I. Terms of Reference 278 II. Economic Data 279 III. Domestic Support 291 IV. Export Credit Guarantees 293
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See Exhibit Bra-41 (Congressional Hearing, “The Future of the Federal Farm Commodity Programs (Cotton),” House of Representatives, 15 February 2001, p. 6).
972 Exhibit Bra-413 (USDA, NASS “Agricultural Cash Rents, July 1999, p. 2-3); Exhibit Bra-414 (USDA, NASS “Agricultural Land Values and Cash Rents,” August 2003, p. 12-13.)(examining cropland cash rent values). 973 Exhibit Bra-415 (USDA, NASS, “Agricultural Land Values”, April 1999, p. 4); Exhibit Bra-414 (USDA, NASS, “Agricultural Land Values and Cash Rents,” August 2003, p. 12-13). 974 Exhibit Bra-413 (USDA, NASS “Agricultural Cash Rents, July 1999, p. 2-3); Exhibit Bra-414 (USDA, NASS “Agricultural Land Values and Cash Rents”, August 2003, p. 12-13.)(examining cropland cash rent values). 975 http://woodrow.mpls.frb.fed.us/research/data/us/calc/ ($1.00 in 1996 is worth $1.17 in 2003). 976 Exhibit Bra-413 (USDA, NASS “Agricultural Cash Rents, July 1999, p. 2-3); Exhibit Bra-414 (USDA, NASS “Agricultural Land Values and Cash Rents”, August 2003, p. 12-13.)(examining cropland cash rent values). 977 Data for several other states is distorted by the fact that cash rents for irrigated land, which is not used for upland cotton production, are shown. 978 Brazil’s 22 December 2003 Answer to Question 196, para. 8. 979 13.8 million acres times 0.25 times $9 equals $31,050,000. 980 US 22 December 2003 Answer to Question 242, para. 157. 981 US 22 December 2003 Answer to Question 242, para. 157. 982 Exhibit Bra-310 (“The Incidence of Government Program Payments on Agricultural land Rents: The Challenges of Identification,” Roberts, Kirwan, Hopkins, p. 769) (“It could be … [and] [m]ore research is needed to verify these incidence estimates to ascertain the time it takes for rents to reflect changes in associated government payments and to measure how incidence is ultimately capitalized into land values.”). 983 Exhibit Bra-41 (Testimony of Roberto McLendon, p. 7)(“I think people that are professional farm managers have been concerned for the last 2 or 3 years that we are going to have a decrease in land values because they saw it in the 1980’s. We had low prices and a bad situation. Again, in my opinion, we have had such a strong economy outside of agriculture it has supported land values, but that support won’t last forever … .”) 984 US 22 December 2003Answer to Question 242, para. 158. 985 Brazil’s 18 November 2003 Further Rebuttal Submission, Section 2.1, para. 23; Brazil’s 9 September 2003 Further Submission, paras. 59-331; Brazil’s 22 August 2003 Rebuttal Submission, para. 50 citing Exhibit Bra-173 (Revised Estimate of Support Granted by Commodity via Counter-Cyclical Payments). 986 Brazil’s 27 October 2003 Answers to Question 125(c), paras. 15-25. 987 Brazil’s 9 September 2003 Further Submission, Annex I, paras. 37-42 and Exhibits Bra-280 and Bra-345 (paras. 18-34). 988 Brazil’s 18 November 2003 Further Rebuttal Submission, Section 3.7.5. 989 Similarly, 100 per cent of the contract payments, as allocated by Brazil, were “support to” upland cotton, within the meaning of Article 13(b)(ii) of the Agreement on Agriculture. 990 Brazil’s 9 September 2003 Further Submission, Annex I, paras. 43-51. 991 Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 96-107; Brazil’s 2 December 2003 Oral Statement, paras. 4-6. See also Brazil’s comment on Question 231, above. 