Comments of the united states on the answers of brazil to further questions from the panel to the parties following the second panel meeting
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- 10. Application of The US-Proposed Allocation Methodology to The US Summary Data
- MY 1999 MY 2000 MY 2001 MY 2002 339
- 11. The Japan – Agricultural Products Decision is Inapposite
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84. For purposes of comparison, Brazil presents below its results based on the “14/16th” methodology:328
As the Panel can see, Brazil’s figures based on the 14/16th methodology are consistently below the results using the US summary data provided on 18 and 19 December 2003. It follows that the results of this methodology using the flawed US summary data, at the very least, do not contradict Brazil’s 14/16th methodology. Judging from these results, it appears that, even having in mind all the limitations of the US data as discussed above,329 Brazil’s methodology is rather conservative compared to an allocation based on the US summary data, which the United States seems to endorse as a valid base for calculating support to upland cotton.330 10. Application of The US-Proposed Allocation Methodology to The US Summary Data 85. Brazil recalls that its allocation methodologies offered so far and their results are provided in the context of the peace clause analysis under Article 13(b)(ii) of the Agreement on Agriculture.331 The United States has criticized Brazil’s 14/16th methodology and asserts that, for purposes of Brazil’s claims under Articles 5(c) and 6.3 of the SCM Agreement, Brazil has to allocate contract payments to farms producing upland cotton over the entire sales of those farms.332 (On the other hand, the United States maintains that any such allocation is not warranted for purposes of the peace clause333 – an entirely untenable position, as Brazil explains in its 28 January 2004 Comments on the US 22 December 2003 Answers to Questions.334) 86. Despite its serious misgivings about the proposed US methodology, Brazil sets forth below its analysis of the US methodology. Since the United States provided on 18/19 December 2003 some limited summary data on the production composition of upland cotton farms, Brazil has attempted to offer an estimate using the US allocation methodology. As described below, Brazil has been required to make several assumptions, given the shortcomings in the data and due to the US refusal to provide data in support of its own methodology. 87. Brazil notes that for MY 2002, the United States collected and has access to information on all acreage planted to any crops, including non-programme crops, produced by farmers receiving contract payments and marketing loan payments.335 The United States has never produced this information to the Panel or Brazil in any form (either as summary or farm-specific data). Thus, while the United States asserts that the Panel should apply a particular methodology, it refuses to provide the information that would permit the Panel to calculate the payments under the US methodology. 88. But the information requested by Brazil on all different types of contract crop plantings during MY 1999-2002 would go a long way towards permitting the calculation of the value of all crop production, as well as the calculation of the value of upland cotton produced in relation to other crops produced. This is because most cotton farms producing upland cotton specialize in the production of upland cotton as opposed to other crops, and only produce a limited amount of other crops and almost no livestock.336 89. Brazil notes that among the selected information provided by the United States is the amount of total cropland on farms producing upland cotton.337 The following table shows the percentage of total cropland and the percentage of total programme cropland that is planted to upland cotton (and other programme crops) on upland cotton producing farms, i.e., farms in category (1) and (3).338
90. As demonstrated by this table, US farms planting upland cotton are specialized in that crop. Upland cotton plantings account for 50 per cent of their cropland and for between 60 and 70 per cent of the land devoted to programme crops. Important alternative crops planted by upland cotton farms are wheat, corn, sorghum, soybeans and rice. About 20 per cent of the cropland on farms producing upland cotton is devoted to non-programme crops or to no crops.340 As detailed below, Brazil has conservatively assumed that the value of the crops produced on this 20 per cent of farmland is the average per-acre value of production of non-programme crops in that marketing year in the entire United States, as reported by USDA.341 91. Performing the US-invented allocation methodology, Brazil starts again by considering the group of farms that produce upland cotton and have upland cotton base acreage. As a first step, Brazil has calculated the total amount of contract payments received by these farms by multiplying the contract payment units provided in the US summary files by the payment rates applicable to the crop in any given marketing year.342 The resulting payments have been summed up. 92. As a second step, Brazil has calculated the value of the programme crop production on farms producing upland cotton and holding upland cotton base. To estimate the value of the programme crop production on these farms,343 Brazil has multiplied the acreage planted to a crop by its average yield in the United States and the average price received by US farmers for that crop in any given marketing year.344 As the United States has not provided any specific information on what upland cotton farms plant on the remainder of the cropland not devoted to the programme crops, Brazil had to make several assumptions. First, Brazil