The United States has failed to fall into line with World Trade Organisation ruling issued more than five years ago which condemned corporate tax break legislation, the global commerce's referee said Friday.
In a report, a panel set up by the WTO's Dispute Settlement Body (DSB) said that legal changes last year had failed properly to repeal the previous US Foreign Sales Corporations (FSC) system.
The new US rules maintain subsidies which were declared in breach of the rules of international trade by the WTO in March 2000, after a European Union complaint, the report said.
The 148 trading nations in the WTO set the regulations among themselves, and agree to be bound by DSB decisions which are issued after investigations that often last for years.
EU trade chief Peter Mandelson hailed the finding. "It has been confirmed that the US has yet to comply with previous WTO rulings," he said in a statement.
"The EU appreciates that the US Congress has repealed the original FSC tax scheme" but replacement legislation was "unacceptable." "I hope that the US authorities will choose to act consistently in this matter." US trade diplomats in Geneva said they had no immediate reaction.