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Last Updated: Friday, 7 October 2005, 04:29 GMT 05:29 UK
US-Brazil rift on cotton deepens
Brazil says US subsidies are hurting smaller cotton producers
Brazil wants fairer access to trade markets
The US has said it may retaliate against Brazil if it imposes sanctions in a cotton trade dispute.

US Deputy Secretary of State Robert Zoellick said the US could remove trade preferences which are worth more than $2bn (1.1bn).

Earlier, Brazil asked the World Trade Organization (WTO) for permission to impose penalties on Washington.

Brazil says the US has failed to meet a deadline for cutting its aid to US cotton farmers.

During a visit to Brazil, Mr Zoellick warned: "There's always a danger in trade relations that things start to slip out of control ... If one decides to retaliate, who knows, maybe others will too."

He added that sanctions should only be taken when neither side was trying to fix a problem.

The US had introduced legislation in Congress to address Brazil's concerns and was also acting through the Doha round of world trade talks, he said.


Mr Zoellick's comments followed calls from US Agriculture Secretary Mike Johanns for Washington to overhaul its system of subsidies for the country's farming industry.

Without such measures, the US would be unable to set out its own terms for access to world market, Mr Johanns warned during a lunch with leaders from the agricultural sector.

"We must use the WTO to force open markets for US products," he said.

"Let me be clear that the WTO will not write our next farm bill, but we must show leadership in the area of support program policy to gain market access in other countries."

On Thursday, Brazil asked the WTO for permission to impose $1bn in sanctions on the US for its failure to make changes to the subsidy system.

Brazil is at the forefront of efforts by the G20 group of developing nations to win more access to foreign markets.

Poorer countries say US subsidies distort prices and harm competition by lowering export prices for cotton.

Last month, US trade representative Rob Portman insisted the country was taking action.

But reform legislation sent to Congress had not yet been passed as the government had been forced to deal with the impact of Hurricane Rita, he added.

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