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Last Updated: Friday, 27 July 2007, 23:19 GMT 00:19 UK
Brazil claims WTO cotton victory
US cotton farmer harvesting
The US is the world's second-largest producer of cotton
Brazil has claimed a victory over the US after the World Trade Organization (WTO) upheld many of its complaints over subsidies paid to cotton farmers.

The US has been accused of unfairly helping its farmers, distorting the price of cotton and make it harder for developing nations to compete.

Brazil called on the US to comply with the WTO's preliminary ruling, warning of retaliation should it not.

The US said it was disappointed by the ruling and would protect its farmers.

It argued that it had already taken sufficient steps to meet WTO requirements, and had scrapped a number of payments and credits.

However, the WTO said that it was "very disappointed with these results".

It added that: "The changes made by the US 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."

'Right to retaliate'

Subsidies, particularly those paid to the US cotton industry, have been at the heart of WTO trade talks that have been sputtering and stalling.

Earlier this week, the WTO urged its members to make a fresh effort to find a global trade agreement during talks scheduled for September.

"The panel has recognized most of the points that Brazil has raised," said Clodoaldo Hugueney, Brazil's ambassador to the WTO, adding that his first reaction to the ruling was one of satisfaction.

US Agriculture Secretary Mike Johanns had a different view, adding that the US would work "very very hard" to protect the financial payments it made to cotton farmer.

"Brazil claims once again to have largely defeated the US," Mr Johanns said.

"They have been emboldened by a declaration that they have a right to retaliate."

The WTO's member nations are due to meet in September to try and save the current Doha round of trade talks, which started in Qatari capital in 2001.

It has proved impossible to find an agreement as developed nations and less-developed countries have clashed over tariffs levels, the amount of state aid given to key industries, and the level of access to markets.

As well as the stalemate between the US, the EU and other developing nations, there is also deep opposition to a trade deal in the US Congress.

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