Document: WT/DS267/R/Add.3 Page L-1 ANNEX L COMMUNICATIONS FROM THE PANEL Contents Page L-1.  Communications to Parties Annex L-1.1 Communication of 21 May 2003 L-2
Date: 21 May 2003
Document codes: WT/DS267/R/Add.3
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

ANNEX L

COMMUNICATIONS FROM THE PANEL

Contents Page
L-1. Communications to Parties
Annex L-1.1 Communication of 21 May 2003 L-2
Annex L-1.2 Communication of 27 May 2003 L-3
Annex L-1.3 Communication of 28 May 2003 L-4
Annex L-1.4 Communication of 20 June 2003 L-6
Annex L-1.5 Communication of 25 July 2003 L-11
Annex L-1.6 Communication of 30 July 2003 L-27
Annex L-1.7 Communication of 5 August 2003 L-28
Annex L-1.8 Communication of 19 August 2003 L-31
Annex L-1.9 Communication of 23 August 2003 L-32
Annex L-1.10 Communication of 25 August 2003 L-33
Annex L-1.11 Communication of 5 September 2003 L-34
Annex L-1.12 Communication of 12 September 2003 L-36
Annex L-1.13 Communication of 18 September 2003 L-37
Annex L-1.14 Communication of 24 September 2003 L-38
Annex L-1.15 Communication of 13 October 2003 L-39
Annex L-1.16 Communication of 3 November 2003 L-50
Annex L-1.17 Communication of 14 November 2003 L-53
Annex L-1.18 Communication of 8 December 2003 L-54
Annex L-1.19 Communication of 23 December 2003 L-65
Annex L-1.20 Communication of 24 December 2003 L-68
Annex L-1.21 Communication of 12 January 2004 L-69
Annex L-1.22 Communication of 3 February 2004 L-71
Annex L-1.23 Communication of 16 February 2004 L-78
Annex L-1.24 Communication of 20 February 2004 L-80
Annex L-1.25 Communication of 24 February 2004 L-81
Annex L-1.26 Communication of 4 March 2004 L-82
Annex L-1.27 Communication of 7 April 2004 L-83
L-2. Communications to Third Parties 1
Annex L-2.1 Communication of 28 May 2003 L-84
Annex L-2.2 Communication of 25 July 2003 L-86
Annex L-2.3 Communication of 30 July 2003 L-93
Annex L-2.4 Communication of 13 October 2003 L-94

1 Communications included as L-1.4, -1.7, -1.11, -1.12, -1.13 and -1.14 were also sent to 3rd parties.

ANNEX L-1.1

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

21 May 2003

 I refer to the letter from the United States dated 21 May 2003and addressed to the Chair of the
Panel. I understand this was also copied to your delegation. The Panel wishes to ask Brazil to
communicate its views, if any, in writing in response to this letter.

 The Panel would appreciate if Brazil's written r esponse could be submitted before the close of
business this Friday, 23 May 2003. This is in view of the fact that the Chairman of the Panel,
Mr. Rosati, is proposing to convene an organiza tional meeting with the parties on Monday 26 May
2003 from 11:30 a.m. The venue will be communicated to you shortly.

ANNEX L-1.2

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

27 May 2003

 The Panel takes note of the United States' comme nts with respect to the Panel's timetable and
working procedures, dated 21 May 2003, and Brazil's communication dated 23 May 2003.

 Attached you will find the Panel's proposed working procedures and timetable . The Panel
intends to hold an organizational meeting with the parties at 8 a.m. on Wednesday, 28 May 2003
at room C in order to hear the parties' views on these proposals.

 As indicated in the attached proposed timetable , prior to the submission by the parties of their
first written submissions, the Panel intends to request the parties to address, in their initial briefs to the
Panel, the following:

• whether Article 13 of the Agreement on Agriculture precludes the Panel from considering
Brazil's claims under the Agreement on Subsidies and Countervailing Measures in these
proceedings in the absence of a prior conclusi on by the Panel that certain conditions of
Article 13 remain unfulfilled. In particular, the Panel invites the parties to explain their
interpretation of the words "exempt from actions" as used in Article 13 of the Agreement on
Agriculture, as well as bringing to the Panel's attenti on any other relevant provisions of the
covered agreements and any othe r relevant considerations whic h the parties consider should
guide the Panel's consideration of this issue.

 As also indicated in the attached timetable, the Panel will invite the parties to submit any
written comments on each other's comments on this i ssue. The Panel currently wishes to signal its
intention to clarify to the parties its view on these is sues prior to the parties' submission of their first
written submissions.

 In the event that the Panel were to rule th at Article 13 precludes the Panel from considering
certain claims raised by Brazil prior to a conclusi on that certain conditions of Article 13 remain
unfulfilled, we may decide to adjust the timetable to permit the parties to make further submission(s)
after the second substantive meeting and to schedule further substantive meeting(s), as necessary, with
the parties.

 With respect to the participation of third par ties in these Panel proceedings, the Panel is aware
of the provisions of Article 10.3 of the DSU, which states that third parties shall receive the
submissions of the parties to the dispute to the first meeting of the Panel. Given the significant
systemic issues in this Panel proceeding, and in exercise of our discretion to manage these Panel
proceedings, we believe that it would be appropriate in this case for the third parties to have access to
the parties' initial written comments (and any writte n comments the parties may make on each others'
comments) as well as to have the ability to s ubmit any written comments they themselves may have
on the issue that we have identified above. We ther efore intend to invite the parties to serve also on
the third parties their initial briefs and any respondi ng comments. At the organizational meeting, we
will invite any comments you may have on this proposed approach to third party participation.

[Attachment omitted]

ANNEX L-1.3

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

28 May 2003

 Attached you will find the timetable and working procedures adopted by the Panel for this
dispute in accordance with Article 12.1 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU"). In adopting the timetable and working procedures, the Panel has
carefully considered the parties' comments at this morning's organizational meeting.

 As indicated in the attached timetable, prior to the submission by the parties of their first
written submissions, the Panel requests the parties to a ddress, in their initial briefs to the Panel (to be
submitted on 5 June 2003
), the following:

• whether Article 13 of the Agreement on Agriculture precludes the Panel from considering
Brazil's claims under the Agreement on Subsidies and Countervailing Measures in these
proceedings in the absence of a prior conclusion by the Panel that certain conditions of Article
13 remain unfulfilled. In particular, the Panel invites the parties to explain their interpretation
of the words "exempt from actions" as used in Article 13 of the Agreement on Agriculture, as
well as bringing to the Panel's attention any other relevant provisions of the covered
agreements and any other releva nt considerations which the pa rties consider should guide the
Panel's consideration of this issue. For greater clarity, the Panel invites the parties, during this
initial stage of the proceedings, to focus on matters of legal interpretation, rather than upon
the submission of any factual evidence that might be associated with the substantive elements
of Article 13.

 As also indicated in the attached timetable, the Panel will invite the parties to submit any
written comments on each other's comments on this issue (i.e. on 13 June 2003). The Panel intends to
rule on these issues on 20 June 2003, prior to the parties' submission of their first written submissions.

 As has been indicated, the Panel recognizes that it may need to revisit certain aspects of its
timetable and working procedures in light of develo pments during the course of the Panel procedures,
including the nature of the Panel's ruling that is scheduled for 20 June 2003. In particular, in the event
that the Panel were to rule that Article 13 precl udes the Panel from considering certain claims raised
by Brazil prior to a conclusion that certain conditions of Article 13 remain unfulfilled, we may decide
to adjust the timetable to permit the parties to ma ke further submission(s) after the second substantive
meeting and to schedule further substantive meeti ng(s), as necessary, with the parties. Related
amendments to the working procedures may also be made, if necessary.

 With respect to the participation of third par ties in these Panel proceedings, we have carefully
considered the parties' comments at this morni ng's organizational meeting. In exercise of our
discretion to manage these Panel proceedings, we con tinue to believe that it would be appropriate in
this case for the third parties to have access to the parties' initial written comments (and any written
comments the parties may make on each others' comments) as well as to have the ability to submit
any written comments they themselves may have on the issue that we have identified above. The
Panel considers that such third party participation in this initial stage of the Panel proceedings is
appropriate for the following reasons.

 The Panel is aware of the pr ovisions of Article 10.3 of the DSU, which states that third parties
shall receive the submissions of the parties to the disp ute to the first meeting of the Panel. We would
also observe that the factual circumstance that pres ents itself here is not itself specifically addressed
by the DSU. In our view, the legal issue that the Panel has asked the parties to address in their initial
briefs will necessarily have ramifications for the remainder of the Panel proceedings, including the
scope of the first substantive meeting, at which third parties will participate.

 We therefore invite the parties to serve also on the third parties their initial briefs and any
responding comments. The Panel will also invite third parties to submit any written comments they
might have concerning the initial phase of these proceedings. The deadline for any third party
comments is 10 June 2003
. The parties' comments to be submitted on 13 June may, of course, also
address comments made by third parties.

[Attachment omitted]

ANNEX L-1.4

COMMUNICATION TO BRAZIL AND THE
UNITED STATES AND THIRD PARTIES

20 June 2003

1. In a communication to the Panel, dated 21 May 2003, prior to the Panel's adoption of its
working procedures, the United States had "propose[d] that the Panel organize its procedures to deal
with the threshold Peace Clause issue at the outset of this dispute". The United States asserted inter
alia that "[b]ecause in this dispute Brazil has made claims under 17 different provisions of the WTO
Multilateral Agreements with respect to numerous US programmes under at least 12 US statutes, we
believe the Panel’s consideration of the critical Peace Clause issue would be aided by briefing and
argumentation focused on this threshold issue". Brazil submitted a communication in response, dated
23 May 2003, opposing the US proposal.

2. On 28 May 2003, after having heard the views of the parties, we adopted our timetable and
working procedures in accordance with Article 12.1 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (the "DSU").

3. At the same time, we indicated that we w ould consider giving a ruling on certain issues on
20 June 2003, prior to the submission by the parties of their first written submissions, in relation to the
following question and we requested the parties and third parties to address us in relation to it:

"whether Article 13 of the Agreement on Agriculture precludes the Panel from
considering Brazil's claims under the Agreement on Subsidies and Countervailing
Measures in these proceedings in the absence of a prior conclusion by the Panel that
certain conditions of Article 13 remain unfulf illed. In particular, the Panel invites the
parties to explain their interpretation of the words "exempt from actions" as used in
Article 13 of the Agreement on Agriculture , as well as bringing to the Panel's
attention any other relevant provisions of the covered agreements and any other
relevant considerations which the par ties consider should guide the Panel's
consideration of this issue. For greater clarity, the Panel invites the parties, during
this initial stage of the proceedings, to focu s on matters of legal interpretation, rather
than upon the submission of any factual ev idence that might be associated with the
substantive elements of Article 13."
4. The parties submitted their initial briefs on this question on 5 June 2003. On 10 June, the
following six third parties submitted briefs: Arge ntina; Australia; European Communities; India,
New Zealand and Paraguay. The parties submitted further comments on 13 June 2003.

5. Article 13(a)(ii) of the Agreement on Agriculture states that domestic support measures that
conform fully to the provisions of Annex 2 of the Agreement on Agriculture shall be exempt from
actions based on Article XVI of GATT 1994 and Part III of the Agreement on Subsidies and
Countervailing Measures (the "SCM Agreement"). Article 13(b)(ii) of the Agreement on Agriculture
states that domestic support measures that conform fu lly to certain conditions shall be "exempt from
actions based on paragraph 1 of Article XVI of GATT 1994 or Articles 5 and 6 of the Subsidies
Agreement, provided that such measures do not gr ant support to a specific commodity in excess of
that decided during the 1992 marketing year." Articles 5 and 6 of the SCM Agreement are each
qualified by the proviso that "[t]his Article does not apply to subsidies maintained on agricultural

products as provided in Article 13 of the Agreemen t on Agriculture". Article 13(c)(ii) of the
Agreement on Agriculture provides that export subsidies that conform fully to the provisions of Part V
of that Agreement, as reflected in each Member's Schedule, shall be "exempt from actions based on
Article XVI of GATT 1994 or Articles 3, 5 and 6 of the Subsidies Agreement". Article 3.1 of the
SCM Agreement, which prohibits export subsidies, is qualif ied by the proviso: "Except as provided in
the Agreement on Agriculture...". These provisions of Article 13 afford a conditional exemption from
certain obligations relating to certain actionable and prohibited subsidies under the provisions of the
SCM Agreement and Article XVI of the GATT 1994 . This conditionality requires, inter alia , a
comparison of facts with the applicable exemption requirements.

6. Briefly, Brazil asserts that the Panel can si multaneously consider all of the arguments and
evidence on the substance of its claims under the SCM and Agriculture Agreements , while the
United States asserts that the Panel is precluded from examining the SCM claims concerning
prohibited and actionable subsidies in the absence of a prior ruling that the conditions of Article 13 of
the Agreement on Agriculture are not satisfied, and, even if no t, the Panel should exercise its
discretion to order its proceedings in this way. All of the six third parties that made submissions
support the view that the Panel is not precluded fro m simultaneously considering all of the arguments
and evidence on the substance of Brazil's claims under the SCM and Agriculture Agreements , or,
putting this another way, that conclusions on the applicability of the Article 13 exemptions do not
have to be made before consideration of SCM claims in relation to the measures concerned.

7. We are faced with two questions:

• first
, whether we are required to defer any examination of certain of Brazil's claims based on
Articles 3, 5 and 6 of the SCM Agreement and Article XVI of the GATT 1994 until after
making a ruling or expressing views on the issue of fulfilment of Agreement on Agriculture
Article 13 conditions; and
• second, if not, then how we should exercise our discretion to best structure our examination of
the matter before us.
8. These questions concern the manner in which we should or must treat the claims of Brazil
based on Articles 3, 5 and 6 of the SCM Agreement and Article XVI of the GATT 1994 having regard
to the provisions of Article 13 of the Agreement on Agriculture.

9. We therefore look first to the dispute settlement procedures governing disputes under the
SCM Agreement . Article 30 of the SCM Agreement states: "The provisions of Articles XXII and
XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply
to consultations and the settlement of disputes under this Agreement, except as otherwise specifically
provided herein."

10. We thus turn next to the Understanding on Rules and Procedures Governing the Settlement of
Disputes (the " DSU") and to the terms of the SCM Agreement itself (in order to see whether or not
there is anything otherwise specifically pr ovided therein). Article 1.1 of the DSU is entitled
"Coverage and Application". It states that "[t]he rules and procedures of this Understanding shall
apply to disputes brought pursuant to the consu ltation and dispute settlement provisions of the
agreements listed in Appendix 1 to this Unders tanding (referred to in th is Understanding as the
"covered agreements")."

11. As the Appellate Body has observed, "[a]rt icle 1.1 of the DSU establishes an integrated
dispute settlement system which applies to all of the agreements listed in Appendix 1 to the DSU (the
"covered agreements"). The DSU is a coherent syst em of rules and procedures for dispute settlement

which applies to "disputes brought pursuant to the consultation and dispute settlement provisions of"
the covered agreements."
1 The SCM Agreement and the GATT 1994 are Multilateral Agreements on
Trade in Goods in Annex 1A of the WTO Agreement and are therefore "covered agreements" listed in
Appendix 1 of the DSU. The general DSU rules and procedures do not set forth any specific distinct
way to deal with claims under the SCM Agreement and the GATT 1994 having regard to the
provisions of Article 13 of the Agreement on Agriculture.

12. Article 1.2 of the DSU provides, in relevant part, that the rules and procedures of the DSU
shall apply subject to such special or additional rules and procedures on dispute settlement contained
in the covered agreements as are identified in Appendix 2 to the DSU.

13. We therefore examine whether Appendix 2 to the DSU identifies any special or additional
dispute settlement rules or procedures relating to the SCM Agreement or to Article XVI of the GATT
1994.

14. Appendix 2 of the DSU does not identify Article XVI of the GATT 1994 as a special or
additional rule. It does identify Articles 4.2-4.12 and Articles 7.2-7.10 of the SCM Agreement as
"special or additional rules and procedures". These provisions contain special procedures and
remedies for disputes involving prohibited and actionable subsidies governed by the SCM Agreement.
However, none of these provisions purports to confer any sort of precedence or priority for
considering SCM remedies in a dispute involving claims under the Agreement on Agriculture .
Furthermore, Article 7.1 of the SCM Agreement, which is not identified as a special or additional rule
or procedure in Appendix 2 of the DSU, indicates that it applies: "Except as provided in Article 13 of
the Agreement on Agriculture....". This clearly indicates to us that this provision must be read in the
light of the provisions of Article 13 of the Agreement on Agriculture . Moreover, as noted in para. 5
above, the substantive provisions to which these re medial articles are linked – Articles 3, 5 and 6 –
stipulate either that they apply "except as provi ded in the Agreement on Agriculture" (Article 3
relating to prohibited subsidies), or that they do "not apply to subsidies maintained on agricultural
products as provided in Article 13 of the Agreemen t on Agriculture" (Articles 5 and 6.9 of the SCM
Agreement, entitled "Adverse Effects" and "Serious Prejudice", respectively).

15. The cited provisions of the SCM Agreement refer, as just indicated, to the Agreement on
Agriculture, and some specify more precisely Article 13 of the Agreement on Agriculture . We
therefore examine the rules applicab le to dispute settlement under the Agreement on Agriculture ,
which is also a Multilateral Agreement on Trade in Goods in Annex 1A of the WTO Agreement and
is, therefore, a "covered agreement" listed in Appendix 1 of the DSU. Article 19 of the
Agreement on
Agriculture is entitled "Consultation and Dispute Settlement". It states that the provisions of
Articles XXII and XXIII of GATT 1994, as elaborated and applied by the DSU, shall apply to
consultations and the settlement of disputes under that Agreement.

16. Appendix 2 to the DSU does not identify any special or additional dispute settlement rules or
procedures relating to Article 13 of the Agreement on Agriculture.

17. Consequently, consistent with our consideration of the relevant provisions, there is no special
dispute settlement requirement foreseen in the covered agreements in respect of a panel's
consideration of the fulfilment of Article 13 conditi ons. The issue of fulfilment of the conditions of
Article 13 of the Agreement on Agriculture is to be resolved using generally applicable DSU rules and
procedures. The fact that certain very specifi c provisions are included in Appendix 2 of the DSU as
special or additional rules indicates that, when the drafters intended to make a particular provision

 1 Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from
Mexico ("Guatemala – Cement I "), WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, 3767,
para. 64.

applicable as a special or additional dispute settlement rule, they did so explicitly. Therefore, their
failure to include a reference to any provision of the Agreement on Agriculture in the text of
Appendix 2 demonstrates that they did not intend to make any provision of that Agreement a special
or additional dispute settlement rule. It is not necessary for us to look for any further interpretive
guidance on this issue.

18. We next turn to the issue of how we shoul d structure our procedures to consider the matter
before us. As we have concluded above, this issue is subject to the DSU but not otherwise affected by
the covered agreements. In this regard, within the overall parameters set by the DSU of prompt and
efficient dispute resolution
2, we must exercise our discretion as to how best to organize our
procedures. Our discretion must be guided by the instructions given to us by the DSU. Pursuant to
Article 12.1 of the DSU, "[p]anels shall follow the Worki ng Procedures in Appendix 3 unless the
panel decides otherwise after consulting the parties to the dispute". Moreover, Article 12.2 provides:
"Panel procedures should provide sufficient flex ibility so as to ensure high-quality panel reports,
while not unduly delaying the panel process."

19. Article 11 of the DSU, entitled "Function of Panels" provides that the function of panels is to
assist the DSB in discharging its responsibilities under the DSU and the covered agreements.
Accordingly, a panel should make an objective as sessment of the matter before it, including an
objective assessment of the facts of the case and the a pplicability of and conform ity with the relevant
covered agreements, and make such other fi ndings as will assist the DSB in making the
recommendations or in giving the rulings provided for in the covered agreements. Article 11
contemplates that a panel must make an “obj ective assessment of the facts of the case and the
applicability of and conformity with the relevant covered agreements.” It does not require that a panel
must conduct its proceedings in any particular way, pr ovided that its requirements are fulfilled. It is
within our discretion to manage our procedures so as to best fulfil the requirements of Article 11.

20. Given the potential complexity of the claims before us, the conditional nature of certain of
these claims and the volume of evidence which may be introduced by the parties in support of their
claims and arguments, and in order to organize our pr oceedings in an orderly, effective and efficient
manner which serves to facilitate an objective assessment of the matte r before us, and optimizes use
of our resources, we have adopted the following modi fications to our procedures (as indicated in the
attached timetable):

• The Panel intends to express its views on whethe r measures raised in this dispute satisfy the
conditions in Article 13 of the Agreement on Agriculture, to the extent that it is able to do so,
by 1 September 2003, and will defer its consideration of claims under Articles 3, 5 and 6 of
the SCM Agreement and Article XVI of the GATT 1994 as those provisions are referred to in
Article 13 of the Agreement on Agriculture until after it has expressed those views. The
Panel's views may be expressed in the form of rulings which could affect the Panel's further
consideration of this dispute.
• In order that third parties may participate effec tively at the first meeting at which the claims
under Articles 3, 5 and 6 of the SCM Agreement and Article XVI of the GATT 1994 as
referred to in Article 13 of the Agreement on Agriculture are examined (as necessary), the
Panel intends to divide its first meeting into two sessions, each of which will include a third
party session.

2 Article 3.3 of the DSU provides: "The prompt settlement of situations in which a Member considers
that any benefits accruing to it dir ectly or indirectly under the covere d agreements are being impaired by
measures taken by another Member is essential to the effective functioning of the WTO and the maintenance of
a proper balance between the rights and obligations of Members."

• Accordingly, for the purposes of the first se ssion of the first substantive meeting on 22-
24 July 2003, the Panel does not require the parties to address claims under Articles 3, 5 and 6
of the SCM Agreement and Article XVI of the GATT 1994 as referred to in Article 13 of the
Agreement on Agriculture . Having said this, the Panel notes that this does not preclude the
parties from addressing such matters in their first submissions.
• All other claims of Brazil in relation to measures which Brazil maintains do not involve a
consideration of Article 13 of the Agreement on Agriculture should also be addressed in first
submissions, in order for the other party and th ird parties to have an opportunity to express
their views on any such claims.
• For the purposes of allowing the Panel to expr ess its views on the exemption conditions of
Article 13 of the Agreement on Agriculture by 1 September 2003, in relation to those
measures which may be affected by Article 13, full and complete submissions on factual and
legal issues related to Article 13 in this dispute will need to be provided, at the latest, in the
parties' rebuttal submissions (to be submitted on 22 August 2003).
21. We recognize that we may need to revis it certain aspects of our timetable and working
procedures in light of developments during the cour se of the Panel procedures. Related amendments
to the working procedures may also be made, if necessary. We have been mindful of due process
considerations in revising our timetable and will con tinue to ensure that the parties have reasonable
time to prepare for any subsequent stages of the dispute, as appropriate.

[Attachment omitted]

ANNEX L-1.5

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

25 July 2003

 Please find attached a communication from the Panel on the following issues:

1. The Panel's view on the preliminar y ruling requested by the United States.
2. Questions from the Panel to the parties.
3. A copy of the Panel's questions to third parties (sent for your reference)

 The Panel's questions are intended to facilitate the work of the Panel, and do not in any way
prejudge the Panel's findings on the matter before it. Nor does the fact that the Panel has placed these
questions under certain headings prejudge the Panel' s findings on the matter before it. Each party is
free to respond to or comment on questions posed to the other party or third parties.

 Please be reminded that as stated by the Chairman of the Panel in the meeting, parties are
requested to submit answers by the close of busin ess of 4 August 2003. Subsequently, parties can
submit comments to each other's responses by the close of business 22 Au gust, the same deadline
applicable to the rebuttal submissions

Panels' views on the preliminary ruling requested by the United States

1. The United States requests a preliminary ruling that:

 (1) export credit guarantee measures relati ng to eligible US agricultural commodities
other than upland cotton,

 (2) production flexibility contract payments and market loss assistance payments, and

 (3) the Agricultural Assistance Act of 2003

are not within the Panel's terms of reference.
1

2. Brazil asserts that these items are properly with in the Panel's terms of reference and asks the
Panel to reject the United States' request.
2

3. The Panel wishes to indicate to the parties how it intends to rule on items (1) and (2), in order
to assist them in deciding what argumentation and evidence to submit in thei r answers to questions
and rebuttals.

4. The DSB established the Panel at its mee ting on 18 March 2003 with the following standard
terms of reference:
3

"To examine, in the light of the relevant provisions of the covered agreements cited
by Brazil in document WT/DS267/7, the matter referred to the DSB by Brazil in that
document and to make such findings as will assist the DSB in making the
recommendations or in giving the rulings provided for in those agreements".
5. With respect to item (1), the Panel intends to rule in its report that "export credit guarantees
… to facilitate the export of US upland cotton, and other eligible agricultural commodities" as
addressed in document WT/DS267/7, are within its terms of reference.

