GENEVA — A World Trade Organization panel on Wednesday upheld the majority of Brazil’s complaints about U.S. cotton subsidies, giving Washington until July 1 to end support programs for cotton producers and exporters that violate global trade rules.

The three-member committee found in its 351-page report that the effect of U.S. subsidies “is significant price suppression in the same world market” and that they constitute “serious prejudice to the interests of Brazil.” Opponents of the subsidies say they put poor countries at a competitive disadvantage.

The cotton ruling came after a landmark WTO decision that European Union sugar subsidies are in breach of global trade rules. Wealthy nations’ support programs for their farmers have been the focus of intense debate within the trade body, as many of the world’s poorest nations assert that agriculture is one of the few sectors of the global economy in which they are able to compete.

“Brazil won all points on which they had a major interest,” said a trade lawyer familiar with the findings, who spoke on condition of anonymity. The lawyer estimated that the ruling bans more than $2 billion worth of annual outlay by the U.S., but noted that about $500 million in production subsidies were found not to be in breach.

However, U.S. Trade Representative Robert Zoellick said in a statement that the ruling was “a mixed verdict” and “we strongly disagree with some aspects of the panel, which we will be appealing.”

Zoellick said the panel agreed with the U.S. that “income support provided to U.S. farmers that is fully decoupled from production and prices…has not suppressed or depressed world cotton prices.”

Brazil, 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.

Trade diplomats said the WTO decisions will intensify the pressure in the Doha round of trade talks to negotiate an earlier date for the phaseout of all agricultural export subsidies.

This story first appeared in the September 9, 2004 issue of WWD. Subscribe Today.