"They've got the go-ahead," said Kenyan ambassador Amina Muhammad, chairwoman of the WTO's Dispute Settlement Body on Friday.
The case, one of a number pitting Brussels against Washington, involves the so-called Byrd amendment, which the WTO (World Trade Organisation) has repeatedly said breaks trade rules by handing out duties raised in anti-dumping cases to US firms.
The opening round of punitive duties - which will be reviewed each year - is relatively modest, when compared, for example, with the $4 billion the EU was awarded in a case over corporate tax breaks. But the figure could soar in coming years.
"We are delighted that the authorisation confirmed our case. We hope that the US will bring the legislation as soon as possible into conformity"
EU trade spokeswoman
The administration of US President George Bush has called on Congress to drop the law.
But it enjoys wide support among legislators, who see it as a way of punishing foreign companies accused of dumping, or exporting goods at below the cost of production.
EU, Japan benefit
The lion's share of the right to retaliate goes to the European Union and Japan, because their companies are the most affected. Brussels has warned it could slap additional duties on US goods early in 2005 if Washington does not repeal the law.
"We are delighted that the authorisation confirmed our case. We hope that the US will bring the legislation as soon as possible into conformity," EU trade spokeswoman Claude Veron-Reville said in Brussels.
The green light for sanctions was automatic because the case has exhausted all the WTO steps for settling disputes, including appeals and arbitration. Only a unanimous decision by all 148 WTO member states, including those seeking the sanctions, could have blocked it.
Both the EU and Japan, given the right to additional levies of $50 million and $80 million, respectively, by arbitrators, have presented the WTO with a list of products they plan to hit
- ranging from sweetcorn to metals and textiles.
Canadian softwood woes
Canada, which along with Brazil, South Korea, India, Mexico and Chile is also involved in the complaint, has said that it is studying whether to impose sanctions and on what.
US legislators wanted to penalise
firms charging less than US rates
The US amendment has been applied to billions of dollars of imports of Canadian softwood, the subject of a separate dispute between the two North American neighbours.
Ottawa has said its WTO-authorised sanctions could reach $720 million in 2007, if the measure stays on the statute books.
The WTO decision was delayed 48 hours after the US, in a rare late objection, demanded assurances that the requests for punitive duties were in line with limits fixed by the trade arbitrators.
Trade tensions between the European Union and the United States are running high over a number of disputes, including mutual accusations of paying illegal subsidies to Airbus and
Boeing, their main civil aviation companies.