992 US 18 and 19 2003 December Letters to the Panel; US 20 January 2004 Letter to the Panel; See also Brazil’s 28 January 2004 Comments and Requests Regarding US Data. 993 These facts are summarized in Annex 1 to Brazil’s 9 October 2003 Closing Statement, but are also contained in a number of Brazil’s earlier submissions to the Panel beginning with its 24 June 2003 First Submission; See also Brazil’s 18 November 2003 Further Rebuttal Submission, Sections 2.1 and 2.4; Brazil’s 2 December 2003 Oral Statement, Sections 5.1 and 5.3. 995 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 44-48. 996 See Electronic PFC and DCP Summary Files provided on 18 and 19 December 2003 respectively. See also Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 22-24. 997 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 48-55. Thus, contrary to the US assertions in the last sentence of paragraph 163, Brazil does not advocate allocating a non-tied payment across the total value of the recipients production. 999 Brazil’s 11 August 2003 Answer to Question 40 provided detailed analysis regarding the application of its 14/16th methodology. Brazil explained in its Rebuttal Submission that: “Necessarily, this process requires allocation of support that may be provided to producers of more than one type of agricultural product, but which is not provided to producers in general.” See Brazil’s 11 August Answer to Question 40. An allocation process is also required with respect to Annex 3 paragraph 7 support to processors of agricultural products,” ‘to the extent that such measures benefit the producers of the basic agricultural product.” Brazil’s 22 August 2003 Rebuttal Submission, note 33. 1000 The United States has refused to produce the most relevant information – the precise amount of contract payments received by current US upland cotton producers. Brazil summarized much of the available evidence, demonstrating that the contract payments are, de facto, tied to the production of upland cotton, in its 9 October 2003 Closing Statement, Annex I. 1001 Brazil’s 11 August 2003 Answer to Question 40. Brazil’s 22 December 2003 Answer to Question 258, paras. 43-55; Brazil’s 28 January 2004 Comments and Requests Regarding US Data, Sections 9 and 10. See also Brazil’s 11 August 2003 Answer to Question 40. An allocation process is also required with respect to Annex 3 paragraph 7 support to processors of agricultural products,” ‘to the extent that such measures benefit the producers of the basic agricultural product.” Brazil’s 22 August 2003 Rebuttal Submission, note 33. 1002 Brazil’s 28 January 2004 Comments on Data Provided by United States, Section 10. 1003 See Brazil’s 22 August Rebuttal Submission, paras. 13-22; Brazil’s 22 August 2003 Comments on US Answers, paras. 48-53, 58, 61; Brazil’s 11 August 2003 Answers to Questions, paras. 54-55, 57-58, 61-64, 66-72, 129-132; Brazil’s 24 July 2003 Closing Statement, para. 8; Brazil’s 22 July 2003 Oral Statement, paras. 13-26; Brazil’s 24 June 2003 First Submission, paras 130-134. 1004 US 11 August Answer 2003 to Question 38, para. 81. 1005 US 11 August 2003 Answer to Question 38, para. 81. 1006 Compare Brazil’s 11 August 2003 Answer to Question 41, paras. 57-58. 1007 Brazil’s 22 August 2003 Rebuttal Submission, para. 14. 1008 See, in particular, Brazil’s 22 August 2003 Rebuttal Submission, paras. 15-22 (legal arguments), as well as factual evidence regarding each direct payment subsidy, in paras. 24-52. Since August, Brazil has presented considerable additional evidence establishing the de facto link between each type of contract payment and the production of US upland cotton. See Annex 1 of Brazil’s 9 October 2003 Closing Statement; Brazil’s 27 October 2003 Answers to Questions, paras. 7-26, 37-40; Brazil’s 18 November 2003 Further Rebuttal Submission, Section 3.7.5; Brazil’s 2 December 2003 Oral Statement, Section 5.3. 1009 Brazil’s 22 July 2003 Oral Statement, paras. 