6. With respect to item (2), th e Panel intends to rule in its report that production flexibility
contract payments and market loss assistance payments as addressed in document WT/DS267/7 are
within its terms of reference. This is without prej udice to the relevance, if any, of those payments
under Article 13(b) of the Agreement on Agriculture, Articles 5, 6 and 7 of the SCM Agreement and
Article XVI of GATT 1994.

7. The Panel has not yet decided upon its approach to item (3) and asks the parties not to
exclude consideration of the Agricultural Assistan ce Act of 2003 in responding to the Panels' written
questions and in rebuttal submissions.

2 Brazil's Oral Statement at the First Substantive Meeting, paragraphs 90, 144 and 145.
3 WT/DSB/M/145 (paragraph 35)

Questions from the Panel to the parties –
First session of the first substantive Panel meeting

UPLAND COTTON

1. Please confirm that all information and data th at you have provided to the Panel relating to
"cotton" in fact relates to upland cotton only. BRA, USA

PRELIMINARY ISSUES

Note to parties: As indicated in the cover note, the Panel has expressed its views in respect of the
three United States requests for preliminary rulings . The Panel's questions reflected in this
compilation relating to the requested preliminary rulings on which the Panel has expressed its views
are those that were posed in the c ourse of the first session of the first Panel meeting. This is to give
an opportunity for the parties to transpose into writing their oral responses.

Product scope of Panel's terms of reference relating to Brazil's export credit guarantee claims

2. Is Brazil's claim in relation to export credit guarantees against the measures said to constitute
the GSM-102, GSM-103 and SCGP programmes in thei r entire application, or against the measures
said to constitute the GSM-102, GSM-103 and SCGP programmes in their application to upland
cotton, or both? BRA

3. If the request for consultations in this dispute omitted certain products in relation to export
credit guarantees, on what basis is it argued that it failed to identify the measures at issue in
accordance with Article 4.4 of the DSU? USA

4. Is it argued that the export credit guarantee programmes concerning upland cotton are each a
separate or independent measure, in that they operate independently? USA

5. Is there a specification in any legislation or regulation (or any other official government
document) which limit or restrict the export cred it guarantee programmes at issue exclusively to
upland cotton? USA

6. For the purposes of the Panel's examination of Brazil's claims relating to GSM-102, GSM-103
and SCGP under the Agreement on Agriculture and the SCM Agreement , is accurate data and
information available with respect to these e xport credit guarantee programmes concerning upland
cotton alone (e.g. with respect to "long-term operati ng costs and losses")? In this respect, the Panel
also directs the parties' attention to the specific questions below relating to the programmes. USA

7. Are commitments with respect to export subsidies under the Agreement on Agriculture
commodity-specific? How, if at all, is this relevant? BRA, USA

8. Does the United States confirm that the questi ons referred to by Brazil in paragraph 92 of
Brazil's oral statement were posed to the United States in the consultations? USA

9. How does the United States respond to paragraph 94 of Brazil's oral statement? USA

10. What actual prejudice, if any, has the Un ited States suffered as a result of the alleged
omission of products other than upland cotton from the request for consultations? USA

11. Does the United States agree that Brazil's re quest for establishment of the Panel can be
understood to indicate that Brazil's export credit guara ntee claims relatesto products other than upland
cotton? How, if at all, is this relevant? USA

12. Please address issues and submit eviden ce regarding the three export credit guarantee
programmes concerned relating to upland cotton and other eligible agricultural commodities in your
answers to questions and rebuttal submissions. BRA, USA

13. Please include any argumentation and eviden ce to support your statement during the Panel
meeting that the inclusion of such other eligib le agricultural commoditi es would create additional
"work" for the Panel with respect to each of these commodities under Article 13 of the Agreement on
Agriculture. USA

Expired measures

14. Please submit evidence regarding the progra mmes under the 1996 FAIR Act, in particular,
production flexibility contract payments and market lo ss assistance payments, to the extent that they
would be relevant to the Panel's de termination under Article 13 of the Agreement on Agriculture in
your answers to questions and rebuttal submission. USA

15. Do the parties agree that it is beyond a Pa nel's power to recommend a remedy for an expired
measure? Could the Panel coul d be required to examine "expired measures" in order to conduct its
assessment of the matter before it? How, if at all, is Article 7.8 of the SCM Agreement relevant to
these matters? BRA, USA

Agricultural Assistance Act of 2003

16. What, if any, prejudice in terms of the pr esentation of its case does the United States allege,
should the Panel proceed to consider the measu res constituting the cottonseed payments under the
Agricultural Assistance Act of 2003? USA

17. (a) What is the relationship of the Agricultural Assistance Act of 2003 to other
legislation in the request for establishment of the Panel? BRA, USA

 (b) Do the legal instruments follow directly one after another, or are there temporal gaps?
Are payments authorized under a broad legislative authority or are they specific to
each legal instrument? BRA, USA

 (c) Please provide any implementing regula tions. Do these implementing regulations
resemble those relating to previous prog rammes or payments? Are payments made
retrospectively? How if at all is this relevant? BRA, USA

18. If the Panel is correct in understanding th at cottonseed payments are divided between
processors and producers, how is this reflected in Brazil's calculations? BRA

Measures at issue

19. The Panel notes that Brazil's panel request refers, inter alia , to alleged "subsidies" and
"domestic support" "provided" in various contexts. Please specify the measures, in particular, the
legislative and regulatory provisions, by number and le tter, in respect of which Brazil seeks relief and
indicate where each is referred to in the panel request. BRA

ARTICLE 13(B): DOMESTIC SUPPORT MEASURES

"exempt from actions"

20. In paragraph 8 of its initial brief (dated 5 June, 2003), the United States argued that the word
"actions" as used in the phrase "exempt from actions" in Article 13 of the Agreement on Agriculture
includes the "bringing of a case" and consultations. In paragraph 36 of its first written submission
(dated 11 July, 2003), the United States stated as follows:

"[P]rior to this point in the process, the DSU rules did not afford the United States
any opportunity to prevent the dispute from proceeding through consultations and
panel establishment automatically, regardless of the U.S. insistence that its measures
conform to the Peace Clause."
Is it the United States' understanding that the draf ters used the phrase "exempt from actions" knowing
that under the DSU it would not be possible fully to exempt " actions", as the United States interprets
that term? USA

21. In US - FSC and US - FSC (21.5) the Appellate Body made findings under the SCM
Agreement relating to export subsidies in respect of agricultural products without making a finding in
respect of Article 13 of the Agreement on Agriculture. How is this relevant to the United States'
interpretation of the phrase "exempt from actions" as used in Article 13? USA

"such measures" and Annex 2 of the Agreement on Agriculture

22. Please explain the difference, if any, between the meaning of "defined" and the meaning of
"fixed" in the phrase "a defined and fixed base pe riod" in paragraph 6(a) of Annex 2 of the Agreement
on Agriculture. BRA, USA

23. Please explain the meaning of "a" in "a define d and fixed base period" in paragraph 6(a) of
Annex 2 of the Agreement on Agriculture , the meaning of "the" in "the base period" in
paragraphs 6(b), (c) and (d), and the differe nce between these and the phrase "based on the years
1986-88" in Annex 3. BRA, USA

24. How often can a Member define and fix a base period in accordance with paragraph 6 of
Annex 2 of the Agreement on Agriculture? BRA, USA

25. Does the United States consider that there is any ambiguity in the term "type of production"
as used in paragraph 6(b) of Annex 2 of the Agreement on Agriculture? USA

26. Can the United States confirm Brazil's ass ertions in paragraph 174 of its first written
submission that the implementing regulations for dir ect payments prohibit or limit payments if base
acreage is used for the production of certain crops? If so, can the United States clarify the statement
in paragraph 56 of its first written submission that direct payments are made regardless of what is
currently produced on those acres? Can the Unite d States confirm the same point in relation to
production flexibility contracts? USA

27. Does Brazil argue that any United States measure that does not comply with the fundamental
requirement of paragraph 1 of Annex 2 of the Agreement on Agriculture is actionable independently
of any failure of that measure to comply with the basic or policy-specific criteria in Annex 2? BRA

28. Please explain the meaning of the word "criteria" in Articles 6.1 and 7.1. What effect, if any,
does the use of the word "Accordingly" in paragraph 1 of Annex 2 of the Agreement on Agriculture
have on the meaning of the preceding sentence? BRA

29. Please explain the meaning of the words "the fundamental requirement" as used in
paragraph 1 of Annex 2 of the Agreement on Agriculture. USA

30. Do the parties consider that direct paym ents and production flexibility contract payments
meet or met the basic criteria referred to in paragraph 1 of Annex 2 of the Agreement on Agriculture?
BRA, USA

31. If the first sentence of paragraph 1 of Annex 2 is not a stand-alone obligation, then must new,
non- or minimally trade-distorting measures that do not conform to the criteria listed in Annex 2 be
classified as non-Green Box? BRA, USA

32. If the first sentence of paragraph 1 of Anne x 2 expresses a general principle which informs
the interpretation of the criteria in Annex 2, pl ease explain how this affects the assessment of the
direct payments programme's compliance with paragraph 6 of Annex 2. USA

"do not grant support to a specific commodity"

33. According to the United States' interpretation of the word "grant", when can a Member claim
that a measure is not exempt from action under Article 13(b)? What if the measure is enacted
annually? Can the Member obtain a remedy in respect of that measure under the DSU? USA

34. Does Brazil interpret the word "grant " as used in Article 13(b)(ii) of the Agreement on
Agriculture to mean payment made in a specific year or payment made in respect of a specific year?
BRA

35. Does a failure by a Member to comply in a given year with either the chapeau of
Article 13(b) or the proviso in subparagraph (ii) of Article 13(b) impact its entitlement to benefit in an
earlier or a later year from the exemption from action provided by Article 13(b)? BRA, USA

36. Does a failure by a Member to comply with Article 13(b) in respect of a specific commodity
impact its entitlement to benefit in respect of other agricultural products from the exemption from
action provided by Article 13(b)? BRA, USA

37. In the United States' view, why did the drafters not use the exact term "product-specific" in
Article 13(b)(ii)? USA

38. Given the fact that subsidies available for mo re than one product could have various effects
on production, how does the United States demar cate between product-specific support and non-
product specific support ? USA

39. If "such measures" in Article 13(b)(ii) refers to all those in the chapeau of Article 13(b), why
are they not all included in the potential comparisons with 1992? In what circumstances can measures
which grant non-product specific support lose exemp tion from action under Articles 5 and 6 of the
SCM Agreement and Article XVI of
GATT 1994? USA

40. In relation to which other provisions in the Agreement on Agriculture is it relevant to
disaggregate non-product specific support in terms of specific commodities? BRA

41. What is the position of Brazil with regard to certain other domestic support measures not cited
by Brazil that were notified by the United St ates as non-product-specific (e.g. G/AG/N/USA/43),
some of which presumably deliver support to uplan d cotton (e.g. state credit programmes, irrigation
subsidies etc). Why have budgetary outlays for such measures related to upland cotton not been
included in the comparison of support with 1992? BRA

42. If the word "specific" were deleted from Artic le 13(b)(ii), would this change the meaning of
the subparagraph? BRA

43. What are the precise differences between defici ency payments and counter-cyclical payments
that lead you to classify the former as product-specific and the latter as non-product specific? How do
you classify market loss assistance payments? USA

44. Do you allege that counter-cyclical paymen ts could be considered product-specific? BRA

45. If the Panel considered that Step 2 payments paid to exporters were an export subsidy, would
the United States count them as domestic support measures for the purposes of Article 13(b)? Please
verify Brazil's separate data for Step 2 export pa yments and Step 2 domestic payments in Exhibit
BRA-69 or provide separate data. BRA, USA

46. What is the relevance, if any, of the concept of "specificity" in Article 2 of the SCM
Agreement and references to "a product" or "subsidized product" in certain provisions of the SCM
Agreement to the meaning of "support to a specific commodity" in Article 13(b)(ii) Agreement on
Agriculture? BRA, USA

"in excess of that decided during the 1992 marketing year"

47. Where does Article 13(b)(ii) require a year-on-year comparison? BRA, USA

48. Does Article 13(b)(ii) require a comparison of support granted with support decided? How
could such a comparison be made? BRA, USA

49. Brazil claims that the terms "grant" and "decide d" in Article 13(b)(ii) have broadly the same
meaning. If so, why did the drafters not use the same term? BRA

50. Please provide any written drafting history wh ich could shed light on why the proviso was
added to what is now Article 13(b)(ii) and, in pa rticular, why both words "grant" and "decided" were
used. USA

51. Could the United States please comment on th e interpretation advanced by the EC, in
paragraphs 16 and 18 of its oral statement, of the words "decided during the 1992 marketing year"?
USA

52. Please comment on an interpretation of the word s "decided during" in Article 13(b)(ii) that
would read them as synonymous with the words "authorized during". BRA, USA

53. Assume, for arguments sake, that the only "d ecision" made in the United States in 1992 was
the target price. How would Brazil make the comparison vis-à-vis, for example, the year 2001? BRA

54. Please identify all United States legal and regul atory and administrative instruments decided
during the marketing year 1992, with the respective dates of decision, that decided support for upland
cotton. BRA, USA

55. Please provide a copy of the instrument in which the rate of support for upland cotton during
the marketing year 1992 was decided, indicating the date of the decision. USA

56. Could the United States please explain how s upport granted under legislation that dates back
to 1990 can have been support "decided during the marketing year 1992"? USA

57. If the United States decided on a rate of support for MY1992, does that not mean that it
decided on whatever budgetary outlay was required to meet that rate of support, even if the exact
amount was not known at that time? USA

58. Please comment on the argument advanced by the EC, in paragraph 17 of its oral statement
that: "Had WTO Members intended a limitation to th e support provided or granted in 1992 the word
'for' would have been used in place of 'during'." BRA

59. Should the rate of support as indicated in Article 13(b)(ii) include the market price? If so,
why is it appropriate to include it in the comparison under Article 13(b)(ii)? BRA, USA

60. Can you provide information on support decided in 1992 and the years with which you
believe it should be compared, on a per support programme / per unit of production / per annum
basis? If possible, please specify how, if at all, budget outlays may be transposed into units of
production, and which units of production are best to use. BRA, USA

61. Does the United States consider that Article 13(b)(ii) permits a comparison on any basis other
than a per pound basis? USA

62. According to Prof. Sumner's calculation, the per pound support increased by approximately
24% from 1992 to 2002. On the other hand, the Pa nel understands that the total budget outlay,
according to Brazil, increased more than that. What, in Brazil's view, is the reason for this difference
in the rate of increase? BRA

63. In relation to Prof. Sumner's presentation at the first session of the first substantive meeting,
please elaborate on the reasons behind the increas e in the figures (from 1992 to 2002) concerning
Loan Support and Step 2 payments. BRA

64. Do the figures cited in Prof. Sumner's presenta tion at the first session of the first substantive
meeting indicate amount available or amount spent? Can the Panel derive amount spent from these
figures? If Article 13(b)(ii) requires a rate of support comp arison, is the rate of support the "rate" of
support available or the "rate" at which the support was spent? BRA

65. Does Brazil consider that adjustment for inflati on is relevant in the context of the comparison
under Article 13 (b)(ii) ? BRA

66. Could you please comment on the relative me rits of each of the following calculation
methods for the purposes of the comparison of supp ort to upland cotton with 1992, irrespective of
whether a particular measure should be included or excluded:

 (a) Total budgetary outlays (Brazil's approach). USA

 (b) Budgetary outlays per unit of upland co tton: Could you please calculate and provide
an estimate for the marketing years 1992 and 1999-2002, respectively, and draw
attention to any factors/qualifications that the Panel would need to be aware of.
BRA, USA

 (c) Per unit rate of support (United States approach): How should changes in acreage,
eligibility and payment limitations per farm (s) (commodity certificate programs) be
factored into this approach? BRA

 (d) Per unit rate of support for upland cotton (Prof. Sumner's approach at the first session
of the first substantive meeting ). USA

67. The Panel requests the parties to calculate and submit estimates of the AMS for upland
cotton for marketing years 1992, 1999, 2000, 2001 and 2002. For this purpose the parties are each
requested to submit AMS calculations for upland cotton (using the budgetary-outlay/non-price gap
methodology employed by the United States in respect of cotton in its DS Notifications (e.g.,
G/AG/N/USA/43) and using the formats and suppor ting tables in document G/AG/2) on the same
basis as would be the case in calculating a product specific AMS for the purposes of the calculation of
the "Total Current AMS" in any year in accord ance with the relevant provisions, including as
appropriate Article 1(a), (b) and (h), Article 6 and Annex 3 to the Agreement. BRA, USA

68. Could you please clarify the result of the cal culations of, and the meaning of the title, in
Appendix Table 1 "Estimated per unit Subsidy Rat es by Program and Year" in Annex 2 to Exhibit
BRA-105, page 12. Why are the numbers calculated for marketing loans considered to be subsidies?
Could the Panel, for example, read the "total le vel of support" (bottom line of the table) as the
effective support price for upland cotton or the maximum rate of support for upland cotton? BRA,
USA

69. Can the United States confirm that the "marke ting year" for upland cotton is 1 August to 31
July ? Can the United States confirm the Panel's understanding that USDA data for the "crop year"
corresponds to the "marketing year"? USA

EXPORT CREDIT GUARANTEE PROGRAMMES

70. How does Brazil respond to the United States' as sertion that Brazil is trying to realize through
litigation what it could not achieve in past negotiations ? BRA

71. (a) Is an export credit guarantee a financial c ontribution in the form of a "potential direct
transfer of funds or liabilities (e.g. lo an guarantee)" within the meaning of
Article 1.1(a)(1)(i) of the SCM Agreement? Why or why not? Does it confer a benefit
within the meaning of Article 1.1(b)? Why or why not? If so, to whom? USA

 (b) How, if at all, would these elements be relevant to the claims of Brazil, and the
United States response thereto? BRA, USA

72. Could Brazil expand on why, as indicated in pa ragraph 118 of its oral statement, it does "not
agree" with the United States arguments relating to the viability of an a contrario interpretation of
item (j) of the Illustrative List of Export Subsidies in Annex 1 of the SCM Agreement? BRA

73. The Panel could arguably take the view that Articles 1 and 3 of the SCM Agreement were
relevant in assessing the WTO-consistency of Unit ed States export credit guarantees. The United
States has yet to submit any evidence or argumentati on on this point, either as potential context for
interpretation of the terms in Article 10 of the Agreement on Agriculture or in relation to Brazil's
claims under the SCM Agreement . The Panel would therefore appreciate United States views in
respect of this situation, and invites the United States to submit relevant argumentation and evidence.
USA

74. If the Panel decides to refer to provisions of the SCM Agreement for contextual guidance in
the interpretation of the terms in Article 10 of the Agreement on Agriculture, should the Panel refer to
item (j) or Articles 1 and 3 of the SCM Agreement or both? BRA, USA

75. The Panel's attention has been drawn to Article 14(c) of the SCM Agreement (see e.g. written
third party submission of Canada) and to the panel report in DS 222 Canada- Export Credits and
Loan Guarantees. How and to what extent are Article 14(c) of the SCM Agreement, and the cited
panel report, relevant to the issue of whethe r or not the United States export credit guarantee
programmes confer a "benefit"? What would be th e appropriate market benchmark to use for any
comparison? Please cite any other relevant material. BRA, USA

76. How does the United States respond to Brazil's statement that : "...export credit guarantees
for exports of agricultural exports [ sic] are not available on the marketplace by commercial lenders."?
USA

77. How does the United States interpretation of "l ong term operating costs and losses" in item (j)
as claims paid give meaning to both "costs" and "losses"? Do claims paid represent "losses" or
"costs" or both? If claims paid is represented by "losses", what would go into the "cost" element of
item (j)? Could the United States expand on why it disagrees with the items which Brazil identifies
for inclusion in the examination to be conducted under item (j)? USA

78. Can the United States provide supporting documen tation for data used relating to "costs and
losses" in paragraph 173? Could the United States co nfirm that the figures cited in paragraph 173 of
its first written submission relate to the SCGP? Why did the United States cite these figures after
stating that it is not possible to make any assessment of the long-term operating costs and losses of
this programme? USA

79. In respect of what time periods does Article 13(c) require an assessment of conformity with
Part V of the Agreement on Agriculture ? How does this affect, if at all, your interpretation of
Article 13(b)? BRA, USA

80. In Brazil's view, why did the drafters of the Agreement on Agriculture not include export
credit guarantees in Article 9.1? BRA

81. How does the United States respond to the following in Brazil's oral statement: USA

 (a) paragraph 122 (rescheduled guarantees)
 (b) paragraph 123 (interest on debt to Treasury)
 (c) paragraphs 125 ff. (guaranteed loan subsidy)
 (d) paragraphs 127-129 (re-estimates, etc.)
 (e) Exhibits BRA-125-127
 (f) the chart on page 53 of Brazil's oral statement at the first session of the first Panel
meeting relating to "Guaranteed Loan S ubsidy and Administrative Expenses of US
Export Credit Guarantee Programs GSM-102 GSM 103 and SCGP"?
 (g) In respect of (a)-(f) above, how and to what extent do the information and data
presented for the export guarantee programmes concerning "program" and
"financing", "summary of loan levels", "s ubsidy budget authority", "outlay levels",
etc., in particular in Exhibits BRA-125-127, reflect "actual costs and losses" of the
GSM-102, GSM-102 and SCGP export credit guarantee programmes(see e.g. Brazil's
closing oral statement at the first session of the first substantive meeting, paragraph
24)? USA

82. Please explain each of the following statemen ts and any possible significance it may have in
respect of Brazil's claims about GSM-102 and GSM-103 (7 CFR 1493.10(a)(2), Exhibit BRA-38):
BRA, USA

 (a) "The programs operate in cases where cred it is necessary to increase or maintain U.S.
exports to a foreign market and where U.S. financial institutions would be unwilling
to provide financing without CCC's guara ntee. (7 CFR 1493.10(a)(2) Exhibit BRA-
38)

 (b) "The programs are operated in a manner intended not to interfere with markets for
cash sales. The programs are targeted toward those countries where the guarantee is
necessary to secure financing of the expor ts but which have sufficient financial
strength so that foreign exchange will be av ailable for scheduled payments." (7 CFR
1493.10(a)(2) Exhibit BRA-38)

 (c) "In providing this credit guarantee facility, CCC seeks to expand market
opportunities for US agricultural exporters and assist long-term market development
for US agricultural commodities." (7 CFR 1493.10(a)(2) Exhibit BRA-38)

83. Could Brazil explain how the procedure in Annex V of the SCM Agreement would be relevant
to its claims concerning agricultural export subsid ies, prohibited subsidies and agricultural domestic
support? (e.g. note 301 in Brazil's first submission a nd paragraph 4 of Brazil's oral statement at the
first session of the first substantive meeting). BRA

84. Is the Panel correct in understanding that, under the GSM-102 and GSM-103 programmes, the
exporter pays a fee calculated on the dollar amo unt guaranteed, based on a schedule of rates
applicable to different credit periods? How and on what basis are the fee rates fixed? Do the fee rates
ever change? If so, how and for what reason? W ould it be necessary to amend the legislation and/or
regulations in order to adjust the fee rates? USA

85. Is the Panel correct in understanding that, under the SCGP, the exporter pays a fee for the
guarantee calculated on the guaranteed portion of th e value of the export sales? How and on what
basis are the fee rates fixed? Do the fee rates ever change? If so, how and for what reason? Would it
be necessary to amend the legislation and/or regulations in order to adjust the fee rates? Please
explain any "risk" assessment involved in the programme. USA

86. Is there a risk categorization in relation to three export credit guarantee programmes (GSM-
102, GSM-103 and SCGP)? Does this have any imp act on premiums payable and the ability of the
CCC to on-sell the guarantees ? USA

87. What proportion of CCC (export-related and to tal) long term operating costs and losses are
represented by GSM-102, GSM-103 and SCGP programmes? USA

88. (a) Is the Panel correct in understanding that the United States' argument is that, at
present, by virtue of Article 10.2 of the Agreement on Agriculture , there are no
disciplines on agricultural export credit guarantees under the Agreement on
Agriculture (or the SCM Agreement)? USA

