INTERVIEW, UPDATE 1-EU wants quick end to US biodiesel incentive

(Adds U.S. industry comment paragraphs 9-10)

By Missy Ryan

WASHINGTON, March 10 (Reuters) - U.S. tax breaks for biodiesel exporters undercut competitors in Europe and undermine trans-Atlantic trade ties, the European Union's ambassador in Washington said on Monday.

"We don't really believe it's the job of U.S. taxpayers to subsidize European motorists," Ambassador John Bruton told Reuters in an interview.

"We don't think it's the best use of US tax funds; we also believe it is likely to damage to European biodiesel industry," Bruton said, naming U.S. biodiesel incentives as one of the "negative developments" that threaten to cloud an otherwise strong U.S.-EU commercial relationship.

The EU supports its biodiesel with excise duty reductions to consumers, but it is rankled by the U.S. policy on blended biodiesel -- which it calls "splash and dash" -- which permits companies to claim a tax credit on biodiesel, including exports, with even a small percentage of conventional fuel.

The European industry blames the policy for the recent explosion of low-cost biodiesel imports blended in the United States. Bruton cited a 30 percent price differential.

Those imports grew tenfold in 2007, the EU says, to 1 million tonnes, and now comprise up to a fifth of the European market. The EU estimated the United States was spending $200 million to $300 million a year to support that trade.

The European Biodiesel Board was expected to lodge an anti-dumping complaint with the EU against the U.S. policy, but it has yet to take that step.