World Trade Organization (WTO) chief Roberto Azevedo said Thursday he expected Brazil and the United States to reach a deal on their cotton dispute.
Brazil's foreign trade council Camex on Wednesday said it would hold public consultations next month before deciding if it will apply cotton sanctions in protest at US subsidies.
The two countries reached agreement on the issue in 2010 but Camex said it was preparing the ground for "possible application of sanctions," a move which won the approval of Brazil's National Industry Confederation (CNI).
"I expect the parties to continue negotiating to avert measures that could restrict or distort bilateral trade," the official Agencia Brasil quoted Azevedo as saying after meeting with CNI President Robson Andrade.
In 2009, the WTO, in a rare move, allowed Brazil to take cross-retaliatory measures worth $830 million in response to US subsidies to American cotton producers, ruling they were discriminatory.
The WTO accepted Brazil's argument that the US subsidies distort the market and hit Brazilian exports.
In 2010, before Brazil launched threatened sanctions, Washington proposed an accord under which it would pay an annual $147.3 million spread out in monthly instalments to Brazil's Cotton Institute pending a new US farm bill phasing out cotton subsidies.
But Camex observed that "three years have gone by and no new farm bill has been approved."
And it added that since September "the United States has not been making the payments" either.
Wednesday, CNI said that public consultations next month would allow the government and the industry to assess the impact of any retaliatory sanctions and would give Washington extra time to meet its obligations.
CNI said approval of a new version of the US farm bill would bring a final resolution of the issue.