 (b) Does the United States agree with the following proposition: a WTO Member may
therefore extend agricultural export credit guarantees without charging a premium,
and for an indefinite period, in additi on to any other terms and conditions it may
wish? How would this reconcile with the title of Article 10 of the Agreement on
Agriculture ("Prevention of Circumvention on Export Subsidy Commitments"), and

with other commitments contained in the Agreement on Agriculture ? Please cite any
relevant material, including any past WTO dispute settlement cases. How would this
reconcile with the United States' own statemen t, at paragraph 21 of its closing oral
statement that "of course, the United States may not provide subsidies without any
limit". USA

 (c) If, as the United States argues, ther e are no disciplines on export credit guarantees in
the Agreement on Agriculture , how could export credit guarantees "conform fully to
the provisions of Part V" of the Agreement on Agriculture within the meaning of
Article 13 (how can you assess "conformity" or non-conformity when there are
allegedly no disciplines against which such an assessment could occur)? USA

 (d) Is the United States advocating the vi ew that its own export credit guarantee
programmes, which pre-dated the Uruguay Roun d, are effectively "grandfathered" so
as to benefit from some sort of exempti on from the export subsidy disciplines of the
Agreement on Agriculture ? How, if at all, is it relevant that the SCGP did not,
according to the United States, become relevant for upland cotton until the late 1990's
(i.e. after the entry into force of the WTO Agreement)? USA

STEP 2 PAYMENTS

89. Does the United States confirm Brazil's statemen t in paragraph 331 of its first submission that
"The conditions and requirements for Step 2 domestic payments remain unchanged with the passage
of the 2002 FSRI Act"? What is the relevance of this, if any, to this dispute? USA

90. Does the United States confirm Brazil's statemen t in paragraph 235 of its first submission that
the changes concerning Step 2 export payments from the 1996 FAIR Act to the 2002 FSRI Act are:
increase in the amount of the subsidy by 1.25 cents per pound and the removal of any budgetary limits
that applied under the 1996 FAIR Act? What is the relevance of this, if any, to this dispute? USA

91. What is the significance of the elimination of the 1.25 cent threshold payment in the 2002
FSRI Act pertaining to Step 2 payments? USA

92. Does the United States confirm that Exhibit BRA-65 represents a sample contract for
exporters of eligible upland co tton to conclude with the CCC under the FSRI 2002, and that an
application form (Exhibit BRA-66) needs to be f illed out with data on week ly exports and submitted
to the USDA FAS. Is Exhibit BRA-66 - Form C CC 1045-2 – also a valid example? If not, please
identify any differences or distinctions. USA

93. Please elaborate why the United States deems that Step 2 payments upon submission of proof
of export are not subsidies contingent upon export. Is it the US contention that, in order to be
contingent on export, exportation must be the exclusive condition for receipt of the payment? USA

94. Is the Panel correct in understanding that Braz il alleges an inconsistency with Article 3.1(b)
of the SCM Agreement only with respect to Step 2 domestic payments? BRA

95. Do the criteria in 7 CFR 1427.103(c)(2) (Exhibit BRA-37) that Step 2 "eligible upland
cotton" must be "not imported cotton" apply to both domestic and export payments? USA

96. Is a domestic sale a "use" for the purposes of St ep 2 payments? Is a sale for export, or export,
considered a "use"? USA

97. How does the United States respond to Brazil's assertion, at paragraph 70 of Brazil's oral
statement at the first session of the first substantive meeting, that "I t is obvious that a single bale of
cotton cannot be both exported and used domestically." Is this a relevant consideration? USA

98. How many Step 2 payments are received if a bale of upland cotton is exported, and then
opened by a domestic user in the United States, or vice versa? USA

99. How does the United States respond to Brazil's arguments in paragraphs 71-75 of Brazil's oral
statement at the first session of the first Panel meeting concerning the relevance of the Appellate Body
Report in US-FSC (21.5). USA

100. How does Brazil respond to the statement in note 119 of the United States' first written
submission that "...to the extent a consumer that had intended to export inst ead opens the bale, then
that consumer could still obtain the Step 2 paymen t upon submission of the requ isite documentation".
The Panel notes that Step 2 payments all involve upland cotton produced in the United States. What
are the two distinct factual situations that Step 2 payments involve? Other than the panel report in
Canada-Dairy and the findings of the Appellate Body in US-FSC (21.5)
4, do any other dispute
settlement reports offer guidance on this issue? For example, how, if at all is the Appellate Body's
report in Canada-Aircraft relevant here?5 BRA

101. How does Brazil respond to the United States' as sertion at paragraph 22 of its oral statement
that the programme involves "elig ible users" who constitute the "entire universe" of potential
purchasers of upland cotton? BRA

102. How does Brazil respond to the United States' a ssertion at paragraph 129 of its first written
submission, that "[t]he program is indifferent to wh ether recipients of the benefit of this programme
are exporters or parties that open bales for the processing of manufacturing raw cotton into cotton
products in the United States." BRA

103. Is the Step 2 programme fund a unified fund th at is available for either domestic users or
exporters, without a specific amount earmarked fo r either domestic users or exporters? Please

4 "We recall that the ETI measure gr ants a tax exemption in two differ ent sets of circumstances: (a)
where property is produced within the United States and held for use outside the United States; and (b) where
property is produced outside the United States and held for use outside the United States. Our conclusion that
the ETI measure grants subsidies that are export contingent in the first set of circumstances is not affected by the
fact that the subsidy can also be obtained in the second set of circumstances. The fact that the subsidies granted
in the second set of circumstances might not be export contingent does not dissolve the export contingency
arising in the first set of circumstances. 4 Conversely, the export contingency arising in these circumstances has
no bearing on whether there is an export contingent subsidy in the second set of circumstances. Where a
United States taxpayer is simultaneously producing property within and outside the United States, for direct use
outside the United States, subsidies may be granted under the ETI measure in respect of both sets of property.
The subsidy granted with respect to th e property produced within the United St ates, and exported from there, is
export contingent within the mean ing of Article 3.1(a) of the SCM Agreement , irrespective of whether the
subsidy given in respect of property produced outside the United States is also export contingent."
2 5 There, the Appellate Body stated that,
"the fact that some of TPC's contributions, in some industry sectors,
are not contingent upon export performance, does not necessarily
mean that the same is true for all of TPC's contributions. It is enough
to show that one or some of TPC 's contributions do constitute
subsidies "contingent ... in fact … upon export performance". 5

substantiate your response, including by reference to any applicable statutory or regulatory provisions.
USA

104. How does the United States respond to the data presented in Exhibit BRA-69? Is it accurate?
Please substantiate. USA

105. Why is the Step 2 programme separated into "domestic users" and "exporters"? Apart from
differentiating between exporters and domestic users, with conse quential differentiation as to the
forms that must be filled out and certain other co nditions that must be fulfilled, are the eligibility
criteria for Step 2 payments identical? Are the fo rm and rate of payment, as well as the actual
payment made, identical? USA

106. With respect to paragraph 139 of the United States' first written submission, are Step 2 export
payments included in the annual reduction commitments of the United States? If so, why? USA

107. Please comment on any relevance, to Brazil's de jure claims of inconsistency with the
provisions of the Agreement on Agriculture, of Exhibit BRA-69, which shows Step 2 payments made
to (i) domestic users and (ii) exporters. This Exhibit shows that, from FY 91/92 through 02, the
Step 2 payments for exporters exceeded those for domestic users in FY 94; FY 95; FY 96 (in fact
there were no domestic payments in FY 96); and FY 02. In the other years, the domestic payments
are greater than export payments. BRA, USA

108. At paragraph 135 of its first written subm ission, the United States states : "[T]he subsidy is
not contingent upon export performance..." (emphasis a dded). Again, in the course of the first Panel
meeting, the United States admitted that the Step 2 payments were "subsidies". Does the United
States thus concede that Step 2 payments cons titute a "subsidy" within the meaning of the WTO
Agreement? USA

109. How does the United States respond to Brazil's arguments concerning a
mandatory/discretionary distinction and the allegation that certain United States measures (including
s.1207(a) of the 2002 FSRI Act) are mandatory? (This is referred to, for example, in paragraph 28 of
Brazil's first written submission). Does the United St ates agree with the assertion that (subject to the
availability of funds) the payment by the Secretar y of Step 2 payments is mandatory under section
1207(a) FSRI upon fulfilment by a domestic user or exporter of the conditions set out in the
legislation and regulations? If not, then why not? To what extent is this relevant here? What
determines the "availability of funds"? Please cite an y other relevant measures or provisions which
you consider should guide the Panel in respect of this issue. USA

110. Section 1207(a) of the 2002 FSRI Act provides that during the period beginning on the date
of the enactment of the FSRI Act through 31 July 2008, " .. the Secretary shall issue marketing
certificates or cash payments, at the option of the recipient, to domestic users and exporters for
documented purchases by domestic users and sales fo r export by exporters...". The Panel notes that
Brazil does not appear to distinguish between the tr eatment of (i) cash payments and (ii) marketing
certificates in terms of the issue of whether or not a "subsidy" exists. The United States refers to
"benefits" and "payments" and "programme" in as serting that Step 2 is not export contingent
(paragraphs 127-135 of the United States' first written submission).

 (a) Do the parties thus agree that there is no need to draw any distinction between the
treatment of (i) cash payments and (ii) marketing certificates in terms of the issue of
whether or not a "subsidy" exists for the purposes of the Agreement on Agriculture ?
BRA, USA

 (b) Why would a domestic user or an exporter select to receive a marketing certificate
over a cash payment? What is the pr oportion of cash payments vs. marketing
certificates granted under the programme? USA

111. Does the United States maintain its argumen t that actions based on Article 3.1(b) of the SCM
Agreement are conditionally "exempt from actions" due to the operation of Article 13 of the
Agreement on Agriculture? USA

112. In the event that the Panel finds that Article 6.3 of the Agreement on Agriculture does not
preclude an examination of Brazil's claims under Article 3.1 of the SCM Agreement and Article III:4
of GATT 1994, how does the United States respond to the mer its of Brazil's claims relating to Step 2
payments under those provisions? USA

113. Is it necessary for measures directed at agricultural processors included in AMS to
discriminate on the basis of the origin of goods? USA

114. With respect to the last sentence of paragr aph 22 of Brazil's closing oral statement, could
Brazil elaborate on the circumstances in which a local content subsidy would comply with
Article 3.1(b) of the SCM Agreement? BRA

115. What is the meaning and relevance (if an y) to Brazil's claims under Article 3 of the SCM
Agreement and Article III:4 of GATT 1994 of the phrase "measures directed at agricultural processors
shall be included to the extent that such measure s benefit the producers of the basic agricultural
products" in the Agreement on Agriculture? BRA, USA

116. With respect to paragraph 32 of the oral stat ement of the EC, are subsidies contingent on the
use of domestic goods consistent with the Agreement on Agriculture ? Does the phrase "provide
support in favour of domestic producers" in Article 3.2 of the Agreement on Agriculture refer to,
and/or permit such subsidies? BRA, USA

117. What is the relationship between Step 2 pa yments to exporters and the marketing loan
payments, both of which appear to compensate for the price differences relative to the Liverpool A-
Index? For example, is there double compensation? Or is one of the explanations that these export-
related price compensatory payments are paid to di fferent operators (namely, the producer, on the one
hand under the marketing loan arrangements, and the processor/users (Step 2 programme)
arrangements on the other? USA

118. Can the United States confirm that it does not rely on Article III:8 of GATT 1994? USA

ETI ACT

119. How does the United States respond to Br azil's reference to the panel report in India - Patents
(EC) (at paragraph 138 of its oral statement at th e first session of the first substantive meeting)? 6

6That panel stated: "It can thus be concluded that panels are not bound by previous decisions
of panels or the Appellate Body even if the subject-matter is the same. In examining dispute
WT/DS79 we are not legally bound by the conclusions of the Panel in dispute WT/DS50 as
modified by the Appellate Body report. However, in the course of "normal dispute settlement
procedures" required under Article 10.4 of the DSU, we will take into account the conclusions
and reasoning in the Panel and Appellate Body reports in WT/DS50. Moreover, in our
examination, we believe that we should give significant weight to both Article 3.2 of the DSU,
which stresses the role of the WTO dispute settlement system in providing security and
predictability to the multilateral trading system, and to the need to avoid inconsistent rulings

How, if at all, should the Panel take this report into account in considering the issues raised by Brazil's
claims relating to the ETI Act? USA

120. Concerning its claims on the ETI Act, Brazil relies on the US – FSC case. However, it
appears that the United States did not raise the issu e of the Peace Clause in that case, nor did the
United States appear to invoke Article 6 of the Agreement on Agriculture . If the Panel's
understanding is correct, how, if at all, are these di fferences relevant here? Could you direct the Panel
to any relevant findings or conclusions by the panel or Appellate Body in that case? BRA

121. How do you respond to the reference in paragr aph 43 of EC third party oral statement with
respect to the relevance of Article 17.14 of the DSU, and, in particular, the phrase "a final resolution
to that dispute" (emphasis added)? Please explain the use, and relevance (if any) of the term
"disputes" in Articles 9.3 and 12 and Appendix 3 of the DSU, and please cite any other provisions you
consider relevant. USA, BRA

[Attachment on questions to Third Parties omitted]

(which concern has been referred to by both parties). In our view, these considerations form
the basis of the requirement of the referral to the "original panel" wherever possible under
Article 10.4 of the DSU." (footnote omitted)

ANNEX L-1.6

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

30 July 2003

 The Panel is in receipt of the communication from the United States, dated 29 July, requesting
an extension of the deadline for the submission of the parties' responses to questions, as well as the
response from Brazil, dated 30 July.

 Taking these communications into account, the Pa nel has decided to extend the deadline for
the submission of the parties' responses to questions from Monday 4 August to Monday 11 August.
The Panel reminds the parties that paragraph 17(b) of the Panel's working procedures indicates that
the responses should be submitted by 17:30 (Geneva time).

 The Panel has also decided upon the follow ing additional changes to its schedule:

 Panel's views on certain issues: 5 September 2003
 Further submission of Brazil: 9 September 2003
 Further submission of the US: 23 September 2003
 Further submission of the third parties (as necessary): 29 September 2003

 For the time being, all other dates remain unchanged. This includes the deadline for the
submission of the parties' comments on each other's responses, as well as the submission of the
parties' rebuttal submissions (i.e. 22 August). It al so includes the dates for the resumption of the first
substantive meeting (as necessary) and the second substantive meeting (i.e. 7-9 October).

ANNEX L-1.7

COMMUNICATION TO BRAZIL AND THE
UNITED STATES AND THE THIRD PARTIES

5 August 2003

1. The Panel has received a letter from the Europ ean Commission, dated 31 July 2003, in which
the European Communities ("EC"):

• seeks clarification of the Panel's procedures for its expression of views on 5 September 2003
in relation to Article 13 of the Agreement on Agriculture; and

• makes two requests for additional third party rights.

2. The Panel sought the views of the parties to the dispute on these requests, which it received in
letters dated 1 August 2003. Neither party objects to the Panel communicating its views to the third
parties on 5 September 2003, but neither party ag rees that the Panel should accept the EC's requests
for additional third party rights. The EC responded to the parties' letters in a further letter dated
4 August 2003.

1. Panel's procedures for its expression of views on 5 September 2003 in relation to
Article 13 of the Agreement on Agriculture

3. The Panel confirms that, in accordance w ith its communication dated 20 June 2003, as
amended on 30 July 2003, it intends to express its vi ews on whether measures raised in this dispute
satisfy the conditions in Article 13 of the Agreement on Agriculture, to the extent that it is able to do
so, by 5 September 2003. Those views will be communi cated to third parties, as well as to the parties
to the dispute, in order to enable them to partic ipate, as necessary and appropriate, in any second
session of the first substantive meeting in a full and meaningful fashion.

2. EC requests for additional third party rights

4. The EC requests the following additional third pa rty rights: (a) access to the oral statements
of the parties to the dispute at the first ses sion of the first substantive meeting held on 22-
24 July 2003, and (b) the opportunity to commen t on their responses to the Panel's questions, or
questions that they have posed to each other.
1

5. Third parties have certain rights in panel proceedings under Article 10 of the DSU, which a
panel may not deny. The grant of third party ri ghts beyond those provided in the DSU lies within the
discretion and authority of a panel. That discretion is limited by the requirements of due process.
Article 10.1, 10.2 and 10.3 of the DSU provides as follows:

1 The Panel notes that the parties to the dispute have not posed any written questions to each other, and
therefore does not need to address th e request to allow third parties to comment upon the re sponses to such
questions.

Third Parties

"1. The interests of the parties to a dispute and those of other Members under a
covered agreement at issue in the dispute shall be fully taken into account during the
panel process.
"2. Any Member having a substantial interest in a matter before a panel and
having notified its interest to the DSB (refe rred to in this Understanding as a "third
party") shall have an opportunity to be heard by the panel and to make written
submissions to the panel. These submissions shall also be given to the parties to the
dispute and shall be reflected in the panel report.
"3. Third parties shall receive the submissi ons of the parties to the dispute to the
first meeting of the panel."
6. In our view, written versions of the parties' oral statements and the parties' responses to the
Panel's questions do not form part of "the submissions of the parties to the dispute to the first meeting
of the Panel", as provided for in Article 10.3 of the DSU. Articles 10.2 and 12.6 and the working
procedure in paragraph 3 of Appendix 3 use the terms "written submissions" and "submissions"
interchangeably. Appendix 3 distinguishes between "written submissions" in pa ragraphs 3, 4 and 10
and "a written version of … oral statements" in paragraph 9. Under the standard panel working
procedures set out in Appendix 3 of the DSU, third parties may only attend the third party session and
are not present during the rest of the panel's mee tings. The granting of access by the Panel to written
versions of the parties' oral statements would ru n counter to the standard practice under the DSU of
holding the sessions at which those statements are made in the absence of the third parties.

7. As the Panel indicated in its communication dated 20 June 2003, the first meeting in this
dispute is to be held in two separate sessions two months apart, as necessary. The issues under
consideration at each session are distinct, so that th e written versions of oral statements at the first
session cannot be considered submissions to the second session. The Panel's working procedures
currently envisage that third parties will receive the parties' written submissions to any second session
of the first meeting, and will have an opportunity to present their views at any such session. Thus,
with respect to the issues that form the subject of each session of the first meeting, each third party
will receive the rights provided for in Article 10.2 and 10.3 of the DSU.

8. Therefore, in our view, third parties ha ve no entitlement under the DSU to the additional
rights requested by the EC, and we also note that th ere is no agreement between the parties that such
additional rights should be granted. In any case, the EC indicates in its letter dated 4 August 2003 that
this was not the thrust of its requests but, rather , it would be a "reasonable exercise of the Panel's
discretion" to allow the third parties also to comme nt on the responses of the parties to the dispute to
the Panel's questions.

9. The Panel must consider whether it should gran t such additional rights as part of its duty to
ensure due process of law for third parties, or w ithin its discretion to grant or refuse the rights
requested as it believes appropriate, keeping firmly in mind the Panel's duty to ensure an objective
assessment of the matter before it in accordance with Article 11 of the DSU, and the requirement that
the interests of the parties to the dispute and t hose of other Members under a covered agreement at
issue in the dispute shall be fully taken into account during the panel process, in accordance with
Article 10.1.

10. The EC has argued that access to oral statemen ts would permit third parties to respond to
arguments made by the parties to the dispute wh ere such a response would be of relevance in
answering the Panel's questions to third parties, an d that this would benefit the Panel since the third

parties would be able to provide more complete responses to the Panel's questions. It also argues that
the third parties' comments on each others' responses to questions will be more full and meaningful,
and consequently more beneficial to the Panel, if it is also possible for them to comment on the
responses of the parties to the dispute.

11. In addition to the issues raised by the EC, the Pa nel is keenly aware of the implications of this
particular dispute for third parties, including th e systemic importance of the interpretation of
Article 13 of the Agreement on Agriculture and its trade policy impact.

12. In fact, the Panel has already taken into account , to a certain extent, the systemic implications
of this dispute and the issues now raised by the EC. The Panel has posed a large number of questions
to third parties, including 39 questions addressed specifically to the EC. Through the third parties'
responses to these questions, the Panel hopes to r eceive their views on the merits and systemic
considerations presently at issue in this dispute, which it will take into account in its assessment of the
matter before it. The questions are detailed precisely to ensure that third parties' views are fully taken
into account in what is a complex case. The Pa nel believes that, through the questions that it has
posed to the parties to the dispute and to third part ies, it has ensured that it will benefit from third
parties' input and that nothing prevents them from participating in a full and meaningful fashion.

13. This is not the only opportunity for third par ties to express their views in this dispute. The
Panel specifically sought the views of third pa rties on the issue of whether Article 13 of the
Agreement on Agriculture precludes the Panel from considering Brazil's claims under the Agreement
on Subsidies and Countervailing Measures in these pr oceedings in the absence of a prior conclusion
by the Panel that certain conditions of Article 13 re main unfulfilled. Six third parties, including the
EC, made submissions to the Panel on that issue, which the Panel took into account.

14. Nothing precludes the Panel from posing further qu estions to the parties to the dispute or third
parties as the Panel deems necessar y or appropriate throughout the course of these proceedings. The
Panel may also seek the views of third parties in further questions at any second session of the first
meeting that may be held, by posing questions on the issues under consideration at that session.

15. The Panel notes that none of the third par ties, including the EC, requested any additional
rights prior to the first meeting, even after the Panel's communication of 20 June 2003, in which it
announced that the first meeting would be held in two sessions, as necessary. The parties to the
dispute therefore delivered their oral statements at that meeting in closed session without third parties
present, as is the usual procedure under Article 12 a nd Appendix 3 of the DSU, on the basis that the
confidentiality of those statements was within thei r own respective control. The Panel is therefore
unwilling to direct the parties to grant access to written versions of those statements after the event.

16. The Panel notes that nothing in the DSU or the Panel's working procedures precludes a party
to the dispute from disclosing statements of its ow n positions to the public, as foreseen in Article 18.2
and paragraph 3 of the working procedures, and that the United States has indicated that it makes its
oral statements available on its website and has already provided a copy directly to the EC.

17. For the reasons set out above, the Panel denies both the EC's requests for additional third
party rights. Nonetheless, in view of the phased na ture of the first meeting, the Panel directs the
parties to the dispute to make best efforts to ensu re that their submissions to any second session of the
first meeting are understandable either on their own or in conjunction with the submissions to the first
session of the meeting. In particular, such submis sions should not refer to any document to which the
third parties do not have access without, at the very least, a summary, explanation or description of
the contents of that document (or a citation i ndicating where that document may be found on the
public record).

ANNEX L-1.8

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

19 August 2003

 The Panel has received a communication from Br azil dated 14 August 2003 in which Brazil
draws attention to the timing and format of serv ice of the United States' responses to the Panel's
questions, in light of paragraphs 17(b) and (d) of our Working Procedures, and in which it raises
issues of procedural fairness.

 The Panel has taken note of the matters rais ed in the communication from Brazil and draws
them to the United States' attention. The Panel recalls that, at its meeting with the parties on
22 July 2003, it also drew the attention of the Un ited States to these issues as raised by Brazil in
connection with the filing of the United States' first written submission and comments on Brazil's
initial brief.

 In its communication dated 14 August 2003, Brazil also requested the right to comment on
any new information, arguments or documents presen ted for the first time in the United States'
rebuttal submission with respect to specific questions po sed by the Panel. It raised considerations of
due process and requested that the Panel provide it until 28 August 2003 to file any such comments
without granting the United States any corresponding right.

 The Panel has a duty to ensure the fairness of its proceedings, which requires that the parties
receive sufficient opportunity to comment on info rmation, argumentation a nd documents submitted.
Due to the phasing of the first meeting, a party mi ght lack sufficient opportunity to comment on such
material presented for the first time in a rebuttal submission before the Panel expresses its views on
certain issues in dispute. However, this w ill depend on what the rebuttal submissions actually
contain.

 Accordingly, when each party receives the othe r party's rebuttal submission, it is invited,
without delay, to draw the Panel's attention to any specific material on which it has not had an
opportunity to comment and to show cause why it needs such an opportunity. Upon a showing of
good cause, the Panel will permit that party to comm ent in writing by 27 August 2003. The Panel is
willing to grant such permission on Saturday, 23 August 2003, if necessary.

ANNEX L-1.9

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

23 August 2003

 The Panel has received a communication from Br azil dated 23 August 2003 in which Brazil
requests the opportunity to comment on specific paragraphs of the United States' rebuttal, and exhibits
thereto, as the parties were invited to do by the Panel in its communication dated 19 August 2003.

 The Panel considers that Brazil has not had sufficient opportunity to comment on new
material specifically listed in its communica tion of 23 August 2003. The Panel notes that the
argument raised in paragraph 123 of the United States ' rebuttal is not new but was raised earlier in the
United States' response to question 66(d) posed by the Panel and in section 2.3.2 of Brazil's rebuttal.

