WASHINGTON — The U.S. on Monday appealed a World Trade Organization ruling that many of the country’s cotton subsidies violated international trade rules.

“We strongly disagreed with some aspects of the panel report issued in September,” said a spokeswoman for the Office of the U.S. Trade Representative. “We still believe the most effective way to address any trade distorting domestic support in global agricultural programs is through a comprehensive reform program, not dispute settlement.”

She said the U.S. prefers to focus on negotiations, “not litigations,” and stressed there will be no immediate impact on the U.S. farm program.

“We will be defending U.S. agricultural interests in every forum we need to and have no intention of unilaterally disarming,” the USTR spokeswoman added.

The WTO dispute panel’s ruling in September upheld a majority of issues raised by Brazil in a complaint filed against the U.S. in September 2002 alleging U.S. cotton subsidy programs violate international trade rules by distorting and depressing world cotton prices. Brazil claimed the system puts poor countries at a severe competitive disadvantage.

The WTO panel said the U.S. must end the cotton subsidies by July 1.

The South American nation, citing U.S. Department of Agriculture figures, said U.S. cotton producers received $12.47 billion in subsidies between August 1999 and July 2003, while the value of the U.S. cotton crop produced during the same four-year period was $13.94 billion.

In its notice of appeal, the U.S. challenged the WTO panel’s conclusions, asserting they were based on “erroneous findings on issues of law and related legal interpretations.” The U.S. has 10 days to follow up the notice with a detailed legal brief, after which Brazil has five days to decide whether it will file a counter-appeal.

A senior Brazilian trade diplomat in Geneva, said, “It’s probable we’ll do that.”

Any changes to the U.S. farm program would require action by Congress and many U.S. lawmakers with agricultural constituencies would fight against reducing or eliminating subsidies for cotton farmers.

William Gillon, international trade counsel at the National Cotton Council, said the association is “hopeful” the panel’s initial findings will be “substantially revised” by the WTO appellate body.

This story first appeared in the October 19, 2004 issue of WWD. Subscribe Today.

Woody Anderson, chairman of the NCC, said in a statement: “A more decoupled U.S. cotton program, a lower loan rate, a lower target price, a stable world market share, an unbiased economic study showing minimal price impacts and Brazil’s own dramatic increase in cotton production all point to a U.S. cotton program that is not causing serious prejudice to Brazil or any other country in the world.”

Following the WTO panel’s decision last month, the NCC said the finding of “serious prejudice seems contrary to 33 years of stability in the share of the world market held by United States cotton, and indeed, a loss of market share in 2002.”

The NCC also pointed to an independent study conduced by Texas Tech University that showed estimated price impacts from the U.S. cotton program ranging from less than 0.5 percent to a little more than 2 percent, or a quarter of a cent to 1.2 cents per pound.

Meanwhile, the international humanitarian advocacy group Oxfam International was critical of the U.S. decision to appeal.

“The appeal casts serious doubts about whether the U.S. has any real intention to reform its unfair cotton industry,” said Celine Charveriat, head of advocacy at Oxfam’s Geneva office.

In a report published Monday titled “Finding the Moral Fiber,” Oxfam called on the U.S. to reform its farm programs and to stop alleged dumping on global markets.

The report also estimates that the U.S measures cost cotton producing poor countries losses of almost $400 million between 2001 and 2003 and claimed “the largest 10 percent of cotton farms in the U.S. receive a staggering 78 percent of subsidies.”

— With contributions from John Zarocostas, Geneva