The WTO's final report upholds an April preliminary ruling that American government subsidies cause artificially low international prices, hurting Brazilian farmers.
The decision will have no immediate impact on U.S. policy because the United States will appeal the decision, according to a statement from the office of U.S. Trade Representative Robert Zoellick. According to the WTO Web site, the appeals process will last some three months.
"We believe U.S. farm programs were designed to be and are fully consistent with our WTO obligations," the U.S. statement said. "We have serious concerns with aspects of the final panel report"
Clodoaldo Hugueney, an economic official with Brazil's foreign ministry, told the Associated Press, "We are very satisfied and content (of the decision): The document confirmed our expectations."
Critics of U.S. trade policies are hoping Friday's decision will lead to other changes in global trade practices, especially farm subsidies.
"This ruling will attack the multi-billion-dollar corporate welfare at the heart of global trade," Phil Bloomer, head of Oxfam's Make Trade Fair campaign said in a statement issued before the WTO decision was made public. "It's a wake-up call for all rich countries to change the way they've mismanaged and manipulated world trade rules for years in their own interests."
If the ruling is upheld, Oxfam says it has the potential to help West African counties as well as Brazil. Oxfam had calculated that West African countries that rely on cotton exports have lost hundreds of millions of dollars in needed export earnings because of the U.S. subsidies.
In the complaint, Brazil alleged that the United States kept its place as the world's second-largest cotton grower and largest exporter because the government paid $12.5 billion in assistance to American farmers between August 1999 and July 2003.
The ability of the some 25,000 U.S. cotton farmers to sell cotton below cost meant Brazilian farmers lost $600 million in sales during the 2001 season alone, Brazil argued. The United States countered that certain subsidies were not linked directly to production, did not distort trade and therefore do not count toward the WTO subsidy cap.
Both the United States and European Union want to make use of such "decoupled" subsidies.
If the U.S. loses its appeal, it will have to "bring its policy into line with the ruling," according to the WTO online explanation of the dispute settlement process. If the U.S. does not comply and further negotiations with Brazil are unsuccessful, Brazil could ask the WTO for permission to impose limited trade sanctions.
If the U.S. does eventually end subsidies to its cotton farmers, some of them may shift to other crops.
"The cotton business will have a hard time surviving without subsidies at current prices," Mississippi cotton farmer John Rogers Brashier told Bloomberg news. Brashier, who also grows soybeans and corn, said he would "definitely grow less'' cotton.