The US-led challenge to the European Union's ban on genetically-modified crops suffered an embarrassing setback yesterday when it emerged that Egypt had withdrawn its support for the case before the World Trade Organisation.

The decision, revealed yesterday by environmental groups opposed to the US action, was contained in a letter sent by Egypt's EU ambassador, Soliman Awaad, to the Brussels-based European Consumers' Organisation.

The letter said: "The government of Egypt took this decision in conscious emulation of the need to preserve adequate and effective consumer and environmental protection, and with the desire to reduce further distortions and impediments to international trade that may result due to the further pursuit of this matter within the WTO."

US officials immediately challenged the claim, saying Egypt would support the case. But Egypt has not filed any documents in Geneva, the WTO headquarters, in support of the case.

The decision, if it stands, could be a blow to US efforts to win developing country support for the case. The US announced earlier this month, in launching the WTO challenge, that Egypt would be a co-complainant with itself, Canada and Argentina.

Egypt's participation was seen as crucial to the long-held US view that the EU's restrictive position on GM crops harms developing countries. President George W. Bush last week accused the EU of fostering hunger in Africa by impeding US efforts to sell GM crops.

The European Commission reacted with thinly-disguised glee yesterday. "That is pretty embarrassing for this 'coalition of the willing'," one official said, adding that the US had "put the group [of complainants] together in a total haste - so really it's no wonder the whole thing is now falling apart".

The Commission denied it had exerted pressure on Egypt. While Europe is an important trading partner for Egypt, buying about one quarter of its exports, the US remains Egypt's most lucrative foreign market.

The EU is also trying to exercise gentle pressure on Argentina to reconsider its support for the case. Argentina's corn exports to the EU, for instance, have tripled since 1995 during the period when US corn growers were blocked from Europe because of the GM moratorium.

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