The Brazilian government said on Friday it welcomed a US move to cut cotton subsidies this week but that the move was insufficient to comply with a World Trade Organisation ruling.
Brazil is studying whether to seek a dispute panel in the WTO to decide if the United States complied with a 2004 ruling that US cotton subsidies were illegal and distorted global trade.
The case gained a high profile after last month's collapse of the Doha round of global trade talks.
On Tuesday, the United States repealed the "Step 2" cotton support program, saying it thereby terminated export subsidies and import substitution subsidies cited by the WTO.
Brazil's Foreign Ministry said in a statement the repeal was a "positive step" but "insufficient to fully comply with (WTO) determinations in the cotton case."
It said the "main US internal (farm) support mechanisms were still in place, assuring artificially high levels of cotton production and exports by US farmers."
Brazil is to decide formally on August 16 whether to ask the WTO to create a dispute panel. The WTO gave Washington until July 2005 to start eliminating the subsidies, but the Bush administration failed to do so.
In response, Brazil threatened to exercise its right to retaliate by imposing billions of dollars in trade sanctions on the United States. Brazil later agreed to hold off on the sanctions to give Washington more time to comply with the ruling.
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