\nadditional costs generated by these measures would a dd to inflationary pressures – at a time when\nincreasing prices have pointed to a worrying inflationary scenario – and would limit access of\nBrazilian consumers to these impor ted goods, negatively affecting Brazil's economy and the welfare\nof its population.\n274\n5.124 Furthermore, in Brazil's view, any measures that are contrary to the objectives of a developing\ncountry to ensure steady and sustainable development; to pursue high growth rates; to fight poverty;\nand to promote the increased welfare of its popul ation within a stable macroeconomic environment\nwill necessarily be costly and impracticable by definition. 275 Brazil also contends that the\nsignificantly unbalanced nature of the trade relati ons between Brazil and the United States, and the\nconsiderable economic differences between the tw o countries, render the suspension of concessions\n\n268 US responses to questions from the Arbitrator, question 135, para. 166.\n269 Brazil's responses to questions from the Arbitrator, question 140, para. 337.\n270 Brazil's responses to questions from the Arbitrator, question 140, para. 349.\n271 Brazil's responses to questions from the Arbitrator, question 140, para. 337.\n272 Brazil's comments on US responses to questions 135 from the Arbitrator, Paras 394..\n273 US comments on Brazil's responses to questions from the Arbitrator, question 140, paras. 179-181.\n274 Brazil's written submission, paras. 517-519.\n\nand other obligations under trade in goods alone ne ither practicable nor effective as a response to the\nUnited States' failure to comply with its obligations.276\n5.125 In Brazil's view, countermeasures that are simply most likely to add to those costs and effects\nare not practicable, as the Brazilian Government does not consider that they could be employed in\npractice.277\n5.126 Brazil also considers that countermeasures restri cted solely to trade in goods may not have\nsufficient political influence to press for the United St ates' withdrawal of the billions in US dollars\nannually paid subsidies or to remove their adverse effects. Therefore, such countermeasures are not\n\"effective\" for the purpose of encouraging compliance.278\n5.127 Brazil submits that, at the very least, it \"could plausibly arrive at the conclusion that it was not\npracticable or effective for it to suspend con cessions and other obligations\" in respect of the\nimportation of goods alone.279 Brazil reiterates that, besides being authorized to take countermeasures\nunder trade in goods, it needs to have the option to suspend concessions or other obligations under\nTRIPS and GATS. In this regard, Brazil is seeking to take countermeasures that \"produce the greatest\nlikelihood of compliance with minimal damage to its own economy\", as commented by the United\nStates itself in a DSB meeting adopting the arbitration report in EC – Bananas III (Ecuador)\n(Article 22.6 – EC).280\n(b) Analysis by the Arbitrator\n5.128 We recall our determination above that Braz il cannot be taken to have applied a proper\nconsideration of the principles and procedures of Article 22.3, because the amount of the\ncountermeasure it assumed was much greater than the countermeasure determined by the Arbitrator.\nNonetheless we have proceeded further, to give gui dance whether, on the basis of the level of the\ncountermeasures authorized under this Decision, and in the circumstances of the trade between the\ntwo Members involved, an objective and plausible conclusion could be reached that it is \"not\npracticable or effective\" to seek suspension in tr ade in goods alone and that \"the circumstances are\nserious enough\".\n5.129 We also recall that, as we have explained in our preliminary observations above, we will take\ninto account in our review of Brazil's determinati ons the amount of countermeasures that we have\ndetermined that Brazil is entitled to, in relation to the ML and CCPs (US$147.3 million), as well as\nthe amount of countermeasures determined to be \"app ropriate\" in the separate proceedings relating to\nthe prohibited subsidies at issue in the underlying dispute (US$147.4 million). The total amount of\ncountermeasures in relation to which we cons ider Brazil's determinations is therefore\nUS$294.7 million.\n(i) Initial observations\n5.130 Brazil observes at the outset that it would not be adequate to suspend concessions \"by\ncreating barriers to Brazilian imports of US goods and thereby imposing additional costs on the\nBrazilian economy in general\". The United States responds that suspension of concessions with\nrespect to goods always entails creating barrier s to another Member's goods and thereby imposing\nadditional costs on the sanctioning state's economy, and that the DSU negotiators were \"well aware\n\n280 Brazil's written submission, para. 527; WT/DSB/M/78, paras. 44-45.\n\nthat suspension of concessions with respect to goods would be painful for both the sanctioned\ngovernment and the sanctioning government\". If the me re fact of additional cost on Brazil's domestic\neconomy were sufficient for suspensi on of concessions in the same sector not to be practical or\neffective, the United States observes, then it could be argued that \"any and all violations with respect\nto goods would warrant cross-retaliation\".\n5.131 We agree with the United States that \"the mere fact of additional cost on Brazil's domestic\neconomy\" would not be sufficient, in and of itself, to conclude that suspension of concessions or other\nobligations is \"not practicable or effective\" within the meaning of Article 22.3 of the DSU. To the\nextent that the imposition of a barrier to trade on certain imports inherently generates economic costs\non the Member imposing them, the suspension of co ncessions on trade in goods may always have the\npotential to cause some harm to the economy of th e Member imposing the barriers. To assume that\nthis inherently would justify recourse to cross-re taliation would amount to reading out of Article 22.3\nthe principle contained in subparagraph (a). Rather , subparagraphs (b) and (c ) of Article 22.3 set out\nthe specific circumstances in wh ich a complaining Member may be entitled to seek to suspend\nconcessions in another sector or another agreement, whatever the sector in which the violation was\nfound.\n5.132 At the same time, as we have observed in our analysis of the terms \"not practicable or\neffective\" above, it is quite possible that the pot ential costs associated with the suspension of\nconcessions or other obligations in a given sector or under a certain agreement would precisely be of\nsuch an extent and magnitude that such suspension is \"not practicable or effective\". The fact that\nsubparagraph (d) requires a consideration of the \"b roader economic consequences of the suspension\"\nfurther confirms, in our view, that it is appropriate and legitimate for the complaining party to take\ninto account the potential costs that may be associated with the suspension, and not simply the legal\nfeasibility of that suspension, in a determination of whether it is \"practicable or effective\".\n5.133 In short, a consideration of the economic costs associated with the suspension is legitimate,\nbut it is not just any economic costs associated with the suspension of concessions or other obligations\nin a given sector or agreement that would justify a conclusion that such suspension would be \"not\npracticable or effective\". Rather, the costs at issue would have to be of such extent and magnitude as\nto render the suspension \"not practicable or effective\".\n5.134 In these proceedings, Brazil has provided general explanations as to the profile of its trade\nwith the United States, which in its view affect its ability to suspend concessi ons or other obligations\nin trade in goods, as well as specific explanations wh y it considers that it would not be practicable or\neffective to seek to suspend obligations with respect to certain categories of imports of goods from the\nUnited States, so that the range of imports that it can actually target is very limited. Finally, Brazil\nalso argues that, even within the range of produc ts that it could target, suspension would not be\n\"practicable or effective\", for various reasons. We consider these three aspects in turn.\n(ii) Overall profile of US imports of goods to Brazil\n5.135 Brazil argues that there is a great imbalance of trade between Brazil and the United States,\nand that its imports account for only a small sh are 1.7 per cent (or US$18.7 billion) of total\nUS exports (US$1.16 trillion) Hence an increase in tariffs imposed on this trade would not\nsufficiently affect the United States and therefore w ould be an ineffective response to the continued\nviolation of its obligations in this dispute.281\n5.136 In Brazil's view, it would be much easier for the United States to redirect 1.7 per cent of its\nexports to other destinations than for Brazil to fi nd suitable alternative sources for its imports. Brazil\n\n281 Brazil written submission, para. 514.\n\nis much more dependent on imports from the Un ited States. Brazil indicates that among the top\n20 products in the list of Brazil's imports from th e United States, the United States accounts for more\nthan 50 per cent of total Brazilian imports in 12 cases, and greater than 90 per cent of Brazilian\nimports in five of these products. 282 Brazil also presented an exhibit showing that out of the\n30 HS chapters in value of imports that represen ts 96 per cent of total Brazil's imports from the\nUnited States in 2007, the US share was above 10 pe r cent in 26 cases. This share was higher than\n20 per cent in 20 cases and above 30 per cent in eight cases.283\n5.137 The United States responds that the difference be tween the percentage of US imports into\nBrazil and the percentage of Brazil's imports into th e United States is not the question. The question\nis whether, within trade from the Un ited States that does occur, it would be practicable or effective to\nimpose countermeasures in goods. The United Stat es considers that Brazil, in fashioning its\ncountermeasures, could take into account the difficu lty of finding substitute goods from other sources\n(e.g., focusing on luxury goods to the extent possibl e, where increased costs would have little impact,\nand then exploring other goods wher e substitute goods are available). 284 Given the size and diversity\nof the Brazilian economy, and the availability of goods from other countries or from Brazil itself,\nBrazil has many tools at its disposal to apply countermeasures within the goods sector.285\n5.138 The United States further observes that Brazil is an important market for the United States,\nwhich exported between US$15.3 a nd US$24.6 billion annually to Br azil between 2005 and 2007. If\nBrazil suspends concessions in the goods sector, it would deprive the United States of access to the\nimportant Brazilian market. At a time of economic ch allenges, loss of this large market would lead to\na serious economic cost.286\n5.139 We take note of the fact that the total annua l value of trade in goods from the United States\nrepresents more than 15 per cent of Brazilian impor ts overall, and that this represents less than\n2 per cent of total US exports of goods. We are no t persuaded, however, that this \"imbalance\" that\nBrazil describes in its trade in goods from the Unite d States would in itself be a sufficient basis to\nconclude that a suspension of c oncessions or other obligations in re lation to such goods would be \"an\nineffective response\", as Brazil argues. In order to arrive at the conclusion that suspension in a given\nsector or agreement is not \"practicable or effectiv e\", a more detailed consideration of the possibilities\nfor suspension of concessions or obligations within the range of imports that could potentially be\ntargeted is appropriate, especially where the total level of imports is not insignificant and greatly\nexceeds the level of permissible countermeasures to which the complaining party is entitled.\n5.140 We note that the total value of Brazil's impor ts of goods from the United States, as estimated\nby Brazil, is US$18.7 billion. The United States estimates these imports at between US$15.3 and\nUS$24.6 billion annually. Brazil's estimation of th e value of its total imports of goods from the\nUnited States is therefore within the range cited by the United States.\n5.141 These figures suggest that, in principle, Braz il has at its disposal a total value of\nUS$18.7 billion of US exports that could potentially be subjected to suspension of concessions or\nother obligations. The question we must now c onsider is whether Brazil could plausibly have\nconsidered that, from those imports, it is not practic able or effective to suspend concessions or other\nobligations under the agreements on trade in goods alone, to a level of US$294.7 million. We are\naware that Brazil, in making its determination, w as assuming that it would be entitled to a total level\nof suspension significantly in excess of this figure an d we have already outlined why it is that we are\n\n284 US responses to questions from the Arbitrator, question 68, paras. 202-203.\n285 US responses to questions from the Arbitrator, question 68, para. 206.\n286 US oral statement, para. 69.\n\nreviewing the application of the principles and pr ocedure of Article 22.3 despite that supervening\nobstacle to Brazil's claim in the circumstances of this case (i.e. that it did not actually undertake the\nconsideration that it would have had to have done in order to argue its position before the Arbitrator).\n5.142 We recall our determination above that whether suspension in a given sector or agreement is\n\"practicable\" essentially relates to whether it is availa ble or feasible in practice. This question is in\npart answered by a consideration of the total leve l of trade, to which suspension of concessions or\nother obligations could be applied. To the extent th at the total level of imports from the United States\nexceeds the total value of imports to which suspen sion could apply, such suspension is at least\navailable in principle. We also recall our determin ation that whether suspension in a given sector or\nagreement is \"effective\" relates more directly to the question of whether the complaining party could\neffectively make use of the authorization, and that this may in particular depend on the extent to\nwhich that party would cause itself significant harm in suspending concessions on the imports\nconcerned, to such an extent that the suspension would not be effective.\n5.143 Bearing in mind these general considerations, we now consider Brazil's arguments to the\neffect that it only has, in fact, limited scope to seek suspension in relation to its imports of goods from\nthe United States.\n(iii) Detailed profile of US imports to Brazil and ava ilability of suspension in relation to various\ncategories of imports\n5.144 Among its US$18.7 billion of annual imports from the United States, Brazil indicates that\n95 per cent is composed of imports of intermed iate goods, capital goods, and other essential inputs\ninto Brazil's economy. Brazil argues that the costs involved in switching suppliers are normally\nprohibitive for capital goods and intermediate goods. Brazil further argues that, of the\nUS$1.27 billion of annual imports of consumer goods from the United States, almost US$1.1 billion,\nor 86 per cent, correspond to medical and educa tional supplies, food, automotive goods and arms,\nsectors where any raising of barriers would enta il serious and unreasonable costs to the Brazilian\neconomy.287 We consider in turn Brazil's determinatio n relating to capital, intermediate and other\ninput goods, and its determination in relation to consumer goods.\nCapital goods, intermediate goods and other goods constituting inputs into Brazil's economy\n5.145 Brazil observes that in addition to prices, decisi ons on the purchase of capital or intermediate\ngoods are conditioned by several factors that sever ely constrain the ability of producers to switch\nsuppliers, including long-term cont racts that cannot be terminated easily or without heavy pecuniary\npenalties, the fact that capital goods in particular are tailor-made to respond to the specific needs of\nthe producer and are ordered many months or even year s in advance, the fact that in most industries,\ninputs must have the exact technical specifications that match the requirements of the machinery in\nplace, as well as the fact that intellectual prope rty protection and intra-company trade determine\npurchase decisions and curb the ability of producers to change suppliers.288\n5.146 The United States does not specifically comment on Brazil's assessment that suspension of\nconcessions in relation to capital, intermediate or other input goods would not be practicable or\neffective. The United States generally considers, however, that Brazil takes a broad category of goods\nout of consideration based on mere assertion, and th at \"while it may be appropriate to examine the\nnegative impact on particular goods that are ne cessities, where goods are not necessities or where\nalternative sources of supply are available, there is no basis to assert that suspension of concessions\nfor those goods is not practicable or effective\".\n\n287 Brazil's responses to questions from the Arbitrator, question 140, para. 336.\n288 Brazil's responses to questions from the Arbitrator, question 140, para. 334.\n\n5.147 We note that the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) considered a\ncomparable argument in relation to \"primary goods and investment goods\". In approaching this\nquestion, the arbitrator made the following assumption:\n\"[W]e presume that the suspension of c oncessions on imports by Ecuador from the\nEuropean Communities of those types of goods and the imposition of additional\ntariffs would increase the cost of domestic production in the absence of alternative\nsources of supply at a similar price\".289\n5.148 The arbitrator in that dispute then cons idered whether the European Communities had\nprovided sufficient information and evidence to dem onstrate that alternative sources of supply existed\nfor these products at a similar price. It ultimatel y concluded that the European Communities had not\nsucceeded in rebutting Ecuador's argument that switching to other than EC sources of supply would\ninvolve transitional costs of adjusting to those sources of supply, which Ecuador considered were\nrelatively significant for it as a developing country.\n5.149 We first note, as the arbitrator on EC – Bananas III (Ecuador) (Article 22.6 – EC) did in\nrelation to \"primary goods and investment goods\", that suspension of concessions in relation to\ncapital, intermediate or other input goods, which constitute direct inputs into domestic production, has\nthe potential to be damaging to economic operato rs domestically. We also note the arguments\npresented by Brazil to explain why, in relation to such goods specifically, it may be especially\ndifficult to have recourse to alternative suppliers without significantly upsetting the supply chain.\n5.150 We see merit in this argument particularly in relation to capital and intermediate goods,\nalthough we consider it may have less force in re lation to primary goods which are more homogenous\nin character. It could be expected that a signi ficant proportion of imports of goods constituting inputs\nfor manufacturing or processing are in the form of such primary goods, for which alternative sources\nof supply may be more readily available than for certain other more differentiated products.\n290\n5.151 However, the United States has not specifically addressed this question or attempted to rebut\nBrazil's arguments by identifying such imports. Although the United States has presented a number\nof examples of products in relation to which Brazil could, in the view of the United States, easily find\nalternative suppliers, none of these examples appear to relate to capital, inte rmediate or input goods\n(except arguably computers, discussed below). 291 We also note the acknowledgement, by the United\nStates, that it could be appropriate to consider the negative impact of suspension of concessions in\nrelation to goods that are \"necessities\".\n5.152 There remains a question of definition of the scope of capital goods, as far as computers are\nconcerned. Brazil considers that computers, in relation to which the United States argues that Brazil\nhas the opportunity to import from other sources than the United States, are capital goods, in relation\nto which it would be harmful to retaliate. The United States has not specifically responded to this\nassertion. The United States has also not indicated what level of imports computers represent.292\n\n289 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 91.\n290 We note, in this context, that with respect to agricultural goods specifica lly, Brazil's experts state\nthat: \"Agricultural goods are largely undifferentiated, relatively homogeneous and therefore highly fungible.\"\n(Annex 1 to Brazil's written submission (the \"Sumner-Sundaram Statement\", para. 8).\n291 See US oral statement, para. 70. The United Stat es identifies the followi ng product categories as\nexamples of goods for which alterna tive sources of supply can be found easily: passenger cars, antibiotics,\ncomputers, salmon. See also Brazil's responses to questions from the Arbitrator, question 140, para. 344.\n292 We note in this respect that Exhibit US-109, presented by the United States for the purposes of\nillustrating the US share of imports to Brazil in various product categories, was contested by Brazil, who stated\nthat this table was in fact erroneous and represented th e share of that HS chapter in Brazil's imports from the\n\n5.153 In light of the elements presented to us, a nd in the absence of any sufficiently specific\nargument of the United States to the effect that suspension in relation to capital goods, intermediate\ngoods or other inputs into the Brazilian economy would be practicable or effective, we accept, for the\npurposes of our determination, Brazil's position that it would not be practicable or effective to seek to\nsuspend concessions or other obligat ions in relation to imports of capital, intermediate and other\nessential inputs into Brazil's economy.\nConsumer goods\n5.154 Brazil further argues that, of the US$1.27 billi on of annual imports of consumer goods from\nthe United States, almost US$1.1 billion, or 86 per cent, correspond to medical and educational\nsupplies, food, automotive goods and arms, sectors wh ere any raising of barriers would entail serious\nand unreasonable costs to the Brazilian economy.\n293\n5.155 The United States provides different figures for Brazilian imports of consumer goods from the\nUnited States. It states that, including food a nd automotive goods in the consumer goods category,\nBrazil imported between US$1.826 billion and US$2.717 billion annually from the United States\nbetween 2005-2007.294 Excluding food and automotive goods, the United States estimates that Brazil\nimported between US$1.125 billion and US$1.676 billi on in consumer goods annually in the same\ntime period. In the United States' view, given Brazi l's large and diverse economy and the actual level\nof nullification and impairment incurred by the US policies at issue, suspension in consumer goods\nalone should be effective and practicable.295\n5.156 Neither party provides an explanation for th e significant differences in values that they\npresent concerning Brazil's imports of consumer goods from the United States. Apart from the fact\nthat Brazil uses import data and the United States relies on export data, the most likely explanation for\nthe difference is that the parties do not have the same definition of consumer goods. However, it is\nnot possible to confirm this since the United States has provided only an aggregate figure and does not\nprovide a listing of the individual tariffs lines (as Br azil does) of what it cons iders to be consumer\ngoods.\n296\n5.157 In light of these elements, and given that th e United States has not explained why Brazil's\nclassification of consumer goods would be incorrect and provides no detailed list of its own, the\nArbitrator assumes, for the purposes of its analysis, that Brazil's figures in respect of consumer goods\n(as found in Exhibit Bra-754) reflect an adequate classification of such goods (see Table 3). At the\nsame time, we take note of the fact that there is a very significant difference between the two sets of\nfigures presented, and that Brazil's total figure for imports of consumer goods from the United States\nis more than 50 per cent lower than those presente d by the United States, for the same categories of\nproducts.\n\nUnited States, rather than the US share in Brazil's total imports. See Brazil's oral statement, paras. 122-123. The\nUnited States did not present alternative figures.\n293 Brazil's responses to questions from the Arbitrator, question 140, para. 336.\n294 US written submission, para. 336 and Exhibit US-62.\n295 US written submission, para 336.\n296 The only specific product category, the classification of which the parties have discussed, is\n\"computers\". In response to an argument that Brazil has alternative sources of supply for computers, Brazil has\nresponded that computers are \"capital goods\", in relation to which it would not be appropriate to suspend\nobligations. It is therefore possible that the United States classifies computers as \"consumer goods\", while\nBrazil has classified them as \"capital goods\". However, we are not in a position to determine what impact this\ndifference in classification has, in the absence of fu rther information on the level of Brazilian imports of\ncomputers from the United States.\n\n5.158 This means that, in principle, assuming that Braz il's figures are accurate, it has at its disposal\na total value of at least US$1.127 billion worth of US imports of consumer goods to which suspension\nof concessions or other obligations could in principle be applied.\n5.159 We also note at the outset the followi ng observations of the arbitrator on EC – Bananas III\n(Ecuador) (Article 22.6 – EC):\n\"Suspension of concessions with respect to consumer goods cannot cause any direct\nadverse effects on Ecuador's domestic manufacturing and processing industries. Thus\nEcuador's main argument with respec t to investment goods and primary goods\nreferred to above cannot apply with respect to consumer goods. It is also true that\nresulting price increases resulting from the suspension of concessions on consumer\ngoods could cause welfare losses to end-c onsumers in the country suspending\nconcessions.\"297\n5.160 Similarly, in these proceedings, it cannot be assu med that the types of economic costs that we\nhave accepted would be likely to arise as a result of a suspension affecting capital goods, intermediate\ngoods and other goods constituting inputs into Brazi l's economy would be e qually relevant to\nconsumer products. While some welfare costs to end-consumers might arise in the event that the\nsuspension leads to price increases, this would only o ccur if no alternative substitute is available at a\ncomparable price.\n5.161 In light of the fact that the value of Br azil's annual imports of consumer goods from the\nUnited States (at least US$1.273 billion) significan tly exceeds the total level of countermeasures that\nit is entitled to take (US$294.7 million), it would th erefore in principle be possible for Brazil to\nsuspend concessions or other obligations entirely in relation to imports of consumer goods from the\nUnited States.\n5.162 However, Brazil suggests that, out of the US $1.273 billion of consumer goods that it imports\nfrom the United States, a total of only US$182.8 million would potentially be available for suspension\nof concessions or other obligations, once the sectors where raising of barriers would entail \"serious\nand unreasonable costs to the Brazilian economy\" are deducted.\nTable 3: Total Consumer Goods imports from the United States\n\n(in US$millions) 2007\nTotal Consumer Goods Imports from the United States 1,273.1 (=)\nTag* Description\nMedical Medicines and other medical or safety products 909.5 (-)\nFood Food Products 88.7 (-)\nBooks Books, teaching material and related products 28.9 (-)\nArms Arms and ammunition 0.6 (-)\nAutos Automobiles and related goods 62.6 (-)\nTotal minus selected groups of products 182.8 (=)\nSource: Exhibit Bra-754\n\n5.163 The United States considers, however, that Braz il has simply taken broad categories of goods\nout of consideration based on mere assertion, and that, while it may be appropriate to examine the\nnegative impact on particular goods that are ne cessities, where goods are not necessities or where\nalternative sources of supply are available, there is no basis to assert that suspension of concessions\n\n297 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 100.\n\nfor those goods is not practicable or effective. The United States observes that Brazil's economy is\nsufficiently diversified, that it could easily turn to other sources of supply, and that the key question is\nwhether alternative sources of supply exist.\n5.164 Brazil considers that the crucial question is not whether alternative sources of supply exist,\nbut whether it would be \"feasible and sensible for Braz il, in practice, to force its economic agents to\nswitch to other suppliers\". Brazil identifies a number of considerations that would be relevant to such\nan assessment: \"the US share in Brazil's total im ports; the price levels of alternative suppliers;\ntechnical specifications and product differentiati on; intellectual property and intra-company trade\nrestrictions; and the economic, welfare and inflat ionary costs resulting from the disruption of\nproduction and supply chains\".298\n5.165 We agree that the question of whether suspensi on of concessions or other obligations is\n\"practicable or effective\" is not strictly limited to whether alternative sources of supply exist, but\ninvolves a broader consideration of whether it would be feasible, in practice, for Brazil to require its\neconomic agents to switch to other operators, taking into account the ra nge of factors that may have a\nbearing on this question.\n5.166 Bearing this general observation in mind, we now consider Brazil's arguments to the effect\nthat suspension of concessions or other obligati ons on imports of medica l and food products, books,\narms and automobiles would entail \"serious and un reasonable costs\". In doing so, we recall that\nBrazil accepts that in relation to \"other\" cons umer goods, the costs of suspension would not be\nexcessive. This represents an amount of US$182.8 million of imports of consumer goods from the\nUnited States, in relation to which it is undisputed th at it would be practicable or effective to suspend\nconcessions or other obligations. The margin betw een this figure and the amount of authorized\ncountermeasures is small, in relative terms.\n5.167 The first category of consumer goods for which Br azil considers that the costs of suspension\nconcessions would be \"serious and unreasonable\" is \" medicines and other medical or safety\nproducts.\" This category, according to Brazil, represents a value of US$909.5 million in annual\nimports (2007).299 The United States observes that medical sterilizers exported by Brazil exceed the\nimported amount from the United States in 2007 (US$4.6 million in imports, US$1.5 million in\nexports). The United States further notes that both China and Korea exported about twice as much\nantibiotics into Brazil as the United States in 20 08, by value, and that China and Korea both\nsubstantially increased their share of exports to Brazil from the prior year (19.4 per cent to 33 per cent\nfor China and 13 per cent to 31 per cent for South Korea). Brazil responds that a \"big share\" of\npurchases of antibiotics is made by the Ministry of Health after arduous price negotiations and\nfollowing the rules of public procurement. Theref ore, Brazil argues, finding other suppliers is not\neasy, and there are sometimes no alternatives at all. Moreover, Brazil argues, increasing the costs of\nhealth care provision will affect the welfare of the people.\n5.168 We see merit in Brazil's argument with respect to the specificities of the market and\npurchasing practices for certain pharmaceutical produc ts, which may make it difficult to freely switch\nsuppliers with respect to such products. We also note that, even within a given category of medicines,\nsuch as \"antibiotics\", products are not necessarily freely interchangeable. Brazil has not provided\nexact indications, however, as to what proportion of its imports of \"medicines and other medical or\nsafety products\" is subject to such purchasing practi ces or requirements, such that would allow us to\n\n298 Brazil's responses to questions from the Arbitrator, question 140, para. 337.\n299 See Exhibit Bra-754, reproduced above as Table 3.\n\nascertain what proportion of such imports would be a dversely affected in the event of a suspension of\nconcessions in this sector.300\n5.169 Brazil also excludes imports in the \"food\" and \"books\" categories from the range of consumer\nproducts that could be considered for suspension of concessions. The United States considers that\nthere is no reason to exclude such end use pr oducts from the range of products to which\ncountermeasures could be applied.\n5.170 With respect to food products, where US imports represent a total value of US$88.7 million,\nthe United States notes for example that US$1.8 million of sugarless chewing gum is imported. The\nUnited States also indicates that under the \"food\" category, US$10.071 million of pears and quinces\nwere imported from the United States in 2007, but imports from Argentina jumped from\nUS$73 million in 2007 to US$98 million in 2008. Brazil argues that more Brazilians have sufficient\nincome today to buy food items than before and that such social and economic development should be\npreserved at all costs. However, Brazil accepts that certain items classified as food, could be\nconsidered luxury products, though the amount and value of such products is rather limited.\n5.171 Brazil therefore essentially argu es that, except for a limited range of foods that can be\nconsidered as luxury products, food products as a whole should not be targeted because \"more\nBrazilians have sufficient income\" than in the p ast to buy food and this should be preserved.\nNaturally, if the suspension of concessions or othe r obligations were to deprive consumers of the\nopportunity to purchase food, it could legitimately be concluded that such suspension would not be\n\"practicable or effective\". However, this would only be the case if there was no opportunity to source\nthe same or substitutable goods from other domestic or imported sources. Brazil has not explained,\nhowever, why this would be the case with respect to the entire category of food products.\n301\n5.172 With respect to books, for which it estimates the total value of imports from the United States\nat US$28.9 million, Brazil observes that increased ta riffs would be highly detrimental to the policy\ngoal of increased access to education and the improvement of education standards. Also,\nArticle 150 VI (d) of the Federal Constitution exempts printed publications from import taxes, so that\nit is not practicable to take countermeasure on books . We note that books, almost by definition, are\ntotally differentiated products, such that it may not be possible to assume that one title could easily be\nsubstituted for another. However, we also note that many books have a primarily entertainment rather\nthan educational purpose.\n5.173 Brazil also considers that the automotive sector (for which imports from the United States\namount to US$62.6 million annually) should not be targeted. The United States observes that it\naccounts for less than 2 per cent of imports to Br azil of passenger cars in 2007-2008, and that auto\nparts, similarly, range from about 6 to about 8 per cent. Brazil responds that many limitations,\nincluding intra-company restrictions, apply to auto parts, making it virtually impossible or extremely\ncostly for this industry to change suppliers. With respect to passenger cars, the main characteristic of\n\n300 We observe that even within this sub-category of consumer go ods, there are items where the\nUS share of imports is less than 20 per cent. If one adds up the value of these imports of medical goods, where\nthe US share was below 20 per cent in 2007, the total amounted to US$193.7 million. The import share is not\nthe only relevant consideration in evaluating the ease of sourcing alternative supplies, as domestic producers\nmay also be potential suppliers. However, neither party has given us information on the US share of the market\nincluding domestic products.\n301 We note that Brazil's imports of food from the United States in 2007 accounted for only 10 per cent\nof its entire imports of food. Adding up the value of those food imports where the US share was below\n20 per cent in 2007 gives an amount of US$33.2 million. As noted above, the impot share is not the only\nrelevant consideration in evaluating the ease of sourcing alternative supplies, as domestic producers may also be\npotential suppliers. However, neither party has given us information on the US share of the market including\ndomestic products.\n\ntrade in this sector, Brazil argues, is intra-comp any trade. Countermeasures on cars of \"General\nMotor do Brasil\", and \"Ford do Brasil\", for exampl e, are unlikely to be well received by these\nsubsidiaries and will affect their operations in Br azil. Moreover, imports of vehicles from the\nUnited States rely on long-established networks of authorized retailers and maintenance services,\nwhich make it virtually impossible for importers to easily switch suppliers. In addition, Brazil\nobserves, car sales in Brazil fell more than 40 pe r cent in December 2008, and given the present crisis\naffecting the car industry worldwide, the Brazilia n Government has adopted several measures to\nimprove the car market conditions including reduc ing the rates of federal tax on industrialized\nproducts. Brazil considers that it is therefore not viable to adopt measures that will distort the car\nmarket and prevent consumers from reaping the bene fits of such incentives. Finally, Brazil notes that\nit wishes to maintain the conditions of competiti on and prices prevailing in Brazilian car market. 302\nWe note that the US share of Brazil's imports in the automotive sector is only 2 per cent, which\nsuggests that only limited competitive pressure could be exerted through such imports. However, we\nsee merit in Brazil's arguments relating to the struct ure of trade in the automotive sector being such\nthat a suspension could be harmful to Brazilian subs idiaries importing the cars. We also agree that\nauto parts from different manufacturers are not necessar ily substitutable for each other. In light of\nthese elements and in the absence of specific ar guments from the United States disputing Brazil's\ndescription of the situation on the automotive market in Brazil, we accept Brazil's position that\nsuspension in this sector would entail \"serious and unreasonable costs\".\n5.174 In the arms category (annual value of imports from the United States estimated at\nUS$0.6 million), the United States observes that Braz il has not indicated the extent to which these\nimported goods are to be used by the police, military , or others in the public service. In response,\nBrazil indicated that \"a very high percentage\" of imports are to be used by the police or military and\nthe level of imports of these products is very low as shown by Exhibit Bra-754. 303 This very general\nindication, however, expressed only in terms of \"a very high percentage\" does not allow us to\nascertain exactly what amount of imports would fall into this category. The total annual value of\nimports from the United States is in any event very small.\n5.175 The United States also observes that exports of computers from China to Brazil continue to\noutpace those from the United States, at 36.7 per cent in 2008 compared to 18.5 per cent. Brazil\nconsiders, however, that computers are in the category of \"capital goods\", and that it would be\nunreasonable and very costly to impose additi onal hurdles on the importation of information\ntechnology products, as increased costs of informat ion technology products would have widespread\neffects on the whole economic structure and would have a direct negative impact on the welfare of\nBrazil's population.\n304 Since the United States has not sufficiently rebutted Brazil's classification of\nconsumer goods, we do not consider the treatment of computers under this category.\nConclusion\n5.176 Overall, in light of the above, we are not convi nced that Brazil could plausibly conclude that\nsuspension of concessions or other obligations woul d entail \"serious and unreasonable costs\" in the\nentirety of these various sectors. At best, Brazil ha s plausibly explained why suspension in relation to\nsome imports within these categories of consumer goods might not be practicable or effective.\n5.177 We are therefore not convinced that Brazil c ould plausibly determine, on the basis of the\nelements presented to us in these proceedings, that it is not practicable or effective to seek to suspend\nconcessions or other obligations in relation to the entirety of the broad range of consumer products\n\n302 Brazil's responses to questions from the Arbitrator, question 140, paras. 345-347.\n303 Brazil's comments on US responses to questions from the Arbitrator, question 135, paras. 395-397.\n304 Brazil's responses to questions from the Arbitrator, question 140, paras. 342-344.\n\nthat it proposes to exclude from consideration, in particular in the areas where the US share of imports\nis relatively small.\n5.178 In light of the elements presented to us as discussed above, we can accept Brazil's\ndeterminations, on the whole, in re lation to books and the automotive sector. However, in relation to\nthe categories of medical products, food and arms, we are not persuaded that Brazil could plausibly\ndetermine, on the basis of the elements that it has presented to us alone, that suspension would entail\n\"serious and unreasonable costs\" in relation to the entire range of products in these sectors.\n5.179 We find it useful, in this context, to consider the extent to which it may be expected that\nBrazil would in fact have alternative sources of supply at its disposal for these remaining product\ncategories, as a further indication of whether Brazil could plausibly determine that it is not practicable\nor effective to suspend concessions or other obligations on such imports.\n5.180 We recognize that within the broad categori es of \"medicines\" and \"food\", certain products\nmay not be readily substitutable. In particular, we recognize that some medicines, including those\nthat are subject to proprietary rights, may need to be sourced from a specific supplier. We also recall\nour determination above that we see merit in Braz il's argument that certain medicines, such as\nantibiotics, are sourced through public procurement in such a manner that a change in supplier may be\nimpracticable. We also note, however, that medical products and food, as a whole and taken together,\nrepresent the vast majority of Brazil's consumer goods imports from the United States and that they\nboth contain a very broad range of products. Th e category \"[m]edicines and other medical or safety\nproducts\" thus include, for example, items such as \"[t]ooth brushes, incl. dental-plate brushes\". 305 In\nthese circumstances, we find that the US share of imports in these product categories as a whole may\nprovide a useful indicator of the likelihood of other sources of supply being available, and thus of the\nlevel of substitutability on the market, for these product categories.