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UPDATE 1-EU expects U.S. to turn to WTO in poultry dispute

(Adds U.S. trade chief comment)

BRUSSELS, June 6 (Reuters) - The United States is likely to escalate a trade row with the European Union over the EU’s ban on imports of U.S. poultry by taking action at the World Trade Organisation, an EU official said on Friday.

“The idea that the Americans are going to take us to Geneva I think is very possible,” the official said, speaking on condition of anonymity. “The U.S. is going to take us to court. They believe this.”

The EU imposed the import ban in 1997 because U.S. poultry producers use a low-concentration chlorine wash on chickens, a practice that is not permitted in Europe. The issue has been an irritant in transatlantic trade ties ever since.

In a new move to get the row resolved, Washington has said poultry ban is a test case for the Transatlantic Economic Council (TEC), which it set up last year with Brussels to smooth trade and business between the two giant economies.

The European Commission last month proposed ending the ban, though with strict conditions.

But veterinary experts from EU capitals this week rejected that proposal, dashing hopes in Brussels for progress towards settling the dispute before next week’s EU-U.S. summit in Slovenia which U.S. President George W. Bush will attend.

U.S. chicken producers estimate they could have exports worth between $200 and $300 million in Europe.

That is only a fraction of transatlantic trade but the case is being billed by Washington as a barometer of the effectiveness of the TEC which is working to boost business on a range of other issues, from cosmetics to securities trading.

“The poultry issue is one that has been of significant concern, both in its actual facts and its symbolic importance in terms of our ability to resolve transatlantic trade conflicts,” U.S. Trade Representative Susan Schwab said on Friday.

In an interview with Reuters on the separate issue of world trade talks, she said it was too soon to talk about possible action at the WTO against the EU over the chickens case.

The United States has so far not told the EU’s executive European Commission that it will be launching litigation against the bloc at the WTO, the EU official said.

The United States has sued the EU at the WTO in other food-related trade disputes such as Europe’s drawn-out process for approving imports of genetically modified food and crops and its ban on hormone-treated meat. (Additional reporting by Doug Palmer and Missy Ryan in Washington; Editing by Timothy Heritage)

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