RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/186 
14 April 2005 
 (05-1536) 
Dispute Settlement Body 
21 March 2005  
 
 
    
MINUTES OF MEETING 
 
Held in the Centre William Rappard
 
on 21 March 2005  
 
Chairman:  Mr. Eirik Glenne (Norway) 
  
 Subjects discussed
: Page  
 
1. Surveillance of implementation of recommendations adopted by the DSB.........................2  
(a) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by 
the United States .............................................................................................................. ...........2  
(b) United States – Anti-dumping measures on certain hot-rolled steel products from 
Japan:  Status report by  the United States...................................................................................3  
(c) United States – Continued Dumping and Subsidy Offset Act of 2000:  Status report 
by the Unite d States ........................................................................................................... .........3  
(d) United States – Section 110(5) of the US Copyright Act:  Status report by the United 
States......................................................................................................................... ..................5  
(e) Mexico – Measures affecting telecommunications services:  Status report by Mexico .............5  
2. European Communities – Se lected customs matters .............................................................6  
(a) Request for the establishment of a panel by the United States ...................................................6  
3. Japan – Import quotas on dried laver and seasoned laver....................................................7  
(a) Request for the establishment of a panel by Korea.....................................................................7  
4. United States – Subsidies on upland cotton............................................................................7  
(a) Report of the Appellate Body and Report of the Panel...............................................................7  
 WT/DSB/M/186 
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 1. Surveillance of implementation of recommendations adopted by the DSB 
(a) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.29) 
 (b) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.29) 
 (c) United States – Continued Dumping and Subsid y Offset Act of 2000:  Status report by the 
United States (WT/DS217/16/Add.14 – WT/DS234/24/Add.14) 
 
(d) United States – Section 110(5) of the US Copyright Act:  Status report by the United States 
(WT/DS160/24/Add.4) 
 (e) Mexico – Measures affecting telecommunications services:  Status report by Mexico 
(WT/DS204/9/Add.3) 
 
1. The Chairman
 recalled that Article 21.6 of the DSU required that "unless the DSB decides 
otherwise, the issue of implementation of the re commendations or rulings shall be placed on the 
agenda of the DSB meeting after six months follo wing the date of establishment of the reasonable 
period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is 
resolved".  He proposed that the five sub-items to which he had just referred be considered separately. 
(a) United States – Section 211 Omnibus Appropria tions Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.29) 
2. The Chairman  drew attention to document WT/DS176/ 11/Add.29, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning US Section 211 Omni bus Appropriations Act of 1998. 
3. The representative of the United States  said that her country had provided a status report in 
this dispute on 10 March 2005, in accordance with Ar ticle 21.6 of the DSU.  As noted in the report, 
several legislative proposals relating to S ection 211 that would implement the DSB's 
recommendations and rulings in this dispute had been  introduced in the current Congress, both in the 
US Senate and the US House of Representatives. The US administration was working with the US 
Congress with respect to appropriate stat utory measures to resolve this matter. 
4. The representative of the European Communities  said that in February 2005 two bills had 
been introduced in the US Senate and th e US House of Representatives that would, inter alia , repeal 
Section 211.  Adoption of these bills would bring a sa tisfactory solution to this dispute by removing a 
legislation driven by specific interests.  The EC  hoped that the introduction of these bills would give 
an impetus to the implementation process.  It would be most damaging if the United States were to 
miss the deadline of 30 June 2005.  The United States could not be a strong advocate of efficient and 
non-discriminatory protection of intellectual property ri ghts worldwide, while at the same time failing 
to bring itself into compliance with its TRIPS obligations more than three years after the 
condemnation of the US legislation.  In that resp ect, the EC stressed that half of the additional 
implementation period had already elapsed. 
5. The representative of Cuba  expressed her country's deep regret that months and years had 
been passing by while the United States had continue d to fail to comply with the DSB's rulings.  For 
more than three years Members had been listening to repetitive reports informing them that the US 
administration was working with the US Congress towa rds an appropriate solution to this dispute.  
Cuba wondered how much time the US Congress would need to do something so straightforward as  WT/DSB/M/186 
 Page 3 
 