\n5.181 While there is no exact mathematical precision to this determination, we consider that, for the\npurposes of our assessment in these proceedings, a US share of imports of 20 per cent constitutes a\nreasonable threshold by which to estimate the extent to which Brazil may be able to find alternative\nsources of supply for these three remaining categories of consumer goods imports. This does not take\ninto account the fact that the actual market shar e of US products might be smaller if domestic\ncompetition were to be included also, but we have not been provided any figures that would have\nallowed us to estimate that. In selecting this indi cative threshold, we also bear in mind our earlier\ndeterminations in relation to other categories of imports. In particular, we recall that we have\naccepted Brazil's broad assertion that all capital goods, intermediate goods and other inputs in to the\nBrazilian economy should be excluded from considera tion. We have also accepted Brazil's overall\nclassification of consumer goods, including the excl usion of computers from this category. At the\nsame time, in future arbitrations of this nature , a Member arguing against the plausibility of another\nMember's determination of the practicality and e ffectiveness of taking countermeasures only within\nthe goods sector might present a more detailed and sci entific rebuttal of the determination made by\nthat other Member. In applying a benchmark of 20 per cent, this Arbitrator is not intending to signal\nthat this is the appropriate percentage to use in this kind of analysis in all cases.\n5.182 The table below (Table 4) reflects the results of this assessment. It calculates the amount of\nBrazil's imports of consumer goods from the Un ited States that could be the subject of\ncountermeasures. It is based on data at the 8-digi t level of the tariff headings within the relevant\nconsumer good categories, as reflec ted in Brazil's own submission.\n306 The calculations proceed as\nfollows. First, it excludes the value of imports of books and autos from the United States reflecting\nBrazil's determination that suspension of con cessions in these sectors would entail \"serious and\n\n305 Tariff line 9603.21.00, Exhibit Bra-823.\n306 Exhibit Bra-823.\n\nunreasonable costs\". Second, it includes imports of \"other\" consumer goods, which amount to\nUS$182.8 million, reflecting Brazil's acceptance that in relation to \"other\" consumer goods, the costs\nof suspension would not be excessive. Finally, for food, pharmaceutical products and arms, it\nincludes only the import value of those tariff lines wher e the US share in Brazil's imports is less than\n20 per cent. For illustrative purposes, the table also includes the results of the same calculation for a\n10 per cent and 30 per cent threshold.\nTable 4: Amount of Brazil's imports of consumer goods from the United States\nthat could be the subject of countermeasures\n(Millions of dollars)\n\nThreshold Applicable to Food, Medical Products and Arms\nItem\n10% 20% 30%\n - Food $11.0 $33.2 $48.8\n - Medical products $15.3 $193.7 $333.1\n - Arms $0.0 $0.0 $0.0\n\n - Books $0.0* $0.0* $0.0*\n - Autos $0.0* $0.0* $0.0*\n\n - Others $182.8** $182.8** $182.8**\nAll Consumer goods $209.1 $409.7 $564.6\n\n * In respect of Books and Autos, no amount is included, to take into account our determination that we\naccept Brazil's position that suspension in these sectors would entail \"serious and unreasonable costs\".\n\n ** In respect of the \"Others\" category, the total amount of imports from the United States is included,\nas Brazil accepts that suspension in these sectors would not entail \"serious and unreasonable costs\".\n\n Sources: Exhibit Bra-754 and Exhibit Bra-823.\n\n5.183 Using the 20 per cent benchmark for the shar e of the US imports (and not taking into\nconsideration the availability of dom estic products that also can substitu te imports), the results of this\ncalculation suggest that, even if we were to assume that Brazil would choose not to suspend\nconcessions in any category of imports of capital go ods, intermediate goods and other inputs into its\neconomy, and that it would also not suspend concess ions in books or the automotive sector, it would\nstill have at its disposal imports of other consumer goods from the United States amounting to a total\nvalue of at least US$409.7 million, from which to su spend concessions or other obligations. This\nwould therefore still leave a value of US imports of consumer goods significantly in excess of\nUS$294.7 million, to which suspension could be applied.\n307\n5.184 We also recall that, of these US$409.7 m illion of consumer goods imports from the\nUnited States, Brazil itself concedes that the costs would not be \"serious and unreasonable\", up to a\n\n307 We also note that Brazil accepts that suspension of concessions in relation to certain items that\ncould be considered luxury products, amounting to a total of US$28 million, would probably not lead to\nexcessive costs on the Brazilian economy. This amount may partially overlap with other categories, so we have\nnot added it to the figures considered in this section.\n\nlevel of US$182.8 million. This means that Brazil would only in fact need to find an additional\namount of imports of other goods from the United States to a total value of US$112.1 million to\nwhich to apply the suspension of concessions or othe r obligations, in order to apply the full level of\nsuspension that it is entitled to, on imports of goods from the United States.\n5.185 We further observe that the above calculation is made on the basis of the arguments and\ninformation provided by the parties. For the purposes of the calculation, we have accepted Brazil's\ndeterminations in relation to capital goods, intermediate goods and other inputs into the economy, and\nalso in relation to various categories of consumer goods. However, our analysis does not imply that\nBrazil necessarily has to retaliate in the categories in question. It would in fact remain entitled to\napply the suspension to any imports of goods that it chooses to target for suspension. Keeping in\nmind that the overall amount of imports from the Un ited States to Brazil is US$18.7 billion, and that\nimports of consumer goods alone represent at least US$1.273 billion in total, we are confident that, on\nthe basis of what was put before us in these proceedings and at current levels, Brazil has at its disposal\na sufficient level and variety of imports from the United States, to which it could apply the suspension\nthat it is entitled to, without incurring \"serious or unreasonable costs\" to its economy.\n(iv) General considerations\n5.186 Even in relation to the range of imports in re lation to which Brazil considers that it could in\nprinciple be practicable to retaliate (which it estimates at US$182.8 million) 308, Brazil also argues that\nsuch suspension would not be practicable or effective, due to its potential adverse welfare effects in an\ninflationary environment and also because any meas ures contrary to Brazil's development objectives\nshould be avoided. Brazil also generally argues th at the trade imbalance between the parties would\nrender such suspension ineffective. We therefore now consider these aspects.\nGeneral economic and welfare costs\n5.187 Brazil considers that \"within the very limited scope of consumer goods that it has to target,\nthe costs and welfare-reducing effects resulting fro m the adoption of counter measures exclusively in\nthat sector would render such an alternative not practicable\".\n5.188 As we have observed in para graph 5.133 above, a consideration of the economic costs\nassociated with the suspension is legitimate, but it is not just any economic costs associated with the\nsuspension of concessions or other obligations in a given sector or agreement that would justify a\nconclusion that such suspension would be \"not practi cable or effective\". Rather, the costs at issue\nwould have to be of such extent and magnitude as to render the suspension \"not practicable or\neffective\". We have also already considered in detail Brazil's specific arguments relating to the\neconomic and welfare costs of the suspension of concessions and other obligations on various\ncategories of US imports. Even considering cons umer goods alone, our determinations above suggest\nthat, at current levels, Brazil has at its disposal a total value of at least US$409.7 million of imports of\ngoods from the United States, to which it could apply a suspension.\n5.189 This confirms to us that, in principle, Brazil has at its disposal sufficient imports of goods\nfrom the United States and elsewhere in order to allow it to suspend concessions on a total value of\nUS$294.7 million of imports from the United States without incurring significant costs to its\neconomy. We further emphasize that nothing w ould compel Brazil to apply the suspension of\nconcessions or other obligations \"exclusively in that sector\". As we have observed in paragraph 5.185\nabove, Brazil would be entitled to apply the suspensi on to any imports of US goods that it chooses to\ntarget for suspension. As we also observed above, keeping in mind that the overall amount of imports\nfrom the United States to Brazil is of US$18.7 billi on, and that imports of consumer goods alone\n\n308 Based on Exhibit Bra-754.\n\nrepresent at least US$1.273 billion, we are confident th at, on the basis of what was put before us in\nthese proceedings and at current levels, Brazil has at its disposal a sufficient level and variety of\nimports from the United States, to which it could apply the suspension that it is entitled to, without\nincurring \"serious or unreasonable costs\" to its economy.\nInflationary pressure\n\n5.190 Brazil also argues that the adoption of counter measures exclusively in the small range of\nconsumer goods that it has to target would add to inflationary pressures at a time when increasing\nprices have pointed to \"a worrying inflationary scenario\" and would limit access of Brazilian\nconsumers to these imported goods, negatively affec ting Brazil's economy and the welfare of its\npopulation.\n309\n5.191 As evidence of the threat of inflation, Brazil, points out that all its price monitoring agencies\nhave recorded rising inflation in 2008, whichever measuring standard is used. As an example, it\nclaims that the annualized change in the Broad C onsumer Price Index (IPCA), which is used as the\nstandard inflation index by the Brazilian Central Bank, reached 5.9 per cent in 2008. 310 Brazil\ncontends that this surpassed the inflation target of 4.5 per cent set by the Central Bank.\n5.192 As a result of these strong inflationary pressures, it claims that the Brazilian Central Bank has\nbeen compelled to consistently raise basic interest rates since the beginning of 2008. After four\nconsecutive increases, yearly basi c interest rates reached 13.75 per cent in September 2008, making\nBrazil one of the countries with the highest real interest rates in the world.311\n5.193 The United States does not dispute that there are co sts, including the risk of inflation, from\nimposing countermeasures on merchandise goods. But it argues that countermeasures are by\ndefinition counter to WTO disciplines. Furthermore, given the size and diversity of Brazil's economy,\nand the availability of goods from other sources or from Brazil itself, it claims that Brazil has many\ntools at its disposal to apply countermeasures within the goods sector.312\n5.194 Brazil has provided sufficient evidence to show that the threat of inflation seriously concerns\nBrazilian policymakers. The United States has not dis puted the magnitude of the inflation rate in the\ncountry nor of the successive steps taken by the Ce ntral Bank to increase the interest rate. However,\nwe believe that while the risk of price incr eases from applying countermeasures on merchandise\ngoods exist, it does not rise to a level where Br azil has no room to apply countermeasures on\nmerchandise goods.\n5.195 The size of the countermeasures, at current le vels, is not large relative to the value of\nconsumer goods imports from the United States. We also note that the inflation index is based on\ndomestic consumption, which is made up predominantly of dom estically-produced goods. This\nsuggests that countermeasures on merchandise goods imports may only have a limited impact on\ninflation given the composition of the basket of good s that enter into the calculation of the inflation\nindex.\nDevelopment objectives, imbalance in trade relations and political influence\n5.196 Brazil further argues that any measures that are contrary to the objectives of a developing\ncountry to ensure steady and sustainable developmen t will necessarily be costly and impracticable by\n\n312 US responses to questions from the Arbitrators, question 68, para. 206.\n\ndefinition, and that the significantly unbalanced na ture of the trade relations between Brazil and the\nUnited States, and the considerable economic di fferences between the tw o countries, render the\nsuspension of concessions and other obligations un der trade in goods alone neither practicable nor\neffective as a response to the US failure to comply with its obligations.\n5.197 Finally, Brazil also argues that suspension in the area of trade in goods alone may not have\nsufficient political influence to press for the United States' withdrawal of the billions of dollars it pays\nannually in subsidies or to remove their adverse effe cts, and that, therefore, they are not \"effective\"\nfor the purpose of encouraging compliance.\n5.198 We agree that a complaining Member seeking to suspend concessions or other obligations\nshould not be required to act against its own intere sts in applying such suspension. However, our\nfindings above suggest to us that Brazil has at its disposal a sufficient range of imports of goods,\nincluding consumer goods, from the United States, so as to enable it to suspend concessions in the\narea of trade in goods alone, without causing itself such economic harm as to render such suspension\n\"not practicable or effective\". In the absence of other specific detailed arguments as to why such\nsuspension would otherwise adversely affect Brazil's interests, we conclude that, on the basis of the\nelements presented to us and at current levels, Br azil could not conclude that suspension in trade in\ngoods alone would not be \"practicable or effec tive\". Further, Brazil's insistence that its\ncountermeasures must have \"sufficient political infl uence\" from the perspective of the United States\nto press for the withdrawal of the subsidies and the removal of their adverse effects is misplaced.\n\"Effectiveness\" relates to the ability of a Member to have recourse to the authorized remedy, such that\nit can serve to induce compliance. However, the pr eference of a Member for a particular type of\ncountermeasure, because it would constitute a more powerful form of persuasion in a political sense,\nis not a relevant consideration for an arbitrator in these proceedings.\n5.199 Our conclusion is not modified by the \"signifi cantly unbalanced nature of the trade relations\nbetween Brazil and the United States\". As we have observed above, the elements presented to us do\nnot suggest that Brazil's dependence on US imports is such that it could not find at least\nUS$239.6 million worth of imports of goods from the United States in relation to which it would have\nsufficient alternative domestic or imported sour ces of supply at its disposal, so as to suspend\nconcessions effectively. In addition, the fact that exports to Brazil only represent a very small\nproportion of US exports generally does not, in itsel f, necessarily imply that countermeasures applied\nto some of these goods would not be \"effective\" for the purposes of inducing compliance. It would be\nup to Brazil to identify those US exports in relation to which it would apply the suspension, and to do\nthis in a manner that would make such measures as effective as possible within the limits of the\npermissible level of countermeasures. In light of th e fact that the total value of imports to Brazil from\nthe United States, at current levels, significantly ex ceeds the level of permissible countermeasures, we\nsee no reason to assume that this would not provide a sufficient margin or discretion for Brazil to\ntarget accordingly the specific products to which suspension would be applied.\n(v) Overall conclusion\n5.200 In light of all the above, we conclude that, on th e basis of the elements presented to us and at\ncurrent levels, Brazil could not plausibly have reac hed the conclusion that it is not practicable or\neffective to suspend concessions or other obligations in trade in goods alone, even if it had considered\nthe \"necessary facts\", i.e. taking into account a level of permissible countermeasures not exceeding\nUS$294.7 million.\n5.201 We note, however, that the level of counterme asures that was determined to be permissible\nunder the Decision contained in WT/DS267/ARB/1 is variable. We have ba sed our determinations\nabove on the level of those countermeasures as calcu lated on the basis of FY 2006 and on the basis of\nBrazil's imports of consumer goods in the year 200 7. Given the volume and composition of Brazil's\n\nimports of consumer goods in the year 2007, we de termined that there was at least US$409.7 million\nworth of Brazil's imports of consumer goods from the United States that could be the subject of\ncountermeasures (\"threshold\"). However, in the ev ent that the level of countermeasures that Brazil\nwould be entitled to in a given year 313 should increase to a level that would exceed this threshold,\nupdated for the same year in a manner described in Section V.C.6 below to account for the change in\nBrazil's total imports from the United States, then, we find that it would be concluded, on the basis of\nthe elements presented to us, that the suspension of concessions or obligations applied to trade in\ngoods alone would not be \"practicable or effective\" within the meaning of Article 22.3(c) of the DSU.\n5.202 In light of this determination, we must cons ider further Brazil's determination that \"the\ncircumstances are serious enough\" within the mean ing of Article 22.3 and its consideration of the\nelements of subparagraph (d) of Article 22.3.\n4. Whether \"the circumstances are serious enough\"\n(a) Main arguments of the parties\n5.203 Brazil says that, with respect to prohibited s ubsidies, the granting or maintenance of such\nsubsidies constitutes in itself, at the very least, a strong indication that \"circumstances are serious\nenough\". In addition, the seriousness of the breach in the present case is compounded by the specific\ncharacteristics of the subsidy at issue. Th e GSM 102 programme and the guarantees granted\nthereunder constitute recurrent export subsidies, granted year after year in connection with billions of\ndollars in agricultural exports in violation of US WTO obligations. Brazil notes that these subsidies\nhave been granted since 1981 and have been dist orting international markets on a continuous and\ncumulative basis for the whole period covered by this dispute (from 1999 up to 2009). The statutory\nframework of the programme ensures that it is of fered continuously and requires that billions of\ndollars in guarantees be made available every year. Brazil argues that the subsidies are particularly\npernicious in light of their stated objective and pe rformance measure, to open high risk markets to US\ncommodities and establish the dominance of US exporters by means of prohibited export subsidies, to\nthe detriment of competing exporters. In a single day, on 6 October 2008, the USDA received\napplications for ECGs worth US$3.5 billion. Acco rding to a director of CoBank, this enormous\namount of applications is a result of \"the credit markets seizing up\".\n314\n5.204 With respect to the actionable subsidies, Br azil considers that the sheer amount of the\nsubsidies granted under the ML and CCP progra mmes, which have been found to cause adverse\neffects in the form of significant price suppression in the world market; the repeated refusal of the\nUnited States to comply, since 2005, with the ruli ngs and recommendations adopted by the DSB; and\nthe concrete expectation, confirme d in the 2008 Farm Bill, that the same design and structure for the\ngranting of the same subsidies will be maintain ed in the future also demonstrate that the\ncircumstances are serious enough to justify the types of countermeasures proposed by Brazil.315\n5.205 Brazil says that these subsidies provide a pern icious predictability for US producers and\nexporters – who may take for granted that they will enjoy an artificial competitive advantage vis-à-vis\nother competitors every year – and for producers of the other Members – who have their production\nand investment decisions negatively affected in the long term by the chilling effect caused by the\npermanent availability of the US subsidies. Braz il argues that these subsidies constitute a structural\nelement of the world markets for the wide range of products they support, and that the current credit\n\n313 It is understood that this amount is to be calcu lated taking into account the entirety of the level of\ncountermeasures that Brazil is entitled to at that point in time, arising both from this Decision and from the\nDecision by the Arbitrator contained in WT/DS267/ARB/1.\n\ncrisis only heightens their distorting effects. Producers and exporters all over the world, who are\nstruggling to find credit for their operations, have to compete with US producers and exporters that\nare cushioned from the effects of the crisis by the unlawful subsidies, as the US$5.5 billion worth of\nECGs under the GSM 102 available in FY 2008 strikingly reminds us. In Brazil's view, these features\nrender the circumstances certainly no less than serious enough.316\n5.206 In Brazil's view, the fact that the United St ates has revived in the 2008 Farm Bill, under a\nslightly different disguise, the only subsidy it had eliminated as part of its implementation of the\nrecommendations and rulings of the DSB in the pr esent case – the \"Step 2\" programme – constitutes\nadditional indication that the circumstances are serious enough.317\n5.207 The United States argues that \"'circumstances ar e serious enough' may refer to the potential\nconsequences for the Member of suspending concessi ons in the same sector and agreement, or the\npotential consequences of forgoing the right to suspend concessions\". 318 In the circumstances of this\ndispute, where Brazil's proposal for countermeasur es does not substantiate any adverse effect on\nBrazil from the measure at issue, it is not clear, in the United States' view, what consequences these\nwould be or whether they would be serious at all. 319 In the United States' view, Brazil's agricultural\nsector, and its cotton producers in particular, have been effective competitors worldwide even with the\nexistence of GSM 102, marketing loan payments and countercyclical payments and without any\ncountermeasures, and Brazil's cotton exports have reached record levels in recent years.320\n5.208 Brazil responds that the United States' erroneous legal analysis first equates the meaning of\n\"circumstances\" with that of \"potential conseque nces\" and then moves on to argue that \"potential\nconsequences\" means trade damage to Brazil. In Brazil's view, however, there is no legal basis to\nargue that in selecting the type of countermeasures Brazil must show \"any adverse effect on Brazil\nfrom the measures at issue\" to enab le an assessment of whether circ umstances are serious enough. In\nany event, Brazil argues, as regards actionable subs idies, the existence of adverse effects of the\nmeasures at issue has already been determined by two panels and the Appellate Body. Brazil notes\nthat, with respect to the GSM 102 subsidies, the tw o panels and the Appellate Body found that they\nconstitute prohibited subsidies – arguably the most egregious violation of WTO disciplines, as can be\ninferred from the special rules applicable to them – and that they should have been withdrawn without\ndelay. Hence, Brazil argues, even under the US flawed and convoluted logic, circumstances would be\nserious enough because the consequences of maintaini ng the subsidies in place could not be anything\nless than serious, as is made clear by the findings, rulings and recommendations of the panels and the\nAppellate Body in this dispute.\n321\n5.209 Brazil considers that Article 22.3(c) of the DSU can encompass the impact on Brazil of\napplying countermeasures under trade in goods alone, as well as broader circumstances which\nsurround Brazil's consideration of retaliatory action ag ainst the United States' failure to comply with\nthe DSB's recommendations and rulings in this disp ute, such as the demonstrated lack of willingness\nof the United States to comply.322\n5.210 In the view of the United States, the circum stances surrounding potential countermeasures in\nservices and intellectual property are also a factor . Brazil has not detailed how it might impose such\ncountermeasures; and in fact it is not obligated to do so at this time. Effectively, the United States\n\n318 US responses to questions from the Arbitrator, question 136, para. 174.\n319 US responses to questions from the Arbitrator, question 136, para. 174.\n320 US responses to questions from the Arbitrator, question 136, para. 175.\n321 Brazil's comments on US responses to questions from the Arbitrator, question 136, paras. 401-402.\n322 Brazil's comments on US responses to questions from the Arbitrator, question 136, para. 403.\n\nargues, if Brazil is authorized to impose c ountermeasures under these other Agreements it would\ncause an additional layer of uncertainty fo r these sectors, with potentially devastating\nconsequences.323\n5.211 Brazil welcomes the United States' acknowledgement that Brazil \"is not obligated\" to detail\nhow it might impose countermeasures with respect to services and intellectual property rights. 324\nBrazil also notes that the United States, by refe rring to \"potentially devastating consequences\", 325\nseems to agree with Brazil's view that count ermeasures under the TRIPS Agreement and the GATS\nwould be much more effective within the meaning of Article 22.3 of the DSU than countermeasures\nunder trade in goods alone.326\n(b) Analysis by the Arbitrator\n5.212 Under Article 22.3(c) of the DSU, in order for suspension of obligations to be permissible, the\ncomplaining party is required to have determined that \"the circumstances are serious enough\", in\naddition to having determined that suspension unde r the same agreement is \"not practicable or\neffective\".\n5.213 We recall our determination in paragraph 5.84 above that an assessment of whether \"the\ncircumstances are serious enough\" is necessarily a case-by-case assessment depending on the specific\ncircumstances of the case.\n5.214 The United States argues that \"'circumstances ar e serious enough' may refer to the potential\nconsequences for the Member of suspending concessi ons in the same sector and agreement, or the\npotential consequences of forgoing the right to suspend concessions\". 327 In Brazil's view,\nArticle 22.3(c) of the DSU can encompass the impact on Brazil of applying countermeasures under\ntrade in goods alone, as well as broader circum stances which surround Brazil's consideration of\nretaliatory action against the United States' failure to comply with the DSB's recommendations and\nrulings in this dispute, such as the demonstrated lack of willingness of the United States to comply.\n5.215 As we have determined in paragraph 5.83 a bove, an assessment of whether circumstances are\n\"serious enough\" would legitimately include a c onsideration of the elements identified in\nsubparagraph (d) of Article 22.3, namely the trade in the sector in which a violation has been found\nand its importance to the complaining party (in th is case, trade in goods, including trade in cotton and\nother products affected by the measures at issue), as well as \"the broader economic elements related to\nthe nullification or impairment and the broader ec onomic consequences of the suspension\". At the\nsame time, the assessment is not limited to these factors, and may include other elements, depending\non the specific \"circumstances\" of the case. We ther efore agree with Brazil that a determination of\nwhether \"the circumstances are serious enough\" may in principle encompass both the impact on Brazil\nof applying countermeasures under trade in goods (i.e . \"the broader economic consequences of the\nsuspension\") and \"broader circumst ances which surround Brazil's consid eration of retaliatory action\"\nagainst the US failure to comply with the DSB's recommendations and rulings.\n5.216 Brazil considers that a number of elements rende r the circumstances \"serious enough\" in this\ncase, including the granting or maintenance by the United States of the prohibited subsidies, the\nfourfold increase in the transactions supported by the GSM 102 programme in 2009; the continued\ngranting of actionable subsidies and the enactment of 2008 Farm Bill. In Brazil's view, these facts\n\n323 US responses to questions from the Arbitrators, question 136, para. 176.\n324 US response to questions from the Arbitrators, question 136, para. 176.\n325 US response to questions from the Arbitrators, question 136, para. 176.\n326 Brazil's comments on US responses to questions from the Arbitrator, question 136, para. 399.\n327 US responses to questions from the Arbitrator, question 136, para. 174.\n\nshow that the United States has no intention of complying with the DSB recommendations and\nrulings. Brazil further argues that the design and struct ure of the subsidies at issue is such as to create\n\"an artificial competitive advantage for US operators vis-à-vis other competitors every year\" to the\ndetriment of producers of other Members \"who ha ve their production and investment decisions\nnegatively affected in the long term by the chilling effect caused by the permanent availability of the\nUS subsidies\". Brazil argues that these subsidies constitute \"a structural element of the world markets\nfor the wide range of products they support\", and that the current credit crisis only heightens their\ndistorting effects. Brazil further considers that th e conditions that render the circumstances \"serious\nenough\" also include the potential effects on Braz il if countermeasures are confined to the goods\nsector, which will lead to disproportionate costs to the Brazilian economy and to the welfare of its\npopulation.\n328\n5.217 In our view, Brazil's determination that the circumstances are serious enough within the\nmeaning of Article 22.3(c) of the DSU is reasonable in light of the circumstances of the case.\n5.218 In this regard, we recall some salient aspects of the findings of the original and compliance\npanels and of the Appellate Body in relation to the subsidies concerned:\n\"As we have just indicated, several of the United States subsidies are directly linked\nto world prices for upland cotton, thereby numbing the response of United States\nproducers to production adjustment decisions when prices are low . We have readily\navailable information on the record showing us that the price-contingent subsidies in\nquestion involve very large amounts of Un ited States government money benefiting\nUnited States upland cotton. In our view, the collective operation of these subsidies\nwas akin to a very large, counter cyclical, deficiency payment laced with additional\nenhancements. We believe that the structure, design and operation, particularly of the\nprice-contingent subsidies, constitutes st rong evidence supporting a finding of price\nsuppression.\"329 (emphasis added)\n\"Given that in most recent years actual mark et prices have been lower than expected\nmarket prices at the time of planting and th at the adjusted world price has been below\nthe marketing loan rate, the Panel considers that it is reasonable to conclude that the\nfact that US cotton producers know that th ey will receive marketing loan payments\nwhenever the adjusted world price is below the marketing loan rate continues to be an\nimportant factor affecting the level of acreag e planted to cotton (and thus the level of\nproduction), even when, as in MY 2006, the expected market price for upland cotton\nat the time of planting is higher than the ma rketing loan rate. The Panel also notes in\nthis regard that accordi ng to FAPRI and USDA data, the projected amount of\nmarketing loan payments in MY 2006 is very significant. \"330 (emphasis added,\nfootnote omitted)\n\"First, we recall that the original panel noted that the CCC has access to funds from\nthe US Treasury and benefits from the fu ll faith and credit of the US Government.\nThis is still the case, and were the GSM 102 programme to incur massive losses, it\nwould have access to additional funds from the US Treasury .\"331 (emphasis added,\nfootnote omitted)\n\n328 Brazil's comments on US responses to questions from the Arbitrator, question 136, paras. 404-405.\n330 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.81.\n331 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 14.110.\n\n\"The Panel considers, in light of the appr oach taken by the pa nel and Appellate Body\nin the original proceeding, that in determining whether the magnitude of the subsidies\nat issue in this proceeding supports a findi ng that the effect of these subsidies is\nsignificant price suppression, it is necessary to examine this factor in relation to other\nfactors. Thus, the relevance of the magnitude of the subsidies in this connection must\nalso be assessed in light of our analysis above of the structure, design and operation\nof the subsidies. We recall, in this re spect, our conclusion regarding the important\nrevenue-stabilizing effect of these mandatory, price-contingent subsidies. In the latter\nregard, the evidence before us indicates th at marketing loan and counter-cyclical\npayments play a significant role in stabilizing the revenues of US upland cotton\nproducers. The share of marketing loan payments and counter-cyclical payments in\ntotal revenues of US upland cotton producers was 35 per cent in MY 2004 and 27 per\ncent in MY 2005.\"332 (emphasis added, footnotes omitted)\n\"Table 6B shows market revenue from cotton lint, total costs (less ginning costs) and\nthe difference between market revenue a nd total costs on a per acre basis in MY\n2002-2006. Over the period examined, US cotton producers' market revenue\nexceeded total costs of production twice, in MY 2003, when cotton prices were at\ntheir highest since MY 1997, and also in the year immediately following that. In\nother marketing years, total costs of pr oduction exceeded market revenue, at times by\nvery huge margins. In MY 2002, for example, total costs exceeded market revenue\nby 84 per cent. Data provided by Brazil for MY 2006 suggests that total costs will\ncontinue to exceed market revenue. The gap is expected to be about 56.25 dollar per\nacre, which would be equivalent to about 14.7 percent of US cotton producers' market\nrevenue in that marketing year. Cumulated over the five marketing years 2002-2006,\nUS cotton farmers' costs of production have exceeded market revenues by an average\nof 227.49 dollars per acre.\"\n333 (emphases added)\n\"In conclusion, the Panel finds that there exists a significant gap between the total\ncosts of production of US upland cotton producers and their market revenue. The\nPanel considers that this gap between costs and revenue, when analyzed in\nconjunction with the magnitude of the mark eting loan and counter-cyclical subsidies\nand their importance as a share of the revenue of US cotton producers, supports the\nproposition that the marketing loan and counter-cyclical payments are an important\nfactor affecting the economic viability of US upland cotton farming . The Panel\ntherefore also considers that without these subsidies the level of US upland cotton\nacreage and production would be considerably lower.\"\n334 (emphasis added, footnotes\nomitted)\n\"We do not see a contradiction between the fact that United States shares of world\nproduction and exports of upland cotton have remained stable at consistently high\nlevels between MY 2002 a nd MY 2007 and the Panel's findings of substantial\nproportionate influence of the United States in the world market for upland cotton.\nThis is because stable high United States shares of world production and exports of\nupland cotton could be seen as evidence of the fact that the United States continued to\nexert a substantial proportionate influence in the period examined by the Panel, just\nas it had during the period examined by the original panel. We also observe that the\nPanel specifically noted that this element supported its finding of significant price\nsuppression when \"analysed in the light of the totality of the evidence\". Therefore, we\n\n332 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.111.\n333 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.190.\n334 Panel Report, US – Upland Cotton (Article 21.5 – Brazil), para. 10.196.\n\ndo not consider that the Panel erred in finding that the United States exerts a\nsubstantial proportionate influence on the world market for upland cotton .\"335\n(emphasis added, footnotes omitted)\n5.219 We are not persuaded that, as Brazil argues, the very granting of the subsidies at issue would\nbe sufficient to conclude that the circumstances are \"s erious enough\". It is inherent in the situation at\nhand that a violation has taken place and that comp liance has not been achieved in a timely manner.\nThis circumstance alone, which is common to all ca ses in which suspension of obligations is sought\nunder the DSU, would not in our view justify the conclusion that the circumstances are \"serious\nenough\". However, we agree with Brazil that the specific design and structur e of the subsidies at\nissue, as they have been maintained over a signifi cant period of time, is such as to have created an\nartificial and persisting competitive advantage for US producers over all other operators, and that this\nhas a significant trade-distorting impact, not just on the US domestic market, but on the world market\nin these products.\n5.220 The United States responds that Brazil has in fact remained very competitive in the\nagricultural sector, including cotton, even w ith the US subsidies in place and without\ncountermeasures. We are not persuaded, however, th at this consideration alters the essence of the\nsituation. The fact that Brazil may have remain ed competitive in spite of the trade-distorting\nconditions arising from the granting and maintenanc e of the subsidies at issue does not in essence\nmodify the fact that these subsidies have a trade- distorting impact on the world market for cotton and\nthe other products affected by them. Given the st ructure and design of the programmes at issue, and\nin light of the time period over which they have been in place, these distortions are virtually, as Brazil\nputs it, a \"structural\" element of the world market for the affected products, including cotton, as long\nas they remain available. Our earlier determin ations in relation to the level of permissible\ncountermeasures suggest that these trade-distorting e ffects are not insignificant, including on Brazil.\nFurthermore, these impacts are felt not only on the US market but on other markets for the products at\nissue. In addition, as Brazil observes, in times of credit crisis, this trade-distorting impact will be\nfurther amplified, at least in so far as the GSM 102 programme is concerned. These considerations, in\nour view, support the conclusion that \"the circumstances are serious enough\".\n5.221 In addition, Brazil observes that the dispropor tionate adverse impact of the suspension of\nconcessions or other obligations on its economy, if a pplied only to trade in goods, also contributes to\nthe \"circumstances\" being \"serious enough\". We agree that this may also be a relevant consideration\nin such determination.\n336 We have considered extensively Brazil's arguments concerning the potential\nadverse impact on its economy of a suspension applie d to trade in goods alone, in reviewing whether\nit is \"practicable or effective\" for Brazil to seek su spension in trade in goods alone. In this context,\nwe concluded that, to the extent that the level of countermeasures that Brazil would be entitled to take\nwould exceed a certain threshold, such suspension would be \"not practicable or effective\". These\nconsiderations also inform the determination of whether \"the ci rcumstances\" would be \"serious\nenough\" to justify cross-agreement suspension. If the threshold were reached, such that suspension of\nconcessions or other obligations under the same sect or or agreement would not be practicable or\neffective for Brazil, this would also directly contri bute to the circumstances being \"serious enough\" to\njustify recourse to suspension under another agreement.\n\n335 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 446.\n336 We note in this respect the observation of the arbitrator on US – Gambling that the circumstances\nthat justified a determination that \"the circumstances ar e serious enough\" in that case could be \"directly related\nto the practicability and effectiveness of suspension under the agreement in which the violation was found (in\nthat case, the GATS). See Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 4.115.\n\n5.222 In light of all the above, and on the basis of the elements pr esented to us, we find that Brazil\ncould reasonably determine that \"the circumstan ces are serious enough\" within the meaning of\nArticle 22.3(c) of the DSU.\n5.223 In light of our determinations in the previ ous section above, we note that the two conditions\nforeseen in Article 22.3(c), i.e. a determination th at \"it is not practicable or effective\" to seek\nsuspension under the same agreement and a determination that \"the circumstances are serious enough\"\nwould only be met simultaneously in this case when ever the threshold identified in paragraph 5.201\nabove would be exceeded.\n5.224 The United States has suggested that the potential implications of a suspension of obligations\nunder the TRIPS Agreement is also a consideration to be taken into account, in light of the \"layer of\nuncertainty\" that may arise from such suspensi on in the sectors concerned and the \"potentially\ndevastating consequences\" of such suspension. We recognize that there may be legitimate\nconsiderations to which the complaining Member should be attentive in applying any suspension of\nobligations under the TRIPS Agreement. 337 We are not persuaded, however, that this is a relevant\nconsideration for us to take into account in revi ewing the question of whether the \"circumstances are\nserious enough\" to justify suspension of obligations u nder that agreement. We first note that there is\nno general hierarchy in the DSU as between susp ension in various sectors or under various WTO\nAgreements, such that we should assume that a suspension of obligations under the TRIPS Agreement\nwould be inherently more detrimental to the respond ing Member than another. The only hierarchy to\nbe found in the DSU in this respect is relative to the sector and agreement in which the violation has\nbeen found (thus, in a case involving a TRIPS viola tion, same-sector suspension would have to be\nsought first under the TRIPS Agreement). We also not e that the level of suspension authorized will be\nthe same whatever sector or agreement it may apply to. We further note that, as the United States\nitself has observed in these proceedings, Brazil is not ob ligated at this time to explain in detail how it\nmight impose such countermeasures. This question is , in our view, beyond the scope of this enquiry,\nand it is not for us to speculate how a suspensi on of certain obligations under the TRIPS Agreement\nmight be applied by Brazil or to assume that it wo uld have more detrimental consequences than a\nsuspension in another sector or agreement. In fact the United States itself does not explain what\n\"devastating consequences\" it is referring to.\n5.225 We make no determination in relation to th e United States' willingness or unwillingness to\ncomply with the recommendations and rulings at issue. We assume that the United States intends in\ngood faith to promptly comply with these recommendati ons and rulings. We have also not based our\nfindings on Brazil's arguments relating to the adopti on of the 2008 Farm Bill, as such, in relation to\nwhich we have made no specific determinations.\n5. Brazil's consideration of the elements under subparagraph (d) of Article 22.3\n5.226 Subparagraph (d) of Article 22.3 of the DSU requires the complaining party to \"take into\naccount\", in applying the principles of subparagraphs (a) to (c), two elements:\n\"(i) the trade in the sector or under the ag reement under which the panel or Appellate\nBody has found a violation or other nullifi cation or impairment , and the importance\nof that trade to [the complaining] party\n(ii) the broader economic elem ents related to the nullification or impairment and the\nbroader economic consequences of the suspension of concessions or other\nobligations\".