The European Union has given the United States a deadline of autumn this year to make progress in repealing disputed tax breaks, or face massive trade sanctions.

A meeting at World Trade Organisation (WTO) headquarters is today (May 7th) expected to see the EU given permission to impose retaliatory tariffs on up to $4 billion worth of US trade, with jewellery one of the notable products listed.

The EU has said it is willing to wait around six months before taking action in the five-year old dispute, but insist it will move to impose tariffs of up to 100 per cent if the US does not change its current regulations.

The issue relates to an arrangement in which American companies can channel export sales through what are called Foreign Sales Corporations - companies established overseas which pay a lower rate of tax.

According to the EU such an arrangement constitutes an export subsidy, which is banned under WTO rules.

European officials say the list has been specifically drawn up of products that have alternative, non-US sources of supply, in an effort to avoid penalising European businesses and consumers.