 Accordingly, the Panel permits Brazil to comment in writing on such new material by
27 August 2003. The procedures regarding service of documents set out in paragraph 17 of the Panel's
working procedures shall apply.

ANNEX L-1.10

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

25 August 2003

 The Panel has received a communication from the United States dated 25 August 2003 in
which the United States requests the opportunity to comment on specific paragraphs of Brazil's
rebuttal, and comments on responses to questions, as the parties were invited to do by the Panel in its
communication dated 19 August 2003. The Panel has also received a response to that communication
from Brazil, also dated 25 August 2003, in which Brazil submits that the United States' request should
be rejected.

 The Panel considers that the United States has not had sufficient opportunity to comment on
new material specifically listed in its communicat ion of 25 August 2003, other than the alleged
misstatements in paragraphs 88, 90-94 of Brazil' s rebuttal which the Panel can check against the
cross-referenced United States' responses and Panel report, if necessary.

 Accordingly, the Panel permits the United Stat es to comment in writing on such new material
by 27 August 2003. The procedures regarding servi ce of documents set out in paragraph 17 of the
Panel's working procedures shall apply.

 The Panel notes that the United States welcomes the opportunity to respond to any further
questions that the Panel may have. Therefore, the Panel poses the following additional question to the
United States and seeks a response by 27 August 2003:

67bis. Please state the annual amount granted by the US government in each of the
1999, 2000, 2001 and 2002 marketing years (as applicable) to US upland cotton
producers, per pound and in total expenditures, under each of the following programs:
production flexibility contract payments, market loss assistance payments, direct
payments and counter-cyclical payments.

ANNEX L-1.11

COMMUNICATION TO BRAZIL AND THE
UNITED STATES AND THIRD PARTIES

5 September 2003

1. On 20 June 2003, the Panel communicated to the parties and third parties that:

"Given the potential complexity of the clai ms before us, the conditional nature of
certain of these claims and the volume of evidence which may be introduced by the
parties in support of their claims and arguments, and in order to organize our
proceedings in an orderly, effective and efficient manner which serves to facilitate an
objective assessment of the matter before us, and optimizes use of our resources, we
have adopted the following modifications to our procedures …"
2. The first modification to our procedures was as follows:

"The Panel intends to express its views on whether measures raised in this dispute
satisfy the conditions in Article 13 of the Agreement on Agriculture, to the extent that
it is able to do so, by 1 September 2003, an d will defer its consideration of claims
under Articles 3, 5 and 6 of the SCM Agreement and Article XVI of the GATT 1994
as those provisions are referred to in Article 13 of the Agreement on Agriculture until
after it has expressed those views. The Panel's views may be expressed in the form of
rulings which could affect the Panel's further consideration of this dispute."
3. In a fax dated 30 July 2003, the Panel decide d to modify the date for expression of its views
to 5 September 2003.

4. The Panel takes note of the correspondence fro m the parties dated 27, 28 and 29 August 2003
and declines to make findings at this stage as to whether measures raised in this dispute satisfy the
conditions in Article 13 of the Agreement on Agriculture, for the reasons given in its communication
dated 20 June 2003. The Panel's findings on that issu e will be included in its interim report, on which
the parties will have the right to comment in accordance with Article 15.2 of the DSU.

5. The Panel has now had the opportunity to consid er the parties' and third parties' evidence and
arguments to date . At this stage, the Panel cannot conclude its assessment of the matter before it on
the basis that the measures raised in this dispute satisfy the conditions in Article 13 of the Agreement
on Agriculture. The expression by the Panel of this view is without prejudice to the Panel's eventual
findings, and is subject to paragraph 6 below. In this context, the Panel is of the view that
consideration, as appropriate, of Brazil's claims under Articles 3, 5 and 6 of the SCM Agreement and
Article XVI of the GATT 1994, as those provisions are referred to in Article 13 of the Agreement on
Agriculture, is warranted in order for the Panel prope rly to discharge its responsibilities under the
DSU and the relevant covered agreements. Therefor e, the Panel will consider those claims at a
second session of the first substantive meeting.

6. The Panel also wishes to inform the parties that, on the basis of the evidence and arguments
presented to date, it is unable to form any view on whether the ETI Act satisfies the relevant
provisions of the Agreement on Agriculture.

7. Regarding the Panel's procedures:

(a) the Panel invites the parties to address in further submissions, due on 9 and 23 September
respectively, the claims referred to in paragraph 5 above;

(b) the Panel also invites the parties to addr ess further the issue whether the export credit
guarantee programs at issue constitute export subsidies for the purposes of the Agreement on
Agriculture;

(c) the Panel confirms that items (o), (p) and (q ) of its timetable will be necessary, and confirms
the following dates:

 Further submissions of the third pa rties: 29 September 2003;

 First substantive meeting with the parties 7, 8 and
 (resumed second session) : (as necessary) 9 October 2003;

 Third party session: 8 October 2003
1;

(d) the Panel invites the third parties to address in their further submissions the claims referred to
in paragraph 5 above;

(e) the Panel intends to postpone the second substantive meeting; and

(f) the Panel invites the parties to comment on the a ttached draft further revised timetable. Such
comments should be submitted no later than close of business on Tuesday, 9 September 2003.

[Attachment omitted]

 1 The Panel wishes to inform parties and third parties that due to the availability of meeting rooms, the
third party session, previously scheduled for 9 October, will now be held on Wednesday, 8 October . The Panel
will continue its meeting with the parties after the third party session and also on 9 October, as necessary.

ANNEX L-1.12

COMMUNICATION TO BRAZIL AND THE
UNITED STATES AND THIRD PARTIES

12 September 2003

 Having carefully considered the parties' co mments received on 9, 10 and 11 September, the
Panel intends to follow the revised timetable, as attached.

 In this connection, the Panel would like to in form the United States that the deadline for its
"further submission" is 15h00 (i.e. 3 pm) Geneva time on Monday, 29 September.

 The Panel also wishes to draw the attention of third parties that the deadline for their
further submissions has been changed to 3 October.

 In light of the US request for an opportunity to comment on the new dates of the second
meeting, now rescheduled to be 2 and 3 December 2003, the Panel invites the US and Brazil to submit
comments, if any, on these dates. Such comment s, which should focus on the date of the second
substantive meeting and other dates directly affect ed by this date, should be submitted no later than
close of business on Tuesday, 16 September.

[Attachment omitted]

ANNEX L-1.13

COMMUNICATION TO BRAZIL AND THE
UNITED STATES AND THIRD PARTIES

18 September 2003

 The Panel has received letters from Brazil and the US dated 16 September and 17 September,
in which they submit further comments on certain dates we indicated in our fax dated 12 September.

 Having carefully considered the views of both parties, the Panel amends the dates indicated
in the 12 September fax as follows:

- The deadline for the receipt of answers to Pa nel's questions (previously, 22 October) will be
changed to 27 October.

- The deadline for the receipt of further rebuttals of the parties (previously, 3 November) will
be changed to 18 November.

 In respect of items (u) and (v), the Panel not es Brazil's preference for "the completion of the
parties' main substantive work still in 2003". The Panel reminds the parties that, as indicated in the 12
September fax, items (u) and (v) are deadlines that would apply "as necessary". They may, therefore,
depend upon various factors, including the number and nature of any questions the Panel may actually
pose to one or both parties at that juncture. Therefore, at least for the time being, the Panel prefers to
leave these dates as indicated (22 December and 19 January, respectively).

 All other dates indicated in the fax of 12 September remain unchanged, and are now
confirmed.

ANNEX L-1.14

COMMUNICATION TO BRAZIL AND THE
UNITED STATES AND THIRD PARTIES

24 September 2003

 The Panel has received a letter from the Un ited States dated 23 September, in which it
informs the Panel of delays in the preparation of its further submission caused by hurricane Isabel, as
well as a response from Brazil, also dated 23 Septembe r. Having carefully considered the views of
both parties, the Panel further amends the dates we indicated in our fax of 12 September as follows:

 deadline for the US's further submission: 30 September, 2003 (by 17:30 Geneva time)

 All other dates and deadlines indicated in the fax of 12 September (and subsequently
amended in the fax of 18 September) including th e deadline for the "further submission from third
parties" (3 October), remain unchanged.

 The Panel notes that the time for the third parties to review the US's "further submission"
before making their respective written submissions is limited. The Panel reminds third parties that
they are free to present arguments in addition to those set out in thei r written submissions in their oral
statements to be presented on 8 October.

ANNEX L-1.15

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

13 October 2003

1. Please find attached the Panel's questions to the parties following the resumed session of the
first substantive Panel meeting. Parties are reminded that responses are due by 27 October 2003.

2. The Panel's questions are intended to facilitate the work of the Panel, and do not in any way
prejudge the Panel's findings on the matter before it. Nor does the fact that the Panel has placed these
questions under certain headings prejudge the Panel' s findings on the matter before it. Each party is
free to respond to or comment on questions posed to the other parties or third parties.

3. The Panel takes note of Brazil's request in its letter dated 2 October 2003 regarding the late
receipt of submissions, and the US response in its letter dated 6 October 2003. In accordance with
paragraph 17(b) of the Panel's working procedures, the Panel sets the following time for the provision
of submissions by the parties: 11:59 pm, Geneva time on the dates concerned. This time refers to
receipt of submissions by the other party and th e Secretariat and not to commencement of
transmission. For greater clarity, this time for r eceipt of submissions also refers to the time of
completion of receipt of any Exhibits and service of all Exhibits (if necessary, electronically) to the
other party and to the Secretariat as envisaged in paragraphs 17(a)-(d) of the Panel's working
procedures. All other provisions of the Working Procedures remain unchanged. The Panel confirms
the dates in the revised timetable, as revised in its communication of 18 September 2003.

4. The Panel has set this time in light of the re peated service of submissions by the United States
after 5.30 p.m. and in order to ensure due process and secure a balance between the two parties. The
Panel stresses its expectation that the parties will re spect all of the rules and procedures set out in the
DSU and in the working procedures, including the new time set by the Panel above for the dates in
question.

5. The Panel takes note of the United States' re quest in section II of its further submission for
three preliminary rulings, regarding interest subs idies and storage payments; cottonseed payments;
and export credit guarantees for products other than upl and cotton. The Panel is not currently in a
position to rule on these issues. The Panel will ma ke rulings as necessary and appropriate in the
course of this proceeding and hopes to be in a pos ition to express its views, or give a ruling, on these
requests, as appropriate, by 3 November (that is, shor tly after the date of receipt of written responses
to questions). Meanwhile, the Panel requests the par ties not to exclude consideration of these issues
in their responses to questions.

Questions from the Panel to the Parties –
Resumed first session of the first substantive Panel meeting

A. REQUEST FOR PRELIMINARY RULINGS

122. Does Brazil allege that cottonseed payments, interest subsidies and storage payments are
included in the subsidies that cause serious prejudice? Do they appear in the economic calculations?
BRA

123. Does Brazil’s request for the establishment of the Panel name the statute authorizing
cottonseed payments for the 1999 crop? BRA

B. EXEMPTION FROM ACTIONS

124. According to its revised timetable, the Panel w ill issue its report to the parties after the end of
the 2003 calendar year. Does this have any impact on “exempt[ion] from actions” under
Article 13(b)(ii) and 13(c)(ii) of the Agreement on Agriculture? BRA, US

C. IDENTIFICATION OF THE SUBSIDIZED PRODUCT

125.

(1) In view of requirements in the FAIR Ac t of 1996 and the FSRI Act of 2002 that contract
acreage remain in agricultural or conservation u ses and which impose penalties if the producer grows
fruits or vegetables, how likely is it that the pr oducer with upland cotton base acreage will not use his
or her land to produce programme crops or covered commodities? US

(2) Brazil has submitted that "The record suggests that historic producers are current producers."
It points to factors including the specialization of upland cotton producers, the need to recoup
expensive investments in cotton-specific equipm ent, and the geographic focus and climatic
requirements of upland cotton production in the "c otton belt". (Brazil's rebuttal submission,
footnote 98, on page 24)

(a) Regarding the specialization of upland cotton producers and the geographic focus of upland
cotton production, how does Brazil take account of the fact that cotton is produced in 17 of
the 50 states of the United States and that average cotton area is approximately 38% of a
cotton farm's acres? (This information is taken from the US's response to question 67 bis,
footnote 35). BRA

(b) Regarding the geographic focus of upland cotton production, how many other crops can
upland cotton producers viably grow in the cotton belt, other than fruits and vegetables? US

(c) Regarding the high cost of upland cotton prod uction, can Brazil show that farms who planted
upland cotton could only have covered their cost s by receiving upland cotton, rice or peanut
payments in every year from 1999 through 2002? BRA

(d) Regarding the need to recoup investments in cotton-specific equipment, is it important to
planting decisions that upland cotton producers cannot run any other crop through their
cotton-pickers? How does this affect the likelihood that they will grow other crops? US

(3) In calculating the amount of PFC, MLA, direct and counter-cyclical payments that went on
upland cotton, Brazil made an adjustment for the ratio of current acreage to base acreage (see its

answer to question 67, footnotes 2, 3, 4 and 5). Is this an appropriate adjustment for the particular
factors referred to above? Why or why not? BRA, US

(4) Dr. Glauber has alleged that there are statistical problems in comparing planted acres to
programme acres because of abandonment of crops and also because planted acres are only survey
estimates, not reported figures (See Exhibit US-24, the first full paragraph in P2). Would it be more
appropriate to divide harvested acreage by base acrea ge? What margin of error is there between the
survey estimates and reported figures? BRA, US

(5) Do the acreage reports under section 1105(c) of the FSRI Act of 2002 indicate or assist in
determining the number or proportion of acres of upland cotton planted on upland cotton base acres?
Was there an acreage reporting requirement for upland cotton during MY1996 through 2002? BRA,
US

(6) Please prepare a chart showing upland cott on base acreage, planted acreage and harvested
acreage for MY1996 through 2002. Does the planted acr eage fluctuate within a broad band? If not,
does this indicate any stability in decisions to plant the same acres to upland cotton? BRA, US

(7) Brazil states that one third of all US farms with eligible acreage decided to update their base
acreage under the direct payments and counter-c yclical payments programmes using their MY1998-
2001 acreage. What is the proportion of the current base acreage for upland cotton resulting from
such updating? Is the observed updating of base acreag e consistent with Brazil's argument that it is
only profitable to grow upland cotton on base acreage (and peanut and rice base acreage)? BRA

(8) How could one take account of upland cotton producers who receive PFC, MLA, direct and
counter-cyclical payments for other covered commodity base acreage? BRA, US

(9) Assuming that Brazil's payment figures were to amount to a prima facie case, please answer
the following questions: US

(a) How would the United States calculate or estimate the proportion of upland cotton producers
who receive subsidy payments for upland cotton base acreage?

(b) Should any adjustment estimates be made for any factors besides those listed by Brazil?

(c) What adjustment estimate would it be appropriate to make?

(d) How could one take account of upland cotto n producers who receive decoupled payments
 for other programme crop base acreage?

(e) Could the US specifically indicate what, in its view, are the flaws in the approach summarized
in paras. 6-7 of Brazil's closing oral statement
1 on 9 October (i.e. the use of the ration of 0.87
to adjust the amount of total upland cotton direct and CCPs for the MY to obtain the amount
of subsidies received by upland cotton produ cers)? Can the US suggest an alternative
approach that would yield reliable results in its view?

 1 All of the paragraph numbers in relation to oral statements (opening statement and closing
statement) cited in this document corresponds to the numbering made in the version available to the Panel on the
date of the statement.

D. "LIKE PRODUCT"

126. Does the US agree that the product at issue is upland cotton lint and that Brazilian upland
cotton lint is "like" US upland cotton lint with in the meaning of Article 6.3(c) of the SCM Agreement
in that it is a separate like product that is identi cal or has characteristics similar to the upland cotton
lint from the United States? (e.g. Brazil's further submission, para. 81) US

E. "SUBSIDIES"

127. The Panel notes that the US contests that export credit guarantees constitute "subsidies". The
Panel recalls that the US agrees that Step 2 paymen ts are "subsidies" and wishes to have confirmation
that it is correct in understanding that the US does not disagree that the following are "subsidies" for
the purposes of Article 1 of the SCM Agreement : marketing loan/loan deficiency payments, PFC,
direct payments, market loss assistance and CCP payments, crop insurance payments, cottonseed
payments, storage payments and interest subsidy (w ithout prejudice to the Panel's rulings on the US
requests for preliminary rulings on the latter two payments). US

F. PROHIBITED SUBSIDIES

128. Could the US respond to Brazil's assertions relating to the meaning and effect of the
introductory phrase of Article 3 (“Except as provided in the Agreement on Agriculture ....”)? Would
the meaning/effect change if Article 13 of the Agreement on Agriculture did not exist? BRA, US

G. SPECIFICITY / CROP INSURANCE

129. In the event that the Panel does not consider that the alleged prohibited subsidies fall within
the provisions of Article 3 and are therefore, pursuant to Article 2.3, "deemed to be specific", are there
any other grounds on which Brazil would rely in or der to support the view that such measures are
"specific" within the meaning of Article 2 of the SCM Agreement (see, for example, fn 16 of Brazil's
further submission)? BRA

130. Does Brazil agree that the US insurance premium subsidy is available in respect of all
agricultural products? Please cite relevant portions of the record. BRA

131. How should the concept of specificity – and, in particular, the concept of specificity to "an
enterprise or industry or group of enterprises or industries" -- in Article 2 of the SCM Agreement
apply to subsidies in respect of agricultural commodities? Please answer the following questions,
citing the principles in Article 2 of the SCM Agreement: BRA, US

(a) is a subsidy in respect of all agricultural, but not other, products specific?

(b) is a subsidy in respect of all agricultural cr ops (i.e. but not to other agricultural commodities,
such as livestock) specific?

(c) is a subsidy in respect of certain identified agricultural products specific?

(d) is a subsidy in respect of upland cotton, but not other products, specific?

(e) is a subsidy in respect of a certain proportion of the value of total US commodities (or total
US agricultural commodities) specific?

(f) is a subsidy in respect of a certain proportion of total US farmland specific?

132. Please state the amount and percentage of upland cotton acreage covered by each crop
insurance programme and/or policy under the ARP Act of 2000. US

133. Concerning Brazil's arguments in its oral st atement, para. 7, can the US indicate if any
producers of livestock outside a pilot programme are covered by the crop insurance programme? US

134. Please state the annual amount of premiums pa id or contributions made by US upland cotton
farmers relating to each of the crop insurance progr ammes and/or policies supported by the US Risk
Management Agency and the Federal Crop Insura nce Corporation in each year from 1992 through
2002. US

135. Please state the annual amount of insura nce indemnity payments made by the US
government; or insurance companies participati ng in crop insurance programmes and/or policies
under the ARP Act of 2000 to upland cotton farmers in each year from 1992 through 2002. US

136. Is the US arguing that crop insurance subsid ies corresponding to "over 90 per cent of insured
cotton area" (US 7 October oral statement, para . 46) in MY1999 through 2002 are consistent with
paragraph 8(a) of Annex 2 of the Agreement on Agriculture ? Is it correct that in the past these
subsidies were nonetheless notified to the Co mmittee on Agriculture as non-product specific AMS
(see, for example, G/AG/N/USA/43 in Exhibit BRA-47)? US

H. EXPORT CREDIT GUARANTEES

137. Please elaborate the meaning of "net losses" as is used in paragraph 70 of Brazil's 7 October
oral statement. BRA

138. Please comment on Brazil’s views stated in pa ragraph 70 of its 7 October oral statement. US

139. In the context of export credit guarantees, is the Panel correct in understanding that Brazil's
claims of inconsistency with the Agriculture Agreement involve GSM 102, GSM 103 and SCGP, but
that it limits its "serious prejudice" allegations in respect of export credit guarantee programmes to the
GSM 102 programme, and does not challenge GSM 103 and SCGP in this respect? If so,

(a) could Brazil please explain why it did so, and confirm that all the data relied upon in its
further submissions (e.g. in Table 13) relate to the GSM 102 programme rather than to GSM
102, GSM 103 and SCGP (and, if the data needs to be adjusted to take account of a narrower
"serious prejudice" focus, supply GSM-102-relevant data)? BRA

(b) for the purposes of Article 13(c)(ii) of the Agreement on Agriculture , is it necessary for the
Panel to examine only GSM 102 or should the Panel's examination include also GSM 103 and
SCGP? Why or why not? BRA

140. Could Brazil explain how, if at all, it ha s treated export credit guarantees for the purpose of
Table 1 of its further submission? BRA

141. The Panel notes the US argument, inter alia in its further submission, that the export credit
guarantee programmes are "self-sustaining". Recalling that item (j) of the Illustrative List of Export
Subsidies in Annex I of the SCM Agreement refers to "premium rates", could the US expand upon
how it takes into account the premium rates for the export credit guarantee programmes in its analysis.
US

142. The US has pointed out that there are many limitations on granting export credit guarantees
and that there is no requirement to issue any pa rticular guarantee (US further submission, paras 153-

156). Can the Commodity Credit Corporation declin e to grant an export credit guarantee even in
cases where the programme conditions are met? US

143. Brazil agrees with National Cotton Council estimates of the effects of the GSM 102
programmes (Brazil's further submission, para. 190) but it also cites a different conclusion by Prof.
Sumner (paragraph 192). Brazil cites other estim ates by Prof. Sumner throughout its further
submission. Does Brazil adopt Prof. Sumner's conclu sions and estimates as part of its submission?
BRA

I. STEP 2 PAYMENTS

144. Is the Panel correct in understanding that th e US does not dispute that Step 2 (domestic)
payments are contingent upon impor t substitution, and that it argues that such measures are permitted
due to the operation of the provisions of the Agreement on Agriculture ? How is that relevant to a
claim under Articles 5 and 6 of the SCM Agreement? US

J. ACTIONABLE SUBSIDIES

145. The Panel notes that different remedies are available in respect of prohibited and actionable
subsidies under Articles 4.7 and 7.8 of the SCM Agreement . If the Panel were to conclude that a
subsidy was prohibited and were to make a recommendation under Article 4.7 of the SCM Agreement
to withdraw the subsidy without delay, can the Panel:

(a) also conclude that the same subsidy had resulte d in adverse effects to the interests of another
Member? If so, what would be the value of su ch a conclusion in terms of the settlement of
the matter before the Panel? BRA, US

(b) take into account the effects of the interac tion of those prohibited subsidies with other,
allegedly, actionable subsidies? If so, how is this relevant to the issue of causation under
Article 5 of the SCM Agreement? BRA, US

146. Brazil acknowledges that there are some inter action effects that may increase or decrease the
overall effects of the subsidies (Brazil's further submission, para. 225). How would your analysis
under Articles 5(c) and 6.3 of the SCM Agreement and Article XVI of GATT 1994 differ if it
excluded, for example, crop insurance subsidies, PFC and/or direct payments? BRA

147. Does the US agree that s ubsidies provided under the marketing loan programme, counter-
cyclical payments and market loss assistance are or were more than minimally trade-distorting? If so,
please elaborate on the type of effects which are more than minimally trade-distorting within the
meaning of Annex 2 of the Agreement on Agriculture but less than adverse effects within the meaning
of Article 5 of the SCM Agreement. US

148. How should the significance of price suppression or depression be assessed under
Article 6.3(c) of the SCM Agreement? In terms of a meaningful effect? Or another concept? BRA,
US

149. What is the meaning of "may" in the chapeau of Article 6.3(c) in the context of Brazil's
assertion that there is no need to conduct a distinct analysis of "serious prejudice" under Article 5(c)
after having made a finding under 6.3(c) or (d)? (B razil's further submission, paras 437 ff). How, if
at all, are Articles 6.2 and 6.8 relevant in this context? What context should the Panel use for
assessing serious prejudice under Article 5(c) of the SCM Agreement if the Panel takes the view that
Article 6.3(c) and (d) are permissive conditions for a determination of serious prejudice? US

150. Is the list in Article 6.3 of the SCM Agreement exhaustive, or could serious prejudice arise in
circumstances other than those listed in paragraphs (a) through (d)? US

151. Where in the text of Article 6.3(d) of the SCM Agreement is there a basis to take into account
that 1998 may be a "misleading" year for the purposes of comparison? For example, unlike the text of
Article XVI:3 of the GATT 1994, there does not seem to be a general reference to "special factors".
US

152. If the US is correct in asserting that the Article 13(b)(ii) Agreement on Agriculture analysis is
a year-by-year analysis, how would this affect the Panel's examination of Brazil's claims of serious
prejudice, including the three year period and the trend period in Article 6.3(d) of the SCM
Agreement? US

153. Would the conditions in Article 6.3(d) of the SCM Agreement be satisfied in respect of time
periods other than the one specified? What relevan ce, if any, would this have for Brazil's claims?
BRA