\n\n337 See para. 5.233.\n\n5.227 As we have determined in Section V.C.1(c) above, in the circumstan ces of this case, this\nmeans that what is to be taken into account is \"the trade\" in all goods under the trade in goods\nagreement, that is, trade in goods generally, and its importance to Brazil, as well as \"the broader\neconomic elements\" relating to the nullification or impairment arising for Brazil from the subsidies at\nissue and the broader economic consequences of th e suspension, including a consideration of the\neconomic consequences of the suspension.\n5.228 As we have discussed extensively in the pr eceding sections above, Brazil's determinations\nthat it was not practicable or effective for it to seek to suspend obligations in trade in goods alone and\nthat the circumstances are serious enough, were based importantly on a consideration of the\nimportance to its economy of its trade in goods with the United States, and of the potential\nconsequences of the proposed suspension, which it considers would be disproportionately detrimental\nto its economy if applied solely to trade in goods. In addition, Brazil has also taken into account the\neconomic impact of the measures on the market of the products affected by the measures at issue.\n5.229 In light of these elements, we are satisfied th at Brazil has taken into account the relevant\nelements under subparagraph (d) of Article 22.3 in accordance with the requirements of that\nprovision.\n6. Conclusion\n5.230 In light of our determinations above, we find that in the event that the level of\ncountermeasures that Brazil would be entitled to in a given year 338 should increase to a level that\nwould exceed the threshold identified in paragraph 5.201 above, updated for the same year in a\nmanner described in the next paragraph to account for the change in Brazil's total imports from the\nUnited States, then Brazil would be entitled to suspend certain obligations under the\nTRIPS Agreement and/or the GATS as identified in its request pursuant to Article 7.9 of the\nSCM Agreement and Article 22.2 of the DSU 339, with respect to any amount of permissible\n\n338 It is understood that this amount is to be calcu lated taking into account the entirety of the level of\ncountermeasures that Brazil is entitled to at that point in time, arising both from this Decision and from the\nDecision by the Arbitrator contained in WT/DS267/ARB/1.\n339 See WT/DS267/26. Brazil identifies the following obligations in its request:\n\nWith respect to the TRIPS Agreement:\n\n\"The following sections of Part II of the Ag reement on Trade-Related Aspects of Intellectual\nProperty Rights:\n\n Section 1: Copyright and related rights\n Section 2: Trademarks\n Section 4: Industrial designs\n Section 5: Patents\n Section 7: Protection of undisclosed information.\"\n\nWith respect to the GATS:\n\n\"horizontal and/or sectoral concessions and obligations for all sectors contained in Brazil's\nSchedule of Specific Commitments (GATS/SC/13) under the General Agreement on Trade in\nServices. Those sectors are:\n\n 1. Business Services\n 2. Communication Services\n 3. Construction and Related Engineering Services\n 4. Distribution Services\n\ncountermeasures applied in excess of that figure. In any subsequent year where the level of\ncountermeasures that Brazil would be entitled to falls below this threshold, updated to account for the\nchange in Brazil's total imports from the Unite d States, Brazil would be entitled to suspend\nconcessions or other obligations only in trade in goods.\n5.231 As stated in the previous paragraph, in or der to determine whether suspension of certain\nobligations under the TRIPS Agreement or the GATS is permissible in a given year, the threshold\nshould be updated to account for the change in Brazil's total imports from the United States. For year\n2008, for example, the updated amount of the threshold would be equal to US$409.7 million\nmultiplied by (1 + g 2008), where g 2008 is the percentage change in the value of Brazil's total imports\nfrom the United States between the years 2007 and 2008, or in the absence of the trade data for years\n2007 and 2008, the percentage change in the value of Brazil's total imports from the United States\nbased on the last available annual trade statistics. 340 In general, the following difference equation and\ninitial condition shall determine the updated amount of the threshold:\n (2) )1(* 11 ++ += ttt gTT , T 2007 = US$409.7 million\n\nwhere:\n\nTt+1=threshold value in year t+1;\n\nTt =threshold value in year t;\n\ng\nt+1 = percentage change in the value of Brazil's to tal imports from the United States between the\nyears t and t+1, or in the absence of the trade data for years t and t + 1, the percentage change in the\nvalue of Brazil's total imports from the United States based on the last available annual trade\nstatistics.\n\n5.232 The \"same\" year shall mean that the amount of countermeasures, calculated based on the\nfixed amount awarded under this Decision and the va riable amount arising from the Decision by the\nArbitrator contained in WT/DS267/ARB/1, shall be compared to the value of the threshold in year\n2008 (1 January 2008 to 31 December 2008).\n5.233 In light of our determination that Brazil, ma y, in application of the above, be entitled to\nsuspend certain obligations under the TRIPS Agreement and the GATS, we note the remarks made by\nthe arbitrators on EC – Bananas III (Ecuador) (Article 22.6 – EC), with respect to the suspension of\nobligations under the TRIPS Agreement\n341, which were also noted by the arbitrator on US – Gambling\n(Article 22.6 – US) .342 We consider these remarks to be releva nt also to this case, in that the same\nconsiderations will be pertinent to the manner in which Brazil might implement a suspension of its\nobligations under the TRIPS Agreement in this case.\n5.234 In light of the fact that the form of permissible countermeasures may vary over time, we urge\nBrazil, if and when it submits a revised request for authorization to suspend concessions or other\n\n 7. Financial Services\n 9. Tourism and Travel Related Services\n 11. Transport Services\"\n\n340 Brazil shall use UN Comtrade data for the purpose of calculating the percentage change of its total\nimports from the United States.\n341 Decision by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC) , Section V,\nparas. 139-165.\n342 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 5.11.\n\nobligations to the DSB in accordan ce with this Decision, to be as specific as possible about the terms\nof the measures to be adopted, so as to promote transparency and predictability in this process.\n5.235 We also take note of the undertaking by Br azil in its request under Article 4.10 of the\nSCM Agreement and Article 22.2 of the DSU, that:\n\"Every year, Brazil will notify to the DSB th e amount and the form of the suspension\nof concessions and other obligations in the light of data concerning the operation of\nthe identified programmes in the most recent concluded marketing and fiscal year, as\napplicable.\"343\n5.236 We suggest that Brazil also similarly notify the amount and form of the suspension of\nconcessions and other obligations arising from this Decision, with respect to its request under\nArticle 7.10 of the SCM Agreement and Article 22.2 of the DSU.\n5.237 Finally, like previous arbitrators 344, we also note that the United States may have recourse to\nthe appropriate dispute settlement procedures in the event that it considers that the level of\nconcessions or other obligations suspended by Br azil exceeds the level of countermeasures we have\ndetermined to be \"commensurate with the degree and nature of the advers e effects determined to\nexist\" in this case.\nVI. CONCLUSIONS AND AWARD\n6.1 For the reasons set out above, the Arbitrator determines that the annual level of\ncountermeasures \"commensurate with the degree and nature of the adverse effects determined to\nexist\" in relation to the marketing loan and countercyclical payments amounts to US$147.3 million.\n6.2 We have also determined that Brazil has not followed the principles and procedures of\nArticle 22.3 of the DSU in determining that it is not practicable or effective to suspend concessions or\nother obligations in trade in goods, and that, at cu rrent levels, it could not have plausibly determined\nthat it is not practicable or effective to suspend c oncessions or other obligations in trade in all goods\nunder the Agreements contained in Annex 1A of the WTO Agreement. We have also found,\nhowever, that, in the event that the level of countermeasures that Brazil would be entitled to in a given\nyear345 should increase to a level that would exceed a threshold, as identified in paragraph 5.201\nabove, updated for the same year in a manner described in paragraphs 5.231-5.232 to account for the\nchange in Brazil's total imports from the United Stat es, then, it could be reasonably concluded that it\nis not practicable or effective for Brazil to susp end concessions or other obligations on trade in goods\nalone. We have also determined that the ci rcumstances are serious enough and that Brazil has\ncomplied with the requirements of subparagraph (d) of Article 22.3.\n6.3 In light of these findings, we find that Brazil w ould be entitled to suspend certain obligations\nunder the TRIPS Agreement and/or the GATS, w ith respect to any amount of permissible\ncountermeasures applied in excess of the threshold identified in paragraph 5.201 above, updated for\nthe same year in a manner described in paragraphs 5.231-5.232 to account for the change in Brazil's\ntotal imports from the United States. In any subse quent year where the level of countermeasures that\nBrazil would be entitled to falls below this threshol d, updated to account for the change in Brazil's\n\n343 WT/DS267/21.\n344 Decisions by the Arbitrators, EC – Hormones (US) (Article 22.6 – EC), para. 82; US – 1916 Act\n(EC) (Article 22.6 – US ), para. 9.2; US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), para. 4.27;\nand US – Gambling (Article 22.6 – US), para. 5.12.\n345 It is understood that this amount is to be calcu lated taking into account the entirety of the level of\ncountermeasures that Brazil is entitled to at that point in time, arising both from this Decision and from the\nDecision contained in WT/DS267/ARB/1.\n\ntotal imports from the United States, Brazil woul d be entitled to suspend concessions or other\nobligations only in trade in goods.\n6.4 We have also found that, in determining whether the level of countermeasures that Brazil\nwould be entitled to has increased to an amount th at would allow it to suspend certain obligations\nunder the TRIPS Agreement and/or the GATS, the data in Table 4 shall be updated to reflect the\namount of imports in the same year, as described in paragraph 5.232 above.\n6.5 Accordingly, the Arbitrator determines that:\n(a) Brazil may request authorization from th e DSB to suspend concessions or other\nobligations under the Agreements on trade in goods in Annex 1A, at a level not to\nexceed the value of US$147.3 million annually.\n(b) In the event that the total level of counter measures that Brazil would be entitled to in\na given year346 should increase to a level that would exceed the threshold described in\nparagraph 5.201, updated to account for the change in Brazil's total imports from the\nUnited States, then, Brazil would also be entitled to seek to suspend certain\nobligations under the TRIPS Agreement and/or the GATS as identified in\nfootnote 339, with respect to any amount of permissible countermeasures applied in\nexcess of that figure.\n\nDecision contained in WT/DS267/ARB/1.\n\nANNEX 1\n\nRoot Mean Square Error Results and Data\n\n1. Stata log file\n\n----------------------------------------------------------------------------------------------\nlog: F:\\Article 22.6\\Final Calculations\\Actionable\\RMSE.smcl\nlog type: smcl\nopened on: 15 May 2009, 16:18:14\n\n. use \"F:\\Article 22.6\\Final Calculations\\Actionable\\RMSE.dta\", clear\n\n. regress Farmprice LagFarmprice if Year>=1975&Year<=2005\n\n Source | SS df MS Number of obs = 31\n-------------+------------------------------ F( 1, 29) = 6.64\n Model | 557.674474 1 557.674474 Prob > F = 0.0153\n Residual | 2434.25281 29 83.939752 R-squared = 0.1864\n-------------+------------------------------ Adj R-squared = 0.1583\n Total | 2991.92728 30 99.7309094 Root MSE = 9.1619\n\n------------------------------------------------------------------------------\n Farmprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]\n-------------+----------------------------------------------------------------\nLagFarmprice | .4230483 .1641283 2.58 0.015 .0873683 .7587284\n _cons | 33.35276 9.584455 3.48 0.002 13.75035 52.95517\n------------------------------------------------------------------------------\n\n. regress Farmprice FebFutures if Year>=1975&Year<=2005\n\n Source | SS df MS Number of obs = 31\n-------------+------------------------------ F( 1, 29) = 9.55\n Model | 741.187194 1 741.187194 Prob > F = 0.0044\n Residual | 2250.74009 29 77.6117272 R-squared = 0.2477\n-------------+------------------------------ Adj R-squared = 0.2218\n Total | 2991.92728 30 99.7309094 Root MSE = 8.8098\n\n------------------------------------------------------------------------------\n Farmprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]\n-------------+----------------------------------------------------------------\n FebFutures | .4870207 .1575967 3.09 0.004 .1646993 .8093422\n _cons | 26.6572 10.166 2.62 0.014 5.86539 47.44902\n------------------------------------------------------------------------------\n\n. regress Farmprice LagFarmprice if Year>=1985&Year<=2007\n\n Source | SS df MS Number of obs = 23\n-------------+------------------------------ F( 1, 21) = 7.36\n Model | 667.012479 1 667.012479 Prob > F = 0.0130\n Residual | 1903.19719 21 90.6284377 R-squared = 0.2595\n-------------+------------------------------ Adj R-squared = 0.2243\n Total | 2570.20967 22 116.827712 Root MSE = 9.5199\n\n------------------------------------------------------------------------------\n Farmprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]\n-------------+----------------------------------------------------------------\nLagFarmprice | .5101912 .1880608 2.71 0.013 .1190974 .901285\n _cons | 27.61829 10.75863 2.57 0.018 5.24449 49.9921\n------------------------------------------------------------------------------\n\n. regress Farmprice JanMarFutures if Year>=1985&Year<=2007\n\n Source | SS df MS Number of obs = 23\n-------------+------------------------------ F( 1, 21) = 9.32\n Model | 790.326662 1 790.326662 Prob > F = 0.0060\n Residual | 1779.88301 21 84.7563337 R-squared = 0.3075\n-------------+------------------------------ Adj R-squared = 0.2745\n Total | 2570.20967 22 116.827712 Root MSE = 9.2063\n\n------------------------------------------------------------------------------\n Farmprice | Coef. Std. Err. t P>|t| [95% Conf. Interval]\n-------------+----------------------------------------------------------------\nJanMarFutu~s | .6679844 .2187505 3.05 0.006 .2130678 1.122901\n _cons | 14.63084 13.78153 1.06 0.300 -14.02942 43.29109\n------------------------------------------------------------------------------\n\n. log close\nlog: F:\\Article 22.6\\Final Calculations\\Actionable\\RMSE.smcl\nlog type: smcl\nclosed on: 15 May 2009, 16:19:39\n-----------------------------------------------------------------------------------\n\n2. Data\n\nYear JanMarFutures FebFutures Farmprice LagFarmprice\n1960 . . 30.1 .\n1961 . . 32.8 30.1\n1962 . . 31.7 32.8\n1963 . . 32 31.7\n1964 . . 30.9 32\n1965 . . 29.3 30.9\n1966 . . 21.5 29.3\n1967 . . 26.5 21.5\n1968 . . 23 26.5\n1969 . . 21.9 23\n1970 . . 22.82 21.9\n1971 . . 28.07 22.82\n1972 . . 27.2 28.07\n1973 . . 44.4 27.2\n1974 . . 42.7 44.4\n1975 . 44.19 51.1 42.7\n1976 . 58.7 63.8 51.1\n1977 . 68.23 52.1 63.8\n1978 . 59.3 58.1 52.1\n1979 . 64.86 63.1 58.1\n1980 . 77.36 74.4 63.1\n1981 . 82.61 54 74.4\n1982 . 71.69 59.1 54\n1983 . 67.92 66 59.1\n1984 . 72.36 57.5 66\n1985 66.5 66.48 56.8 57.5\n1986 46.1 46.8 51.5 56.8\n1987 54.2 53.45 63.7 51.5\n1988 59.8 59.5 55.6 63.7\n\nYear JanMarFutures FebFutures Farmprice LagFarmprice\n1989 60 58.81 63.6 55.6\n1990 64.8 65.31 67.1 63.6\n1991 66.6 67.69 56.8 67.1\n1992 61.1 60.32 53.7 56.8\n1993 61.3 61.87 58.1 53.7\n1994 70.5 70.61 72 58.1\n1995 75.8 75.25 75.4 72\n1996 78.6 78.58 69.3 75.4\n1997 76.8 76.82 65.2 69.3\n1998 72.7 72.15 60.2 65.2\n1999 61.1 60.27 45 60.2\n2000 61 61.31 49.8 45\n2001 57.8 58.63 29.8 49.8\n2002 42.7 42.18 44.5 29.8\n2003 59.1 59.6 61.8 44.5\n2004 67.4 66.81 41.6 61.8\n2005 52.9 45.67 47.7 41.6\n2006 59.3 . 46.5 47.7\n2007 58.8 . 59.3 46.5\nSources: Exhibit Bra-770 and US responses to questions from the Arbitrator, question 7, para. 39.\n\nANNEX 2\n\nWorksheet 1\n\nOverview\n\n– Worksheet 2 \"Instructions for Simulation\" c ontains details for unde rstanding and using the\nmodel.\n\n– Worksheet 3 \"Param Matrix\" contains the pa rameters to be used in the simulation.\n\n– Worksheet 4 \"Model Run\" contains the operational simulation model.\n\n– Worksheet 5 \"Instructions for Data\" cont ains details for understanding and using the\nsubsequent four spreadsheets.\n\n– Worksheet 6 is based on sheets \" γ and P over g\" and \"Regressions\" of Exhibit Bra-17 nov\n(Annex I).\n\n– Worksheet 7 is based on sheets \"dLnG\" and \"Regressions\" of Exhibit Bra-17 nov (Annex I).\n\n– Worksheet 8 contains data on US and ROW production, consumption and exports.\n\n– Worksheets 9 and 10 presents the model results, including the apportioning of adverse effects\nto Brazil.\n\n– Worksheet 11 contains the regressions results from sheet \"Regressions\" of Exhibit Bra-17 nov\n(Annex I).\n\n– Each of the individual spreadsheets also contain instructions and explanations.\n\nWorksheet 2\n\nInstructions for Simulation\n\n1. Enable Macros:\n (a) The default security setting in Microsoft Excel will likely disable the macro that\nexecutes the simulation.\n\n (b) To enable the macro and run the simula tion, the security level in Microsoft Excel\nmust be reduced.\n – Go to \"Options\" in the Tools menu.\n – Click on the \"Security\" tab.\n – Click on \"Macro Security\".\n – Set security to \"Medium\" or \"Low\".\n\n (c) If necessary, close and reopen Microsoft Excel.\n\n2. Set parameters in spreadsheet 3 \"Input param Matrix\".\n (a) Instructions for data input:\n (i) Rows 4 and 5 have US and rest-o f-world production and consumption shares\nin the world. These can be obtained from worksheet 8 \"US and RoW shares\".\n\n (ii) Rows 6-9 have US and rest-of-w orld supply and demand elasticities. These\nhave to be entered manually here.\n\n (iii) Row 10 shows dlnG. The dlnG data is taken from worksheet 7 \"dlnG\"\n(row 63) for the partial reductions that apply when ML and CCP subsidies are\nremoved.\n – When pasting from the dlnG spreadsheet use \"Paste Special\" and\n\"Values and Number formatting\".\n\n (iv) Rows 11 and 12 show γ and P/g. Data for these rows is taken from\nworksheet 6 \"γ and P over g\".\n – When pasting from the γ and P/g spreadsheet use \"Paste Special\" and\n\"Values and Number formatting\".\n\n3. Run the model and get results:\n (a) Copy the entire input parameter matrix (cells B4:H12, in all simulations use the full\n\ndimensions of this matrix) out of work sheet 3 \"Input Param Matrix\" into cells\nG5:M13 of worksheet 4 \"Model Run\".\n\n NOTE: It is important to always copy and paste the whole parameter matrix to\nspreadsheet 4 \"Model Run\", meaning cells B4:H12, no matter which marketing year.\n\n (b) In worksheet 4 \"Model Run\", click \"Run\" in order to run a simulation. A macro will\ncopy results into cells C27:M30 of worksheet 4 \"Model Run\".\n\n (c) Click \"Switch\" to align year s into ascending chronological order.\n\n (d) To save results they must be c opied into a separate sheet or file.\n\nWorksheet 3\n\nInput Parameter Matrix\n MY 1999-2005 (for instructions see below and worksheet 2 \"Instructions for\nsimulation\")\n\n– Copy from here (B4:H12) to cells G5:M13 in worksheet 4 \"Model Run\". Always copy the whole area,\neven if not interested in all years.\n\n 1999 2000 2001 2002 2003 2004 2005\nδsu 0.193 0.193 0.206 0.189 0.189 0.192 0.205\nδdu 0.112 0.096 0.082 0.074 0.064 0.062 0.051\nεu 0.8 0.8 0.8 0.8 0.8 0.8 0.8\nεr 0.2 0.2 0.2 0.2 0.2 0.2 0.2\nηu -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2\nηr -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2\ndlnG -0.543 -0.529 -0.519 -0 .677 -0.606 -0.571 -0.698\nγ 0.633 0.661 0.717 0.698 0.674 0.673 0.676\nP/g 1.66 1.77 1.67 0.82 1.37 1.86 1.11\n\n– Description of parameters:\n\nδsu Share of US production in world production ( see worksheet 8 \"US and RoW shares\")\nδdu Share of US consumption in world consumption ( see worksheet 8 \"US and RoW shares\")\nεu Elasticity of supply in US\nεr Elasticity of supply in RoW\nηu Elasticity of demand in US\nηr Elasticity of demand in RoW\ndlnG Percentage change in the effective government subsidy (measured as a price-subsidy equivalent; see\nworksheet 7 \"dlnG\")\nγ overall \"coupling factor\": degree to which government revenue provides a production incentive\nrelative to revenue from the\n market ( see worksheet 6 \"γ and P over g\")\nP/g Ratio of market revenue to revenue from government subsidy ( see worksheet 6 \"γ and P over g\")\n\n– Instructions for data input (the second step in worksheet 2 \"Instructions for simulation\"):\n\n 1. Rows 4 and 5 contain US production and consumption shares in the world. The shares\ncurrently listed are from the worksheet 8 \"US and RoW shares\".\n 2. Rows 6-9 contain US and ROW supply and dema nd elasticities. These are entered manually.\n 3. Data for row 10 is taken from the worksheet 7 \"dlnG\" (row 63) for the partial reductions that\napply when the ML and CCP subsidies are removed. This is based on worksheet \"dLnG\"\nfrom Bra-17 nov (Annex I). When pasting from the dlnG spreadsheet use \"Paste Special\" and\n\"Values and Number formatting\".\n 4. Rows 11 and 12 show γ and P/g. Data inputs are taken from the worksheet 6 \" γ and P over g\"\n(rows 34 and 35). This is based on worksheet \" γ and P over g\" of Bra-17 nov (Annex I).\nWhen pasting from the γ and P/g spreadsheet use \"Paste Special\" and \"Values and Number\nformatting\".\n\nWorksheet 4\n\n– This is the simulation sheet. For instructions see below and worksheet 2 \"Instructions for simulation\".\n– Before running this spreadsheet, the parameter input matrix s hould have been copied to cells G5:M13 (from worksheet 3 \"Input param. matrix\").\n– If desired, copy the results from ce lls H36:N38 into a new spreadsheet.\n\n A B C D E F\n4 Input 2005 Parameter Description\n5 0.205 δsu is the share of US in world production δsu\n6 0.051 δdu is the share of US in world consumption δdu\n7 0.8 εu is the elasticity of supply in US εu\n8 0.2 εr is the elasticity of supply in ROW εr\n9 -0.2 ηu is the elasticity of demand in US ηu\n10 -0.2 ηr is the elasticity of demand in ROW ηr\n11 -0.698 dlnG reduction dlnG\n12 0.676 γ γ\n13 1.11 P/g P/g\n14 0.3779 1- α\n15 0.6221 α\n\n A B C D E F G H I J K L M N\n20 1-α Calculations Price Quantities supplied, demanded, exported\n21 ( γ/(γ + P/g) α dln P = 0.062 δsuεu(1-α) dlnSu= -0.1644 dlnSr= 0.0188 dlnXr=\n22 0.3779 0.6221 -0.200 δduηu + (1- δdu)ηr dlnDu= -0.0188 dlnDr= -0.018764\n23 0.261 δsuαεu + (1- δsu)εr dlnXu= -0.211631\n24 dln P = 0.09382053 S/X 1.32 dlnX u = dln(Su – Du) = (Su/Xu)dlnSu – (Du/Xu)dlnDu.\n25 D/X 0.33 dlnI u = dln(Du-Su) = (Du/Xu)dlnDu- (Su/Xu)dlnSu\n\n A B C D E F G H I J K\n28 Results 2005 2004 2003 2002 2001 2000 1999\n29 dlnP\n30 dlnSu=\n31 dlnXu=\n32\n33 switch to get the right chronological order\n34\n\n A B C D E F G H I J K L M N\n35 Results in reverse order 1999 2000 2001 2002 2003 2004 2005\n36 dlnP 4.87% 4.68% 5.40% 10.65% 6.50% 4.89% 9.38%\n37 dlnSu= -9.13% -8.76% -9.42% -20.39% -12.49% -9.24% -16.44%\n38 dlnXu= -11.78% -11.30% -12.13% -26.31% -16.13% -11.92% -21.16%\n\nWorksheet 5\n\nInstructions for Data Input\n\n1. Worksheet 6 \" γ and P over g\" calculates fa rmers' expectations of \"γ\" (overall coupling factor)\nand \"P/g\" (ratio of market revenue to reve nue from government subsidy), which are then\ncopied into worksheet 3 \"Input param matrix\".\n\n – Cells B4:K11 in worksheet 6 \" γ and P over g\" contain subsidy data.\n\n – Rows 20 through 23 contain the calculations for the per-unit payment of the PFC, DP,\nMLA and Crop Insurance Program. These payments are non-price based and thus\nindependent of the expectation values of P, g and γ. Instead, direct payments are\nbased on well-known formulas that are publicized well in advance of the crop year.\nActual direct payments each year are u sed to represent what farmers expected to\nreceive.\n\n – The resulting per unit payment rates from the four programs are marked in grey\nhighlight and in bold.\n\n – Rows 27 through 29 show the calculation of the per unit payment rates of the CCP,\nmarketing loan and Step 2 programs based on the regressions of actual payments on\nfutures prices. The per unit rates are in grey highlight and in bold.\n\n – Rows 31 through 39 show the calculations of γ and P/g based on the payment rates\nderived using futures prices to model expectations. The resulting P/g and γ are in bold\nand grey highlight.\n\n – Because the cells are connected by formul ae, any change in subsidy information in\ncells B4:K11 will also result in a change of outcome for P/g and γ.\n\n – If one wanted to change the calculation of P/g and γ, one would have to change the\nsubsidy data in B4:K11 (if PFC, DP, MLA or CIS figures were to be changed).\n\n2. Worksheet 7 \"dlnG\" calculates dlnG, the pe rcentage change in the effective government\nsubsidy (measured as a price-subsidy equivalent). The result is then copied into worksheet 3\n\"Input param matrix\".\n\n – Worksheet 7 \"dlnG\" is not linked to worksheet 6 \" γ and P over g\". So, if the per-unit\npayment data is updated, the new per unit payment rates (E(P), MLA, CCP, ML,\nStep 2, DP, etc.) have to be copied into spreadsheet 7 \"dlnG\" and dlnG has to be\nrecalculated. Do not copy and paste the three lines \" γ\", \"g\", \"P/g\" from worksheet 6\n\"γ and P/g\" to worksheet 7 \"dlnG\".\n\n – Rows 17-50 show the dlnG calculations for each individual program payment.\n\n – In order to calculate the withdrawal of individual subsidies, proceed in the following\nmanner. The example given here is for ML payments, but it applies to ML and CCP\nsubsidies in the same way.\n\n – The dlnG for the ML program is shown in rows 43-45. In row 43, g1 stands for total\ng (government subsidies) without including the ML payment. In row 44, γ1 stands\nfor a γ (total coupling factor) without having the ML program in place. To obtain this\nlatter number, one must delete row 11 (ML payments) and then copy and paste the\nnew resulting γ (from row 15) into row 44. After th at, paste back in the data for ML\npayments into row 11 and move on to the next program. The resulting figure in row\n45 is the dlnG for the ML program.\n\n – After conducting the same calculations fo r the CCP subsidies, one can add up the\ndlnG for the two individual programs into one dlnG for an aggregate of programs.\n\n – In row 58, the impacts of the removal of CCP and ML subsidies are shown.\n\n – Rows 60-63 contain the same figures as in row 55-58 times (-1).\n\n – Results from row 63 are then pasted into the worksheet 3 \"Input param. matrix\".\n\n3. Worksheet 8 \"US and RoW shares\" calculates the production and consumption shares of the\nUS in the world, which are copied into rows 4 and 5 of worksheet 3 \"Input param matrix\" and\nthe ratios US production over US Exports and US Consumption over US exports, which are\ncopied into worksheet 4 \"Model Run\", cell K24 + K25 (Shares of MY 2005 are used for all\nyears).\n\n4. Once the input parameter matrix is fully comp iled, the data can be inserted in worksheet 4\n\"Model run\" ( see worksheet 2 \"Instructions for simulation\"). The output matrix shows the\nresults for dlnP, dlnSu, and, less pertinent for the question at hand, dlnXu, for the\nMY 1999-2005. These percentage changes from the initial equilibrium are then used as data\ninputs for the calculations in worksheet 9 \"Model results MY1999-2005\" as indicated.\n\nWorksheet 6\n\nExpected prices and expected subsidy revenue (using futures prices)\n\n3 Subsidy data* 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005\n4 Production Flexibility Contract payments ( PFC)1) 699 597 637 616 575 474 436 0 0 0\n5 Direct payments ( DP)1) 0 0 0 0 0 0 182 616 615 611\n6 Counter Cyclical payments ( CCP)1) 0 0 0 0 0 0 1312 392 1375 1376\n7 Market Loss Assistance payments ( MLA) 1) 0 0 316 613 612 524 0 0 0 0\n8 User Marketing ( Step 2) payments1) 3 390 308 422 236 193 429 350 544 350\n9 Marketing Loan Program benefits ( ML)1) 0 29 534 1546 531 2520 871 168 1842 1257\n10 Crop insurance subsidy (CIS)1) 185 67 308 317 426 473 277 279 79 -11\n11 Total support 887 1083 2103 3514 2380 4184 3507 1805 4455 3583\n12 Value of production 6,125 5,710 3,894 3,665 4,109 2,904 3,676 5,415 4,643 5,470\n13 Quantity produced, in million lbs 3) 8,838 8,758 6,468 8,145 8,250 9,745 8,260 8,762 11,160 11,467\n14 Per unit market revenue $/lb. 2) $0.69 $0.65 $0.60 $0.45 $0.50 $0.30 $0.45 $0.62 $0.42 $0.48\n\nThe following per-unit calculations refer to the expected per unit rate of the PFC, DP, MLA and CIS programs FAPRI expected production1)\n\n bales 17.25 18.88 18.67 17.02 16.45 17.44 18.14\n pounds 8,280 9,062 8,962 8,170 7,896 8,371 8,707\n\nPFC4) per unit rates 0.074 0.063 0.053 0.053 0.000 0.000 0.000\nDP4) per unit rates 0.000 0.000 0.000 0.022 0.078 0.073 0.070\nMLA4) per unit rates 0.074 0.068 0.058 0.000 0.000 0.000 0.000\nCIS4) 0.025 0.031 0.046 0.046 0.045 0.038 0.024\n\nThe following per-unit calculations refer to the expected per-unit rate of CCP, ML and Step 2 subsidies (based on regressions on futures prices)\n\nCCP5) 0.000 0.000 0.000 0.137 0.113 0.081 0.137\nML5) 0.111 0.108 0.117 0.171 0.113 0.090 0.142\nStep 25) 0.039 0.038 0.039 0.048 0.039 0.035 0.043\n\nE(P) 0.538 0.546 0.525 0.390 0.533 0.591 0.463\nPFC4) 0.074 0.063 0.053 0.053 0.000 0.000 0.000\nDP4) 0.000 0.000 0.000 0.022 0.078 0.073 0.070\nCCP 0.000 0.000 0.000 0.137 0.113 0.081 0.137\nMLA4) 0.074 0.068 0.058 0.000 0.000 0.000 0.000\nStep2 0.039 0.038 0.039 0.048 0.039 0.035 0.043\nLoan 0.111 0.108 0.117 0.171 0.113 0.090 0.142\nCIS4) 0.025 0.031 0.046 0.046 0.045 0.038 0.024\nE(g) 0.32 0.31 0.31 0.48 0.39 0.32 0.42\nE(γ)6) 0.633 0.661 0.717 0.698 0.674 0.673 0.676\nE(P/g)6) 1.66 1.77 1.67 0.82 1.37 1.86 1.11\n\nNotes:\n* Rows 4-14 are identical to Exhibit Bra-705 (US Upland cotton subsidy, and value of production MY 1996-2005 ($million and million lbs)).\n1) See Exhibit Bra-705.\n2) Cotton farm-gate price data available from http://usda.mannlib.cornell.edu/usda/ers/89004/Table11.xls (last accessed 10 October 2008).\n3) Data taken from worksheet 8 \"US and RoW shares\".\n4) These cotton subsidies do not change with variations in price expectation.\n5) The cells in grey highlights depict US cotton farmers' subsidy expectations according to worksheet 11 \"Regressions\". It is b ased on sheet \"Regressions\" in Bra-17 nov (Annex\nI).\n6) The results in grey highlights enter directly into worksheet 3 \"Input param matrix\".\n\nWorksheet 7\n\ndlnG calculations\n\nExpectations formed using futures prices\n\n4 1999 2000 2001 2002 2003 2004 2005\n5 E(P) 0.54 0.55 0.52 0.39 0.53 0.59 0.46\n6 PFC 0.07 0.06 0.05 0.05 0.00 0.00 0.00\n7 DP 0.00 0.00 0.00 0.02 0.08 0.07 0.07\n8 CCP 0.00 0.00 0.00 0.14 0.11 0.08 0.14\n9 MLA 0.07 0.07 0.06 0.00 0.00 0.00 0.00\n10 Step 2 0.04 0.04 0.04 0.05 0.04 0.04 0.04\n11 ML 0.11 0.11 0.12 0.17 0.11 0.09 0.14\n12 CIS 0.03 0.03 0.05 0.05 0.04 0.04 0.02\n13 g 0.323 0.31 0.31 0.48 0.39 0.32 0.42\n14 P/g 1.66 1.77 1.67 0.82 1.37 1.86 1.11\n15 γ 0.633 0.661 0.717 0.698 0.674 0.673 0.676\n1 6\n1 7 P F C\n18 g1 0.25 0.24 0.26 0.42 0.39 0.32 0.42\n19 γ1 0.777 0.793 0.832 0.767 0.674 0.673 0.676\n20 dlnG 0.055 0.047 0.035 0.024 0.000 0.000 0.000\n2 1\n2 2 D P\n23 g1 0.32 0.31 0.31 0.46 0.31 0.24 0.35\n24 γ1 0.633 0.661 0.717 0.720 0.781 0.801 0.762\n25 dlnG 0.000 0.000 0.000 0.017 0.075 0.086 0.062\n2 6\n2 7 C C P\n28 g1 0.32 0.31 0.31 0.34 0.27 0.24 0.28\n29 γ1 0.633 0.661 0.717 0.818 0.787 0.767 0.811\n30 dlnG 0.000 0.000 0.000 0.165 0.173 0.152 0.195\n3 1\n3 2 M L A\n33 g1 0.25 0.24 0.25 0.48 0.39 0.32 0.42\n34 γ1 0.746 0.776 0.824 0.698 0.674 0.673 0.676\n35 dlnG 0.090 0.083 0.065 0.000 0.000 0.000 0.000\n3 6\n3 7 U s e r\n38 g1 0.28 0.27 0.27 0.43 0.35 0.28 0.37\n39 γ1 0.583 0.613 0.676 0.664 0.638 0.632 0.638\n40 dlnG 0.188 0.187 0.175 0.143 0.149 0.165 0.153\n4 1\n4 2 M L\n43 g1 0.21 0.20 0.20 0.31 0.27 0.23 0.27\n44 γ1 0.441 0.478 0.549 0.529 0.540 0.545 0.509\n45 dlnG 0.543 0.529 0.519 0.513 0.433 0.419 0.503\n4 6\n4 7 C I S\n48 g1 0.30 0.28 0.27 0.43 0.34 0.28 0.39\n49 γ1 0.601 0.622 0.668 0.665 0.632 0.629 0.656\n50 dlnG 0.124 0.154 0.205 0.139 0.170 0.178 0.086\n5 1\n52 Test 1.00 1.00 1.00 1.00 1.00 1.00 1.00\n5 3\n5 4\n\n55 MLA+CCP+ML 0.633 0.612 0.584 0.677 0.606 0.571 0.698\n56 MLA+CCP+ML+Step2 0.821 0.799 0.760 0.820 0.755 0.736 0.852\n57 Step2 0.188 0.187 0.175 0.143 0.149 0.165 0.153\n58 CCP+ML 0.543 0.529 0.519 0.677 0.606 0.571 0.698\n5 9\n60 MLA+CCP+ML -0.633 -0.612 -0.584 -0.677 -0.606 -0.571 -0.698\n61 MLA+CCP+ML+Step2 -0.821 -0.799 -0. 760 -0.820 -0.755 -0.736 -0.852\n62 Step2 -0.188 -0.187 -0.175 -0.143 -0.149 -0.165 -0.153\n63 CCP+ML -0.543 -0.529 -0.519 -0. 677 -0.606 -0.571 -0.698\n\nNotes:\n(i) Worksheet 7 \"dlnG\" calculates dlnG, the percentage change in the effective government subsidy\n(measured as a price-subsidy equivalent). The result is then copied into the worksheet 3 \"Input param\nmatrix\".\n(ii) For input details (rows 5-12), see worksheet 6 \" γ and P over g\".\n(iii) This spreadsheet is not linked to worksheet 6 \" γ and P/g\". So, if the per-unit payment data is updated\nor changed, the new per-unit payment rates have to be copied into this spreadsheet (dlnG) and dlnG has\nto be recalculated.\n(iv) Rows 17-50 show the dlnG calculations for each individual program payment.\n(v) In order to calculate the withdrawal of ML an d CCP subsidies, proceed in the following manner.\n – The example given here is for The ML payment, but it applies to ML and CCP subsidies in the\nsame way.\n – The dlnG for the ML program is shown in rows 43-45. In row 43, g1 stands for total g\n(government subsidies) without including the ML payment. In row 44, γ1 stands for a γ (total\ncoupling factor) without having the ML program in place. To obtain this latter number, one\nmust delete row 11 (ML payments) and then copy and paste the new resulting γ (from row 15)\ninto row 44. After that, paste back in the data for ML payments into row 11 and move on to\nthe next program. The resulting figure in row 45 is the dlnG for the ML program. After\nconducting the same calculations for the CCP subs idies, one can add up the dlnG for the two\nindividual programs into one dlnG for an aggregate of programs. In rows 58 the resulting sum\nis presented.\n(vi) Rows 60-63 contain the same figures as in row 55-58 times (-1).\n(vii) Results from row 63 are then pasted into worksheet 3 \"Input param matrix\".\n\nWorksheet 8\n\nUS and rest-of-world shares in cotton production, consumption and exports\n\n 1999 2000 2001 2002 2003 2004 2005\nProduction in 1000 480 lb bales1),2),3)\n United States 16,968 17,188 20 ,303 17,209 18,255 23,251 23,890\n World Total 87,964 89,099 98,702 90,991 96,782 121,386 116,590\n ROW (World - US) 70,996 71,911 78,399 73,782 78,527 98,135 92,700\n Share US in World, in % 19.29% 19.29% 20.57% 18.91% 18.86% 19.15% 20.49%\n Share ROW in % 80.71% 80.71% 79.43% 81.09% 81.14% 80.85% 79.51%\n\nConsumption In 1000 480 lb bales1),2)\n United States 10,194 8,862 7,696 7,237 6,266 6,691 5,871\n World Total 91,082 92,158 94,278 98,355 98,033 108,586 116,241\n ROW (World - US) 80,888 83,296 86,582 91,118 91,767 101,895 110,370\n Share US in World, in % 11.19% 9.62% 8.16% 7.36% 6.39% 6.16% 5.05%\n Share ROW in % 88.81% 90.38% 91.84% 92.64% 93.61% 93.84% 94.95%\n\nExports in 1000 480lb bales1),2)\n United States 6,750 6,740 11,000 11,900 13,758 14,436 18,036\n World Total 27,195 26,258 29, 093 30,325 33,277 35,012 44,935\n ROW (World - US) 20,445 19,518 18,093 18,425 19,519 20,576 26,899\n Ratio US Production/US Exports5) 2.51 2.55 1.85 1.45 1.33 1.61 1.32\n Ratio US Consumption/US Exports6) 1.51 1.31 0.70 0.61 0.46 0.46 0.33\n Ratio ROW Production/ROW Exports 3.23 3.39 3.39 3.00 2.91 3.47 2.59\n Ratio ROW Consumption/ROW Exports 3.96 4.27 4.79 4.95 4.70 4.95 4.10\n\nNotes:\n1) Source: Panel Report, US – Upland Cotton (21.5), Table 3, and http://www.fas.usda.gov/psdonline/.\n2) Production, consumption and exports are converted into pounds (lb) in columns L-S.\n3) The share of US production in world production (row 13) enters into worksheet 3 \"Input param matrix\" cells B4:H4.\n4) The share of US consumption in world consumption (row 20) enters into worksheet 3 \"Input param matrix\" cells B5:H5.\n5) The ratio of US production over US exports (row 27) enter into worksheet 4 \"Model Run\" to calculate the approximate change in US exports (dlnXu).\n6) The ratio of US consumption over US exports (row 28) enters into worksheet 4 \"Model Run\" to calculate the approximate change in US exports (dlnXu).\n\n 1999 2000 2001 2002 2003 2004 2005\nProduction in lb\n United States 8,144,640,000 8,250,240,000 9,745,440,000 8,260,320,000 8,762,400,000 11,160,480,000 11,467,200,000\n World Total 42,222,720,000 42,767,520,000 47,376,960,000 43,675,680,000 46,455,360,000 58,265,280,000 55,963,200,000\n ROW (World - US) 34,078,080,000 34,517,280,000 37,631,520, 000 35,415,360,000 37,692,960,000 47,104,800,000 44,496,000,000\n\nConsumption in lb\n United States 4,893,120,000 4,253,760,000 3,694,08 0,000 3,473,760,000 3,007,680,000 3,211,680,000 2,818,080,000\n World Total 43,719,360,000 44,235,840,000 45,253,440,000 47,210,400,000 47,055,840,000 52,121,280,000 55,795,680,000\n ROW (World - US) 38,826,240,000 39,982,080,000 41,559,360, 000 43,736,640,000 44,048,160,000 48,909,600,000 52,977,600,000\n\nExports in lb\n United States 3,240,000,000 3,235,200,000 5,280,00 0,000 5,712,000,000 6,603,840,000 6,929,280,000 8,657,280,000\n ROW 13,053,600,000 12,603,840,000 13,964,640,000 14, 556,000,000 15,972,960,000 16,805,760,000 21,568,800,000\n ROW (World - US) 9,813,600,000 9,368,640,000 8,684,64 0,000 8,844,000,000 9,369,120,000 9,876,480,000 12,911,520,000\n\nWorksheet 9\n\nModel Results MY 1999-2005\n\n1. Model scenario: complete and permanent withdrawal of ML and CCP subsidies.\n2. Input parameters: see worksheet 3 \"Input param matrix\".\n3. Price expectations: Futures prices.\n4. Coupling factor for CCP is 0.4.\n\nRow A B C D E F G H I\n7 Input parameter matrix MY 1999-2005\n8 Source 1999 2000 2001 2002 2003 2004 2005\n9 δsu worksheet 8 \"U.S. and RoW shar es\" 0.193 0.193 0.206 0.189 0.189 0.192 0.205\n10 δdu worksheet 8 \"U.S. and RoW shar es\" 0.112 0.096 0.082 0.074 0.064 0.062 0.051\n11 εu worksheet 3 \"Input param matrix \" 0.8 0.8 0.8 0.8 0.8 0.8 0.8\n12 εr worksheet 3 \"Input param matrix\" 0.2 0.2 0.2 0.2 0.2 0.2 0.2\n13 ηu worksheet 3 \"Input param matrix\" -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2\n14 ηr worksheet 3 \"Input param matrix\" -0.2 -0.2 -0.2 -0.2 -0.2 -0.2 -0.2\n15 dlnG worksheet 7 \"dlnG\" -0.543 -0 .529 -0.519 -0.677 -0.606 -0.571 -0.698\n16 γ worksheet 6 \"g and P over g\" 0.633 0.661 0.717 0.698 0.674 0.673 0.676\n17 P/g worksheet 6 \"g and P over g\" 1.66 1.77 1.67 0.82 1.37 1.86 1.11\n1 8\n19 Output matrix MY 1999-2005 (see worksheet 4 \"Model run\")\n20 Output matrix Explanation/calculation 1999 2000 2001 2002 2003 2004 2005\n21 dlnP Model run output 1) 4.87% 4.68% 5.40% 10.65% 6.50% 4.89% 9.38%\n22 dlnSu Model run output 1) -9.13% -8.76% -9.42% -20.39% -12.49% -9.24% -16.44%\n23 dlnXu Model run output 1) -11.78% -11.30% -12.13% -26.31% -16.13% -11.92% -21.16%\n24 dlnP Model run output 1) 4.87% 4.68% 5.40% 10.65% 6.50% 4.89% 9.38%\n25 dlnSr dlnSr = εr(dlnP) 0.97% 0.94% 1.08% 2.13% 1.30% 0.98% 1.88%\n26 dlnDr dlnDr = ηr(dlnP) -0.97% -0.94% -1.08% -2.13% -1.30% -0.98% -1.88%\n\nNotes:\n1) See worksheet 4 \"Model Run\".\n\nRow A B C D E F G H I\n31 Model results MY 1999-2005 - US excess production and excess revenue, worldwide adverse effects\n32 US production effects Explanation/calculation 1999 2000 2001 2002 2003 2004 2005\n33 US excess production\n(lb cotton) dlnSu*actual US production -743,597,092 -723,046, 405 -918,506,550 -1,683,967,155 -1, 094,758,202 -1,031,224,878 -1,8 85,027,126\n34 US excess revenue\n(USD)\ndlnSu*actual US\nproduction*actual WP\n-$392,991,063 -$413,944,067 -$384,670, 543 -$939,822,069 -$758,010,579 - $552,014,677 -$1,076,350,489\n35\n36 Worldwide adverse\neffects\nExplanation/calculation 1999 2000 2001 2002 2003 2004 2005\n37 Sales value effect AESV=dlnP*actual WP*world\nProd. (in lb)\n$877,604,225 $924,387,671 $851,429,013 $2, 104,166,093 $1,697,696,545 $1, 233,867,383 $2,383,718,532\n38 Reduced production\neffect\nAERP=actual world prod. *\n(dlnSr)*(1+dlnP)*actual WP\n$184,073,625 $193,525,744 $179,485,392 $465,634, 078 $361,626,110 $258,848,961 $521,472,055\n39 Total adverse effects AE SV + AERP $1,061,677,850 $1,117,913,415 $1, 030,914,405 $2,569,800,171 $2,059,322 ,655 $1,492,716,344 $2,905,190,586\n\nWorld price (A-Index)\n1999-2005\n Year 1999 2000 2001 2002 2003 2004 2005\n\nPer unit market revenue\n$/lb. P $0.53 $0.57 $0.42 $0.56 $0.69 $0.54 $0.57\nSource: http://usda.mannlib.cornell.edu/usda/ers/CWS-yearbook//2000s/2007/CWS-yearbook-12-10-2007.pdf (Appendix table 14); accessed 10 October 2008\n\nWorksheet 10\n\nApportioning to Brazil\nAdverse Effects (Global Level) $2,905,190,586\nBrazil's Share $147,314,091\n\nCotton Production\n(1000 480 lb bales)\nCountry/Region 2005/2006\nBrazil 4,700\nROW (World less US) 92,689\nWorld 116,579\nBrazil's Share of ROW 5.1%\nSource: Exhibit US-68 (worksheet \"Production\").\n\nWorksheet 11\n\nThis spreadsheet contains the regression on future prices, the results, and calculations based on those results.\n\nThe resulting expected figures fo r a specific program were then copied into the spreadsheet \" γ and P over g\". Those figures are here in bold and with grey\nbackground.\n\n1. Regression Results and Expected Market Price\n\n Average February Price of December Contract Marketing Year Average Farm Price Expected Per Unit Market price\n1996 0.786 0.693\n1997 0.768 0.652\n1998 0.721 0.602\n1999 0.603 0.450 0.538\n2000 0.613 0.498 0.546\n2001 0.586 0.298 0.525\n2002 0.422 0.445 0.390\n2003 0.596 0.618 0.533\n2004 0.668 0.416 0.591\n2005 0.511 0.477 0.463\n2006 0.604 0.539\n\nSUMMARY OUTPUT\n\nRegression Statistics\nMultiple R 0.957943\nR Square 0.917655\nAdjusted R Square 0.907362\nStandard Error 0.037467\nObservations 10\n\nANOVA\n df SS MS F Significance F\nRegression 1 0.125149 0.125149 89.1528 1.3E-05\nResidual 8 0.01123 0.001404\nTotal 9 0.136379\n\n Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lo wer 95.0% Upper 95.0%\nIntercept 0.04565 0.051091 0.893509 0. 