GENEVA -- The World Trade Organization set up an arbitration panel Thursday to assess the losses incurred by the United States and Canada because of a European Union ban on hormone-treated beef.
The panel must report back by mid-July. At that point, the United States and Canada will be entitled to slap punitive 100 percent duties against EU products ranging from chocolate to mineral water to offset losses incurred by the ban, which has been ruled illegal by the WTO.
The go-ahead for both the sanctions and arbitration closely follows the U.S. imposition of $191 million worth of sanctions in a dispute over EU import restrictions on bananas distributed by U.S. multinationals like Chiquita and Dole Foods.
In the beef clash, Washington wants to slap punitive tariffs against $202 million of EU exports, while Canada has threatened sanctions on trade worth $51 million.
EU delegate Ian Wilkinson said the $250 million total "exceeds by a long way any legitimate loss they might have suffered."
U.S. trade ambassador Rita Hayes said Washington would still prefer a negotiated settlement to avoid sanctions, but that the EU had shown this was impossible.
"The EU must and should meet its WTO obligations," said Hayes. "To do anything less would jeopardize the credibility and integrity of the WTO."
Washington has drawn up a preliminary list of goods worth $900 million, including Danish canned hams, foie gras, truffles, Belgian chocolates, French mustard, Perrier and other mineral waters, chestnuts and chewing gum.
The tariffs would double the price of the targeted products and make them prohibitively expensive for American consumers. It would also spell possible economic ruin for European manufacturers involved.
Hayes said once the WTO arbitration panel had set the amount of damages, then Washington would issue a final list of products for retaliatory duties.
EU delegate Jean-Jacques Buffet complained that Washington should narrow down the list now so European producers could prepare themselves.
But he indicated there was little chance of reaching a compromise -- for instance by resuming beef imports and labeling them as U.S. beef as Washington has suggested.
The EU maintains that six hormones used -- three of which occur naturally -- may cause cancer. Pending the result of further scientific studies, due out by the end of this year, it is refusing to lift the ban even though it was supposed to do so by May 13 under WTO rules.
U.S. officials have long accused Europe of acting for political rather than health motives.
The "mad cow" scare in Europe sent beef consumption plummeting and political leaders are worried about provoking a consumer backlash -- and upsetting the powerful farming lobby -- over hormone-treated beef.
Jitters about eating meat will likely increase because of this week's escalating scandal over cancer-causing dioxin in feed given to Belgian poultry and possibly pigs. The EU commission has imposed an Europe-wide ban.
Some 90 percent of the beef produced in the United States and Canada uses hormones approved by the regulatory U.S. Food and Drug Administration to make cattle grow faster and bigger.
"The U.S. experts and evidence from numerous studies over the past four decades confirm very clearly that the six hormones cited are safe when used in cattle," said Hayes. "There is no health risk from U.S. beef."