1. BEIJING BRUSSELS CHICAGO DALLAS GENEVA HONG KONG LONDON LOS ANGELES NEW YORK SAN FRANCISCO SHANGHAI SINGAPORE TOKYO WASHINGTON D.C. Todd J. Friedbacher Nicolas J. S. Lockhart Christian Lau U.S. – Cotton Subsidies 18 May 2005 BIICL Conference, London

2. Results of the Cotton Case Prohibited subsidies Export credit guarantee programs Step 2 program

3. Results of the Cotton Case (cont.) Subsidies causing “adverse effects” Marketing loan payments Counter-cyclical payments Step 2 payments

4. Topics Evidence and the Appellate Body’s standard of review “Green box” domestic support Circumvention of agricultural export subsidy commitments

5. Evidence Complex economic and econometric evidence Numerous studies from various sources Expert testimony Alternative approaches offered for certain issues

6. No Appellate Review of the Facts Article 11 is the bulwarkArticle 11 is the bulwark Panel’s discretionPanel’s discretion “Egregious” Errors“Egregious” Errors Procedural GlossProcedural Gloss

7. U.S. Appeal the evidence did not support the conclusion that U.S. payments have insulated U.S. cotton farmers from market forces “… the evidence did not support the conclusion that U.S. payments have insulated U.S. cotton farmers from market forces.”

8. Appellate Body “the United States confirmed that it has not made an Article 11 claim in this appeal…” (para. 398)

9. Appellate Body Application of Law to Facts NOT Objective Assessment of Matter?

10. Appellate Body “… the Panel adopted a plausible view of the facts …, even though it attributed to these factors a different weight or meaning than did the United States.” (para. 445)

11. Appellate Body “We are not prepared to second- guess the Panel’s appreciation and weighing of the evidence before it …” (para. 448)

12. Appellate Body “… this fact seems to support the Panel’s conclusion …” (para. 449)

13. Appellate Body Application of Law to Facts PERMITS Review of the Facts on Appeal

14. “Green Box” Agricultural domestic support that is properly classified as “Green box” is exempt from domestic support reduction commitments

15. Measures at Issue Production flexibility contract payments Direct payments Restrictions on plantings of fruits and vegetables

16. Reasons for “Green Box “Challenge Peace Clause Support of adverse effects claims Clarification of provisions in view of the Round

17. “Green Box” Finding Annex 2 of the Agreement on Agriculture Paragraph 6(b): related to, or based on, the type of production undertaken after the base period Planting restrictions on fruits and vegetables U.S. programs violate this requirement

18. Implementation No requirement to implement Significant incentive to implement Significant difficulties in implementing

19. Implications of the green box finding Members cannot self-declare support as green box Panels and the Appellate Body will interpret Annex 2 strictly

20. Circumvention Findings ActualThreat Supported Scheduled 1 Yes Over Commitments 5 No Unsupported Scheduled 2 No 6 No SupportedUnscheduled 3 Yes 7 No UnsupportedUnscheduled 4 No 8 No

21. “There is, in other words, no mechanism in the measure for stemming, or otherwise controlling, the flow of FSC subsidies that may be claimed with respect to any agricultural products.” “There is, in other words, no mechanism in the measure for stemming, or otherwise controlling, the flow of FSC subsidies that may be claimed with respect to any agricultural products.” (FSC, para. 149) Appellate Body

22. “There is no basis in Article 10.1 for requiring WTO Members to take affirmative, precautionary steps to ensure that circumvention of their export subsidy commitments does not occur.” “There is no basis in Article 10.1 for requiring WTO Members to take affirmative, precautionary steps to ensure that circumvention of their export subsidy commitments does not occur.” (para. 707) Appellate Body

23. Circumvention Findings ActualThreat Supported Scheduled 1 Yes Over Commitments 5 No Unsupported Scheduled 2 No 6 No SupportedUnscheduled 3 Yes 7 No UnsupportedUnscheduled 4 No 8 No