assumed that the per-acre value of these non-contract programme crops equals the average per-acre value of total US non- contract programme crop production, excluding fruits and vegetables.345 Brazil has, therefore, calculated the total value of non-contract payment crops as the total value of US crops minus the value of programme crops and fruits and vegetables for each marketing year between MY 1999-2002.346 The resulting figure has been divided by the total US cropland347 (minus cropland devoted to fruits348 and vegetables349 and programme crops350).351 The per-acre value thereby generated has been multiplied by the acreage not planted to programme crops on category (1) farms,352 resulting in a figure for the total value of non-contract programme crops produced on the group of farms that produce upland cotton and hold upland cotton base.353 93. Following these preparatory steps, it is now possible to allocate contract payments that constitute support to upland cotton. Summing up the value of all crops produced on the farm provides the total value of the production on farms that produce upland cotton and hold upland cotton base. Dividing the value of the upland cotton crop by the value of all crops provides the adjustment factor to be applied to the total contract payments received by that group of farms.354 This concludes the allocation for all group (1) farms. 94. Turning to farms in group (3), the Panel will recall that these farms plant upland cotton, but do not hold upland cotton base. The Panel will further recall that the United States has not provided any information concerning contract payments for this group of upland cotton farms.355 This US refusal renders any precise calculations for the third group of farms impossible. Therefore, Brazil has assumed that farms producing upland cotton but not holding upland cotton base receive per acre of upland cotton the same amount of allocated contract payments as farms producing upland cotton and holding upland cotton base.356 95. Since the United States has not provided any information on the amount of market loss assistance payments received by any farm producing upland cotton – the United States did not even provide aggregate information357 – Brazil has assumed that any allocation of market loss assistance payment as support to upland cotton would have to be made in the same manner as the allocation of PFC payments in the marketing year in question.358 96. Contract payments allocated in both groups of upland cotton farms are aggregated. The results of this calculation are reported in the table below:
97. For purposes of comparison, Brazil presents below its results based on the “14/16th” methodology:361
98. As the Panel can readily see, even using the methodology proposed by the United States as relevant under Part III of the SCM Agreement results in amounts of support to upland cotton from contract payments that, accounting for the shortcomings of the US data, are roughly equivalent to the figures produced by Brazil’s 14/16th methodology. Brazil cautions against the direct use of these results, as they may be tainted by the assumptions Brazil had to make due to the refusal of the United States to provide data that would render possible performing the allocation that the United States asserts is called for under Part III of the SCM Agreement.362 In particular, the data withheld on MY 2002 peanut contract payments to farms producing upland cotton would have increased the amount of contract payments allocated to upland cotton. Other shortcomings of the data are discussed above. 11. The Japan – Agricultural Products Decision is Inapposite 99. The United States claims that the Appellate Body’s decision in Japan – Measures Affecting Agricultural Products would have prevented the Panel from using the information the United States refused to provide to calculate the amount of contract payments across the “total value of the recipient’s production.”363 However, this Appellate Body decision is inapposite.364 100. In Japan – Agricultural Products, the complaining party (the United States) did not “claim” in its request for establishment of a panel that there was an alternative SPS testing “measure” (determination of sorption levels) that was less trade restrictive.365 Rather, the request for establishment “claimed” that testing by product (not variety) was sufficient to achieve Japan’s appropriate level of protection. The panel, based on expert testimony and not on any arguments or evidence presented by the United States, found a violation of SPS Article 5.6 based on the alternative (sorption levels) testing “measure.” This decision was taken despite a US argument to the panel that “it is not within the scope of the Panel’s terms of reference to make findings with respect to the comparative efficacy of alternative treatments proposed by technical experts.”366 101. On appeal, the Appellate Body reversed the panel’s finding. Noting that a panel has authority under DSU Article 13.1 to request information, it found that “this authority cannot be used by a panel to rule in favour of a complaining party which has not established a prima facie case of inconsistency based on specific legal claims asserted by it.” The Appellate Body found the panel had erred in relying on expert information and advice as the basis for a finding of inconsistency with SPS Article 5.6, “since the United States did not establish a prima facie case of inconsistency with Article 5.6 based on claims relating to the ‘determination of sorption levels.’”367 102. The factual situation in this dispute is entirely different from that in Japan –Agricultural Products. Brazil’s “claim” in relation to the withheld data is, first, that the United States does not enjoy peace clause protection because, inter alia, the non-green box contract