* EU accepts WTO ruling on technology, urges negotiations
* Ruling allows possibility of technical change in products
By Jonathan Lynn
GENEVA, Sept 21 (Reuters) - The World Trade Organization adopted a ruling on Tuesday condemning controversial European duties on electronics products after the European Union declined to appeal against the verdict by WTO judges.
The United States, Japan and Taiwan had challenged the EU tariffs on flat-panel displays, multi-function printers and television set-top boxes which they said violated the WTO's Information Technology Agreement.
Accepting some aspects of the finding, the EU renewed its call for a reform of the agreement, which eliminates duties on some information technology (IT) goods to foster trade in them, adding that further litigation was counter-productive.
"Litigation on a small set of products should never divert attention from negotiations on a broad set of products, not to mention all the other issues that still need to be agreed ... to further liberalise trade in IT products," an EU diplomat told a session of the WTO's dispute settlement body.
U.S. trade officials estimated worldwide trade in the three products at $44 billion in 2009, and the EU's 27 member states imported $7 billion worth of the products that year.
The 1996 agreement, which is voluntary, abolished tariffs among 72 countries on certain electronics products.
But the EU had argued that added functionality since the agreement was reached meant some products were now consumer goods rather than information technology of the kind the agreement was intended to encourage.
For example it said that flat-panel computer displays could now serve as television screens.
TECHNICAL ADVANCES
But a Japanese diplomat told the WTO meeting that IT products should not be treated less favourably or penalised "simply because, with additional features and functions, they have become smarter, more sophisticated and more advanced".
A U.S. official said the ruling provided an important foundation for further negotiations on duty-free treatment of additional electronics products in the Doha round to open world trade -- a key goal of Washington in the long-running talks.
Taiwan's WTO ambassador, Yi-fu Lin, welcomed the adoption of the ruling, saying the products involved made up a significant part of the island's trade and were vital for its economy.
U.S. electronics producers like Hewlett-Packard, Motorola and Cisco unit Scientifc Atlantic and Asian producers like South Korea's Samsung and LG Display or Taiwan's AU Optronics had been waiting to see whether Brussels would challenge the WTO ruling.
In another dispute, the EU and United States told the WTO committee they would extend efforts to agree on how Washington implements a WTO ruling that faulted its method of calculating duties on unfairly-priced imports, delaying the prospect of EU sanctions.
The dispute body set up a panel at Mexico's request to examine whether the United States was complying with an earlier WTO ruling in a separate dispute on the same issue.
(editing by Paul Taylor)