El buen salvaje de Eduardo Caballero Calderón

On the 20th of June 2003, Brazil handed in its first submission to the DSB. This submission was exclusively focused on refuting the US claim that its support measures were in accordance with the Peace Clause, - the issue to which the first panel from the 22-24th of July had been dedicated (Tel. 1503, 26/6, 2003). The Brazilian delegation was led by the General Coordinator of Dispute Settlements, Roberto Azevêdo, and included the lawyers from Sidley Brown and Wood, Scott Andersen, Christian Lau, and Luz Sosa - contracted by ABRAPA, - as well as the agricultural economist, Dan

56 Interview with former ABRAPA president, Brasília, May 10, 2018 (English translation).

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Sumner, who also was on this organization´s payroll (Tel. Dis. 801, 15/7 2003; Tel.

1776 29/7, 2003).

A meeting with third parties, - Argentina, Australia, Benin, Canada, China, the EU, India, New Zeeland, Pakistan, Paraguay, Taiwan, and Venezuela - preceded the panel. With exception of the EU and China, the third-parties were largely supportive of Brazil (Tel. 1763, 26/7, 2003). During the meeting, Daniel Sumner made a presentation in which he advanced the argument that the US cotton subsidies from 1999-2002, even through the country´s own calculation methodology, surpassed those of 1992, and thereby were not in accordance with the Peace Clause. The Brazilian Ambassador viewed Sumner´s presentation as a vital technical element in support of the juridical arguments advanced by Brazil at the meeting (Tel. 1776 29/7, 2003). The panel eventually ruled in favor of Brazil regarding the preliminary matters discussed at the occasion (Tel. 1763, 26/7, 2003).

In the course of the panel phase, the cotton issue also gained much visibility beyond the DSB level; not least within the negotiations below the Doha Round. In the run-up to the Cancun meeting, the C4 West-African cotton producers elaborated a document which called for special measures in favor of cotton, minded upon poverty reduction. The initiative was positively received by Brazil and the Cairns Group countries, but met with dismissal on behalf of the US and the EU (Tel. 2004, 3/9, 2003).

The Cancun Conference thereby firmly put cotton on the international agenda, but also became strongly divided over this issue, which eventually contributed to the breakdown of the Ministerial (EAGLETON-PIERCE 2012, p.105-106). After the Cancun meeting, Brazil continued its cooperation with the C4 countries and became active in the sectorial initiative below the Doha negotiations, within which it expressed its support for the West-African cotton producers´ position (Tel. 2640, 27/11, 2003). It is difficult to evaluate the specific effect which the discussions about cotton below the Doha Round had on the case within the DSB context. Though in principle, this body should be strictly focused on the technical arguments presented before it, and thereby insulated from broader global debates, it nonetheless becomes difficult to discard any possible indirect spillovers of this nature. The alignment with the C4 Group certainly does appear to have been perceived by Brazil as an opportune strategy to strengthen its claim that the US cotton subsidies were illegal, and to some degree also immoral. This cleared the path for making the argument that the issue of reform of the US cotton support regime was grounded in legal, as well as ethical rationality.

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Towards the second panel from the 7-9th of October, disagreement regarding procedural issues continued to characterize the process, as the US again delayed the submission of its responses to the Brazilian questions. This led Brazil to clearly state its frustration with this practice before the panel (Tel. Dis. 894, 14/8, 2003). At the second panel, Brazil sought to emphasize a series of alleged US violations of WTO law, as well as the danger that continued subsidies would hurt the Brazilian cotton sector in the period from 2003-2007 (Tel. Dis. 1062, 2/10, 2003). The Brazilian delegation was composed by Roberto Azevêdo, Lino Colsera from MAPA, the ABRAPA hired agricultural economist, Daniel Sumner, ABRAPA´s team of lawyers, as well as Andrew McDonald from the Liverpool cotton association and Christopher Ward, - a cotton producer from Mato Grosso - who both served in the role as expert witnesses (Tel.

2355, 24/10, 2003).

