The ruling came several weeks after the World Trade Organization ruled against Mexico's anti-dumping duties on imports of the U.S. corn-based sweetener.

The NAFTA dispute settlement panel stated in its report that the Mexican government had ``failed to establish threat of injury to the Mexican sugar industry because of these imports.''

The report, made public by a North American Free Trade Agreement office here, also said Mexico now has 90 days to either terminate the duties and refund amounts already collected, or present a new argument for keeping the duties.

The United States ships about 225,000 tonnes of high-fructose corn syrup to Mexico a year. The U.S. industry, led by such influential companies as Archer Daniels Midland Co. (NYSE:ADM - news) and Cargill Inc., wants Mexico to agree to fully open its market in coming years.

Mexico began imposing anti-dumping duties on U.S. high fructose corn syrup in 1997. The U.S. industry filed a NAFTA complaint the following year.

For several years now, the United States and Mexico have been arguing over high-fructose corn syrup trade. The dispute is related to a fight over the amount of sugar Mexico should be allowed to export to the United States.

Currently, the United States sets Mexico's sugar export quota, now at about 116,000 tons, based in part on Mexico's consumption of high fructose corn syrup.

But Mexico argues the NAFTA agreement allows it to ship all of its sugar surplus, now at about 600,000 tonnes, to the United States.

Under NAFTA, U.S. controls on Mexican sugar imports diminish each year, with full free trade set for 2008.

U.S. and Mexican officials discussed the sugar and corn syrup dispute in Washington this week, but no agreement was reached.

Further talks are expected in coming weeks, with both sides hoping to find a solution before Mexican President Vicente Fox arrives in the U.S. capital for a state visit Sept. 5-7.