The World Trade Organisa-tion yesterday ruled that the US had failed to dismantle fully a WTO-illegal corporate tax subsidy, paving the way for the European Union to reintroduce punitive tariffs worth more than $300m on US exports.

The six-year-old WTO battle over the controversial US tax subsidy, known as the Foreign Sales Corporation scheme, has implications for the escalating transatlantic trade dispute over aircraft subsidies, because Boeing remains the largest beneficiary of the FSC tax break.