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By Adriana Barrera
MEXICO CITY (Reuters) - Mexico is seeking a sugar export floor of at least 1 million tonnes per year and insists that the United States drop anti-dumping claims against its southern neighbour to resolve a sugar trade dispute, a Mexican source close to the negotiations said on Tuesday.
But if an agreement is not reached, Mexico will escalate the dispute to an international body such as the World Trade Organization, the source told Reuters, speaking on condition of anonymity due to the sensitivity of the negotiations.
U.S. sugar producers have complained Mexico is flooding the U.S. market with under-priced and subsidized sugar, launching a trade dispute which has the potential to push up the prices of U.S. candy and confectionary.
The proposed 1 million tonne export floor is similar to the amount of fructose imported by Mexico from the U.S.
The U.S. Department of Commerce is due to make a decision on anti-dumping duties on Oct. 24, which would be added to recommended preliminary anti-subsidy duties up to 17.01 percent on Mexican imports.
But duties could be suspended if the parties can reach an agreement to cap exports, which are currently unlimited, at a certain level.
A spokesman for the American Sugar Alliance, which represents the U.S. petitioners, declined to comment.
But Rick Pasco, president of the Sweetener Users Association, said 1 million tonnes would "not be acceptable," noting that Mexican imports have been 1.8 million -1.9 million tonnes in recent years. The group, which represents confectioners and other sugar buyers, has spoken against a managed trade agreement on sugar between the two countries.
The head of Mexico's government-owned mills has said Mexico would be open to a settlement which sets an export minimum of between 1.1 million and 1.3 million tonnes.
Cato Institute senior fellow Daniel Pearson said Mexico should keep in mind that the U.S. industry might lose the case in the end, as it also needs approval from the International Trade Commission as well as the Commerce Department.
Pearson, a former ITC commissioner, said sugar producers had to show the domestic industry has been materially injured or is threatened with material injury as a result of imports from Mexico, and this was a high hurdle.
"It's not clear to me that they should give up at this point on achieving a negative vote at the ITC," he said.
National Foreign Trade Council President Bill Reinsch said any agreement to limit trade could keep prices artificially high.
"The problem in this case is that that ignores everybody but the growers on both sides of the border. Consumers and downstream users of sugar (bakers, candy makers, etc.) are left out in the cold," he said in an email.
(Reporting by Adriana Barrera; Additional reporting by Chris Prentice in New York and Krista Hughes in Washington; Editing by Cynthia Osterman)