 
 taking the only proper decision, namely, to repeal Se ction 211.  Cuba believed that this process must 
be very frustrating for the US administration, which had been entrusted with the task of persuading 
the US Government to meet its obligations as a WTO Member.   The situation, as described, 
resembled a boxing ring while the strategy of the US  boxer was attrition.  Cuba's advice to him was to 
give this up since his opponents' resilience was well known.  Cuba would not stop its calls for 
compliance with the DSB's recommendations and rulings in this dispute and would continue to repeat 
that the only possible solution was the abrogation of Section 211.  In that respect, Cuba considered 
that the bill introduced on 9 February 2005 by 20 Democratic and Republican US senators would fully comply with this objective. 
6. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(b) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.29) 
7. The Chairman  drew attention to document WT/DS184/ 15/Add.29, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning US anti-dumping measures on certain hot-rolled steel products from Japan. 
8. The representative of the United States  said that her country had provided a status report in 
this dispute on 10 March 2005, in accordance with Ar ticle 21.6 of the DSU. As of 23 November 2002, 
the US authorities had addressed the DSB's recommendations and rulings with respect to the calculation of antidumping margins in the hot-rolled steel anti-dumping duty investigation at issue in this dispute. Details were provi ded in WT/DS184/15/Add.3.  The US administration continued to 
support specific legislative amendments that would implement the DSB's recommendations and 
rulings with respect to the US anti-dumping duty statute, and was working with the US Congress to pass these amendments. 
9. The representative of Japan
 expressed his country's regret that, since 31 August 2004 when 
the reasonable period of time had been extended fo r the third time, no tangible step had been taken 
towards the full implementation of the DSB's reco mmendations beyond general statements repeated 
by the United States at every DSB meeting.  Jap an expressed concern about the fact that since 
4 January 2005, when the 109th US Congress had conve ned, no bill had yet been introduced.  As had 
been stated at previous DSB meetings, Japan's decision to agree to the third extension of the 
reasonable period of time had been premised on tr ust in the pledges made by the United States 
towards the full implementation of the DSB's recomme ndations within the reasonable period of time.  
Since the reasonable period of time would expire in the next four months, Ja pan reiterated its urgent 
call for the United States to meet its obligati on under the WTO Agreement, by first promptly 
introducing a bill to the US Congress.  Prompt compliance was important for maintaining the credibility of the dispute settlement mechanism.  If  the United States fell short of implementation by 
the end of July 2005, Japan would be entitled to the recourse provided for under the DSU in order to 
safeguard its rights and interest. 
10. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(c) United States – Continued Dumping and Subsidy Offset Act of 2000:  Status report by the 
United States (WT/DS217/16/Add.14 – WT/DS234/24/Add.14) 
11. The Chairman  drew attention to document WT/D S217/16/Add.14 – WT/DS234/24/Add.14, 
which contained the status report by the United St ates on progress in the implementation of the DSB's 
recommendations in the case concerning the US Conti nued Dumping and Subsidy Offset Act of 2000. WT/DSB/M/186 
Page 4  
 
 12. The representative of the United States
 said that her country had provided a status report on 
10 March 2005, in accordance with Article 21.6 of  the DSU.  On 7 February 2005, the US 
administration had proposed repeal of the CDSOA in its budget proposal for fiscal year 2006.  In addition, on 3 March 2005, legislation that would repeal the CDSOA had been  introduced in the US 
House of Representatives.  The US administratio n would work with the US Congress to enact 
legislation, and would  continue to confer with th e complaining parties in these disputes in order to 
reach mutually satisfactory resolutions of these matters. 
13. The representative of th e European Communities
 said that the EC welcomed the introduction 
of a bill that would repeal the CDSOA.  This was certainly a positive sign.  The EC would, however, 
recall that in the last US Congress two bills aimed at implementing the DSB's ruling and 
recommendation had also been pending, but there was not even an attempt to discuss them, even less 
to adopt them.  And unfortunately, this had not been  an isolated incident.  The EC as well as other 
WTO Members had had the same experience in othe r disputes where bills had been introduced, but 
never discussed.  The EC hoped that, this time, further steps would follow and called on the US 
administration to actively work with Congressional l eaders in order to ensure rapid compliance with 
the US obligations under the WTO.  In the absence of su ch immediate action the EC would have no 
other option than to exercise its retaliation rights. 
14. The representative of Canada  said that his country noted the status report of the United States.  
In particular, Canada welcomed the 3 March 2005 bill that would re peal the Byrd Amendment.  As 
had been stated in the past, Canada considered th at the repeal of the Byrd Amendment was the most 
effective way of ending the dispute under consideration.  In that vein , Canada certainly hoped that the 
March 2005 initiative would have a mo re felicitous outcome than the efforts undertaken in June 2003, 
March 2004 as well as February 2005.   He recalled that in 2004, Ca nada had conducted an extensive 
public consultation process with Canadians on its retaliatory options.  At present, Canada was 
assessing comments received from Canadians on its retaliatory options.  Canada was clear that retaliation was not its preferred option.  Canada hoped that the United States would remove this 
option altogether by repealing the Byrd Amendment,  and thereby bringing itself into compliance with 
its WTO obligations.  Canada again called upon the Unite d States to end this dispute and to repeal the 
Byrd Amendment. 
15. The representative of Japan
 said that his country very much welcomed the fact that a bill 
repealing the CDSOA had been introduced to the US  Congress in March.  Japan had taken note of it 
as an important, positive step toward the resolution of this dispute.  However, what was more 
important was the passage of this repealing legisl ation at the earliest possible opportunity.  Japan 
noted that during the  economic/trade discussions he ld by the United States and Japan, including the 
recent high-level discussion in March, the US side had always stated the importance of complying 
with its obligations under the WTO Agreements. In order to substantiate this commitment, Japan 
strongly urged the US administration to make furt her efforts towards securing the repeal of the 
CDSOA by taking all actions it had at its disposal. 
16. The representative of Brazil  said that his country welcomed the recent introduction in the US 
Congress of new legislation that would repeal the CDSOA.  The illegality of the Byrd Amendment had been confirmed at all stages of the WTO disput e settlement process, at least since the adoption of 
the Appellate Body's decision in January 2003. The United States had been repeatedly requested to 
bring its measure into conformity with the multilate rally-agreed trade rules.  While the United States 
continued to show lack of compliance, companies from many countries, including Brazil, continued to 
suffer from the illegal disbursements under the Act.   Brazil urged the United States to enact this 
legislation as soon as possible.  Brazil wished to re mind that continuation of the illegal disbursements 
could prompt the co-complainants in this case to use the right to suspend concessions at any given 
moment.  WT/DSB/M/186 
 Page 5 
 
