WTO approves $295M in Brazilian sanctions on U.S.

GENEVA -- American goods will face around $295 million in annual sanctions as a result of the United States' failure to eliminate illegal subsidies to U.S. cotton growers, the World Trade Organization ruled Monday.

The result was disappointing for Brazil, which has won a series of rulings against the U.S. over the last seven years. The Latin American country had sought to target American goods and drug patents for $2.5 billion worth of economic retaliation.

The WTO ruled that the sanctions should vary depending on U.S. payments each year. Arbitrators used 2006 as a base year for the ruling, and said U.S. payments would have to increase significantly for Brazil to be allowed to punish American drug patents.

"The cumulated amount of countermeasures to which Brazil is entitled to is $294.7 million," the WTO said in a two-part ruling totaling 269 pages.

Washington had argued that the award should not exceed $30 million.

"While we remain disappointed with the outcome of this dispute, we are pleased that the arbitrators awarded Brazil far below the amount of countermeasures it asked for," said Carol Guthrie, spokeswoman for U.S. Trade Representative Ron Kirk.

Guthrie said the U.S. is also pleased that the WTO rejected Brazil's request for "unlimited" sanctions on U.S. patents and trademarks, and for a one-time award of $350 million in penalties for a subsidy Washington has already repealed.

Monday's ruling was the fifth major decision since the Brazilian government brought the case to the WTO in 2002, alleging that the U.S. was able to retain its place as the world's second-largest cotton producer by paying out some $3 billion to American farmers each year. China is the largest exporter of cotton, while Brazil is fifth.

The WTO's condemnation of the U.S. in September 2004 was seen as a victory for Brazil and for West African countries that claimed to have been harmed by the subsidies. Three decisions since have confirmed that U.S. support programs unfairly help U.S. producers undersell foreign competitors and depress world market prices, dealing a double blow to cotton growers in Brazil and elsewhere.