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World News

WTO allows Brazil sanctions in US cotton row

GENEVA (Reuters) - The World Trade Organization set conditions for how Brazil can retaliate against the United States over its cotton subsidies on Monday, but the two sides began another fight over what the sanctions were worth.

Brazil said the ruling would entitle it to about $800 million in sanctions against the United States this year, including $340 million of “cross-retaliation” against intellectual property or services.

The United States said the sanctions would be worth about $300 million, and that Brazil would be unlikely in the near future be able to retaliate against intellectual property -- for instance, lifting patent protection on pharmaceuticals, rather than simply raising tariffs on U.S. goods.

“While we remain disappointed with the outcome of this dispute, we are pleased that the arbitrators awarded Brazil far below the amount of countermeasures it asked for,” U.S. trade spokeswoman Carol Guthrie said in a statement.

POLITICIZED ISSUE

The complex WTO arbitration ruling brings to a climax one of the most politicized disputes in WTO history, which goes to the heart of developing countries’ calls to reform world trade in agricultural goods.

Brazil is the plaintiff in this case, but U.S. subsidies have affected cotton producers all over the world, especially in sub-Saharan Africa, where the entire gross domestic product of most cotton exporters is smaller than subsidies paid by the United States to its 25,000 cotton farmers.

The United States is also under pressure to cut cotton subsidies in the WTO’s Doha round on a new trade deal, on which key ministers are meeting in Delhi this week.

U.S. cotton farmers complained the decision is outdated. Now, hurt by recession and competition from China, India and even Brazil, U.S. cotton production has shrunk 46 percent since 2005 and exports by 25 percent.

CONFLICTING INTERPRETATIONS

Brazil had sought $2.5 billion in annual retaliatory trade sanctions in the dispute but the United States had said a figure of $20-30 million was appropriate.

In one 132-page ruling, the WTO said Brazil was entitled to annual retaliation of $147.3 million because of the impact of U.S. marketing loan and counter-cyclical payments.

In a second 152-page ruling, the WTO said Brazil was entitled to compensation for U.S. export credit guarantees, this compensation would be $147.4 million for the fiscal year ended September 2006, and set by formula for other years.

Cross-retaliation would be possible if compensation in a given year rose above a certain level of imports of U.S. consumer goods, the WTO said.

The Obama administration will talk to Congress and industry stakeholders about cotton subsidies in the light of the ruling, the U.S. Trade Representative’s office said.

Additional reporting by Raymond Colitt in Brasilia, Roberta Rampton and Doug Palmer in Washington

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