 
 17. The representative of Chile  said that, like other Members, Chile welcomed the initiative of the 
United States to repeal the measure in question.  However, this initiative was only intended to bring 
the long-standing question of conformity with the DS B's recommendations in th e context of the fiscal 
year of 2006.  Therefore, even if successful, th is was still far from constituting prompt action to 
comply with the DSB's rulings.  Like other Member s, Chile urged the United States to take further 
and urgent efforts in this matter. 
18. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(d) United States – Section 110(5) of the US Copyright Act:  Status report by the United States 
(WT/DS160/24/Add.4) 
19. The Chairman  drew attention to document WT/DS160/ 24/Add.4, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning Section 110(5) of the US Copyright Act. 
20. The representative of the United States  said that her country had provided a status report in 
this dispute on 10 March 2005, in accordance with Ar ticle 21.6 of the DSU.  As noted in the report, 
the US administration had been consulting on this matter with the US Congress.  The US 
administration would continue to work with the US Congress and confer with the EC in order to reach 
a mutually satisfactory resolution of this matter. 
21. The representative of th e European Communities  said that his delegation was bound to note, 
once again, that the status report submitted by th e United States at the present meeting was a copy of 
the previous one, which had been submitted at th e 17 February DSB meeting.  This was further 
evidence of the apparent unwillingness of the Unite d States to abide by the DSB's recommendations 
and rulings in the dispute under consideration and, more generally, by the copyright obligations under 
the TRIPS Agreement.  The EC was extremely disappoi nted with the lack of any initiatives by the US 
administration or by the US Congress to bring the US Copyright Act into compliance with the TRIPS 
Agreement.  Needless to say, the systemic impli cations of this situation had gone well beyond the 
case under consideration.  At the 17 February DSB meeting, the United States had forcefully 
contended that it was second to nobody when it came to  the protection of intell ectual property rights.  
The EC had taken note of that statement, but deed s not words were required from the United States.  
Once again, in order to break the current impasse,  the EC invited the United States to explain in 
concrete terms what was the substance of the consu ltations that the US administration stated to be 
conducting with the US Congress.  Finally, the EC recalle d that it had reserved its right to reactivate, 
at any point in time, arbitration proceedings pursuant to its retaliation request. 
22. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(e) Mexico – Measures affecting telecommunications services:  Status report by Mexico 
(WT/DS204/9/Add.3) 
23. The Chairman  drew attention to document WT/DS204/ 9/Add.3, which contained the status 
report by Mexico on progress in the implementation of the DSB's recommendations in the case concerning Mexico's measures affecting telecommunications services. 
24. The representative of Mexico
 said that on 10 March 2005, pursuant to Article 21.6 of the 
DSU, his country had submitted its most recent  status report on implementation of the DSB's 
recommendations in the case:  "Mexico – Measures A ffecting Telecommunications Services".  In that 
status report, Mexico had provide d information with regard to th e notification of an agreement on WT/DSB/M/186 
Page 6  
 
