WTO to Probe U.S. Cotton Subsidies

The World Trade Organization opened a formal investigation into whether the United States has complied with an order to scrap a series of illegal subsidies paid to American cotton growers, trade officials said Thursday.

Washington had blocked Brazil’s request this month for the WTO to investigate U.S. compliance with a 2005 decision that said billions of dollars in U.S. government handouts had unfairly distorted international cotton prices.

If the WTO finds that the U.S. has failed to remove all subsidies previously ruled illegal, Brazil could ask for permission to impose retaliatory sanctions against U.S. goods.

“With respect to some of the ... recommendations and rulings, the United States has adopted no implementation measures at all,” Brazilian Ambassador Clodoaldo Hugueney told the WTO’s dispute settlement body. “The implementation measures it has adopted fall far short of compliance.”

The United States rejected the criticism and said it had sufficiently overhauled its cotton regime after scrapping two export credit guarantee programs. And last month, it repealed the so-called Step 2 cotton-marketing program that made payments to exporters and domestic mill users as compensation for buying higher-priced American cotton.

“The United States has gone to extraordinary lengths to implement

Under WTO rules, Washington had the right to delay the establishment of an investigative panel only once.

Brazil alleges that the U.S. has retained its place as the world’s second-largest cotton grower because Washington paid $12.5 billion in subsidies to American farmers from August 1999 to July 2003.

The United States is the world’s second-largest exporter of cotton after China. Brazil is fifth.