In 2002, Brazil expressed its growing concerns about U.S. cotton subsidies by initiating a WTO dispute settlement case against certain features of the U.S. cotton program. Panel and AB concluded that various payments for upland cotton which were conferred by U.S were export subsidies and trade distorting domestic subsides so that they prejudice brazilian upland cotton producer by suppressing international price. Also, with regard to subsidies that are turned out prejudicing brazilian upland cotton farmers, panel stated article 7.8 of SCM Agreement, therefore U.S. was obilged to take steps to remove the adverse effects or withdraw the subsidy by June 30, 2005.
AoA does not define subsidy whereas SCM Agreement provides definition of subsidy in a clear way thus panel and AB establish the significance of subsidy. This leads to diversity of opinion what is agriculture subsidy. Because there have been no study on relationship between AoA and SCM Agreement until now, this article initially aims to give an outline of upland cotton dispute and tries to find out implication for us by analyzing panel and AB's rulings.
The panel and AB's rulings provide guideline for the way to interpret subsidy which have not defined in AoA and it is of importance dealing with a role of peace clause, the relationship between AoA and others in detail. It is the agricultural area that emerges different point of views in DDA negotiation. Thus it is anticipated that there will be many disputes among WTO members on agriculture subsidy regardless of which direction the negotiation will take. In this context, it is very appropriate and timely to understand background and fact about agriculture related disputes. Also we have to prepare correspondence logic for potential disputes by knowing and comprehending WTO's way to interpret AoA well.