 implementation between Mexico and the United States.  Pursuant to that agreement, Mexico had to 
implement the DSB's recommendations within a re asonable period of time of 13 months, which 
would expire in July 2005.  Mexico had complied with the first phase of that agreement, which had 
been notified accordingly.  Mexico was also drafti ng regulations for the establishment of commercial 
agencies.  Once these were developed, Mexico woul d fully comply with the DSB's recommendations 
and rulings. 
25. The representative of the United States
 said that her country thanked Mexico for its status 
report.  The United States looked forward to revi ewing and consulting with Mexico on its proposed 
regulations allowing the resale of international telecommunication services, which the United States understood were forthcoming. 
26. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
2. European Communities – Selected customs matters 
(a) Request for the establishment of a panel by the United States (WT/DS315/8) 
27. The Chairman  recalled that the DSB had considered th is matter at its meeting on 25 January 
and had agreed to revert to it.  He drew at tention to the communication from the United States 
contained in document WT/DS315/8, and invited the representative of the United States to speak. 
28. The representative of the United States  said that, as her delegation had explained at the DSB 
meeting that had considered this issue, the United States was concerned with the non-uniform 
application of customs law in the EC and the failure  of the EC to maintain a forum for the prompt 
review and correction of administrative action relating to customs matters.  These aspects of the 
administration of customs law in the EC were in consistent with Article X of the GATT 1994 and 
amounted to a trade barrier that was especially bur densome for small and medi um-sized companies.  
Therefore, for all the reasons previously discussed , the United States again requested that the DSB 
establish a panel pursuant to Article 6 of the DSU, w ith standard terms of reference, to examine the 
matters set forth in the US panel request. 
29. The representative of the European Communities  said that the EC strongly regretted the US 
determination to proceed to litigation and its unwilli ngness to engage in any meaningful dialogue to 
address their alleged concerns with regard to the EC 's customs administration.  As the EC had noted 
on the first occasion when the United States had brought its request for the establishment of a panel: i.e. at the 25 January 2005 DSB meeting, and contra ry to the US claims, the issues subject to this 
dispute had never been raised in the relevant bila teral or multilateral fora in the past.  The United 
States had also failed – before, during and after the WTO consultations – to provide a single example 
of real and practical problems for US operato rs resulting from the application of EC customs 
measures.  When the United States had published this  case in the Federal Register, the US authorities 
had received only three submissions from US industr y, none of which constituted any evidence in 
support of the US allegations of lack of uniformity in the application of EC's customs measures.  The 
nature and motivation of the US claims remained unclear to the EC.  The United States seemed to 
allege that the EC should establish a single centr alised customs administration, as well as an 
immediate review of customs decisions at the EC le vel – as opposed to the current review by the EC 
member States' authorities and tribunals – in order to ensure uniformity in customs treatment across 
the EC.  The EC reiterated that these were questions  regarding the distribution of competences in the 
administration of customs rules within the intern al legal order of a WTO Member which had gone 
well beyond what was required by the WTO rules.  The EC had in place harmonized customs rules 
and institutional and administrative measures – en forced by the Commission and the European Court 
of Justice – to prevent divergent practices.  Th ese ensured effective co-ordination between the EC  WT/DSB/M/186 
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 member States and uniform customs treatment in all the EC member States.  The EC remained 
confident that a WTO panel would confirm the co mpatibility of the EC customs regime with the 
WTO provisions.  In order to avoid any further delay in this direction, and despite the absence of any 
factual and legal basis of the US claims, the EC  would not object to the US request for the 
establishment of a panel at the present meeting. 
30. The DSB took note  of the statements and agreed  to establish a panel in accordance with the 
provisions of Article 6 of the DSU w ith standard terms of reference. 
31. The representatives of Australia , Brazil , China  and Chinese Taipei  reserved third-party rights 
to participate in the Panel's proceedings.  
3. Japan – Import quotas on dried laver and seasoned laver 
(a) Request for the establishment of a panel by Korea (WT/DS323/2) 
32. The Chairman  recalled that the DSB had considered th is matter at its meeting on 17 February 
and agreed to revert to it.  He  drew attention to the communicati on from Korea contained in document 
WT/DS323/2, and invited the representative of Korea to speak. 
33. The representative of Korea  said that his country had requested the establishment of a panel 
with respect to Japan's import quotas on dried and seasoned laver, as contained in WT/DS323/2, 
which had been circulated on 7 February 2005 and discussed at the previous regular DSB meeting on 
17 February 2005.  Korea believed that, as stated at the 17 February DSB meeting, the highly restrictive import quotas on dried and seasoned laver imposed by Japan were inconsistent with Japan's 
obligations under the WTO, and in particular Article XI of GATT 1994.   Since bilateral consultations 
had regrettably failed to reach a mutually satisfact ory resolution to the dispute, Korea had no option, 
but to pursue a panel procedure to secure an effect ive and expeditious resolution of this dispute. 
Therefore, Korea requested, for a second time, that the DSB establish a panel pursuant to Article 6 of 
the DSU with standard terms of reference. 
34. The representative of Japan
 said that his country regretted th at Korea had decided to proceed 
with the second request for the establishment of a pa nel on this matter.  It was Japan's understanding 
that, in accordance with Article 6.1 of the DSU, a panel would be established at the present meeting.  
Japan firmly believed that its import quota system on dried and seasoned lave r was fully consistent 
with the relevant provisions of the WTO Agreemen ts.  Accordingly, Japan intended to make its case 
fully in support of its position before the Panel. 
35. The DSB took note  of the statements and agreed  to establish a panel in accordance with the 
provisions of Article 6 of the DSU w ith standard terms of reference. 
36. The representatives of China , the European Communities  and the United States  reserved 
third-party rights to participate in the Panel's proceedings.  
4. United States – Subsidies on upland cotton 
(a) Report of the Appellate Body (WT/DS267/AB/R ) and Report of the Panel (WT/DS267/R and 
Corr.1) 
37. The Chairman  drew attention to the communication from the Appellate Body contained in 
document WT/DS267/19 transmitting the Appellate Body Report on "United States – Subsidies on 
Upland Cotton", which had been circulated on 3 March 2005 in document WT/DS267/AB/R, in 
accordance with Article 17.5 of the DSU.  He re minded delegations that in accordance with the WT/DSB/M/186 
Page 8  
 
