Oct. 16 (Bloomberg) -- Brazil may spare the U.S. any retaliation over cotton subsidies because of the political and economic costs, settling for a ``moral'' victory in a World Trade Organization dispute, said Brazilian Agriculture Minister Reinhold Stephanes.

The WTO ruled that the U.S. failed to cut cotton aid enough to comply with global trade rules, the Brazilian government said yesterday. The ruling, which upholds a preliminary report in July, lets Brazil impose tariffs on goods imported from the U.S., the country's main trading partner, and apply other sanctions such as curbs on property rights.

``It's very, very difficult to adopt measures against the United States,'' Stephanes told reporters today in Brussels after meeting European Union officials. ``It is a big power and a big trading partner.''

The remarks highlight the challenge of enforcing international trade rules and upholding the WTO's credibility. A WTO panel first ruled in September 2004 that as much as $4 billion a year in U.S. aid to cotton growers violated trade rules by pushing world prices down because of excess production.

After the 2004 ruling, the U.S. eliminated part of its export-credit guarantees and a program that paid exporters and U.S. mills to buy cotton grown in the country. Brazil argued that the U.S. failed to cut marketing loans and stipends to farmers when crop prices fall below a threshold level, which the Geneva-based WTO also said depresses world cotton prices.

`Moral Effect'

``I see this kind of conflict as the typical situation where you win, but you don't get any compensation,'' Stephanes said. ``Victory has a moral effect only.''

He said his remarks were a ``personal opinion about the complexity of the process of taking retaliation measures'' and the ultimate decision would come from the Brazilian government and President Luiz Inacio Lula da Silva.

Stephanes spoke after a meeting at the European Commission, the 27-nation EU's regulatory arm, which said Brazil was on track to meet demands for improved safety controls on beef by an end-of-year deadline. As a result, a threat of European trade curbs is diminishing.

``Brazil has made significant progress,'' EU Health Commissioner Markos Kyprianou told reporters. ``Remaining problems can be dealt with quite easily.''

In July, European beef producers led by Ireland urged more EU checks on imports from Brazil and a possible ban, saying the South American nation's meat-safety standards might be inadequate. In response, the commission said it had requested more information from Brazil on controls and any further action to protect consumers would come by the end of the year.

In 2005, the EU imported about 520,000 metric tons of beef, of which 350,000 tons came from Brazil, the commission said in July.

To contact the reporter on this story: Jonathan Stearns in Brussels at jstearns2@bloomberg.net

Last Updated: October 16, 2007 15:00 EDT