An end to the long and damaging trade dispute between the US and the European Union seemed in sight last night after the EU said it would abide by a World Trade Organisation ruling on banana imports.

However, Brussels signalled it might appeal against some of the WTO decisions.

The WTO ruled this week that the damage suffered by US companies because of the EU's preferential treatment for bananas from former European colonies in the Caribbean and elsewhere was significantly lower than the US had estimated.

It limited the scope of Washington's retaliatory measures and postponed a decision on whether it was legal for the US to impose sanctions on the EU.

The acting EU trade commissioner, Sir Leon Brittan, said that Brussels reserved the right to appeal but would abide by the decision.

The ruling meant there was now "a basis to settle the dispute" with the US, said Mr Simon Fraser, an official in Sir Leon's office. He said the US measures would have to be scaled down.

However, the EU suffered a setback in a related case when a WTO arbitration panel supported a complaint from Ecuador that the EU's banana import regime, favouring former British and French colonies, was incompatible with WTO rules. Changes introduced in January had not eliminated the distortions.

EU officials said yesterday they reserved the right to appeal against the WTO judgment.

In the case brought by the US, the WTO ruled that the damage caused to American companies by the EU's banana import regime amounted to $191.4 million a year, well under an earlier US estimate of $520 million. A WTO official said the $191.4 million figure was final. The US earlier claimed the arbitration award as a major victory.

It was "too early for either side to claim victory", said Mr Fraser.

The US recently started setting up its retaliatory measures in the form of tariffs of up to 200 per cent on several EU products sold in the US.

In Washington, Ms Charlene Barshefsky, US trade representative, said: "The EU has now yet another opportunity to demonstrate that it is willing to respect the rules of world trade."

Caribbean officials expressed disappointment at the outcome of the WTO investigation.