The European Union, which produces four-fifths of the world's olive oil, called on Mexico to defend its use of duties on imports of the foodstuff at the World Trade Organization, the first step in a legal dispute.
Mexico, which imports about 8,000 metric tons of olive oil worth $21 million annually from EU countries including Italy, Spain and Greece, began applying import duties of as high as 30 percent to protect its market in June, the European Commission, the bloc's executive arm, says.
As part of its overhaul of subsidies for farm production, the EU in April pledged to start dismantling protections for olive oil which cost European taxpayers 4.2 billion euros ($5 billion) a year, over objections of Spain, the world's biggest producer. The bloc no longer compensates producers with export subsidies for lower world market prices.
"There's no reason for the duties so we're happy that the Commission is being firm on this,'' said Cristina Rueda, head of the olive oil sector at Brussels-based group COPA, which represents 11 million farmers in the EU. " It may not be such an important market, but it has implications for loss of market share elsewhere, which is difficult to recover.''
The 25-nation EU has doubled its exports in the past decade and shipped an average of 321,000 metric tons of olive oil a year between 2001 and 2003, of which about 194,000 tons went to the U.S. Mexico imports 90 percent of its olive oil from the EU.
Mexico failed to investigate the effect of imports and lacks evidence of damage to domestic producers, the European Commission said in a submission to the Geneva-based trade arbiter.
Australia, the EU's third biggest market after the U.S. and Japan, this year found that there was no justification for extra duties on imports of olive oil from the EU to its own market.
