Brazil to harden line on U.S. farm aid post Doha

By Reese Ewing and Inae Riveras

SAO PAULO (Reuters) - Brazil will likely take a hard line against U.S. agricultural subsidies at the World Trade Organization now that the Doha talks have collapsed, trade specialists said on Wednesday.

The WTO's so-called Doha Round of talks to cut trade barriers and farm subsidies collapsed on Tuesday in Geneva, frustrating hopes in Latin America's largest economy for a global deal.

As one of the world's farming giants, Brazil had hoped that a successful conclusion to the talks would have resolved many of its outstanding objections to U.S. agricultural subsidies and tariffs, most notably in the areas of cotton and ethanol.

"With U.S. cotton subsidies, there does not appear to be any way out -- retaliation is the only option for the government now," said Pedro Camargo Neto, who was instrumental in forming Brazil's WTO challenge against U.S. cotton aid.

Earlier this year, the WTO upheld its original ruling against U.S. cotton subsidies in favor of Brazil in the final appeal process lodged by the United States.

"There was some kind of agreement that Brazil would not retaliate because Doha was supposed to solve the cotton problem. But now there is no hope of such a solution," Camargo said. "The government won't like it but the rule is, if you win the appeal, trade sanctions are the only option."

Camargo said he did not see U.S. farm policy changing without Brazil imposing trade sanctions against U.S. products, including intellectual property rights.

ETHANOL DISPUTE BREWS

With the collapse of the Doha Round, litigation against the United States's ethanol import tariff at the WTO also seems more likely.

Brazil's Sugar Cane Industry Association (Unica) had hired lawyers to study the compatibility between the U.S. tariff and WTO rules but decided to give the Doha talks a chance before deciding whether to press the government to back a challenge.

Producers see the 54-cent-a-gallon import tariff as an obstacle to cane-based ethanol exports to the U.S. market.

The Brazilian government has already said it was finishing studies on the issue and that a challenge at the WTO was on the table.

"Going to the WTO and asking the dispute settlement body to analyze the legal basis of the U.S. tariff is now possible," Unica President Marcos Jank said. "Of course, we would prefer a negotiated solution. Litigation could be complicated -- look what happened with cotton."

Unica's president said other options under consideration are working with groups in the United States that also defend the tariff reduction and searching for bilateral talks.

"Bilateral talks are always a possibility but there is little mood now," Jank said, adding that the presidential elections in the United States would make things even more difficult. "I doubt we'll see any results in the short term."