The United States is likely to challenge a WTO ruling that it kept up illegal subsidies to American cotton growers at a key meeting this week that could open the way to trade sanctions from Brazil.
The World Trade Organization announced that a meeting has been set for Feb. 15, at which point the panel report condemning the American payments will either be adopted or sent for a final appeals proceeding.
If the U.S. declines to appeal, Brazil could seek trade sanctions worth billions of dollars.
The WTO verdict in December was a major victory for Brazil's cotton industry and for West African countries that have claimed to have been harmed by the American payments to growers. The three-member WTO compliance panel found that export credit guarantees and U.S. subsidies under the 2002 Farm Bill unfairly helped American cotton farmers undersell foreign competitors.
Brazil has reserved the right to impose annual sanctions of up to $4 billion on the United States, but would probably seek less in retaliatory measures because the U.S. has removed some of subsidies found illegal by the trade body.
Despite repeated legal setbacks, Washington looks set to continue with the payments. The U.S. Senate joined the House of Representatives in December in approving a new $286 billion farm bill that would leave cotton programs largely intact for the next five years.
Brazil says Washington's continued support for American cotton producers ensures artificially high production and export levels, hurting Brazilian and African producers. The Brazilian government claims the U.S. retained its place as the world's second-largest cotton grower by paying out $12.5 billion in government subsidies to American farmers between August 1999 and July 2003. China is the largest exporter of cotton, while Brazil is fifth.
If the U.S. declines to appeal the WTO ruling - or fails to win its challenge - Brazil has said it would target American goods, as well as trademarks, patents and commercial services, in retaliation.
