USTR files formal appeal of WTO Brazilian ruling

WASHINGTON – The Office of the U.S. Trade Representative today filed a long-awaited appeal in the case of Brazil’s World Trade Organization complaint against the U.S. cotton program.

A three-member WTO panel issued a ruling that appeared to favor substantial portions of the Brazilian challenge to the U.S. cotton program last June. But the formal ruling was not released until Sept. 8, after it had been translated into all of the WTO member countries’ languages.

The appeals body of the WTO has three months to respond to today’s appeal, according to observers.

The National Cotton Council issued a statement saying it fully supported the filing by the U.S. Trade Representative and that it continues to disagree with many of the WTO panel’s findings.

“We do not believe the United States – or, for that matter, any WTO member - intended that the WTO Agreements would be interpreted as this panel has done,” said NCC Chairman Woody Anderson. “We are even more convinced that neither the facts, the economics nor the agreements support the panel's primary decisions. We look forward to the appeal process.”

The panel, which consisted of members from Poland, Chile and Australia, ruled against the United States on many of Brazil's substantive points, including that the U.S. cotton program violated the so-called Peace Clause, which says countries may not use agricultural subsidies that exceed those of the base year of 1992.

It also said that the Step 2 program and the export credit guarantee program constitute prohibited subsidies; that direct payments do not qualify as “green box” payments; and that the presence of the domestic cotton program caused "serious prejudice" to Brazil’s cotton interests.

William Gillon, the National Cotton Council’s international trade counsel, said the NCC is hopeful that the panel’s initial ruling will be substantially revised by the WTO appellate body. He said the appeal process will take several more months and even then, parties are given a reasonable amount of time in which to comply with any WTO rulings upheld on appeal.

NCC Chairman Woody Anderson also reiterated the U.S. cotton industry’s disagreement with the panel’s decision regarding the U.S. cotton program and expects no immediate changes to the U.S. cotton program.

Following the public release of the Panel’s decision last month, the NCC issued a statement saying the panel's finding of serious prejudice seems contrary to 33 years of stability in the share of the world market held by U. S. cotton and, indeed, a loss of market share in 2002.

The decision also runs counter to recent findings by an independent Texas Tech University study that showed estimated price impacts from the U.S. cotton program ranging from less than one-half of a percent to just more than 2 percent or a quarter of a cent to 1.2 cents per pound.

“A more decoupled U.S. cotton program, a lower loan rate, a lower target price, a stable world market share, an unbiased economic study showing minimal price impacts and Brazil's own dramatic increase in cotton production all point to a U.S. cotton program that is not causing serious prejudice to Brazil, or any other country in the world,” said Anderson.

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