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Last Updated: Tuesday, 16 October 2007, 10:32 GMT 11:32 UK
US loses cotton subsidies fight
US cotton farmer harvesting
The US is the world's second-largest producer of cotton
The US could face billions of dollars in trade sanctions for failing to scrap illegal subsidies paid to American cotton growers.

The World Trade Organisation ruling is a victory for Brazil's cotton industry and for West African states which say the payments harmed their producers.

Brazil hailed the ruling, saying US subsidies had hit world prices, hurting farmers in Brazil and elsewhere.

But US officials believe the payments comply with international trade rules.

Washington is expected to make an appeal against the ruling.

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.

"It wasn't changed," he told the Associated Press (AP) news agency just after the ruling was released confidentially to US and Brazilian officials in Geneva.

The office of the US Trade Representative in Washington confirmed the news, saying the US was "very disappointed".

Brazil has reserved the right to impose annual sanctions of up to $4bn on the United States but would probably seek less in retaliatory measures because the US has removed some of the offending subsidies, AP notes.

Oxfam official Gawain Kripke told the BBC that the ruling would also have a beneficial impact on African cotton farmers, if Brazil is successful in reducing American cotton subsidies.

But if they are not then small countries, like Mali or Burkina Faso, wouldn't really hurt American producers very much.

"The truth is that it takes a bigger country to really make the US comply, because the market has to be big enough that the US is worried about it," he said.

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