The preparatory work in gathering testimonies of the effects of the US cotton subsidies on Brazilian cotton producers had been conducted by ABRAPA. The sectorial organization amounted a series of accounts by producers who claimed to have been hurt by US subsidies, in some cases motivating them to abandon this crop due to low profitability (CUNHA & SPINDOLA 2013, p.317). ABRAPA also invited the president of the Liverpool Cotton Association, Andrew McDonald, to testify in front of the panel, aiming the testimony at explaining certain essentials of the cotton business and the workings of the global cotton market (MCDONALD 2004, p.68-69). ABRAPA also arranged the invitation of the cotton producer from the Brazilian state of Mato Grosso, Christopher Ward, who contributed with an important economically elaborate testimony⁵⁷.

A central point for Brazil to prove before the panel was that the US cotton support regime had caused "serious prejudice" to Brazilian production. While legal argumentation permitted the Brazilian delegation to make the claim that the subsidies were illegal below WTO law, it would have to rely on econometric evidence in order to specify the numerical value of these losses (TOLLINI, 2014). The agricultural economist from the University of California, Daniel Sumner, had been contracted by ABRAPA for the specific purpose of developing econometric data to support the Brazilian claim. Instead of constructing an entirely new econometric model, Sumner

57 Videoconference interview with Sidley Austin lawyers on May 2, 2018.

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opted for applying the FAPRI⁵⁸ model which was used by the US Congress to analyze the effects of the Farm Bill (SUMNER 2004, p.124). Sumner applied the FAPRI model in the construction of counterfactual scenarios, implying different estimates for global production, consumption, and prices, varying according to the level of US subsidies (DAEMMRICH 2012, p.226-227). Sumner´s study provided Brazil with a technical argument for affirming that the US subsidies had caused "serious prejudice" to its cotton producers, in line with the way this notion had been formulated in the WTO agreement on Subsidies and Countervailing Measures (SHAFFER et al. 2010, p.80). The Brazilian Ambassador reported that Sumner´s presentation, focused on demonstrating the causal nexus between the level of US cotton subsidies and depression of world market prices, had been very difficult for the US delegation to counter (Tel. 2355, 24/10, 2003).

The high degree of technical complexity which the cotton case had come to imply, meant that the panelists, - none of whom were more closely familiarized with agricultural economics - were in a position in which they had to make decisions on technical issues, which implied very deep political ramifications (DAEMMRICH 2012, p.226). The depth and level of technical sophistication within the arguments brought to bear on the case by the parties involved, thus appears to have surpassed even the capacity of the WTO apparatus within central areas. Such circumstances underline the importance of the Brazilian public-private cooperation on establishing a firm technical foundation for the case, as even a legally elaborate argument might well have stranded on the lack of concrete data to prove the numerical magnitude of the alleged "serious prejudice". Brazil did have a strong case from the outset of the proceedings, yet, the ability to frame this case in an opportune manner nonetheless became essential in order to pursue successful litigation, as is emphasized by a Sidley Austin lawyer:

To me, what made the difference is that in a situation where both the economic and legal teams on both sides are of comparable strength, it is the facts that matter, and the ability to make good use of the facts. And the US had bad facts to play with. Enormous amounts of subsidies, for a big producer and a big exporter on the world market, those weren't easy facts to deal with. Now, conversely they were nice facts for us to have. But it still requires a good and experienced team to deal with all of the things that the US would throw at you. It wasn´t a case that would develop into a no brainer, write a few papers and it seems obvious, a 100% subsidization, how can you not win that case? Well, there´s really a team on the other side, and they will make your life hell.⁵⁹

58 FAPRI - The Food and Agricultural Research Institute, is a joint programme between the University of Missouri and Iowa State University.

59 Videoconference interview with Sidley Austin lawyers on May 2, 2018.

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(Videoconference interview with Sidley Austin lawyers on May 2, 2018.)

The engagement of the Brazilian stakeholders in the cotton case with leading specialists, beyond Itamaraty - and even beyond Brazil, - thereby seems to have been absolutely essential, as does the private sector´s willingness to provide the financial resources necessary to contract this expertise.

