US cotton aid illegal, rules WTO

African cotton producers called on the US yesterday to speedily end subsidies to its cotton farmers, after the World Trade Organisation issued a final ruling that such aid - worth more than $12bn in the five years to 2003 - was illegal.

The WTO decision to reject an appeal by the US came in response to a complaint by Brazil. But it will increase pressure on rich countries - the European Union as well as the US - to dismantle their entire structure of subsidies on farm products, that hurts cheaper Third World producers, in particular in Africa. The EU is appealing against an analogous WTO ruling last autumn, against the subsidies it pays sugar producers.

The US, the world's second largest cotton producer and largest exporter, could now face sanctions from Brazil and other cotton producers. But the signs last night were that it would take no immediate action to slash the annual $3bn (£1.6bn) assistance it provides for the 25,000 cotton producers. "Negotiation, not litigation, is the best way forward," a US spokesman said. Washington, he added, would study the final 300-page ruling from the WTO, and consult Congress and representatives of US farm groups.

In fact, suspicions are strong that the US will delay any action until the current four-year-old Doha round of trade liberalisation is complete. That may not be until the beginning of 2006 and possibly later still.

Cotton has emerged as a key issue at the WTO, as the organisation tries to finalise a new global deal to slash subsidies, tariffs and other barriers to trade, and ease the plight of poor countries. Development economists insist that traditional aid flows from the rich world are more than cancelled out by the former's farm subsidies, which hit potential markets for subsistence farmers in Africa, Latin America and Asia.

Samuel Amehou, the ambassador to the WTO of cotton-producing Benin, said: "The WTO verdict confirms that these subsidies are not fair and must be phased out in a very, very short time."

Despite issuing repeated calls for a more equitable world trade system, the Bush administration raised subsidies for US cotton producers in its last major farm bill, in May 2002.