154. Does the US agree that upland cotton is a "primary product or commodity" within the
meaning of Article 6.3(d) of the SCM Agreement? (ref. Brazil's further submission, para. 262) and
within the meaning of Article XVI:3 of the GATT 1994? US

155. Please respond to Brazil's identification of the seven-year period beginning with MY1996
(following the passage of the FAIR Act of 1996) as the "most representative period" for the purposes
of Article 6.3(d)? (ref. Brazil further submission, para. 269) US

156. Does the US agree that "...footnote 17 [of the SCM Agreement] does not carve out upland
cotton from the scope of Article 6.3(d) of the SCM Agreement"? (ref. Brazil further submission, para.
275). US

157. Does the reference to "trade" in footnote 17 of the SCM Agreement have any impact on the
interpretation of "world market share" in Article 6.3(d)) If so, what is it? US

158. Please respond to Brazil's assertion that " ...the absence of any payment, production or
expenditure limitations in the US marketing loan programme is analogous to the EC sugar regime that
was challenged in EC – Sugar Exports II (Brazil) and EC – Sugar Exports I (Australia) ." (ref. Brazil
further submission, para. 317) US

159. The EC, in its oral statement (paras 9 and 10), disagrees with the US interpretation of the
terms "same market". Can the US comment on the EC's view? US

160. Without prejudice to the meaning of "world ma rket share" as used in Article 6.3(d) of the
SCM Agreement, can you confirm the world export share statistics provided in Exhibit BRA-206? US

161. Would a finding of serious prejudice under Article 5(c) of the SCM Agreement be
determinative for a finding under Article XVI:1 of the GATT 1994? Why or why not? What, if any,
is the role of footnote 13 of the SCM Agreement in this context? BRA, US

162. Can the US confirm that marketing loan/LDP, step 2 and counter-cyclical payments are
mandatory if the price conditions are fulfilled? US

163. Are US cotton producers able to cover the fi xed and variable costs without subsidies? Please
provide substantiating evidence. Of what relevan ce is this, if any, to Brazil's actionable subsidy
claims ? US, BRA

K. CAUSATION

164. When the US points, in its oral statement of 7 October, to the alleged "bias" of Prof. Sumner's
model, is it arguing that US subsidies are irre levant to the movement in prices and production
(acreage) of upland cotton? US

165. Please comment (and submit substantiating ev idence) on the US assertion that the FAPRI
model has been designed and develope d for prospective analysis, and is not suitable for retrospective
counterfactual analysis. What is the reliability of past FAPRI-produced analyses when compared
with actual data for the period covered by them? Is there any other instrument that can be used to try
to identify the effect of subsidies already granted, or of their removal? BRA, US

166. The US states that "futures prices demonstrat e that market participants predict increasing
upland prices over the course of the marketing year" (US 7 October oral statement, para. 62). Please
elaborate on this argument including citing specific futures prices. US

167. How does Brazil react to Exhibit US-44? BRA

168. Please confirm that the production figures cite d in Exhibit US-47 are for upland cotton only
and do not include textiles. US

169. Can the US confirm the accuracy of the fact s and figures cited in the four bullet points in
paragraph 12 of Brazil's 7 October oral statement? US

170. Brazil quotes a report that states that a 10% increase in soybean prices reduces upland cotton
acreage by only 0.25% (Brazil's 7 October oral st atement, para. 27). Could Brazil indicate if this
analysis is done on a short-run basis or a long-run basis? BRA

171. In paragraphs 22 and 23 of its further subm ission, we understand that the US is, in short,
claiming that increased total supply (i.e. including polyester) drove prices down. On the other hand,
we note that, according to the figures in the chart in paragraph 22 of the same submission, the world
production of cotton during this period has basically been steady. Do all polyester fibres as
represented by these figures compete directly with cotton? That is to say, do these figures for
polyester fibres include, for example, those that are used for textiles that technically cannot be
substituted by cotton? US

172. Please estimate the price effect, in cents per pound, of the growth in the US retail market
which it is said has directly contributed to strengthening world cotton prices. US

173. The US asserts that "burgeoning US textile imports … shifted the disposition of US cotton
production from domestic mills to export markets" (US further submission, para. 20). A similar
description appears in paragraph 33, together with the explanation that "the share of world cotton
consumption supplied by US cotton has been roughly the same since 1991/92". Why have sales of US
cotton for export increased and sales of cotton imported into the US increased? US

174. How, if at all, did the Asian financial crisis affect the United States' world market share? Did
it disproportionately affect the US as compared to other exporters? US

175. With reference to paragraphs 57-58 and th e related table on page 21 of the US further
submission, could you please clarify the arguments regarding the ratio of the soybean futures to the
cotton futures prices since in the table the inverse ratio is used? US

176. With reference to Figure 4 of Brazil's Further Submission, how does Brazil explain the
apparent decrease in prices in 2001 and the incr ease of the A-Index in recent months, despite the
continued use of US subsidies on upland cotton? BRA

177. Could the United States further elaborate on pa ragraph 50 of its 7 October oral statement?
US

178. The Panel notes Exhibit US-63. Could the US please provide a conceptually analogous graph
concerning US export sales during the same period? US

179. Could Brazil comment on the argument that decoupled payments and other subsidies to
upland cotton are largely being capitalized into land values and that removing these subsidies would
reduce the cost of production of upland cotton producer s (US 7 October oral statement, para. 48).
What would be the net effect of these adjustments? BRA

180. Please describe the precise formula as to how USDA determines the "adjusted world price"
using the Liverpool A-Index, the NY futures price a nd any other relevant price indicators. Please
submit substantiating evidence. BRA, US

181. Please provide a side-by-side chart of the w eekly US adjusted world price, the Liverpool A-
Index, the NY futures price, and spot market pric es from 1996-present. What, if anything, does this
reveal? BRA, US

182. Please explain why the US can be taken to be price leaders, or price setters, (and not just
takers) when US producers receive large subsid y payment to support the difference between world
prices and their own costs? BRA

L. ARTICLE XVI OF GATT 1994

183. Why does Brazil believe that the appropriate "previous representative period" is the term of
the previous Farm Bill, MY1996-2002? (Brazil's further submission, para. 282) BRA

184. Why does Brazil believe that an "equitable share" is one which factors out all subsidies? To
the extent that domestic support and export subsidies are permitted by the Agreement on Agriculture,
why should they not be accepted as being normal cond itions in analyzing an equitable market share?
(See Brazil's further submission, paras 288-289) BRA

185. Please respond to the following questi ons concerning the relationship between
Article XVI:3 of the GATT 1994, the disciplines on export subsidies and domestic support in the
Agreement on Agriculture and the disciplines on prohibited export subsidies and actionable subsidies
in Articles 3, 5(c) and 6.3(d) of the SCM Agreement. BRA, US

(a) Are agricultural domestic support programm es challengeable under Article XVI:3 of the
GATT 1994? How, if at all, is the title of Section B of Article XVI ("Additional provisions
on export subsidies" (emphasis added)) relevant? How, if at all, are Articles 13 and 21.1, or
any other provisions of the Agreement on Agriculture, relevant?

(b) Are the requirements of Article XVI:3 of the GATT 1994 reflected in, developed by or
subsumed by the requirements in Article 6.3(d) of the SCM Agreement , or in any other

provisions of the covered agreements? Of what relevance, if any, is the Appellate Body
2 here?

(c) Of what relevance, if any, is the fact that the definition of "subsidy" in Article 1 of the SCM
Agreement and the prohibition on subsidies continge nt upon export in Article 3.1(a) were
introduced in the Uruguay Round, but did not exist at the time that the GATT 1947 was
negotiated?

186. Could the United States please expand upon its statement that "[t]hese are the types of
considerations that led to the negotiation of th e Subsidies Agreement...." (US further submission,
para. 109)? Is there any relevant material, includi ng, for example, drafting history that might support
this statement? US

M. THREAT CLAIMS

187. Please provide USDA's projections of marke ting loan/LDP payments, direct payments and
counter-cyclical payments to be made during MY 2003 through 2007 based on the most recent USDA
baseline projection. US

2 WT/DS108/AB/R, para 117:
"… the provisions of the SCM Agreement do not provide explicit assistance
as to the relationship between the export subsidy provisions of the
 SCM Agreement and Article XVI:4 of the GATT 1994. In the absence of
any such specific textual guidance, we must determine the relationship
between Articles 1.1(a)(1) and 3.1(a) of the SCM Agreement and
Article XVI:4 of the GATT 1994 on the basis of the texts of the relevant
provisions as a whole. It is clear from even a cursory examination of
Article XVI:4 of the GATT 1994 that it differs very substantially from the
subsidy provisions of the SCM Agreement, and, in particular, from the
export subsidy provisions of both the SCM Agreement and the Agreement on
Agriculture. First of all, the SCM Agreement contains an express definition
of the term "subsidy" which is not contained in Article XVI:4. In fact, as we
have observed previously, the SCM Agreement contains a broad package of
new export subsidy disciplines that "go well beyond merely applying and
interpreting Articles VI, XVI and XXIII of the GATT 1947". Next,
Article XVI:4 prohibits export subsidies only when they result in the export
sale of a product at a price lower than the "comparable price charged for the
like product to buyers in the domes tic market." In contrast, the
 SCM Agreement establishes a much broader prohibition against any subsidy
which is "contingent upon export performance". To say the least, the rule
contained in Article 3.1(a) of the SCM Agreement that all subsidies which
are "contingent upon export performance" are prohibited is significantly
different from a rule that prohibits only those subsidies which result in a
lower price for the exporte d product than the comp arable price for that
product when sold in the domestic market. Thus, whether or not a measure
is an export subsidy under Article XVI:4 of the GATT 1947 provides no
guidance in determining whether that measure is a prohibited export subsidy
under Article 3.1(a) of the SCM Agreement . Also, and significantly,
Article XVI:4 of the GATT 1994 does not apply to "primary products",
which include agricultural products. Unquestionably, the explicit export
subsidy disciplines, relating to agricultural products, contained in Articles 3,
8, 9 and 10 of the Agreement on Agriculture must clearly take precedence
over the exemption of primary products from export subsidy disciplines in
Article XVI:4 of the GATT 1994."

188. Can the United States comment on the FAPRI projections for cotton provided in Exhibit
BRA-202? US

N. CLARIFICATIONS

189. Please indicate whether the correct figure in pa ragraph 37 of Brazil's 7 October oral statement
is 38.1% or 38.3%? BRA

190. Please confirm that the figure "17.5" in paragra ph 43 of Brazil's 7 October oral statement, is
"percentage point". BRA

191. Brazil clarify its statement in para. 12 of its 9 September further subm ission: "Alternatively
crop insurance is not specific because the 2000 ARP Act denies benefits to commodities representing
more than half of the value of US agriculture. Further US crops represent only 0.8 per cent of total
US GDP." (emphasis added) BRA

ANNEX L-1.16

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

3 November 2003

1. The Panel recalls that paragraph 5 of its 13 October 2003 communication reads as follows:
"The Panel takes note of the United States' request in section II of its
further submission for three preliminary rulings, regarding interest
subsidies and storage payments; cottonseed payments; and export
credit guarantees for products other than upland cotton. The Panel is
not currently in a position to rule on these issues. The Panel will
make rulings as necessary and appropriate in the course of this
proceeding and hopes to be in a position to express its views, or give
a ruling, on these requests, as appropriate, by 3 November (that is,
shortly after the date of receipt of written responses to questions).
Meanwhile, the Panel requests the parties not to exclude
consideration of these issues in their responses to questions."
2. Accordingly, please find attached a communication from the Panel.

Panel's views on the preliminary ruling requested by the United States
in its further written submission of 30 September 2003

1. In its further written submission of 30 Se ptember 2003, the United States requests a
preliminary ruling that:

 (1) Brazil may not advance claims under either Article 4 or Article 7 of the SCM
Agreement with respect to export credit guarantee measures relating to eligible US
agricultural commodities other than upla nd cotton, because it did not include a
statement of available evidence with respect to these measures as required by
Articles 4.2 and 7.2 of the SCM Agreement;

 (2) cottonseed payments made for the 1999 and 2000 crops are not within the Panel's
terms of reference; and

 (3) storage payments and interest subsidies referred to as "other payments" for upland
cotton are not within the Panel's terms of reference.
1

2. Brazil asks the Panel to reject the United States' request. In respect of item (1), Brazil asserts
that the US request is not new and is untimely, groundless and "mooted by" the Panel's 25 July
communication indicating that the Panel intended to ru le that export credit guarantees to facilitate the
export of US upland cotton and other eligible agricu ltural commodities are within the Panel's terms of
reference.
2 Brazil asserts that items (2) and (3) are properly within the Panel's terms of reference.3

3. The Panel wishes to indicate to the parties how it intends to rule on items (1) and (2), in order
to assist them in deciding what argumentation a nd evidence to submit in their further rebuttal
submissions.

4. With respect to item (1), assuming arguendo that the US request was timely,
4 the Panel
intends to rule in its report that Brazil provided a statement of available evidence with respect to
export credit guarantee measures relating to eligible US agricultural commodities other than upland
cotton, as required by Articles 4.2 and 7.2 of the SCM Agreement . As previously indicated in the
Panel's communication of 25 July 2003, the Panel also intends to rule that "export credit guarantees
… to facilitate the export of US upland cotton, and other eligible agricultural commodities" as
addressed in document WT/DS267/7, are within its terms of reference.

5. With respect to item (2), the Panel intends to rule that cottonseed payments made under
Public Laws 106-224 and 107-25 (in respect of the 2000 crop) are within its terms of reference, but
that cottonseed payments made under Public Law 106-113 (in respect of the 1999 crop) are not within
its terms of reference. This is without prejudice to the relevance, if any, of the cottonseed payments in
respect of the 1999 crop to the conditions set out in Article 13(b) of the Agreement on Agriculture.

1 US Further Written Submission, Sections II and XIII.
2 Brazil's Oral Statement at the Resumed First Substantive Meeting, paragraphs 73-78.
3 Brazil's Oral Statement at the Resumed First Substantive Meeting, paragraphs 79-81.
4 The Panel recalls paragraph 12 of its working procedures but, in light of its intended ruling, does not
need to address the issue of timeliness here.

6. The Panel has not yet decided upon its approach to item (3) and asks the parties not to exclude
consideration of these other payments in their further rebuttal submissions.

 ANNEX L-1.17

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

14 November 2003

1. The Panel takes note of the United States' written request of 14 October 2003 for certain
information relating to the quantitative simulation model used by Dr. Sumner in his analysis presented
in Annex I to Brazil's 9 September 2003 further written submission. The Panel also takes note of the
parties' related communications dated 5, 11, 12 and 13 November 2003, and the submissions by Brazil
on 12 and 13 November 2003.
2. The Panel confirms the dates in its ex isting timetable, subject to the following.
3. The Panel does not require the parties' 18 N ovember further rebuttal submissions, nor their
oral statements during the second Panel meeting, to address the methodology, equations or parameters
underlying the quantitative modelling simulation in Annex I to Brazil's further written submission
which are directly linked to the information requ ested by the United States on 14 October 2003 and
the submissions by Brazil on 12-13 November 2003. Having said this, the parties are not precluded
from doing so.
4. Mindful of the requirements of Article 12.4 of the Understanding on Rules and Procedures
Governing the Settlement of Disputes and in keeping with its duty to conduct an objective assessment
of the matter before it, the Panel invites the Unite d States to submit, on 22 December, in conjunction
with its responses to any questions following th e second Panel meeting, any comments that it may
have on Brazil's submissions of 12-13 Novemb er 2003. Brazil may submit any comments on any
such US comments by 12 January 2004, and the Un ited States may submit any further comments by
19 January 2004. If necessary, at the discretion of th e Panel, a further Panel meeting with the parties
may be held to address this specific material.
5. This decision is without prejudice to the relevance and significance which the Panel may
ascribe to the quantitative simulation model and related evidence and argumentation in its report.
6. Finally, the Panel wishes to ask the Un ited States to respond, by 22 December, to the
following:
Is the Panel correct in understanding that the US government (including the United States
Department of Agriculture) does not have a licen se or any other form of permission (standing
or otherwise; free of charge or otherwise) to run, electronically, the FAPRI/CARD model
and/or Professor Sumner's adaptations thereto?

ANNEX L-1.18

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

8 December 2003

1. Please find attached:

• a communication from the Panel concerning its views on one of the preliminary ruling
requests from the United States.
• a communication from the Panel concerning the FAPRI model, the essence of which was
communicated to the parties by the Chairman of the Panel on 3 December 2003. As indicated
therein, any US comments are due by 22 December . Brazil will be given until
12 January 2004, to comment on the US comments.
• the questions from the Panel. As was indicated earlier, responses to these questions are to be
submitted by 22 December.
2. As stated by the Chairman on 3 December, the United States will be given until
18 December to respond to Brazil's request made in Exhibit BRA-369. Brazil will be given until
12 January 2004, to comment on the US response.

3. The parties may submit any furthe r comments on each other's comments by
19 January 2004.

Panels' views on the preliminary ruling requested by the United States
regarding the Agricultural Assistance Act of 2003

7. The United States requests a preliminary ruli ng that any measure under the Agricultural
Assistance Act of 2003, including a cottonseed payment under that Act, is not within the Panel's terms
of reference.
1

8. Brazil asserts that that Act is properly within th e Panel's terms of reference and asks the Panel
to reject the United States' request.
2

9. The Panel wishes to indicate to the parties how it in tends to rule on this item in order to assist
them in deciding what argumentation and evidence to submit in their answers to questions.

10. The Panel intends to rule that cottonseed pa yments made under the Agricultural Assistance
Act of 2003 are not within its terms of reference. This is without prejudice to the relevance, if any, of
those cottonseed payments to the conditions set out in Article 13(b) of the Agreement on Agriculture.

11. The Panel notes that it has not expressed a view concerning the United States' request for a
preliminary ruling that storage payments and inter est subsidies referred to as "other payments" for
upland cotton are not within th e Panel's terms of reference.
3 The Panel has not yet decided upon its
approach to this item and asks the parties to re spond to its written questions relevant to these
payments, and not to exclude consideration of these payments in their answers to other questions.

1 US First Written Submission, paras 217, 218; US Further Submission, para. 8.
2 Brazil's Oral Statement at the first session of the First Substantive Meeting, para. 145; Brazil's
Response to Panel Question No. 17 and comments on US Response to Panel Question No. 17.
3 US Further Written Submission, Sections II and XIII.

Panels' communication concerning the FAPRI model

1. The Panel has been advised by Brazil that, to th e best of Brazil's knowledge and belief, all of
the information used by FAPRI to generate the various results presented in Brazil's submissions
concerning the effects of the subsidies, and thei r removal, has been provided to the US in an
electronic format. Conceptually sp eaking, the information is in two parts: (a) the model used as the
basis for generating the results ("the FAPRI model" ), and (b) adaptations to the model and other
specific pieces of information which effect th e calculations made by the model ("the Brazil
information"). FAPRI has possession of the FAPRI model and the Brazil information. Brazil only has
possession of the Brazil information. Brazil instructed FAPRI as to the use of the Brazil information
that FAPRI then used to generate the various results presented by Brazil to the Panel.

2. We say that the US has all of the information (ie both the FAPRI model and Brazil's
information) "to the best of Brazil's knowledge a nd belief" because Brazil itself has never had access
to all of the data comprising the FAPRI model, which is voluminous. FAPRI considers the model to
be its own work product. At the request of Brazil, FAPRI has made all of the information available to
the US. Why it has done this in the case of the US, but not Brazil, relates to the relationship
(commercial or otherwise) between FAPRI (which receives US funding for its work) and the US
Government. FAPRI has provided a ll of the information to the US on the express stipulation that the
model not be provided to the Panel or Brazil ("the FAPRI stipulation").

3. At para 74 of its Opening Statement at the Second Panel Meeting, the US asks this of the
Panel:

"[W]hether it intends the United States to comment on this new model,
documentation, and results by the original 22 December deadline to file comments on
the methodology underlying the Annex I model."
4. During the Second Panel Meeting, Brazil advised the Panel that it had no objection, then, to
the US looking at the information provided to it by FAPRI, notwithstanding the FAPRI stipulation.
The Panel acknowledges this, but also notes that it w ould be open to Brazil to reconsider its position
depending on anything that the US may wish to present to the Panel about the FAPRI model.

5. The Panel's view in these circumstances is that the US should comment on the FAPRI model,
if it believes that it needs to do so in the interests of presenting its case to the Panel, by 22 December.
The FAPRI stipulation does not, in the Panel's view , affect the Panel's ability to make an objective
assessment of the matter before it in the terms of Article 11 of the DSU. The Panel will assess the
reliability and relevance of the FAPRI model on th e basis of the evidence presented to it by the
parties.

6. Brazil will be given until 12 January 2004, to comment on the above US comments.

Questions from the Panel to the Parties –
second substantive Panel meeting

A. TERMS OF REFERENCE

192. Regarding the interest subsidies and storag e payments listed by the United States in its
response to the Panel's Question No. 67:

 (a) Please provide a copy of the regulations under which they are currently provided and
under which they were provided during the marketing years 1996-2002;

 (b) Please indicate whether there are any such payments which are not provided to
implement the repayment rate for upland cotton within the marketing loan
programme. USA

193. Are interest subsidies and storage payments already included in the amounts shown in your
submissions to date for payments under the marke ting loan programme? Has there been any double-
counting? BRA

194. Does the United States maintain its position stat ed in response to the Panel's Question No. 67
that "it would not be appropriate for the Panel to examine payments made after the date of panel
establishment"? If so, please explain why. Can Brazil comment on this statement? BRA, USA

B. ECONOMIC DATA

195. Does the United States wish to revise its response to the Panel's Question No. 67 bis, in
particular, its statement that "the United States ... does not maintain information on the amount of
expenditures made under the cited programmes to US upland cotton producers"? Did the United
States make enquiries of the FSA in the course of preparing its original answer? USA

196. Please provide the latest data for the 2002 marketing year on payments under the marketing
loan, direct payments, counter-cyclical payments, user marketing certificate (step 2) programmes and
export credit guarantee programmes. BRA, USA

197. Please provide actual data for 2002/2003 for US exports, US consumption and per cent of
world consumption to replace the projected data in Exhibit US-47. If available, please provide
projected data for 2003/2004 to replace the forecast data. USA

198. Please comment on the respective merits of the price-gap calculations of MY1992 deficiency
payments in US comments of 27 August, footnote 14 ($867 million), and Brazil's response to the
Panel's Question No. 67 ($812 million). BRA, USA

199. What is the composition of the A-Index? We do note footnote 19 and, for example, Exhibit
BRA-11, but please explain more in detail how this index is calculated. BRA

200. Concerning the chart on page 37 of Brazil's fu rther rebuttal submission, why did Brazil use a
futures price at planting time? Is this a relevant measure for assessing acreage response? BRA

201. Is data available to show the proportion of US upland cotton production sold under futures
contracts, and the prices under those contracts, at different times during the marketing year? If so,

please provide summarized versions to the Panel. How does a futures sale impact the producer's
entitlement to marketing loan programme payments? BRA, USA

202. Concerning paragraph 7 of the US oral statem ent, are the expected cash prices shown for
February only? Can the US provide the prices for January and March of each year as well? USA

203. Please provide information concerning the organi zation, mandate, credentials and standing of
FAPRI. BRA

204. Which support to upland cotton is not capture d in the EWG data referred to in Brazil's
18 November further rebuttal submission? BRA

205. Does the United States accept or agree with th e EWG data submitted by Brazil? If not, please
explain your reasons. USA

206. Please explain how the graph in paragraph 40 of the US further rebuttal submission was
derived. In so doing, please clarify whether the figures are on a cents per pound basis or some other
basis. What averaging method was used? Can you prepare individual charts showing average US and
Brazilian cotton prices for each of those third country markets? USA

207. Please indicate whether any of the measures challenged in this dispute obliges cotton farmers
to harvest their crop in order to receive the benefit of the programme (subsidy). USA

208. Please provide data for the marketing y ears 1992 and 1999-2002 of the "quantity
of production to receive the applied administered price" ( Agreement on Agriculture , Annex 3,
paragraph 8) for purposes of a price-gap calcul ation of support through the marketing loan
programme. USA

209. It is understood that the data in the graph in paragraph 5 of the US oral statement are as at
harvest time, while the data in the graph in paragr aph 39 of Brazil's oral statement are as at planting
time. Please explain why the trend of US acreage increase/decrease differs between these two graphs.
BRA, USA

210. Are worldwide planted acreage figures available? BRA, USA

211. Brazil presents a graph in paragraph 59 of its further rebuttal submission indicating the
increasing cumulative loss incurred by cotton producer s. Please comment on the argument that US
cotton producers could not continue operating without subsidies. In particular:

 (a) to what extent does the use of 1997 surv ey technological coefficients with annually
updated values affect the results?

