UPDATE 1-Mexican sugar producers no threat to U.S. industry-lawyer

(Adds background, lawyer for U.S. industry, Mexico embassy)

WASHINGTON, April 18 (Reuters) - Mexican sugar producers pose no threat to the U.S. sugar industry, their lawyer said on Friday, rejecting a charge that Mexican sugar is being dumped in the United States and unfairly benefits from government subsidies.

In a petition to the U.S. International Trade Commission, which experts have called the first of its kind, U.S. sugar producers said that below-cost and subsidized Mexican imports would cost them nearly $1 billion in net income in 2013-14.

But Irwin Altschuler from law firm Greenberg Traurig said Mexican producers were not to blame for a drop in sugar prices and the U.S. sugar industry remained profitable.

"The past three years have been the most profitable in the history of the U.S. industry," he told the ITC.

U.S. sugar producers, however, said low prices were threatening the survival of many sugar cane and sugar beet growers given the glut of sugar on global markets.

The tightly controlled U.S. sugar industry has strict caps on imports - except for those from Mexico, which has unlimited, duty-free access under the North American Free Trade Agreement.

"NAFTA is not a license to dump and subsidize sugar and cause material injury to the domestic sugar industry," said Robert Cassidy, from Cassidy Levy Kent, representing the American Sugar Coalition.

"Mexico is exploiting its status under NAFTA."

The U.S. growers said Mexican sugar imports more than doubled in the last year to a record high, pushing prices to a decade low.

Kenneth Smith Ramos, head of the trade office at the Mexican embassy in Washington, said Mexico had taken steps to divert sugar away from the U.S. market.

"A temporary fluctuation in market conditions should not be used as an excuse to impose what could become a long-lasting trade barrier," he said at the ITC.

(Reporting by Krista Hughes; Editing by Chizu Nomiyama and Andrea Ricci)