GENEVA —?The World Trade Organization?agreed Tuesday?to establish a?panel to examine?Brazil’s complaint?that U.S. subsidies to American producers and exporters of upland cotton violate global trade rules.

This story first appeared in the March 19, 2003 issue of WWD.  Subscribe Today.

The subsidies for the year ended July 31 “totaled almost $4 billion,” Brazilian WTO ambassador Luis Felipe Seixas Correa told delegates to a session of the agency’s dispute-settlement body.

Deputy U.S. Trade representative Linnet?F. Deily called the charges unfounded.

“It appears that Brazil is attempting to litigate for a reduction in U.S. cotton support that is not embodied in U.S. WTO commitments,” he continued. He said the Bush administration believes “the support programs are within?our allowable WTO limits and consistent with our WTO obligations.”

Deily said the U.S. will “vigorously defend” the programs.

Countries including Argentina, Canada,?China, India, Pakistan, Taiwan, and Venezuela, as well as the EU, said they would participate in the dispute proceedings as interested third parties.

If the panel upholds Brazil’s charge, the result could have a major influence in shaping the outcome of talks to reform global subsidy rules in the Doha global trade talks, diplomats said.

Brazil contended the subsidies are trade distorting and have a significant negative effect on the production and commercialization of cotton in Brazil and worldwide.

It further claimed the effect of the measures “is significant price depression and price suppression in the markets for upland cotton in Brazil, the U.S. and other third-country markets, and the world market.”

Brazilian diplomatic sources said the U.S. subsidies caused damages of $640 million?a year and led to a decline in Brazilian cotton production of 160,000 tons.

A recent study by Oxfam, the British charity and advocacy group for the poor, said U.S. support to its 25,000 cotton producers totaled about $3.9 billion per year and cost poor African cotton exporting nations about $300 million a year in lost revenue.