 (b) to what extent do producers base planti ng decisions on their ability to cover operating
costs but not whole farm costs? USA

212. Brazil states in paragraph 37 of its oral statement that studies of Westcott and Price found that
the effect of the programme on cotton is to add an additional 1 to 1.5 million acres during marketing
years 1999-2001 and to suppress US prices by 5 cents per pound. Does the US reject these findings?
Why or why not? USA

213. What differences, if any, can be observed in the results of econometric models in the literature
which use lagged prices and those which use futures prices to analyse the effect of prices on planting
decisions? BRA, USA

C. DOMESTIC SUPPORT

214. Please provide a copy of regulations regard ing the marketing loan programme and loan
deficiency payments published at 58 Federal Regi ster 15755, dated 24 March 1993. What does this
regulation indicate about the target price? USA

215. Please expand or comment on the statement at paragraph 91 of the US further rebuttal
submission that the counter-cyclical target price ce ases to be paid when th e farm price rises above
65.73 cents per pound. In this scenario, should the Panel disregard Direct Payments? BRA, USA

216. How many times have upland cotton producers be en able to update their base acres since
1984? How do upland cotton producers come to note the possibility of future updating? Please
provide examples of relevant material. BRA, USA

217. What is the reason for reducing payments unde r the PFC and direct payments programmes for
planting and harvesting fruit, vegetables and wild rice on certain base acreage? Please comment on
the statements by the European Communities that "the reduction in payment for fruit and vegetables,
if the EC understands correctly, is in fact designe d to avoid unfair competition within the subsidising
Member." (EC oral statement at first session, firs t substantive meeting, paragraph 29) and "To find
otherwise would not permit a WTO Member wishi ng to introduce decoupled payments to take
account of important elements of internal comp etition (…)" (EC response to Panel third party
Question No. 5). USA

218. Please comment on the testimony of USDA Ch ief Economist Keith Collins cited in paragraph
36 of Brazil's oral statement regarding the trade- distorting and production-distorting nature of the
marketing loan payments. USA

D. EXPORT CREDIT GUARANTEES

219. Under the Agreement on Agriculture the general position is that the use of export subsidies,
both those listed in Article 9.1 as well as those within the scope of Article 1(e) which are not so listed,
may only be used within the limits of the product specific reduction commitments specified in Part IV
of Members' Schedules. One might theref ore have expected that Article 3.3 of the Agreement on
Agriculture would have prohibited the use of both liste d and non-listed export subsidies in excess of
reduction commitment levels in the case of schedul ed products and, in the case of non-scheduled
products, would have simply prohibited the use of any export subsidy. Instead, the Article 3.3
prohibition is limited in both cases to export subsidies listed in Article 9.1. What significance, if any,
does this contextual aspect have for how Artic le 10.2 might be interpreted having regard, inter alia,
to:

 (a) the fact that export performance-related tax incentives, which like subsidised export
credit facilities were considered as a possible candidate for listing as an Article 9.1
export subsidy in the pre-December 1991 Draft Final Act negotiations, have been
held (for example, in United States – Tax Treatment for Foreign Sales Corporations ,
WT/DS108) to be subject to the anti-circumvention provisions of Article 10.1; and

 (b) the treatment of international food aid and non-commercial transactions under
Article 10? USA

220. What will be the relevance of Articles 9 and 10.1 of the Agreement of Agriculture to export
credit guarantees when disciplines are internationally agreed? BRA

221. In respect of the table in paragraph 161 of the US August 22 rebuttal submission (concerning
the cohort specific treatment of export credit gua rantees), the Panel notes the subsequent US
agreement (footnotes 82 and 96 in US further submi ssion of 30 September 2003; footnote 160 in US
18 November further rebuttal submission) to Brazil's assertion (footnote 67 in Brazil's 27 August 2003
comments on US rebuttal submission) that the tota l figure net of re-estimates should be $230,127,023
instead of the figure which originally appeared ($381,345,059).

 (a) Please submit a corrected table reflecti ng all of the necessary information to produce
this result, to the extent this is possible fo r the reasons indicated in footnote 96 in US
further submission of 30 September 2003.

 (b) Please clarify whether and how the Panel should treat the figures in Exhibit BRA-182
for the net lifetime re-estimates for each respective cohort.

 (c) The Panel notes that the CCC 2002 financia l statement in Exhibit BRA-158 refers to
annual "administrative" expenses of $4 million, and that the US has also referred to
this figure in its submissions (e.g. US first written submission, paragraph 175).
Please confirm whether the figures in the table in paragraph 161 of the US August 22
rebuttal submission (or a corrected vers ion thereof) includes "administrative
expenses", of approximately $4 million pe r year over the period 1992-2002, and
explain why (or why not) this affects the substantive result.

 (d) Please identify what is considered an "a dministrative expense" for this purpose.

 (e) The Panel notes the US statement in para graph 160 of its answers to Panel questions
following the first meeting that all coho rts are still open although the 1994 and 1995
cohorts will close this year. Is this still an accurate statement? If not, please indicate
whether any cohorts have since "closed" for the period 1992-2002.

 (f) The Panel notes the current "high" figures for 1997 and 1998 indicated in the original
US chart. Pending their confirmation and/or updating by the US, why does the US
assert that a cohort will necessarily reach a "profitable" result (for example, the 1994
cohort, which has almost closed still i ndicates an outstanding amount)? Do "re-
estimates" reflect also expectations about a cohort's future performance?

 (g) Why should the Panel "eliminate" the 2001 and 2002 cohorts from its examination, as
suggested in paragraph 198 of the US further rebuttal submission?

 (h) Why should the Panel "eliminate", in a ddition, the 2000 cohort, as also suggested in
paragraph 198 of the US further rebutta l submission for which information is
presumably more "complete"?

 (i) Under the US approach, at what point in time could a Panel ever make an assessment
of the programme, if it had to wait for each cohort to be completed before it could be
"properly" assessed? Why is it inappropriate for the Panel to include these "most
recent years" in its evaluation, as the US suggests in paragraph 199 of its 18
November further rebuttal submission? USA

222. For GSM 102, 103 and SCGP, please provide year-by-year amounts from 1992 to 2003 with
respect to: (i) cumulative outstanding guarantees; (ii) claims paid; (iii) recoveries made; (iv) revenue
from premiums; (v) other current revenue, including in terest earned; (vi) interest charges paid; and
(vii) administrative costs of running the programmes. Please indicate any allocation methodologies
used to calculate administrative costs. USA

223. Are the premium rates applicable to GSM 102, 103 and SCGP subject to regular review as to
their adequacy in enablin g the operating costs and losses associat ed with these programmes? If so,
what criteria or benchmarks are taken into consideration for this purpose? Secondly, how do the
premium rates applied compare with the implicit co st of forfaiting transactions and with premiums
for export credit insurance? USA

224. Please indicate how the CCC's cost of borro wing was treated in the 2002 financial statement
of the CCC, in Exhibit BRA 158. USA

225. Please indicate whether there was any instance where the CCC "wrote off" debt and, if so,
please indicate the accounting regulation or principle used. If a "written off" debt is subsequently
recovered, do the CCC's accounts reflect both the inter est cost and interest received in relation to the
debt during the time it was "written off"? USA

226. If a debt was "written off" more than ten years ago, does it still create a cost to the
programme? If so, how is this reflected in the 2002 financial statement of the CCC, in Exhibit BRA
158 (or any other material)? USA

227. The United States has indicated that Brazil c ontinues to "mischaracterize" the amount of $411
million in the 2002 financial statement of the CCC, in Exhibit BRA 158, pp. 18 & 19. Can the
United States please indicate how it believes this amount – referred to on p. 19 of the Exhibit as
"Credit Guarantee Liability-End of Fiscal Year" - should be properly characterized? How, if at all,
does it represent CCC operating costs or losses? USA

228. What accounting principles should the Panel use in assessing the long-term operating costs
and losses of these three programmes? For example, if internal US Government regulations require
costs to be treated differently to generally accepted accounting principles, is it incumbent on the Panel
to conduct its analysis in accordance with that treatment? BRA, USA

E. SERIOUS PREJUDICE

229. What is the meaning of the words "may arise in any case where one or several of the
following apply" (emphasis added) in Article 6.3 of the SCM Agreement ? Please comment on the
possibility that these words indicate that one of the Article 6 subparagraphs ma y not be sufficient to
establish serious prejudice and that serious prejudice should be considered an additional or overriding
criterion to the factors specified in the subparagraphs. BRA

230. Please comment on Brazil's views on Article 6.3 of the SCM Agreement as stated in
paragraphs 92-94 of its further submission. USA

231. Do you believe that the now-expire d Article 6.1 and/or Annex IV of the SCM Agreement are
relevant context for the Panel's interpretation of Article 6.3? USA

232. How, if at all, should the Pane l take into account the effects of other factors in its analysis of
the effects of US subsidies under Article 6.3? If th e Panel should compare the effects of other factors
to establish the relative significance of one compared to others, how would this be done? What would
be relevant “factors” for this purpose? BRA

233. In Brazil's view, what is or are the "same ma rket(s)" for the purposes of Article 6.3(c)? Does
Brazil's view of "world market" imply that regardless of which domestic (or other) "market" is
examined, price suppression will be identifiable? BRA

234. Does "significant" price suppression under Ar ticle 6.3(c) necessarily amount to "serious"
prejudice within the meaning of Article 5(c)? Could the level of "significance" of any price
suppression under Article 6.3(c) dete rmine whether any prejudice under Article 5(c) rises to the level
of "serious prejudice"? USA, BRA

235. Please comment on paragraphs 8, 9 and 10 of the US 2 December oral statement, in
particular, why the average Brazilian price is shown as lower than the average US price. BRA

236. The Panel notes Exhibit US-47 (and the chart in paragraph 13 of the US 2 December oral
statement). Please provide a conceptually analogous chart to Exhibit US-63 with respect to data
relating to the US interpretation of "world market share". USA

237. Could a phenomenon that remains at approxima tely the same level over a given period of
time be considered a "consistent trend" within the meaning of Article 6.3(d) ? Do parties have any
suggestions as to how to determine a "consistent trend", statistically or otherwise? BRA, USA

238. According to the US interpretation of the term "world market share":

 (a) should the domestic consumption of closed markets be added into the denominator?

 (b) if US production and consumption increased by the same percentage, whilst the rest
of the world's production and consumption remained steady, would this imply an
increase in the US "world market share" by a different percentage?

 (c) does Saudi Arabia have a small world market share for oil? USA

239. How does the US respond to Brazil's assertions that, under the US interpretation of the term
"world market share":

 (a) there would be no WTO disciplines on pr oduction-enhancing subsidies that increase a
Member's world market share of exports? (see paragraph 64 of Brazil's 2 December
oral statement);

 (b) a Member's exports would have to be di sregarded in calculating their "world market
share" in terms of "world consumption"? (see e.g. paragraph 65 of Brazil's
2 December oral statement) USA

240. Does Article XVI:3 of GATT 1994 provide cont ext in interpreting Article 6.3(d) of the SCM
Agreement? Do these provisions apply separately? If not, could it indicate that "world market share"
is intended to mean the same as "share of world export trade"? USA

241. How does the US reconcile its data on consum ption for 2002 in US Exhibit 40, Table 1 with
the "consumption" data it refers to in its 30 September submission, paragraph 34, Exhibit US-47 or
US-71? USA

242. How much of the benefits of PFC, MLA, CCP and Direct Payments go to land owners? If not
all of the benefits go to land owners, what proportion goes to producers? USA

243. Can the Panel assume that any support at all, even marketing loan programme payments,
benefits upland cotton if an upland cotton producer has other agricultural production besides upland
cotton? USA

244. What proportion of the 2000 co ttonseed payments benefited producers of upland cotton ,
given that payments were made to first handlers , who were only obliged to share them with the
producer to the extent that the revenue from sale of the cottonseed was shared with the producer? (see
7 CFR §1427.1104(c) in Exhibit US-15). BRA

245. Can a panel take Green Box subsidies into account in considering the effects of non-Green
Box subsidies in an action based on Articles 5 and 6 of the SCM Agreement? BRA, USA

246. Can a panel take prohibited subs idies into account in considering the effects of subsidies in an
action based on Articles 5 and 6 of the SCM Agreement? BRA, USA

247. Can the Panel take into acc ount trends and volatility in market and futures prices of upland
cotton after the date of establishment of the Panel? If so, how do they affect the analysis of Brazil's
claim of a threat of serious prejudice? BRA, USA

F. STEP 2

248. In respect of the level of Step 2 payments in certain time periods, the Panel notes, inter alia,
footnote 129 in the US first written submission; f ootnote 33 in the US 18 November further rebuttal
submission; and Exhibit BRA-350. Have Step 2 paymen ts ever been zero since the elimination of the
1.25 cent per pound threshold in the FSRI Act of 2002 ? In what circumstances could a Step 2
payment be zero? How does the elimination of th e 1.25 cent per pound threshold in the FSRI Act of
2002 affect your response? BRA, USA

249. The Panel notes that the definition of eligib le "exporter" in 7 CFR 1427.104(a)(2) includes "a
producer":

 (a) How does this reconcile with Brazil's argument that Step 2 "export payments" do not
directly benefit the producer?
4 How, if at all, would this be relevant for an analysis of
the issue of export contingency under the Agreement on Agriculture or the SCM
Agreement? BRA

 (b) How does this reconcile with Dr. Gla uber's statement in Exhibit US-24, p. 3
(referring to "the 1990 Farm B ill and subsequent legislation") that Step 2 payments
do not go directly to the producer? USA

 (c) What proportion of Step 2 "expor t payments" go to producers? Please supply
supporting evidence. USA

G. REMEDIES

250. Does Brazil seek relief under Article XVI of GATT 1994 in respect of expired measures?
What type of recommendation would the Panel be au thorized to make? (Bra zil further submission,
paragraph 471 (iii)) BRA

251. In light, inter alia, of Article 7.8 of the SCM Agreement, if the Panel were to find that any
subsidies have resulted in adverse effects to the in terests of another Member within the meaning of
Article 5 of the SCM Agreement, should it make any recommendation other than the one set out in the
first sentence of Article 19.1 of the DSU? BRA

4 For example, Brazil's response to Panel Question 125, paragraph 14.

252. Without prejudice to any findings by the Panel, if the Panel were to find that any of the
challenged measures constitute proh ibited subsidies within the meaning of Article 3 of the SCM
Agreement, what are the considerations that shoul d guide the Panel in making a recommendation
under Article 4.7 of the SCM Agreement relating to the time period "within which the measure must
be withdrawn"? What should that time period be? BRA

H. MISCELLANEOUS

253. Regarding the adjustment authority related to Uruguay Round compliance in s.1601(e) of the
FSRI Act of 2002 (the so-called "circuit-breaker provision"):

 (a) Does it relate to export credit guarant ees, crop insurance and cottonseed payments?

 (b) Does it relate only to compliance with AMS commitments?

 (c) Is the authority discretionary? If so, can its exercise be limited by the legislative
branch of government?

 (d) How would the Secretary exercise her au thority to prevent serious prejudice to the
interests of another Member? How would she exercise her authority to prevent a
threat of serious prejudice to the interests of another Member? At what time and on
the basis of what type of information would she exercise her authority?

 (e) What does "to the maximum extent practi cable" mean? In what circumstances would
it not be practicable for the Secretary to exercise her adjustment authority? USA

254. Would payments made after the date of panel establishment be mandatory under the
marketing loan, direct payments, counter-cyclical payments and user marketing certificate (step 2)
programmes, but for the circuit-breaker provision? USA

255. How does Brazil respond to US assertions concerning the circuit-breaker provision? (see US
2 December oral statement, paragraph 82). Does th is mean that US subsidies cannot be "mandatory"
for the purposes of WTO dispute settlement? BRA

256. The United States submits that the Panel ca nnot make rulings without allocating precise
amounts of payments to upland cotton production. However, to the extent that such precise data is not
on the Panel record, to what extent can the Panel rely on less precise data, and on reasonable
assumptions, in fulfilling its duty under Article 11 of the DSU in this case? USA

ANNEX L-1.19

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

23 December 2003

Please find attached additional questions from the Panel.

We would ask the parties to provide their responses by 12 January 2004. The parties may
submit any comments on each other's responses by 19 January 2004.

Additional Questions from the Panel to the parties –
following the second substantive Panel meeting

257. The Panel takes note of the Appellate Body Report in United States – Sunset Review of Anti-
Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan (DS244), which was
circulated to WTO Members on 15 December 2003. Th e Panel is aware that this report has yet to be
adopted by the Dispute Settlement Body. Neverthe less, the Panel asks the parties to respond to the
following related questions.

(a) In that report, the Appellate Body cautioned against the "mechanistic" application of the so-
called "mandatory/discretionary distinction" and stated that the import of this distinction may
vary from case to case (para. 93). For the Appellate Body, the question of whether a measure
is mandatory or not is relevant "if at all" only as part of the assessment of whether the
measure is, as such, inconsistent with particul ar obligations. How, if at all, are these
statements and the related findings concerning th e mandatory/discretionary distinction in that
Appellate Body Report relevant to:

 (i) the legal standard and elements Brazil sets out to establish its export and prohibited
subsidy claims under the provisions of the Agreement on Agriculture and Articles
3.1(a) and (b) of the SCM Agreement, concerning: BRA

 - Step 2 payments (see, e.g. paras. 244-245 & 250 Brazil's first written
submission; Panel Question 109 and parties' responses/comments thereon); and

 - export credit guarantee programmes: GSM-102, GSM-103 and SCGP (see, e.g.,
para. 90 Brazil's oral statement at second Panel meeting).

 (ii) the legal standard and elements Brazil sets out to establish its serious prejudice and
"threat of serious prejudice" claims, and in particular, its designation of marketing
loan; crop insurance; counter-cyclical payments; direct payments and Step 2 as
"mandatory"? BRA

 (iii) the legal standard and elements Brazil sets out to establish its " per se " "serious
prejudice" claims (e.g. Brazil's 9 September further submission, para. 417 ff; US oral
statement at second Panel meeting, para. 86 ff.)? BRA

(b) How and to what extent are the legal and re gulatory provisions cited in paras. 415 and 423 of
Brazil's 9 September further submission "normative" in nature and treated as binding within
the US legal system (see, e.g., para. 99 of the Appellate B ody Report)? Does your response
differ depending on whether the payments are dependent upon market price conditions? BRA

(c) Does Brazil challenge as "mandatory" the "subs idies" themselves, the subsidy programmes or
the legal/regulatory provisions for the grant or maintenance of those subsidies, or something
else? BRA

(d) Does the "requirement" upon the CCC to make available "not less than" $5.5 billion annually
in guarantees have a normative character and operation? (see, e.g. Brazil's response to Panel
Question 142; Exhibit BRA-297, 7 USC 5641(b)(1); 7 USC 5622(a) & (b); paragraph 201 of
US 18 November further rebuttal submissions). Is this requirement "mandatory"? If so, how
does the CCC have "discretion" not to make th is amount of guarantees available in a given
year? USA

(e) Does the US agree that, under the Budget Enforcement Act of 1990, the Office of
Management and Budget classifies the export cr edit guarantee programs as "mandatory" (see
Brazil's response to Panel Question 142, para. 89)? Does this exempt the programmes from
the requirement to receive new Congressional budget authority before it undertakes new
guarantee commitments (e.g. Exhibit BRA-117 (2 USC 661(c)(2))? USA

ANNEX L-1.20

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

24 December 2003

 The Panel has received a letter from Brazil da ted 23 December (numbered 760), in which it
requests extension of certain deadlines. The Panel has also received a response from the US, dated 23
December. Having carefully considered the views of both parties, the Panel notifies the parties that it
would amend the four immediate deadlines and schedules as follows:

 (1) all submissions originally du e 12 January 2004 would now be due Tuesday,
20 January 2004

 (2) all submissions originally due 19 January 2004 would now be due Wednesday,
28 January 2004.

 (3) issuance of descriptive part of the re port to parties (currently scheduled for
26 January) would be rescheduled to Wednesday, 4 February 2004.

 (4) receipt of comments by parties on the descriptive part of the report (currently
scheduled for 19 February) would be rescheduled to Monday, 1 March 2004.

 All subsequent dates remain unchanged. However, please be reminded that such dates may be
changed in light of further developments.

ANNEX L-1.21

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

12 January 2004

 The Panel takes note that, as stated in its letters dated 18 and 22 December 2003, the
United States provided certain data requested by Br azil, but deleted from farm-level planted acreage
data any fields that could identify individual farms. Brazil commented on this in its answer to Panel
Question No. 196. The United States stated in its le tter dated 18 December 2003 that "the release of
planted acreage information associated with a partic ular farm, county and state number is confidential
information that cannot be released under US domestic law, in particular the Privacy Act of 1974."

The Panel has reviewed the material submitted in support in Exhibits US-102 through 107,
and makes the following observations:

• in the sample Freedom of Information Act ("FOIA") determination submitted to the Panel, the
FSA appears to have relied on the fact that th e acreage requested concerned a single producer
only and that there was no public interest in disclosure of records which did not directly
reveal the operations or activities of the US Federal Government;

• in that sample FOIA determination, the FSA applied the relevant US domestic law and
expressly acknowledged that disclosure of individual data on commodity programme
recipients can be released where the recipien ts' privacy interests in that information are
outweighed by the public interest in disclosure;

• the information which the US asserts that it ca nnot disclose is relatively generic, concerning
planted acreage, and does not relate to one indi vidual but to tens of thousands of business
people, and can be protected under the DSU and our working procedures;

• farm-specific information on contract payments is already available free of charge on the
internet on the EWG database, having been disclosed under the FOIA; and

• comprehensive farm-specific in formation concerning rice, including planted acreage data
associated with particular farm, county and state numbers, was provided on request under the
FOIA to a member of the public who was assi sting Professor Sumner in the presentation of
Brazil's case to the Panel. A sample of this data is set out in Exhibit BRA-369.

Article 13.1 of the DSU relevantly provides as follows:

“A Member should respond promptly and fully to any request by a panel for such
information as the panel considers n ecessary and appropriate. Confidential
information which is provided shall not be revealed without formal authorization
from the individual, body, or authorities of the Member providing the information.”
 Pursuant to Article 13 of the DSU, the Pane l requests the United States to provide the same
data that it agreed to provide in its letters da ted 18 and 22 December 2003 but in a format which
permits matching of farm-specific information on contract payments with farm-specific information

on plantings. The Panel considers it both necessary a nd appropriate to seek this information in a
suitable format in order to undertake its mandate to assist the DSB in discharging its responsibilities
under the DSU and the covered agreements. Disclosur e is sought to permit an assessment of the total
expenditures of PFC, MLA, CCP and direct paymen ts by the US Federal Government to upland
cotton producers in the relevant marketing years.

The United States may again designate the data as confidential in accordance with
paragraph 3 of the Panel's working procedures. Disc losure can be limited to Brazil's delegation, the
Panel and Secretariat staff assisting the Panel. Th e United States may also protect the identity of
individual producers by, for example, using substitute farm numbers which still permit data-matching.

A refusal by the United States to provide the information as requested without an adequate
explanation may lead to adverse inferences being drawn.

 The Panel reminds Brazil that it may not disclo se the above information outside its delegation
in this proceeding if it is designated by the United States as confidential.

 The Panel also wishes to pose the following additional question to Brazil:

258. Please submit a detailed explanati on of the method by which one could
calculate total expenditures to producers of upland cotton under the four relevant
programmes on the basis of the data which it seeks.
 The Panel asks the parties to provide the respective information requested by
20 January 2004.

ANNEX L-1.22

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

3 February 2004

 Please find attached the Panel's supplementary request to the United States for information
pursuant to Article 13 of the DSU, as well as add itional questions to both parties. The Panel would
like to ask the parties to provide the information requested and responses to the additional questions
by Wednesday 11 February 2004 . The Parties are invited to submit, by Wednesday
18 February 2004, any comments on material submitted on 11 February by the other party.

 In light of the above development, the Pane l intends to postpone the issuance of the
descriptive part until Friday 20 February 2004. The remainder of the Panel's schedule remains
unchanged for the time being.

 The Panel recalls that it indicated, in its communication dated 14 November, that "[i]f
necessary, at the discretion of the Panel, a furthe r Panel meeting with the parties may be held" to
address the issue of econometric models. The Panel woul d like to indicate that, at this stage, it does
not see the need to hold such a meeting.

