US EU trade war moves closer

A looming trade war between the United States and the European Union over tax incentives for exporters has moved a step closer.

The EU has asked the international authority, the World Trade Organisation, to allow it to impose sanctions said to be worth more than four-billion dollars on selected American exports.

But it may still take several months before the higher tarriffs proposed are implemented.

The EU took action despite new legislation passed by the United States' Congress, which Washington says will bring its tax breaks for exporters into line with current international law.

EU officials argue that the Americans will still, in effect, be subsidising their exports, contrary to free trade rules.

From the newsroom of the BBC World Service