Subsidization, price suppression, and expertise: causation and precision in Upland Cotton

• Published in: World trade review Vol. 7; no. 1; pp. 183 - 209
• Main Authors: SAPIR, ANDRE, TRACHTMAN, JOEL P.
• Format: Journal Article
• Language: English
• Published: Cambridge, UK Cambridge University Press 01.01.2008
• Subjects: Agreements; Antidumping duties; Causality; Causation; Cotton; Cotton trade; Dispute resolution (Law); Economic analysis; Economic aspects; Law and legislation; Prejudice; Prices; Subsidies; World Trade Organization. Appellate Body; UNITED STATES
• ISSN: 1474-7456; 1475-3138
• DOI: 10.1017/S1474745607003667

The determination of causal linkage in trade-remedies cases - subsidies, dumping, and safeguards - has challenged WTO dispute settlement. There are two difficult questions in the context of determination of 'serious prejudice' under Articles 5 and 6 of the Agreement on Subsidies and Countervailing Measures (SCM Agreement). First, while theory indicates that subsidization of tradable goods may affect prices, and therefore cause 'serious prejudice' arising from 'significant price suppression', empirical validation and estimation of the magnitude of the effect is difficult. Second, the relevant treaty language does not explicitly specify the standard by which Panels must determine whether significant price suppression exists, or the standard by which Panels must determine whether this significant price suppression is caused by subsidies. These problems, combined with the institutional limitations on the ability of Panels to deal with economic evidence, make the outcome of these types of cases somewhat uncertain.