 The Panel has noted the US letter dated 30 Ja nuary, Brazil's response dated 2 February, and a
further letter from the US dated 3 February 2004. Keeping in mind the dictates of due process and
relevant provisions of the cove red agreements -- including Article 12.2 of the DSU which requires
Panel procedures to provide sufficient flexibility so as to ensure high-quality panel reports while
not unduly delaying the panel process -- the Panel is of the view that the above revisions to
the timetable provide the United States and Brazil sufficient opportunity to comment on each other's
comments. Accordingly, the US is free to submit its comments on Brazil's above mentioned
submission by 11 February (but no later).

 This is without prejudice to any definitive view of the Panel on the characterization of any of
the above communications by the parties and, in particular, of the doc ument submitted by Brazil
entitled "Brazil's Comments and Requests Regard ing Data Provided by the United States on
18/19 December 2003 and the US Refusal to Provide Non-scrambled Data on 20 January 2004".

PANEL'S SUPPLEMENTARY REQUEST FOR
INFORMATION PURSUANT TO ARTICLE 13 OF
THE DSU AND ADDITIONAL QUESTIONS

 The Panel has reviewed the United St ates' letters dated 18 December 2003 and
20 January 2004, and the material submitted in support in Exhib its US-102 through 107, and Brazil's
response to Question No. 258.

 Pursuant to Article 13 of the DSU, the Panel requests the United States to provide:

(a) such of the information requested on 12 Ja nuary 2004 in the format requested, as regards
payment recipients who do not have interests protected under the Privacy Act 1974, if any;
and

(b) the following information for each of the PFC, MLA, CCP and direct payments programmes
for each of the 1999, 2000, 2001 and 2002 ma rketing years, showing as many of the
underlying calculations as possible:

• How many farms had fewer upland cotton planted acres than upland cotton base acres, or
equal numbers of each? We refer to these as "Category A" farms. What was the total of their
upland cotton base acreage? What was the total of their upland cotton planted acreage?

o How many Category A farms did not plant any other covered commodities? What
was the total of their upland cotton base acreag e? What was the total of their upland
cotton planted acreage?

• How many farms had more upland cotton planted acres than upland cotton base acres? We
refer to these as "Category B" farms. What was the total of their base acreage for each
covered commodity, including upland cotton? What was the total of their planted acreage for
each covered commodity, including upland cotto n? Please also provide the following
information concerning these farms:

o How many Category B farms had equal num bers of acres planted to all covered
commodities and base acres for all covere d commodities? We refer to these as
"Category B-1" farms. What was the total of the base acreage of Category B-1 farms
for each covered commodity, including uplan d cotton? What was the total of the
planted acreage of Category B-1 farms for each covered commodity, including
upland cotton?

o How many Category B farms had fewer acr es planted to all covered commodities
than base acres for all covered commodities? We refer to these as "Category B-2"
farms. How much was the total acreage of Category B-2 farms planted to all covered
commodities less than their base acreage for all covered commodities? What was the
total of the base acreage of Category B-2 farms for each covered commodity,
including upland cotton? What was the to tal of the planted acreage of Category B-2
farms for each covered commodity, including upland cotton?

o How many Category B farms had more acres planted to all covered commodities than
base acres for all covered commodities? We refer to these as "Category B-3" farms.

How much did the total acreage of Cate gory B-3 farms planted to all covered
commodities exceed their base acreage for a ll covered commodities? What was the
total of the base acreage of Category B-3 farms for each covered commodity,
including upland cotton? What was the to tal of the planted acreage of Category B-3
farms for each covered commodity, including upland cotton?

• How many farms had upland cotton planted acres but no upland cotton base acres? We refer
to these as "Category C" farms. What was th e total of the base acreage of Category C farms
for each covered commodity? What was the tota l of the planted acreage of Category C farms
for each covered commodity, including upland cotton?

• In addition, for the marketing year 2002, please reply to the above questions with respect to
all crops on cropland covered by the acreage re ports, not simply commodities covered by the
programmes.

• In addition, please provide all of the above information on a state-by-state basis.

You may wish to present your responses regarding acr eage for each covered commodity in a table as
follows:

TABLE
Programme:
Marketing year:
Category of Farm:

Covered commodities

 Upland
Cotton
Barley Corn Oats Rice Sorghum Wheat Soybeans* Other
Oilseeds*
Base
acres

Planted
acres

* Where applicable.

 The Panel considers it both necessary and appropria te to seek this information to undertake its
mandate to assist the DSB in discharging its responsibilities under the DSU and the covered
agreements. However, the Panel reserves its views as to the extent to which any methodology might
be appropriate to determine support provided to upland cotton in the circumstances of this case.

A refusal by the United States to provide the information as requested without an adequate
explanation may lead to adverse inferences being drawn.

 The Panel also wishes to pose the followi ng additional questions to the United States
(Nos. 259 – 275) and to Brazil (No. 276):

259. With respect to the Privacy Act of 1974, 5 U.S.C. 552a:

(a) Whose interests are protected under secti on 552a(b) in light of the definition of
"individual" in section 552a(a)(2)? Do all pa yment recipients, including corporations and
organizations, have Privacy Act rights? If not, is the United States prevented by its domestic
law from releasing such of the information requested on 12 January 2004 as relates to
payment recipients without Privacy Act rights? Please explain with references to case law.

(b) The Panel notes that data concerning the four relevant programmes, in particular,
payment amounts, identified by specific farms, is freely available on the internet. Please
explain why that data can be disclosed but the requested planted acreage data cannot. Do
individual recipients have Privacy Act rights w ith respect to their entrepreneurial activity?
Please explain with references to case law.

(c) Please provide any further available ev idence of the USDA's long-standing policy
that planted acreage information will not be released.

260. On 27 August 2003, in its response to Question No. 67 bis, the United States
indicated that "it does not maintain information on the amount of expenditures made under the
cited programmes to US upland cotton producers" . On 12 January 2004, the Panel requested
the United States to provide information "to pe rmit an assessment of the total expenditures of
PFC, MLA, CCP and direct payments by the US Federal Government to upland cotton
producers in the relevant marketing years". On 20 January 2004, the United States informed
the Panel that "the data already provided by the United States to Brazil and the Panel would
permit an assessment of total expenditures of decoupled payments to farms planting upland
cotton." Is the latest statement responsive to the Panel's request? If so, how can it be
reconciled with the first statement?

261. Please confirm that each record in the act ual planting database relates to a specific
farm (Filenames: rPFCplac and rDCPplac in E xhibits US-111 and US-112). For example, in
the data from rDCPplac:

First line:
Field9;Field16;Field22;Field28;Field34;Field40;Field46;Field52;Field58;Field64;Field70;Fiel
d76;Field82;Field88;Field94;Field100

Second line:
237.10;23059.80;5566.20;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00

Does the second line represent data on plantings by the same farm?

262. The Panel has noted the two CD-ROMs de livered by the US in the evening of
23 December 2003. They are marked "US-111" an d "US-112" respectively, but the contents
actually do not correspond to the indication. The Panel also takes note of the US letter dated
28 January 2004 and the CD-ROM delivered toge ther with it. For the record, please clarify
the correct CD-ROMs and provide corresponding de scriptions of their contents with exhibit
numbers.

 263. The Panel has noted that the United Stat es' response to Question No. 214 refers to
Exhibits US-117 and US-118. Are these the co rrect documents to which the United States
intended to refer in that response? If not, pl ease provide a copy of regulations regarding the

marketing loan programme and loan deficiency payments published at 58 Federal Register
15755, dated 24 March 1993.

 264. The Panel asks the United States to clarify certain aspects of Exhibit US-128:

 (a) Is the Panel correct in understanding th at -- as Brazil asserts in footnotes 290 and 291
of Brazil's 28 January 2004 comments on US responses to questions -- Exhibit US-128, all
data are presented on a cohort-specific basis? If so, please also present the information
originally requested by the Panel in another chart containing programme (as opposed to
cohort-specific) activity by fiscal year.

 (b) Does the US agree with the statement in paragraph 135 of Brazil's 28 January 2004
comments on US responses to questions that the difference between the $1,148 billion in the
chart at para. 165 of Brazil's 11 August answer s to questions and the $666 million amount in
Exhibit US-128 ($1.75 billion) closely corres ponds to the total "Claims rescheduled" figure
reported by the US in Exhibit US-128 (column F)?

 (c) Does the US agree that from the formul a in column G (that is: (Column (D) minus
(E) minus (F)), it follows that a rescheduled claim no longer constitutes an outstanding claim
at the moment the terms of the re-scheduling ar e agreed and that a rescheduling is treated as
100 per cent recovered, as Brazil states in f ootnote 292 of Brazil's 28 January 2004 comments
on US responses to questions?

 (d) Is the Panel correct in understanding that the amount of $888,984,792.04 in column F
in Exhibit US-128 under "ALL" for 1992 re presents the total continuing amount of
unrecovered claims for the 1992 cohort, and that the amount of 387,692,219.39 represents the
total continuing amount of unrecovered claims for the 1993 cohort, etc? Please indicate and
substantiate how much principa l and/or interest has actually been paid/recovered/rescheduled
annually 1992-2003 in respect of each of the am ounts shown in Columns D, E & F in the
table.

 265. In connection with the US response to Question No. 225, please also provide amounts
actually "written off" and "forgiven" annually for each post-1992 cohort, with annual details
of country and amount (principal/interest).

 266. What are the precise terms, conditions a nd duration of each rescheduling reflected in
column F in Exhibit US-128?

 267. Is the Panel correct in understanding th at "interest collected on reschedulings" in
Column M in Exhibit US-128 refers not to amounts that have been actually collected by the
CCC but rather to interest capitalized in conjunc tion with the rescheduling? If so, what are
the terms, conditions and duration of the arrangements pertaining to these amounts?

 268. Concerning Column N in Exhibit US-128, please elaborate upon "Interest earned
from US Treasury on uninvested funds". What is the source and authority for these funds and
for the interest thereon to be part of the CCC total revenues? What are the terms, conditions
and duration of the arrangements pertaining to these amounts?

 269. The Panel notes the table submitted by th e US in its answer to Question No. 224
(CCC Financing Account Payments of Interest on Borrowings from Treasury and Interest
Earned on Uninvested Funds). Is the Panel co rrect in understanding that the figures in this
table correspond to the "ALL" figures in Columns I and N of Exhibit US-128?

 270. With respect to Column I in Exhibit US-128, ("Interest paid on borrowing from US
Treasury") and Note 8, p. 25 of Exhibit US-129:

 (i) please provide the total annual amounts (interest bearing and non-interest
bearing) borrowed by the CCC from the US Treasury (annually since 1992), as well
as the terms, conditions, interest rate (w here applicable) and duration of such
borrowing. Please provide details of an y other amount borrowed by the CCC from
the US Treasury during this period that ma y not have formed part of the regular
annual borrowings.

 (ii) Please explain the nature of "CCC's permanent indefinite borrowing authority
from Treasury" referred to in Note 8, p. 25 of Exhibit US-129.

 (iii) What determines the level of CCC export credit guarantee borrowing
(interest-bearing and non-interest-bearing)? Is the interest-free borrowing up to the
amount of unreimbursed realized losses?

 (iv) Why are repayments applied to non-interest bearing notes first, as indicated
at Note 8, p. 25 of Exhibit US-129?

 271. Note 8, p. 25 of Exhibit US-129 states that "In fiscal year 2003, CCC was fully
reimbursed for its prior year net realized lo sses." Please indicate the amounts of prior year
net realized losses (annually, since 1992) for which the CCC has been fully reimbursed.

 272. With respect to the US response to Question No. 226, is the Panel correct in
understanding that the reflection of write-offs as part of the operating loss of the CCC which
in turn was replenished through the annual appr opriations process ended with the entry into
force of the FCRA in fiscal year 1992? If not, what amounts have been replenished through
this process annually since fiscal year 1992?

 273. With respect to the US response to Question No. 225, what criteria does the CCC
apply to "independently determine" that a debt is uncollectible? For post-1992 cohorts, what
are these uncollectible amounts (annually) and how, if at all, are such "uncollectible amounts"
shown in Exhibit US-128?

 274. The Panel notes the US statement in the US response to Question No. 81 that "All
rescheduled claims are currently performing " and that "all payments due up to this point
under [rescheduling] agreements have been r eceived". However, the Panel also notes
Exhibit US-129 (in particular, Note 5 on p. 22) and Brazil's reference thereto in Brazil's
28 January comments on the US response to Question No. 222. In this connection:

 (a) How does the US respond to Brazil's statement in Brazil's 28 January comments
that Exhibit US-129 confirms that rescheduli ng of export credit guarantee receivables cover
both principal and interest, thereby confirming th at not all of the rescheduled debt performs
and that additional interest charges were also rescheduled?

 (b) In Note 5 on p. 22 of Exhibit US-129, what is the definition of "non-performing"?
What is the meaning of "delinquent"? What is the current principal balance and amount of
interest of the three CCC export credit gua rantee programme "receivables" in a non-
performing status (individually and together , for GSM 102, GSM 103 and SCGP))? What is
the amount of interest on non-reporting "receivables"?

 (c) The Panel notes the US reference to th e "Paris Club" in US response to Question
No. 225. What is the P.L. 480 programme referred to in Note 5 on p. 22 of Exhibit US-129
(including the Paris Club debt reduction process a nd the HIPC Initiative) ? To what extent is
the P.L. 480 programme and Paris Club pro cess relevant to the export credit guarantee
programmes at issue in this dispute? Please identify and give the amounts of all CCC export
credit guarantee debt subject to the P.L. 480 debt reduction (or other similar) process since
1992.

 (d) Can the US explain the process referred to in the second column of Note 5 on p. 22
("CCC is awaiting an apportionment from the O ffice of Management and Budget before the
transaction can be completed. Until such time , however, there is a 100% subsidy allowance
established against the relevant debt as of September 30, 2003.") Please provide details of all
such "apportionments" relating to the three export credit guarantee programmes in fiscal years
1992-2003.

 275. Please provide evidence (or cite releva nt portions of the record) that the premium
rates for the export credit guarantee programmes are "reviewed annually" as stated in US
28 January comments on response to Question No. 223 (see also US 22 December response to
Question No. 107; Brazil's 28 January 2004 comments on responses to Question No. 223.).

 The Panel wishes to pose the following additional question to Brazil:

 276. The Panel notes the parties' respon ses and comments relating to Question No. 252
concerning the time period within which any pr ohibited measure must be withdrawn within
the meaning of Article 4.7 of the SCM Agreement . Please supplement your original
response, taking into account the particular nature of each alleged prohibited subsidy
measure (i.e. "Step 2" paym ents under Section 1207(a) of the 2002 FSRI Act, export credit
guarantee programmes and the ETI Act) and the functioning of the US legal and regulatory
system in respect of these measures.

ANNEX L-1.23

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

16 February 2004

1. The Panel is in receipt of the letter from th e U.S. dated 11 February, the response from Brazil
dated 13 February and another US letter dated 16 February.

2. On page 2 of the United States letter of 11 Fe bruary, with respect to item (b) of the Panel's
supplementary request for information, the United States asks the Panel to specify which commodities
are "covered commodities". We would like to clar ify that "covered commodities" and "commodities
covered", as used in the bullet points and sub-bulle ts, refer to wheat, corn, grain sorghum, barley,
oats, upland cotton, rice, soybeans, "other oilseeds" as defined in Section 1001(9) of the FSRI Act of
2002, and peanuts, except that soybeans do not apply to PFC payments and "other oilseeds" and
peanuts do not apply to PFC or MLA payments.

3. The Panel also confirms that the additiona l information sought for marketing year 2002 "with
respect to all crops on cropland covered by the acr eage reports" refers to the reports filed under
Section 1105(c) of the FSRI Act of 2002. The re levant portions of the "above questions" are those
that ask for planted acreage information for each Ca tegory of farms. All crops other than "covered
commodities" as defined in Section 1001(4) of the FSRI Act of 2002 and peanuts may be aggregated
as "other crops".

4. In relation to the third point the US raises in its letter dated 11 February, the Panel informs the
parties as follows:

(a) Without prejudice to whether any further comme nts are necessary, we would consider the US
request for another opportunity to comment if Brazil submits any such comments on the US
submission entitled "Comments of the United States of America on the Comments of Brazil
to US data Submitted on 18 and 19 December 2003" (submitted 11 February).

(b) The US would be granted until Tuesday 3 March, at the latest, to submit all remaining data
that was requested by the Panel in its communication dated 3 February.

(c) The issuance of the descriptive part would be changed to Friday 5 March.

(d) The remainder of the Panel's schedul e remains unchanged for the time being.

5. The Panel notes that the data submitted by th e United States, as described in Exhibit US-145,
does not include data on MLA and CCP payments. The Panel asks the United States to address these
payments and include this information in its response to the supplementary request for information.

6. The Panel also notes that the US response to Panel Question No. 263 refers to Exhibit US-
263. Could the United States please confirm that this should refer to Exhibit US-146.

7. The Panel further notes Brazil's request for an opportunity to comment after the United States
has submitted the data referred to in paragraph 4(b) above. The Panel will consider this request after
it has had the opportunity to review data submitted by the United States.

ANNEX L-1.24

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

20 February 2004

1. The Panel refers to its communication dated 16 February. Item 4 (a) of this communication
deals with the request made by the United States (i n its letter dated 11 February) that it be provided
another opportunity to comment on a certain submissi on from Brazil. The Panel has informed parties
in the same 4 (a) that it would consider this requ est if Brazil submits any such comments. The Panel
has received on 18 February a submission entitled "Brazil's Comments on United States 11 February
Comments on Brazil's 28 January 'Comments and Requests Regarding Data Provided by the
United States on 18/19 December 2003 and the US Refusal to Provide Non-scrambled Data on
20 January 2004'". The Panel understands that this submission corresponds to what the United States
was requesting to be given another opportunity to comment on. The Panel would now allow the
United States to submit, if it so wishes, comments on this specific submission from Brazil by
Wednesday 25 February . The Panel informs parties that it doe s not see, at this time, the need to
have further opportunities to comment on this submission (if any) from the United States.

2. The Panel also takes note of Brazil's ob servation in paragraph 33 of its 18 February
"Comments on US 11 February 2004 Answers to Additional Questions from the Panel Following the
Second Meeting of the Panel with the Parties" that "...the Panel did not respond to Brazil's request
that it deny the United States' efforts to decide at what pace it wishes to offe r responses to the Panel's
questions". The Panel also recalls the Unite d States' original statement in connection
with Question 264(b) that it "expects to be able to provide an answer within the same time period as
its response to the Panel's supplemental request for info rmation." In this connection, we wish to draw
the parties' attention to our statement in item 4(b) of the 16 February communication, and to clarify
that that statement also pertains to the Un ited States response to Question 264(b). Thus, the
United States has until 3 March , at the latest, to submit its response. We further note that Brazil
states in the same paragraph 33 that it "reserves the right to comment" on the United States response
to Question 264(b). In line with what we men tioned in paragraph 7 of our communication dated
16 February, we would decide whether it is appropriate to give Brazil the opportunity, after we have
had the opportunity to review the response from the United States.

ANNEX L-1.25

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

24 February 2004

The Panel is in receipt of the letter from the United States dated 23 February 2004.
After carefully considering the views of the Un ited States, we now change the date by which
the United States is expected to submit its co mment from the date originally designated as
25 February in our communication dated 20 February, to 3 March 2004.
All other statements in our communication dated 20 February remain unchanged.

ANNEX L-1.26

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

4 March 2003

The Panel is in receipt of the submissions fro m the United States dated 3 March. The Panel
reminds parties of our communications dated 16, 20 and 24 February 2004, especially in relation to
our intention to consider whether or not to allow Brazil to comment on certain US submissions. After
carefully examining yesterday's submission from the United States, the Panel informs parties of the
following amendment to the current timetable.
1. Brazil is granted until 10 March 2004 to submit comments, if any, on (a) the data supplied by
the United States, dated 3 March, in the form of a CD-ROM (i.e. 8 data files therein) and (b) the
submission entitled "Answers of the United St ates of America to Questions 264(b) Dated
3 February 2004, from the Panel to the Parties following the Second Panel Meeting". The Panel does
not see the need to grant Brazil the opportunity to comment on any other submission from the United
States.

2. The United States is granted until 15 March 2004 to submit comments, if any, on the
submission from Brazil to be received by 10 March 2004.

3. The descriptive part will be issued on 16 March 2004.

4. Comments on the descriptive part is to be received by 30 March 2004.

5. The rest of the timetable remains unchanged for now.

ANNEX L-1.27

COMMUNICATION TO BRAZIL
AND THE UNITED STATES

7 April 2004

The Panel informs the parties of the following change in the timetable for this dispute. As
indicated, the Panel now intends to issue the interim report to the parties on Monday 26 April 2004.

Issuance of the interim report, including the findings and
conclusions, to the parties:
 26 April 2004
Deadline for parties to request review of part(s) of report: 10 May 2004
Interim review meeting with the parties, if requested. If interim
review meeting not requested, the deadline for comments on
each others' comment.
 3 June 2004
(if a review meeting is to
be held, 4 June as well
as 3 June, as necessary.)
Issuance of final report to the parties: 18 June 2004
Circulation of the final report to Members: [after translation]

ANNEX L-2.1

COMMUNICATION TO THIRD PARTIES

28 May 2003

 Your delegation has reserved its rights to participate as a third party in the Panel United States
- Subsidies on Upland Cotton (DS267) - Complaint by Brazil - established by the DSB on
18 March 2003. The Panel has now started its work.

 Attached you will find the timetable and working procedures adopted by the Panel for this
dispute in accordance with Article 12.1 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU").

 As indicated in the attached timetable, prior to the submission by the parties of their first
written submissions in these proceedings, the Panel has requested the parties to address, in their initial
briefs to the Panel (to be submitted on 5 June 2003
), the following:

• whether Article 13 of the Agreement on Agriculture precludes the Panel from considering
Brazil's claims under the Agreement on Subsidies and Countervailing Measures in these
proceedings in the absence of a prior conclusi on by the Panel that certain conditions of
Article 13 remain unfulfilled. In particular, the Panel invites the parties to explain their
interpretation of the words "exempt from actions" as used in Article 13 of the Agreement on
Agriculture, as well as bringing to the Panel's attenti on any other relevant provisions of the
covered agreements and any othe r relevant considerations whic h the parties consider should
guide the Panel's consideration of this issue. For greater clarity, the Panel invites the parties,
during this initial stage of the proceedings, to fo cus on matters of legal interpretation, rather
than upon the submission of any factual ev idence that might be associated with the
substantive elements of Article 13.

 As also indicated in the attached timetable, the Panel will invite the parties to submit any
written comments on each other's comments on this issue (i.e. on 13 June 2003
). The Panel intends to
rule on these issues on 20 June 2003, prior to the parties' submission of their first written submissions.

 We have invited the parties to serve also on the third parties their initial briefs and any
responding comments. The Panel also invites third parties to submit any written comments they
might have concerning the initial phase of these proceedings. The deadline for any initial third
party comments on the specific issue identified above is 10 June 2003

 Moreover, as also indicated in the attached timetable, the Panel invites your delegation to
present its views at a meeting with the parties to the dispute and other third parties, which is scheduled
for 24 July 2003. The exact time and venue will be communicated to you in due time.

 The Panel would appreciate it if your delega tion could provide the Panel with your written
submission by 5.30 p.m. on 15 July 2003. If you so wish, this written statement may take the place of
an oral presentation to the Panel. The Panel woul d appreciate the submission being kept as short as
possible. I would appreciate it if you would advise the Panel before 1 July 2003 through me as
Secretary to the Panel (telephone 022/739 6419) whether your delegation w ill be represented at the
meeting and whether your delegation will require interpretation services into and out of English.

[Attachment omitted]

ANNEX L-2.2

COMMUNICATION TO THIRD PARTIES

25 July 2003

 Please find attached a communication from the Panel on the following issues:

1. The Panel's view on the preliminar y ruling requested by the United States.

2. Panel's questions to third parties.

 The Panel's questions are intended to facilitate the work of the Panel, and do not in any way
prejudge the Panel's findings on the matter before it. Nor does the fact that the Panel has placed these
questions under certain headings prejudge the Panel's findings on the matter before it. Each third party
is free to respond to or comment on questions posed to the other third parties.

 Please be reminded that you are requested to submit answers by the close of business of
4 August 2003. Subsequently, third parties can submit comments to other's responses by the close of
business 22 August.

