WTO RELEASES COTTON REPORT; US VOWS TO APPEAL

The ruling in the case brought by Brazil against US cotton subsidies was finally made public on 8 September. The panel ruled that subsidies granted to US cotton farmers by the US government from 1999-2002 under certain programmes, such as marketing loans, export credits, commodity certificates and direct payments, depressed world market prices and were injurious to Brazil's trade interests (see BRIDGES Weekly, 23 June 2004). The parties to the dispute had received copies of the report on 18 June, and the delay of its release was due to the need for translation to all three official WTO languages. Following the public release of the report, the US stressed the "mixed nature" of the verdict, noting that the panel had ruled that decoupled subsidies did not depress world cotton prices. "We welcome the panel's findings that US decoupled income support payments have not caused 'serious prejudice' under WTO rules. This report confirms that reforms in our 1996 farm legislation and continued in 2002 have worked and that fully decoupled payments do not cause WTO-inconsistent effects by distorting production or trade," said US Trade Representative Robert Zoellick. He said the US would appeal, and stressed that certain issues covered in the report should be negotiated, not litigated.

To access the panel report, visit http://www.wto.org/english/news_e/news_e.htm

ICTSD reporting; "United States Successfully Defends Decoupled Payments from "Serious Prejudice" Claims," USTR PRESS RELEASE, 8 September 2004.

BYRD AMENDMENT: WTO ALLOWS SANCTIONS AGAINST US

On 31 August, a WTO arbitrator ruled that the EC and seven other countries can impose retaliatory sanctions on the US, which has failed to comply with a ruling that found certain US anti-dumping practices illegal. Under the so called Byrd Amendment -- the popular name for the US Continued Dumping and Subsidy Offset Act of 2000 (CDSOA) -- foreign firms selling their products below cost in the US could be fined, and the money redistributed to the US companies who initiated the complaint. This redistribution scheme was ruled illegal by a WTO panel in January 2003 (see BRIDGES Weekly, 22 January 2003). The US had requested arbitration to determine the parameters of the retaliation. The arbitrator ruled that the complainants -- the EC with Brazil, Canada, Chile, India, Japan, Korea and Mexico -- could fine the US to the tune of 72 percent of monies collected in duties under the Byrd Amendment. Following the ruling, the US said it would work to modify the CDSOA, but would continue its use of anti-dumping and countervailing measures. The case, which was initiated in 2001, has already gone through an appeal and two other arbitrations, highlighting systemic problems at the implementation phase of the WTO dispute settlement system that has resulted in prolonged disputes.

In relation to the ruling, US manufacturing alliance Consuming Industries Trade Action Coalition (CITAC) noted that trade petitions filed against shrimp imports from six developing countries (see BRIDGES Trade BioRes, 23 July 2004) were initiated by the US shrimp industry in hopes of receiving millions of dollars in payments under the Byrd Amendment. According to the coalition, annual anti-dumping payouts to these domestic companies amount to as much as US$829,493 per company each year, creating an incentive for domestic shrimp companies to launch complaints against foreign firms.

ICTSD reporting; "WTO rules for EU in US trade row," BBC NEWS, 31 August 2004; "US Responds to WTO Byrd Amendment Ruling," CALTRADE REPORT, 1-15 September 2004.