BRUSSELS The European Commission and the U.S. government have reached an agreement settling a dispute over trade in bananas, AFP quoted European Trade Commissioner Pascal Lamy as saying on Wednesday.

"We reached an agreement last night on a solution to the banana conflict," Lamy told a news conference in Brussels.

The banana dispute has dogged trade relations between the European Union and the United States since 1993.

"After many years and many difficulties, we struck a balance between all parties," Lamy added.

"We managed to ensure protection of (European Union) producers and the protection of production from ACP," he said, referring to an organization of Africa, Caribbean and Pacific nations.

"Moreover, we have a system which conforms to World Trade Organization (WTO) commitments and which will allow U.S. sanctions to be lifted," Lamy said.

In 1999, the WTO handed down a ruling in favor of the U.S. on the dispute, saying that EU's system for importing bananas was illegal.

The decision led to U.S. trade sanctions against a broad range of European products worth a total of $191.4 million (215.2 million euros) per year.

"The new (European) regulations will take effect on July 1, and the U.S. sanctions will first be suspended, then completely withdrawn after that," Lamy told reporters.