publication . Other literature type . Article . 2005

U.S. Agricultural Export Credits after the WTO Cotton Ruling: The Law of Unintended Consequences

Benitah, Marc; Benitah, Marc;
English
  • Published: 01 Jan 2005
  • Publisher: Unknown
Abstract
The recent WTO cotton ruling has led to a paradoxical result for the United States, a result that seems a textbook illustration of the "law of unintended consequences". Indeed, during the Uruguay Round negotiations of the present WTO agreements, the United States refused to put agricultural export credits in the category of agricultural export subsidies, where they would then have been subject only to reduction commitments. Paradoxically, the United States finds itself now in a position where these same agricultural export credits that it did not condescend to reduce during the Uruguay Round are openly considered as prohibited export subsidies. This article anal...
Subjects
free text keywords: Agreement on Agriculture, Brazil, cotton, Doha Round, export credits, export subsidies, SCM, United States, WTO, International Relations/Trade,, International Relations/Trade, Agreement on Agriculture, Brazil, cotton, Doha Round, export credits, export subsidies, SCM, United States, WTO
24 references, page 1 of 2

1. Professor Benitah is the author of The Law of Subsidies under the GATT/WTO System, Kluwer Law International, 2001.

2. The U.S. Department of Agriculture (USDA) administers export credit guarantees for commercial financing of U.S. agricultural commodities through the Commodity Programs Credit Corporation (CCC). The CCC operates three export credit guarantee programs: General Sales Manager 102 (GSM 102), General Sales Manager 103 (GSM 103) and the Supplier Credit Guarantee Program (SCGP). These programs were established by 7 USC 5622. Pursuant to this statute, the CCC may: guarantee the repayment of credit made available to finance commercial export sales of agricultural commodities on credit terms that do not exceed three years (under the GSM 102 program); issue guarantees for the repayment of credit made available for a period of not more than 180 days by a U.S. exporter to a buyer in another country (under the SCGP program); and guarantee the repayment of credit made available by financial institutions in the United States to finance commercial export sales of agricultural commodities on credit terms of between three and ten years (under the GSM 103 program) “in a manner that will directly benefit United States agricultural producers.”

3. Report of the panel, United States - Subsidies on Upland Cotton, September 8, 2004, WT/DS267/R/Add.2 (hereafter, the Cotton Panel Report) and Report of the Appelate Body, United States - Subsidies on Upland Cotton, September 8, 2004, WT/DS267/AB/R (hereafter, the Cotton Appellate Body Report).

4. The Concise Encyclopedia of Economics (CEE), article by Rob Norton, available at http://www.econlib.org/library/Enc/UnintendedConsequences.html

5. For an analysis of the conceptual difference between export subsidies and export credits, see Rude, J. (2000), Reform of Agricultural Export Credit Programs. The Estey Centre Journal of International Law and Trade Policy 1(1), 66-82. Available at http://www.esteycentre.ca/journal/archives.htm

6. Available at http://www.wto.org/english/docs_e/legal_e/14-ag_01_e.htm

7. The portion conforming to reduction commitments would have been shielded from actions under the AoA (or the SCM by virtue of the “peace clause” included in Article 13 of the AoA, at least until December 31, 2003). At the moment, i.e., subsequent to the expiration of the peace clause, the issue of whether the SCM Agreement applies to the agricultural export subsidy as a whole, or whether it applies only to the extent that the subsidy exceeds a member's commitment levels as specified in its schedule, is still not resolved and has not been yet addressed by the Appellate Body. At first glance, for the portion conforming to reduction commitments, it seems that a recommendation to “withdraw” a subsidy under the SCM would be difficult to reconcile with the right to grant an export subsidy up to a certain point under the AoA. See on this issue footnote 537 of the Cotton Appellate Body Report.

8. Cotton Panel Report, para 7.869

9. Cotton Appellate Body Report, para 625

10. More precisely, the panel found that they were export subsidies not listed in paragraph 1 of Article 9 of the AoA.

11. Cotton Appellate Body Report, para 68

12. Idem, para 609

13. Idem, para 632

14. Idem, para 634

15. Idem, para 626

24 references, page 1 of 2
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