21-25. 1010 Brazil’s 22 December 2003 Answers to Question 196, para 8. 1011 See e.g. Brazil’s 9 October 2003 Closing Statement, Annex I; Brazil’s 27 October 2003 Answers to Question 125(2)(a), paras. 7-25; Brazil’s 18 November 2003 Further Rebuttal Submission, Section 3.7.5. 1012 Brazil’s 22 August 2003 Rebuttal Submission, paras. 15-22. 1013 Brazil’s 11 August 2003 Answer to Question 41, paras. 57-58. 1014 Brazil’s 22 December 2003 Answers to Questions, para. 147; Brazil’s 27 October 2003 Answers to Questions, paras. 108-110. 1015 US 22 December 2003 Answers to Questions, para. 171. 1016 Brazil’s 9 September 2003 Further Submission, paras. 124-128 and the Exhibits cited therein; Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 78-80. 1017 For example, Brazil's response to Panel Question 125, paragraph 14. 1018 US 22 December 2003 Answer to Question 253(a), para. 176. 1019 US 22 December 2003 Answer to Question 253(b), para. 178. 1020 US 22 December 2003 Answer to Question 253(d), para. 180. 1021 US 27 October 2003 Answer to Question 162, para 95 (“The statutory authority for marketing loan payments, step 2 payments, and counter-cyclical payments does not provide the Secretary with the authority to arbitrarily decline to make these payments to qualified recipients.”), para. 97 (“there is no present limit on the total amount of payments that can be made under each of these programs although for counter-cyclical payments a maximum total outlay can be calculated using the base acres, base yields, and maximum payment rate for each commodity produced during the historical base period.”). 1022 See Brazil’s 20 January 2004 Answers to Additional Questions, paras. 17 (with further references), 24-30. 1023 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 27-30. 1024 Exhibit Bra-416 (“What Is A Farm Bill,” Congressional Research Service, Report for Congress, 5 May 2001) (“Commodity programmes are entitlements. Expenditures are based upon programme rules and commodity market conditions. Eligible farmers are guaranteed legislatively-specified support based on these rules and conditions.”). USDA noted with respect to an earlier commodity program – the deficiency payment program – that “[d]eficiency payments are entitlements; that is, spending is determined by rules that define eligibility and govern benefit levels rather than by the annual appropriations process. USDA and Congress have no control over deficiency payment outlays.” (Exhibit Bra-417 (“Commodity Program Entitlements: Deficiency Payments”, USDA, May 1993). 1025 US 22 December 2003 Answers to Questions, para. 182. 1026 In the context of the peace clause arguments, the United States argued that it could not control the amount of budgetary outlays under the programmes. 1027 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 18-22 (with further references). 1028 Brazil’s 28 January 2004 Comments and Requests Regarding US Data, Section 6. 1029 See also Brazil’s 28 January 2004 Comments and Requests Regarding US Data, Section 11. 1030 Brazil’s 9 October 2003 Closing Statement, paras. 2, 9 (citing Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.39). 1032 Panel Report, US – Wheat Gluten, WT/DS166/R, para. 8.12. 1033 Panel Report, US – Wheat Gluten, WT/DS166/R, para. 8.12. 1034 Appellate Body Report, US – Wheat Gluten, WT/DS166/AB/R, para. 174. 1035 Appellate Body Report, US – Wheat Gluten, WT/DS166/AB/R, para. 171. 1036 Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.54. 1037 Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.56. 1038 Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.33. 1039 Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.65 (emphasis added). 