Australian Wool Innovation (AWI) has confirmed signing what it called an historic agreement demanding that People for the Ethical Treatment of Animals (PETA) stop threatening global retailers over the practice of mulesing until 2010.

31 December 2010 is the date that the Australian wool industry has agreed that surgical mulesing will be phased out. AWI has now dropped its court case against the animal rights group in the Federal Court of Australia.

PETA, however, claims the wool growers group had been forced to drop the case. It said that the AWI had abandoned its case and that its campaign would continue "full steam ahead".

"Our message is that when animal abusers sue PETA, it's at their own peril," said PETA founder Ingrid Newkirk. "PETA promises the sheep who suffer greatly in the production of Australian wool garments that the upcoming holiday season will find us protesting all around the world to urge consumers to boycott all products made of Australian wool," continued Newkirk.

PETA said that due to its efforts, that retailers including Liz Claiborne, Abercrombie & Fitch, American Eagle, Timberland, and Limited Brands had moved away from Australian wool.

AWI said it demanded that PETA must "agree to conduct itself within the law and to cease activity which calls for, or threatens to call for a consumer boycott of any specific retailer in relation to the sale of products from mulesed wool until 31 December 2010".

AWI deputy CEO Les Targ said: "This has been a hard fought campaign by Australian woolgrowers that started in October 2004. Since the Federal court case began, PETA's activities have been curbed and demand for Australian Merino wool has grown, unfettered by the influence of the animal rights movement. The last 12 months the value of wool exports has increased by more than AUD$700m (US$600.8m)."

AWI said that the National Mulesing Accreditation Program (NMAP) would continue being rolled out, as well as genetic research into bare breech sheep.