Cotton subsidy is ruled illegal

The United States has failed to scrap a series of illegal subsidies paid to American cotton growers, the World Trade Organization declared Tuesday, opening the door to Brazilian trade sanctions worth billions of dollars.

The formal release of the ruling is a major victory for Brazil’s cotton industry and for West African countries that claim to have been harmed by the U.S. payments.

“The United States has failed to comply,” the three-member WTO compliance panel said.

Details of the 188-page decision have been known since July, when the panel delivered its interim findings confidentially to the United States and Brazil.

The two nations confirmed at that time and again in October that the panel found that export credit guarantees and U.S. subsidies under the 2002 farm bill unfairly helped American cotton farmers undersell foreign competitors.

Brazil has reserved the right to impose annual sanctions of as much as $4 billion on the United States, but would probably seek less in retaliatory measures because the U.S. has removed some of the offending subsidies.

The office of the U.S. trade representative in Washington said it was considering a final appeal.

“We are very disappointed with the compliance panel’s findings,” spokeswoman Gretchen Hamel said. “We continue to believe that support payments and export credit guarantees under our programs are fully consistent with our WTO obligations.”

Despite repeated legal setbacks, Washington looks set to continue the payments. The Senate joined the House on Friday in approving a new $286-billion farm bill that would leave cotton programs largely intact for the next five years.