1040 Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.39. 1041 Panel Report, Argentina – Textiles and Apparel, WT/DS56/R, para. 6.40. 1042 Brazil recalls that the United States has invoked the peace clause of Article 13 of the Agreement on Agriculture. As demonstrated by Brazil, the peace clause is in the nature of an affirmative defense. And even if the Panel were to disagree, Brazil established a prima facie case of inconsistency of the US measures with Article 13(b)(ii) of the Agreement on Agriculture. Neither the claim nor the measures to which it relates are outside the Panel’s terms of reference, within the meaning of the Appellate Body decision in Japan – Agricultural Products, paras. 129-130. 1043 Brazil’s 20 January 2004 Answers to Additional Questions, paras. 43-55. 1044 These facts are summarized in Annex 1 to Brazil’s 9 October 2003 Closing Statement, but are also contained in a number of Brazil’s earlier submissions to the Panel, beginning with its 24 June 2003 First Submission. See also Brazil’s 18 November 2003 Further Rebuttal Submission, Sections 2.1 and 2.4; Brazil’s 2 December 2003 Oral Statement, Sections 5.1 and 5.3. 1045 Brazil’s 28 January 2004 Comments and Requests Regarding US Data, Section 6. 1046 Brazil’s 28 January 2004 Comments and Requests Regarding US Data, Section 6. 1047 See Brazil’s comment on Question 243, above. 1048 See inter alia Brazil’s 2 December 2003 Oral Statement, paras. 4-6 (and the references cited therein). 1049 See US 22 December 2003 Answers to Questions, paras. 185-186, 10-11, 160-164. 1050 Brazil’s 18 November 2003 Further Rebuttal Submission, Section 2.2; Exhibits Bra-368 – Bra-369. 1051 See generally Brazil’s 28 January 2004 Comments and Requests Regarding US Data. 1052 Brazil’s 28 January 2004 Comments and Requests Regarding US Data, Section 10. 1053 Brazil’s 28 January 2004 Comments and Requests Regarding US Data, Section 10. 1054 US. 22 December 2003 Answers to Questions, paras. 185-186. 1055 Appellate Body Report, US – FSC, WT/DS108/AB/R, para. 150. 1056 Exhibit Bra-299 (“Summary of FY 2003 Export Credit Guarantee Program Activity,” USDA, covering GSM-102, GSM-103 and SCGP). For 1999-2002, see also Exhibit Bra-73 (“Summary of Export Credit Guarantee Program Activity,” USDA, covering GSM 102, GSM 103 and SCGP for US fiscal years 1999-2003). For 1992-1998, see Exhibit US-41. 1057 The Panel will recall that in addition to its threat of circumvention claims with respect to scheduled products, Brazil has also demonstrated that the United States has used the CCC guarantee programs to circumvent its export subsidy commitments with respect to rice (a scheduled product). See Exhibit Bra-300 (Calculation on US Rice Exports Benefiting from GSM 102, GSM 103 and SCGP). The United States has not rebutted this evidence. 1058 Appellate Body Report, US – FSC, WT/DS108/AB/R, para. 149. Brazil’s 27 October 2003 Answers to Questions, para. 88; Brazil’s 18 November 2003 Further Rebuttal Submission, para. 257; Brazil’s 2 December 2003 Oral Statement, paras. 90-91; Brazil’s 20 January 2004 Answers to Additional Questions, para. 13. 1059 Brazil is aware of no other provision of US law that provides a floor, and not a corresponding ceiling, for support to US industry. 1060 Exhibit Bra-296 (“USDA Announces $2.8 Billion in Export Credit Guarantees,” FAS Press Release, 30 September 2003). 