BRUSSELS (March 14 2003) : The European Union said on Thursday it hadopened a probe into alleged unfair US assistance to growers of oilseedssuch as soyabeans and sunflower, which could heighten trade tensions withWashington.

The European Commission, which runs trade policy for EU states, said inthe Official Journal, the bloc's journal of record, that it was actingafter a complaint from the European Oilseed Alliance, representing EUproducers.

"The Community has a systemic interest in the application of WTO rules inthe agricultural sector," the Commission said, listing its reasons foropening a probe.

"The complainant has provided sufficient prima facie evidence to justifyinitiating an examination procedure that the contested measures areinconsistent with the obligations of the United States of America underthe WTO Agreement," it added.

The spokeswoman for European Trade Commissioner Pascal Lamy played downany impact on trade ties of the oilseeds probe.

"This is just a preliminary step," she said, adding that the probe couldlast between five and eight months.

"This is normal procedure, this is not another (trade) row," she added."We are acting on behalf of the industry which presented the complaint."

If the Commission backs the complaint, it can ask for consultations withthe United States under the auspices of the WTO to find an amicablesolution. If that fails, it can launch a dispute procedure.

The Commission said the oilseeds group had complained that a scheme ofloans to US producers was a barrier to trade.

It said the scheme provided loans for producers at below market rates andhad been worth $3.5 billion in 2001.

The EU and United States are involved in several trade spats, including USduties on steel and a US export tax-break system that has given the EU theright to slap sanctions worth $4.0 billion on US products.

The two sides also differ strongly over agricultural issues, with eachlabelling the other a subsidy-hungry trade monster.

Agriculture is also one of the key areas of disagreement in WTO talks ontrade liberalisation.-Reuters