397667 -0.07217 0.16 -0.072165174 0.163\nX Variable 1 0.816883 0.086515 9.442076 1.3E-05 0.617378 1.02 0.617378453 1.016\n\n2. Regression Results and Expected Step 2 Payment\n\n Average February Price of\nDecember Contract Step 2, million $ production, million lbs paym ent rate, $/lb Expected Per Unit Step 2\n1996 0.786 3 8,838 0.000\n1997 0.768 390 8,758 0.045\n1998 0.721 308 6,468 0.048\n1999 0.603 422 7,821 0.054 0.039\n2000 0.613 236 8,064 0.029 0.038\n2001 0.586 193 9,409 0.021 0.039\n2002 0.422 429 7,935 0.054 0.048\n2003 0.596 350 8,555 0.041 0.039\n2004 0.668 544 10,802 0.050 0.035\n2005 0.511 350 11,165 0.031 0.043\n\nSUMMARY OUTPUT\n\nRegression Statistics\nMultiple R 0.333198\nR Square 0.111021\nAdjusted R Square -0.0001\nStandard Error 0.017144\nObservations 10\n\nANOVA\n df SS MS F Significance F\nRegression 1 0.000294 0.00 0294 0.999086 0.346802\nResidual 8 0.002351 0.000294\nTotal 9 0.002645\n\n Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%\nIntercept 0.069045 0.03223 2.142276 0.064547 -0.00528 0.14 -0.00527693 0.143\nX Variable 1 -0.05061 0.050632 -0.99954 0.346802 -0.16737 0.07 -0.167365142 0.066\n\n3. Regression Results and Expected Marketing Loan Program Payment\n\n Average February Price of\nDecember Contract MLG total, million $ production, million lbs payment rate, $/lb Expected Per Unit Loan\nPayment\n1996 0.786 0 8,838 0.000\n1997 0.768 29 8,758 0.003\n1998 0.721 534 6,468 0.083\n1999 0.603 1,546 7,821 0.198 0.111\n2000 0.613 531 8,064 0.066 0.108\n2001 0.586 2,520 9,409 0.268 0.117\n2002 0.422 871 7,935 0.110 0.171\n2003 0.596 168 8,555 0.020 0.113\n2004 0.668 1,842 10,802 0.170 0.090\n2005 0.511 1,257 11,165 0.113 0.142\n2006 0.604 0.111\n\nSUMMARY OUTPUT\n\nRegression Statistics\nMultiple R 0.423526\nR Square 0.179375\nAdjusted R Square 0.076796\nStandard Error 0.084794\nObservations 10\n\nANOVA\n df SS MS F Significance F\nRegression 1 0.012573 0.01 2573 1.748663 0.222598\nResidual 8 0.05752 0.00719\nTotal 9 0.070093\n\n Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%\nIntercept 0.310755 0.159407 1.949448 0.087066 -0.05684 0.68 -0.056837531 0.678\nX Variable 1 -0.33115 0.250421 -1.32237 0.222598 -0.90862 0.25 -0.908621632 0.246\n\n4. Regression Results and Expected CCP payment\n\n Average February Price of\nDecember Contract CCP, million $ production, million lbs payment rate, $/lb Expected Per Unit CCP\nPayment\n1996 0.786 0 8,838 0.000\n1997 0.768 0 8,758 0.000\n1998 0.721 385 6,468 0.060\n1999 0.603 1,312 7,821 0.168\n2000 0.613 1,312 8,064 0.163\n2001 0.586 1,312 9,409 0.139\n2002 0.422 1,312 7,935 0.165 0.191\n2003 0.596 392 8,555 0.046 0.113\n2004 0.668 1,375 10,802 0.127 0.081\n2005 0.511 1,376 11,165 0.123 0.151\n2006 0.604 0.110\n\nSUMMARY OUTPUT\n\nRegression Statistics\nMultiple R 0.754296\nR Square 0.568962\nAdjusted R Square 0.515082\nStandard Error 0.04654\nObservations 10\n\nANOVA\n df SS MS F Significance F\nRegression 1 0.022872 0.02 2872 10.55985 0.011708\nResidual 8 0.017328 0.002166\nTotal 9 0.0402\n\n Coefficients Standard Error t Stat P-value Lower 95% Upper 95% Lower 95.0% Upper 95.0%\nIntercept 0.379375 0.087492 4.336105 0.002491 0.177618 0.58 0.177617707 0.581\nX Variable 1 -0.44664 0.137446 -3.24959 0.011708 -0.7636 -0.1 -0.763595134 -0.13"},"processing_date":{"kind":"string","value":"2026-03-15T15:46:33.997788"}}},{"rowIdx":3981,"cells":{"folder_number":{"kind":"string","value":"267"},"case_number":{"kind":"string","value":"267"},"original_filename":{"kind":"string","value":"DS267_SEQ83_Arbitration_Award_02.pdf"},"new_filename":{"kind":"string","value":"DS267_SEQ83_Arbitration_Award_02.pdf"},"doc_sequence":{"kind":"number","value":83,"string":"83"},"doc_type":{"kind":"string","value":"Arbitration_Award"},"doc_type_raw":{"kind":"string","value":"Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 7.10 of the SCM Agreement Decision by the Arbitrator Corrigendum Paragraph 5.167, 3 rd sentence, should read: \"The United States observes that medical sterilizers exported by Brazil exceed the imported amount from the United States in 2007 (US$4.6 million in exports,"},"doc_class":{"kind":"string","value":"ARBITRATION"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":2,"string":"2"},"case_title":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON"},"date":{"kind":"string","value":"31 August 2009"},"header_codes":{"kind":"string","value":"WT/DS267/ARB/2/Corr.1"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Brazil']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand']"},"dispute_stage":{"kind":"string","value":"Mutually Agreed Solution"},"agreements_cited":{"kind":"string","value":"Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 30 October 2014\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Brazil.\nOn 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users and/or exporters of upland cotton, as well as legislation, regulations, statutory instruments and amendments thereto providing such subsidies (including export credits), grants, and any other assistance to the US producers, users and exporters of upland cotton (“US upland cotton industry”).\nBrazil contended that these measures were inconsistent with the obligations of the United States under the following provisions: Articles 5(c), 6.3(b), (c) and (d), 3.1(a) (including item (j) of the Illustrative List of Export Subsidies in Annex I), 3.1(b), and 3.2 of the SCM Agreement; Articles 3.3, 7.1, 8, 9.1 and 10.1 of the Agreement on Agriculture; and Article III:4 of GATT 1994. Brazil was of the view that the US statutes, regulations, and administrative procedures listed above were inconsistent with these provisions as such and as applied.\nOn 9 October and 11 October 2002, Zimbabwe and India, respectively, requested to join the consultations. On 14 October 2002, Argentina and Canada requested to join the consultations. The United States informed the DSB that it had accepted the requests of Argentina and India to join the consultations.\nOn 6 February 2003, Brazil requested the establishment of a panel. At its meeting on 19 February 2003, the DSB deferred the establishment of a panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Brazil, the DSB established a Panel at its meeting on 18 March 2003. Argentina, Canada, China, Chinese Taipei, the European Communities, India, Pakistan and Venezuela reserved their third-party rights to participate in the Panel’s proceedings.\nAt that meeting, the Chairman of the DSB announced that he continued to consult with Brazil and the United States on the issue of appointing a DSB representative to facilitate the information-gathering process, pursuant to the Annex V procedures under the SCM Agreement, which had been invoked by Brazil in its panel request. Following a communication from the United States, on 20 March 2003, Brazil indicated, in conformity with paragraph 1 of Annex V, that it considered the following third-county markets as relevant: Argentina, Bangladesh, Colombia, Germany, India, Indonesia, Italy, Portugal, Philippines, Slovenia, South Africa, South Korea, Switzerland, Thailand and Turkey.\nOn 24 March 2003, Benin reserved its third-party rights. On 25 March 2003, Australia reserved its third-party rights. On 26 March 2003, Paraguay reserved its third-party rights. On 28 March 2003, New Zealand reserved its third-party rights. On 4 April 2003, Chad reserved its third-party rights. On 9 May 2003, Brazil requested the Director-General to compose the panel. On 19 May 2003, the Director-General composed the panel.\nOn 17 November 2003, the Chairman of the panel informed the DSB that it would not be able to complete its work in six months due to the complexity of the matter and that the panel expected to issue its final report to the parties in May 2004.\nOn 8 September 2004, the panel report was circulated to Members. The panel found that:\nOn 18 October 2004, the United States notified its intention to appeal certain issues of law and legal interpretations developed by the panel. On 16 December 2004, the Chairman of the Appellate Body informed the DSB that in light of the numerous and complex issues raised in this dispute, the increased burden on the Appellate Body as well as the translation services, the intervening holiday period, and the fact that the Appellate Body expects to be considering two or three other appeals in the coming weeks, the Appellate Body would not be able to circulate its Report by, 17 December 2004. The Chairman stated that the Appellate Body estimated that the Appellate Body report would be circulated no later than 3 March 2005.\nOn 3 March 2005, the Appellate Body report was circulated to Members. The Appellate Body found inter alia as follows:\nA. As regards the applicability of the Peace Clause to this dispute, the Appellate Body:\nB. As regards serious prejudice, the Appellate Body:\nC. As regards user marketing (Step 2) payments, the Appellate Body:\nD. As regards export credit guarantee programs, the Appellate Body:\nAt its meeting on 21 March 2005, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report. The resulting DSB recommendations and rulings include the recommendation that the United States withdraw, by at the latest within six months of the date of adoption of the Panel report by the DSB or 1 July 2005 (whichever is earlier), the following prohibited subsidies: (i) the export credit guarantees under the GSM 102, GSM 103 and SCGP export credit guarantee programmes in respect of exports of upland cotton and other unscheduled agricultural products supported under the programmes, and in respect of one scheduled product (rice); (ii) Section 1207(a) of the Farm Security and Rural Investment (FSRI) Act of 2002 providing for user marketing (STEP2) payments to exporters of upland cotton; and (iii) Section 1207(a) of the FSRI Act of 2002 providing for user marketing (STEP2) payments to domestic users of upland cotton. As for the actionable subsidies the recommendation is that the United States takes appropriate steps to remove the adverse effects of certain subsidies or withdraw these subsidies within six months from the date of adoption of the Panel and Appellate Body reports, i.e. the compliance period expired on 21 September 2005.\n\nCompliance proceedings\nFollowing the suspension of the arbitration proceedings under Article 22.6 triggered by Brazil's request to take countermeasures with respect to the prohibited and actionable subsidies (see below), on 18 August 2006, Brazil requested the establishment of a compliance panel. At its meeting on 1 September 2006, the DSB deferred the establishment of a compliance panel. Further to a second request, at its meeting on 28 September 2006, the DSB agreed, if possible, to refer the matter raised by Brazil to the original panel. Argentina, Australia, Canada, China, the European Communities, India, Japan and New Zealand reserved their third party rights. Subsequently, Chad and Thailand reserved their third party rights. On 18 and 20 October 2006, Brazil and the United States respectively requested the Director-General to compose the compliance panel. On 25 October 2006, the Director-General composed the panel.\nOn 9 January 2007, the Chairman of the panel informed the DSB that given the particular circumstances of this case and the schedule adopted after consultations with parties to this dispute, it had not been possible for the panel to complete its work within the 90-day period as foreseen in Article 21.5. The panel expected to complete its work in July 2007.\nOn 18 December 2007, the compliance panel report was circulated to Members. The Panel found that with respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's finding of inconsistency with Articles 5 and 6 of the SCM Agreement:\nWith respect to the measure taken by the United States to comply with the DSB recommendations and rulings relating to the original panel's findings of inconsistency with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the panel found:\nThe panel also considered that to the extent that the measures taken by the United States to comply with the recommendations and rulings adopted by the DSB in the original proceeding were inconsistent with the objections of the United States under the covered agreements, these recommendations and rulings remain operative.\nOn 12 February 2008, the United States notified its decision to appeal to the Appellate Body certain issues of law covered in the compliance panel report and certain legal interpretations developed by the panel. On 25 February 2008, Brazil notified its decision to appeal to the Appellate Body certain issues of law and legal interpretations in the compliance panel report. On 11 April 2008, the Chairman of the Appellate Body informed the DSB that it would not be possible to circulate its report within 60 days in light of the numerous and complex issues raised in this appeal, and the increased burden on translation services. It estimated that the Appellate Body report would be issued no later than 2 June 2008.\nOn 2 June 2008, the Appellate Body report was circulated to Members.\nAs regards the scope of the Article 21.5 proceedings, the Appellate Body upheld the Panel's finding that Brazil's claims relating to export credit guarantees for pig meat and poultry meat are properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated had not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred when it found that the measure that is the subject of Brazil's claims is not the revised GSM 102 programme itself.\nThe Appellate Body also upheld the Panel's finding that Brazil's claims against marketing loan and counter-cyclical payments made by the United States after 21 September 2005 were properly within the scope of these Article 21.5 proceedings. Because the condition on which it was predicated has not been fulfilled, the Appellate Body did not find it necessary to consider Brazil's other appeal that the Panel erred in finding that the original panel's conclusions and recommendations addressed only the payments made under the marketing loan and counter-cyclical payments programmes, and not the programmes themselves.\nAs regards the revised GSM 102 export credit guarantee programme, the Appellate Body found that the Panel failed to make an objective assessment of the matter, under Article 11 of the DSU, because it dismissed the import of the re-estimates data submitted by the United States on the basis of internally inconsistent reasoning. Consequently, the Appellate Body reversed the Panel's intermediate finding that “the initial subsidy estimates provide a strong indication that GSM 102 export credit guarantees are provided against premia which are inadequate to cover the long-term operating costs and losses of the GSM 102 programme”.\nThe Appellate Body upheld the Panel's finding that “the GSM 102 programme is not designed to cover its long term operating costs and losses” and, albeit for reasons that differ from those of the Panel, the Panel's conclusion that “the GSM 102 export credit guarantee programme constitutes an 'export subsidy' because it is provided against premiums which are inadequate to cover its long term operating costs and losses under the terms of item (j) of the Illustrative List”.\nConsequently, the Appellate Body upheld the Panel's finding that GSM 102 export credit guarantees issued after 1 July 2005 are export subsidies within the meaning of Article 3.1(a) of the SCM Agreement and Article 10.1 of the Agreement on Agriculture; and that regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005 the United States acts inconsistently with Article 10.1 of the Agreement on Agriculture by applying export subsidies in a manner which results in the circumvention of United States' export subsidy commitments with respect to certain unscheduled products and certain scheduled products, and as a result acts inconsistently with Article 8 of the Agreement on Agriculture. Regarding export credit guarantees issued under the revised GSM 102 programme after 1 July 2005, the Appellate Body also found that the United States also acts inconsistently with Articles 3.1(a) and 3.2 of the SCM Agreement by providing export subsidies to unscheduled products and by providing export subsidies to scheduled products in excess of the commitments of the United States under the Agreement on Agriculture.\nThe Appellate Body further found that, by acting inconsistently with Articles 10.1 and 8 of the Agreement on Agriculture and Articles 3.1(a) and 3.2 of the SCM Agreement, the United States had failed to comply with the DSB recommendations and rulings and specifically, had failed to bring its measures into conformity with the Agreement on Agriculture and “to withdraw the subsidy without delay”.\nAs regards whether the effect of marketing loan and counter-cyclical payments is significant price suppression, the Appellate Body upheld the panel's findings that the United States acted inconsistently with its obligations under Articles 5(c) and 6.3(c) of the SCM Agreement in that the effect of marketing loan and counter-cyclical payments provided to United States upland cotton producers pursuant to the FSRI Act of 2002 is significant price suppression, within the meaning of Article 6.3(c) of the SCM Agreement, in the world market for upland cotton, constituting “present” serious prejudice to the interests of Brazil within the meaning of Article 5(c) of the SCM Agreement. The Appellate Body also found that, by acting inconsistently with Articles 5(c) and 6.3(c) of the SCM Agreement, the United States had failed to comply with the DSB's recommendations and rulings and, specifically, failed to comply with its obligation under Article 7.8 of the SCM Agreement “to take appropriate steps to remove the adverse effects or ... withdraw the subsidy”.\nThe Appellate Body further found that the Panel did not fail to make an objective assessment of the matter before it, as required by Article 11 of the DSU, in its analysis of Brazil's claim that the effect of the marketing loan and counter-cyclical payments is significant price suppression.\nThe Appellate Body recommended that the DSB request the United States to bring its measures, found to be inconsistent with the Agreement on Agriculture and the SCM Agreement, into conformity with its obligations under those Agreements.\nAt its meeting on 20 June 2008, the DSB adopted the Appellate Body report and the Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 4 July 2005, prior to the initiation of the compliance proceedings (see above), and in respect of the “prohibited subsidies”, Brazil requested, the DSB for authorization to take appropriate countermeasures pursuant to Article 4.10 of the SCM Agreement and to suspend concessions or other obligations pursuant to Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 1 July 2005. Brazil stated it intended to take appropriate countermeasures in the form of the suspension of tariff concessions and related obligations under the GATT 1994 by imposing additional customs duties on a list of products imported from the United States, to be defined by Brazil. In addition, given that it considered that it was not practicable or effective to exclusively apply additional import duties and that it considered that the circumstances were serious enough, Brazil stated it may resort, to the extent necessary, to countermeasures in the form of suspension of certain obligations under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS Agreement) and the General Agreement on Trade in Services (GATS).\nWith regard to the prohibited subsidies, on 5 July 2005 the parties to the dispute jointly notified the DSB of “Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding and Article 4 of the SCM Agreement”. On 14 July 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 4.11 of the SCM Agreement challenging the appropriateness of the countermeasures, the proposed level of suspension and asserting that the principles and procedures set forth in Article 22.3 of the DSU had not been followed. At its meeting on 15 July 2005, the DSB referred the matter raised by the United States to arbitration. On 17 August 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 6 October 2005, in respect of the “actionable subsidies” Brazil requested the DSB for authorization to suspend concessions or other obligations under Article 7.9 of the SCM Agreement and Article 22.2 of the DSU. Brazil asserted that the reasonable period of time had expired on 21 September 2005. Brazil stated that in principle, these countermeasures would take the form of suspension of tariff concessions and related obligations under the GATT 1994 by means of the imposition of additional import duties on a list of products imported from the United States, to be defined by Brazil. In addition, Brazil contended that it was not practicable or effective to suspend concessions or other obligations exclusively with respect to the same sector/agreement as that in which the Panel and the Appellate Body have found the violations and that the circumstances are serious enough to justify the suspension of concessions or obligations under other covered agreements. Therefore it affirmed it may, to the extent necessary, resort to countermeasures in the form of suspension of certain obligations under the TRIPS Agreement and the GATS.\nOn 17 October 2005, the United States submitted its objections to the request for authorization by Brazil pursuant to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement arguing that the countermeasures proposed are not commensurate with the degree and nature of the adverse effects determined to exist within the meaning of Article 7.9 of the SCM Agreement and that the level of suspension proposed is not equivalent to the level of nullification or impairment within the meaning of Article 22.7 of the DSU. With respect to Brazil's request for “cross-retaliation”, the United States claimed that the principles and procedures set forth in Article 22.3 of the DSU have not been followed. At its meeting on 18 October 2005, the DSB referred the matter raised by the United States to arbitration. On 21 November 2005, the parties to the dispute jointly requested the Chairman of the Arbitrator to suspend the Article 22.6 arbitration proceedings in accordance with the Agreed Procedures under Articles 21 and 22 of the DSU, and the Arbitrator suspended the proceedings accordingly.\nOn 25 August 2008, and following the completion of the compliance proceedings (see above), Brazil requested that the two arbitration proceedings be resumed. At the time that Brazil requested the resumption of the arbitration proceedings, two of the arbitrators had become unavailable to serve in these proceedings. On 1 October 2008, the parties agreed to the replacement arbitrators. On 31 August 2009, the two Decisions by the Arbitrator were circulated to Members.\nWith respect to the “prohibited subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.4 million for FY 2006, or, for subsequent years, an annual amount to be determined by applying a methodology described in the Decision of the Arbitrator. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “actionable subsidies” at issue, the Arbitrator determined that Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of USD 147.3 million annually. The Arbitrator also determined that, in the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold described in the decisions, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS with respect to any amount of permissible countermeasures applied in excess of that figure.\nWith respect to the “prohibited subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 4.10 of the SCM Agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nWith respect to the “actionable subsidies”, on 6 November 2009, Brazil requested authorization from the DSB to suspend the application to the United States of concessions or other obligations in conformity with the Arbitrators' Decision pursuant to Article 22.7 of the DSU and Article 7.9 of the SCM agreement. At its meeting on 19 November 2009, the DSB authorized Brazil to suspend the application to the United States of concessions or other obligations.\nOn 8 March 2010, Brazil notified the DSB that, starting on 7 April 2010, it would suspend the application to the United States of concessions or other obligations under the GATT 1994 in the form of increased import duties on certain products when they are imported from the United States. However on 30 April 2010, Brazil notified the DSB that it had decided to postpone the imposition of countermeasures vis-à-vis the United States indicating that no countermeasures would enter into force before 21 June 2010, since Brazil and the United States were engaged in a dialogue with a view to reaching a mutually satisfactory solution to the dispute.\n\nImplementation of adopted reports\nOn 25 August 2010, Brazil and the United States notified the DSB they had concluded a Framework for a Mutually Agreed Solution to the Cotton Dispute (Framework) which in itself does not constitute a mutually agreed solution to the dispute but sets out parameters for discussions on a solution with respect to domestic support programs for upland cotton in the United States, as well as a process of joint operation reviews as regards export credit guarantees under the program GSM-102. Brazil and the United States also agreed to hold consultations not less than four times a year, unless they agree otherwise, with the aim of obtaining convergence of views in respect of a solution to the Cotton dispute. The Framework also provides that, upon enactment of successor legislation to the US Food, Conservation and Energy Act of 2008, Brazil and the United States will consult with a view to determining whether a mutually agreed solution to the Cotton dispute has been reached. The joint communication also specified that as long as the Framework is in effect, Brazil will not impose the countermeasures authorized by the DSB.\nAt the DSB meeting on 23 October 2012, Brazil said that on 30 September 2012, the 2008 US Farm Bill had expired without the enactment of a successor legislation. However, taking into account that the current US agricultural support programs remained unchanged, Brazil had decided not to terminate the Memorandum of Understanding and the Framework Agreement and would thus not impose any countermeasures at this time.\nOn 16 October 2014, Brazil and the United States notified the DSB that, in accordance with Article 3.6 of the DSU, they had concluded a Memorandum of Understanding, and agreed that this dispute was terminated. As a result, no suspension of concessions or other obligations pursuant to the authorization previously granted by the DSB shall be applied and no further action shall be taken under Article 21.5 of the DSU based on a disagreement as to the existence or consistency of any measure taken to comply with the DSB recommendations and rulings."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUBSIDIES ON UPLAND COTTON\n\nRecourse to Arbitration by the United States under Article 22.6 of the DSU\n\nand Article 7.10 of the SCM Agreement\n\nDecision by the Arbitrator\n\nCorrigendum\n\nParagraph 5.167, 3\nrd sentence, should read:\n\n\"The United States observes that medical sterilizers exported by Brazil exceed the\nimported amount from the United States in 2007 (US$4.6 million in exports,\nUS$1.5 million in imports).\"\n\n* In English only."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:33.998133"}}},{"rowIdx":3982,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ01_Request_For_Consultations_01.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ01_Request_For_Consultations_01.pdf"},"doc_sequence":{"kind":"number","value":1,"string":"1"},"doc_type":{"kind":"string","value":"Request_For_Consultations"},"doc_type_raw":{"kind":"string","value":"Request for Consultations by Argentina"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"10 October 2002"},"header_codes":{"kind":"string","value":"WT/DS268/1; G/L/572; G/ADP/D43/1"},"agreement_indicators":{"kind":"string","value":"Anti-Dumping Practices (ADP); General Council"},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":3,"string":"3"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\nRequest for Consultations by Argentina\nThe following communication, dated 7 October 2002, from the Permanent Mission of\nArgentina to the Permanent Mission of the United States and to the Chairman of the Dispute\nSettlement Body, is circulated in accordance with Article 4.4 of the DSU.\nThe Government of the Republic of Argentina hereby requests consultations with the\nGovernment of the United States of America pursuant to Article 4 of the\n(WTO) Understanding on Rules and Procedures Go verning the Settlement of Disputes (DSU),\nArticle XXII:1 of the General Agreement on Ta riffs and Trade 1994 (GATT 1994), and Article 17.3\nof the Agreement on Implementation of Article VI of GATT 1994 (the Anti-Dumping Agreement)\nregarding the final determinations of the United States Department of Co mmerce (the Department)\nand the United States International Trade Commission (the Commission) in the sunset reviews of the\nanti-dumping duty order on oil country tubular goods (OCTG) from Argentina, issued on\n7 November 2000 (65 Federal Register 66701) and June 2001 (USITC Pub. No. 3434), respectively,\nand the Department's determination to conti nue the anti-dumping duty order on OCTG from\nArgentina, issued on 25 July 2001 (66 Federal Register 38630).\nThe Republic of Argentina considers that the following US laws, regulations, policies and\nprocedures related to the administration of sunset reviews and the application of anti-dumping\nmeasures are inconsistent with the obligations of the United States under the WTO, either on their\nface or as applied, as set forth in greater detail in Sections A and B below:\n• Sections 751 (c) and 752 of the Tariff Act of 1930, as amended, codified at Title 19 of the\nUnited States Code §§ 1675 (c) and 1675a; and the US Statement of Administrative Action\naccompanying the Uruguay Round Agreements Act (the SAA), H.R. Doc. No. 103-316,\nvol. 1;\n• The Department's Policies Regarding the Conduct of Five-year (\"Sunset\") Reviews of\nAnti-Dumping and Countervailing Duty Orders ; Policy Bulletin, 63 Federal Register 18871\n(16 April 1998) (Sunset Policy Bulletin);\n• The Department's sunset review regulations, codified at Title 19 of the United States Code of\nFederal Regulations § 351.218; and the Commission' s sunset review regulations, codified at\nTitle 19 of the United States Code of Federal Regulations §§ 207.60-69 (Subpart F).\nArgentina considers that the US anti-dumping measures are inconsistent with the following\nprovisions of the Anti-Dumping Agreement, the GATT 1994, and the WTO Agreement:\n\n• Articles 1, 2, 3, 5, 6, 11, 12, and 18 of the Anti-Dumping Agreement;\n• Articles VI and X of the General Agreement on Tariffs and Trade (GATT) 1994; and\n• Article XVI:4 of the WTO Agreement.\nArgentina's specific claims related to the US sunset reviews of anti-dumping measures on\nOCTG from Argentina are as follows:\nA. With respect to the sunset review conducted by the Department:\n1. The Department failed to base the initiation of its sunset review on sufficient\nevidence that the termination of the anti-dumping duty measure would likely lead to a\ncontinuation or recurrence of dumping, in violation of procedural, evidentiary, and\npublic notice requirements of Articles 5, 11.3, 12.1, and 12.3 of the Anti-Dumping\nAgreement.\n2. The United States' de minimis standard for sunset reviews –both on its face and as\napplied in this case- is inconsistent with the United States' obligations under\nArticles 11.3 and 5.8, which establish a 2.0 percent de minimis standard. The US\nanti-dumping statute (19 U.S.C. § 1675a (c)(4)), regulations (19 C.F.R. §\n351.106(c)(1)) and official internal guidelines (including section II.A.5. of the Sunset\nPolicy Bulletin) provide for a 0.5 percent de minimis standard for sunset reviews.\nApplication of the WTO de minimis standard in this case would have resulted in the\nterminations of the anti-dumping order on OCTG from Argentina.\n3. The Department's determination of the likelihood of continuation or recurrence of\ndumping misapplied the \"likelihood\" standard, lacked an adequate factual basis, and\nwas based on a presumption in favor of maintaining the order, in violation of\nArticles 2, 11.3 and 11.4 of the Anti-Dumping Agreement.\nB. With respect to the sunset review conducted by the Commission:\n1. The United States' standard for determin ing whether the termination of anti-dumping\norders would be \"likely\" to lead to continuation or recurrence of injury fails to\nimplement the requirements of the Anti- Dumping Agreement because it equates\n\"possible\" injury with \"likely\" injury, in violation of Article 11.3 of the\nAnti-Dumping Agreement.\n2. The Commission failed to conduct an \"objective examination\" of the record and\nfailed to base its determination on \"positive evidence\" regarding whether termination\nof the anti-dumping duty order \"would be likely to lead to continuation or recurrence\"\nof injury or threat of injury with respect to the volume of imports, price effects on\ndomestic like products and impact of imports on the domestic industry, in violation of\nArticles 11.3 and 3 of the Anti-Dumping Agreement.\n3. The US statutory requirements that the Commission determine whether injury would\nbe likely to continue or recur \"within a reasonably foreseeable time\" (19 U.S.C. §\n1675a(a)(1)) and that the Commission \"shall consider that the effects of revocation or\ntermination may not be imminent, but may manifest themselves only over a longer\nperiod of time\" (19 U.S.C. § 1675a(a)(5)) are inconsistent with Articles 11.3 and 3 of\nthe Anti-dumping Agreement.\n\nThe Government of Argentina reserves its right to raise further factual claims and legal issues\nduring the course of the consultations. In light of the DSU provisions governing this matter, including\nArticle 4.3 thereof, as well as Article 17 of the Anti-Dumping Agreement, the Government of\nArgentina looks forward to receiving your reply to this request and to fixing a mutually acceptable\ndate for consultations."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:46.998070"}}},{"rowIdx":3983,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ02_Request_For_Establishment_Of_Panel_00.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ02_Request_For_Establishment_Of_Panel_00.pdf"},"doc_sequence":{"kind":"number","value":2,"string":"2"},"doc_type":{"kind":"string","value":"Request_For_Establishment_Of_Panel"},"doc_type_raw":{"kind":"string","value":"Request for the Establishment of a Panel by Argentina"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"4 April 2003"},"header_codes":{"kind":"string","value":"WT/DS268/2"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":5,"string":"5"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\nRequest for the Establishment of a Panel by Argentina\nThe following communication, dated 3 April 2003, from the Permanent Mission of Argentina\nto the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.\nOn 7 October 2002, the Government of the Republic of Argentina requested consultations\nwith the Government of the United States of America pursuant to Article 4 of the (WTO) Understanding on Rules and Procedures Governing the Settlement of Disputes\n(DSU), Article XXII:1 of the General Agreement on Tariffs and Trade 1994 (GATT 1994), and\nArticle 17.3 of the Agreement on Implementation of Article VI of GATT 1994 (the Anti-Dumping\nAgreement) regarding the determinations of the US Department of Commerce (Department) and the\nUS International Trade Commission (Commission) in the sunset reviews of the anti-dumping duty\nmeasure on oil country tubular goods (OCTG) from Argentina.\nThe first consultation was held in Geneva, Switzerland, on 14 November 2002. A second\nconsultation was held in Washington, D.C., on 17 December 2002. While the consultations enabled\nthe parties to gain a better understanding of their respective positions, unfortunately the consultations\nfailed to produce a mutually agreeable solution.\nIn the original anti-dumping duty investigation of OCTG from Argentina covering the period\n1 January 1994 through 30 June 1994, the Department determined that Siderca S.A.I.C. (Siderca), an\nArgentine producer and exporter of OCTG, was dumping at a margin of 1.36 percent.\n1 T h e\nDepartment did not conduct a substantive administrative review of the anti-dumping duty measure on\nOCTG from Argentina in the five years following its imposition.\nOn 3 July 2000, the Commission and the Department initiated sunset reviews of the\nanti-dumping measures on OCTG from Argentina, Italy, Japan, Korea, and Mexico. 2 Based on the\nDepartment's determination that the responses submitted by Argentine respondent parties to the\ninitiation notice were \"inadequate\", the Department conducted an \"expedited\" sunset review of the\nanti-dumping duty measure applicable to OCTG from Argentina (Department's Determination to\n\n1 Final Determination of Investigation of Sales at Less Than Fair Value of Oil Country Tubular Goods\nFrom Argentina, 60 Federal Register 33539 (28 June 1995). The 1.36 percent margin was calculated on the\nbasis of the Department's practice of \"zeroing\" negative dumping margins.\n2 Notice of Initiation of Five-Year (\"Sunset\") Reviews, 65 Federal Register 41053 (3 July 2000)\n(Department's notice); Oil Country Tubular Goods From Argentina, Italy, Japan, Korea, and Mexico, 65 Federal\nRegister 41088 (3 July 2000) (Commission's notice).\n\nExpedite).3 On the basis of the \"expedited\" review, the Department determined that termination 4 of\nthe anti-dumping duty measure on OCTG from Argen tina would be likely to lead to continuation or\nrecurrence of dumping at 1.36 percent (Department's Sunset Determination).5\nThe Commission determined that termination of the anti-dumping duty measure on OCTG\n(other than drill pipe – i.e., casing and tubing) from Argentina, Italy, Japan, Korea, and Mexico would\nbe likely to lead to continuation or recurrence of material injury to an industry in the United States\nwithin a reasonably foreseeable time (Commission's Sunset Determination). 6 The Commission also\ndetermined that termination of the anti-dumping duty measure on drill pipe from Japan would be\nlikely to lead to continuation or recurrence of material injury to an industry in the United States within\na reasonably foreseeable time. On 25 July 2001, the Department issued a determination to continue\nthe anti-dumping duty measure on OCTG from Arge ntina (Department's Determination to Continue\nthe Order).7\nThe Republic of Argentina considers that the Department's Determination to Expedite, the\nDepartment's Sunset Determination, the Commissi on's Sunset Determination, and the Department's\nDetermination to Continue the Order are inconsistent with US WTO obligations, and that certain\naspects of US laws, regulations, policies and procedures related to the administration of sunset\nreviews are inconsistent with US WTO obligations. The Republic of Argentina requests that a panel\nbe established in accordance with Articles 4.7 and 6 of the DSU to address the specific claims related\nto the US sunset reviews of anti-dumping duty measure on OCTG from Argentina as set forth below.\nA. The Department's Determination to Expedite and the Department's Sunset\nDetermination are inconsistent with the Anti-Dumping Agreement and the GATT 1994:\n1. US laws, regulations, and procedures regarding \"expedited\" sunset reviews are inconsistent\nwith Articles 11, 2, 6 and 12 of the Anti-Dumping Agreement. In particular, 19 U.S.C. § 1675(c)(4)\nand 19 C.F.R. § 351.218(e) operate in certain instances to preclude the Department from conducting a\nsunset review and making a determination as to whether termination of an anti-dumping duty measure\nwould be likely to lead to continuation or recurr ence of dumping, in violation of Articles 11.1, 11.3,\n11.4, 2.1, 2.2, 2.4, 6.1, 6.2, 6.6, 6.8, 6.9, 6.10, 12.2, 12.3, and Annex II of the Anti-Dumping\nAgreement. When a respondent interested party is deemed by the Department to have \"waived\"\nparticipation in the Department's sunset review, US law mandates that the Department find that\ntermination of the order would be likely to lead to continuation or recurrence of dumping, without\nrequiring the Department to conduct a substantive review and to make a determination based on the\nsubstantive review.\n\n3 Oil Country Tubular Goods From Argentina: Adequacy of Respondent Interested Party Responses to\nthe Notice of Initiation, Department of Commerce Memorandum For J. May from E. Cho, No. A-357-810\n(22 Aug. 2000).\n4 Referred to as \"revocation\" under US law.\n5 Final Results of Expedited Sunset Reviews: Oil Country Tubular Goods From Argentina, Italy,\nJapan, and Korea, 65 Fed. Reg. 66701 (7 Nov. 2000) (together with the Department of Commerce Issues and\nDecision Memorandum for the Expedited Sunset Reviews of the Antidumping Duty Orders on Oil Country\nTubular Goods From Argentina, Italy, Japan, and Korea, dated 31 October 2000, and incorporated by reference\ninto the Department's Sunset Determination).\n6 Oil Country Tubular Goods From Argentina, Italy, Japan, Korea, and Mexico, Inv. Nos. 701-TA-364\n(Review), 731-TA-711, and 713-716 (Review), USITC Pub. 3434 (June 2001); 66 Federal Register 35997\n(10 July 2001).\n7 Continuation of Countervailing and Antidumping Duty Orders on Oil Country Tubular Goods from\nArgentina, Italy, Japan, Korea and Mexico, and Partial Revocation of Those Orders from Argentina and Mexico\nWith Respect to Drill Pipe, 66 Fed. Reg. 38630 (25 July 2001).\n\n2. The Department's application of the expedited sunset review procedures in the sunset review\nof OCTG from Argentina was inconsistent with Articles 11, 2, 6 and 12 of the Anti-Dumping\nAgreement because: (1) Siderca was deemed to have waived its right to participate in the sunset\nreview, despite its full cooperation with the Department, in violation of Articles 11.1, 11.3, 11.4, 2.1,\n2.2, 2.4, 6.1, 6.2, 6.6, 6.8, 6.9, 6.10, 12.2, 12.3 and Annex II; (2) the Department did not in fact\nconduct a \"review\" within the meaning of Article 11.3; and the (3) the Department failed to\n\"determine\" – as required by Article 11.3 – whether termination of the anti-dumping order would be\nlikely to lead to continuation or recurrence of dumping.\n3. The Department's Determination to Expedite the review of Argentina solely on the basis that\nSiderca's shipments to the United States constituted less than 50 percent of the total exports from\nArgentina was inconsistent with Articles 11.1, 11.3, 11.4, 2.1, 2.2, 2.4, 6.1, 6.2, 6.6, 6.8, 6.9, 6.10,\n12.2, 12.3 and Annex II of the Anti-Dumping Agreement.\n4. The Department's Sunset Determination is inconsistent with Article 11.3 of the Anti-Dumping\nAgreement, and Article X:3(a) of the GATT 1994 because it was based on a virtually irrefutable\npresumption under US law as such that termination of the anti-dumping duty measure would be likely\nto lead to continuation or recurrence of dumping. This unlawful presumption is evidenced by the\nconsistent practice of the Department in sunset re views (which practice is based on US law and the\nDepartment's Sunset Policy Bulletin).\n5. The Department's application of the standard for determining whether termination of\nanti-dumping measure would be \"likely to lead to continuation or recurrence of dumping\" is\ninconsistent with Articles 11.1, 11.3, 2.1, 2.2, and 2.4 of the Anti-Dumping Agreement. The\nDepartment's finding in this case that dumping was likely to recur in the event of termination, and that\nthe likely margin of dumping would be 1.36 percent, is inconsistent with the standard established by\nArticle 11.3 of the Anti-Dumping Agreement. The Department's reliance on the 1.36 percent margin\nfrom the original investigation cannot support a determination that dumping would be likely to\ncontinue or recur under Article 11.3. In addition, the 1.36 percent margin – calculated on the basis of\nthe Department's practice of \"zeroing\" negative dumping margins – cannot support the Department's\nSunset Determination or the Department's Determination to Continue the Order.\nB. The Commission's Sunset Determination was inconsistent with the Anti-Dumping\nAgreement and the GATT 1994:\n1. The Commission's application of the standard for determining whether the termination of\nanti-dumping duty measure would be \"likely to lead to continuation or recurrence of ... injury\" was\ninconsistent with Articles 11, 3 and 6 of the Anti-Dumping Agreement. The Commission failed to\napply the plain and ordinary meaning of the term \"likely\" and instead applied a lower standard in\nassessing whether injury would continue or recur in the event of termination, in violation of\nArticles 11.1, 11.3, 11.4, 3.1, 3.2, 3.3, 3.4, 3.5, and 6 of the Anti-Dumping Agreement.\n2. The Commission failed to conduct an \"objective examination\" of the record and failed to base\nits determination on \"positive evidence\" regarding whether termination of the anti-dumping duty\nmeasure \"would be likely to lead to continuation or recurrence\" of injury. In particular, the\nCommission's conclusions with respect to the volume of imports, price effects on domestic like\nproducts, and impact of imports of the domestic industry demonstrate the Commission's failure to\nconduct an objective examination in violation of Articles 11, 3, and 6. The Commission's findings on\nthese issues do not constitute \"positive evidence\" of likely injury in the event of termination, in\nviolation of Articles 11.1, 11.3, 11.4, 3.1, 3.2, 3.3, 3.4, 3.5, and 6 of the Anti-Dumping Agreement.\n3. The US statutory requirements that the Commi ssion determine whether injury would be likely\nto continue or recur \"within a reasonably foreseeable time\" (19 U.S.C. § 1675a(a)(1)) and that the\n\nCommission \"shall consider that the effects of re vocation or termination may not be imminent, but\nmay manifest themselves only over a longer period of time\" (19 U.S.C. § 1675a(a)(5)) are\ninconsistent with Articles 11.1, 11.3 and 3 of the Anti-Dumping Agreement.