WORLD TRADE  
ORGANIZATION  WT/DS267/26 
7 October 2005 
 
 (05-4541) 
 Original:   English 
  
 
UNITED STATES – SUBSIDIES ON UPLAND COTTON 
 
Recourse to Article 7.9 of the SCM Agreement
 
and Article 22.2 of the DSU by Brazil  
 
 
 The following communication, dated 6 Octobe r 2005, from the delegation of Brazil to the 
Chairman of the Dispute Settlement Body, is circul ated pursuant to Article 7.9 of the SCM Agreement 
and Article 22.2 of the DSU.  
_______________ 
 
  Brazil requests that the following item be in cluded in the agenda of the meeting of the 
Dispute Settlement Body (the "DSB")  to be held on 18 October 2005:  
 
 " United States – Subsidies on Upland Cotton " (DS267) 
  A. Recourse to Article 7.9 of the Agre ement on Subsidies and Countervailing Measures 
and Article 22.2 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes by Brazil 
 
Background
 
  On 21 March 2005, the Dispute Settlement Body  (the "DSB") adopted the Appellate Body 
report and the Panel report in this dispute. The Appellate Body upheld the Panel's finding that the 
United States, through the effect of certain pri ce-contingent subsidies, caused significant price 
suppression in the world upland cotton market, within the meaning of Article 6.3(c) of the Agreement 
on Subsidies and Countervailing Measures (the "S CM Agreement"), constituting serious prejudice 
and adverse effects to the interests of Brazil within the meaning of Article 5(c) of the same Agreement. The recommendations and rulings of  the DSB include the recommendation that the 
United States take appropriate steps to remove the adverse effects of certain subsidies or withdraw 
these subsidies within six months from the date of adoption of the Panel and Appellate Body reports. 
The subsidies in question include marketing loan  programme payments, user marketing (Step 2) 
payments, market loss assistance payments and counter-cyclical payments.   The compliance period expired on 21 Septembe r 2005.  Pursuant to Article 22.2 of the 
Understanding on Rules and Procedures Governing the Settlement of Disputes (the "DSU") and 
Article 7.9 of the SCM Agreement, Brazil hereby requ ests that the DSB, in its meeting of 18 October 
2005, grant Brazil authorization to take counterme asures in the annual amount of US$ 1.037 billion 
until such time as the United States withdraws th e above-mentioned subsidies or removes their 
adverse effects.  WT/DS267/26 
Page 2  
 
  In principle, these countermeasures would take the form of suspension of tariff concessions 
and related obligations under the GATT 1994 by m eans of the imposition of additional import duties 
on a list of products imported from the Unite d States, to be defined by Brazil. 
  However, Brazil considers that it is not prac ticable or effective to suspend concessions or 
other obligations exclusively with respect to the same  sector/agreement as that in which the Panel and 
the Appellate Body have found the violations. Brazil also considers that the circumstances are serious 
enough to justify the suspension of concessions or obligations under other c overed agreements. These 
considerations are further explained below.  
Suspension of concessions and obligations under Article 22.3(c) of the DSU
 
  It is neither practicable nor effective for Br azil to suspend concessions and other obligations 
on imports of US goods up to a value of approxima tely US$ 1 billion, when, in 2004, the total value 
of these imports amounted to US$ 11.3 billion. 
 
 First, the imposition of additional import du ties negatively affects the cost of inputs and 
capital goods to Brazilian industry. As a developing country, Brazil cannot place itself at a competitive disadvantage in domestic and internationa l markets. Second, the rise in import costs will 
inevitably have a significant negative impact on cu rrent efforts to control inflation. Given the 
asymmetries between the two economies, additiona l import duties would have a much greater 
negative impact on Brazil than on the United States. 
  Additionally, in Brazil's view, the United States continuing non-compliance renders the 
circumstances "serious," within the meaning of Article 22.3(c) of the DSU, given that Brazilian 
producers of upland cotton will continue to suffer serious losses so long as the United States does not 
withdraw the measures at issue or remove their adverse effects. 
 Summary of countermeasures
 
  For the reasons given above, Brazil intends to  take countermeasures in the form of the 
suspension of tariff concessions and related ob ligations under the GATT 1994 by imposing additional 
customs duties on a list of products imported from the United States, to be defined by Brazil. 
  Given that Brazil considers that it is not prac ticable or effective to limit countermeasures to 
additional import duties, and considering that the ci rcumstances are serious enough, Brazil may, to the 
extent necessary, resort to countermeasures in th e form of suspension of obligations under the 
following sections of Part II of the Agreement on Trade-Related Aspects of Intellectual Property 
Rights:   Section 1:  Copyright and related rights  Section 2:  Trademarks  Section 4: Industrial designs 
 Section 5: Patents 
 Section 7: Protection of undisclosed information.   Likewise, Brazil may also suspend horizontal and/or sectoral concessions  and obligations for 
any, some or all sectors contained in Brazil's Schedule of Specific Commitments (GATS/SC/13) 
under the General Agreement on Trade in Services. Those sectors are: 
  1. Business Services  2. Communication Services  3. Construction and Rela ted Engineering Services  WT/DS267/26 
 Page 3 
 
 
  4. Distribution Services 
 7. Financial Services  9. Tourism and Travel Related Services  11. Transport Services  
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