 Decision on Procedures for the Circulation and De restriction of WTO Documents contained in 
document WT/L/452, the Appellate Body Report an d the Panel Report pertaining to this case had 
been circulated as unrestricted documents.  He reca lled that Article 17.14 of the DSU required that:  
"An Appellate Body report shall be adopted by the DSB and uncond itionally accepted by the parties 
to the dispute unless the DSB decides by consensus not  to adopt the Appellate Body report within 30 
days following its circulation to Members.  This adoption procedure is without prejudice to the right 
of Members to express their views on an Appellate Body report". 
38. The representative of Brazil
 recalled that the Report of the Appellate Body in the case:  
"United States – Subsidies on Upland Cotton", which had been circulated to Members on 3 March 2005, had confirmed the Panel's findings and conclusions which had been made public on 
8 September 2004.  Both the Panel and the Appellate  Body had found that various subsidies granted 
by the United States on the production, use and exports of cotton (and, as regards export credit guarantees, other commodities) were inconsistent w ith the US obligations under the Agreement on 
Agriculture and the SCM Agreement.  Brazil welcom ed the adoption of the Reports and thanked the 
Panel, the Appellate Body
 and the Secretariat for their hard work  on this dispute.  A 300-page Report 
of the Appellate Body and a 350-page Report of the Panel were more than telling about the dedication 
required from all the parties involved.  The adopti on of these Reports would take place almost two 
years after the establishment of the Panel.  Two year s that had been peppered with thousands of pages 
in often intricate submissions and exhibits, an unpr ecedented number of three hearings with the Panel, 
and many procedural disputes, including the draw n-out argument about the use of Annex V of the 
SCM Agreement.  This protracted and sometimes pa inful process had finally come to an end.  The 
Reports of the Panel and the Appella te Body dealing with the consistency of US subsidies with the 
multilateral disciplines on agricultural trade had now been finalized. 
39. Before going over the most relevant points in the decisions arrived at by the Panel and the 
Appellate Body, he wished to make some remark s on the background of the Cotton case.  First, he 
wished to recall what the case under consideration was about.  This dispute concerned massive US 
subsidies for the production, use and export of US upland cotton – over US$4 billion in marketing 
year 2001 and US$12.9 billion from 1999 to 2002.  The average subsidization rate for upland cotton, measured by the price received by US farmers, was 95 per cent in the same period.  The average amount of upland cotton subsidies between mark eting years 1999-2002 was almost 200 per cent 
above the average of the 1980-1998 period.  These subsid ies came in a variety of forms, including:   
marketing loans guaranteeing producer revenues of US$0.52 per pound;  countercyclical payments 
triggered by prices below US$0.6573 per pound;  mu ltiple and special crop insurance subsidies for 
upland cotton;  payments to US purchasers of US upland cotton;  payments to US exporters of US upland cotton;  direct payments to cotton farmers based on historical and updated acreage and yield 
data, and increased by market loss assistance paym ents as well as export credit guarantee programs 
(in this respect, not limited to upland cotton) .  These subsidies had enabled US upland cotton 
producers to increase production and US market shar e of world exports at a time when the gap had 
been growing between rising US costs of production and falling market prices, and when the value of 
the US dollar was increasing.  Between marketi ng years 1998 and 2001, US production had increased 
31.5 per cent.  During the same period, US exports had surged more than 45 per cent.  At the same 
time, the US share of the world export market had increased from 17.9 per cent in marketing year 
1998 to 38.1 per cent in marketing year 2001.  Had the United States abided by its WTO obligations 
or some basic laws of economics, the reality would have been markedly different.  In the absence of 
the subsidies at issue, many US producers of  upland cotton would have, at least, switched to 
alternative crops.  The scenario that had just been  described would be bad enough for US and world 
prices, if the United States did not export much of  its upland cotton.  But unfortunately for Brazil and 
other lower-cost producers in Africa and elsewhere, most of this subsidy-generated upland cotton was 
not consumed in the United States, by far the larg est exporter of upland cotton in the world.  These 
US exports – created and sustained by subsidy-e nhanced overproduction and disposed of with the 
help of export subsidies – had a significant depr essing and suppressing impact on world and Brazilian  WT/DSB/M/186 
 Page 9 
 
 
 prices for upland cotton.  The average international upland cotton price measured by the A - Index for 
the period of 1999-2001 had fallen by more than 30 pe r cent in comparison to the average price for 
the period of 1980-1998.  Not surprisingly, as US production and exports had increased, those of low-
cost producers elsewhere in the world had decreased. 
40. Brazilian cotton producers had lost an estim ated U$450 million in revenue from suppressed 
world prices linked to US subsidies during the period of 1999 to 2002.  The case filed by Brazil was 
100 percent founded on the existing multilateral discip lines on trade in agriculture.  Brazil was not 
advocating for a non-negotiated change of the nego tiated rules in this dispute.  Nor had Brazil 
requested the creation and imposition of new obliga tions on the United States.  Brazil had simply 
asked that Members comply with the obligati ons to which they had committed themselves in 
Marrakesh on 15 April 1994.  Brazil had already paid for the package that had been negotiated in the 
Uruguay Round.  This case was about implementation of that package.  Brazil should not be called 
upon to pay again for the very same rights and obligations it had bargained for a decade ago.  Brazil would not, however, disagree that the Reports of the Panel and the Appellate Body in this dispute had 
an obvious and important impact on the negotiations in  the context of the Doha Development Agenda.  
The Reports provided Members with a better unders tanding about the present content and reach of 
some of the issues at the heart of the Doha R ound, namely decoupled payments, export subsidies, 
trade-and production-distorting subsidies as a cause of serious prejudice, the interplay between the 
Agreement on Agriculture and the SCM Agreement, to  name a few.  In order to clarify where one 
wanted to arrive at, Brazil considered that it would be more than useful to know where one were to 
depart from.  The Reports also reinforced the le gitimacy of the position of those who defended that 
the distortions in world agricultural trade had to cease. 
41. With regard to the legal reasoning and conclusions  of the Panel and the Appellate Body in the 
Cotton dispute, Brazil would briefly refer to the issues his delegation believed deserved special attention.  These issues were:  (i) the relationshi p between the Agreement on Agriculture and the SCM 
Agreement; (ii) the "green-box";  (iii) the analysis in  the context of serious prejudice claims;  and (iv) 
the disciplines on export credit guarantees for agricultu ral products.  On the relationship between the 
Agreement on Agriculture and the SCM Agreemen t, the Reports in the Cotton case clearly and 
conclusively had put an end to any remaining doubt  about the need to read both Agreements (and the 
WTO Agreement as a whole) in a harmonious, coherent way.  Building upon the Report of the Appellate Body in "EC – Bananas III", the Reports in  the Cotton case had put to rest the idea that the 
Agreement on Agriculture was an impregnable fortress or a unique animal that stood alone among the 
WTO Agreements.  In the Appellate Body's words:  ... "[T]he Agreement on Agriculture and the SCM 
Agreement are both multilateral Agreements on Tr ade in Goods contained in Annex 1A of the 
Marrakesh Agreement Establishing the World Trad e Organization (the WTO Agreement), and, as 
such, are both 'integral parts' of the same treat y, the WTO Agreement, that are 'binding on all 
Members'.  Furthermore, [...] a treaty interpreter must  read all applicable provisions of a treaty in a 
way that gives meaning to all of them, harmoniously". 
42. With reference to the so-called "green-box", th e conclusions by the Panel and the Appellate 
Body were also unequivocal.  A Member claiming "g reen-box" status for a measure must demonstrate 
that the measure was truly decoupled from the current  type of production.  Such a measure must not 
only appear to be decoupled, it must be so as a matter of fact.  In other words, Annex 2 of the 
Agreement on Agriculture did not provide room for measures which channeled production decisions 
toward or away from certain crops, in particular where the crops in question formerly benefited from 
subsidies that were also not green-box subsidi es.  Green box measures must provide full planting 
flexibility and could not be used – even to alle gedly "maintain fair competition" between domestic 
producers – to channel farmers' production decisions. 
43. The Reports to be adopted at the present meeting had equally shed light on the approach 
panels were to take in examini ng serious prejudice claims.  Contrary to what the United States had WT/DSB/M/186 
Page 10  
 
