The US is threatening Canada with an application to the World Trade Organisation for the right to impose trade sanctions, because it claims that Ottawa has failed to comply with last year’s WTO ruling that its two-tiered export pricing system for milk broke world trade rules.

Two days of meetings between Canadian and US trade officials last week failed to resolve the row. It is now expected that WTO disputes procedures experts will be asked to re-examine the case to decide whether Canada has reformed its dairy export procedures in line with their decision last year.

The US has alleged that the Canadian dairy industry has subsidised its exports, by insisting on local sales being made at a higher price than those made abroad.

By Keith Nuthall, correspondent