1061 Brazil’s 18 November 2003 Further Rebuttal Submission, para. 261, citing Exhibit Bra-297 (7 U.S.C. § 5641(b)(1); 7 U.S.C. § 5622(a), (b)). See also Brazil’s 2 December 2003 Oral Statement, para. 91, citing Exhibit Bra-366 (7 U.S.C. § 5622 note, “Promotion of Agricultural Exports to Emerging Markets, para. (a) (“The Commodity Credit Corporation shall make available for fiscal years 1996 through 2002 not less than $1,000,000,000 of direct credits or export credit guarantees for exports to emerging markets under section 201 or 202 of the Agricultural Trade Act of 1978 (7 U.S.C. 5621 and 5622), in addition to the amounts acquired or authorized under section 211 of the Act (7 U.S.C. 5641) for the program.”)). See also Exhibit Bra-367 (Section 3203 of the 2002 FSRI Act (extending mandate to 2007)). 1062 Exhibit Bra-295 (2004 US Budget, Federal Credit Supplement, Introduction and Table 2 (CCC Export Loan Guarantee Programme classified as “Mandatory” in Table 2, and in the “Introduction,” the Office of Management and Budget states that Table 2 provides “the program’s BEA classification under the Budget Enforcement Act (BEA) of 1990 as discretionary or mandatory”); Exhibit Bra-117 (2 U.S.C. § 661(c)(2)) (exempting CCC programmes from appropriations requirement); Exhibit Bra-185 (Congressional Budget Office Staff Memorandum, “An Explanation of the Budgetary Changes under Credit Reform,” April 1991, p. 7 (for quote provided in text above)). 1063 Brazil’s 27 October 2003 Answers to Questions, para. 95, citing the archived list of USDA press releases announcing supplemental allocations extended throughout fiscal year 2003 (http://www.fas.usda.gov/excredits/exp-cred-guar.asp). 1064 Appellate Body Report, US – FSC, WT/DS108/AB/R, para. 149. 1065 Exhibit Bra-300 (Calculation on US Rice Exports Benefiting from GSM 102, GSM 103 and SCGP). The United States has never rebutted Brazil’s showing. The CCC announced guarantee allocations of $5.762 billion in 2001, $6.158 billion in 2002, and $6.247 billion in 2003, while granting guarantees in the amount of $3.227 billion in 2001, $3.388 billion in 2002, and $3.223 billion in 2003. See Exhibit US-41. 1066 US 20 January 2004 Answers to Questions, para. 3. 1067 US 20 January 2004 Answers to Additional Questions, para. 3. 1068 Brazil has elsewhere explained the CCC’s authority to undertake an inquiry into whether particular countries are creditworthy, and the possibility that this inquiry could end up reducing the amount of CCC guarantees, does not prevent a conclusion that nothing “stem[s], or otherwise control[s], the flow of” CCC guarantees. Brazil’s 27 October 2003 Answers to Questions, para. 92. Under the United States’ FSC measure, US authorities were permitted to undertake a factual inquiry into, among other things, whether the foreign-source income of the foreign corporation was “effectively connected with the conduct of a trade or business within the United States.” Appellate Body Report, US – FSC, WT/DS108/AB/R, para. 16. This authority, and the possibility that the factual inquiry could limit the amount of income that would qualify for the FSC exemption, did not prevent the Appellate Body from concluding that nothing in the FSC measure “stem[ed], or otherwise control[led], the flow of” FSC benefits, leading to a threat of circumvention of the United States’ export subsidy reduction commitments. 1069 US 20 January 2004 Answers to Additional Questions, para. 3. The United States has not offered any support for its assertion that CCC has the authority “to suspend the issuance of expert credit guarantees under any particular allocation”. In any event, Brazil demonstrates infra that the allocation process does not remotely abate the threat that the United States will circumvent its quantitative export subsidy reduction commitments. 1070 Exhibit Bra-295 (2004 US Budget, Federal Credit Supplement, Introduction and Table 2 (CCC Export Loan Guarantee Program classified as “Mandatory” in Table 2, and in the “Introduction”, the Office of Management and Budget states that Table 2 provides “the programme’s BEA classification under the Budget Enforcement Act (BEA) of 1990 as discretionary or mandatory”). 