The US could face billions of dollars worth of retaliatory sanctions against its products after failing to overturn a World Trade Organisation (WTO) ruling that it paid illegal subsidies to its cotton farmers.

In a decision yesterday (2 June), a WTO appeals panel upheld its verdict last year that the subsidies breach global commerce agreements.

The ruling means that Brazil, which launched the complaint, can ask the WTO to approve sanctions on imports of goods and services from the US.

In a dispute going back to 2002, Brazil has accused the US of paying out $12.5bn in subsidies and export credit guarantees to its farmers.

It also alleges the US kept its position as the world's second-biggest cotton producer because of the subsidies.

The US, however, maintains it has made the changes necessary and that it has been complying with all WTO rules since 2004.

This includes eliminating the so-called Step 2 programme which meant US exporters and manufacturers would no longer receive an incentive for buying higher-priced cotton from US cotton growers.