Mexican sugar producers are no threat to the profitable and protected U.S. sugar industry, their lawyer said, rejecting a charge that Mexican sugar is being dumped in the United States and unfairly benefits from government subsidies.

In a petition to the U.S. International Trade Commission, which experts have called the first of its kind, U.S. sugar producers said that below-cost and subsidized Mexican imports would cost them nearly $1 billion in net income in 2013-14.

But Irwin Altschuler from law firm Greenberg Traurig said Mexican producers were not to blame for a drop in sugar prices and the U.S. sugar industry had just had its most profitable three years ever.

A price floor backed by cheap loans and limits on supply gave the industry the “Rolls Royce of safety nets.”

“You can’t blame a well-heeled industry, used to getting its way, for pushing yet again. But the Commission shouldn’t indulge them,” Altschuler told the ITC.

The tightly controlled U.S. sugar industry has strict caps on imports - except for those from Mexico, which has unlimited, duty-free access under the North American Free Trade Agreement.

The ITC will determine whether Mexican imports harm, or threaten to harm, the U.S. sugar industry. The Commerce Department is separately tasked with establishing whether dumping - selling below cost - or subsidization occurs.

U.S. sugar producers, who allege dumping margins of 45 percent, said Mexico was the only unregulated source of sugar in the domestic market and a doubling in imports in the last year had pushed prices to a decade low.

“NAFTA is not a license to dump and subsidize sugar and cause material injury to the domestic sugar industry,” said Robert Cassidy, from Cassidy Levy Kent, representing the American Sugar Coalition.

Sugar cane farmer Todd Landry said his crop would sell for below cost this season, down 14.5 cents per pound since 2011, a price collapse that would cost Louisiana sugar farmers more than $1 million in lost revenue.

“My farm and other Louisiana farms cannot sustain themselves if these prices become the norm,” he told the ITC.

“The only reason my farm is at risk is because of Mexican subsidies and then dumping. Mexico has chosen to substantially increase its sugar care acreage and expand its production far beyond its needs and now they are dumping into our market in order to protect their own market.”

Sugar Wars

Kenneth Smith Ramos, head of the trade office at the Mexican embassy in Washington, urged the ITC to reject the case and avoid a tit-for-tat trade war.

Mexican Economy Minister Ildefonso Guajardo has warned Mexican farmers have the right to seek an investigation into U.S. fructose production, potentially hitting U.S. exports of high fructose corn syrup, a cheaper alternative to sugar.

“The request, if granted, could seriously disrupt the delicate trade of sweeteners between Mexico and the United States,” Smith said.

“A temporary fluctuation in market conditions should not be used as an excuse to impose what could become a long-lasting trade barrier.”

The bid to prevent excessive imports and bolster prices faces criticism from a coalition of sweetener users that fought for changes to the U.S. sugar program ahead of the 2014 farm law.

Tim Jones, senior manager at confectionary firm Just Born, the maker of marshmallow Peeps, said imports were vital to satisfy demand for sugar.

“Restrictions on Mexican imports will harm our company, as well as many other companies operating in the United States that depend on a consistent, reliable supply of sugar,” he said in prepared testimony to the ITC.

The Corn Refiners Association said the U.S. complaint did not take into account the fact that sugar imports fell sharply in 2012-2013 because of a large domestic crop.

“In these circumstances it is irresponsible for them to assert that unfair foreign competition has depressed U.S. sugar prices at a time when imports declined and domestic production surged,” CRA President John W. Bode said in a statement. (Reuters)