[1
st attachment omitted]

Questions from the Panel to the third parties –
First session of the first substantive Panel meeting

ARTICLE 13 OF THE AGREEMENT ON AGRICULTURE

1. Australia has argued that Article 13 of the Agreement on Agriculture is an affirmative
defence. How do you reconcile this with your view that the conditions in Article 13 are a
"prerequisite" to the availability of a right or privilege? Australia Would other third parties have any
comments on Australia's assertion? 3RD parties, in particular Argentina, Benin, China,
Chinese Taipei

ARTICLE 13(B) OF THE AGREEMENT ON AGRICULTURE: DOMESTIC SUPPORT MEASURES

2. Please explain the difference, if any, between the meaning of "defined" and the meaning of
"fixed" in the phrase "a defined and fixed base pe riod" in paragraph 6(a) of Annex 2 of the Agreement
on Agriculture . 3rd parties, in particular Australia, Argentina, Canada, EC, NZ

3. Please explain the meaning of "a" in "a define d and fixed base period" in paragraph 6(a) of
Annex 2 of the Agreement on Agriculture , the meaning of "the" in "the base period" in
paragraphs 6(b), (c) and (d), and the differe nce between these and the phrase "based on the years
1986-88" in Annex 3. 3rd parties, in particular Australia, Argentina, Canada, EC, NZ

4. How often can a Member define and fix a base period in accordance with paragraph 6 of
Annex 2 of the Agreement on Agriculture? 3
rd parties, in particular Australia, Argentina, Canada,
China, EC, NZ

5. Do you agree that a payment penalty based on crops produced is "related to type of
production"? EC

6. Please explain the meaning of the word "criteria" in Article 6.1 and 7.1. What effect, if any,
does the use of the word "Accordingly" in paragraph 1 of Annex 2 of the Agreement on Agriculture
have on the meaning of the preceding sentence? 3rd parties, in particular Australia, Argentina,
Canada, EC, NZ

7. Please explain the meaning of the words "the fundamental requirement" as used in
paragraph 1 of Annex 2 of the Agreement on Agriculture . 3
rd parties, in particular Australia,
Argentina, Canada, EC, NZ

8. In your oral statement, you emphasize the u se of the word "criteria" in other parts of the
Agreement on Agriculture , as distinct from the reference to "fundamental requirement" in the first
sentence of paragraph 1 of Annex 2. Is it the case that sub-paragraphs (a) and (b) of paragraph 1 of
Annex 2 are also "criteria"? EC

9. If the first sentence of paragraph 1 of Annex 2 is a stand-alone obligation, does this allow
effects-based claims of non-compliance with Annex 2? If so, how does this affect the purpose of
Article 13(b)? 3
rd parties , in particular Australia, Argentina, Canada, EC, NZ

10. If the first sentence of paragraph 1 of Annex 2 is not a stand-alone obligation, then must new,
non- or minimally trade-distorting measures that do not conform to the criteria listed in Annex 2 be
classified as non-Green Box? 3
rd parties, in particular Australia, Argentina, Canada, EC, NZ

11. If the first sentence of paragraph 1 of Anne x 2 expresses a general principle which informs
the interpretation of the criteria in Annex 2, pl ease explain how this affects the assessment of the
direct payments programme's complian ce with paragraph 6 of Annex 2. 3
rd parties, in particular,
Australia, Argentina, Canada, EC, NZ

12. Where does Article 13(b) require a year-on-year comparison? 3
RD parties, in particular
Australia, Argentina, Canada, China, EC, NZ

13. Does a failure by a Member to comply in a given year with either the chapeau of
Article 13(b) or the proviso in subparagraph (ii) of Article 13(b) impact its entitlement to benefit in an
earlier or a later year from the exemption from action provided by Article 13(b)? 3RD parties, in
particular Australia, Argentina, Canada, China, EC, NZ

14. Does a failure of a Member to comply with Article 13(b) in respect of a specific commodity
impact its entitlement to benefit in respect of other agricultural products from the exemption from
action provided by Article 13(b)? 3RD parties, in particular Australia, Argentina, Canada, China,
EC, NZ

15. Is there any basis on which counter-cyclical pa yments could be considered product-specific?
3RD parties, in particular Australia, Argentina, Canada, China, EC, NZ

16. If the word "specific" were deleted from Artic le 13(b)(ii), would this change the meaning of
the subparagraph? 3
RD parties, in particular Australia, Argentina, Benin Canada, China, EC, NZ

17. What is the relevance, if any, of the concept of "specificity" in Article 2 of the SCM
Agreement and references to "a product" or "subsid ized product" in certain provisions of the SCM
Agreement to the meaning of "support to a specific commodity" in Article 13(b)(ii) Agreement on
Agriculture? 3
RD parties, in particular Australia, Argentina, Canada, China, EC, NZ

18. Benin's oral statement considers the phrase "support to a specific commodity" in
Article 13(b)(ii) of the Agreement on Agriculture . How does Benin believe that phrase is best
interpreted. Please substantiate your response, commenting on other submissions by parties and third
parties as you believe appropriate. Benin

19. Where does Article 13(b)(ii) require a year-on-year comparison? 3
rd parties, in particular
Australia, Argentina, Canada, EC, NZ

20. Does Article 13(b)(ii) require a comparison of support granted with support decided? How
could such a comparison be made?

21. Please comment on Brazil's assertion that the terms "grant" and "decided" in Article 13(b)(ii)
have broadly the same meaning. If so, why did the drafters not use the same term? 3
rd parties, in
particular, Australia, Argentina, Canada, China, EC, NZ

22. What is the meaning of "support" in Agreement on Agriculture 13(b)(ii) ? Why would it be
used differently from Annex 3, where it refers to total outlays? 3
rd parties, in particular, Australia,
Argentina, Canada, China, EC, NZ

23. Should support be compared under Article 13(b )(ii) in terms of unit of production or total
volume of support or both? 3
rd parties, in particular, Australia, Argentina, Canada, China, EC,
NZ

24. Please provide any written drafting history wh ich could shed light on why the proviso was
added to what is now Article 13(b)(ii) of the Agreement on Agriculture and, in particular, why the
words "grant" and "decided" were used. EC

25. Please comment on an interpretation of the word s "decided during" in Article 13(b)(ii) that
would read them as synonymous with the words "authorized during". 3
rd parties, in particular
Australia, Argentina, Canada, China, EC, NZ

26. Under Article 13(b)(ii), a comparison is require d between support at different times. One of
the issues which is contested between the parties is whether the only later period that the Panel can
consider is the present one (i.e. the period underway at the time of the request for establishment of the
Panel). This argument is based on the present tense of the words "do not grant" in the English text.
The Panel asks whether there is any difference in th e verb tense as used in the Spanish-language text,
or any other difference which might aid the Panel in interpreting these words? Argentina, EC,
Paraguay, Venezuela

27. If the 1992 "decision" led to or was the funding source for the money provided in 1992 and
later years, is it the full amount of all that fundi ng that constitutes the "support" decided in 1992? If
the answer to this question is that it is the fu ll amount of all the support provided pursuant to the
"decision" that must be taken into account, must th is be compared with the total amount of support
that will or might flow from the decision made in the more recent period for the purposes of the
comparison required under Article 13(b)(ii)? If a Me mber did not make a "decision" (however that
may be interpreted) in 1992 about "support", is it the case that the Member has a zero base for the
purposes of the comparison required under Article 13(b)(ii)? EC

28. In paragraph 13 of Australia's oral statement, you state that a "question" is: "could conditions
of price competition for the purposes of a non-violation or impairment claim be assessed solely on the
basis of budgetary outlay figures, as argued by Brazil, or on the basis of a rate of payment, as argued
by the United States? In Australia's view, both factors put forward by Brazil and the United States
would properly form a part of that assessment, but not the whole." Could you please clarify this
statement (indicating other elements which would co mplete the "whole" and e xplain its relevance for
the purposes of our consideration of Article 13 of the Agreement on Agriculture? Australia, EC

EXPORT CREDIT GUARANTEE PROGRAMMES

29. (a) Is an export credit guarantee a financial c ontribution in the form of a "potential direct
transfer of funds or liabilities (e.g. lo an guarantee)" within the meaning of
Article 1.1(a)(1)(i) of the SCM Agreement ? Why or why not? 3rd parties, in
particular, Argentina, Canada, EC, NZ

 (b) How, if at all, would this be relevant to the claims of Brazil? 3rd parties, in
particular, Argentina, Canada, EC, NZ

30. The Panel could arguably take the view that Articles 1 and 3 of the SCM Agreement were
relevant in assessing the WTO-consistency of Unit ed States export credit guarantees. The Panel
would therefore appreciate third party views on this situation, including with respect to the viability of
an a contrario interpretation of item (j) of the Illustrativ e List (as addressed in paragraphs 180-183 of
the United States' first written submission). 3
rd parties, in particular, Argentina, Canada, EC, NZ

31. If the Panel decides to refer to provisions of the SCM Agreement for contextual guidance in
the interpretation of the terms in Article 10 Agreement on Agriculture, should the Panel refer to item
(j) or Articles 1 and 3 of the SCM Agreement or both? . 3
rd parties, in particular, Argentina,
Canada, EC, NZ

32. The Panel's attention has been drawn to Article 14(c) of the SCM Agreement (see third party
submission of Canada) and to the panel report in DS 222 Canada- Export Credits and Loan
Guarantees. How and to what extent are Article 14(c) of the SCM Agreement, and the cited panel
report, relevant to the issue of whether or not the United States export credit guarantee programmes
confer a "benefit"? What would the appropriate market benchmark be to use for any comparison?
Please cite any other relevant material. . 3
rd parties, in particular, Argentina, Canada, EC, NZ

33. What is the relevance (if any) of Brazil's statement that : "...export credit guarantees for
exports of agricultural exports [sic] are not availa ble on the marketplace by commercial lenders." .
3
rd parties, in particular, Argentina, Canada, EC, NZ

34. Comment on the United States' view of the m eaning of "long term operating costs and losses"
in item (j) of the Illustrative List of Export Subsidies in Annex I of the SCM Agreement as meaning
"claims paid" under the export credit guarantee progr ammes. Does the Unite d States' interpretation
give meaning to both "costs" and "losses"? Do claims paid represent "losses"? 3rd parties, in
particular, Argentina, Canada, EC, NZ

35. Did the drafters of the Agreement on Agriculture include export credit guarantees in
Article 9.1 of the Agreement on Agriculture? Why or why not? 3rd parties, in particular, Argentina,
Canada, EC, NZ

36. Please explain any possible significance the following statements may have in respect of
Brazil's claims about GSM102 and 103 (7 CFR 1493.10(a)(2), Exhibit BRA-38) 3
rd parties, in
particular, Argentina, Canada, EC, NZ

 (a) "The programmes operate in cases where credit is necessary to increase or maintain
US exports to a foreign market and wh ere US financial institutions would be
unwilling to provide financing without CCC's guarantee. (7 CFR 1493.10(a)(2)
Exhibit BRA-38)

 (b) "The programmes are operated in a manne r intended not to interfere with markets for
cash sales. The programmes are targeted toward those countries where the guarantee
is necessary to secure financing of the e xports but which have sufficient financial
strength so that foreign exchange will be av ailable for scheduled payments." (7 CFR
1493.10(a)(2) Exhibit BRA-38)

 (c) "In providing this credit guarantee facility, CCC seeks to expand market
opportunities for US agricultural exporters and assist long-term market development
for US agricultural commodities." (7 CFR 1493.10(a)(2) Exhibit BRA-38)

37. The United States seems to argue that, at present, by virtue of Article 10.2 of the Agreement
on Agriculture, there are no disciplines on agricultural export credit guarantees under the Agreement
on Agriculture (or the SCM Agreement).

 (a) Comment on the following proposition: a WTO Member may therefore extend
agricultural export credit guarantees wit hout charging a premium, and for an
indefinite period, in addition to any ot her terms and conditions it may wish? How
would this reconcile with the title of Article 10 of the Agreement on Agriculture
("Prevention of Circumvention on Export Subsidy Commitments"), and with other
commitments contained in the Agreement on Agriculture ? Please cite any relevant
material, including any past WTO dispute settlement cases. 3
rd parties, in
particular, Argentina, Canada, EC, NZ

 (b) If, as the United States argues, ther e are no disciplines on export credit guarantees in
the Agreement on Agriculture , how could export credit guarantees "conform fully to
the provisions of Part V" of the Agreement on Agriculture within the meaning of
Article 13 (how can you assess "conformity" or non-conformity with non- existent
disciplines)? 3rd parties, in particular, Argentina, Canada, EC, NZ

STEP 2 PAYMENTS

38. Please comment on the statement in note 119 of the United States' first written submission
that "...to the extent a consumer that had intended to export instead opens the bale, then that consumer
could still obtain the Step 2 payment upon submission of the requisite documentation". The Panel
notes that Step 2 payments all involve upland cotton produced in the United States. What are the two
distinct factual situations that Step 2 paym ents involve? Other than the panel report in Canada-Dairy
and the findings of the Appellate Body in US-FSC (21.5)
1, do any other dispute settlement reports
offer guidance on this issue? For example, how, if at all is the Appellate Body's report in Canada-
Aircraft relevant here?2 . 3rd parties, in particular, Australia, Argentina, NZ, Paraguay

39. Please comment on the United States asserti ons at paragraph 129 of its first written
submission, that "[t]he programme is indifferent to whether recipients of the benefit of this
programme are exporters or parties that open ba les for the processing of manufacturing raw cotton
into cotton products in the United States." . 3
rd parties, in particular, Australia, Argentina, NZ,
Paraguay

40. With respect to paragraph 32 of the oral stat ement of the EC, are subsidies contingent on the
use of domestic goods consistent with the AoA? Does the phrase "provide support in favour of
domestic producers" refer to, and/or permit such subsid ies? What is the meaning and relevance of this
(if any) to Brazil's claims under Article 3 of the SCM Agreement and Article III:4 of the GATT 1994..
3rd parties, in particular, Australia, Argentina, EC, NZ, Paraguay

1 "We recall that the ETI measure gr ants a tax exemption in two differ ent sets of circumstances: (a)
where property is produced within the United States and held for use outside the United States; and (b) where
property is produced outside the United States and held for use outside the United States. Our conclusion that
the ETI measure grants subsidies that are export contingent in the first set of circumstances is not affected by the
fact that the subsidy can also be obtained in the second set of circumstances. The fact that the subsidies granted
in the second set of circumstances might not be export contingent does not dissolve the export contingency
arising in the first set of circumstances. 1 Conversely, the export contingency arising in these circumstances has
no bearing on whether there is an export contingent subsidy in the second set of circumstances. Where a
United States taxpayer is simultaneously producing property within and outside the United States, for direct use
outside the United States, subsidies may be granted under the ETI measure in respect of both sets of property.
The subsidy granted with respect to th e property produced within the United St ates, and exported from there, is
export contingent within the mean ing of Article 3.1(a) of the SCM Agreement , irrespective of whether the
subsidy given in respect of property produced outside the United States is also export contingent."
3. 2 There, the Appellate Body stated that,
"the fact that some of TPC's contributions, in some industry sectors, are not
contingent upon export performance, does not necessarily mean that the
same is true for all of TPC's contributions. It is enough to show that one or
some of TPC's contributions do cons titute subsidies "contingent ... in
fact … upon export performance".
2

ETI ACT

41. Concerning its claims on the ETI Act, Brazil relies on the US – FSC case. However, it
appears that the United States did not raise the issu e of the Peace Clause in that case, nor did the US
appear to invoke Article 6 of the Agreement on Agriculture . If the Panel's understanding is correct,
how, if at all, are these differences relevant here? Argentina, China, EC, NZ

42. How do you view the reference in paragraph 43 of the EC's third party oral statement with
respect to the relevance of Article 17.14 of the DSU, and, in particular, the phrase "a final resolution
to that dispute" (emphasis added)? Please explain the use, and relevance (if any) of the term
"disputes" in Articles 9.3 and 12 and Appendix 3 of the DSU, and please cite any other provisions you
consider relevant. Argentina, China, EC, NZ

ANNEX L-2.3

COMMUNICATION TO THIRD PARTIES

30 July 2003

 Taking into account a 29 July 2003 communication received from the United States, and
Brazil's 30 July response, the Panel has decided to extend the deadline for the submission of the
parties' and third parties' responses to questions from Monday 4 August to Monday 11 August
(17h30 (Geneva time)).

 The Panel has also decided upon the follow ing additional changes to its schedule:

 Panel's views on certain issues: 5 September 2003
 Further submission of Brazil: 9 September 2003
 Further submission of the US: 23 September 2003
 Further submission of the third parties (as necessary): 29 September 2003

 For the time being, all other dates remain unchanged. This includes the deadline for the
submission of the parties' and third parties' comment s on responses. It also includes the dates for the
resumption of the first substantive meeting and the third party session (as necessary) and the second
substantive meeting (i.e. 7-9 October).

ANNEX L-2.4

COMMUNICATION TO THIRD PARTIES

13 October 2003

 Please find attached the Panel's questions to third parties following the resumed first session
of the first substantive Panel meeting.

 The Panel's questions are intended to facilitate the work of the Panel, and do not in any way
prejudge the Panel's findings on the matter before it. Nor does the fact that the Panel has placed these
questions under certain headings prejudge the Panel' s findings on the matter before it. Each third
party is free to respond to or comment on questions posed to the other third parties.

 You are requested to submit answers by close of business on 27 October 2003. All
provisions of the existing working procedures, including the time specified in paragraph 17(b) of the
Panel's existing working procedures for service of submissions by third parties, are confirmed.

Questions from the Panel to the third parties –
resumed first session of the first substantive Panel meeting

A. QUESTIONS TO INDIVIDUAL THIRD PARTIES

43. Please elaborate, citing figures, on your statement that polyester fibre prices actually follow
cotton prices. Argentina

44. Please explain how Ar ticles 5 and 6 of the SCM Agreement and Article XVI of the GATT
1994 would permit or require the Panel to take account of any effects of the subsidies in question on
the interests of Members other than the complaining party. Benin and Chad

45. In relation to the term "same market" in Article 6.3(c) of the SCM Agreement, the EC states in
paragraph 10 of its oral statement that a "world market" cannot exist if there are significant trade
barriers between Members. On the other hand, the Pa nel notes that in relation to cotton, the EC takes
the position in paragraph 14 of its further submission that the term "same market" in Article 6.3(c)
should be read to include the domestic market of the subsidising Member. In light of the fact that
many domestic cotton markets, possibly including that of China, have significant trade barriers, how
can the EC reconcile these two positions? EC

46. Should the Panel prefer a concept of allocation of the benefit of subsidies to later years, to a
concept of fully expensing subsidies to the year in which the benefit was provided? EC

47. In the EC further submission, it is said that significantly different conditions of competition in
regional markets may prevent the Panel from arriving at the conclusion that there is a world market.
Is the payment of a subsidy a “condition of compe tition” and, if so, how should that impact upon the
Panel’s analysis? EC

48. In the further submission of India, it is stated that “there is “no obligation under the SCM
Agreement to demonstrate serious prejudice separately after establishing that one of the effects of a
subsidy listed under Article 6.3 applies, as the effects listed in Article 6.3 themselves equate to serious
prejudice”. How does this view relate to Article 6.3(d), which appears to contain no element of
degree? India

B. QUESTIONS TO ALL THIRD PARTIES

49. What is the meaning and effect of th e introductory phrase of Article 3 of the SCM Agreement
("Except as provided in the Agreement on Agriculture...")? All third parties

50. According to its revised timetable, the Panel w ill issue its report to the parties after the end of
the 2003 calendar year. Does this have any impact on “exempt[ion] from actions” under
Article 13(b)(ii) and 13(c)(ii) of the Agreement on Agriculture? All third parties

51. How should the concept of specificity – and, in particular, the concept of specificity to "an
enterprise or industry or group of enterprises or industries" -- in Article 2 of the SCM Agreement
apply to subsidies in respect of agricultural commodities? Please answer the following questions,
citing the principles in Article 2 of the SCM Agreement: All third parties

 (a) is a subsidy in respect of all agricultural, but not other, products specific?

 (b) is a subsidy in respect of all agricultu ral crops (i.e. but not to other agricultural
commodities, such as livestock) specific?

 (c) is a subsidy in respect of certain identified agricultural products specific?

 (d) is a subsidy in respect of upland cotton, but not other products, specific?

 (e) is a subsidy in respect of a certain pr oportion of the value of total US commodities (or
total US agricultural commodities) specific?

 (f) is a subsidy in respect of a certain proportion of total US farmland specific?

52. The Panel notes that different remedies are available in respect of prohibited and actionable
subsidies under Article 4.7 and 7.8 of the SCM Agreement . If the Panel were to conclude that a
subsidy was prohibited and were to make a recommendation under Article 4.7 of the SCM Agreement
to withdraw the subsidy without delay, can the Panel:

 (a) also conclude that the same subsidy had resulted in adverse effects to the interests of
another Member? If so, what would be the va lue of such a conclusion in terms of the
settlement of the matter before the Panel? All third parties

 (b) take into account the effects of the in teraction of those prohibited subsidies with
other, allegedly, actionable subsidies? If so, how is this relevant to the issue of
causation under Article 5 of the SCM Agreement? All third parties

53. Would a finding of serious prejudice under Article 5(c) of the SCM Agreement be
determinative for a finding under Article XVI:1 of the GATT 1994? Why or why not? What, if any,
is the role of footnote 13 of the SCM Agreement in this context? All third parties

54. Are US cotton producers able to cover the fi xed and variable costs without subsidies? Please
provide substantiating evidence. Of what relevan ce is this, if any, to Brazil's actionable subsidy
claims ? All third parties

55. In light of the fact that certain third parties have provided submissions about the price effect
of claimed US subsidies, which Me mber or Members is, or are, the “other party” under Article 6.3(c)
(“another Member”) for the purposes of these proceedings? All third parties

56. Please respond to the following questions c oncerning the relationship between Article
XVI:3 of the GATT 1994, the disciplines on export subsidies and domestic support in the Agreement
on Agriculture and the disciplines on prohibited export subsidies and actionable subsidies in
Articles 3, 5(c) and 6.3(d) of the SCM Agreement. All third parties

 (a) Are agricultural domestic support progra mmes challengeable under Article XVI:3 of
the GATT 1994? How, if at all, is the title of Section B of Article XVI ("Additional
provisions on export subsidies " (emphasis added)) relevant? How, if at all, are
Articles 13 and 21.1, or any other provisions, of the Agreement on Agriculture,
relevant?

 (b) Are the requirements of Article XVI:3 of the GATT 1994 reflected in, developed by
or subsumed by the requirements in Article 6.3(d) of the SCM Agreement, or in any
other provisions of the covered agreements ? Of what relevance, if any, is the
Appellate Body Report in US-FSC, para. 117
1 here?

 (c) Of what relevance, if any, is the fact th at the definition of "subsidy" in Article 1 of the
SCM Agreement and the prohibition on subsidies contingent upon export in

 1 WT/DS108/AB/R, para 117:
"… the provisions of the SCM Agreement do not provide explicit assistance
as to the relationship between the export subsidy provisions of the
 SCM Agreement and Article XVI:4 of the GATT 1994. In the absence of
any such specific textual guidance, we must determine the relationship
between Articles 1.1(a)(1) and 3.1(a) of the SCM Agreement and
Article XVI:4 of the GATT 1994 on the basis of the texts of the relevant
provisions as a whole. It is clear from even a cursory examination of
Article XVI:4 of the GATT 1994 that it differs very substantially from the
subsidy provisions of the SCM Agreement, and, in particular, from the
export subsidy provisions of both the SCM Agreement and the Agreement on
Agriculture. First of all, the SCM Agreement contains an express definition
of the term "subsidy" which is not contained in Article XVI:4. In fact, as we
have observed previously, the SCM Agreement contains a broad package of
new export subsidy disciplines that "go well beyond merely applying and
interpreting Articles VI, XVI and XXIII of the GATT 1947". Next,
Article XVI:4 prohibits export subsidies only when they result in the export
sale of a product at a price lower than the "comparable price charged for the
like product to buyers in the domes tic market." In contrast, the
 SCM Agreement establishes a much broader prohibition against any subsidy
which is "contingent upon export performance". To say the least, the rule
contained in Article 3.1(a) of the SCM Agreement that all subsidies which
are "contingent upon export performance" are prohibited is significantly
different from a rule that prohibits only those subsidies which result in a
lower price for the exporte d product than the comp arable price for that
product when sold in the domestic market. Thus, whether or not a measure
is an export subsidy under Article XVI:4 of the GATT 1947 provides no
guidance in determining whether that measure is a prohibited export subsidy
under Article 3.1(a) of the SCM Agreement . Also, and significantly,
Article XVI:4 of the GATT 1994 does not apply to "primary products",
which include agricultural products. Unquestionably, the explicit export
subsidy disciplines, relating to agricultural products, contained in Articles 3,
8, 9 and 10 of the Agreement on Agriculture must clearly take precedence
over the exemption of primary products from export subsidy disciplines in
Article XVI:4 of the GATT 1994."

Article 3.1(a) were introduced in the Uruguay Round, but did not exist at the time that
the GATT 1947 was negotiated?