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The United States has dropped its complaint against Brazil for allowing the production of generic Aids-treatment drugs within the South American country.

The Bush administration made the announcement as a three-day special United Nations session on HIV/Aids was getting underway in New York.

Thousands of patients are expected to benefit from the move.

Trade Representative Robert Zoellick said the US and Brazil had established a new mechanism to address the dispute, which centers on where certain Aids drugs will be manufactured.

"The Bush administration wants to resolve trade disputes by seeking constructive solutions to problems that arise," Mr Zoellick said.

"With this positive step, we will be able to harness our common energy toward our shared goal of combating the spread of this dangerous virus," he said.

Protectionist measure

The US filed its complaint with the World Trade Organisation (WTO) in February over a Brazilian law that permits a local company to manufacture a product, made by a foreign company, if that company fails to initiate production within Brazil within three years.

The US complained that the Brazilian law discriminated against all imported products and was a protectionist measure.

For its part, Brazil had accused the Bush administration of launching an attack on its successful Aids-treatment programme, adding that the pharmaceutical industry exerts a disproportionate influence on Washington.

Brazil has said its law permitting production of generic drugs was an "important instrument" in battling HIV/Aids. It has halved annual deaths from the disease since 1995, thanks to free distribution of mainly Brazilian-produced Aids drugs.

Brazilian president Fernando Henrique Cardoso has vigorously defended his country's practice of ignoring patents on anti-Aids drugs.

Free treatment

The charity Medicins Sans Frontieres says the Brazilian Government's programme has allowed it to offer free treatment to more than 90,000 patients.

The group said the programme would be threatened if Brazil had to pay higher prices for imported drugs.

It is not the first time the US has come under fire over its objection to the production of generic Aids drugs.

The US in recent years has come under much scrutiny for supporting the intellectual property rights of US drug manufacturers who do not want foreign countries manufacturing cheaper generic equivalents.

Most of the controversy has focused on Africa, where even generic drugs are beyond the financial means of those suffering from HIV/Aids.

In April, the United Nations Human Rights Commission voted overwhelmingly to support a Brazilian resolution calling for universal medical treatment for people with HIV and Aids.

The UN says Aids has killed 22 million people and orphaned 13 million children. The global infection rate is now 15,000 people a day, 5 million a year, and 36 million are living with the virus.