The World Trade Organisation (WTO) has authorised the EU to impose a record $4 billion dollars a year of trade sanctions against the United States in a dispute over tax breaks for US multinationals.
Brussels presented a list of US products against which it may now impose punitive duties, complaining that Washington had failed to comply with a WTO ruling against the tax breaks.
The level of retaliation is the highest ever authorised by the Geneva-based trade body in its eight-year history, but the authorisation does not mean the measures automatically take effect, a source said.
The EU said it would give the US until the autumn to change the so-called foreign sales corporations tax system (FSC).
US companies such as Boeing and Microsoft have benefited from the FSC system which allows US firms carrying out business through subsidiaries in offshore tax havens to benefit from reduced export taxes.
The EU has listed 95 categories of US products on which it could impose additional duties of up to 100 per cent that range from dairy, cereal, meat and vegetables products, to wood, leather, fur and textiles.
The EU first challenged the US tax breaks in 1997 on the grounds that they provided a de facto subsidy that gives US companies an unfair advantage over European rivals.
The WTO confirmed in January 2002 that the FSC system flouted global trade rules, and arbitrators later agreed with the EU that just over four billion dollars would constitute "appropriate countermeasures" based on the trade impact of the US policy.
Washington had contested the level, arguing sanctions should be not more than $956 million.
AFP