(Adds background in paragraphs 6-8, industry comment)
By David Lawder
WASHINGTON, March 10 (Reuters) - The United States and Mexico will launch a new round of negotiations to resolve a years-long trade dispute over Mexico's sugar exports to the United States, senior officials in both governments said on Friday.
U.S. Commerce Secretary Wilbur Ross and Mexican Economy Minister Ildefonso Guajardo said the talks would be aimed at resuming imports of Mexican sugar to the United States after they had been halted earlier this week as Mexico reached a temporary limit on sugar exports to its northern neighbor.
"These discussions are the beginning of our work together on the day-to-day issues that arise from our very important bilateral relationship," Ross told a news conference.
The U.S. sugar quotas are set under a 2014 trade pact that has become a source of tension between the two countries. The deal ended a year-long investigation by the U.S. government after domestic farmers and sugar companies said Mexican millers were flooding the market with cheap, subsidized sugar.
Ross said the Commerce Department pushed back an April 4 deadline for completing a review of the trade pact until May 1, to allow more time to reach a resolution that suits both countries. The government said in November that a preliminary review indicated the deal may not be working.
The 11-million-tonne U.S. sugar market is protected through a complex network of price supports and import quotas. Mexico is the country's top foreign supplier, contributing about one-third of U.S. imported supplies.
The two countries have been in ongoing negotiations to rework the agreements since 2016, under pressure from the U.S. industry. Those discussions were slowed amid the transition to a new administration under President Donald Trump.
Although the deal is specific to sugar, heightening tensions or a change in trade flows could have ripple effects on other markets, especially for corn syrup. The two sweetener markets became integrated as NAFTA opened borders between the two countries, and U.S. corn refiners like Archer Daniels Midland Co , Tate & Lyle Plc and Cargill Inc ship the bulk of their exports to Mexico.
Earlier this week, Reuters learned that Mexico had canceled export licenses, at a time of tightening cane supplies for U.S. refiners, who have said that Mexico's mills are circumventing them to sell refined sugar into the U.S. market.
The U.S. sugar industry has asked the government to end the 2014 pact unless it can be renegotiated. The country's cane refiners have said that Mexican suppliers are continuing to circumvent them to sell refined sugar, starving them of raw supplies.
"The impact on people’s lives is real and the U.S. cane sugar refining industry is in crisis – it is time to finally protect America’s workers from this unfair trade before more U.S. factories are forced to close,” said Imperial Sugar Company's President and Chief Executive Officer Michael A. Gorrell in an emailed statement.
Imperial is the U.S. refining unit of global commodities trader Louis Dreyfus Co. (Reporting by David Lawder; Additional reporting by Chris Prentice in New York; Editing by Chizu Nomiyama and Dan Grebler)