Before the Appellate Body of the World Trade Organization
United States – Subsidies on Upland Cotton
Recourse to Article 21.5 of the DSU by Brazil (AB-2008-2)
Opening Statement of Australia
Geneva, 14 April 2008
Members of the Division,
1. Thank you for the opportunity to present the views of Australia.
2. Australia is a third participant in this appeal for three reasons:
3. First - Australia as a major agricultural exporter, including of cotton, has a direct economic interest in the subject of this appeal.
4. Second – Australia has a systemic interest in ensuring the proper functioning of the dispute settlement system, including that the recommendations and rulings of the DSB are complied with promptly to ensure effective resolution of disputes to the benefit of all Members. In particular, this appeal is concerned with the remedy that is available to a Member under Article 7.8 of the Agreement on Subsidies and Countervailing Measures where that Member has successfully claimed that its interests have been adversely affected, so as to bring an end to the dispute.
5. Third - This appeal also raises important systemic issues relating to the interpretation and application of the WTO Agreements, including the Understanding of Rules and Procedures Governing the Settlement of Disputes. In particular, this appeal raises fundamental issues as to the scope of Article 21.5 proceedings, especially in the context of a claim of adverse effects under Articles 5 and 6 of the Agreement on Subsidies and Countervailing Measures.
6. Australia has provided a written submission identifying some key issues of law and legal interpretation raised by this appeal. I do not wish to repeat the arguments set out in our submission. However, Australia does wish to emphasise the following points.
7. A Member that has successfully argued that its interests are adversely affected by payment of a subsidy should not be required to bring a fresh action with respect to payments made on the same legal basis as the payments that were subject to a panel’s finding of “present serious prejudice”. To find otherwise would oblige the complaining Member to become embroiled in a litigation loop of periodic challenges under the Agreement on Subsidies and Countervailing Measures and would deny that Member a remedy under Article 7.8 of that Agreement. Such a result would be contrary to the object and purpose of the WTO dispute settlement system, including Articles 3 and 21 of the DSU.
8. Moreover, the consequences of finding that only those marketing loan and counter-cyclical payments that were made between 1999-2002 fell within the scope of the Article 21.5 proceedings, as suggested by the United States, would lead to Article 21.5 proceedings being restricted to a re-examination of the effects of the exact measures at issue in the original proceedings, rather than the existence or consistency of measures taken to comply. Such unduly restrictive interpretation of Article 21.5 has been previously rejected by the Appellate Body, and ignores the fact that Article 21.5 proceedings often concern the consistency of a new measure taken to comply with the recommendations and rulings in the dispute.  Australia therefore submits that the marketing loan and counter-cyclical payments that were made after 21 September 2005 were properly found by the Article 21.5 Panel to fall within the scope of the Article 21.5 proceedings.
9. Turning to the remedy available to a Member under Article 7.8 of the Agreement on Subsidies and Countervailing Measures, that Article imposes a positive obligation on the subsidizing Member to take appropriate steps to remove the adverse effects or to withdraw the subsidy. This obligation was highlighted by the Panel in the original proceedings when it stated that "the United States is obliged to take action concerning its present statutory and regulatory framework as a result of [the Panel's] 'present' serious prejudice finding". By repealing the Step 2 program, but leaving in place in unamended form the marketing loan and counter-cyclical payments programs, it was open to the Article 21.5 Panel to find that the combined effect of continuing to make payments under those programs was significant price suppression causing serious prejudice to the interests of Brazil. As such, the United States has failed to fulfil the requirements of Article 7.8.
10. Australia further submits that the export credit guarantees issued with respect to pig meat and poultry meat have a “particularly close relationship” to the measure taken to comply with the recommendations and rulings of the DSB, whether that measure is defined as the amended GSM 102 program or as the guarantees issued under that program. As such, these guarantees were correctly found by the Article 21.5 Panel to be within the scope of the Article 21.5 proceedings.
11. Finally, Australia submits that the Article 21.5 Panel acted appropriately in following the analytical approach that was adopted by the Panel in the original proceedings. The Article 21.5 Panel also acted appropriately in relying on the original findings, recommendations and rulings as a starting point for its analysis, given that the legislative basis, conditions and criteria for payment of the two subsidies at issue, marketing loan and counter-cyclical payments, had not changed since those proceedings. To decide otherwise would require every aspect of the claims of serious prejudice to be relitigated. As Australia has previously submitted, relitigation of disputes is not consistent with the accelerated nature of Article 21.5 proceedings.
See for example Appellate Body Report, US – Softwood Lumber (IV) (Article 21.5 – Canada), para. 89; Appellate Body Report, Canada – Aircraft (Article 21.5 – Brazil), para. 36