 argued throughout the proceedings, bot h the Panel and the Appellate Body had agreed that Article 6.3 
of the SCM Agreement imposed no specific methodolog y to be followed in the determination of the 
existence of serious prejudice.  Nothing in that provision required a panel to apply the very same methodologies that domestic investigating authoriti es had to comply with in countervailing duty 
proceedings.  In that sense, the Panel had found, a nd the Appellate Body had co nfirmed that it had no 
obligation, for example, to precisely quantify the am ount of benefits flowing from the subsidies in 
question nor to examine issues like "pass-through". 
44. With regard to the issue of export credit guara ntees, the Panel and the Appellate Body had  
confirmed that subsidized agricultural export cr edit guarantees did not enjoy a carve-out from the 
general disciplines on export subsidies.  To conclude  otherwise would lead not only to the perception 
of a significant gap in the Agreement on Agriculture , but also in practice it would open a huge avenue 
for circumvention of export subsidy commitments with billions and billions of dollars of export 
subsidies flowing without restraint or accountability.  It would be hard to envisage a more disruptive 
way to depart from the object and purpose of the Agreement on Agriculture. 
45. Finally, he concluded by expressing Brazil's hope and expectation that the United States 
would fully and timely comply with the DSB's rulings and recommendations in this matter. 
46. The representative of the United States
 said that her country wished to note at the outset that it 
continued to believe that negotia tion, not litigation, was the mo st effective way to address any 
distortions in agricultural trade. True, lasti ng reform was best achieved through multilateral 
negotiations in which all instruments that might distort global markets were addressed.  The United 
States wished to reaffirm that it remained  committed to success through the ongoing Doha 
Development Agenda negotiations.  The United Stat es was deeply disappointed in the Panel and the 
Appellate Body Reports in this dispute.  The US measures at issue – domestic support for upland 
cotton, domestic support decoupled from production of  any commodity and export credit guarantees 
for all agricultural commodities – had been designe d to conform fully to its WTO commitments.  The 
United States, therefore, regretted that the Panel and the Appellate Body had found several of these 
measures – though not all of them  – to be WTO-inconsistent. 
47. At the present meeting, the United States highli ghted certain interpretations and approaches 
that should be of concern to Members no matter their view on the merits of Brazil's claims.  But first, 
the United States noted that it was pleased that the Pa nel had rejected Brazil's claim that all types of 
US domestic support had caused significant suppression of  cotton prices. In particular, the Panel had 
rejected Brazil's claim on direct payments and on crop insurance payments. The United States 
especially welcomed the Panel's findings that US di rect payments under its 2002 farm legislation were 
consistent with WTO rules.  These payments suppor ted farmer income, but were not tied to current 
production or prices.  In plain terms, a payment recipient needed not to produce cotton to get the 
payment – in fact, they were free to produce nothing at all.  The United States had extensively reformed its farm programs in 1996,  and its 2002 farm legislation c ontinued those reforms.  A key 
part of those reforms was to eliminate traditional "deficiency payments" with  high levels of support 
tied to current production of cotton.  In their place,  payments not tied to current production of cotton 
had been introduced. 
48. Contrary to Brazil's claims that direct payments caused significant price suppression, the 
economic literature demonstrated that such non-tie d, or decoupled, support had at most minimal 
effects on production.  The Panel Report had respec ted the economic literature and had supported the 
view that payments that were not tied to current  production or prices did not cause WTO-inconsistent 
effects.  Unfortunately, the analysis in the Reports was not as careful with respect to other elements of 
Brazil's claims.  The Appellate Body had simply not required anything close to the analytical rigor 
from the Panel – either in its legal interpretations or  its economic analysis – that was expected in the 
WTO dispute settlement system.  The analysis by the Panel, particularly whether "the effect of the  WT/DSB/M/186 
 Page 11 
 
