UNITED STATES – SUBSIDIES ON UPLAND COTTON
Document: Joint Communication from Brazil and the United States
Date: 31 August 2010
Document codes: WT/DS267/45
Complainant: Brazil
Respondent: U.S.
Third parties: Argentina, Australia, Benin, Canada, Chad, China, Taiwan, EU, India, New Zealand, Pakistan, Paraguay, Venezuela, Japan, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 3, 5, 6  Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1  AgricultureArt. III:4, XVI  GATT 1994

UNITED STATES – SUBSIDIES ON UPLAND COTTON

Joint Communication from Brazil and the United States

 The following communication, dated 25 August 2010, from the delegations of Brazil and the
United States to the Chairperson of the Dispute Settle ment Body, is circulated at the request of those
delegations.

On 30 April 2010, Brazil notified you that it had decided to postpone the imposition of
countermeasures vis-à-vis the United States in the context of the dispute (DS267).
1 Brazil also indicated that no counterm easures would enter into force before
21 June 2010, since Brazil and the United States were engaged in a dialogue with a view to reaching a
mutually satisfactory solution to the dispute.

In this connection, we wish to inform you th at Brazil and the United States have concluded a
Framework for a Mutually Agreed Solution to th e Cotton Dispute in the
(WT/DS267), the text of which is attached to this letter. The Framework does not in itself constitute a
mutually agreed solution to the dispute. It sets out parameters for discussions on a solution with
respect to domestic support programs for upland cotton in the United States, as well as a process of
joint operation reviews as regards export cred it guarantees under the program GSM-102. Brazil and
the United States also agreed to hold consultations not less than four times a year, unless they agree
otherwise, with the aim of obtaining convergen ce of views in respect of a solution to the Cotton
dispute. The Framework also provides that, upon enactment of successor legislation to the US Food,
Conservation and Energy Act of 2008, Brazil and the United States will consult with a view to
determining whether a mutually agreed solution to the Cotton dispute has been reached.

As long as the Framework is in effect, Brazil will not impose the countermeasures authorized
by the DSB.

 We would be grateful if you could circulate this notification to the DSB.

 (Signed)

Paulo Estivallet de Mesquita
Chargé d’Affaires
Permanent Mission of Brazil
Michael Punke
Ambassador
Permanent Mission of the United States

1 Document WT/DS267/44. The imposition of countermeasures was authorized by the Dispute
Settlement Body ("DSB") in its meeting of 19 November 2009.

Framework for a Mutually Agreed Solution to the
Cotton Dispute in the World Trade Organization
(WT/DS267)

The Government of the United States of Americ a ("United States") and the Government of the
Federative Republic of Brazil ("Brazil") (collectively "the parties"),

Recalling the letter of April 5, 2010, from the United St ates to Brazil and the letter of April 6, 2010 in
reply from Brazil to the United States regarding the Cotton dispute;

Recalling the Memorandum of Understanding Between the Government of the United States of
America and the Government of the Federative Re public of Brazil Regarding a Fund for Technical
Assistance and Capacity Building with Respect to the Cotton Dispute in the World Trade
Organization (the "Memorandum");

Taking note of Section II.3 of the Memorandum, wherein the parties agreed to "jointly work on an
understanding that is mutually satisfactory that will provide a framework for reaching a mutually
agreed solution to the Cotton dispute;"

Expressing the desire and intent that this Framew ork serve as the basis to avoid countermeasures
authorized by the World Trade Organization (WTO) in the Cotton dispute until enactment of
successor legislation to the U.S. Food, Conservation and Energy Act of 2008;

Hereby agree as follows:

Section I

U.S. Domestic Cotton Support

Discussions on a mutually agreed solution to the WTO Cotton dispute with respect to domestic
support for upland cotton will have as a basis an annual limit on trade-distorting domestic support
provided for upland cotton by the United States (" the limit"), in accordance with the following
parameters:

a. The level of the limit would be significan tly lower than the average annual level of
trade-distorting domestic support provided for upland cotton in the period MY 1999-2005.

b. The level of the limit would depend on th e types of trade-distorting domestic support
provided. The extent to and manner in which a type of trade-distorting support counts against
the limit would depend on the trade-distorting effect of a program of that type.

c. Domestic support measures that have no, or at most minimal, trade-distorting effects
or effects on production (i.e. "green box"
1) would not be counted against the limit.

1 For the purposes of this Framework, "green box" support means support provided to producers of
cotton through the application of one or more measures that qualify as exempt from reduction commitments
under the criteria set out in Annex 2 to the WTO Agreement on Agriculture.

Section II

The GSM-102 Program

1. Beginning with the fiscal year that commenc es October 2010, the United States will annually
announce allocations under the GSM-102 program in tw o approximately equal installments. The first
installment will be announced near the beginning of the fiscal year and the second installment will be
announced approximately half way through the fiscal year.

