WTO lets Mexico slap trade sanctions on U.S. in tuna dispute

By Tom Miles

GENEVA (Reuters) - Mexico can impose annual trade sanctions worth $163.23 million against the United States after winning a dispute over trade in tuna fish, a World Trade Organization arbitrator ruled on Tuesday.

Mexico's economy ministry said it planned immediate action to initiate the trade sanctions.

However, the ruling could be overturned later this year if a subsequent WTO decision finds the United States has stopped discriminating against tuna caught by its southern neighbor.

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The sanctions award was only a third of the $472.3 million Mexico had asked for. It has previously said it planned to impose the sanctions on imports of U.S. high-fructose corn syrup.

Mexico's complaint, which dates back to 2008, focused on U.S. rules on "dolphin friendly" labeling, which Mexico said unfairly penalized its fishing industry.

Mexico said it had cut dolphin deaths to minimal levels but that it was being discriminated against by U.S. demands for paperwork and sometimes government observers. Tuna catches from other regions did not face the same stringent tests, it said.

After losing the case, the United States changed its rules in 2013. The WTO said the rule change was not enough and Mexico was still being unfairly treated, giving rise to the award of trade sanctions.

However, the United States changed its rules again in 2016 by expanding the tougher rules to all countries. If the WTO decides that has stopped the discrimination, Mexico would have to stop its retaliation. The WTO is expected to decide in July.

A spokeswoman for the U.S. Trade Representative's office said the United States was disappointed by the ruling.

"Regrettably, the WTO Arbitrator's decision does not take into account the United States' most recent dolphin-safe labeling updates and dramatically overstates the actual level of trade effects on sales of Mexican tuna caught by intentionally chasing and capturing dolphins in nets," she said.

"We will continue to monitor the situation and closely consult with Congress and stakeholders about next steps."

U.S.-Mexican trade relations are already under strain, as U.S. President Donald Trump seeks to renegotiate the NAFTA trade pact that has defined North-American commerce for a generation and threatens a border wall.

NAFTA tensions were raised further on Monday when the United States put anti-subsidy tariffs on Canadian lumber.

Mexico has long complained that U.S. fructose imports are too cheap. In 2007, the WTO ruled against a tax Mexico imposed on soft drinks made with imported sweeteners, after the United States said it discriminated against U.S. corn growers and refiners.

The Mexican sugar industry says the cost of U.S. fructose exports to Mexico are about 35 percent less than domestic fructose.

The retaliatory measures coincide with a new U.S.-Mexico dispute over quotas for Mexican sugar that prompted Mexico’s sugar industry association last month to threaten "to block" fructose imports.

(Reporting by Tom Miles, Frank Jack Daniel and David Lawder; editing by Stephanie Nebehay and Richard Lough)