WTO hits U.S. with sanction

GENEVA | American goods will face about $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 United States over the past seven years. The South American country sought to target American goods and drug patents for $2.5 billion worth of economic retaliation.

The WTO ruled the sanctions should vary depending on U.S. payments each year. Arbitrators used 2006 as a base year for the ruling, saying 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 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.

Ms. Guthrie said the United States was 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U.S. patents and trademarks, and for a one-time award of $350 million in penalties for a subsidy Washington has already repealed.

Brazil’s WTO ambassador, Roberto Azevedo, said the award was significant because it is the “second largest that has ever been authorized in the WTO’s history.”

But he said the actual sanctions may be much larger than what the 2006 base year suggests. For this year, he estimated the formula would mean that Brazil could set $800 million worth of sanctions.

Of that, he said $340 million could be from U.S. services and intellectual property rights, such as patents and trademarks.

Monday’s ruling was the fifth major decision since the Brazilian government brought the case to the WTO in 2002, charging that the United States 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.