1071 See Exhibit Bra-117 (2 U.S.C. § 661(c)(2)); Exhibit Bra-185 (Congressional Budget Office Staff Memorandum, “An Explanation of the Budgetary Changes under Credit Reform,” April 1991, p. 7 and Table 2); Exhibit Bra-186 (Congressional Research Service Issue Brief for Congress, “Agriculture and the Budget,” IB95031 (16 February 1996), p. 3). 1072 US 20 January 2004 Answers to Additional Questions, para. 7. 1073 Exhibit Bra-186 (Congressional Research Service Issue Brief for Congress, “Agriculture and the Budget,” IB95031 (16 February 1996), p. 3). The United States made a similar error in its 30 September 2003 Further Submission, at paragraph 156, when it cited the very same generic, non-agency-specific document (Circular A-11) for the principle that “the ability of CCC to issue guarantees is constrained by the apportionment process . . .” As Brazil has demonstrated, the CCC programs are exempt from the requirement that to receive new Congressional budget authority before undertaking new guarantee commitments. See Exhibit Bra-117 (2 U.S.C. § 661(c)(2)). 1074 Appellate Body Report, US – 1916 Act, WT/DS136/AB/R, para. 100. 1075 Exhibit US-6. 1076 US 20 January 2004 Answers to Additional Questions, para. 3. 1077 See US 30 September 2003 Further Submission, para. 154. 1078 US 20 January 2004 Answers to Additional Questions, para. 3. 1079 US 20 January 2004 Answers to Additional Questions, para. 3. See also US 30 September 2003 Further Submission, para. 155. 1080 See Brazil’s 27 October Answers to Questions, para. 99, note 136 and Exhibit Bra-299 (“Summary of FY 2003 Export Credit Guarantee Programme Activity,” USDA, covering GSM-102, GSM-103 and SCGP (Total GSM 102, GSM 103 and SCGP allocations for fiscal year 2003 are listed as $6.025 billion, with product-specific allocations for scheduled products as follows: $200 million for wheat to Korea; $85 million for wheat to Pakistan; and, $10 million for vegetable oils for Tunisia.). See also Brazil’s 18 November 2003 Further Rebuttal Submission, para. 261 (second bullet point). 1081 Exhibit Bra-296 (“USDA Announces $2.8 Billion in Export Credit Guarantees,” FAS Press Release, 30 September 2003). 1082 Brazil’s 27 October 2003 Answers to Questions, para. 100. 1083 Exhibit Bra-300 (Calculation on US Rice Exports Benefiting from GSM 102, GSM 103 and SCGP). 1084 US 20 January 2004 Answers to Additional Questions, para. 4. 1085 Brazil’s 2 December 2003 Oral Statement, para. 78; Brazil’s 24 June 2003 First Submission, para. 265. 1086 US 11 August 2003 Answers to Questions, para. 180. See also Exhibit Bra-297 (7 U.S.C. § 5641(b)(2)). 1087 Brazil’s 22 December 2003 Answers to Questions, paras. 63-64. 1088 See, e.g., Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 233-241. 1089 This evidence is summarized at paragraphs 231-241 of Brazil’s 18 November 2003 Further Rebuttal Submission. 1090 See Brazil’s 24 June 2003 First Submission, paras. 289-292; Brazil’s 22 July 2003 Oral Statement, para. 116; Brazil’s 11 August 2003 Answers to Questions, paras. 139-140, 152-157, 183-187; Brazil’s 22 August 2003 Rebuttal Submission, paras. 103-105; Brazil’s 22 August 2003 Comments, paras. 92-93, 109-113; Brazil’s 27 August 2003 Comments on US Rebuttal Submission, paras. 68-80; Brazil’s 7 October 2003 Oral Statement, para. 72; Brazil’s 18 November 2003 Further Rebuttal Submission, paras. 230-242; Brazil’s 2 December 2003 Oral Statement, para. 79. 1091 For citations, see Brazil’s 2 December 2003 Oral Statement, para. 91. 1092 Exhibit Bra-300 (Calculation on US Rice Exports Benefiting from GSM 102, GSM 103 and SCGP). 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