RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/146
19 May 2003
(03-2674)
Dispute Settlement Body
31 March 2003
MINUTES OF MEETING
Held in the Centre William Rappard
on 31 March 2003
Chairman:  Mr. Shotaro Oshima (Japan)
Subjects discussed: Page
1. United States – Subsidies on upland cotton............................................................................1
(a) Designation by the DSB of a representative to serve the function of facilitating the
information-gathering process, pursuant to paragraph 4 of Annex V of theSCM Agreement .................................................................................................................. .......1
2. Canada – Measures relating to exports of wheat and treatment of imported
grain .......................................................................................................................... .................5
(a) Request for the establishment of  a panel by the United States ...................................................5
1. United States – Subsidies on upland cotton
(a) Designation by the DSB of a representative to serve the function of facilitating the
information-gathering process, pursuant to paragraph 4 of Annex V of the SCM Agreement
1. The Chairman recalled that at its meeting on 18 March 2003, the DSB had agreed to establish
a panel to examine Brazil's complaint regarding US subsidies on upland cotton (WT/DS267/7).  He
recalled that in addition to the panel request, Brazil had also requested that the DSB initiate theprocedures provided in Annex V of the SCM Agreement.  In accordance with these procedures, the
DSB was required to designate a representative to serve the function of facilitating the information-
gathering process needed by the parties and the panel.  He said that in order to meet Brazil's request,
he had been consulting with the parties to the dispute on this matter.  However, these consultations
had not yet been completed.  Therefore, he was not in a position to make a proposal at the presentmeeting, but hoped to be able to do so shortly.  He then invited delegations to speak, if they so
wished.
2. The representative of Brazil said that on 18 March 2003, at the request of Brazil, the DSB had
established a panel to examine the subsidies granted by the United States on upland cotton.  In its
request for the establishment of a panel, dated 7 February 2003, Brazil had also requested that theDSB initiate the procedures provided in Annex V of the SCM Agreement, pursuant to paragraph 2 of
that Annex.  These procedures aimed to obtain info rmation from the government of the subsidizing
Member, as necessary, to establish the existence and amount of subsidization as well as information
required to analyze the adverse effects caused by the subsidized product.  Pursuant to paragraph 4 of
Annex V, the DSB was required to designate a representative to serve the function of facilitating theinformation-gathering process.  He noted that according to paragraph 1 of Annex V, every Member
shall cooperate in the development of evidence to be examined by a panel pursuant to the proceduresWT/DSB/M/146
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under Article 7 of the SCM Agreement.  He said that two names had been proposed to the parties on
5 March 2003;  i.e. 26 days ago and a representative should have been designated by the DSB at the
18 March meeting.  However, at that meeting, the United States had stated that it was not in a position
to agree on the designation of the representative.  As a pretext, the United States had questioned
whether the item was properly included on the agenda and had stated that Brazil was required toidentify the third-country markets relevant to the process.  While Brazil did not agree with the US
arguments, it had requested that a special DSB meeting be convened for the purpose of the
designation of a representative and had included this matter on the agenda as a separate item.  Brazil
had also provided the list of third-country markets in document WT/DS267/9, circulated on
21 March 2003.  He noted that 13 days had elapsed since the establishment of the panel and since the
day when the DSB should have designated a representative to serve the function of facilitating the
information-gathering process.  It was, therefore, high time that the DSB fulfill its obligation under
paragraph 4 of Annex V of the SCM Agreement.  He  reiterated that paragraph 4 of Annex V provided
that "The DSB shall designate a representative to serve the function of facilitating the
information-gathering process".
3. The representative of the United States said his country believed that it was premature to
appoint a DSB representative at the present meeting under Annex V of the Subsidies Agreement.  As
the United States had explained in informal consultations held in the previous week, Brazil was not
entitled to use the Annex V procedures at this poin t.  The United States had maintained throughout the
dispute that the measures at issue were covered by Article 13 of the Agreement on Agriculture, also
known as the Peace Clause.  In this dispute, Brazil was claiming adverse effects, including serious
prejudice.  Both the Subsidies Agreement and the Agreement on Agriculture made clear that suchclaims were precluded in the case of measures covered by the Peace Clause.  The Annex V process
could only be applied for claims of serious prejudi ce.  Since the Peace Clause precluded actions based
on such claims, the Annex V process could not be applied in this dispute to the measures at issue.
However, just as it had entered into consultations with Brazil in good faith and had responded to well
over one hundred consultation questions, the United States was proposing a pragmatic way tosafeguard both parties' positions.  Under the US proposal, if the panel were to determine that the
Peace Clause did not apply, the parties could then engage in the Annex V process.  Of course, just to
be clear, the United States believed that the Peace Clause did apply and so one would never reach this
point.  The United States remained prepared to consult further with a view to agreeing on an
appropriate DSB representative.  In fact, the United States had been prepared to seek a consensus at
the present meeting.  However, it was premature to appoint a DSB representative when the parties had
not yet agreed on the time when the Annex V procedures should begin.
