The United States and European Union are in talks to resolve their dispute over the EU's ban on genetically modified crops, diplomats have said.
But Washington reserved its right to seek sanctions against Brussels by restarting a suspended arbitration process if the talks fail to make headway, the United States told the dispute settlement body of the World Trade Organisation.
"The arbitration will resume, at the request of the United States, if and when the DSB finds that a measure taken to comply with the recommendations and rulings of the DSB in this dispute does not exist or is inconsistent with a covered agreement," the US said in a statement to the dispute body.
The United States says it could seek compensation for the millions of dollars in lost exports and licensing fees for biotech crops it is suffering because of EU bans.
The WTO has said the EU ban is illegal, and the two sides are now talking to see how Brussels should implement the ruling. Washington says its main aim is to crack open the EU market rather than retaliating.
Crops engineered to resist pests and tolerate pesticides while improving yields are increasingly popular with farmers in both rich and poor countries.
But green groups say they threaten biodiversity, and many European consumers are wary of eating "Frankenfoods". European supermarkets often advertise foods as being free from genetically modified organisms.
However, some European farmers fear that Europe could find itself without supplies of animal feed at a time of record commodities prices, as more and more growers worldwide turn to GM crops.
The EU told the dispute body that it had authorised 17 applications for GM crops since ending a moratorium in 2003, including seven new GM products in 2007, and was likely to add another four early this year.
But the United States said more than 40 applications were pending in the EU approval system, including one filed over 10 years ago, and many of these were already approved and traded in other major world markets.
"A handful of approvals over a nine-year period is, unfortunately, of little commercial significance," it said.
Brussels has found it hard to implement the WTO ruling in the dispute, which also pits it against Argentina and Canada, because the 27 EU member states operate their own bans.
The EU said its executive commission was working to lift bans imposed by Austria on MON810 maize produced by U.S. biotech company Monsanto and on T25 maize developed by German drugs and chemicals group Bayer. The commission is currently examining scientific data provided by Austria to support its ban, the EU said.
The commission is also reviewing a decision this month by France, the EU's biggest food producer, to impose a temporary ban on MON810, it said. But it noted that Germany had lifted its ban on MON810 at the end of last year.
The dispute will also be closely watched by other biotech companies such as US chemical majors Du Pont and Dow Chemical , and by Switzerland's Syngenta, the world's biggest agrochemicals company.