US Trade Representative Mr Robert Zoellick said yesterday he would defend US interests to the hilt and defied European criticism of hefty new US farm subsidies and steel tariffs. "Sanctimoniousness is a posture, it is not a policy," he said of Europeans' barbs over stepped-up US agricultural support signed into law this month by President George W Bush.

He said that World Trade Organisation rules allowed the European Union to provide $60 billion (€65 billion) of domestic farm subsidies annually and the United States only $19.1 billion.

"We start out with a disadvantage on a three-to-one number," Mr Zoellick said in a discussion with European Trade Commissioner Mr Pascal Lamy, who appeared via satellite link from Brussels.

The US Farm Bill contained a circuit breaker only allowing the United States to go up to its maximum WTO allowance for domestic farm subsidies, he told a World Economic Forum conference. "This is one aspect about the United States and a rules-based system people will have to recognise: we are going to pursue our national interests fully within those rules," Mr Zoellick said.

When disagreements such as the festering European-US spat over US steel import tariffs emerged, both sides should go to a neutral arbiter to decide, he added.

"We are willing to negotiate but if people think that the United States is going to basically sit back and not pursue our national interests, think again."

US-European Union trade relations have been frayed by Mr Bush's decision to impose a three-year programme of high tariffs on imported steel products to protect US steel makers. Further souring ties, Mr Bush this week signed into law a bill providing domestic farm subsidies of $173.5 billion over 10 years, marking a 70 per cent increase in US agricultural spending.

Mr Lamy countered that the US farm subsidies and steel import tariffs were largely driven by political motives ahead of November's mid-term congressional elections. The European trade chief said he could understand the importance to the Bush administration of getting lawmakers to pass Trade Promotion Authority. "Of course it is extremely important that the US administration regains the authority on the US trade policy," Mr Lamy said.

The European official believed Mr Zoellick was inferring that steel tariffs and higher US domestic farm subsidies were the price to pay for getting Trade Promotion Authority. "We Europeans are not prepared to pay for TPA with steel protection the way it is," Mr Lamy said, arguing that it hurt the European industry, failed to stimulate restructuring of the US industry and also widened the scope for the US use of such trade protection.