4. The representative of Brazil recalled that the DSB should have designated a representative as
mandated by paragraph 4 of Annex V at its 18 March meeting.  Brazil noted with concern that the
United States continued to object to the designation of a representative at the present meeting.  Brazil
also noted that the United States had raised some arguments which related to the application of the
Peace Clause and Annex V.  Brazil recalled that the only requirement for the development of evidenceunder the procedures of Annex V was the referral of the matter to the DSB under paragraph 4 of
Article 7 of the SCM Agreement.  This had been done pursuant to Brazil's panel request.  The
information-gathering process under Annex V as well as the designation of the facilitator should have
been properly in place since at least the establishment of the panel on 18 March.  The argument
related to the Peace Clause raised by the United States at the present meeting was a false argumentwhich sought to introduce confusion in a straightforward process.  The so-called Peace Clause
protection was not an absolute or unconditional right.  It had to conform to criteria which were set out
in the Agreement on Agriculture.  Brazil believed that information gathered under Annex V might be
useful before the panel, including claims in relation to the Peace Clause.
5. Brazil noted that the objection raised by the United States amounted to a Catch-22 situation
whereby the United States tried to prevent Br azil from gathering the information necessary to
demonstrate its claim.  The Peace Clause had different scopes according to the categorization of theWT/DSB/M/146
Page 3
measures at issue.  The United States would have to be more specific about the provisions which it
considered applicable.  Brazil would reserve for the panel stage some more specific references to
Article 13 of the Agreement on Agriculture.  However, for the record, Brazil wished to recall that
paragraph 1 of Annex V established an obligation for the parties to cooperate with the development of
evidence to be examined by a panel in the procedures under Article 7 of the SCM Agreement.  It wasnot the best endeavour clause, and the panel had already been established under Article 7.4 of the
SCM Agreement and Article 6 of the DSU.  Brazil also wished to point out that the new allegations
raised by the United States at this meeting had not been raised at the time when the procedure under
paragraph 2 of Annex V had been initiated.
6. Brazil noted that it was hard to escape the feeling that the United States was trying to delay
and impair the procedures.  If the United States had any doubts about the relevance of Annex V in
these proceedings, it could raise this matter before the panel.  The reasonable solution would then befor the DSB to designate a respresentative, as mandated by paragraph 4 of Annex V, to conclude the
information gathering process and, in accordance to paragraph 5 of Annex V, to submit this
information to the panel.  By blocking the consensus to designate such a representative, the United
States was clearly demonstrating its unwillingness to cooperate with the information-gathering
process.  Brazil would draw the appropriate conclusion from the US attitude.  It regretted that theprocedures under Annex V were being impaired, but  would nonetheless proceed with the collection of
information as it was entitled to.  Brazil would send its request for information to the United States as
well as to third countries and would count on their cooperation for the fulfilment of the purpose of
Annex V.
7. The representative of the European Communities recalled that the EC had reserved its third-
party rights to participate in the Panel's proceeding.  The EC assumed that questions asked and
information provided under the Annex V procedure would be available to third parties, as they could
become key elements for the panel to make its j udgement in this case.  The EC would like to have
confirmation of such assumption and recalled that the organisation responsible for the administration
of Annex V within the territory of the European Communities was the EC Commission.  Accordingly,any requests for information concerning the markets of Germany, Italy and Portugal should be
addressed to the delegation of the EC Commission in Geneva.
8. The representative of Argentina said that with regard to the references made concerning the
Peace Clause, it was his country's understanding that the exception contained in the Clause did not
afford absolute immunity from complaints under the DSU.  The Clause provided for exemption from
the measures based on Article XVI of GATT 1994 and Articles 3, 5 and 6 of the SCM Agreement
only to the extent that the conditions stipulated therein were fulfilled.  Argentina emphasized that thedue restraint granted until 31 December 2003 could not apply unless those conditions had actually
been met.  Argentina was, therefore, concerned about the US interpretation.  Argentina wished to
reiterate its statement made at the 18 March DSB meeting concerning the participation of third parties
in the Annex V procedures under the SCM Agreement.
9. The representative of Benin said his delegation wished to know if the Chairman of the DSB
had received a communication which had been sent to him on 24 March 2003 informing the DSB that
Benin wished to participate as a third party in the Panel's proceedings on "United States – Subsidies
on Upland Cotton".
10. The Chairman said that he had received Benin's communication and that Benin would
participate as a third party in the Panel's proceedings on this matter.
11. The representative of Benin said that his country was a cotton producing and exporting
country.  Cotton farming employed a large segment of Benin's rural population.  Cotton production
accounted for around 93.8 per cent of the country's agricultural exports, 19.3 per cent of its total
exports and 8.8 per cent of its GDP.  In recent years, the level of Benin's cotton exports in the worldWT/DSB/M/146
Page 4
market had fallen sharply in terms of both volume and revenue.  This trend was the result of distortive
practices by other cotton producing countries, including  the United States, with regard to their cotton
production and exports.  The ensuing injury to Benin's agricultural production and economy, and the
worrying prospects for this sector, had prompted Benin, following the failure of the consultations
between Brazil and the United States on upland cotton subsidies, to request to be joined as a thirdparty in the complaint lodged by Brazil.  Benin stressed that as a cotton producer and exporter, it had
an economic and trade interest in the ongoing proceedings as well as a systemic interest in the
implementation of the WTO rules, disciplines and procedures, including those concerning market
access, domestic support and export subsidies.