Brazil and the US both handed in their individual submissions for the third and last panel, set to take place from the 2-3rd of December, 2003. The Brazilian submission contained a critique of the perceived lack of will on behalf of the US to hand in important information about the country´s export support measures, as well as a series of arguments leveled against its domestic subsidies. The US submission sought to refute the Brazilian arguments, but was read by Brazil as being relatively incomplete, as many submissions only were delivered in partial form. The Brazilian delegation was composed of Roberto Azevêdo, diplomats from the Itamaraty, and the lawyers and experts contracted by ABRAPA. (Tel. Dis. 1275, 28/11, 2003; Tel. 2919, 26/12, 2003) The econometric models, and the methodology and presumptions on which they were constructed became a central object of discussion during the third panel. These discussions were so comprehensive that they reached the point of questioning the very underlying economic principles on which the other party´s claims rested (DAEMMRICH 2012, p.237). Daniel Sumner aimed at advancing the argument that the rise in subsidized US cotton prices would spill over into increases in production volumes (Ibid 2012, p.228). The third session marked the end of the panel phase, and the parties thereafter awaited the panelists´ ruling, which would be delayed well into 2004.

After the third panel had ended in December 2003, ABRAPA President Jorge Maeda assumed contact with the Brazilian Ambassador in Geneva, Seixas Corrêa, informing that the organization´s funds were close to being exhausted due to the expenses related to the case. Initially estimated at some US$ 400.000, the costs of the econometric studies and legal counseling had surpassed US$ 1 million by late 2003. In a telegram to Brasília, Ambassador Corrêa stressed the importance of ABRAPA´s technical support in an eventual appeal phase, and the need to assume any possible additional expenses. Corrêa also accentuated the historical significance of the challenge to the US$ 12,9 billion Farm Bill, which the Brazilian engagement in the cotton dispute constituted. (Tel. 2852, 17/12, 2003)

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The objections, preliminary questions, and emissions of information on behalf of the US, even though they had mainly been rejected and criticized, meant that the total costs of the case had risen markedly (ANDERSEN 2004, p.121). In January 2004, Itamaraty reached an agreement with ABRAPA as the latter pledged to assume all eventual costs towards the conclusion of the panel phase, after which it could not guarantee any further financial commitment. At the time, Itamaraty´s general perception of working together with the private sector in the hiring of specialized legal support was that this had been a very positive experience, and that mechanisms to facilitate such cooperation should be further institutionalized with future dispute settlement cases in mind (Tel. Dis. 30, 14/1, 2004).

As the parties handed in their final comments in March 2004, the substantial part of the cotton dispute had reached a closure. At this point in the process, ABRAPA´s team of lawyers expressed that Brazil´s chances of winning the dispute were very reasonable with regards to the alleged Peace Clause violations, the US export subsidies, and export credit guarantees. This was also sustained in relation to the challenge of proving that previous US cotton support measures had resulted in "serious prejudice" to Brazilian cotton production, though recently rising cotton prices had made it more difficult to make the case for "future serious prejudice". In communications to Brasilia, Ambassador Corrêa expressed the belief that a positive outcome in the case might wield profound impacts on the jurisprudence of the WTO, and set a precedent which would present a range of new opportunities for Brazil within the dispute settlement system.

(Tel. 657, 29/3, 2004)

Towards the end of the panel phase, a change in Itamaraty's perception of the international repercussions of the cotton case became evident: from initially being somewhat cautious towards the potential negative consequences of challenging the US agricultural subsidies, the cotton case became seen as a point of departure towards pushing for liberalization of hitherto protectionist agricultural domestic policy frameworks in developed countries. This change in mood appears even more remarkable when considering the short time period of less than two years in which it took place.

Although the final panel report had been planned to be circulated in May 2004, it was repeatedly delayed until its eventual release on the 8th of September, 2004 (Tel.

657, 29/3, 2004; Tel. 1975, 6/9, 2004; Tel. 781, 6/4, 2004; Tel. 1997, 8/9, 2004). The final report came out positively for Brazil on a range of different areas: 1) violation of