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Brazil delays trade retaliation against U.S

By Maria Carolina Marcello

BRASILIA (Reuters) - Brazil delayed slapping import duties on U.S. goods for two weeks on Monday after getting a proposal from Washington aimed at settling a long-standing dispute over U.S. cotton subsidies.

Diplomats, trade experts and business leaders are closely watching the case, one of a few in which the World Trade Organization has allowed the wronged party to retaliate against a sector not involved in the dispute. Brazil would become the first country to apply cross-retaliation under WTO rules.

Brazil will suspend retaliation measures against U.S. goods until April 22, Lytha Spindola, executive director of the government's foreign trade chamber CAMEX, told reporters in the capital Brasilia.

The retaliation would be suspended for another 60 days if Washington takes further steps requested by Brazil.

Those steps include changing the credit guarantee program for U.S. cotton exports and laying out a framework for an assistance fund worth $147 million a year for Brazil's cotton industry.

Brazil also wants the United States to declare the state of Santa Catarina free of Aftosa fever, a move that could open up more markets for Brazilian meat exports.

"If they effectively take these measures, a new period of 60 days will take effect on April 22 for there to be a complete negotiation," said Carlos Cozendey, the head of economic issues at Brazil's Foreign Ministry.

On March 8, Brazil detailed 102 U.S. goods that would be subject to import tariffs within 30 days unless an agreement was found. It later disclosed a list of U.S. patents and intellectual property rights it could restrict.

The total value of both sets of retaliatory measures would be $829 million.

The WTO gave Brazil the formal go-ahead last year to impose sanctions on U.S. imports after it ruled the U.S. cotton subsidies and export guarantee program was illegal.

Brazil has indicated it could accept a U.S. pledge to send a reform bill to Congress if Brazil were compensated for damages until the bill's approval.

Some Brazilian business leaders have proposed compensation through U.S. investments into cotton research, as well as the United States accepting more imports of Brazilian beef, orange juice and ethanol.

(Writing by Raymond Colitt and Stuart Grudgings; Editing by Philip Barbara)

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