updated 3/6/2006 6:15:46 PM ET 2006-03-06T23:15:46

The World Trade Organization ruled Monday that Mexico violated global trade rules in a soft-drink dispute with the United States.

A WTO panel rejected a Mexican appeal, supporting U.S. claims that Mexico was in breach of international law in imposing a 20 percent tax on drinks that are sweetened with anything other than cane sugar grown in Mexico.

“It is clear that Mexico must eliminate this tax and restore fairness for our U.S. corn growers and refiners,” said U.S. Trade Representative Rob Portman. “This is a good result for our farmers and producers, who seek a level playing field.”

Mexico was a top market for high-fructose corn syrup from the U.S. before the tax was imposed in 2002. The tax made it too expensive to use the corn sweetener in soft drinks, and today, the U.S. share of the market is about 6 percent of pretax levels, according to the U.S. trade representative’s office.

The dispute over sugar and corn sweetener has cost U.S. corn refiners $944 million annually, according to the Washington-based Corn Refiners Association.

“This tax clearly violates WTO rules, and this decision should end Mexico’s barriers to high fructose corn syrup,” said Iowa Senator Tom Harkin. “American corn farmers and processors have lost substantial business as a result of the Mexican tax. I urge the WTO to establish a quick timetable to allow free trade of high fructose corn syrup.”

Mexico has insisted that its actions are in line with trade rules, saying that it will continue to adopt the measures it considers necessary to protect the interests of its sugar sector regardless of the previous WTO decision, unless it can reach an agreement with the United States.

The WTO’s dispute settlement body will now formally ask Mexico to bring its measures into line with trade rules. The decision cannot be appealed.

“We hope Mexico sees this decision as we do, as an opportunity to work together to quickly resolve all outstanding sweetener trade issues between us,” Portman added.

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