It also threatened to retaliate if the full WTO report, which is due out in October, found the United States had failed to fulfil an earlier order to remove the subsidies.

"Brazil is greatly satisfied by the conclusions made in this report," said Roberto Azevedo, the foreign ministry's deputy secretary for economic affairs.

"We are very satisfied that it takes into consideration Brazil's concern that measures taken by the United States to address the issue are not enough."

Brazil believes its cotton producers are being harmed by US subsidies to its own cotton farmers.

The WTO ruled in 2005 that this aid amounted to illegal subsidies which skewed international trade by undermining global cotton prices, and the United States assured last year that it had ended the program.

However, Brazil believes measures taken by Washington did not go far enough and called for the WTO to investigate.

"If, at the end of the current process, it is decided that the US is not fulfilling its obligations, Brazil reserves the right to carry out reprisals," Azevedo told a press conference.

In 2005, Brazil asked for the right to impose billions of dollars worth of sanctions on the United States but agreed to wait for a final WTO decision.

According to US government figures, the subsidies excluding federal insurance guarantees for farmers stood at 3.1 billion dollars (2.4 billion euros) for the 2005 crop year, down from 3.7 billion for 2004.