 
 subsidy" was to cause "significant price suppressi on," would not survive WTO scrutiny had it been 
undertaken by a domestic investigating authority. No r had the Appellate Body itself exercised close to 
that level of rigor in its analysis or reasoning.  Th e United States would  not go into detail on all of the 
flaws at the present meeting. 
49. The Appellate Body had recognized serious weaknesses in the Panel's reasoning.  For 
example, the United States shared the Appellate Bo dy's concerns that "in its reasoning, the Panel 
could have provided a more detaile d explanation of its analysis of the complex facts and economic 
arguments arising in this dispute".  The United States further agreed that this Panel did not – to use the 
Appellate Body's own words – "demonstrate precisely how [the Panel] evaluated the different factors 
bearing on the relationship between the price-con tingent subsidies and significant price suppression" 
(Appellate Body Report, para. 458).  Given the poten tial ramifications of serious prejudice disputes on 
domestic support programs, the United States ques tioned whether Members were well served by a 
dispute settlement system that allowed panels to  make rulings without "demonstrat[ing] precisely" 
how their conclusions had been reached. 
50. With respect to export credit guarantees, the Un ited States encouraged Members to read the 
dissenting views of one Appellate Body member found at paragraphs 631 – 641 of the Appellate 
Body Report.  That member had su ccinctly explained that the text of  Article 10.2 of the Agreement on 
Agriculture reflected a deferral of export subs idy disciplines on export credit guarantees until such 
time as "international disciplines" were agreed by  WTO Members.  Consider the following:  had 
Members agreed that export credit guarantees were export subsidies and had included them within the 
list of measures subject to reduction under the Agreement on Agriculture, the United States would 
have scheduled its extensive export credit guara ntee activity during the base period.  The United 
States would then have been able to operate its current program within substantial volume reduction 
commitments.  Instead, the United States had been  precluded from scheduling such program activity 
because export credit guarantees were not included in  the list of export subsidy measures.  And now, 
under the Appellate Body's majority interpretation, the United States found that it was also 
immediately subject to a zero export subsidy commi tment for most products using the program.  The 
United States had failed to see how the WTO Agreemen ts could fairly be read to prohibit US export 
credit guarantees for most products while Members' direct export subsidies were subject only to 
reduction. 
51. The United States also respectfully disagreed  with the Peace Clause finding that certain 
payments that were not tied to current production or prices were not  "green box" decoupled income 
support under the Agreement on Agriculture.  The so le reason that the Panel and the Appellate Body 
had deemed these payments not to be "green" was that  the payments were contingent on recipients not 
producing fruits or vegetables on cer tain farmland.  The Reports had concluded that these payments 
were, therefore, "related to" the fruit or vegetable production undertaken by the recipient.  However, 
full payment was only "related to" the recipient not  undertaking certain fruit or vegetable production.  
In fact, the recipient could choose to produce nothing at all and still be paid in full.  Under the flawed 
reasoning in the Reports, it would appear that a Member could not provide decoupled income support 
unless all production had been permitted, even pro duction of environmentall y damaging crops or 
illegal narcotic crops.  The United States questione d whether any Member could agree to provide 
support without imposing any conditions at all on what  could and could not be produced by recipients. 
Further, the United States reminded Members that , even though these payments not tied to current 
production or prices had been found not to be "green ," nonetheless, the Panel had rejected Brazil's 
claim that these payments had caused price suppression.   Thus, the "green box" interpretation in the 
Reports could well have the perverse result of di scouraging Members from shifting to admittedly less-
distorting forms of support, impeding rather than ad vancing the reform of agricultural trade to which 
Members had committed themselves. WT/DSB/M/186 
Page 12  
 
