BBC News' Nigel Gooing reports on the poor state of EU-US trade relations

It is the first time that the WTO, whose founders hoped it would resolve trade disputes through negotiation, approved a set of sanctions imposed by one member on another member.

WTO talks on Monday in Geneva

The United States had called for sanctions after a long running dispute over the importation of bananas into the European Union.

The US complained that the EU gives preferential treatment to its former colonies, with its multi-national banana firms losing out.

EU planning change to rules

The WTO agrees and has estimated the US firms have lost £120m($191m) of sales through 'unfair' competition. The Washington government had demanded sanctions worth more than half a billion dollars.

There is a wide range of goods being targeted by the US sanctions. They take the form of £120m worth of import tariffs being imposed on goods ranging from French handbags to German coffee makers.

The sanctions would be backdated to 3 March 1999.

EU trade commissioner Sir Leon Brittan said it was unlikely that there would be an appeal against the substance of the ruling.

Instead the EU was likely to change its rules: "What we have to do is get together with the Americans, Latin Americans, our own people and African, Carribbean and Pacific people and work out changes to the regime," said Sir Leon.

International trade experts see the ruling as a historic moment for the WTO.

Ecuador 'lack the clout'

"The designers of the WTO were hoping that countries would be able to resolve their disputes by withdrawing measures rather than going for tit-for-tat measures," said Jake Werksman, senior lawyer at the Foundation for International Environmental Law and Development.

He said that the last challengers to the EU had been Ecuador but they did not have the clout necessary for a successful trade war.

Were it not for the presence of the US-owned multi-nationals, Chiquita and Dole, it would have been unlikely that the EU would have been brought to the negotiating table, he added.

There are also a range of other trade disputes brewing between the US and EU, among them the import of beef from cattle treated with hormones, genetically modified food and landings rights for noisy aircraft.