By  on July 15, 2005

GENEVA — Brazil is expected to ask the World Trade Organization's Dispute Settlement Panel today for authorization to retaliate with $3 billion in punitive sanctions against the U.S. over its failure to implement by July 1 the panel ruling that found U.S. cotton subsidies broke global trade rules.

The move is aimed at keeping pressure on the U.S. to deliver on its commitment last week to comply with the findings, trade diplomats said. Agriculture secretary Mike Johanns said on July 5 that the Bush administration intends to work closely with Congress to make the necessary statutory changes in the cotton payments program and the export credit guarantees found in breach of WTO rules.

Brazil is likely to give the Bush administration "until the fall" to comply with the rulings before it launches new WTO proceedings that could trigger the sanctions, trade sources said. But any legal action by Brazil could take a further nine months before a final determination is made on whether Brazil is given the green light to retaliate.

Meanwhile, a report by the U.S. Department of Agriculture predicts that, spurred by strong demand by China, global cotton exports in the coming marketing year 2005/2006, which begins Aug. 1, will rise 12.8 percent to reach about 8.3 million metric tons.

U.S. exports are forecast to grow by 9.1 percent to 3.1 million metric tons and Brazil's by 21.2 percent to reach 435,000 tons.

Reflecting the demand by China's textile industry, fueled by huge gains in textiles and apparel exports since the removal of quotas on Jan. 1, cotton shipments destined for China are forecast to increase by 133.3 percent to 3 million metric tons, up from 1.3 million the year before.

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