payments provide support to upland cotton in excess of the level of support decided by the United States in MY 1992.368 The “measures” impacted by the withheld data are PFC, market loss assistance, direct and counter-cyclical payment subsidies provided under the 1996 FAIR Act and the 2002 FSRI Act,369 which fall squarely within the Panel’s terms of reference. The withheld data is also relevant to Brazil’s actionable subsidy “claims” to establish the volumes of subsidies provided for US upland cotton production.370 Further, the withheld data is relevant to support Brazil’s arguments that the contract payments are “support to upland cotton,” because most of the upland cotton base payments are paid to current producers of upland cotton. Finally, the withheld data is relevant to provide the factual basis for Brazil to rebut US arguments that the US preferred “value” methodology for allocating payments results in much lower benefits to upland cotton.371 Brazil notes that the Panel’s 12 January 2004 request falls squarely within these various Brazilian claims and arguments when it states that “[d]isclosure is sought to permit an assessment of the total expenditures of PFC, MLA, CCP and direct payments by the US Federal Government to upland cotton producers in the relevant marketing years.”372 103. The implication in the US citation to the Japan – Agricultural Products decision is that the Panel’s 8 December 2003 and 12 January 2004 request may be designed to establish a “claim” never advanced by Brazil. This suggestion is obviously contrary to the factual record outlined above. Moreover, it reveals a profound misunderstanding of the difference between a “claim” and an “argument.” The Appellate Body in EC –Hormones held that there is a distinction between legal claims reflected in a panel’s terms of reference, and arguments used by a complainant to sustain its legal claims. The Appellate Body ruled that “nothing in the DSU limits the faculty of a panel freely to use arguments submitted by any of the parties – or to develop its own legal reasoning – to support its own findings and conclusions of the matter under its consideration.”373 Numerous panel reports have narrowly interpreted “claims” to involve only legal claims and have freely permitted complaining parties to advance arguments not expressly reflected in a panel request.374 A close reading of the Appellate Body’s decision in Japan – Agricultural Products shows that it was based on the fact that the United States had not advanced legal “claims” relating to an alternative SPS “measure.” The fact that the United States had also not made legal “arguments” on its non-claim only reinforced the underlying reasoning.375 104. This United States suggestion that the Panel’s request of 8 December 2003 and 12 January 2004 would improperly make the case for Brazil is totally baseless. In the Japan – Agricultural Products case, the United States did not seek the expert information to support a “claim” or “measure” within the Panel’s terms of reference. By contrast, Brazil repeatedly sought the information withheld by the United States for fourteen months. Further, the Panel’s 8 December 2003 and 12 January 2004 requests incorporated Brazil’s request of 3 December 2003, as set out in Exhibit Bra-369. Brazil, as a litigating party, has no independent right to request information from the United States; that must be conducted through the Panel’s authority under DSU Article 13.1. Thus, the US assertion that somehow the Panel (and not also Brazil) is seeking evidence to support a “measure,” “claim” or even “argument” never advanced by Brazil is fallacious. 105. Indeed, the United States cautions that the Panel “must take care not to use the information gathered under [the] authority [of DSU Article 13.1] to relieve a complaining party from its burdens of establishing a prima facie case.” 376 This is a curious argument given the fact that the United States has refused to produce information the Panel found was “necessary and appropriate … in order to undertake its mandate to assist the DSB in discharging its responsibilities under the DSU and the covered agreements.”377 Brazil must ask how the Panel is to even evaluate the evidence to “take care not to use” the information, if it does not even have it? 106. Finally, Brazil notes that this is the first dispute involving interpretations of the peace clause, as well as many provisions in Part III of the SCM Agreement. Brazil obviously does not know how the Panel will resolve many interpretative issues. A good example is the issue of the relevant allocation methodology under the peace clause, or whether subsidies challenged under Part III of the SCM Agreement are required to be allocated at all, and if so, by what methodology. Brazil believes strongly that the US methodology is not supported by any textual or legitimate contextual basis. But in order to “cover all the bases,” and conscious of the absence of any remand procedures, Brazil has presented – or has attempted to present in the case of the withheld US data – considerable evidence to provide the Panel with the basis to make the factual determinations supporting any possible legal interpretation of these not previously interpreted WTO provisions. As demonstrated by Brazil’s analysis in Section 3, above, the information withheld by the United States has deprived the Panel and Brazil of the opportunity to use the most accurate and complete information possible – even to apply the inappropriate US methodology for allocating contract payments.378 Directory: english -> tratop e -> dispu e dispu e -> Annex g list of exhibits submitted by the parties dispu e -> World Trade Organization dispu e -> World Trade Organization Download 2.58 Mb. Share with your friends:
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