By Krista Hughes
WASHINGTON (Reuters) - The World Trade Organization found on Tuesday that U.S. rules on dolphin-safe labels for canned tuna run counter to international trade laws, siding with Mexico in a long-running dispute and opening the door to retaliation against U.S. exports.
The ruling, which the United States said it would appeal, upholds Mexico's complaint that revamped U.S. labeling rules are still discriminatory because they disqualify Mexican tuna from bearing dolphin-safe labels, unlike other countries' tuna.
"We recommend that the dispute settlement body request the United States bring its measure, which we have found to be inconsistent with (the WTO rules) ... into conformity with its obligations," the WTO panel said.
Mexico has been fighting for more than 20 years over rules the country argues have frozen its fishing industry out of a U.S. imported canned tuna market worth $680 million in 2014. Mexico has about a 3.5 percent share.
The clash arose because yellowfin tuna swim with dolphins in the eastern tropical Pacific, where Mexico's fleet operates, using speedboats to herd the dolphins and large purse seine nets to catch the tuna swimming beneath them.
Millions of dolphins were killed before international conservation efforts set standards to protect dolphins and put professional observers on ships to record each tuna catch.
Mexico argued the agreements cut dolphin deaths to minimal levels - below the thresholds allowed in U.S. fisheries - and that tuna from other regions does not face the same stringent tests, with ship captains allowed to self-certify that no dolphins were harmed.
But the United States argued it was reasonable to make distinctions between products based on fishing methods and said Mexico had not shown any cases of a ship's captain lying about dolphin deaths.
U.S. Trade Representative spokesman Andrew Bates said the United States was pleased the WTO compliance panel found it was entitled to disqualify tuna caught in purse seine nets, but disappointed that the WTO found the measures discriminatory.
Mark Robertson, a spokesman for the Campaign for Eco-Safe Tuna, hailed the decision and said Mexico's retaliation would be "very significant."
But the Earth Island Institute, which works with brands such as StarKist and Bumble Bee Foods to certify tuna as dolphin-safe, said the WTO put trade above the environment.
The institute's associate director, Mark Palmer, said Mexico would not be able to claim many lost sales as Mexican tuna was sold in many U.S. shops catering to Latin American clients.
(Additional reporting by Tom Miles in Geneva; Editing by Bill Trott, Jonathan Oatis and Ted Botha)