Comments of the united states on the answers of brazil to further questions from the panel to the parties following the second panel meeting

252 Panel Report, EC – Bananas (22.6) (US), WT/DS27/ARB, para. 2.5 (as requested specially by the United States); Panel Report, Australia – Leather, WT/DS126/R, para. 4.1; Panel Report, Australia – Leather (21.5),WT/DS126/RW, para. 3.2; Panel Report, US – Wheat Gluten, WT/DS166/R, para. 3.1; Panel Report, Canada – Aircraft, WT/DS70/R, para. 9.54-56.

253 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 187 (emphasis added).

254 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 189 (emphasis added).

255 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 189.

256 Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.40.

257 Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.40.

258 Panel Report, US – Wheat Gluten, WT/DS166/R, para. 8.12.

259 Appellate Body Report, US – Wheat Gluten, WT/DS166/AB/R, para. 171.

260 Panel Report, Canada – Aircraft, WT/DS70/R, para. 9.293 (Canada’s description).

261 Panel Report, Canada – Aircraft, WT/DS70/R, para. 9.294.

262 Panel Report, Canada – Aircraft, WT/DS70/R, para. 9.294.

263 Panel Report, Canada – Aircraft, WT/DS70/R, para. 9.345.

264 Panel Report, Canada – Aircraft, WT/DS70/R, para. 9.345.

265 Panel Report, Canada – Aircraft, WT/DS70/R, para. 9.345.

266 In addition to DSU Article 13.1, DSU Article 18.2 provides procedures concerning the protection of confidential information. In addition, Article 12.1 of the DSU permits panels to adopt working procedures in addition to those established in the DSU. This would provide private business interests with adequate protection for their business information, if it is considered of sensitive nature. If the US concern was indeed confidentiality, it could have requested the Panel to arrange for the proper procedures to deal with the information the US claims has such a high confidential status, that it cannot be provided to the Panel or Brazil under normal business confidential information procedures. Therefore, such procedures could have addressed the US concerns about the confidential nature of the information withheld. The United States has not done so.

267 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 137.

268 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 139.

269 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 139.

270 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 140.

271 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, paras 135, 140.

272 See Brazil’s 20 January 2004 Answers to Additional Questions, paras. 43-55.

273 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 202; See also “Evidence Before International Tribunals,” D.V. Sandifer, Revised Edition, University Press of Virginia 1975, p.153.

274 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 205.

275 The Corfu Channel Case, 1949, ICJ, 4, p.18, cited in Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R; note 128.

276 Case Concerning Military and Paramilitary Activities, 1986 ICJ 14, p. 82-86, paras. 152, 154-156, cited in Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R; note 128.

277 Case Concerning the Barcelona Traction, Light and Power Company Limited, 1970 ICJ 3, p. 215, para. 97, cited in Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R; note 128.

278 Reports of International Arbitral Awards, Vol. IV, 35, p.39, cited in Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R; note 128.

279 Appellate Body Report, US – Wheat Gluten, WT/DS166/AB/R, para. 176.

280 Set out in Brazil’s 22 December 2003 Answers to Question, para. 8.

281 Brazil’s 18 November 2003 Further Rebuttal Submission, Section 2.1. See also Brazil’s 28 January 2004 Comments on US Answers, paras. 20-22.

282 US 18 November 2003 Further Submission, paras. 11-17; US 2 December 2003 Oral Statement, paras. 23-24, 26-28.

283 US 22 December 2003 Answers to Questions, paras. 6-11.

284 New Shorter Oxford Dictionary, 1993 edition, p. 1669.

285 The current WTO rules do not permit Brazil to recover the enormous costs it has incurred in this dispute to prove circumstantially what the United States had in its possession for the past 15 months. The Panel should consider that, if the misrepresentations made by the United States in this proceeding had been made in US Federal Courts, they would have resulted in the award of significant attorney’s fees and costs in a US Federal Court. See e.g., Federal Rule of Civil Procedure 26(g)(2)(A), (3) (sanctions include reasonable expenses including attorney’s fees due to misleading certification of accuracy of discovery responses).

286 See e.g. Brazil’s 9 October Closing Statement, Annex I, although later submissions provided considerable additional information such as Brazil’s 18 November Further Rebuttal Submission, Sections 2.1, 3.1 and 3.7.5.

