The WTO gave European nations and other countries the go-ahead to impose punitive duties on US exports ranging from lobsters to trucks because of Washington's failure to repeal a law the WTO says unlawfully protects the US steel industry.
American officials quickly reassured WTO members that the US would comply with a WTO ruling declaring the US law illegal, and that there would be no need for sanctions. But other members of the organization dismissed the assurances and said they would move to begin imposing penalties.
The EU and other plaintiffs were on Friday given formal WTO authorization to retaliate against the US measure by imposing new duties on an array of American products, including cod, cigarettes and textiles, said Amina Mohamed, Kenyan ambassador to the WTO and chairwoman of the organization's dispute settlement body.
The products, EU officials say, were chosen because they are produced in politically important parts of the US, and the new duties "could help Congress focus its mind on compliance," said former EU trade spokeswoman Arancha Gonzalez, who stepped down this week.
Among the products to be hit with punitive duties is heavy machinery made by Caterpillar Inc, based in Illinois, the home state of US House Speaker Dennis Hastert, among the most powerful members of Congress.
At issue is a 2000 law that allows US companies to receive proceeds from duties levied by the US government on foreign products allegedly "dumped" -- sold at below-market prices -- in the US.
US officials have alleged that dumping makes it impossible for US producers to compete and say the law evens the playing field.
The US steel industry has been the major beneficiary of the law, which was named for its sponsor, West Virginia Senator Robert Byrd. Other beneficiaries include the makers of pasta and candles.
Eight countries -- including the EU, Japan and Brazil -- complained to the WTO about the law, and two years ago the organization ruled that the legislation breaks trade laws by punishing exporters to the US twice, fining them and then passing on the fines to competitors.
The EU, Japan, South Korea, India and Canada have submitted to the WTO lists of US exports that could be sanctioned, and new EU trade chief Peter Mandelson said Tuesday the sanctions could be applied early next year.
The value of the sanctions has yet to be determined, but trade officials have said they could amount to more than US$150 million a year. The figure would be based on fines collected over the previous year, not the total since the Byrd amendment became law.
US officials said on Friday that the US would comply with the ruling that declared the law illegal, but did not specify how.
"We do not believe that it will be necessary" to apply the sanctions, US trade official Steven Fabry told Friday's meeting.
A spokeswoman for the US Mission in Geneva, speaking on condition of anonymity, said the US planned to comply with the ruling in a way that would protect American jobs.
But many WTO members expressed skepticism at US assurances of compliance.
"The United States cannot point to any progress for the repeal of the Byrd amendment," even though Washington "has received ample time to bring itself into compliance," Canadian trade official Rambod Behboodi said.
EU trade official Raimund Raith told the meeting that Brussels wants the Bush administration to "transmit this message to Congress" and defend "US credibility in the WTO."
So far, the US government has given American firms more than US$800 million since 2000, and the latest round of payouts could total another US$290 million.
In August, a WTO arbitrator approved penalties on US goods, saying these should be worth up to 72 percent of the fines imposed on foreign firms by US authorities and handed to American companies. The arbitrator also suggested the winners should submit lists of goods to be hit by potential sanctions.
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