\n4. The Commission's application of a \"cumulative\" injury analysis in the sunset review of the\nanti-dumping duty measures on OCTG from Argentina was inconsistent with Articles 11.1, 11.3, 3.1,\n3.2, 3.3, 3.4 and 3.5 of the Anti-Dumping Agreement. There is no textual basis in the Anti-Dumping\nAgreement for conducting a cumulative injury analysis in an Article 11.3 review. Assuming\narguendo that cumulation is permitted in Article 11.3 reviews, then the Commission was required to\nadhere to the requirements of Article 3.3 (including those related to de minimis margins and negligible\nimports) in the Commission's Sunset Determination. The Commission's cumulative injury analysis in\nthe Commission's Sunset Determination failed to satisfy the Article 3.3 requirements.\nArgentina also considers that certain aspects of the following US laws, regulations, policies,\nand procedures related to the determinations of the Department and the Commission are inconsistent\nwith US WTO obligations, to the extent that any of these measures mandate action by the Department\nor Commission that is inconsistent with US WTO obligations or preclude the Department or\nCommission from complying with US WTO obligations:\n• Sections 751(c) and 752 of the Tariff Act of 1930, as amended, codified at Title 19 of\nthe United States Code §§ 1675(c) and 1675a; and the US Statement of\nAdministrative Action (regarding the Agreement on Implementation of GATT Article\nVI) accompanying the Uruguay Round Agreements Act (the SAA), H.R. Doc. No.\n103-316, vol. 1;\n• The Department's Policies Regarding the Conduct of Five-year (\"Sunset\") Reviews of\nAnti-Dumping and Countervailing Duty Orders ; Policy Bulletin, 63 Federal Register\n18871 (16 April 1998) (Sunset Policy Bulletin);\n• The Department's sunset review regulations, codified at Title 19 of the United States\nCode of Federal Regulations § 351.218; and the Commission's sunset review\nregulations, codified at Title 19 of the United States Code of Federal Regulations §§\n207.60-69 (Subpart F).\nArgentina considers that the Department's Determination to Expedite, the Department's\nSunset Determination, the Commission's Sunset De termination, the Department's Determination to\nContinue the Order and the above mentioned US laws, regulations, policies and procedures are\ninconsistent with the following provisions of the Anti-Dumping Agreement, the GATT 1994, and the\nWTO Agreement:\n• Articles 1, 2, 3, 6, 11, 12, 18 and Annex II of the Anti-Dumping Agreement;\n• Articles VI and X of the General Agreement on Tariffs and Trade (GATT) 1994; and\n• Article XVI:4 of the WTO Agreement.\nAccordingly, Argentina respectfully requests that, pursuant to Article XXIII of the GATT\n1994, Article 6 of the DSU, and Article 17 of the Anti-Dumping Agreement, a panel with standard\nterms of reference be established at the next mee ting of the Dispute Settlement Body to examine and\nfind that the measures identified herein are incons istent with US obligations under the Anti-Dumping\nAgreement, the GATT 1994, and the WTO Agreement. To that end, I would be grateful if this request\ncould be included in the agenda of the Dispute Settlement Body scheduled for 15 April 2003.\n\nThe above text describes the legal basis of the claims. It does not restrict the arguments that\nArgentina may develop before the panel."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.000701"}}},{"rowIdx":3984,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ03_Note_By_Secretariat_00.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ03_Note_By_Secretariat_00.pdf"},"doc_sequence":{"kind":"number","value":3,"string":"3"},"doc_type":{"kind":"string","value":"Note_By_Secretariat"},"doc_type_raw":{"kind":"string","value":"Constitution of the Panel Established at the Request of Argentina Note by the Secretariat"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"9 September 2003"},"header_codes":{"kind":"string","value":"WT/DS268/3; WT/DS268/2; WT/DS268/2"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\nConstitution of the Panel Established at the Request of Argentina\nNote by the Secretariat\n1. At its meeting on 19 May 2003, the Dispute Settlement Body established a Panel pursuant to\nthe request by Argentina in document , in accordance with Article 6 of the Dispute\nSettlement Understanding (DSU).\n2. At that meeting, the parties to the dispute also agreed that the Panel should have standard\nterms of reference. The terms of reference are, therefore, the following:\n\"To examine, in the light of the relevant provisions of the covered agreements cited\nby Argentina in document , the matter referred to the DSB by Argentina\nin that document, and to make such findings as will assist the DSB in making the\nrecommendations or in giving the rulings provided for in those agreements.\"\n3. On 22 August 2003, Argentina requested the Director-General to determine the composition\nof the Panel, pursuant to paragraph 7 of Article 8 of the DSU. This paragraph provides:\n\"If there is no agreement on the panelists within 20 days after the date of the\nestablishment of a Panel, at the request of either party, the Director-General, in\nconsultation with the Chairman of the DSB and the Chairman of the relevant Council\nor Committee, shall determine the composition of the panel by appointing the\npanelists whom the Director-General considers most appropriate in accordance with\nany relevant special or additional rules or procedures of the covered agreement or\ncovered agreements which are at issue in the dispute, after consulting with the parties\nto the dispute. The Chairman of the DSB shall inform the Members of the\ncomposition of the panel thus formed no later than 10 days after the date the\nChairman receives such a request.\"\n4. On 4 September 2003, the Director-General accordingly composed the Panel as follows:\nChairman: Mr. Paul O'Connor\nMembers: Mr. Bruce Cullen\nDr. Faizullah Khilji\n5. The European Communities, Japan, Korea, Mexico and Chinese Taipei reserved their third-\nparty rights."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.001250"}}},{"rowIdx":3985,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ04_Communication_00.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ04_Communication_00.pdf"},"doc_sequence":{"kind":"number","value":4,"string":"4"},"doc_type":{"kind":"string","value":"Communication"},"doc_type_raw":{"kind":"string","value":"Communication from the Chairman of the Panel"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"4 March 2004"},"header_codes":{"kind":"string","value":"WT/DS268/4"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nCommunication from the Chairman of the Panel\n\n The following communication, dated 4 Marc h 2004, addressed to the Dispute Settlement\nBody (DSB), is circulated pursuant to Article 12.9 of the Dispute Settlement Understanding (DSU).\n\n Article 12.8 of the DSU stipulates that the period in which a panel shall conduct its\nexamination, from the date that the composition and te rms of reference of the panel have been agreed\nupon until the date that the final report is issued to the parties, shall, as a general rule, not exceed six\nmonths.\n\n Article 12.9 of the DSU states that when a pane l considers that it cannot issue its report within\nsix months, it shall inform the DSB in writing of the reasons for the delay, together with an estimate\nof the period within which it will issue its report.\n\n The Panel on United States-Sunset Reviews Of Anti- Dumping Measures On Oil Country\nTubular Goods From Argentina (DS268) was established by the DSB on 19 May 2003 and composed\non 4 September 2003.\n\n It will not, however, be possible for the Panel to complete its work in six months in light of\nscheduling conflicts.\n\n The Panel expects to complete its work in June 2004."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.001666"}}},{"rowIdx":3986,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ05_Notification_Of_Appeal_00.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ05_Notification_Of_Appeal_00.pdf"},"doc_sequence":{"kind":"number","value":5,"string":"5"},"doc_type":{"kind":"string","value":"Notification_Of_Appeal"},"doc_type_raw":{"kind":"string","value":"Notification of an Appeal by the United States under paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (\"DSU\")"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"31 August 2004"},"header_codes":{"kind":"string","value":"WT/DS268/5"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":2,"string":"2"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nNotification of an Appeal by the United States\nunder paragraph 4 of Article 16 of the Understanding on Rules\nand Procedures Governing the Settlement of Disputes (\"DSU\")\n\n The following notification, dated 31 August 2004, from the Delegation of the United States, is\nbeing circulated to Members.\n\n Pursuant to Article 16 of the Understanding on Rules and Procedures Governing the\nSettlement of Disputes (\"DSU\") and Rule 20 of the Working Procedures for Appellate Review, the\nUnited States hereby notifies its decision to app eal to the Appellate Body certain issues of law\ncovered in the Report of the Panel on (WT/DS268R) and certain legal interpretations developed by\nthe Panel in this dispute.\n\n1. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the\nprovisions of section 751(c)(4)(B) of the Tariff Act re lating to \"affirmative\" waivers are inconsistent\nwith Article 11.3 of the Agreement on Implementation of Article VI of the General Agreement\non Tariffs and Trade 1994 (\"Anti-Dumping Agreement\") . This finding is in error and is based on\nerroneous findings on issues of law a nd related legal interpretations, in cluding, for example, that U.S.\nlaw, including section 751(c)(4)(B) of the Tariff Ac t and section 351.218(d)(2)(iii) of the Department\nof Commerce's regulations, precludes the Depart ment of Commerce from making an order-wide\ndetermination of likelihood of continuation or recurrence of du mping, supported by reasoned and\nadequate conclusions based on the facts before th e agency, where an inter ested party elects not to\nparticipate in the sunset review at the Department of Commerce;\n1\n\n2. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the\nprovisions of section 351.218(d)(2)(iii) of the Depa rtment of Commerce's regulations relating to\n\"deemed\" waivers are inconsistent with Article 11.3 of the Anti-Dumping Agreement. This finding is\nin error and is based on erroneous findings on issues of law and relate d legal interpretations,\nincluding, for example, that U.S. law, including section 751(c)(4)(B) of the Tariff Act and\nsection 351.218(d)(2)(iii) of the Department of Co mmerce's regulations, precludes the Department of\nCommerce from making an order-wid e determination of likelihood of continuation or recurrence of\ndumping, supported by reasoned and adequate conclusions based on the facts before the agency,\nwhere an interested party elects not to participat e in the sunset review at the Department of\nCommerce;\n2\n\n1See Panel Report, paras. 7.80-7.103, 8.1(a)(i)-(ii).\n2See id.\n\n3. The United States seeks review by the Appellate Body of the Panel's legal conclusion that\nprovisions of section 351.218(d)(2)(iii) of the Depa rtment of Commerce's regulations relating to\n\"deemed\" waivers are inconsistent with Articles 6. 1 and 6.2 of the Anti-Dumping Agreement. These\nfindings are in error and are based on erroneou s findings on issues of law and related legal\ninterpretations, including, for example, that unde r U.S. law, including section 751(c)(4)(B) of the\nTariff Act and section 351.218(d)(2)(iii) of the Depa rtment of Commerce's regulations, an exporter\nthat fails to file a complete response to the notice of initiation has been deprived of ample opportunity\nto submit information in accordance with Article 6. 1 or to confront parties with adverse interests\nunder Article 6.2, and which also renders the orde r-wide likelihood determina tion inconsistent with\nArticles 6.1 and 6.2;\n3\n\n4. The United States seeks review by the Appellate Body of the Panel's legal conclusion that\nprovisions of section II.A.3 of the Sunset Policy Bulletin are inconsistent with Article 11.3 of the\nAnti-Dumping Agreement, and, to the extent that the Panel's conclusion is premised on an erroneous\nassessment of the facts, the United States seeks review of that assessment pursuant to Article 11 of the\nDSU. This finding is in error and is based on e rroneous findings on issues of law and related legal\ninterpretations, including, for example: the Panel's conclusion that the Sunset Policy Bulletin is a\nmeasure, based solely on its conclusion that the Ap pellate Body found this in another dispute; the\nPanel's failure to rely on the meaning of the Sunset Policy Bulletin under U.S. municipal law in\nassessing whether the Sunset Policy Bulletin mandates a breach; and the Panel's reliance on the\n\"consistent application\" of the Sunset Policy Bulletin to conclude that the Sunset Policy Bulletin\nmandates a breach;4\n\n5. The United States seeks review by the Appe llate Body of the Panel's factual findings\nregarding U.S. law. These findings are in error and do not represent an obj ective assessment of the\nfacts as required by Article 11 of the DSU;\n5\n\n6. The United States seeks review by the Appellate Body of the Panel's legal conclusion that\nArgentina's Panel Request was not inconsistent with Article 6.2 of the DSU. This finding is in error\nand is based on erroneous findings on issues of law and related legal interpre tations, including, for\nexample: the Panel's conclusion that Argentina's panel request was sufficiently clear and presented the\nproblem clearly,6 the Panel's conclusion that certain claims were within the terms of reference, 7 and\nthe Panel's conclusion that the United States did not establish prejudice.8\n\n3See id., paras. 7.107-7.128, 8.1(a)(iii).\n4See id., paras. 7.134-7.144, 7.152-7.173, 8.1(b).\n5See id., paras. 7.80-7.128.\n6See id., paras. 7.10-7.48.\n7See id., paras. 7.49-7.70.\n8See id., para. 7.71."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.003088"}}},{"rowIdx":3987,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ06_Communication_01.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ06_Communication_01.pdf"},"doc_sequence":{"kind":"number","value":6,"string":"6"},"doc_type":{"kind":"string","value":"Communication"},"doc_type_raw":{"kind":"string","value":"Communication from the Appellate Body"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"1 November 2004"},"header_codes":{"kind":"string","value":"WT/DS268/6"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nCommunication from the Appellate Body\n\n The following communication, dated 28 October 2004, from the Chairman of the Appellate\nBody addressed to the Chair of the Dispute Settleme nt Body, is being circulated in accordance with\nArticle 17.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes.\n\n I am writing to you pursuant to Article 17.5 of the Understanding on Rules and Procedures\nGoverning the Settlement of Disputes , which stipulates that, as a gene ral rule, the Appellate Body\nwill circulate its report no later than 60 days afte r the appellant has formally notified the Dispute\nSettlement Body of its decision to appeal. Ar ticle 17.5 states, furthermore, that when the\nAppellate Body considers that it cannot provide its report within 60 days, it shall inform the Dispute\nSettlement Body in writing of the reasons for the de lay together with an estimate of the period within\nwhich it will submit its report.\n\n The United States notified the Dispute Settlement Body on 31 August 2004 of its decision to\nappeal certain issues of law covered in the Pane l Report and legal interpre tations developed by the\nPanel in this case, with the result that the 60-da y period expires on Monday, 1 November 2004. Due\nto the time required for completion and translation of the Report, the Appellate Body will not be able\nto circulate its Report by Monday, 1 November 2004. We estimate that the Appellate Body Report in\nthis appeal will be circulated to WTO Members no later than Monday, 29 November 2004."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.003577"}}},{"rowIdx":3988,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ07_Communication_02.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ07_Communication_02.pdf"},"doc_sequence":{"kind":"number","value":7,"string":"7"},"doc_type":{"kind":"string","value":"Communication"},"doc_type_raw":{"kind":"string","value":"Communication from the Appellate Body"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":2,"string":"2"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"29 November 2004"},"header_codes":{"kind":"string","value":"WT/DS268/7; WT/DS268/AB/R."},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nCommunication from the Appellate Body\n\n The following communication, dated 29 Nove mber 2004, from Mr. Georges Abi-Saab,\nChairman of the Appellate Body, addressed to th e Chair of the Dispute Settlement Body, is being\ncirculated in accordance with Article 17.5 of the Understanding on Rules and Procedures Governing\nthe Settlement of Disputes.\n\n It is my honour to transmit to you the Report of the Appellate Body in ,\nIt will be circulated to Members of the World Tr ade Organization today at 5:00 p.m., in accordance\nwith paragraph 5 of Article 17 of the Understanding on Rules and Procedures Governing the\nSettlement of Disputes . It is a confidential document until its circulation. The three Members of\nthe Appellate Body who served on this appeal we re: Mr. Yasuhei Taniguchi, as Presiding Member;\nMr. A.V. Ganesan and myself, as Members."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.003922"}}},{"rowIdx":3989,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ08_Extension_Of_Time_Period.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ08_Extension_Of_Time_Period.pdf"},"doc_sequence":{"kind":"number","value":8,"string":"8"},"doc_type":{"kind":"string","value":"Extension_Of_Time_Period"},"doc_type_raw":{"kind":"string","value":"Extension of Time Period under Article 21.3(c) of the DSU"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"null"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"18 March 2005"},"header_codes":{"kind":"string","value":"WT/DS268/10"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nExtension of Time Period under Article 21.3(c) of the DSU\n\n The following communication, dated 16 Marc h 2005, from the delegation of Argentina and\nthe delegation of the United States to the Chairman of the Dispute Settlement Body, is circulated at\nthe request of those delegations.\n\n We refer to the communication from Argen tina, dated 11 March 2005, requesting binding\narbitration under Article 21.3(c) of the Unde rstanding on Rules and Procedures Governing the\nSettlement of Disputes (\"DSU\") to determine the reasonable period of time for the United States to\nimplement the recommendations and rulings of the Dispute Settlement Body (\"DSB\") in the dispute\n\"United States – Sunset Reviews of Anti-Dumpi ng Measures on Oil Count ry Tubular Goods from\nArgentina\" (WT/DS268).\n\n The parties to the dispute, Argentina a nd the United States, are currently holding\nconsultations for the appointment of an arbitrator , pursuant to footnotes 12 and 13 to Article 21.3(c)\nof the DSU.\n\n Article 21.3(c) of the DSU provides that in the absence of an agreement between the parties\non a reasonable period of time for implementation, a period of time shall be determined through\nbinding arbitration within 90 days after the date of adoption of the recommendations and rulings by\nthe DSB. As this 90-day period is about to expire , Argentina and the United States have agreed that\nthe period of time for this binding arbitration shall be completed no later than 60 days after the date of\nthe appointment of the arbitrator. Argentina a nd the United States confirm that the award of the\narbitrator, made within the agreed 60-day period, shal l be deemed to be the award of the arbitrator for\nthe purposes of Article 21.3(c) of the DSU in determining the reasonable period of time for the United\nStates to implement the recommendations and rulings of the DSB."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.004478"}}},{"rowIdx":3990,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ09_Note_By_Secretariat_01.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ09_Note_By_Secretariat_01.pdf"},"doc_sequence":{"kind":"number","value":9,"string":"9"},"doc_type":{"kind":"string","value":"Note_By_Secretariat"},"doc_type_raw":{"kind":"string","value":"Appointment of Arbitrator under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes Note by the Secretariat By joint letter dated 30 March 2005, Arge ntina and the United States requested Mr. A.V. Ganesan, Member of the Appellate Body, to act as arbitrator pursuant to Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlem ent of Disputes in the matter United States – Sunset Reviews of Anti- Dumping Measures on Oil Country Tubular Goods from Argentina (WT/DS268). On 8 April 2005, Mr. Ganesan informed Argentina and the United States in writing that"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"12 April 2005"},"header_codes":{"kind":"string","value":"WT/DS268/11"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON\nOIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nAppointment of Arbitrator under Article 21.3(c) of the\n\nUnderstanding on Rules and Procedures Governing the Settlement of Disputes\n\nNote by the Secretariat\n\n By joint letter dated 30 March 2005, Arge ntina and the United States requested\nMr. A.V. Ganesan, Member of the Appellate Body, to act as arbitrator pursuant to Article 21.3(c) of the\nUnderstanding on Rules and Procedures Governing the Settlem ent of Disputes in the matter United\nStates – Sunset Reviews of Anti- Dumping Measures on Oil Country Tubular Goods from Argentina\n(WT/DS268). On 8 April 2005, Mr. Ganesan informed Argentina and the United States in writing that\nhe accepts the appointment to serve as arbitrator."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.004739"}}},{"rowIdx":3991,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ10_Understanding_00.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ10_Understanding_00.pdf"},"doc_sequence":{"kind":"number","value":10,"string":"10"},"doc_type":{"kind":"string","value":"Understanding"},"doc_type_raw":{"kind":"string","value":"Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":0,"string":"0"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"7 June 2005"},"header_codes":{"kind":"string","value":"WT/DS268/13; WT/DS268/12"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON\nOIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nArbitration under Article 21.3(c) of the Understanding\n\non Rules and Procedures Governing the Settlement of Disputes\n\n The following communication, dated 7 June 2 005, from the arbitrator, Mr. A.V. Ganesan,\nto the Chairman of the Dispute Settlement Body, is circulated in accordance with Article 21.3(c) of\nthe Understanding on Rules and Procedures Governing the Settlement of Disputes.\n\n I am pleased to provide to you a copy of my Arbitration Award in (),\npursuant to Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement\nof Disputes. It was circulated to the Members of the WTO today."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.005026"}}},{"rowIdx":3992,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ11_Understanding_01.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ11_Understanding_01.pdf"},"doc_sequence":{"kind":"number","value":11,"string":"11"},"doc_type":{"kind":"string","value":"Understanding"},"doc_type_raw":{"kind":"string","value":"Understanding between Argentina and the United States Regarding Procedures under Articles 21 and 22 of the DSU"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"9 January 2006"},"header_codes":{"kind":"string","value":"WT/DS268/14"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":3,"string":"3"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nUnderstanding between Argentina and the United States\n\nRegarding Procedures under Articles 21 and 22 of the DSU\n\n The following communication, dated 5 January 2006, from the delegation of Argentina and\nthe delegation of the United States to the Chairman of the Dispute Settlement Body is circulated at the\nrequest of these delegations.\n\nArgentina and the United States would like to in form the Dispute Settlement Body that they\nhave concluded the attached \"Agreed Procedures under Articles 21 and 22 of the Dispute Settlement\nUnderstanding Applicable to the WTO Dispute United States – Sunset Reviews of Anti-Dumping\nMeasures on Oil Country Tubul ar Goods from Argentina (WT/DS268)\". We request that you please\ncirculate these agreed procedures to the Members of the DSB.\n\nAgreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding\nApplicable to the WTO Dispute (WT/DS268)\n\n The Dispute Settlement Body (DSB) adopted th e Panel and Appellate Body Reports in this\ndispute on 17 December 2004.\n\n On 7 June 2005 the Arbitrator appointed pursuant to Article 21.3(c) of the Understanding on\nRules and Procedures Governing the Settlement of Disputes (DSU) issued its award, granting the\nUnited States a reasonable period of time of 12 months to implement the recommendations and\nrulings adopted by the DSB (). The reasonable period of time for implementation\nelapsed on 17 December 2005. On 20 December 2005, the United States informed the DSB that it\nhad implemented the DSB's recommendations and ruli ngs. Argentina then info rmed the DSB that, in\nits view, the United States had not implemented the recommendations and rulings of the DSB in a\nmanner consistent with US WTO obligations.\n\n Given the disagreement between Argentina and the United States (the \"Parties\") within the\nmeaning of Article 21.5 of the DSU, as to the existence or consistency of measures taken by the\nUnited States to comply with the recommendations and rulings of the DSB, the Parties have agreed on\nthe following procedures for purposes of this dispute:\n\n1. If Argentina deems it appropria te to invoke Article 21.5 of the DSU, Argentina will request\nconsultations, which the Parties agree to hold w ithin 15 days from the date of circulation of\nthe request.\n\n2. After the 15-day period referenced in para graph 1 has elapsed, Argentina may request the\nestablishment of a panel pursuant to Article 21.5 of the DSU (the \"compliance panel\").\n\n3. At the first DSB meeting for which Argentina' s request for the establishment of a compliance\npanel appears on the agenda, the United St ates will accept the establishment of the\ncompliance panel.\n\n4. The Parties will cooperate to enable the co mpliance panel to circulate its report within\n90 days of the panel's establishment, excluding such time as the compliance panel's work may\nbe suspended pursuant to Article 12.12 of the DSU.\n\n5. In case of an appeal of the compliance panel report, the Parties will cooperate to enable the\nAppellate Body to circulate its report within 90 days from the date of notification of the\nappeal to the DSB.\n\n6. With respect to the adoption of the panel and Appellate Body reports in the Article 21.5\nproceedings, the parties recognize that the time-frames of Articles 16 and 17.14 of the DSU\napply.\n\n7. In the event that the DSB finds that th e United States has failed to comply with the\nrecommendations and ruling of the DSB or that a measure taken by the United States to\ncomply with the recommendations and rulings of the DSB is inconsistent with a covered\nagreement, Argentina may request authorizati on to suspend concessions or other obligations\nunder Article 22.2 of the DSU. Argentina w ill not request authorization to suspend\nconcessions or other obligations under Article 22.2 of the DSU until the adoption by the DSB\nof its recommendations and rulings in the DSU Article 21.5 proceeding. If, on the basis of\nthese recommendations and rulings, Argentina decides to seek authorization from the DSB for\n\nthe suspension of concessions or other obligatio ns under Article 22.2 of the DSU, the United\nStates will not assert that Argentina is preclude d from obtaining such authorization because\nits request was made outside the time-period speci fied in Article 22.6 of the DSU. This is\nwithout prejudice to the United States’ right to have the matter referred to arbitration in\naccordance with Article 22.6 of the DSU.\n\n8. If Argentina requests authorization to suspe nd concessions or other obligations pursuant to\nArticle 22.2 of the DSU, and if the United Stat es objects under Article 22.6 of the DSU to the\nlevel of suspension of concessions or other oblig ations and/or claims that the principles and\nprocedures set forth in DSU Article 22.3 have not been followed, the matter will be referred\nto arbitration pursuant to DSU Article 22.6.\n\n9. The Parties will cooperate to facilitate the pa rticipation of the orig inal panelists in the\ncompliance panel and the DSU Article 22.6 arbitration.\n\n10. If any of the original panelists is not availa ble either for the compliance panel or for the DSU\nArticle 22.6 arbitration, or both, the Parties will promptly consult on a replacement and either\nParty may request the Director-General of the WTO to appoint, within 10 days of the request,\na replacement for the proceeding or proceedings in which such a replacement is required. If\nan original panelist is unavailable to serve in e ither of the proceedings, the Parties will further\nrequest that in making this appointment, the Director-General seek a person who will also be\navailable to act in both proceedings.\n\n11. The Parties agree to continue to cooperate in all matters referred to in these agreed procedures\nand not to raise any procedural objection to any of the steps set out herein. If, during the\napplication of these procedures, the Parties cons ider that a procedural aspect has not been\nproperly addressed they will endeavour to find a solution within the shortest time possible\nthat will not affect the other agreed procedures.\n\nAgreed in Geneva on 5 January 2006.\n\n For Argentina: For the United States:\n\n (signed) (signed)\n Ernesto Martínez Gondra Peter F. Allgeier\n Minister Ambassador\n Chargé d'affaires a.i. Permanent Mission of the United States\n Permanent Mission of Argentina to the WTO"},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.006326"}}},{"rowIdx":3993,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ12_Request_For_Consultations.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ12_Request_For_Consultations.pdf"},"doc_sequence":{"kind":"number","value":12,"string":"12"},"doc_type":{"kind":"string","value":"Request_For_Consultations"},"doc_type_raw":{"kind":"string","value":"Recourse to Article 21.5 of the DSU by Argentina Request for Consultations"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"null"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"30 January 2006"},"header_codes":{"kind":"string","value":"WT/DS268/15"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":5,"string":"5"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nRecourse to Article 21.5 of the DSU by Argentina\n\nRequest for Consultations\n\n The following communication, dated 26 January 2006, from the delegation of Argentina to\nthe delegation of the United States and to the Chairm an of the Dispute Settlement Body, is circulated\npursuant to Article 21.5 of the DSU.\n\n Argentina hereby requests the United States to enter into consultations under Article 21.5 of\nthe Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and\nparagraph 1 of the Agreed Procedures under Articles 21 and 22 of the Dispute Settlement\nUnderstanding Applicable to the WTO Dispute United States – Sunset Reviews of Anti-Dumping\nMeasures on Oil Country Tubular G oods from Argentina (WT/DS268),\n1 with respect to the purported\nimplementation by the United States of the recomme ndations and rulings of the Dispute Settlement\nBody (DSB) in (WT/DS268).\n\nBackground\n\n On 17 December 2004, the DSB adopted the Appellate Body Report and the Panel Report, as\nmodified by the Appellate Body, in this disput e. The resulting DSB rulings encompassed both \"as\napplied\" violations related to the \"likelihood of dumping\" determination by the US Department of\nCommerce (USDOC) in the sunset review for oil country tubular goods (OCTG) from Argentina, and\n\"as such\" violations related to the \"waiver\" provisions of United States laws and regulations.\n\n The Panel found that the USDOC 2000 \"likeliho od of dumping\" determination in the sunset\nreview for OCTG from Argentina was inconsistent with Articles 11.3 and 6.2 of the Agreement on\nImplementation of Article VI of the General Ag reement on Tariffs and Trade 1994 (Anti-Dumping\nAgreement).2 These findings were not appealed by the United States.\n\n With respect to the \"waiver\" provisions of US laws and regulations, the Appellate Body\nupheld the Panel findings that:\n\n1 WT/DS268/14.\n2 Panel Report, , WT/DS268/R, para. 8.1(d)(i).\n\n (i) Section 751(c)(4)(B) of the Tariff Act of 1930 and Section 351.218(d)(2)(iii) of the\nUSDOC Regulations are inconsistent, as such, with Article 11.3 of the Anti-Dumping\nAgreement; and\n\n (ii) Section 351.218(d)(2)(iii) of the USDOC Regulations is inconsistent, as such, with\nArticles 6.1 and 6.2 of the Anti-Dumping Agreement with respect to respondents that\nfile incomplete submissions in response to the USDOC's notice of initiation of a\nsunset review.\n 3\n\n The DSB recommended that the United States br ing its measures into conformity with its\nWTO obligations.\n4\n\n On 7 June 2005, an arbitrator appointed pursuant to Article 21.3(c) of the DSU determined\nthat the \"reasonable period of time\" for the Un ited States to implement the recommendations and\nrulings of the DSB would be 12 months from th e date on which the DSB adopted the Panel and\nAppellate Body Reports, i.e., by 17 December 2005.\n5\n\n On 28 October 2005, the United States published in the Federal Register a notice of\namendment of section 351.218(d)(2) of the USDOC Regulations.\n6 T h e Federal Register notice\nprovides that the USDOC was \"amending its regulati ons relating to sunset reviews to conform the\nexisting regulation to the United States' obligations under Articles 6.1, 6.2, and 11.3\" of the Anti-\nDumping Agreement. 7 The amendment was effective as of 31 October 2005. The United States\nmade no changes to Section 751(c)(4)(B) of the Tariff Act of 1930.\n\n On 2 November 2005, the USDOC initiate d proceedings under Section 129 of the Uruguay\nRound Agreements Act to address the Panel's findings concerning the Department's likelihood\ndetermination. The USDOC did not issue any su pplemental questionnaires, or provide a briefing\nschedule as to the timing of rebuttal and reply comme nts. There was also no public hearing. On\n16 December 2005, the USDOC issued its Section 129 determination, finding again that \"revocation\nof the order would be likely to lead to continuation or recurrence of dumping.\"\n8\n\n On 20 December 2005, the United States asserted to the DSB that it had \"implemented the\nrecommendations and rulings of the DSB in [this] dispute.\"\n9 Argentina does not agree. Accordingly,\nthere is \"disagreement as to the existence or cons istency with a covered agreement of measures taken\nto comply with the recommendations and rulings\" of the DSB within the meaning of Article 21.5 of\nthe DSU.\n\n3 Appellate Body Report, , WT/DS268/AB/R, para. 365(c)(i) and (ii).\n4 WT/DSB/M/180.\n5 . Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the\nSettlement of Disputes. Award of the Arbitrator. WT/DS268/12. 7 June 2005.\n6 US Department of Commerce, Procedures for Conducting Five-Year (\"Sunset\") Reviews for\nAntidumping and Countervailing Duty Orders: Final Rule, 70 Federal Register 62061 (28 October 2005).\n7 70 Federal Register at 62061.\n8 US Department of Commerce, Issues and Decision Memorandum, Section 129 Determination: Final\nResults of Sunset Review, Oil Country Tubular Goods from Argentina, A-357-810, 16 December 2005.\n9 Statements by the United States at the Decembe r 20th Meeting of the WT O Dispute Settlement Body.\nhttp://www.us-mission.ch/Press2005/1221DSBmeeting.html.\n\n On 5 January 2006, Argentina and the United States concluded an agreement on procedures\nunder Articles 21 and 22 of the DSU that apply to this dispute. 10 This agreement provides, inter alia,\nthat Argentina may request consultations, which the Parties agree to hold within 15 days from the date\nof circulation of the request. It also provides th at after this 15-day period has elapsed, Argentina may\nrequest the establishment of a panel.\n\n In the view of Argentina, the measures taken to comply by the United States have failed to\nimplement the DSB recommendations and rulings in this dispute, and have resulted in additional\nviolations by the United States of its WTO obligations for the reasons set out below:\n\n1. The Section 129 Determination is inconsistent with US WTO obligations\n\n In 2001, the United States extended the anti-dum ping measure on Argentine OCTG based on\nits 2000 determination that dumping would be likely to c ontinue or recur. The original Panel in this\ndispute ruled that the USDOC failed to devel op sufficient evidence to support an affirmative\ndetermination under Article 11.3 of the Anti-Du mping Agreement, and that the USDOC's 2000\ndetermination was inconsistent with Articles 6.2 and 11.3 of the Anti-Dumping Agreement.\n\n In the 2005 Section 129 proceeding, the USDOC attempted to develop a new factual basis to\nsupport the WTO-inconsistent determ ination it made in 2000. The USDOC acted inconsistently with\nArticle 11.3 of the Anti-Dumping Agreement by seek ing to develop new factual information to\nsupport the likelihood of dumping determination it reached in 2000, where none of the evidence\nrequired to support such a determination was developed at that time.\n\n Even if the USDOC were permitted to develop factual information in 2005 to support a 2000\nlikelihood determination, quod non, the 2005 Section 129 Determination nevertheless failed to satisfy\nthe requirements of Article 11.3 of the Anti-Dumping Agreement. The USDOC did not properly\nestablish a factual basis of positive evidence necessary to support a likely dumping finding, it did not\nobjectively assess the information, its conclusions ar e not reasoned, and the evidence developed does\nnot support a WTO-consistent determination that dumping would be likely.\n\n Thus, the United States failed to bring its meas ure into conformity with US obligations under\nArticle 11.3 of the Anti-Dumping Agreement, a nd failed to implement the recommendations and\nrulings of the DSB.\n\n In addition, for separate reasons, the conduct of the Section 129 proceeding, and the resulting\nlikelihood determination, are also inconsistent with the obligations of the United States under the\nAnti-Dumping Agreement for the following additional reasons:\n\n• The USDOC failed to comply with the stri ct conditions for maintenance of an anti-\ndumping order beyond five years, in violation of Articles 11.1 and 11.3.\n\n• The USDOC failed to rely on positive evid ence and did not objectively evaluate\ninformation regarding the Argentine exporters Siderca and Acindar, in violation of\nUS obligations under Article 11.3;\n\n• The USDOC concluded that dumping would be likely to continue or recur based\nsolely on the decline in Argentine OCTG import volume, in violation of US\nobligations under Article 11.3;\n\n10 Agreed Procedures under Articles 21 and 22 of the Dispute Settlement Understanding Applicable to\nthe WTO Dispute United States – Sunset Reviews of Antidumping Measures on Oil Country Tubular Goods\nfrom Argentina, 5 January 2006, WT/DS268/14.\n\n• The USDOC failed to provide to the interested parties ample opportunity to present in\nwriting all evidence which they considered re levant, in violation of US obligations\nunder Article 6.1;\n\n• The USDOC failed to provide to interested parties a full opportunity for the defense\nof their interests, in violation of US obligations under Article 6.2;\n\n• The USDOC failed to provide timely opportunities for interested parties to see all\ninformation that is relevant to the presentation of their cases, in violation of US\nobligations under Article 6.4;\n\n• The USDOC failed to require interested parties to submit non-confidential summaries\nof their written submissions in the Section 129 proceeding in a manner so as to permit\na reasonable understanding of the substa nce of the confidential information\nsubmitted, in violation of US obligations under Article 6.5.1;\n\n• The USDOC characterized Siderca's submitted cost information as unreliable without\na reasonable basis for doing so, in violation of US obligations under Article 6.6;\n\n• The USDOC failed to follow the requirements of Article 6.8 and Annex II by\nrecurring to facts available to determine th at there was likelihood of continuation or\nrecurrence of dumping had the antidumping duty order on OCTG from Argentina\nbeen revoked in 2000;\n\n• The USDOC failed to inform interest ed parties of the essential facts under\nconsideration that formed the basis for th e decision, and failed to provide reasonable\nsummaries of confidential information, in violation of US obligations under Article\n6.9; and\n\n• The USDOC failed to follow the public notice and explanation requirements of\nArticle 12.2 with respect to USDOC's Section 129 Determination.\n\n2. The United States has failed to bring 751(c)(4)(B) of the Tariff Act of 1930 into\nconformity with its WTO obligations\n\n Section 751(c)(4)(B) of the Tariff Act of 1930 has been neither repealed nor amended. It\ntherefore remains WTO-inconsistent. Furthermore, the amendments to the USDOC Regulations have\nin no way eliminated the WTO-inconsistency of this statutory provision. The United States has\ntherefore failed to bring Section 751(c)(4)(B) into conformity with its obligations under Articles 11.1\nand 11.3 of the Anti-Dumping Agreement.\n\n3. The United States has failed to bring Section 351.218(d)(2) of the USDOC Regulations\ninto conformity with its WTO obligations\n\n United States has eliminated paragraph (d)(2)(iii) of Section 351.218 of the USDOC\nRegulations. Additionally, United States has ame nded paragraph (d)(2)(ii) of Section 351.218. This\nparagraph now provides in part that every statemen t of waiver must include \"a statement that the\nrespondent interested party is likely to dump or benefit from a countervailable subsidy (as the case\nmay be) if the order is revoked or the investigation is terminated.\n11\n\n11 70 Federal Register at 62062.\n\n The revised regulation is inconsistent with the obligation of the USDOC under Articles 11.1\nand 11.3 of the Anti-Dumping Agreement to \"arri ve at a reasoned conclusion\" on the basis of\n\"positive evidence.\"\n\n By mandating that a party filing a Statement of Waiver include a statement that it is likely to\ndump, Section 351.218(d)(2)(ii) denies interested parties a full opportunity for the defense of their\ninterests, in violation of Article 6.2 of the Anti-Dumping Agreement.\n\n By mandating that a party filing a Statement of Waiver include a statement that it is likely to\ndump, the USDOC will make a determination without satisfying itself as to the accuracy of the\ninformation supplied by interested parties upon whic h their findings are based, in violation of US\nobligations under Article 6.6 of the Anti-Dumping Agreement.\n\n By mandating that a party filing a Statement of Waiver include a statement that it is likely to\ndump, Section 351.218(d)(2)(ii) prevents the US DOC from making a determination satisfying the\nrequirements of Article 6.8 and Annex II of the Anti-Dumping Agreement.\n\n The United States has therefore failed to brin g the US statutory and regulatory waiver\nprovisions into conformity with US obligations und er Articles 6.1, 6.2, 6.6, 6.8, 11.1, 11.3 and\nAnnex II of the Anti-Dumping Agreement and Article XVI:4 of the WTO Agreement.\n\n For all of the measures identified above, the United States also failed to comply with its\nobligations under Articles 1 and 18.1 of the Anti-Du mping Agreement and Article XVI:4 of the WTO\nAgreement.\n\n Argentina reserves all of its WTO rights in r espect of the United States' purported compliance\nwith its obligations in this case.\n\n We look forward to receiving your reply to the present request and to fixing a mutually\nconvenient date for consultations."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.009514"}}},{"rowIdx":3994,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ13_Request_For_Establishment_Of_Panel_01.