Bridges Weekly Trade News Digest • Volume 9 • Number 10 • 23rd March 2005

WTO Members Adopt Panel And Appellate Body Decisions In Cotton Dispute

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WTO Members at the 21 March meeting of the WTO Dispute Settlement Body (DSB) adopted the reports of the dispute settlement panel and the Appellate Body that found US cotton subsidies to be in violation of WTO rules (see BRIDGES Weekly, 9 March 2005).

All parties to the dispute had the opportunity to comment on the reports to the DSB, which is composed of representatives from every Member country. The US reiterated its position that negotiation, rather than litigation, was the most effective channel to deal with distortions in agricultural trade. US Ambassador Linnet Deily expressed "deep disappointment" with both rulings and alleged that the panel’s connection between American support policies and depressed cotton prices lacked sufficient "analytical rigour." The US felt that the ramifications of this should concern Members irrespective of their opinion on the merits of Brazil’s claims.

Brazil, on the other hand, welcomed the adoption of the reports and expressed hope that the US would fully comply with them in a timely manner. It told the meeting that its case had been "100 percent founded on the existing multilateral disciplines on trade in agriculture… We should not be called upon to pay again for the very same rights and obligations we bargained for a decade ago."

The EU, which had been a third party in the dispute, was of the opinion that the panel and Appellate Body had not applied the right legal interpretive approaches in certain instances. Argentina, also a third party, expressed satisfaction with both reports.

Under WTO dispute settlement rules, the rulings and recommendations of panels and the Appellate Body only become legally binding on the parties to the dispute once they have been adopted by the DSB by "reverse consensus" — that is, the ruling is automatically adopted by the DSB unless there is consensus among Members to reject it.

The US now has 30 days to announce its intentions to comply with the ruling, although it need not reveal the timeframe for doing so. The implementation deadline will be fixed through negotiations between Brazil and the US or, failing that, through WTO arbitration. The arbitration proceedings must normally be completed within 90 days of the DSB’s adoption of the ruling.

ICTSD reporting; "WTO Formally Backs Cotton Ruling; U.S. Slams Appellate Body Analysis," WTO REPORTER, 22 March 2005.