2. Each October and April, beginning in Octobe r 2010, the parties will convene to review the
operation of the GSM-102 program ("Operation Review "). Each April, the parties will conduct an
Operation Review for the preceding October thr ough March, and each October, the parties will
conduct an Operation Review for the preceding April through September.

3. During each Operation Review, the partie s will examine information on uncancelled
guarantees registered for the period of the Operation Review regarding: (1) the dollar value of such
guarantees ("Uncancelled Guarantee Value"); and (2 ) the value-weighted average tenor of such
guarantees ("Weighted Average Tenor").

4. If for the applicable period of an Operation Review the Uncancelled Guarantee Value is more
than $1.3 billion, then the United States, befo re announcing the next allocation of guarantee
availability, will increase premia appropriately. Such increase will be no less than 11 percent of the
average fee rate, calculated as a simple average, in ef fect at the time of the Operation Review. If, in a
given Operation Review, the Uncancelled Guarantee Valu e is not more than $1.3 billion, then, in the
following Operation Reviews in which the Uncancelle d Guarantee Value is more than $1.5 billion,
the United States, before announcing the subsequent allocation of guarantee availability, will increase
premia no less than 15 percent of the average fee rate , calculated as a simple average, in effect at the
time of the Operation Review. If, in any such following Operation Review, the Uncancelled
Guarantee Value is more than $1.3 billion, but less than $1.5 billion, the United States, before
announcing the subsequent allocati on of guarantee availability, will increase premia no less than
11 percent of the average fee rate, calculated as a simple average, in effect at the time of the Operation
Review.

5. If for the applicable period of an Operation Review the Uncancelled Guarantee Value is less
than $800 million, then the United States may decre ase premia by a decrease in the average fee rate,
calculated as a simple average, in an amount not gr eater than half of the most recent increase imposed
pursuant to paragraph 4.

6. Notwithstanding the Uncancelled Guarantee Va lue, if for the applicable period of an
Operation Review, the Weighted Average Tenor is mo re than 16 months, the United States will, after
consultations with Brazil in the Operation Review , effect changes by an increase of premia, or a
decrease in permissible tenor, or a combination of both, with a view to achieve by October 2012 a
Weighted Average Tenor of not longer than 16 months.

7. Consistent with Section III, paragraph 3, and Section VI, the provisions of this section are
without prejudice to the positions of the partie s with regard to the implementation of the
recommendations and rulings of the WTO Dispute Settlement Body in the Cotton dispute with respect
to the GSM-102 program.

Section III

Consultation

1. Unless the parties otherwise agree, they will consult not less than four times annually.

2. During the consultations unde r paragraph 1, the parties will:

a. exchange information on U.S. cotton support in light of the status of discussions for
successor legislation to the U.S. Food, Conser vation and Energy Act of 2008 ("2008 Farm
Bill"), with a view to obtaining convergence of views in respect of:

i. the level of the limit described in S ection I and how to identify which types
of domestic support are less trade-distorting and which are more trade-distorting;

ii. the extent to and manner in which non-product specific support measures
count against the limit described in Section I; and

iii. other issues regarding a solution to the WTO Cotton dispute with respect to
domestic support measures for upland cotton;

b. exchange information on the GSM-102 program in light of the operation of the GSM-
102 program and status of discussions for successor legislation to the 2008 Farm Bill, with a
view to obtaining convergence of views in respect of a solution to the WTO Cotton dispute
with respect to the GSM-102 program; and

c. discuss any other matter regarding a solution to the WTO Cotton dispute or the
operation of this Framework.

3. Upon enactment of successor legislation to the 2008 Farm Bill, the parties will consult with a
view to determining, with respect to measur es of domestic support for cotton and the GSM-102
program, whether a mutually agreed solution to the WTO Cotton dispute (WT/DS267) has been
reached.

Section IV

Duration

This Framework will terminate on the earlier of:

a. Sixty (60) days after termination of the Memorandum; or

b. Twenty-one (21) days after Brazil or the United States provides written notice to the
other party that it is withdrawing from this Framework.

Section V

Suspension of Countermeasures

No later than June 21, 2010, Brazil will publish in the Diário Oficial da União notice that, as long as
this Framework is not terminated, it will not im pose countermeasures authorized by the World Trade
Organization in the Cotton dispute.

Section VI

Reservation of Rights

This Framework is without prejudice to the right s and obligations of Brazil and the United States
under the Marrakesh Agreement Establishing the World Trade Organization.

Section VII

Effective Date

This Framework will be effective on the date of signature.

Done at Washington, on June 25, 2010, in two originals, each in the English and Portuguese
languages, both texts being equally authentic. In case of divergence of interpretation, the English text
will prevail.

For the Government of
the United States of America:

For the Government of the
Federative Republic of Brazil