The World Trade Organization (WTO) confirmed a previous ruling in favor of Brazil on a dispute over cotton subsides by the US. The United States said this Monday, October 15, that it was "very disappointed" with the ruling by the WTO which stated that its subsidies to American cotton farmers breached global trade rules.
The finding confirms a preliminary ruling in July in favor of Brazil, which initially brought the complaint in 2005, and paves the way for sanctions.
Brazil believes its cotton producers are being harmed by government subsidies to US own cotton farmers.
Roberto Azevedo, the Brazilian foreign ministry's trade chief, said that the three-member WTO compliance panel had upheld the findings of its interim report released in July.
The WTO ruled in 2005 that this aid amounted to illegal assistance that skewed international trade by undermining global cotton prices. Washington last year gave assurances it had ended the program.
However, Brazil maintained that measures taken by the United States had not gone far enough and called for the WTO to investigate.
The WTO panel "found that changes made by the United States were insufficient to bring the challenged measures – certain support payments under the 2002 farm bill and export credit guarantees – into conformity with US WTO obligations," a US official said.
"We are very disappointed with these results. We continue to believe that payments and export credit guarantees under our programs are now fully consistent with our WTO obligations," the official added.
According to US government figures, the subsidies excluding federal insurance guarantees for farmers stood at US$ 3.1 billion for the 2005 crop year, down from US$ 3.7 billion for 2004.
Brazil has reserved the right to impose annual sanctions of up to US$ 4 billion on the United States but would probably seek less in retaliatory measures because the US has removed some of the offending subsidies, AP notes
Brazil is the world's third largest producer of cotton, Washington is expected to make an appeal against the ruling.