INTRODUCTION AND SUMMARY

Brazil responds to the Panel's 28 May 2003 request for a briefing on the following issue:

The short answer to this question is “no”. There is no procedural rule or legal requirement for a panel to make such a preliminary finding. The phrase “exempt from actions” in Article 13(b)(ii) and 13(c)(ii) of the Agreement on Agriculture (AoA) means that if all the conditions of Article 13(b)(ii) and 13(c)(ii) are fulfilled (i.e., there is peace clause protection), a complaining Member cannot receive authorization from the DSB to obtain a remedy against another Member's domestic and export support measures that otherwise would be subject to the disciplines of certain provisions of the Agreement on Subsidies and Countervailing Measures (ASCM or SCM Agreement) or Article XVI of GATT 1994. But neither the phrase “exempt from actions” nor AoA Article 13 compel the Panel to first make a peace clause finding before considering the substance of Brazil's ASCM and GATT Article XVI claims.

Article 13 of the Agreement on Agriculture is not a “special and additional” rule set out in Appendix 2 to the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). Article 19 of the AoA makes all DSU provisions applicable to the AoA. Pursuant to DSU Article 11, a panel must make an “objective assessment of the facts of the case”. Assessing and weighing all relevant facts – including rebuttal facts – obtained during the normal two meeting panel process is essential to resolve properly fact-intensive issues relating to the peace clause. This Panel should follow the lead of previous panels that made similar complex threshold findings in final panel reports.

Brazil will be prejudiced by delays in the process because a number of Brazil's claims are not dependent on any resolution of the “peace clause”. Much of the proof required for demonstrating that the US has no peace clause protection under Articles 13(b)(ii) and 13(c)(ii) is the same evidence demonstrating US violations under the SCM Agreement.