287 Appellate Body Report, US – Wheat Gluten, WT/DS166/AB/R, para. 171.

288 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 204.

289 Appellate Body Report, Canada – Aircraft, WT/DS70/AB/R, para. 204.

290 Since planted acreage in all marketing years is below the base acreage, this amounts to a downward adjustment of the total payments made in relation to upland cotton base acreage.

291 The final planted acreage figure provided by the United States in a later stage of this dispute required a slight adjustment to the figure: see Brazil’s 22 December 2003 Answers to Questions, para. 8.

292 See Brazil’s 11 August 2003 Answers to Questions, Notes to Table at paras. 97 and 130.

293 These facts are summarized in Annex 1 to Brazil’s 9 October 2003 Closing Statement but are contained in a number of Brazil’s earlier submissions to the Panel beginning on 24 June 2003. See also Brazil’s 18 November Further Rebuttal Submission, Sections 3.1 and 3.7.5.

294 Brazil’s 22 August 2003 Rebuttal Submission, paras. 30-34 and 39-44; Brazil’s 27 October 2003 Answers to Questions, paras. 14-24 and Brazil’s 2 December 2003 Oral Statement, paras 26-27.

295 Brazil notes that the data provided by the United States does not contain any information on peanut base payments, which would also be a high per-acre payment crop.

296 Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 50-51.

297 Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 22-28. See also Brazil’s 28 January 2004 Comments on US Answers, paras. 20-22.

298 Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 23-24.

299 Brazil’s 18 November 2003 Further Rebuttal Submission, para. 26.

300 E.g., in note 12 of the 22 December 2003 US Answers to Questions the United States asserts that only 30.7 per cent of cropland on US upland cotton farms was planted to upland cotton in MY 2002. This figure is however misleading, as the United States has classified as “upland cotton farm” not only farms that currently grow upland cotton, but also farms that historically grew upland cotton (and, therefore, have upland cotton base) yet have stopped to do so. This is an inappropriate categorization. By contrast, in paragraph 186 of its 22 December 2003 Answers to Questions, the United States provides the correct figure of 48 per cent of cropland on farms actually producing upland cotton is planted to upland cotton. The Panel should not allow the United States to selectively use its data (which cannot be checked), but not allow the Panel or Brazil to receive the data needed to calculate the amount of support to upland cotton from the contract payments.

301 Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 3, 17-19, 47-49; Brazil’s 2 December 2003 Oral Statement, para. 2 and Exhibit Bra-369 (Brazil’s Request to the United States for Farm-Specific Planting and Base Acreage Data).

302 Brazil notes that it is its position that the peace clause is an affirmative defence and that it is the burden of the United States to demonstrate that its current support to upland cotton does not exceed the support decided during 1992 (see inter alia Brazil’s 22 July 2003 Oral Statement, paras. 5-11). The United States has not lived up to its burden of proof and has repeatedly failed to provide the data that would allow the Panel and Brazil to calculate the exact amount of support to upland cotton.

303 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 43-55.

304 See inter alia Brazil’s 9 October 2003 Closing Statement, paras. 2-9, in particular para. 2, 6 and 9; Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 2-3, 17, 32 and 47-51.

305 See Section 3.

306 See inter alia Brazil’s 9 October 2003 Closing Statement, Annex 1.

307 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 43-55.

308 PFC, market loss assistance, direct and counter-cyclical payments.

309 See inter alia Brazil’s 9 October 2003 Closing Statement, Annex I for a summary of these arguments.

310 See Brazil’s 22 August 2003 Rebuttal Submission, para. 13 for further references.

311 See e.g. Brazil’s 22 August 2003 Rebuttal Submission, paras. 13-23 and 24-52 for evidence and arguments concerning the four contract payments.

312 Due to the limitations of the data provided by the United States, Brazil had to simplify its suggested methodology (Brazil’s 20 January 2004 Answers to Additional Questions, paras. 43-55) so as to enable its application to aggregate rather than farm-specific data.

313 Brazil notes that as explained above, the farm-specific data provided by the United States does not allow for matching the contract payment data with the data on current plantings of contract programme crops. Therefore, Brazil could only use the summary data for this allocation exercise.

314 See Electronic PFC and DCP Summary Files provided by the United States on 18 and 19 December 2003 respectively.

315 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 43-55, in particular para. 47 discussion of Sample Farms 1-3.

