US loses in cotton dispute at WTO

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 US cotton growers.

A World Trade Organization (WTO) panel upheld last year's ruling, which said that the subsidies helped US cotton growers undercut foreign competitors.

Brazil, which brought the case in 2002, must now decide whether to impose retaliatory trade sanctions on the US.

The US said it was "very disappointed" by the ruling.

"We believe that the changes made by the United States brought the challenged payments and guarantees into full compliance with the WTO's recommendations and rulings," Sean Spicer, a spokesman for the US Trade Representative Susan Schwab, said.

Sanctions

The ruling allows Brazil to seek WTO approval for more than $1bn a year in sanctions on imports of goods and services from the US.

The WTO suggested that it could retaliate by suspending US intellectual property rights.

US cotton subsidies are one of the most contested issues in the Doha round of world trade talks.

Developing country producers, especially in Africa, say the US subsidies squeeze their own poor farmers out of the market.