2.

ARGUMENTS OF BRAZIL

Applicable Law

1. The Philippines stand in favor of the application of Article VI of

GATT 1994 to this dispute is unacceptable to Brazil and raises relevant
systemic issues of interest to all Members of the WTO.

2. The Brazilian investigation started in 1994, under the Tokyo

Round Code on Subsidies and Countervailing Measures, while the Tokyo
Round SMC Code was in force until 31 December 1996 and should have been
invoked by the Philippines.

3. Furthermore, the scope of Article VI of GATT 1947 is legally

distinct from that of Article VI of GATT 1994. Article VI of GATT 1947, as
interpreted by the Tokyo Round Agreements, embodied a specific set of rights
and obligations; Article VI of GATT 1994, as interpreted by the Agreement on
Subsidies and Countervailing Measures, embodies another specific set of
rights and obligations. To invoke Article VI of GATT 1994 implies the adoption
of the specific views of the WTO agreements as opposed to those of the Tokyo
agreements. Therefore, to invoke now Article VI of GATT 1994 to a dispute
started under the Tokyo Round SCM Code would constitute an attempt to
apply an inappropriate legal framework.

4. Any attempt to frame the present case within the scope of the
WTO agreements constitutes an attempt to circumvent the application of the
appropriate law.

5. No formal consultations ever took place between the Brazilian

and the Philippine Missions in Geneva, in spite of reiterated Brazilian offers to
do so.

Terms of Reference

6. As regards the Terms of Reference of this case, Brazil argued that

the Philippines attempted to broaden the scope thereof to include matters not
brought up in the request for establishment of a panel.

Burden of Proof
 7. On the issue of which party has the burden to prove their case,
Brazil argued that the Philippines, as the party who invoked dispute
settlement provisions, must prove its claims and such burden has not shifted
to Brazil under Article VI of GATT 1994.

Failure to Consult

8. Contrary to the Philippines’ claims, Brazil argued that it had

offered to engage in consultations under the Tokyo Round SCM Code three
times, which offers were declined by the Philippines.

Subsidy Issues

9. Brazil argued that the Philippines consistently failed to meet its

obligation to supply the necessary information within the given time periods,
which would have aided it in determining the level of subsidization on a per
program level. As such, it imposed its countervailing measures based on what
information was given by the Philippines.

10. Brazil then argued that its calculation of the level of subsidization
on desiccated coconut was consistent with its obligations under the GATT
1994 and the Tokyo Round SCM Code. Brazil noted that neither Article VI nor
the Tokyo Round SCM Code contained any guidance on the method of
calculation of the amount of the subsidy. Brazil contended that, as long as its
approach reasonably calculated the subsidy bestowed on the exported
product, it was consistent with the GATT 1994.

11. Brazil further argued that to determine the competitive benefit or

price effect that the subsidization of the input product (coconut fruit) has on
the price of the downstream product (desiccated coconut) the price of the
subsidized input must be compared to the price of an unsubsidized input. In
other words, the investigating country must determine what it would have
cost a producer to purchase the input product in the absence of subsidies.
Without such a benchmark, no determination of a price effect or competitive
benefit can be made.
 12. As regards the costs of the products being investigated, it relied
only on the cost information provided by the Philippines, which contained
estimated costs. Brazil assumed those costs were estimated rather than actual
because they reflected production costs absent the subsidies. Brazil noted that
it could have chosen to rely on Brazilian prices, rather than seeking to
construct a Philippine price, which would have resulted in a much higher rate
of subsidy being found, since Brazilian coconut prices were higher than the
cost information submitted by the Philippines.

Injury Issues

13. Brazil argued that, contrary to the arguments of the Philippines, it

had clearly determined that the domestic industry consisted of the domestic
producers of the like product, desiccated coconut, with the exclusion of one
domestic producer, found to be a significant importer of the subject product. It
likewise determined that that the product most "like" the imported product in
terms of physical characteristics was the domestic desiccated coconut, but
also concluded that competition between imported desiccated coconut and
Brazilian coconut was a significant condition of the Brazilian market that had
to be considered in the injury determination.

14. As to material injury, Brazil argued that it present evidence to

show that indicated that the domestic industry was injured. Particularly, it
found that both the national and domestic production of desiccated coconut
fell considerably from 1989 to 1994. Likewise, the level of employment in the
industry, as well as the domestic industry’s share of apparent consumption
declined significantly from 1991 to 1994. Thus, Brazil argued that there was
substantial evidence that the domestic industry was injured.

15. Brazil found that national production (including production by

the importing company) fell by 45 per cent in the period 1989 to 1994, while
production of the domestic industry (excluding production by the importing
company) declined by 31 per cent during the period 1991 to 1994. There was
a decrease in capacity utilization throughout the period. The level of
employment in the industry declined 13 per cent between 1991 and 1994.
Finally, the domestic industry's share of apparent consumption dropped from
63.9 per cent in 1991 to 37.7 per cent in 1994.
Source:
Brazil - Measures Affecting Desiccated Coconut - Report of the Panel, WT/DS22/R (17
October 1996); Retrieved 13 March 2020 from URL:
https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S006.aspx?
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