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TWN Info Service on WTO and Trade Issues (Sept09/03)
3 September 2009
Third World Network

Brazil can retaliate to tune of $294.7 million against US, says WTO
Published in SUNS #6764 dated 1 September 2009

Geneva, 31 Aug (Kanaga Raja) -- The World Trade Organization (WTO) on Monday issued two separate reports concerning arbitration proceedings in the US-Brazil cotton dispute, in which the Arbitrator ruled that Brazil may request authorization from the Dispute Settlement Body (DSB) to suspend concessions or other obligations totalling $294.7 million annually.

The authorization is in relation to the GSM 102 payments, and marketing loan and counter-cyclical payments provided by the United States to its cotton farmers.

In the first report (WT/DS267/ARB/1), the Arbitrator determined that the annual level of "appropriate countermeasures" in relation to the GSM 102 payments for Fiscal Year 2006 amounts to $147.4 million.

The Arbitrator also determined that Brazil has not followed the principles and procedures of Article 22.3 of the DSU in determining that it is not practicable or effective to suspend concessions or other obligations in trade in goods and that, at current levels, it could not have plausibly determined that it is not practicable or effective to suspend concessions or other obligations in trade in all goods under the Agreements contained in Annex 1A of the WTO Agreement.

The Arbitrator also found, however, that, in the event that the level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold, as identified in paragraph 5.201 (of the report), updated for the same year in a manner described in paragraphs 5.231-5.232 to account for the change in Brazil's total imports from the United States, then, it could be reasonably concluded that it is not practicable or effective for Brazil to suspend concessions or other obligations on trade in goods alone.

(In paragraph 5.201, the Arbitrator recalled, however, that the level of countermeasures that it has determined to be permissible in these proceedings is variable. It has based its determinations above on the level of countermeasures as calculated on the basis of FY 2006 and on the basis of Brazil's imports of consumer goods in the year 2007. Given the volume and composition of Brazil's imports of consumer goods in the year 2007, the Arbitrator determined that there was at least US$409.7 million worth of Brazil's imports of consumer goods from the United States that could be the subject of countermeasures ("threshold").

(However, said the Arbitrator, in the event that the level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed this threshold, updated for the same year to account for the change in Brazil's total imports from the United States, then, the Arbitrator found that it would be concluded, on the basis of the elements presented to it, that the suspension of concessions or obligations applied to trade in goods alone would not be "practicable or effective" within the meaning of Article 22.3( c) of the DSU.)

In light of these findings, the Arbitrator found that Brazil would be entitled to suspend certain obligations under the TRIPS Agreement and/or the GATS, with respect to any amount of permissible countermeasures applied in excess of the threshold identified in paragraph 5.201 above, updated for the same year in a manner described in paragraphs 5.231-5.232 (of the report) to account for the change in Brazil's total imports from the United States.

In any subsequent year where the level of countermeasures that Brazil would be entitled to falls below this threshold, updated to account for the change in Brazil's total imports from the United States, Brazil would be entitled to suspend concessions or other obligations only in trade in goods.

(Paragraph 5.232 of the report states that the "same" year shall mean that the amount of countermeasures, calculated based on GSM 102 transactions in, for example, fiscal year 2008 (1 October 2007 to 30 September 2008) and the fixed amount from the Decision by the Arbitrator contained in WT/DS267/ARB/2, shall be compared to the value of the threshold in year 2008 (1 January 2008 to 31 December 2008).)

The Arbitrator also found that, in determining whether the level of countermeasures that Brazil would be entitled to has increased to an amount that would allow it to suspend certain obligations under the TRIPS Agreement and/or the GATS, the data in Table 4 shall be updated to reflect the amount of imports in the same year, as described in paragraph 5.232.

Accordingly, the Arbitrator determined that:

(a) Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of US$147.4 million for FY 2006, or, for subsequent years, an annual amount to be determined by applying the methodology described in Annex 4 (of the report).

(b) In the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed the threshold described in paragraph 5.201, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS (identified in footnote 468 of the report) with respect to any amount of permissible countermeasures applied in excess of that figure.

In its second report (WT/DS267/ARB/2), the Arbitrator determined that the annual level of countermeasures "commensurate with the degree and nature of the adverse effects determined to exist" in relation to the marketing loan and counter-cyclical payments amounts to US$147.3 million.

The Arbitrator also determined that Brazil has not followed the principles and procedures of Article 22.3 of the DSU in determining that it is not practicable or effective to suspend concessions or other obligations in trade in goods, and that, at current levels, it could not have plausibly determined that it is not practicable or effective to suspend concessions or other obligations in trade in all goods under the Agreements contained in Annex 1A of the WTO Agreement.

The Arbitrator also found, however, that, in the event that the level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed a threshold, as identified in paragraph 5.201 (of the report), updated for the same year in a manner described in paragraphs 5.231-5.232 to account for the change in Brazil's total imports from the United States, then, it could be reasonably concluded that it is not practicable or effective for Brazil to suspend concessions or other obligations on trade in goods alone.

In light of these findings, the Arbitrator found that Brazil would be entitled to suspend certain obligations under the TRIPS Agreement and/or the GATS, with respect to any amount of permissible countermeasures applied in excess of the threshold identified in paragraph 5.201, updated for the same year in a manner described in paragraphs 5.231-5.232 to account for the change in Brazil's total imports from the United States.

In any subsequent year where the level of countermeasures that Brazil would be entitled to falls below this threshold, updated to account for the change in Brazil's total imports from the United States, Brazil would be entitled to suspend concessions or other obligations only in trade in goods.

The Arbitrator also found that, in determining whether the level of countermeasures that Brazil would be entitled to has increased to an amount that would allow it to suspend certain obligations under the TRIPS Agreement and/or the GATS, the data in Table 4 shall be updated to reflect the amount of imports in the same year.

Accordingly, the Arbitrator determined that:

(a) Brazil may request authorization from the DSB to suspend concessions or other obligations under the Agreements on trade in goods in Annex 1A, at a level not to exceed the value of US$147.3 million annually.

(b) In the event that the total level of countermeasures that Brazil would be entitled to in a given year should increase to a level that would exceed the threshold described in paragraph 5.201, updated to account for the change in Brazil's total imports from the United States, then, Brazil would also be entitled to seek to suspend certain obligations under the TRIPS Agreement and/or the GATS (as identified in footnote 339 of the report) with respect to any amount of permissible countermeasures applied in excess of that figure. +

 


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