 52. Finally, with respect to the findings that US  domestic support measures had not been entitled 
to Peace Clause protection:  the United States merely wi shed to register its surprise that, to uphold the 
Panel's Peace Clause conclusion, the Appellate Body had rejected the shared Peace Clause 
interpretation of the Panel and the parties.  The Pane l, Brazil, and the United States had agreed that, to 
determine if challenged "measures ... grant sup port to a specific commodity," the measures 
themselves must (in the Panel's words) "clearly or explicitly define a commodity as one to which they 
bestow or confer support" (Panel Report, para. 7. 579).  Under US payments that were not tied to 
current production, a recipient was free to prod uce no, one, or multiple commodities.  Thus, these 
measures did not "clearly or explicitly define [any] commodity as one to which they bestow or confer 
support." 
53. US farm legislation in 1996 and 2002 had been  written with the Peace Clause in mind.  The 
United States had specifically introduced payments not tied to current production that did not provide 
"support to a specific commodity."  As a result, unde r the shared interpretation of the Panel and the 
parties, all US measures had been entitled to P eace Clause protection. Again, the United States 
wondered whether Members were well served by a P eace Clause interpretation that could not have 
been known to any Member designing its support programs or whether that interpretation instead 
might undermine confidence in the security and pred ictability of the multilateral trading system.  The 
United Stated highlighted another – rather startling – aspect of the Appellate Body Report, which was 
that measures that had expired might nonetheless be subject to challenge in WTO dispute settlement.  
The reason given was that effects could last after th e measure had expired.  Troubling as that finding 
was, the United States further noted that the Appe llate Body had made a recommendation that these 
expired US measures be brought into compliance,  even though neither the Appellate Body nor the 
Panel had actually analyzed whether in this instan ce there were such continuing effects.  The United 
States urged Members to carefully review both th is finding and recommendation and consider their 
implications for the dispute settlement system. 
54. The representative of th e European Communities
 said that the EC had participated in these 
proceedings as a third party.  Both before the Panel and the Appellate Body, the EC had taken 
position on several of the systemic legal questi ons that were at issue in the dispute under 
consideration.  Whilst some of the findings of th e Panel and the Appellate Body corresponded to the 
EC's position, the Panel and the Appellate Body so metimes had not followed the legal interpretations, 
which the EC had considered and continued to consider  to be correct.  Of particular concern to the EC 
was the fact that the Appellate Body had not ta ken into account the EC's arguments on the general 
relationship between the export subsidy and domestic support pr ovisions of the Agreement on 
Agriculture and the corresponding provisions of the SCM Agreement, in light of Article 21.1 of the 
Agreement on Agriculture.  The EC regretted that su ch an important systemic issue had not received 
more attention.  Having said this, at the present mee ting,  the EC did not intend to reiterate all the 
positions that the EC had taken in this dispute.  Instead, the EC wished to thank the Panel and the 
Appellate Body, as well as the WTO Secretariat and the Appellate Body Secretariat for the impressive 
dedication and professionalism with which they ha d mastered the enormous amount of legal and 
factual material that had to be dealt with in the course of these proceedings. 
55.  The representative of Argentina  said that his country, which had participated as a third party 
in the dispute under consideration, wished to express its satisfaction with the findings contained in the 
Reports of the Appellate Body and the Panel to be  adopted at the present meeting.  In Argentina's 
view, the conclusions and findings in the Reports we re extremely significant, both from the point of 
view of trade, since the subsidies at issue had greatly distorted the global agricultural market, and 
from the point of view of subsidy disciplines.  First, he noted that it was of systemic importance to define the central aspects of the disciplines on actionable subsidies under of Article 6.3(c) of the SCM Agreement.   Argentina wished to express its particul ar satisfaction with the findings that the effect of 
the price-contingent subsidies was significant price suppression within the meaning of Article 6.3(c).  
Of particular note was the finding that "significant price suppression" did not necessarily require a  WT/DSB/M/186 
 Page 13 
 
 
 precise quantification of the amount of the subsidy.  Argentina also welcomed the findings that Step 2 
payments to domestic users of cotton represent pr ohibited subsidies contingent upon the use of 
domestic over imported goods (paragraphs 1(b) and 2 of Article 3 of the SCM Agreement), while 
payments to exporters under the same programme  constituted export subsidies in violation of 
Articles 3.3 and 8 of the Agreement on Agriculture , as well as Articles 3.1(a) and 3.2 of the SCM 
Agreement.  At the same time, the confirmation pr ovided by both the Panel and the Appellate Body 
that Article 10.2 of the Agreement on Agriculture could not be taken as an exception to the export 
subsidy disciplines in Article 10.1 and that as a result, export credit, export credit guarantees and 
insurance programmes were subject to the aforemen tioned disciplines, was of particular systemic 
importance.  Argentina also wished to highlight  the finding that showed export credit guarantees GSM 
102, GSM 103 and SCGP were inconsistent with Arti cles 3.1(a) and 3.2 of the SCM Agreement, since 
they constituted prohibited export s ubsidies within the meaning of ite m (j) of the Illustrative List 
annexed to  the SCM Agreement.  Argentina hoped that the United States would implement without 
delay the recommendations contained in the Reports that would be adopted at the present meeting by 
the DSB by withdrawing the subsidies declared to be prohibited within the agreed time-period and 
swiftly bringing into conformity the other subsidies th at violated its WTO obligations in light of their 
adverse effects which had been widely attested. 
56. The representative of Canada  said that his country was still studying the Report of the 
Appellate Body, but Canada appreci ated the enormous effort that the Appellate Body, the panelists 
and the respective Secretariats had put into these Re ports.  The only comment that Canada wished to 
make was with respect to the comment made by the United States at the present meeting, reflecting its 
arguments before the Panel and Appellate B ody, concerning Article 13 of the Agreement on 
Agriculture.  The United States argued that accordin g to the Appellate Body, "paragraph 6(b) would 
require a Member to continue to make decoupled income support payments, even if a producer’s 
production is illegal ", for example involving narcotics or "environmentally-damaging production".  
He recalled paragraph 340 of Appellate Body Re port, where the Appellate Body stated: "Our 
interpretation of paragraph 6( b) would not prevent a WTO Member from making illegal the 
production of certain crops.  Nor would it prevent a Member from providing decoupled income support while at the same time making the production of  certain crops illegal".  The findings of the 
Appellate Body in this respect were unambiguous and unequivocal, and did not bear the interpretation 
placed on them by the United States. 
57. The DSB took note
 of the statements, and adopted  the Appellate Body Report contained in 
WT/DS267/AB/R and the Panel Report contained in  WT/DS267/R and Corr.1, as modified by the 
Appellate Body Report. 
__________