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ13_Request_For_Establishment_Of_Panel_01.pdf"},"doc_sequence":{"kind":"number","value":13,"string":"13"},"doc_type":{"kind":"string","value":"Request_For_Establishment_Of_Panel"},"doc_type_raw":{"kind":"string","value":"Recourse to Article 21.5 of the DSU by Argentina Request for the Establishment of a Panel"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"7 March 2006"},"header_codes":{"kind":"string","value":"WT/DS268/16"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":6,"string":"6"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nRecourse to Article 21.5 of the DSU by Argentina\n\nRequest for the Establishment of a Panel\n\n The following communication, dated 6 March 2006, from the delegation of Argentina to the\nChairman of the Dispute Settlement Body, is circulated pursuant to Article 21.5 of the DSU.\n\n Argentina hereby requests the establishmen t of a Panel under Article 21.5 of the\nUnderstanding on Rules and Procedures Governing the Settlement of Disputes (DSU) and\nparagraph 2 of the Agreed Procedures under Articles 21 and 22 of the Dispute Settlement\nUnderstanding Applicable to the WTO Dispute United States – Sunset Reviews of Anti-Dumping\nMeasures on Oil Country Tubul ar Goods from Argentina (Agreed Procedures for DS268)\n1 with\nrespect to the purported implementation by the Un ited States of the recommendations and rulings of\nthe Dispute Settlement Body (DSB) in (WT/DS268).\n\nI. The History of the Dispute\n\n On 17 December 2004, the DSB adopted the Appellate Body Report 2 and the Panel Report 3,\nas modified by the Appellate Body, in this dispute. The resulting DSB rulings encompassed both \"as\napplied\" violations related to the likelihood of dumping determination by the US Department of\nCommerce (USDOC) in the sunset review for oil country tubular goods (OCTG) from Argentina, and\n\"as such\" violations related to the \"waiver\" provisions of United States law and regulations.\n\n The Panel found that the USDOC 2000 likeliho od of dumping determination in the sunset\nreview for OCTG from Argentina\n4 was inconsistent with Articles 11.3 and 6.2 of the Anti-Dumping\n\n1 , 9 January 2006.\n2 Appellate Body Report, , WT/DS268/AB/R, adopted on 17 December 2004 (the \"Appellate Body\nReport\").\n3 Panel Report, , WT/DS268/R, adopted on 17 December 2004 (the \"Panel Report\").\n4 US Department of Commerce, Final Results of Expedited Sunset Reviews: Oil Country Tubular\nGoods from Argentina, Italy, Japan, and Korea , 65 Federal Register 66701 (7 November 2000) (which\nincorporates USDOC Issues and Decision Memorandum for the Expedited Sunset Reviews of the Antidumping\nDuty Orders on Oil Country Tubular Goods from Argentina, Italy, Japan, and Korea: Final Results\n(31 October 2000)).\n\nAgreement.\n5 The Panel found that USDOC's likelihood of dumping determination was inconsistent\nwith Article 11.3 because (i) there was an insufficient factual basis for the USDOC to have considered\nthat dumping had continued over the life of the order; 6 and (ii) the application of the waiver\nprovisions invalidated the factual basis for th e USDOC's likelihood of dumping determination. 7\nThese findings were not appealed by the United States.\n\n With respect to the \"waiver\" provisions of US laws and regulations, the Appellate Body\nupheld the Panel findings that:\n\n (i) Section 751(c)(4)(B) of the Tariff Act of 1930 and Section 351.218(d)(2)(iii) of the\nUSDOC Regulations are inconsistent, as such, with Article 11.3 of the Anti-Dumping\nAgreement; and\n\n (ii) Section 351.218(d)(2)(iii) of the USDOC Regulations is inconsistent, as such, with\nArticles 6.1 and 6.2 of the Anti-Dumping Agreement with respect to respondents that\nfile incomplete submissions in response to the USDOC's notice of initiation of a\nsunset review.\n 8\n\n The DSB recommended that the United States br ing its measures into conformity with its\nWTO obligations.\n9\n\n On 7 June 2005, an Arbitrator appointed pursu ant to Article 21.3(c) of the DSU determined\nthat the \"reasonable period of time\" for the Un ited States to implement the recommendations and\nrulings of the DSB would be 12 months from th e date on which the DSB adopted the Panel and\nAppellate Body Reports, i.e., by 17 December 2005.10\n\n On 28 October 2005, the United States published in the Federal Register a notice of\namendment of section 351.218(d)(2) of the USDOC Regulations. 11 T h e Federal Register notice\nprovides that the USDOC was \"amending its regulati ons relating to sunset reviews to conform the\nexisting regulation to the United States' obligations under Articles 6.1, 6.2, and 11.3\" of the Anti-\nDumping Agreement. 12 The amendment was effective as of 31 October 2005. The United States\nmade no changes to Section 751(c)(4)(B) of the Tariff Act of 1930.\n\n On 2 November 2005, the USDOC initiate d proceedings under Section 129 of the Uruguay\nRound Agreements Act regarding the Panel's findings conc erning the Department's likelihood\ndetermination. The USDOC did not issue any su pplemental questionnaires, or provide a briefing\nschedule as to the timing of rebuttal and reply comments. There was no public hearing.\n\n On 16 December 2005, the USDOC issued its Section 129 Determination (the \"2005 Section\n129 Determination\"), in which it states: \"we find there is likelihood of continuation or recurrence of\n\n8 Appellate Body Report, para. 365(c)(i) and (ii).\n9 WT/DSB/M/180.\n10 . Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the\nSettlement of Disputes. Award of the Arbitrator. WT/DS268/12. 7 June 2005.\n11 US Department of Commerce, Procedures for Conducting Five-Year (\"Sunset\") Reviews for\nAntidumping and Countervailing Duty Orders: Final Rule, 70 Federal Register 62061 (28 October 2005).\n12 Id.\n\ndumping had the antidumping duty order on OCTG from Argentina been revoked in 2000, i.e., at the\nend of the original sunset period.\"13\n\n On 20 December 2005, the United States asserted to the DSB that it had \"implemented the\nrecommendations and rulings of the DSB in this dispute.\"\n14\n\n On 26 January 2006, Argentina requested consultations with the United States under\nArticle 21.5 of the DSU and paragraph 1 of the Agreed Procedures for DS268. 15 The parties held\nconsultations in Washington, D.C. on 7 February 2006, and by teleconference on 22 February 2006.\nThe consultations failed to resolve the dispute.\n\nII. Request for the Establishment of a Panel\n\n There is thus \"disagreement as to the existen ce or consistency with a covered agreement of\nmeasures taken to comply with the recommendati ons and rulings\" of the DSB in this case.\nAccordingly, Argentina hereby requests the estab lishment of a Panel under Article 21.5 of the DSU\nand paragraph 2 of the Agreed Procedures for DS268 with respect to the purported implementation by\nthe United States of the recommendations and rulings of the DSB in this case (WT/DS268).\n\n The following measures of the United States taken to comply with the recommendations and\nrulings of the DSB are at issue in this proceeding:\n\n• USDOC's 2005 Section 129 Determination (w hich purportedly (i) supplants or\nmodifies the WTO-inconsistent USDOC 2000 likelihood of dumping determination,\n16\nand (ii) provides the sole support for, or additional support for, USDOC's 2001 notice\nof continuation of the antidumping order on OCTG from Argentina).\n17\n• Section 351.218(d)(2) of the USDOC Regulations, as amended by the United States.18\n\n In addition, also at issue in this proceeding is the failure of the United States to take certain\nmeasures to comply with the recommendations and rulings of the DSB:\n\n• The failure of the United States to \"imp lement\" the 2005 Section 129 Determination,\npursuant to Section 129(b)(4) of the Uruguay Round Agreements Act.\n\n• The failure of the United States either to re peal Sections 751(c)(4)(A) and (B) of the\nTariff Act of 1930, or to amend these provisions to remove the WTO-inconsistency.\n\n13 US Department of Commerce, Issues and Decision Memorandum, Section 129 Determination: Final\nResults of Sunset Review, Oil Country Tubular Goods from Argentina, A-357-810, 16 December 2005, at 11.\n14 Statements by the United States at the December 20th Meeting of the WTO Dispute Settlement Body .\nhttp://www.us-mission.ch/Press2005/1221DSBmeeting.html.\n15 United States – Sunset Reviews of Anti-Dumping Measures on Oil Country Tubular Goods, Recourse\nto Article 21.5 of the DSU, Request for Consultations, WT/DS268/15, 30 January 2006.\n16 US Department of Commerce, Final Results of Expedited Sunset Reviews: Oil Country Tubular\nGoods from Argentina, Italy, Japan, and Korea , 65 Federal Register 66701 (November 7, 2000) (which\nincorporates USDOC Issues and Decision Memorandum for the Expedited Sunset Reviews of the Antidumping\nDuty Orders on Oil Country Tubular Goods from Argentina, Italy, Japan, and Korea: Final Results\n(31 October 2000)).\n17 US Department of Commerce, Continuation of Countervailing Duty and Antidumping Duty Orders\non Oil Country Tubular Goods from Argentina, Italy, Japa n, Korea and Mexico, and Partial Revocation of\nThose Orders From Argentina and Mexico With Respect to Drill Pipe, 66 Federal Register 38630, 25 July 2001.\n18 US Department of Commerce, Procedures for Conducting Five-Year (\"Sunset\") Reviews for\nAntidumping and Countervailing Duty Orders: Final Rule, 70 Federal Register 62061 (28 October 2005).\n\n Argentina requests the Panel to find that through these measures and omissions the United\nStates has failed to implement the recommendations a nd rulings of the DSB in this dispute, and has\nviolated its WTO obligations, for the reasons set out below:\n\n A. The USDOC's 2005 Section 129 det ermination is inconsistent with\nUS WTO obligations\n\n In 2001, the United States extended the an ti-dumping duty order on Argentine OCTG based\non USDOC's 2000 determination that dumping would be likely to continue or recur.\n19 The original\nPanel in this dispute ruled that the USDOC ac ted inconsistently with US obligations under\nArticles 6.2 and 11.3 of the Anti-Dumping Agreement.20\n\n The 2005 Section 129 Determination failed to implement the recommendations and rulings of\nthe DSB and is inconsistent with the WTO obligations of the United States for the following reasons:\n\n First, the 2005 Section 129 Determina tion is inconsistent with Articles 11.1, 11.3 and 11.4 of\nthe Anti-Dumping Agreement because:\n\n 1. USDOC developed and relied on a new factual basis in 2005 to support its 2000\nWTO-inconsistent likelihood of dumping determination; and\n\n 2. USDOC relied in 2005 on its infere nce from 2000 of likely dumping based on the\npost-order decline in Argentine OCTG im ports, where USDOC did not (either in\n2000 or 2005) support its assumption of lik elihood of dumping and determine the\nreason for the volume decline.\n\nTherefore, in the absence of a suffi cient factual basis for an affirma tive likelihood determination, the\nUnited States could not extend the anti-dumpi ng duty order on OCTG from Argentina beyond the\nperiod specified in Articles 11.3 and 11.4 of the Anti-Dumping Agreement. The Anti-Dumping\nAgreement prohibits a Member from maintaining anti-dumping duties beyond five years in the\nabsence of strict compliance with the requirements of Articles 11.1, 11.3 and 11.4 of the Anti-\nDumping Agreement.\n\n Second, in the alternative , even assuming arguendo that the USDOC were permitted to\ndevelop factual information in 2005 to support its 2000 likelihood determination, the 2005 Section\n129 Determination nevertheless failed to satisfy the requirements of the Anti-Dumping Agreement for\nthe following reasons.\n\n 1. The USDOC did not properly establish a su fficient factual basis, did not objectively\nassess the facts, applied a WTO-inconsistent legal standard, and did not reach a\nreasoned conclusion supported by positive evidence that expiry of the antidumping\nduty order would be likely to lead to continuation or recurrence of dumping in\nviolation of Articles 11.1 and 11.3 of the Anti-Dumping Agreement:\n\na. The USDOC determination with resp ect to the Argentine exporters is\ninconsistent with Articles 11.1 and 11.3 of the Anti-Dumping Agreement.\n\n19 US Department of Commerce, Continuation of Countervailing Duty and Antidumping Duty Orders\non Oil Country Tubular Goods from Argentina, Italy, Japa n, Korea and Mexico, and Partial Revocation of\nThose Orders From Argentina and Mexico With Respect to Drill Pipe, 66 Federal Register 38630, 25 July 2001.\n20 Panel Report, paras. 7.219, 7.222, 8.1(d)(i).\n\nb. As for the USDOC's statement in the 2005 Section 129 Determination that it\nalso relied on its finding from the origin al sunset review that the post-order\nvolume decline created a basis for inferring that dumping would be likely to\ncontinue or recur, this was an insufficient basis to support the 2000 likelihood\ndetermination and also cannot support the 2005 likelihood determination in\nviolation of Articles 11.1 and 11.3 of the Anti-Dumping Agreement.\n\n 2. The USDOC's Section 129 proceeding was al so inconsistent with Articles 6.1, 6.2,\n6.4, 6.5, 6.5.1, 6.6, 6.8, 6.9, 12.2 and Annex II of the Anti-Dumping Agreement:\n\na. The USDOC's failure to provide the pa rties notice regarding the procedures it\nwould follow to make its determination and to notify the parties of the\nessential facts under consideration that fo rmed the basis for the Section 129\nDetermination, including, when necessary, by providing reasonable\nsummaries of confidential information, was inconsistent with US obligations\nunder Articles 6.1, 6.4, 6.5, 6.5.1, 6.9, and 12.2 of the Anti-Dumping\nAgreement.\n\nb. The USDOC‘s failure to hold a hear ing in the Section 129 proceeding to\nprovide to interested parties a full opportunity for the defense of their\ninterests was inconsistent with US obligations under Article 6.2 of the\nAnti-Dumping Agreement.\n\nc. The USDOC's failure to require inte rested parties to submit non-confidential\nsummaries of their written submissions in the Section 129 proceeding in such\na manner as to permit a reasonable unde rstanding of the substance of the\nconfidential information submitted, in violation of US obligations under\nArticles 6.1, 6.2, 6.5, 6.5.1 of the Anti-Dumping Agreement.\n\nd. The USDOC's characterization of Si derca's submitted cost information as\nunreliable, and USDOC's treatment of Acindar's information, was\ninconsistent with US obligations under Articles 6.1, 6.2, 6.4, 6.6, 6.8 and\nAnnex II of the Anti-Dumping Agreement.\n\ne. The USDOC's failure to provide public notice and sufficient explanation with\nrespect to the 2005 Section 129 Determ ination is inconsistent with US\nobligations under Articles 11.3 and 12.2 of the Anti-dumping Agreement.\n\n 3. The failure of the US Trade Representativ e to direct the USDOC to \"implement\" the\n2005 Section 129 Determination, pursuant to Section 129(b)(4) of the Uruguay\nRound Agreements Act, was inconsistent with US obligations under Article 13 of the\nAnti-Dumping Agreement. In failing to implement the 2005 Section 129\nDetermination, the United States denied the Argentine respondents an opportunity for\njudicial review in US courts of the dete rmination purportedly providing the basis for\nthe United States to continue the imposi tion of anti-dumping duties on OCTG from\nArgentina.\n\n B. Sections 751(c)(4)(A) & (B) of the Tariff Act of 1930 are inconsistent with\nUS WTO obligations\n\n Section 751(c)(4)(B) of the Tariff Act of 1930 has been neither repealed nor amended. It\ntherefore remains in existence, unchanged from the form in which it was found to violate Article 11.3\nof the Anti-Dumping Agreement. Furthermore, th e amendments to the USDOC regulations have not\n\neliminated the WTO-inconsistency of this statut ory provision operating in conjunction with Section\n351.218(d)(2)(ii) of USDOC's regulations, and Section 751(c)(4)(A) of the Tariff Act.\n\n Therefore, Sections 751(c)(4)(A) & (B) of th e Tariff Act are not in conformity with the\nrecommendations and rulings of the DSB, or with US obligations under Articles 11.1 and 11.3 of the\nAnti-Dumping Agreement and Article XVI:4 of the WTO Agreement.\n\n C. Section 351.218(d)(2) of the USDOC Regulations, as amended, is inconsistent\nwith US WTO obligations\n\n The United States has eliminated paragraph (d)(2)(iii) of Section 351.218 of the USDOC\nRegulations. Additionally, the United States has am ended paragraph (d)(2)(ii) of Section 351.218 of\nthe USDOC Regulations. This latter paragraph now provides in part that every statement of waiver\nmust include a statement that the respondent intere sted party is likely to dump or benefit from a\ncountervailable subsidy (as the case may be) if the order is revoked or the investigation is\nterminated.\n21\n The revised Regulation does not address the statutory consequences for parties who \"elect not\nto participate in a review\" (as provided for in Section 751(c)(4)(A)) of the Tariff Act of 1930) but who\nalso do not file a Statement of Waiver. In thes e circumstances, the terms of Section 751(c)(4)(B)\nmandate that USDOC \"conclude that revocation of the order would be likely to lead to continuation or\nrecurrence of dumping…with respect to that interest ed party.\" The United States has therefore failed\nto bring Section 751(c)(4)(B) of the Tariff Act of 1930 into conformity with the recommendations and\nrulings of the DSB and with US obligations under Articles 11.1 and 11.3 of the Anti-Dumping\nAgreement.\n\n The revised Regulation is also inconsiste nt with the obligations of the USDOC under\nArticles 11.1 and 11.3 of the Anti-Dumping Agreement to, inter alia , \"arrive at a reasoned\nconclusion\" on the basis of \"positive evidence.\"\n\n By mandating that a party filing a Statement of Waiver must include a statement that it is\nlikely to dump, and by requiring USDOC to conclude th at dumping is likely to continue or recur with\nrespect to any waiving interested party, Sec tion 351.218(d)(2)(ii) denies non-waiving interested\nparties the full opportunity for the defense of their interests, in violation of US obligations under\nArticles 6.1 and 6.2 of the Anti-Dumping Agreement.\n\n By mandating that a party filing a Statement of Waiver must include a statement that it is\nlikely to dump, the USDOC will be required to ma ke a likelihood determination without satisfying\nitself as to the accuracy of the in formation supplied by interested parties upon which its findings are\nbased, in violation of US obligations under Article 6.6 of the Anti-Dumping Agreement.\n\n The United States has therefore failed to brin g the US statutory and regulatory waiver\nprovisions into conformity with US obligations under Articles 6.1, 6.2, 6.6, 11.1, and 11.3 of the\nAnti-Dumping Agreement and Article XVI:4 of the WTO Agreement.\n\n For all of the measures identified above, the United States also failed to comply with its\nobligations under Articles 1 and 18.1 of the Anti-Du mping Agreement and Article XVI:4 of the WTO\nAgreement."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.013687"}}},{"rowIdx":3995,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ14_Note_By_Secretariat_02.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ14_Note_By_Secretariat_02.pdf"},"doc_sequence":{"kind":"number","value":14,"string":"14"},"doc_type":{"kind":"string","value":"Note_By_Secretariat"},"doc_type_raw":{"kind":"string","value":"Recourse to Article 21.5 of the DSU by Argentina Constitution of the Panel Note by the Secretariat"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":2,"string":"2"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"28 March 2006"},"header_codes":{"kind":"string","value":"WT/DS268/17; WT/DS268/16."},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nRecourse to Article 21.5 of the DSU by Argentina\n\nConstitution of the Panel\n\nNote by the Secretariat\n\n1. At its meeting on 17 March 2006, the Dispute Settlement Body (DSB) referred this dispute, if\npossible, to the original Panel in accordance with Article 21.5 of the Dispute Settlement\nUnderstanding (DSU) to examine the matter refe rred to the DSB by Argentina in document\n\n2. At that meeting, the parties to the dispute al so agreed that the Panel should have standard\nterms of reference. The terms of reference are, therefore, the following:\n\"To examine, in the light of the relevant provisions of the covered agreements cited\nby Argentina in document , the matter referred to the DSB by\nArgentina in that document, and to make such findings as will assist the DSB in\nmaking the recommendations or in giving the rulings provided for in those\nagreements\".\n3. On 20 March 2006, the Panel was composed as follows:\nChairman: Mr. Paul O'Connor\n Members: Mr. Bruce Cullen\nDr. Faizullah Khilji\n4. China, the European Communiti es, Japan, Korea, and Mexico have reserved their rights to\nparticipate in the Panel proceedings as third parties."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.014063"}}},{"rowIdx":3996,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ15_Communication_03.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ15_Communication_03.pdf"},"doc_sequence":{"kind":"number","value":15,"string":"15"},"doc_type":{"kind":"string","value":"Communication"},"doc_type_raw":{"kind":"string","value":"Recourse to Article 21.5 of the DSU by Argentina Communication from the Chairman of the Panel"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":3,"string":"3"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"19 June 2006"},"header_codes":{"kind":"string","value":"WT/DS268/18"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nRecourse to Article 21.5 of the DSU by Argentina\n\nCommunication from the Chairman of the Panel\n\n The following communication, dated 16 June 2006 , addressed to the Chairman of the Dispute\nSettlement Body (DSB), is circulated pursuan t to Article 21.5 of the Dispute Settlement\nUnderstanding (DSU).\n\n Article 21.5 of the DSU stipulates that a panel considering the existence or consistency with a\ncovered agreement of measures taken to comply with the recommendations and rulings of the DSB\nshall circulate its report within 90 days after the date of referral of the matter to it.\n\n Article 21.5 of the DSU further states that wh en a panel considers that it cannot provide its\nreport within this time frame, it shall inform the DS B in writing of the reasons for the delay together\nwith an estimate of the period within which it will submit its report.\n\n The matter – Recourse to Article 21.5 of the DSU by Argentina was referred to\nthe original Panel by the DSB on 17 March 2006, with the formalities in composing the Panel being\ncompleted on 20 March 2006.\n\n It will not be possible for the Panel to comple te its work in 90 days in light of scheduling\nconflicts.\n\n The Panel expects to complete its work in November 2006."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.014500"}}},{"rowIdx":3997,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ16_Notification_Of_Appeal_01.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ16_Notification_Of_Appeal_01.pdf"},"doc_sequence":{"kind":"number","value":16,"string":"16"},"doc_type":{"kind":"string","value":"Notification_Of_Appeal"},"doc_type_raw":{"kind":"string","value":"Recourse to Article 21.5 of the DSU by Argentina Notification of an Appeal by the United States under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the Working Procedures for Appellate Review"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":1,"string":"1"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"16 January 2007"},"header_codes":{"kind":"string","value":"WT/DS268/19"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":2,"string":"2"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nRecourse to Article 21.5 of the DSU by Argentina\n\nNotification of an Appeal by the United States\nunder Article 16.4 and Article 17 of the Understanding on Rules\nand Procedures Governing the Settlement of Disputes (DSU),\nand under Rule 20(1) of the Working Procedures for Appellate Review\n\n The following notification, dated 12 January 20 07, from the Delegation of the United States,\nis being circulated to Members.\n\nPursuant to Article 16 of the Understanding on Rules and Procedures Governing the\nSettlement of Disputes (\"DSU\") and Rule 20 of the Working Procedures for Appellate Review, the\nUnited States hereby notifies its decision to app eal to the Appellate Body certain issues of law\ncovered in the Report of the Panel on : Rec ourse to Article 21.5 of the DSU by Argentina\n() and certain legal interpretations developed by the Panel in this dispute.\n\n1. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the\nprovisions of section 751(c)(4)(B) of the Tariff Ac t of 1930, operating in conjunction with section\n751(c)(4)(A) of the Tariff Act and section 351.218(d) (2) of Title 19 of the Code of Federal\nRegulations, are inconsistent with Article 11.3 of the Agreement on Implementation of Article VI of\nthe General Agreement on Tariffs and Trade 1994 (\"Antidumping Agreement\") .\n1 This finding is in\nerror and is based on erroneous findings on issues of law and related legal inte rpretations, such as the\nfinding that U.S. law, including section 751(c)(4)(B) of the Tariff Act and section 351.218(d)(2)(iii)\nof the Department of Commerce's regulations, precludes the Department of Commerce from making\nan order-wide determination of likelihood of continuation or recu rrence of dumping, supported by\nreasoned and adequate conclusions based on the fact s before the agency, wher e an interested party\nelects not to participate in the sunset review at the Department of Commerce.\n\nOther errors include, for example, reversi ng the burden of proof by failing to require\nArgentina to prove its claim and instead requiring the United States to disprove it; in addition, the\nPanel applied the wrong legal standard by ev aluating whether the statute \"may\" breach the\nAntidumping Agreement, rather than whether the st atute mandates a breach of that Agreement .\nFurther, the Panel failed to make an objective assessme nt of the matter before it, including a failure to\nmake an objective assessment of the facts of the case, contrary to Article 11 of DSU . For example,\nthe Panel based its conclusion not on the evidence contained in the panel record – indeed, this\nprovision of U.S. law had never been used – but rather on the basis of pure speculation by the Panel as\nto what the United States would do if the law were to be invoked. For example, the Panel moves from\n\n1See, e.g., paras. 7.32-7.41, 8.1(a).\n\nspeculating that evidence would \"necessarily\" have a \"significant impact\" on the U.S. determination at\nissue to concluding that the United States would be unable to consider any additional evidence.\n\n2. The United States seeks review by the Appellate Body of the Panel's legal conclusion that the\n\"volume analysis\" incorporated by reference in th e Section 129 determination forms part of the\nmeasure taken to comply within the meaning of Article 21.5 of the DSU for purposes of these\nproceedings.\n2 This conclusion is in error and is ba sed on erroneous findings on issues of law and\nrelated legal interpretations of DSU Article 21.5. Fo r example, in the original proceeding, there were\nno recommendations or rulings pertaining to the volu me analysis, and, in the redetermination, the\nvolume analysis was an unchanged asp ect of the original determination that was simply incorporated\nby reference, as was the case in EC – Bed Linen (Article 21.5 – India).3\n\n2See, e.g., paras. 7.88-7.96. Paragraphs 7.98-7.101 and 8.1(c)(2) would be rendered moot if the United\nStates were to prevail with respect to this claim.\n3Appellate Body Report, European Communities – Anti-Dumping Duties on Imports of Cotton-Type\nBed Linen from India: Recourse to Article 21.5 of the DSU by India , WT/DS141/AB/RW, adopted 24 April\n2003 (\"EC – Bed Linen (Article 21.5 – India)\")."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.015676"}}},{"rowIdx":3998,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ17_Communication_04.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ17_Communication_04.pdf"},"doc_sequence":{"kind":"number","value":17,"string":"17"},"doc_type":{"kind":"string","value":"Communication"},"doc_type_raw":{"kind":"string","value":"Recourse to Article 21.5 of the DSU by Argentina Communication from the Appellate Body"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":4,"string":"4"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"7 March 2007"},"header_codes":{"kind":"string","value":"WT/DS268/21"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nRecourse to Article 21.5 of the DSU by Argentina\n\nCommunication from the Appellate Body\n\n The following communication, dated 6 March 2007, from the Chairman of the Appellate\nBody addressed to the Chairman of the Dispute Settlement Body, is circulated in accordance with\nArticle 17.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes.\n\n I am writing to you pursuant to Article 17.5 of the Understanding on Rules and Procedures\nGoverning the Settlement of Disputes, which stipulates that, as a general rule, the Appellate Body will\ncirculate its Report no later than 60 days afte r the appellant has formally notified the Dispute\nSettlement Body (the \"DSB\") of its decision to appeal. Article 17.5 also states that, when the\nAppellate Body considers that it cannot provide its Report within 60 days, it shall inform the DSB in\nwriting of the reasons for the delay together with an estimate of the period within which it will submit\nits Report.\n\n The United States notified the DSB on 12 January 20 07 of its decision to appeal certain issues\nof law covered in the Panel Report and certain lega l interpretations developed by the Panel in this\ncase, with the result that the 60-day period expi res on Tuesday, 13 March 2007. Due to the time\nrequired for completion and translation of the Report, the Appellate Body will not be able to circulate\nits Report by Tuesday, 13 March 2007. We estimate that the Appellate Body Report in this appeal\nwill be circulated to WTO Members no later than Thursday, 12 April 2007."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.016192"}}},{"rowIdx":3999,"cells":{"folder_number":{"kind":"string","value":"268"},"case_number":{"kind":"string","value":"268"},"original_filename":{"kind":"string","value":"DS268_SEQ18_Communication_05.pdf"},"new_filename":{"kind":"string","value":"DS268_SEQ18_Communication_05.pdf"},"doc_sequence":{"kind":"number","value":18,"string":"18"},"doc_type":{"kind":"string","value":"Communication"},"doc_type_raw":{"kind":"string","value":"Recourse to Article 21.5 of the DSU by Argentina Communication from the Appellate Body"},"doc_class":{"kind":"string","value":"NUMBERED"},"variant":{"kind":"null"},"part_number":{"kind":"number","value":5,"string":"5"},"case_title":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA"},"date":{"kind":"string","value":"13 April 2007"},"header_codes":{"kind":"string","value":"WT/DS268/22"},"agreement_indicators":{"kind":"string","value":""},"complainant":{"kind":"string","value":"['Argentina']"},"respondent":{"kind":"string","value":"['U.S.']"},"third_parties":{"kind":"string","value":"['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan']"},"dispute_stage":{"kind":"string","value":"Implementation & Compliance"},"agreements_cited":{"kind":"string","value":"Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization"},"case_summary":{"kind":"string","value":"The summary below was up-to-date at\n 24 February 2010\n\n See also: One-page summary of key findings of this dispute\nConsultations\nComplaint by Argentina.\nOn 7 October 2002, Argentina requested consultations\n with the US regarding the final determinations of the US Department of\n Commerce (“DOC”) and the US International Trade Commission\n (“ITC”) in the sunset reviews of the anti-dumping duty order on\n OCTG from Argentina, issued on 7 November 2000 (65 Federal Register 66701)\n and June 2001 (USITC Pub. No. 3434), respectively, and the DOC’s\n determination to continue the anti-dumping duty order on OCTG from\n Argentina, issued on 25 July 2001 (66 Federal Register 38630).\nArgentina considered that general US laws, regulations,\n policies and procedures related to the administration of sunset reviews\n and the application of anti-dumping measures were inconsistent either on\n their face or as applied with Articles 1, 2, 3, 5, 6, 11, 12, and 18 of\n the Anti-Dumping Agreement (ADA); Articles VI and X of the General\n Agreement on Tariffs and Trade (GATT) 1994; and Article XVI:4 of the WTO\n Agreement.\nFurthermore, Argentina claimed that the sunset review\n conducted by the DOC is inconsistent with Articles 2, 5, 5.8, 11.3, 11.4,\n 12.1, and 12.3 of the ADA. It also claimed that the sunset review\n conducted by the ITC was inconsistent with Articles 3 and 11.3 of the ADA.\nOn 3 April 2003, Argentina requested the establishment\n of a panel. At its meeting on 15 April 2003, the DSB deferred the\n establishment of the panel.\n\nPanel and Appellate Body proceedings\nFurther to a second request by Argentina, the\n DSB established a panel at its meeting on 19 May 2003. The EC, Japan,\n Korea, Mexico and Chinese Taipei reserved their third-party rights.\nOn 22 August 2003, Argentina requested the\n Director-General to compose the panel. On 4 September 2003, the\n Director-General composed the panel.\nOn 4 March 2004, the Chairman of the Panel informed the\n DSB that it would not be able to complete its work in six months in light\n of scheduling conflicts and that the Panel expected to complete its work\n in June 2004.\nOn 16 July 2004, the report of the Panel was circulated\n to Members. The Panel found that:\nOn 31 August 2004, United States notified its intention\n to appeal certain issues of law and legal interpretations developed by the\n Panel. On 28 October 2004, the Chairman of the Appellate Body informed the\n DSB that the Appellate Body would not be able to circulate its Report\n within 60-day period due to the time required for completion and\n translation of the Report, and that the Appellate Body expected to\n complete its work no later than 29 November 2004.\nOn 29 November 2004, the Appellate Body Report was\n circulated to Members. The Appellate Body:\nwith respect to the issues appealed by the United\n States:\nwith respect to the issues appealed by Argentina:\nAt its meeting on 17 December 2004, the DSB adopted the\n Appellate Body report and the Panel report, as modified by the Appellate\n Body report.\n\nImplementation of adopted reports\nAt the DSB meeting on 14\n January 2005, the United States stated that it was the intention\n of the US to implement the recommendations and rulings of the DSB in a\n manner that respected its WTO obligations, and that it would consult\n with Argentina to exploring the possibility of reaching an agreement on\n the reasonable period of time to implement the recommendations and\n rulings of the DSB. On 11 March 2005, Argentina requested the DSB that\n the reasonable period of time be determined through binding arbitration\n pursuant to Article 21.3(c) of the DSU, as Argentina and the United\n Stated were not able to reach an agreement. On 16 March 2005, Argentina\n and the United States informed the DSB that both parties had agreed the\n period of time for this binding arbitration shall be completed no later\n than 60 days after the date of the appointment of the arbitrator, as the\n 90-day period under Article 21.3 (c) was about to expire.\nOn 8 April 2005, Mr. A.V. Ganesan, Member of the Appellate Body, informed Argentina and the United States that he accepts the appointment to serve as arbitrator.\nOn 7 June 2005, the Award of the Arbitrator was circulated to Members. He determined that the reasonable period of time in this case is 12 months and would thus expire on 17 December 2005.\nAt the DSB meeting on 20 December 2005, the United States informed the DSB that it had implemented the DSB recommendations and rulings in this case. Argentina expressed doubts as to whether the US had fully implemented the DSB recommendations and rulings. On 5 January 2006, the parties informed the DSB of agreed procedures under Articles 21 and 22 of the DSU.\n\nAppellate Body and Panel Compliance Reports (Article 21.5) Adopted\nOn 26 January 2006, Argentina requested consultations under Article 21.5 of the DSU and paragraph 1 of the parties' Agreed Procedures under Articles 21 and 22 of the DSU. On 6 March 2006, Argentina requested the establishment of a panel under Article 21.5 of the DSU. At its meeting on 17 March 2006, the DSB referred the matter raised by Argentina to the original Panel. China, the European Communities, Japan and Mexico reserved their third-party rights. Subsequently, Korea reserved its third-party right. On 20 March 2006, the compliance panel was composed.\n\n\n On 16 June 2006, the Chairman of the Panel informed the DSB that it would not be able to complete its work within 90 days in light of scheduling conflicts and that it expected to complete its work in November 2006.\nOn 30 November 2006, the Article 21.5 panel report was circulated to Members. The Panel found that certain waiver provisions under the US Tariff Act of 1930 remain inconsistent with the rules governing sunset reviews found in Article 11.3 of the Anti-Dumping Agreement. The Panel also found that the US Department of Commerce acted inconsistently with Article 11.3 of the Anti-Dumping Agreement in its determination of likelihood of continuation or recurrence of dumping for the purposes of its revised sunset determination in the Section 129 proceedings at issue. The Panel concluded that the US Department of Commerce did not act inconsistently with the relevant provisions of the Anti-Dumping Agreement in developing a new factual basis for its Section 129 determination, or in respect of certain evidentiary and procedural issues.\nOn 12 January 2007, the United States decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 24 January 2007, Argentina decided to appeal to the Appellate Body certain issues of law covered in the Article 21.5 panel report and certain legal interpretations developed by the Panel in this dispute. On 6 March 2007, the Chairman of the Appellate Body informed the DSB that due to the time required for completion and translation of the report. the Appellate Body would not be able to circulate its report within the 60-day period. It estimated that the report would be circulated no later than 12 April 2007.\nOn 12 April 2007, the Appellate Body report was circulated to Members. The Appellate Body:\nAt its meeting on 11 May 2007, the DSB adopted the Article 21.5 Appellate Body report and Panel report, as modified by the Appellate Body report.\n\nProceedings under Article 22 of the DSU (remedies)\nOn 21 May 2007, Argentina requested authorization from the DSB to suspend concessions pursuant to Article 22.2 of the DSU. On 1 June 2007, the United States requested, in accordance with Article 22.6 of the DSU, that the matter be referred to arbitration, since they objected to the level of suspension of concessions proposed by Argentina. At its meeting on 4 June 2007, the DSB decided to refer the matter to arbitration. On 21 June 2007, the parties jointly requested the arbitrator to suspend the Article 22.6 arbitration proceeding until either party subsequently requests its resumption. In accordance with the parties' joint request, the arbitrators suspended the arbitration proceeding, until either party subsequently requests its resumption. The arbitrators also took note of the parties' agreement that, if either party decides to request resumption of the arbitration proceedings, that party will provide the other party with 30 days' advance notice before making such a request."},"page_count":{"kind":"number","value":1,"string":"1"},"clean_text":{"kind":"string","value":"UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES\nON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA\n\nRecourse to Article 21.5 of the DSU by Argentina\n\nCommunication from the Appellate Body\n\n The following communication, dated 12 April 2007, from the Chairman of the Appellate\nBody addressed to the Chairman of the Dispute Settlement Body, is circulated in accordance with\nArticle 17.5 of the Understanding on Rules and Procedures Governing the Settlement of Disputes.\n\n It is my honour to provide to you the Report of the Appellate Body in , Recourse to\nArticle 21.5 of the DSU by Argentina , It will be circulated to Members of the\n at 4:00 p.m. today, in accordance with paragraph 5 of Article 17 of the\nUnderstanding on Rules and Procedures Governing the Settlement of Disputes . It is a confidential\ndocument until its circulation. The three Members of the Appellate Body who served on this appeal\nwere: Mr. Yasuhei Taniguchi, as Presiding Member; Ms. Merit E. Janow and Mr. David Unterhalter,\nas Members."},"processing_date":{"kind":"string","value":"2026-03-15T15:46:47.016562"}}}],"truncated":false,"partial":false},"paginationData":{"pageIndex":39,"numItemsPerPage":100,"numTotalItems":9414,"offset":3900,"length":100}},"jwt":"eyJhbGciOiJFZERTQSJ9.eyJyZWFkIjp0cnVlLCJwZXJtaXNzaW9ucyI6eyJyZXBvLmNvbnRlbnQucmVhZCI6dHJ1ZX0sImlhdCI6MTc3OTcxNjIyMywic3ViIjoiL2RhdGFzZXRzL2RlYW4yMjAyOS9XVE9fRG9jcyIsImV4cCI6MTc3OTcxOTgyMywiaXNzIjoiaHR0cHM6Ly9odWdnaW5nZmFjZS5jbyJ9.pKbCLb_tOFkcqzTE0-IXGu6Oup3ZOJRJDIrAw6usfiMFXJggoe_iUhRPwkM22f3NNHeEgWDM2evyasZFS9fQAA","displayUrls":true,"splitSizeSummaries":[{"config":"default","split":"train","numRows":9414,"numBytesParquet":235278256}]},"discussionsStats":{"closed":0,"open":1,"total":1},"fullWidth":true,"hasGatedAccess":true,"hasFullAccess":true,"isEmbedded":false,"savedQueries":{"community":[],"user":[]}}">
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267 | 267 | DS267_SEQ02_Request_To_Join_Consultations_01.pdf | DS267_SEQ02_Request_To_Join_Consultations_01.pdf | 2 | Request_To_Join_Consultations | Request to Join Consultations Communication from India | NUMBERED | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 18 October 2002 | WT/DS267/3 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Request to Join Consultations
Communication from India
The following communication, dated 11 October 2002, from the Permanent Mission of India
to the Permanent Mission of the United States, the Permanent Mission of Brazil and to the Chairman
of the Dispute Settlement Body, is ... | 2026-03-15T15:46:31.578422 | |
267 | 267 | DS267_SEQ03_Request_To_Join_Consultations_02.pdf | DS267_SEQ03_Request_To_Join_Consultations_02.pdf | 3 | Request_To_Join_Consultations | Request to Join Consultations Communication from Argentina | NUMBERED | null | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 22 October 2002 | WT/DS267/4; WT/DS267/1-; G/L/571-G/SCM/D49/1-G/AG/GEN/54 | General Council | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Request to Join Consultations
Communication from Argentina
The following communication, dated 14 October 2002, from the Permanent Mission of
Argentina to the Permanent Mission of the United States and to the Chairman of the Dispute
Settlement Body, is circulated in accordance ... | 2026-03-15T15:46:31.578803 |
267 | 267 | DS267_SEQ04_Request_To_Join_Consultations_03.pdf | DS267_SEQ04_Request_To_Join_Consultations_03.pdf | 4 | Request_To_Join_Consultations | Request to Join Consultations Communication from Canada | NUMBERED | null | 3 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 9 December 2002 | WT/DS267/5 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Request to Join Consultations
Communication from Canada
The following communication, dated 14 October 2002, from the Permanent Mission of
Canada to the Permanent Mission of the United States, the Permanent Mission of Brazil and to the
Chairman of the Dispute Settlement Body, i... | 2026-03-15T15:46:31.579278 | |
267 | 267 | DS267_SEQ05_Request_To_Join_Consultations_04.pdf | DS267_SEQ05_Request_To_Join_Consultations_04.pdf | 5 | Request_To_Join_Consultations | Acceptance by the United States of the Request to Join Consultations Argentina, Canada, India and Zimbabwe notified the Dispute Settlement Body (DSB) of their desire to be joined in the consultations requested by Brazil, pursuant to Article 4.11 of the DSU. The Permanent Mission of the United States informed the DSB th... | NUMBERED | null | 4 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 11 December 2002 | WT/DS267/6 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Acceptance by the United States of the Request to Join Consultations
Argentina, Canada, India and Zimbabwe notified the Dispute Settlement Body (DSB) of their
desire to be joined in the consultations requested by Brazil, pursuant to Article 4.11 of the DSU.
