Brazil seeks WTO probe of U.S. farm subsidies

Brazil will request that the World Trade Organization formally investigate U.S. farm-subsidy programs, including payments to U.S. corn producers for ethanol production, a Brazilian Foreign Ministry official said.

Brazil, which has already won a series of WTO rulings over U.S. cotton subsidies, is a major producer of ethanol.

The dispute could become a major case for the WTO, which has not dealt with energy issues during its 12-year history. It also could become a controversial topic for U.S. presidential candidates as they prepare for the primaries in Iowa, which produces the most ethanol.

The U.S. and Brazil held consultations last month after Brazil accused Washington of exceeding the $19.1 billion that it is permitted under WTO rules to spend on the most controversial forms of farm subsidies in six of the past eight years. Brazilian trade negotiators also say the U.S. gave illegal export credit guarantees to farmers, largely echoing an earlier complaint by Canada. Included in its complaint are what the Brazilians call "energy subsidies," including tax exemptions on diesel fuel and gasoline.

"Ethanol results from agricultural subsidies," Roberto Azevedo, head of the trade division of Brazil's Foreign Ministry, told the Associated Press. "You don't produce ethanol from rocks or underground. It's derived from agricultural commodities."

Azevedo added that he was not sure when Brazil would formally ask the WTO to launch an investigation. The next meeting of the WTO's dispute settlement body is scheduled for Sept. 25, and new items must be added to its agenda by Thursday.

Brazil has been promoting its sugarcane-based ethanol worldwide as a cheap, eco-friendly alternative to fossil fuels, whose prices are soaring. Although Brazil's business is booming, Brazilian officials say exports have been held back by high U.S. and European tariffs. Brazil first filed its complaint in July when the two countries blamed each other for the collapse of the WTO's Doha Round of trade talks.

Gretchen Hamel, a spokeswoman for the Office of the U.S. Trade Representative in Washington, said in July that claims of wrongdoing by the U.S. were "unfounded when they were made by Canada, and they are just as unfounded when they are made by Brazil."