316 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 44-48.

317 Exhibit Bra-394 (Agricultural Outlook Tables, USDA, November 2003, Table 19).

318 See Exhibit Bra-419 (Allocation Calculations Based on Brazil’s Methodology and US Summary Data). (Also provided electronically as ‘allocation calculations.xls’).

319 See Exhibit Bra-419 (Allocation Calculations Based on Brazil’s Methodology and US Summary Data). (Also provided electronically as ‘allocation calculations.xls’).

320 See Exhibit Bra-419 (Allocation Calculations Based on Brazil’s Methodology and US Summary Data). (Also provided electronically as ‘allocation calculations.xls’).

321 Brazil’s 20 January 2004 Answers to Additional Questions, para. 48 discussing Sample Farm 4.

322 See Brazil’s 20 January 2004 Answers to Additional Questions, paras. 49-55 discussing Sample Farms 5-7. For MY 1999 and 2000, only upland cotton plantings exceeded the crop base acreage, thus, all additional payments were allocated to upland cotton. For MY 2001, also oats and sorghum were planted on more acreage than their respective contract base (“overplanted”), thus, triggering additional payments being allocated pursuant to the crop’s share of the total acreage being “overplanted.” See Exhibit Bra-419 (Allocation Calculations Based on Brazil’s Methodology and US Summary Data). (Also provided electronically as ‘allocation calculations.xls’).

323 See Electronic PFC and DCP Summary Files provided by the United States on 18 and 19 December 2003 respectively. Considering the fact that US upland cotton producers needed contract payments to produce upland cotton in an economically viable manner, it is simply not realistic to assume that there were farms without any kind of contract acreage planting upland cotton. See Sections 4 and 5 rejecting the US reasoning for not providing the data.

324 Brazil also recalls that the US data for MY 2002 does not contain any information concerning the amount of direct and counter-cyclical payments made on peanut base (Exhibit US-112). Thus, the missing peanut contract payments for MY 2002 are also missing in the calculation of the amount of direct and counter-cyclical payments that constitute support to upland cotton. It follows that these figures are understated by an amount unknown to Brazil.

325 Brazil recalls that market loss assistance payments are made on the same basis as PFC payments – with the exception that market loss assistance payments were also made for soybeans.

326 See note to the summary table below. This assumption leads to an understatement of the resulting payments, since market loss assistance payments also covered soybean production in additional to any PFC payment base. Thus, just relying on PFC payments as a proxy leaves out a potential significant amount of money that may have supported upland cotton.

327 The amount of market loss assistance payments has been calculated by applying the ratio of allocated PFC payments (as calculated) to upland cotton PFC payments as provided in Exhibit Bra-4 (“Fact Sheet: Upland Cotton,” USDA, January 2003, p. 6) to the amount of upland cotton market loss assistance payments as provided by the same source.

328 The figures in this table are reproduced from Brazil’s 9 September 2003 Further Submission, Table 1. MY 2002 data is taken from the updated figures presented by Brazil in its 22 December 2003 Answers, para. 8.

329 Brazil notes that some of the limitations result in distortions in different directions. The omission of peanut base information tends to lower the amount of payments allocated. The missing information on market loss assistance payments has an unknown effect and so does the aggregation problem. The missing information on base acreage of farms that produce upland cotton but have no upland cotton base could slightly overstate results – however, Brazil cautions that this effect may not be too strong, as the mount of upland cotton planted on such farms is very limited.

330 US 20 January 2004 Letter to the Panel, p. 2.

331 Brazil maintains that no allocation methodology is warranted under Part III of the SCM Agreement. Rather, it is the effect of the subsidies that is the subject of scrutiny.

332 See e.g. US 7 October 2003 Oral Statement, para. 17; US 18 November 2003 Further Rebuttal Submission, paras. 11-17; US 2 December 2003 Oral Statement, para. 24; US 22 December 2003 Answers to Questions, paras. 11, 159-164, 184.

333 US 22 December 2003 Answers to Questions, paras. 159-164.

334 See Brazil’s 28 January 2004 Comment on US Answer to Question 243. See also Brazil’s 2 December 2003 Oral Statement, paras. 4-6. Brazil strongly disagrees that this is a required or appropriate methodology under Part III of the SCM Agreement or under GATT Article XVI (or even under Article 13(b)(ii) of the Agreement on Agriculture). The US arguments in that respect are not supported by any Vienna Convention interpretation of these provisions.