The Permanent Missi... | 2026-03-15T15:46:31.580786 | |
267 | 267 | DS267_SEQ06_Request_For_Establishment_Of_Panel_00.pdf | DS267_SEQ06_Request_For_Establishment_Of_Panel_00.pdf | 6 | Request_For_Establishment_Of_Panel | Request for the Establishment of a Panel by Brazil | NUMBERED | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 7 February 2003 | WT/DS267/7 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 5 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Request for the Establishment of a Panel by Brazil
The following communication, dated 6 February 2003, from the Permanent Mission of Brazil
to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.
On 27 September, the Government of Braz... | 2026-03-15T15:46:31.583283 | |
267 | 267 | DS267_SEQ07_Communication_00.pdf | DS267_SEQ07_Communication_00.pdf | 7 | Communication | Communication from the United States | NUMBERED | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 21 March 2003 | WT/DS267/8; WT/DS267/7 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from the United States
The following communication, dated 19 March 2003, from the Permanent Mission of the
United States to the Chairman of the Dispute Settlement Body, is circulated at the request of that
delegation.
At the 18 March meeting of the Dispute Settle... | 2026-03-15T15:46:31.583901 | |
267 | 267 | DS267_SEQ08_Communication_01.pdf | DS267_SEQ08_Communication_01.pdf | 8 | Communication | Communication from Brazil | NUMBERED | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 21 March 2003 | WT/DS267/9 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Brazil
The following communication, dated 20 March 2003, from the Permanent Mission of Brazil
to the Chairman of the Dispute Settlement Body, is circulated at the request of that delegation.
In view of the establishment of the panel ""
(WT/DS267) in the last... | 2026-03-15T15:46:31.584180 | |
267 | 267 | DS267_SEQ09_Communication_02.pdf | DS267_SEQ09_Communication_02.pdf | 9 | Communication | Communication from the European Communities | NUMBERED | null | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 27 March 2003 | WT/DS267/10 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from the European Communities
The following communication, dated 25 March 2003, from the Permanent Delegation of the
European Commission to the Chairman of the Dispute Settlement Body, is circulated at the request of
that delegation.
By letter dated 20 March 2003... | 2026-03-15T15:46:31.584469 | |
267 | 267 | DS267_SEQ10_Communication_03.pdf | DS267_SEQ10_Communication_03.pdf | 10 | Communication | Communication from Thailand | NUMBERED | null | 3 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 4 April 2003 | WT/DS267/11; WT/DS267/9 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Thailand
The following communication, dated 1 April 2003, from the Permanent Mission of Thailand
to the Chairman of the Dispute Settlement Body, is circulated at the request of that delegation.
I have the honour to refer to the communication contained in WTO... | 2026-03-15T15:46:31.584690 | |
267 | 267 | DS267_SEQ11_Communication_04.pdf | DS267_SEQ11_Communication_04.pdf | 11 | Communication | Communication from Argentina | NUMBERED | null | 4 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 7 April 2003 | WT/DS267/12; WT/DS267/9; WT/DS267/10 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Argentina
The following communication, dated 1 April 2003, from the Permanent Mission of Argentina
to the Chairman of the Dispute Settlement Body, is circulated at the request of that delegation.
In its communication of 20 March 2003 (), Brazil indicated tha... | 2026-03-15T15:46:31.584950 | |
267 | 267 | DS267_SEQ12_Communication_05.pdf | DS267_SEQ12_Communication_05.pdf | 12 | Communication | Communication from Switzerland | NUMBERED | null | 5 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 15 April 2003 | WT/DS267/13 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Switzerland
The following communication, dated 10 April 2003, from the Permanent Mission of
Switzerland to the Chairman of the Dispute Settlement Body, is circulated at the request of that
delegation.
By letter dated 1 April 2003 Brazil has indicated to the ... | 2026-03-15T15:46:31.585256 | |
267 | 267 | DS267_SEQ13_Communication_06.pdf | DS267_SEQ13_Communication_06.pdf | 13 | Communication | Communication from Turkey | NUMBERED | null | 6 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 17 April 2003 | WT/DS267/14; WT/DS267/9 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Turkey
The following communication, dated 14 April 2003, from the Permanent Mission of Turkey
to the Dispute Settlement Body, is circulated at the request of that delegation.
As its market was indicated in the communication from Brazil contained in the WTO
d... | 2026-03-15T15:46:31.585476 | |
267 | 267 | DS267_SEQ14_Note_By_Secretariat_00.pdf | DS267_SEQ14_Note_By_Secretariat_00.pdf | 14 | Note_By_Secretariat | Constitution of the Panel Established at the Request of Brazil Note by the Secretariat | NUMBERED | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 23 May 2003 | WT/DS267/15; WT/DS267/7; WT/DS267/7 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Constitution of the Panel Established at the Request of Brazil
Note by the Secretariat
1. At its meeting on 18 March 2003, the DSB established a panel in accordance with Article 6 of
the DSU to examine the matter referred to the DSB by Brazil ().
2. At that meeting, the partie... | 2026-03-15T15:46:31.586063 | |
267 | 267 | DS267_SEQ15_Communication_07.pdf | DS267_SEQ15_Communication_07.pdf | 15 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | 7 | UNITED STATES - SUBSIDIES ON UPLAND COTTON | 19 November 2003 | WT/DS267/16 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES - SUBSIDIES ON UPLAND COTTON
Communication from the Chairman of the Panel
The following communication, dated 17 November 2003, addressed to the Chairman of the
Dispute Settlement Body (DSB), is circulated in accordance with Article 12.9 of the Dispute
Settlement Understanding (DSU).
Article 12.8 of the Un... | 2026-03-15T15:46:31.586480 | |
267 | 267 | DS267_SEQ16_Notification_Of_Appeal_00.pdf | DS267_SEQ16_Notification_Of_Appeal_00.pdf | 16 | Notification_Of_Appeal | Notification of an Appeal by the United States under paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU") | NUMBERED | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 20 October 2004 | WT/DS267/17 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 4 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Notification of an Appeal by the United States
under paragraph 4 of Article 16 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes ("DSU")
The following notification, dated 18 October 2004, from the Delegation of the United States,
is being cir... | 2026-03-15T15:46:31.589183 | |
267 | 267 | DS267_SEQ17_Communication_08.pdf | DS267_SEQ17_Communication_08.pdf | 17 | Communication | Communication from the Appellate Body | NUMBERED | null | 8 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 20 December 2004 | WT/DS267/18 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from the Appellate Body
The following communication, dated 16 December , from the Chairman of the Appellate Body
addressed to the Chair of the Dispute Settlement Body , is circulated in accordance with Article 17.5
of the Understanding on Rules and Procedures ... | 2026-03-15T15:46:31.589747 | |
267 | 267 | DS267_SEQ18_Communication_09.pdf | DS267_SEQ18_Communication_09.pdf | 18 | Communication | Communication from the Appellate Body | NUMBERED | null | 9 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 3 March 2005 | WT/DS267/19; WT/DS267/AB/R. | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from the Appellate Body
The following communication, dated 3 March 2005, from Mr. Yasuhei Taniguchi, Chairman
of the Appellate Body, addressed to the Chairman of the Dispute Settlement Body, is being circulated
in accordance with Article 17.5 of the Understand... | 2026-03-15T15:46:31.590042 | |
267 | 267 | DS267_SEQ19_Understanding.pdf | DS267_SEQ19_Understanding.pdf | 19 | Understanding | Understanding between Brazil and the United States Regarding Procedures under Articles 21 and 22 of the DSU and Article 4 of the SCM Agreement | NUMBERED | null | null | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 8 July 2005 | WT/DS267/22 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 4 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Understanding between Brazil and the United States
Regarding Procedures under Articles 21 and 22 of the DSU
and Article 4 of the SCM Agreement
The following communication, dated 5 July 2005, from the delegation of Brazil and the
delegation of the United States to the Chair... | 2026-03-15T15:46:31.591503 | |
267 | 267 | DS267_SEQ20_Note_By_Secretariat_01.pdf | DS267_SEQ20_Note_By_Secretariat_01.pdf | 20 | Note_By_Secretariat | Recourse by the United States to Article 22.6 of the DSU and Article 4.11 of the SCM Agreement Constitution of the Arbitrator Note by the Secretariat | NUMBERED | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 19 July 2005 | WT/DS267/24 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse by the United States to Article 22.6 of the DSU
and Article 4.11 of the SCM Agreement
Constitution of the Arbitrator
Note by the Secretariat
1. At the meeting of the Dispute Settlement Body (DSB) on 15 July 2005, it was agreed that the
matter raised by the United... | 2026-03-15T15:46:31.592109 | |
267 | 267 | DS267_SEQ21_Note_By_Secretariat_Add.pdf | DS267_SEQ21_Note_By_Secretariat_Add.pdf | 21 | Note_By_Secretariat | Recourse by the United States to Article 22.6 of the DSU and Article 4.11 of the SCM Agreement Constitution of the Arbitrator Note by the Secretariat Addendum | NUMBERED | Add | null | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 15 October 2008 | WT/DS267/24/Add.1; WT/DS267/38 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse by the United States to Article 22.6 of the DSU
and Article 4.11 of the SCM Agreement
Constitution of the Arbitrator
Note by the Secretariat
Addendum
1. At the time that Brazil requested the resumption of the arbitration (), two of the
arbitrators, Mr Darius Ros... | 2026-03-15T15:46:31.592338 | |
267 | 267 | DS267_SEQ22_Communication_10.pdf | DS267_SEQ22_Communication_10.pdf | 22 | Communication | Recourse by the United States to Article 22.6 of the DSU and Article 4.11 of the SCM Agreement Communication from the Arbitrator | NUMBERED | null | 10 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 18 August 2005 | WT/DS267/25 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse by the United States to Article 22.6 of the DSU
and Article 4.11 of the SCM Agreement
Communication from the Arbitrator
The following communication, dated 17 August 2005, has been received from the delegation
of Brazil and the delegation of the United States a nd... | 2026-03-15T15:46:31.592823 | |
267 | 267 | DS267_SEQ23_Note_By_Secretariat_02.pdf | DS267_SEQ23_Note_By_Secretariat_02.pdf | 23 | Note_By_Secretariat | Recourse by the United States to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement Constitution of the Arbitrator Note by the Secretariat | NUMBERED | null | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 18 November 2005 | WT/DS267/28; WT/DS267/27 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse by the United States to Article 22.6 of the DSU
and Article 7.10 of the SCM Agreement
Constitution of the Arbitrator
Note by the Secretariat
1. At the meeting of the Dispute Settlement Bo dy (DSB) on 18 October 2005, it was agreed that
the matter raised by the Un... | 2026-03-15T15:46:31.593436 | |
267 | 267 | DS267_SEQ24_Note_By_Secretariat_Add.pdf | DS267_SEQ24_Note_By_Secretariat_Add.pdf | 24 | Note_By_Secretariat | Recourse by the United States to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement Constitution of the Arbitrator Note by the Secretariat Addendum | NUMBERED | Add | null | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 15 October 2008 | WT/DS267/28/Add.1; WT/DS267/39 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse by the United States to Article 22.6 of the DSU
and Article 7.10 of the SCM Agreement
Constitution of the Arbitrator
Note by the Secretariat
Addendum
1. At the time that Brazil requested the resumption of the arbitration () two of the
arbitrators, Mr Darius Rosa... | 2026-03-15T15:46:31.593659 | |
267 | 267 | DS267_SEQ25_Communication_11.pdf | DS267_SEQ25_Communication_11.pdf | 25 | Communication | Recourse by the United States to Article 22.6 of the DSU and Article 7.10 of the SCM Agreement Communication from the Arbitrator | NUMBERED | null | 11 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 7 December 2005 | WT/DS267/29 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse by the United States to Article 22.6 of the DSU
and Article 7.10 of the SCM Agreement
Communication from the Arbitrator
The following communication, dated 21 Novemb er 2005 and addressed to Mr Darius Rosati,
Chairman of the Arbitrator, has been received from the ... | 2026-03-15T15:46:31.594181 | |
267 | 267 | DS267_SEQ26_Request_For_Establishment_Of_Panel_01.pdf | DS267_SEQ26_Request_For_Establishment_Of_Panel_01.pdf | 26 | Request_For_Establishment_Of_Panel | Recourse to Article 21.5 of the DSU by Brazil Request for the Establishment of a Panel | NUMBERED | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 21 August 2006 | WT/DS267/30 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 6 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Request for the Establishment of a Panel
The following communication, dated 18 August 2006, from the delegation of Brazil to the
Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.5 of the DSU.
Uplan... | 2026-03-15T15:46:31.597942 | |
267 | 267 | DS267_SEQ27_Note_By_Secretariat_03.pdf | DS267_SEQ27_Note_By_Secretariat_03.pdf | 27 | Note_By_Secretariat | Recourse to Article 21.5 of the DSU by Brazil Constitution of the Panel Note by the Secretariat | NUMBERED | null | 3 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 1 November 2006 | WT/DS267/31; WT/DS267/30.; WT/DS267/30 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Constitution of the Panel
Note by the Secretariat
1. At its meeting on 28 September 2006, the Di spute Settlement Body (DSB) decided, in
accordance with Article 21.5 of th e Dispute Settlement Understanding (DSU), to refer, if ... | 2026-03-15T15:46:31.598503 | |
267 | 267 | DS267_SEQ28_Communication_12.pdf | DS267_SEQ28_Communication_12.pdf | 28 | Communication | Recourse to Article 21.5 of the DSU by Brazil Communication from the Chairman of the Panel | NUMBERED | null | 12 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 11 January 2007 | WT/DS267/32 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Communication from the Chairman of the Panel
The following communication, dated 9 January 2007, addressed to the Chairman of the
Dispute Settlement Body (DSB), is circulated pur suant to Article 21.5 of the Dispute Settlement
U... | 2026-03-15T15:46:31.598960 | |
267 | 267 | DS267_SEQ29_Notification_Of_Appeal_01.pdf | DS267_SEQ29_Notification_Of_Appeal_01.pdf | 29 | Notification_Of_Appeal | Recourse to Article 21.5 of the DSU by Brazil Notification of an Appeal by the United States under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the Working Procedures for Appellate Review | NUMBERED | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 19 February 2008 | WT/DS267/33 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 3 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Notification of an Appeal by the United States
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 20(1) of the Working Procedures for Appellat... | 2026-03-15T15:46:31.600811 | |
267 | 267 | DS267_SEQ30_Communication_13.pdf | DS267_SEQ30_Communication_13.pdf | 30 | Communication | Recourse to Article 21.5 of the DSU by Brazil Communication from the Appellate Body | NUMBERED | null | 13 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 25 April 2008 | WT/DS267/35 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Communication from the Appellate Body
The following communication, dated 11 April 2008, from the Chairman of the Appellate
Body addressed to the Chairman of the Dispute Settlement Body, is circulated in accordance with
Article ... | 2026-03-15T15:46:31.601360 | |
267 | 267 | DS267_SEQ31_Communication_14.pdf | DS267_SEQ31_Communication_14.pdf | 31 | Communication | Recourse to Article 21.5 of the DSU by Brazil Communication from the Appellate Body | NUMBERED | null | 14 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 9 June 2008 | WT/DS267/36; WT/DS267/AB/RW. | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Communication from the Appellate Body
The following communication, dated 2 June 2008, from the Chairman of the Appellate Body
addressed to the Chairman of the Dispute Settle ment Body, is circulated in accordance with
Article 1... | 2026-03-15T15:46:31.601680 | |
267 | 267 | DS267_SEQ32_Communication_15.pdf | DS267_SEQ32_Communication_15.pdf | 32 | Communication | Communication from Brazil | NUMBERED | null | 15 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 15 October 2008 | WT/DS267/38; WT/DS267/23 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Brazil
The following communication, dated 25 Augus t 2008, addressed to Mr. Darius Rosati, the
Chairman of the Arbitrator, has been received from the delegation of Brazil.
Procedures Governing the Settlement of Disputes a nd Article 4.11 of the Agreement... | 2026-03-15T15:46:31.602170 | |
267 | 267 | DS267_SEQ33_Communication_16.pdf | DS267_SEQ33_Communication_16.pdf | 33 | Communication | Communication from Brazil | NUMBERED | null | 16 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 15 October 2008 | WT/DS267/39; WT/DS267/26; WT/DS267/27 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Brazil
The following communication, dated 25 Augus t 2008, addressed to Mr. Darius Rosati, the
Chairman of the Arbitrator, has been received from the delegation of Brazil.
Cotton (). As the United States obj ected to Brazil's request on 17 October 2005
(... | 2026-03-15T15:46:31.602599 | |
267 | 267 | DS267_SEQ34_Communication_17.pdf | DS267_SEQ34_Communication_17.pdf | 34 | Communication | Communication from Brazil | NUMBERED | null | 17 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 30 September 2009 | WT/DS267/40; WT/DS267/ARB/1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Brazil
The following communication, dated 25 Septembe r 2009, from the delegation of Brazil to the
delegation of the United States and to the Chairman of the Dispute Settlement Body, is circulated at
the request of that delegation.
– Recourse to Arbitra... | 2026-03-15T15:46:31.603912 | |
267 | 267 | DS267_SEQ35_Communication_18.pdf | DS267_SEQ35_Communication_18.pdf | 35 | Communication | Communication from Brazil | NUMBERED | null | 18 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 12 March 2010 | WT/DS267/43; WT/DS267/ARB/1. | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 5 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Brazil
The following communication, dated 8 March 2010, from the delegation of Brazil to the
Chairman of the Dispute Settlement Body, is circulated at the request of that delegation.
On 19 November 2009, the Dispute Settlement Body ("DSB") authorized Br... | 2026-03-15T15:46:31.605677 | |
267 | 267 | DS267_SEQ36_Communication_19.pdf | DS267_SEQ36_Communication_19.pdf | 36 | Communication | Communication from Brazil | NUMBERED | null | 19 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 5 May 2010 | WT/DS267/44 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Communication from Brazil
The following communication, dated 30 April 2010, from the delegation of Brazil to the
Chairman of the Dispute Settlement Body, is circulated at the request of that delegation.
On 8 March 2010, Brazil sent to the Chairman of the Dispute Settlemen... | 2026-03-15T15:46:31.606080 | |
267 | 267 | DS267_SEQ37_Communication_20.pdf | DS267_SEQ37_Communication_20.pdf | 37 | Communication | Joint Communication from Brazil and the United States | NUMBERED | null | 20 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 31 August 2010 | WT/DS267/45 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 5 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Joint Communication from Brazil and the United States
The following communication, dated 25 August 2010, from the delegations of Brazil and the
United States to the Chairperson of the Dispute Settle ment Body, is circulated at the request of those
delegations.
On 30 April ... | 2026-03-15T15:46:31.608472 | |
267 | 267 | DS267_SEQ38_Notification_Of_Mutually_Agreed_Solution.pdf | DS267_SEQ38_Notification_Of_Mutually_Agreed_Solution.pdf | 38 | Notification_Of_Mutually_Agreed_Solution | NOTIFICATION OF A MUTUALLY AGREED SOLUTION | NUMBERED | null | null | UNITED STATES – SUBSIDIES ON UPLAND COTTON NOTIFICATION OF A MUTUALLY AGREED SOLUTION | 23 October 2014 | WT/DS267/46 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 6 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
NOTIFICATION OF A MUTUALLY AGREED SOLUTION
The following communication, dated 16 October 201 4, from the delegation of Brazil and the
delegation of the United States to the Chairper son of the Dispute Settlement Body, is circulated
pursuant to Article 3.6 of the DSU.
In conne... | 2026-03-15T15:46:31.611161 | |
267 | 267 | DS267_SEQ39_Executive_Summary_Add_03.pdf | DS267_SEQ39_Executive_Summary_Add_03.pdf | 39 | Executive_Summary | 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 | NUMBERED | Add | 3 | null | WT/DS267/R/Add.1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 121 | 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 Openi ng Statement of the Un... | 2026-03-15T15:46:31.690461 | ||
267 | 267 | DS267_SEQ40_Executive_Summary_Add_04.pdf | DS267_SEQ40_Executive_Summary_Add_04.pdf | 40 | Executive_Summary | WT/DS267/R/Add.1 Page E-1 ANNEX E SUBMISSIONS OF PARTIES AND THIRD PARTIES FOR THE RESUMED SESSION OF THE FIRST SUBSTANTIVE MEETING ("FURTHER SUBMISSIONS") Contents Page Annex E-1 Executive Summary of Brazil's Further Submission E-2 Annex E-2 Executive Summary of United States Further Submission E-8 | NUMBERED | Add | 4 | null | WT/DS267/R/Add.1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 54 | ANNEX E
SUBMISSIONS OF PARTIES AND THIRD PARTIES FOR THE
RESUMED SESSION OF THE FIRST SUBSTANTIVE MEETING
("FURTHER SUBMISSIONS")
Contents Page
Annex E-1 Executive Summary of Brazil's Further Submission E-2
Annex E-2 Executive Summary of United States Further Submission E-8
Annex E-3 Third Party Further Submission of... | 2026-03-15T15:46:31.717887 | ||
267 | 267 | DS267_SEQ41_Submission_Add_05.pdf | DS267_SEQ41_Submission_Add_05.pdf | 41 | Submission | WT/DS267/R/Add.1 Page E-55 ANNEX E-5 CANADA'S FURTHER THIRD PARTY SUBMISSION | NUMBERED | Add | 5 | 3 October 2003 | WT/DS267/R/Add.1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 27 | ANNEX E-5
CANADA'S FURTHER THIRD PARTY SUBMISSION
Canada’s systemic interest in this case lies in the interpretation of the provisions of Article 13
and Annex 2 of the Agreement on Agriculture , as they related to certain US domestic support
measures. It also lies in the interpretation of the export subsidy provisio... | 2026-03-15T15:46:31.731834 | ||
267 | 267 | DS267_SEQ42_Executive_Summary_Add_06.pdf | DS267_SEQ42_Executive_Summary_Add_06.pdf | 42 | Executive_Summary | WT/DS267/R/Add.1 Page F-1 ANNEX F ORAL STATEMENTS OF PARTIES AND THIRD PARTIES AT THE RESUMED SESSION OF THE FIRST SUBSTANTIVE MEETING Contents Page Annex F-1 Executive Summary of the Opening Statement of Brazil F-2 Annex F-2 Executive Summary of the Closing Statement of Brazil F-7 Annex F-3 Executive Summary of the Op... | NUMBERED | Add | 6 | null | WT/DS267/R/Add.1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 81 | ANNEX F
ORAL STATEMENTS OF PARTIES AND THIRD PARTIES AT THE
RESUMED SESSION OF THE FIRST SUBSTANTIVE MEETING
Contents Page
Annex F-1 Executive Summary of the Opening Statement of Brazil F-2
Annex F-2 Executive Summary of the Closing Statement of Brazil F-7
Annex F-3 Executive Summary of the Openi ng Statement of the ... | 2026-03-15T15:46:31.778440 | ||
267 | 267 | DS267_SEQ43_Terms_Of_Reference_Add2_03.pdf | DS267_SEQ43_Terms_Of_Reference_Add2_03.pdf | 43 | Terms_Of_Reference | Terms of Reference | NUMBERED | Add | 3 | 22 December 2003 | WT/DS267/R/Add.2 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 165 | Table of Cases
Short Title Full Case and Citation
Korea – Beef GATT Panel Report, Republic of Korea – Restrictions on Imports of Beef –
Complaint by the United States, BISD 36S/268, adopted on 7 November 1989.
