The World Trade Organisation has agreed to launch a probe into whether steel import tariffs imposed by the US earlier this year are legal.

The trade watchdog earlier on Monday said it would appoint an expert panel to determine whether the controversial tariffs are compatible with international trade agreements.

The move comes in response to a request from the European Union, and marks the official start of WTO procedures aimed at brokering a deal in an escalating transatlantic trade dispute over steel.

The US blocked a previous EU request for an expert panel, but was unable to do so a second time under WTO dispute settlement procedures.

Rights and wrongs

The EU, backed by South Korea, China and Japan, claims that the three-year tariffs of up to 30% protect inefficient US steel producers from fair foreign competition, in clear breach of trade agreements.

But the US says the duties are a temporary measure designed to safeguard its domestic industry from predatory pricing by foreign producers until it has had time to restructure.

"Safeguard" measures of this kind are permitted under WTO rules.

The EU - which says its steel industry stands to lose about $2bn a year - has drawn up a list of US exports which it is threatening to hit with retaliatory tariffs if Washington does not back down.

The EU's 'tit-for-tat' tariffs could be in place as early as 18 June.

Transatlantic tensions

A recent sharp increase in US farm subsidies - widely condemned as a form of unfair price competition against agricultural exporters in the developing world - has heightened political tensions between the two sides.

The WTO is expected to appoint the three-member panel within a month, with an initial ruling expected six months after that.

But protracted appeal hearings could defer a final decision until late next year.

The latest EU/US trade dispute comes against a backdrop of serious overcapacity in the global steel industry, with producer countries in tentative talks aimed at cutting output by over 100 million tonnes a year.

The WTO has ruled in the US' favour in two previous high-profile disputes with the EU over beef and bananas.