The United States lost its final appeal Monday in a billion-dollar trade dispute with Brazil over subsidies to US cotton growers.

A World Trade Organisation appeals panel reversed parts of an earlier ruling made last December, but found that, on the whole, the US payments breached global commerce agreements.

Brazil can now ask the WTO to authorise retaliatory trade sanctions on the US that could run into billions of dollars (euros) until Washington scraps the payments.

US lawmakers voted last month to overturn a veto by US President George W. Bush and force through a farm bill worth US$290 billion (€187 billion) that will largely maintain the cotton payments for the next five years.

Rejected complaint

US trade officials said they were disappointed with the WTO panel's ruling and rejected Brazil's complaint that the payments distorted the global cotton market.

"We believe that the changes made by the United States brought the challenged payments and guarantees into full compliance with the WTO's recommendations and rulings in the original cotton dispute," said Sean Spicer, spokesman for the US Trade Representative.

"There is no basis to say that US payments are today having any impact on cotton prices," he added.

Brazil and several West African cotton-producing countries have long claimed that their farmers suffer because of Washington's payments to US cotton growers, which amount to some US$3 billion (€1.9 billion) a year.

Any trade sanctions imposed by Brazil will likely target US trademarks, patents and commercial services, the South American country has warned.