Japan – Alcoholic
Beverages
Appellate Body Report, Japan – Taxes on Alcoholic Beverages, ,
adopted 1 November... | 2026-03-15T15:46:31.876901 | ||
267 | 267 | DS267_SEQ44_Terms_Of_Reference_Add2_05.pdf | DS267_SEQ44_Terms_Of_Reference_Add2_05.pdf | 44 | Terms_Of_Reference | COMMENTS OF THE UNITED STATES ON THE ANSWERS OF BRAZIL TO FURTHER QUESTIONS FROM THE PANEL TO THE PARTIES FOLLOWING THE SECOND PANEL MEETING (28 January 2004) A. Terms of Reference | NUMBERED | Add | 5 | 28 January 2004 | WT/DS267/R/Add.2 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 176 | ANNEX I-14
COMMENTS OF THE UNITED STATES ON THE ANSWERS OF
BRAZIL TO FURTHER QUESTIONS FROM THE PANEL TO
THE PARTIES FOLLOWING THE SECOND PANEL MEETING
(28 January 2004)
A. Terms of Reference
194. Does the United States maintain its position stated in response to the Panel's Question
No. 67 that "it would not be ap... | 2026-03-15T15:46:31.999416 | ||
267 | 267 | DS267_SEQ45_Working_Procedures_Add3_04.pdf | DS267_SEQ45_Working_Procedures_Add3_04.pdf | 45 | Working_Procedures | WT/DS267/R/Add.3 Page M-1 ANNEX M WORKING PROCEDURES AND TIMETABLE OF THE PANEL Contents Page Annex M-1 Working Procedures for the Panel M-2 Annex M-2 Timetable M-5 | NUMBERED | Add | 4 | null | WT/DS267/R/Add.3 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 7 | ANNEX M
WORKING PROCEDURES AND TIMETABLE OF THE PANEL
Contents Page
Annex M-1 Working Procedures for the Panel M-2
Annex M-2 Timetable M-5
ANNEX M-1
WORKING PROCEDURES FOR THE PANEL
1. In its proceedings the Panel shall follow the relevant provisions of the Dispute Settlement
Understanding (DSU). In addition, the ... | 2026-03-15T15:46:32.002594 | ||
267 | 267 | DS267_SEQ46_Request_For_Establishment_Of_Panel_Add3_05.pdf | DS267_SEQ46_Request_For_Establishment_Of_Panel_Add3_05.pdf | 46 | Request_For_Establishment_Of_Panel | WT/DS267/R/Add.3 Page N-1 ANNEX N REQUEST FOR CONSULTATIONS AND REQUEST FOR THE ESTABLISHMENT OF A PANEL Contents Page Annex N-1 Request for Consultations by Brazil N-2 Annex N-2 Request for the Establis hment of a Panel by Brazil N-11 | NUMBERED | Add | 5 | null | WT/DS267/R/Add.3 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 15 | ANNEX N
REQUEST FOR CONSULTATIONS AND REQUEST
FOR THE ESTABLISHMENT OF A PANEL
Contents Page
Annex N-1 Request for Consultations by Brazil N-2
Annex N-2 Request for the Establis hment of a Panel by Brazil N-11
ANNEX N-1
UNITED STATES – SUBSIDIES ON UPLAND COTTON
Request for Consultations by Brazil
The following ... | 2026-03-15T15:46:32.009701 | ||
267 | 267 | DS267_SEQ47_Executive_Summary_01.pdf | DS267_SEQ47_Executive_Summary_01.pdf | 47 | Executive_Summary | WT/DS267/RW Page A-1 ANNEX A FIRST WRITTEN SUBMISSIONS OF PARTIES AND THIRD PARTIES Contents Page Annex A-1 Executive Summary of the First Written Submission of Brazil (Executive summary submitted on 24 November 2006) | NUMBERED | null | 1 | 24 November 2006 | WT/DS267/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 174 | ANNEX A
FIRST WRITTEN SUBMISSIONS OF PARTIES
AND THIRD PARTIES
Contents Page
Annex A-1 Executive Summary of the First Written Submission of Brazil
(Executive summary submitted on 24 November 2006)
A-2
Annex A-2 Executive Summary of the First Written Submission of the
United States (Including Request for preliminary r... | 2026-03-15T15:46:32.109149 | ||
267 | 267 | DS267_SEQ48_Submission_02.pdf | DS267_SEQ48_Submission_02.pdf | 48 | Submission | Oral Statements | NUMBERED | null | 2 | 1 November 2006 | WT/DS267/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 133 | ANNEX D
RESPONSES OF PARTIES TO THE PANEL'S QUESTIONS
AND OTHER COMMENTS AND DOCUMENTS
RECEIVED FROM PARTIES
Contents Page
Annex D-1 Brazil's Request for the Panel to Seek Production of
Documents and Information Pursuant to Article 13 of the
DSU – 1 November 2006
D-2
Annex D-2 Responses of Brazil to the Panel's Quest... | 2026-03-15T15:46:32.188916 | ||
267 | 267 | DS267_SEQ49_Request_For_Consultations.pdf | DS267_SEQ49_Request_For_Consultations.pdf | 49 | Request_For_Consultations | Request for Consultations by Brazil | NUMBERED | null | null | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 3 October 2002 | WT/DS267/1; G/L/571; G/SCM/D49/1; G/AG/GEN/54 | Agriculture (AG); General Council; Subsidies and Countervailing Measures (SCM) | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 9 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Request for Consultations by Brazil
The following communication, dated 27 September 2002, from the Permanent Mission of
Brazil to the Permanent Mission of the United States and to the Chairman of the Dispute Settlement
Body, is circulated in accordance with Article 4.4 of the ... | 2026-03-15T15:46:32.193238 |
267 | 267 | DS267_SEQ50_Report_Of_Panel.pdf | DS267_SEQ50_Report_Of_Panel.pdf | 50 | Report_Of_Panel | Report of the Panel | PANEL_REPORT | null | null | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 8 September 2004 | WT/DS267/R | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 377 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Report of the Panel
I. INTRODUCTION
1.1 On 27 September 2002, the Government of Brazil requested consultations with the
Government of the United States pursuant to Articles 4.1, 7.1 and 30 of the Agreement on Subsidies
and Countervailing Measures (" SCM Agreement" ), Article... | 2026-03-15T15:46:32.471858 | |
267 | 267 | DS267_SEQ51_Report_Of_Panel_Add_01.pdf | DS267_SEQ51_Report_Of_Panel_Add_01.pdf | 51 | Report_Of_Panel | Report of the Panel Addendum | PANEL_REPORT | Add | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 8 September 2004 | WT/DS267/R/Add.1; WT/DS267/R. | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Report of the Panel
Addendum
This addendum contains the annexes A-H to th e Report of the Panel to be found in document
Annex I can be found in Add.2 and Annexes J-O can be found in Add.3. | 2026-03-15T15:46:32.472144 | |
267 | 267 | DS267_SEQ52_Report_Of_Panel_Add_02.pdf | DS267_SEQ52_Report_Of_Panel_Add_02.pdf | 52 | Report_Of_Panel | WT/DS267/R/Add.1 Page A-1 ANNEX A INITIAL BRIEFS OF PARTIES AND THIRD PARTIES Contents Page Annex A-1 Initial Brief from Brazil (5 June 2003) A-2 Annex A-2 Initial Brief from the United States (5 June 2003) A-10 | PANEL_REPORT | Add | 2 | 5 June 2003 | WT/DS267/R/Add.1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 156 | ANNEX A
INITIAL BRIEFS OF PARTIES AND THIRD PARTIES
Contents Page
Annex A-1 Initial Brief from Brazil (5 June 2003) A-2
Annex A-2 Initial Brief from the United States (5 June 2003) A-10
Annex A-3 Third Party Initial Brief from Argentina (10 June 2003) A-15
Annex A-4 Third Party Initial Brief from Australia (10 June 2... | 2026-03-15T15:46:32.564943 | ||
267 | 267 | DS267_SEQ53_Report_Of_Panel_Add2_00.pdf | DS267_SEQ53_Report_Of_Panel_Add2_00.pdf | 53 | Report_Of_Panel | Report of the Panel Addendum | PANEL_REPORT | Add | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 8 September 2004 | WT/DS267/R/Add.2; WT/DS267/R. | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Report of the Panel
Addendum
This addendum contains the Annex I to the Report of the Panel to be found in document
Annexes A-H can be found in Add.1 and Annexes J-O can be found in Add.3. | 2026-03-15T15:46:32.565214 | |
267 | 267 | DS267_SEQ54_Report_Of_Panel_Add2_01.pdf | DS267_SEQ54_Report_Of_Panel_Add2_01.pdf | 54 | Report_Of_Panel | WT/DS267/R/Add.2 Page I-1 ANNEX I ANSWERS OF PARTIES TO THE PANEL'S QUESTIONS AND OTHER COMMENTS AND DOCUMENTS RECEIVED FROM PARTIES Contents Page Annex I-1 Answers of Brazil to the Panel's Questions Posed Following the First Session of the First Subs tantive Meeting (11 August 2003) | PANEL_REPORT | Add | 1 | 11 August 2003 | WT/DS267/R/Add.2 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 169 | ANNEX I
ANSWERS OF PARTIES TO THE PANEL'S QUESTIONS AND
OTHER COMMENTS AND DOCUMENTS RECEIVED FROM PARTIES
Contents Page
Annex I-1 Answers of Brazil to the Panel's Questions Posed Following the
First Session of the First Subs tantive Meeting (11 August 2003)
I-3
Annex I-2 Answers of the United States to the Panel's ... | 2026-03-15T15:46:32.683905 | ||
267 | 267 | DS267_SEQ55_Report_Of_Panel_Add2_02.pdf | DS267_SEQ55_Report_Of_Panel_Add2_02.pdf | 55 | Report_Of_Panel | WT/DS267/R/Add.2 Page I-170 ANNEX I-5 ANSWERS OF BRAZIL TO QUESTIONS POSED BY THE PANEL FOLLOWING THE RESUMED FIRST SUBSTANTIVE MEETING OF THE PANEL | PANEL_REPORT | Add | 2 | 27 October 2003 | WT/DS267/R/Add.2 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 105 | Table of Cases
Short Title Full Case and Citation
EC – Sugar Exports II
(Brazil)
GATT Panel Report, European Communities – Refunds on Exports of
Sugar Complaint by Brazil, L/5011 – 27S/69, adopted
10 November, 1980.
EEC – Wheat Flour GATT Panel Report, European Economic Community – Subsidies on
Export of Wheat Flour, ... | 2026-03-15T15:46:32.751587 | ||
267 | 267 | DS267_SEQ56_Report_Of_Panel_Add2_04.pdf | DS267_SEQ56_Report_Of_Panel_Add2_04.pdf | 56 | Report_Of_Panel | BRAZIL’S COMMENTS ON THE 22 DECEMBER US COMMENTS CONCERNING BRAZIL’S ECONOMETRIC MODEL | PANEL_REPORT | Add | 4 | 20 January 2004 | WT/DS267/R/Add.2 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 112 | I. BRAZIL’S INTRODUCTORY COMMENTS
1. Brazil’s response to the US 22 December 2003 Comments Concerning Brazil’s Econometric
Model (“US Critique”) is divided into two parts. First, Brazil provides some introductory comments
setting the US Critique into perspective. And, second, Brazil offers Professor Sumner’s detailed
... | 2026-03-15T15:46:32.831286 | ||
267 | 267 | DS267_SEQ57_Report_Of_Panel_Add2_06.pdf | DS267_SEQ57_Report_Of_Panel_Add2_06.pdf | 57 | Report_Of_Panel | COMMENTS OF THE UNITED STATES TO THE 11 FEBRUARY 2004 ANSWERS OF BRAZIL TO PANEL QUESTION 276 | PANEL_REPORT | Add | 6 | 11 February 2004 | WT/DS267/R/Add.2 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 130 | ANNEX I-21
COMMENTS OF THE UNITED STATES
TO THE 11 FEBRUARY 2004 ANSWERS
OF BRAZIL TO PANEL QUESTION 276
Question 276. “The Panel notes the parties' responses and comments relating to Question
No. 252 concerning the time period within whic h any prohibited measure must be withdrawn
within the meaning of Article 4.7 o... | 2026-03-15T15:46:32.917014 | ||
267 | 267 | DS267_SEQ58_Report_Of_Panel_Add3_00.pdf | DS267_SEQ58_Report_Of_Panel_Add3_00.pdf | 58 | Report_Of_Panel | Report of the Panel Addendum | PANEL_REPORT | Add | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 8 September 2004 | WT/DS267/R/Add.3; WT/DS267/R. | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Report of the Panel
Addendum
This addendum contains the Annexes J-O to th e Report of the Panel to be found in document
Annexes A-H can be found in Add.1 and Annex I can be found in Add.2. | 2026-03-15T15:46:32.917262 | |
267 | 267 | DS267_SEQ59_Report_Of_Panel_Add3_01.pdf | DS267_SEQ59_Report_Of_Panel_Add3_01.pdf | 59 | Report_Of_Panel | WT/DS267/R/Add.3 Page J-1 ANNEX J ANSWERS OF THIRD PARTIES TO THE QUESTIONS FROM THE PANEL AND FROM OTHER THIRD PARTIES', AND COMMENTS THERETO Contents Page Annex J-1 Answers of Argentina to th e Panel's Questions Posed Following the | PANEL_REPORT | Add | 1 | 11 August 2003 | WT/DS267/R/Add.3 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 159 | ANNEX J
ANSWERS OF THIRD PARTIES TO THE QUESTIONS
FROM THE PANEL AND FROM OTHER THIRD PARTIES',
AND COMMENTS THERETO
Contents Page
Annex J-1 Answers of Argentina to th e Panel's Questions Posed Following the
First Session of the First Subs tantive Meeting (11 August 2003)
J-3
Annex J-2 Answers of Australia to the Pa... | 2026-03-15T15:46:33.010228 | ||
267 | 267 | DS267_SEQ60_Report_Of_Panel_Add3_02.pdf | DS267_SEQ60_Report_Of_Panel_Add3_02.pdf | 60 | Report_Of_Panel | WT/DS267/R/Add.3 Page K-1 ANNEX K COMMUNICATIONS FROM PARTIES AND THIRD PARTIES Contents Page Annex K-1 United States letter of 21 May 2003 K-3 | PANEL_REPORT | Add | 2 | 21 May 2003 | WT/DS267/R/Add.3 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 93 | ANNEX K
COMMUNICATIONS FROM PARTIES AND THIRD PARTIES
Contents Page
Annex K-1 United States letter of 21 May 2003 K-3
Annex K-2 Brazil's letter of 23 May 2003 K-5
Annex K-3 Brazil's letter of 14 July 2003 K-9
Annex K-4 United States letter of 29 July 2003 K-10
Annex K-5 Brazil's letter of 29 July 2003 K-11
Annex K-6 ... | 2026-03-15T15:46:33.053011 | ||
267 | 267 | DS267_SEQ61_Report_Of_Panel_Add3_03.pdf | DS267_SEQ61_Report_Of_Panel_Add3_03.pdf | 61 | Report_Of_Panel | WT/DS267/R/Add.3 Page L-1 ANNEX L COMMUNICATIONS FROM THE PANEL Contents Page L-1. Communications to Parties Annex L-1.1 Communication of 21 May 2003 L-2 | PANEL_REPORT | Add | 3 | 21 May 2003 | WT/DS267/R/Add.3 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 98 | ANNEX L
COMMUNICATIONS FROM THE PANEL
Contents Page
L-1. Communications to Parties
Annex L-1.1 Communication of 21 May 2003 L-2
Annex L-1.2 Communication of 27 May 2003 L-3
Annex L-1.3 Communication of 28 May 2003 L-4
Annex L-1.4 Communication of 20 June 2003 L-6
Annex L-1.5 Communication of 25 July 2003 L-11
Annex L... | 2026-03-15T15:46:33.094282 | ||
267 | 267 | DS267_SEQ62_Report_Of_Panel_Add3_06.pdf | DS267_SEQ62_Report_Of_Panel_Add3_06.pdf | 62 | Report_Of_Panel | WT/DS267/R/Add.3 Page O-1 ANNEX O LIST OF EXHIBITS Contents Page Annex O-1 List of Exhibits of Brazil O-2 Annex O-2 List of Exhibits of the United States O-24 | PANEL_REPORT | Add | 6 | null | WT/DS267/R/Add.3 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 32 | ANNEX O
LIST OF EXHIBITS
Contents Page
Annex O-1 List of Exhibits of Brazil O-2
Annex O-2 List of Exhibits of the United States O-24
ANNEX O-1
TABLE OF EXHIBITS OF BRAZIL
Exhibit BRA-1 Draft Understanding on Rul es and Procedures Governing the Settlement
of Disputes, 15 June 1992
Exhibit BRA-2 Draft Understanding ... | 2026-03-15T15:46:33.104345 | ||
267 | 267 | DS267_SEQ63_Report_Of_Panel_Corr.pdf | DS267_SEQ63_Report_Of_Panel_Corr.pdf | 63 | Report_Of_Panel | Report of the Panel Corrigendum | PANEL_REPORT | Corr | null | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 8 September 2004 | WT/DS267/R/Corr.1; WT/DS267/R | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 2 | ∗
UNITED STATES – SUBSIDIES ON UPLAND COTTON
Report of the Panel
Corrigendum
The following corrections should be made to document :
paragraph 6.9
"paragraph 7.227" should read "paragraph 7.277".
paragraph 6.22
"paragraph 7.6314" should read "paragraph 7.634".
paragraph 6.52
"footnote 1374" should read "foo... | 2026-03-15T15:46:33.105131 | |
267 | 267 | DS267_SEQ64_Report_Of_Panel_00.pdf | DS267_SEQ64_Report_Of_Panel_00.pdf | 64 | Report_Of_Panel | Recourse to Article 21.5 of the DSU by Brazil Report of the Panel | PANEL_REPORT | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 18 December 2007 | WT/DS267/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 204 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Report of the Panel
I. INTRODUCTION
1.1 On 18 August 2006, Brazil requested the establishm ent of a panel pursuant to Article 21.5 of
the Dispute Settlement Understanding ("DSU") concer ning the alleged failure of the United Sta... | 2026-03-15T15:46:33.253206 | |
267 | 267 | DS267_SEQ65_Report_Of_Panel_03.pdf | DS267_SEQ65_Report_Of_Panel_03.pdf | 65 | Report_Of_Panel | (27 February 2007) TABLE OF CONTENTS Page Table of Exhibits 135 A. G ENERAL QUESTIONS 136 B. Q UESTIONS WITH RESPECT TO BRAZIL'S REQUEST UNDER ARTICLE 13.1 DSU 137 C. Q UESTIONS CONCERNING THE PRELIMINARY OBJECTIONS RAISED BY THE UNITED STATES 141 | PANEL_REPORT | null | 3 | FIRST SET OF QUESTIONS (SECTIONS A-C) | 27 February 2007 | WT/DS267/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 135 | Table of Exhibits
Exhibit US- Title
112 CCC Commodity Estimates Book, Feb. 5, 2007 (Program Yields)
A. G
ENERAL QUESTIONS
Questions to both parties
1. Is Brazil/US of the view that a party to a dispute referred to a panel established
under Article 21.5 of the DSU (a party in a compliance panel) can make the same
le... | 2026-03-15T15:46:33.340530 | |
267 | 267 | DS267_SEQ66_Report_Of_Panel_04.pdf | DS267_SEQ66_Report_Of_Panel_04.pdf | 66 | Report_Of_Panel | RESPONSES OF BRAZIL TO THE PANEL'S SECOND SET OF QUESTIONS (2 April 2007) TABLE OF CONTENTS Page LIST OF ABBREVIATIONS 270 TABLE OF CASES 271 | PANEL_REPORT | null | 4 | 2 April 2007 | WT/DS267/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 174 | LIST OF ABBREVIATIONS
AMS Aggregate Measurement of Support
Arrangement OECD Arrangement on Offi cially Supported Export Credits
AWP Adjusted World Price
CCC U.S. Commodity Credit Corporation
CCPs Counter-Cyclical Payments
CVD Countervailing Duty
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Gov... | 2026-03-15T15:46:33.459427 | ||
267 | 267 | DS267_SEQ67_Report_Of_Panel_05.pdf | DS267_SEQ67_Report_Of_Panel_05.pdf | 67 | Report_Of_Panel | BRAZIL'S COMMENTS ON THE RESPONSES OF THE UNITED STATES TO THE PANEL'S SECOND SET OF QUESTIONS (24 April 2007) TABLE OF CONTENTS Page LIST OF ABBREVIATIONS 444 | PANEL_REPORT | null | 5 | 24 April 2007 | WT/DS267/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 132 | LIST OF ABBREVIATIONS
Arrangement OECD Arrangement on Offi cially Supported Export Credits
AWP Adjusted World Price
BSC Bond Street Capital
CCC U.S. Commodity Credit Corporation
CCPs Counter-Cyclical Payments
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes
ECG... | 2026-03-15T15:46:33.552102 | ||
267 | 267 | DS267_SEQ68_Report_Of_Panel_06.pdf | DS267_SEQ68_Report_Of_Panel_06.pdf | 68 | Report_Of_Panel | WT/DS267/RW Page E-1 ANNEX E COMMUNICATIONS FROM PARTIES Contents Page Annex E-1 Letter of the United St ates dated 7 November 2006 E-2 Annex E-2 Letter of the United St ates dated 20 November 2006 E-5 Annex E-3 Letter of the United St ates dated 21 November 2006 E-8 | PANEL_REPORT | null | 6 | 7 November 2006 | WT/DS267/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 46 | ANNEX E
COMMUNICATIONS FROM PARTIES
Contents Page
Annex E-1 Letter of the United St ates dated 7 November 2006 E-2
Annex E-2 Letter of the United St ates dated 20 November 2006 E-5
Annex E-3 Letter of the United St ates dated 21 November 2006 E-8
Annex E-4 Letter of Brazil dated 22 November 2006 E-10
Annex E-5 Letter... | 2026-03-15T15:46:33.575747 | ||
267 | 267 | DS267_SEQ69_Report_Of_Panel_Corr.pdf | DS267_SEQ69_Report_Of_Panel_Corr.pdf | 69 | Report_Of_Panel | Recourse to Article 21.5 of the DSU by Brazil Report of the Panel Corrigendum In paragraph 7.8 last line, "Sec tion IX.A.3" should read "Section IX.B.3". In footnote 613, "Article 21 of the Vienna Convention" should read "Article 27 of the Vienna Convention". | PANEL_REPORT | Corr | null | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 20 December 2007 | WT/DS267/RW/Corr.1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Report of the Panel
Corrigendum
In paragraph 7.8 last line, "Sec tion IX.A.3" should read "Section IX.B.3".
In footnote 613, "Article 21 of the Vienna Convention" should read "Article 27 of the Vienna
Convention". | 2026-03-15T15:46:33.575941 | |
267 | 267 | DS267_SEQ70_Appellate_Body_Report_And_Panel_Report_00.pdf | DS267_SEQ70_Appellate_Body_Report_And_Panel_Report_00.pdf | 70 | Appellate_Body_Report_And_Panel_Report | Appellate Body Report and Panel Report Action by the Dispute Settlement Body | AB_REPORT | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 24 March 2005 | WT/DS267/20; WT/DS267/AB/R; WT/DS267/R | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Appellate Body Report and Panel Report
Action by the Dispute Settlement Body
At its meeting on 21 March 2005, the Disput e Settlement Body adopted the Appellate Body
report on () and the Panel report
( and Corr.1, Add.1, Add.2 and Add.3), as modified by the Appellate Body ... | 2026-03-15T15:46:33.576411 | |
267 | 267 | DS267_SEQ71_Report_Of_Appellate_Body_00.pdf | DS267_SEQ71_Report_Of_Appellate_Body_00.pdf | 71 | Report_Of_Appellate_Body | Appellate Body report | AB_REPORT | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 7 October 2005 | WT/DS267/26 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 3 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 7.9 of the SCM Agreement
and Article 22.2 of the DSU by Brazil
The following communication, dated 6 Octobe r 2005, from the delegation of Brazil to the
Chairman of the Dispute Settlement Body, is circulated pursuant to Article 7.9 of the SCM Agreement
a... | 2026-03-15T15:46:33.577607 | |
267 | 267 | DS267_SEQ72_Appellate_Body_Report_And_Panel_Report_01.pdf | DS267_SEQ72_Appellate_Body_Report_And_Panel_Report_01.pdf | 72 | Appellate_Body_Report_And_Panel_Report | Appellate Body Report and Panel Report pursuant to Article 21.5 of the DSU Action by the Dispute Settlement Body | AB_REPORT | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 26 June 2008 | WT/DS267/37; WT/DS267/AB/RW; WT/DS267/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Appellate Body Report and Panel Report pursuant to Article 21.5 of the DSU
Action by the Dispute Settlement Body
At its meeting on 20 June 2008, the Dispute Settlement Body adopted the Appellate Body
report on : Recourse to Article 21.5 of the DSU by Brazil
() and the Pane... | 2026-03-15T15:46:33.578123 | |
267 | 267 | DS267_SEQ73_Report_Of_Appellate_Body_01.pdf | DS267_SEQ73_Report_Of_Appellate_Body_01.pdf | 73 | Report_Of_Appellate_Body | Appellate Body report | AB_REPORT | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 9 November 2009 | WT/DS267/42 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 7.9 of the SCM Agreement and Article 22.7 of the DSU by Brazil
The following communication, dated 6 November 2009, from the Permanent Mission of
Brazil to the Chairman of the Dispute Settlement Bo dy, is circulated pursuant to Article 22.7 of the
DSU and... | 2026-03-15T15:46:33.579111 | |
267 | 267 | DS267_SEQ74_Report_Of_Appellate_Body_02.pdf | DS267_SEQ74_Report_Of_Appellate_Body_02.pdf | 74 | Report_Of_Appellate_Body | Report of the Appellate Body | AB_REPORT | null | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 3 March 2005 | WT/DS267/AB/R | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 311 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
AB-2004-5
Report of the Appellate Body
APPELLATE BODY
United States, Appellant/Appellee
Brazil, Appellant/Appellee
Argentina, Third Participant
Australia, Third Participant
Benin, Third Participant
Canada, Third Participant
Chad, Third Participant
China, Third Participant... | 2026-03-15T15:46:33.731633 | |
267 | 267 | DS267_SEQ75_Recourse_00.pdf | DS267_SEQ75_Recourse_00.pdf | 75 | Recourse | Recourse to Article 4.10 of the SCM Agreement and Article 22.2 of the DSU by Brazil | RECOURSE | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 5 July 2005 | WT/DS267/21 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 3 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 4.10 of the SCM Agreement and Article 22.2 of the DSU by Brazil
The following communication, dated 4 July 2005, from the delegation of Brazil to the
Chairman of the Dispute Settleme nt Body, is circulated pursuant to Article 4.10 of the
SCM Agreement and... | 2026-03-15T15:46:33.733217 | |
267 | 267 | DS267_SEQ76_Recourse_01.pdf | DS267_SEQ76_Recourse_01.pdf | 76 | Recourse | Recourse to Article 21.5 of the DSU by Brazil Notification of an Other Appeal by Brazil under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 23(1) of the Working Procedures for Appellate Review | RECOURSE | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 29 February 2008 | WT/DS267/34 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 21.5 of the DSU by Brazil
Notification of an Other Appeal by Brazil
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),
and under Rule 23(1) of the Working Procedures for Appellate Rev... | 2026-03-15T15:46:33.734308 | |
267 | 267 | DS267_SEQ77_Recourse_02.pdf | DS267_SEQ77_Recourse_02.pdf | 77 | Recourse | Recourse to Article 4.10 of the SCM Agreement and Article 22.7 of the DSU by Brazil | RECOURSE | null | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 9 November 2009 | WT/DS267/41 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Article 4.10 of the SCM Agreement and Article 22.7 of the DSU by Brazil
The following communication, dated 6 November 2009, from the Permanent Mission of
Brazil to the Chairman of the Dispute Settlement Bo dy, is circulated pursuant to Article 22.7 of the
DSU an... | 2026-03-15T15:46:33.735344 | |
267 | 267 | DS267_SEQ78_Recourse_03.pdf | DS267_SEQ78_Recourse_03.pdf | 78 | Recourse | RECOURSE TO ARTICLE 21.5 OF THE DSU BY BRAZIL AB-2008-2 | RECOURSE | null | 3 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 2 June 2008 | WT/DS267/AB/RW | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 194 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
RECOURSE TO ARTICLE 21.5 OF THE DSU BY BRAZIL
AB-2008-2
Report of the Appellate Body
APPELLATE BODY
– Recourse to Article 21.5 of the DSU by Brazil
United States, Appellant/Appellee
Brazil, Other Appellant/Appellee
Argentina, Third Participant
Australia, Third Participa... | 2026-03-15T15:46:33.831192 | |
267 | 267 | DS267_SEQ79_Request_For_Arbitration_00.pdf | DS267_SEQ79_Request_For_Arbitration_00.pdf | 79 | Request_For_Arbitration | Request by the United States for Arbitration under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement | ARBITRATION | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 15 July 2005 | WT/DS267/23 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Request by the United States for Arbitration under Article 22.6 of the DSU
and Article 4.11 of the SCM Agreement
The following communication, dated 14 July 2005, from the Delegation of the United States
to the Chairman of the Dispute Settlement Body, is circulated pursuant... | 2026-03-15T15:46:33.831749 | |
267 | 267 | DS267_SEQ80_Request_For_Arbitration_01.pdf | DS267_SEQ80_Request_For_Arbitration_01.pdf | 80 | Request_For_Arbitration | Request by the United States for Arbitration under Article 22.6 of the DSU and Article 7.10 of the SCM Agreement | ARBITRATION | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 18 October 2005 | WT/DS267/27 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Request by the United States for Arbitration under Article 22.6 of the DSU
and Article 7.10 of the SCM Agreement
The following communication, dated 17 Oc tober 2005, from the delegation of the
United States to the Chairman of the Dispute Settleme nt Body, is circulated pur... | 2026-03-15T15:46:33.832240 | |
267 | 267 | DS267_SEQ81_Arbitration_Award_00.pdf | DS267_SEQ81_Arbitration_Award_00.pdf | 81 | Arbitration_Award | Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11 of the SCM Agreement DECISION BY THE ARBITRATOR | ARBITRATION | null | 0 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 31 August 2009 | WT/DS267/ARB/1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 152 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Arbitration by the United States
under Article 22.6 of the DSU
and Article 4.11 of the SCM Agreement
DECISION BY THE ARBITRATOR
I. INTRODUCTION
A. INITIAL PROCEEDINGS
1.1 On 21 March 2005, the Dispute Settlement Body ("DSB") adopted the Appellate Body report1
an... | 2026-03-15T15:46:33.924049 | |
267 | 267 | DS267_SEQ82_Arbitration_Award_01.pdf | DS267_SEQ82_Arbitration_Award_01.pdf | 82 | Arbitration_Award | Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 7.10 of the SCM Agreement DECISION BY THE ARBITRATOR | ARBITRATION | null | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 31 August 2009 | WT/DS267/ARB/2 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 132 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Arbitration by the United States
under Article 22.6 of the DSU
and Article 7.10 of the SCM Agreement
DECISION BY THE ARBITRATOR
I. INTRODUCTION
A. INITIAL PROCEEDINGS
1.1 On 21 March 2005, the Dispute Settlement Body ("DSB") adopted the Appellate Body report1
an... | 2026-03-15T15:46:33.997788 | |
267 | 267 | DS267_SEQ83_Arbitration_Award_02.pdf | DS267_SEQ83_Arbitration_Award_02.pdf | 83 | Arbitration_Award | Recourse to Arbitration by the United States under Article 22.6 of the DSU and Article 7.10 of the SCM Agreement Decision by the Arbitrator Corrigendum Paragraph 5.167, 3 rd sentence, should read: "The United States observes that medical sterilizers exported by Brazil exceed the imported amount from the United States i... | ARBITRATION | null | 2 | UNITED STATES – SUBSIDIES ON UPLAND COTTON | 31 August 2009 | WT/DS267/ARB/2/Corr.1 | ['Brazil'] | ['U.S.'] | ['Argentina', 'Australia', 'Benin', 'Canada', 'Chad', 'China', 'Taiwan', 'EU', 'India', 'New Zealand', 'Pakistan', 'Paraguay', 'Venezuela', 'Japan', 'Thailand'] | Mutually Agreed Solution | Art. 3, 5, 6 Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1 AgricultureArt. III:4, XVI GATT 1994 | The summary below was up-to-date at
30 October 2014
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Brazil.
On 27 September 2002 Brazil requested consultations with the United States regarding prohibited and actionable subsidies provided to US producers, users a... | 1 | UNITED STATES – SUBSIDIES ON UPLAND COTTON
Recourse to Arbitration by the United States under Article 22.6 of the DSU
and Article 7.10 of the SCM Agreement
Decision by the Arbitrator
Corrigendum
Paragraph 5.167, 3
rd sentence, should read:
"The United States observes that medical sterilizers exported by Brazil ex... | 2026-03-15T15:46:33.998133 | |
268 | 268 | DS268_SEQ01_Request_For_Consultations_01.pdf | DS268_SEQ01_Request_For_Consultations_01.pdf | 1 | Request_For_Consultations | Request for Consultations by Argentina | NUMBERED | null | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 10 October 2002 | WT/DS268/1; G/L/572; G/ADP/D43/1 | Anti-Dumping Practices (ADP); General Council | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 3 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Request for Consultations by Argentina
The following communication, dated 7 October 2002, from the Permanent Mission of
Argentina to the Permanent Mission of the United States and to the Chairman of the Dispute
Settlemen... | 2026-03-15T15:46:46.998070 |
268 | 268 | DS268_SEQ02_Request_For_Establishment_Of_Panel_00.pdf | DS268_SEQ02_Request_For_Establishment_Of_Panel_00.pdf | 2 | Request_For_Establishment_Of_Panel | Request for the Establishment of a Panel by Argentina | NUMBERED | null | 0 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 4 April 2003 | WT/DS268/2 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 5 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Request for the Establishment of a Panel by Argentina
The following communication, dated 3 April 2003, from the Permanent Mission of Argentina
to the Chairman of the Dispute Settlement Body, is circulated pursuant to Art... | 2026-03-15T15:46:47.000701 | |
268 | 268 | DS268_SEQ03_Note_By_Secretariat_00.pdf | DS268_SEQ03_Note_By_Secretariat_00.pdf | 3 | Note_By_Secretariat | Constitution of the Panel Established at the Request of Argentina Note by the Secretariat | NUMBERED | null | 0 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 9 September 2003 | WT/DS268/3; WT/DS268/2; WT/DS268/2 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Constitution of the Panel Established at the Request of Argentina
Note by the Secretariat
1. At its meeting on 19 May 2003, the Dispute Settlement Body established a Panel pursuant to
the request by Argentina in document... | 2026-03-15T15:46:47.001250 | |
268 | 268 | DS268_SEQ04_Communication_00.pdf | DS268_SEQ04_Communication_00.pdf | 4 | Communication | Communication from the Chairman of the Panel | NUMBERED | null | 0 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 4 March 2004 | WT/DS268/4 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Communication from the Chairman of the Panel
The following communication, dated 4 Marc h 2004, addressed to the Dispute Settlement
Body (DSB), is circulated pursuant to Article 12.9 of the Dispute Settlement Understan... | 2026-03-15T15:46:47.001666 | |
268 | 268 | DS268_SEQ05_Notification_Of_Appeal_00.pdf | DS268_SEQ05_Notification_Of_Appeal_00.pdf | 5 | Notification_Of_Appeal | Notification of an Appeal by the United States under paragraph 4 of Article 16 of the Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU") | NUMBERED | null | 0 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 31 August 2004 | WT/DS268/5 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 2 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Notification of an Appeal by the United States
under paragraph 4 of Article 16 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes ("DSU")
The following notification, dated 31 August 2004... | 2026-03-15T15:46:47.003088 | |
268 | 268 | DS268_SEQ06_Communication_01.pdf | DS268_SEQ06_Communication_01.pdf | 6 | Communication | Communication from the Appellate Body | NUMBERED | null | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 1 November 2004 | WT/DS268/6 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Communication from the Appellate Body
The following communication, dated 28 October 2004, from the Chairman of the Appellate
Body addressed to the Chair of the Dispute Settleme nt Body, is being circulated in accordan... | 2026-03-15T15:46:47.003577 | |
268 | 268 | DS268_SEQ07_Communication_02.pdf | DS268_SEQ07_Communication_02.pdf | 7 | Communication | Communication from the Appellate Body | NUMBERED | null | 2 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 29 November 2004 | WT/DS268/7; WT/DS268/AB/R. | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Communication from the Appellate Body
The following communication, dated 29 Nove mber 2004, from Mr. Georges Abi-Saab,
Chairman of the Appellate Body, addressed to th e Chair of the Dispute Settlement Body, is being
c... | 2026-03-15T15:46:47.003922 | |
268 | 268 | DS268_SEQ08_Extension_Of_Time_Period.pdf | DS268_SEQ08_Extension_Of_Time_Period.pdf | 8 | Extension_Of_Time_Period | Extension of Time Period under Article 21.3(c) of the DSU | NUMBERED | null | null | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 18 March 2005 | WT/DS268/10 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Extension of Time Period under Article 21.3(c) of the DSU
The following communication, dated 16 Marc h 2005, from the delegation of Argentina and
the delegation of the United States to the Chairman of the Dispute Sett... | 2026-03-15T15:46:47.004478 | |
268 | 268 | DS268_SEQ09_Note_By_Secretariat_01.pdf | DS268_SEQ09_Note_By_Secretariat_01.pdf | 9 | Note_By_Secretariat | Appointment of Arbitrator under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes Note by the Secretariat By joint letter dated 30 March 2005, Arge ntina and the United States requested Mr. A.V. Ganesan, Member of the Appellate Body, to act as arbitrator pursuant to Artic... | NUMBERED | null | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 12 April 2005 | WT/DS268/11 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON
OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Appointment of Arbitrator under Article 21.3(c) of the
Understanding on Rules and Procedures Governing the Settlement of Disputes
Note by the Secretariat
By joint letter dated 30 March 2005, Arge ntina and the Unite... | 2026-03-15T15:46:47.004739 | |
268 | 268 | DS268_SEQ10_Understanding_00.pdf | DS268_SEQ10_Understanding_00.pdf | 10 | Understanding | Arbitration under Article 21.3(c) of the Understanding on Rules and Procedures Governing the Settlement of Disputes | NUMBERED | null | 0 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 7 June 2005 | WT/DS268/13; WT/DS268/12 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON
OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Arbitration under Article 21.3(c) of the Understanding
on Rules and Procedures Governing the Settlement of Disputes
The following communication, dated 7 June 2 005, from the arbitrator, Mr. A.V. Ganesan,
to the Chair... | 2026-03-15T15:46:47.005026 | |
268 | 268 | DS268_SEQ11_Understanding_01.pdf | DS268_SEQ11_Understanding_01.pdf | 11 | Understanding | Understanding between Argentina and the United States Regarding Procedures under Articles 21 and 22 of the DSU | NUMBERED | null | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 9 January 2006 | WT/DS268/14 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 3 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Understanding between Argentina and the United States
Regarding Procedures under Articles 21 and 22 of the DSU
The following communication, dated 5 January 2006, from the delegation of Argentina and
the delegation of... | 2026-03-15T15:46:47.006326 | |
268 | 268 | DS268_SEQ12_Request_For_Consultations.pdf | DS268_SEQ12_Request_For_Consultations.pdf | 12 | Request_For_Consultations | Recourse to Article 21.5 of the DSU by Argentina Request for Consultations | NUMBERED | null | null | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 30 January 2006 | WT/DS268/15 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 5 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Recourse to Article 21.5 of the DSU by Argentina
Request for Consultations
The following communication, dated 26 January 2006, from the delegation of Argentina to
the delegation of the United States and to the Chairm... | 2026-03-15T15:46:47.009514 | |
268 | 268 | DS268_SEQ13_Request_For_Establishment_Of_Panel_01.pdf | DS268_SEQ13_Request_For_Establishment_Of_Panel_01.pdf | 13 | Request_For_Establishment_Of_Panel | Recourse to Article 21.5 of the DSU by Argentina Request for the Establishment of a Panel | NUMBERED | null | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 7 March 2006 | WT/DS268/16 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 6 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Recourse to Article 21.5 of the DSU by Argentina
Request for the Establishment of a Panel
The following communication, dated 6 March 2006, from the delegation of Argentina to the
Chairman of the Dispute Settlement Bo... | 2026-03-15T15:46:47.013687 | |
268 | 268 | DS268_SEQ14_Note_By_Secretariat_02.pdf | DS268_SEQ14_Note_By_Secretariat_02.pdf | 14 | Note_By_Secretariat | Recourse to Article 21.5 of the DSU by Argentina Constitution of the Panel Note by the Secretariat | NUMBERED | null | 2 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 28 March 2006 | WT/DS268/17; WT/DS268/16. | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Recourse to Article 21.5 of the DSU by Argentina
Constitution of the Panel
Note by the Secretariat
1. At its meeting on 17 March 2006, the Dispute Settlement Body (DSB) referred this dispute, if
possible, to the orig... | 2026-03-15T15:46:47.014063 | |
268 | 268 | DS268_SEQ15_Communication_03.pdf | DS268_SEQ15_Communication_03.pdf | 15 | Communication | Recourse to Article 21.5 of the DSU by Argentina Communication from the Chairman of the Panel | NUMBERED | null | 3 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 19 June 2006 | WT/DS268/18 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Recourse to Article 21.5 of the DSU by Argentina
Communication from the Chairman of the Panel
The following communication, dated 16 June 2006 , addressed to the Chairman of the Dispute
Settlement Body (DSB), is circu... | 2026-03-15T15:46:47.014500 | |
268 | 268 | DS268_SEQ16_Notification_Of_Appeal_01.pdf | DS268_SEQ16_Notification_Of_Appeal_01.pdf | 16 | Notification_Of_Appeal | Recourse to Article 21.5 of the DSU by Argentina Notification of an Appeal by the United States under Article 16.4 and Article 17 of the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU), and under Rule 20(1) of the Working Procedures for Appellate Review | NUMBERED | null | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 16 January 2007 | WT/DS268/19 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 2 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Recourse to Article 21.5 of the DSU by Argentina
Notification of an Appeal by the United States
under Article 16.4 and Article 17 of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU),... | 2026-03-15T15:46:47.015676 | |
268 | 268 | DS268_SEQ17_Communication_04.pdf | DS268_SEQ17_Communication_04.pdf | 17 | Communication | Recourse to Article 21.5 of the DSU by Argentina Communication from the Appellate Body | NUMBERED | null | 4 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 7 March 2007 | WT/DS268/21 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Recourse to Article 21.5 of the DSU by Argentina
Communication from the Appellate Body
The following communication, dated 6 March 2007, from the Chairman of the Appellate
Body addressed to the Chairman of the Dispute... | 2026-03-15T15:46:47.016192 | |
268 | 268 | DS268_SEQ18_Communication_05.pdf | DS268_SEQ18_Communication_05.pdf | 18 | Communication | Recourse to Article 21.5 of the DSU by Argentina Communication from the Appellate Body | NUMBERED | null | 5 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA | 13 April 2007 | WT/DS268/22 | ['Argentina'] | ['U.S.'] | ['China', 'EU', 'Japan', 'South Korea', 'Mexico', 'Taiwan'] | Implementation & Compliance | Art. 1, 2, 3, 6, 11, 12, 18, Annex II Anti-dumpingArt. VI, X GATT 1994Art. XVI:4 Agreement Establishing the World Trade Organization | The summary below was up-to-date at
24 February 2010
See also: One-page summary of key findings of this dispute
Consultations
Complaint by Argentina.
On 7 October 2002, Argentina requested consultations
with the US regarding the final determinations of the US Department of
Commerce (“D... | 1 | UNITED STATES – SUNSET REVIEWS OF ANTI-DUMPING MEASURES
ON OIL COUNTRY TUBULAR GOODS FROM ARGENTINA
Recourse to Article 21.5 of the DSU by Argentina
Communication from the Appellate Body
The following communication, dated 12 April 2007, from the Chairman of the Appellate
Body addressed to the Chairman of the Disput... | 2026-03-15T15:46:47.016562 |
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