12. The representative of India said that his country was one of those Members who had reserved
third-party rights when the panel had been established on this matter.  He recalled that at the 18 March
DSB meeting, India had also sought to participate in the information-gathering process underAnnex V of the SCM Agreement, and wished to reiterate its desire to be associated with the
information-gathering process.  Brazil identified India as one of the countries from which information
could be gathered along with the EC and some othe r Members.  Accordingly, India wished to inform
the DSB that the Indian Mission in Geneva was the focal point for any communications to be
addressed in this regard.
13. The representative of the United States said that his delegation wished to respond to some of
the points made by some delegations who had just spoken.  With respect to the points regarding the
relationship between the Peace Clause and Annex V of the Subsidies Agreement, he said that a
Member could not use the Annex V procedures to establish "the existence and amount of
subsidization" or otherwise for purposes of establishing the applicability of the Peace Clause.  TheAnnex V process was intended to be used to establish claims of serious prejudice under the Subsidies
Agreement.  Nowhere did Annex V provide that a Member might use Annex V of the Subsidies
Agreement for purposes of the Agreement on Agriculture.  While the United States agreed that Brazil
had invoked the procedures of Annex V, it could not agree that those procedures had already begun.
With respect to third parties, the United States recalled its statement at the 18 March DSB meetingthat Annex V did not contemplate participation by third parties in the Annex V process or access to
information gathered in that process.  The United States reiterated that it looked forward to further
consultations on this matter in the near future.
14. The representative of Brazil noted the statements made by third parties and said that Brazil
looked forward to working with them in relation to the information-gathering process and thanked
them for indications of focal points for the collection of information.  He noted that under Annex V in
cases where matters were referred to the DSB under paragraph 4 of Article 7 of the SCM Agreement,the information could be gathered as necessary to establish the existence and the amount of
subsidization.  Therefore, in Brazil's view, there was a clear link with regard to the relevance of the
Peace Clause in this case.
15. The Chairman proposed that the DSB take note of the statements made and agree to suspend
the meeting on this agenda item until further notice.  He further proposed that he would continue to
consult with the parties to the dispute on this matter and, once an agreement was reached, he would
send a fax to delegations informing them that the meeting would be reconvened.
16. The DSB so agreed.WT/DSB/M/146
Page 5
2. Canada – Measures relating to exports of wheat and treatment of imported grain
(a) Request for the establishment of a panel by the United States (WT/DS276/6)
17. The Chairman recalled that the DSB had considered this matter at its meeting on
18 March 2003 and had agreed to revert to it.  He drew attention to the communication from the
United States contained in document WT/DS276/6.
18. The representative of the United States said that at the 18 March DSB meeting, his country
had requested the establishment of a panel pursuant to Article 6 of the DSU to examine whether
Canada's measures relating to wheat exports and to  treatment of imported grain were inconsistent with
Canada's obligations under the GATT 1994 and the TRIMs Agreement.  As the United States had
explained at that meeting, its concerns with respect to wheat exports involved the wheat sales
practices of the Government of Canada and its state-trading enterprise, the Canadian Wheat Board,
which appeared inconsistent with Canada’s obligations under Article XVII of the GATT 1994.  TheUS concerns with respect to imported grain involved discrimination in the rules governing the
Canadian grain handling system and the Canadian rail transportation system, which appeared
inconsistent with Canada’s obligations under Article III of the GATT 1994 and the TRIMs
Agreement.  At the 18 March DSB meeting, Canada had noted its disappointment that the United
States would request a panel.  However, the US request could come as no surprise to Canada.Contrary to what Canada implied at the 18 March DSB meeting, the United States most certainly had
never agreed that Canada’s wheat trading practices were consistent with Canada’s obligations under
the WTO Agreement.  To the contrary, the United States had repeatedly expressed serious concerns
about Canadian wheat trading practices.  Accordingly, the United States respectfully wished to renew
its request that the DSB establish a panel pursuant to Article 6 of the DSU with the standard terms ofreference to examine these matters.
19. The representative of Canada said his country realized that a panel would be established at the
present meeting.  Nevertheless, Canada wished to reiterate its disappointment that the United States
had decided to make this second request for a panel, particularly since the United States itself had
already thoroughly examined and had investigated these issues.  Canada's grain sector andtransportation policies were fully consistent with the WTO rules and obligations.  Canada would
defend its national interest in maintaining a market-driven and competitive grains sector.
20. The DSB took note of the statements and agreed
 to establish a panel in accordance with the
provisions of Article 6 of the DSU with standard terms of reference.
21. The representatives of Chile, Chinese Taipei , the European Communities , Japan  and Mexico
reserved their third-party rights to participate in the Panel's proceedings.
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