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The WTO said an appeal panel upheld the ruling handed down last December that found that the US breached trade rules over its subsidies for cotton farmers.
The US "acts inconsistently with its obligations" as its subsidies for cotton producers is "significant price suppression" that constitutes "serious prejudice" to Brazil, the panel found.
Washington had failed to implement earlier WTO findings against US agricultural support, including for cotton farmers, the WTO said.
Last February, Washington had appealed against the decision.
Monday's ruling paves the way for Brazil to demand sanctions.
In 2005, the Brazilian government suggested it would seek to impose $1bn in sanctions on the world's biggest economy.
Brazil estimates that US subsidies for cotton producers were worth $12bn between 1999 and 2002, compared with the value of the cotton produced of $13.9bn during the period. This indicates a subsidy level of some 89.5%.
Groups championing poorer countries' causes have criticised these subsidies, saying they penalise producers from many countries, particularly in Africa, which cannot hope to compete against American cotton farmers.
- AFP