335 Brazil’s 18 November 2003 Further Rebuttal Submission, para. 41.

336 Brazil’s 27 October 2003 Answers to Questions, paras. 7-13. While the exclusion of tiny livestock production on upland cotton farms from the allocation of contract payments might slightly understate the resulting contract payments allocated to upland cotton, any such over counting would be outweighed by the missing data on peanut contract payments made to farms that results in an undercounting of the contract payments allocated to upland cotton.

337 See Electronic PFC and DCP Summary Files provided by the United States on 18 and 19 December 2003 respectively.

338 Farms planting upland cotton and holding upland cotton base and farms planting upland cotton without holding upland cotton base. Farms not planting upland cotton are excluded from these calculations, as they are entirely irrelevant for purposes of this dispute. They are simply not upland cotton farms, they only have been in the past.

339 Brazil has not indicated the percentages for other oilseeds, as the figures were so small.

340 The lower figures for MY 1999-2001 are explained by the fact that soybeans were not a contract programme crop.

341 This most certainly overstates their value for the farms under scrutiny, as it includes uses for the production of tobacco, greenhouse crops and other high value crops not likely produced on cotton farms. The result is an allocation of contract payments to upland cotton that is too low.

342 Payment rates are published by USDA, see Exhibit Bra-394 (Agricultural Outlook Tables, USDA, November 2003, Table 19).

343 Brazil recalls that the United States has only provided information on programme crop production on upland cotton farms.

344 MY 1999-2002 yields and farm prices for programme crops are published by USDA, see Exhibit Bra-420 (Agricultural Outlook Tables, November 2003, Table 17).

345 Brazil considers this exclusion justified due to the elimination of contract payments if fruits and vegetables are planted.

346 Exhibit Bra-421 (ERS Briefing Room: Farm Income and Costs: US Farm Sector Cash Receipts from Sales of Agricultural Commodities, USDA).

347 Exhibit Bra-106 (“United States State Fact Sheet,” ERS, USDA, 15 July 2003, p. 2). The figure represents the total amount of US cropland pursuant to the 1997 census. This is the latest figure available to Brazil. However, since the total of US cropland can be presumed to not vary too greatly, this may be a reasonable assumption.

348 Exhibit Bra-422 (Fruits and Tree Nuts Yearbook, USDA, October 2003, Table A-2).

349 Exhibit Bra-423 (Vegetables and Melons Yearbook, USDA, July 2003, Table 3).

350 Exhibit Bra-420 (Agricultural Outlook Tables, USDA, November 2003, Table 17).

351 See Exhibit Bra-424 (Allocation Calculations Based on US Methodology and US Summary Data) for the details of the calculation. (Also provided electronically as ‘allocation calculations.xls’).

352 Farms that produce upland cotton and hold upland cotton base.

353 See Exhibit Bra-424 (Allocation Calculations Based on US Methodology and US Summary Data) for the details of the calculation. (Also provided electronically as ‘allocation calculations.xls’).

354 See Exhibit Bra-424 (Allocation Calculations Based on US Methodology and US Summary Data) for the details of the calculation. (Also provided electronically as ‘allocation calculations.xls’).

355 See Electronic PFC and DCP Summary Files provided by the United States on 18 and 19 December 2003 respectively.

356 See Exhibit Bra-424 (Allocation Calculations Based on US Methodology and US Summary Data) for the details of the calculation. (Also provided electronically as ‘allocation calculations.xls’).

357 See Section 3.

358 See note to the summary table below. Brazil recalls that market loss assistance payments were made for soybeans in addition to the PFC crops. This increases the total amount of market loss assistance payments that would be allocated to upland cotton. Solely using the PFC payments as a basis, undercounts Brazil’s results by an unknown amount. Brazil also recalls that the US data for MY 2002 does not contain any information concerning the amount of direct and counter-cyclical payments made on peanut base (Exhibit US-112). Thus, the missing peanut contract payments for MY 2002 are also missing in the calculation of the amount of direct and counter-cyclical payments that constitute support to upland cotton. It follows that these figures are understated by an amount unknown to Brazil.

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