WASHINGTON — The Office of the U.S. Trade Representative plans to consult with Congress, the European Union and U.S. businesses before moving on the dispute over a U.S. law that gives tax breaks to exporters, which has been deemed an illegal subsidy by the World Trade Organization, a U.S. trade official said Tuesday.

As reported, a WTO panel dealt another blow to the U.S. on Monday when it upheld three earlier rulings that found the tax break to be an illegal export subsidy under WTO rules.

The next step in the case is an arbitration process that will decide on the amount of counter measures the EU would be entitled to impose on the U.S. The arbitrators’ report is expected by the end of March.

In the worst-case scenario for the U.S., the EU has sought WTO permission to retaliate on more than $4 billion worth of American goods if the dispute is not settled. A European official, speaking on the condition of anonymity, said the U.S. could avoid a trade war by lowering U.S. tariffs on an equivalent amount of European products, according to a wire service report

Apparel manufacturers, retailers and importers are most concerned about the proposed, incomplete sanctions list put together by the EU, which includes apparel and accessories, both knitted and woven, as well as footwear, cosmetics and fine jewelry.

“We recognize the enormous benefits of our trade relationship with the EU,” a U.S. trade official said during a teleconference. “We are not going to do something to screw that up. That is the premise we are moving forward on.”