Charles Reis, trade spokesman at the US Embassy in London: "Washington has been left with no choice"

The European Union still bans the meat, which is treated with hormones, and now North America is retaliating by seeking to impose tough sanctions on about $117m-worth of European goods.

The World Trade Organisation has ruled that an EU ban on hormone-treated beef has cost the US $116m and Canada $7.4m.

This is well below the figures claimed by both countries, which had argued that their farmers had lost out to the tune of $202m and $75m respectively.

The WTO's ruling is a partial victory for EU diplomats, who say they are "very pleased that the arbitrators have taken our arguments into account". They will now do their best to prevent the imposition of sanctions.

Sanctions vs compensation

Trade Minister Brian Wilson: "We accept the WTO decision"

The EU accepts US claims that damage has been done, and has repeatedly offered to pay North American farmers compensation.

But the US and Canadian governments want to impose sanctions on European exports, feeling that this would provide a bigger incentive for the EU to reconsider its position.

Philippa Thomas reports: "Farmers are ready to back a trade war"

The size of sanction would be based on the WTO's damage assessment.

EU officials hope that the United States may still consider compensation to make up for its farmers' losses. An EU official said that such a solution would be "much better for all the parties concerned".

Health worries

North American farmers use implants of natural and artificial hormones and an hormonal feed additive to boost meat yields. The extra hormones make cattle grow muscle faster than untreated animals.

Mick Sloyan of the Meat and Livestock Commission: This will cost the British pork industry £8.5mn

But EU scientists are worried that hormone-treated beef carries health risks, possibly causing cancer and triggering reproductive disorders in men.

US and Canadian farmers and health experts dispute this.

Another contentious issue is whether all North American farmers follow the rules on placing the hormone implants in the animals, or whether some take a shortcut that increases the amount of hormones ending up on dinner plates of beef consumers.

The BBC's Jonathan Beale explains why the dispute is not likely to be resolved soon

A decade ago, the EU imposed an import ban on all hormone-treated beef, arguing that it wanted to protect European consumers while it carried out its own research into the issue.

US officials have accused the EU of dragging its feet and using drawn-out scientific research as a pretext for protecting its own beef farmers.