* U.S. ban on China chicken 'unscientific, discriminatory'
* One of several U.S.-China trade rows
* Restriction has since been dropped-USTR
* USDA in early stage of evaluating if imports allowed (Adds comment from USTR, background on USDA evaluation)
By Jonathan Lynn
GENEVA, Sept 29 U.S. measures that effectively banned imports of Chinese cooked chicken broke international trade rules and caused injury to China's economy, a World Trade Organization dispute panel said on Wednesday.
The U.S. measures challenged by China were unscientific and discriminatory, the panel found.
The ruling, in one of several trade disputes between China and the United States, came as the U.S. House of Representatives prepared to vote on a bill declaring China's undervalued currency a subsidy and clearing the way for duties to be imposed on some Chinese imports as a countermeasure. [ID:nN28172488]
The chicken dispute originated like many trade rows in health concerns -- in this case U.S. nervousness about Chinese poultry following outbreaks of bird flu in Asia.
Because of these worries, the U.S. Congress included a clause in a spending bill preventing the U.S. authorities from taking measures to process imports of Chinese chicken.
But China said this measure was discriminatory and protectionist because its poultry met international health standards and was being exported to Europe and Japan.
The United States is the world's biggest producer of poultry, with firms such as Sanderson Farms (SAFM.O) and Tyson Foods (TSN.N) exporting chicken.
Congress subsequently ended the ban on funding under pressure from domestic meat producers who feared the loss of exports to China, the third biggest market for U.S. farm goods.
"The measure was replaced in fiscal year 2010 with language permitting the use of funds under certain conditions. Those conditions have been met, and so there is no current funding restriction affecting (the U.S. Agriculture Department's) consideration of poultry from China," said Nefeterius McPherson, a spokeswoman for the U.S. Trade Representative.
The USDA has been working on evaluating whether imports now can be allowed under U.S. food safety laws. Technical officials have been reviewing documents on China's food safety laws to determine whether the USDA can move ahead on inspections of Chinese plants. [ID:nN20100728]
A USDA spokesman was not immediately available for comment on the new WTO ruling.
China had reacted to the U.S. ban by imposing duties on U.S. chicken imports, and announced on Sunday that the minimum levels would be increased. The duties will now be as high as 105.4 percent. [ID:nTOE68P00O]
WTO dispute panels usually recommend that measures breaching trade rules should be changed to bring them in line.
In this case, because the funding ban has already been dropped, China asked the panel to suggest how the United States could implement the ruling, but the WTO team declined to make a recommendation.
The two sides now have up to 60 days to decide whether to appeal. (Additional reporting by Roberta Rampton in Washington) (Editing by Ruth Pitchford and Lisa Shumaker)