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 Business News | June 2005 
WTO Rules Against Sweetener Tax
 Wire reports
The nation's 20 percent tax on corn sweeteners used in soft drinks, which was designed to boost consumption of domestic sugar, is unjustified and violates trade rules, the World Trade Organization (WTO) said in a preliminary ruling.
The preliminary decision was provided to lawyers yesterday, and the final result isn't expected until August, said Hugo Perezcano, the Trade Secretariat's legal director for international negotiations. The United States. initiated the WTO case in June 2004, calling the tax discriminatory and protectionist.
"The result wasn't favorable for Mexico," Perezcano said in a telephone interview on Tuesday.
Mexican lawmakers imposed the tax in January 2002 to push soft-drink makers including Coca-Cola Femsa SA and PepsiGemex SA to buy more sugar amid a glut of the commodity. The tax sapped US920 million a year in exports from U.S. corn growers and makers of syrups such as Archer Daniels Midland Co. and Cargill Inc., according to the Corn Refiners Association in Washington.
"I'm very pleased," U.S. Senate Finance Committee Chairman Charles Grassley, an Iowa Republican, said in a statement. "Due to Mexico's WTO-illegal tax, U.S. exports of this product to Mexico have fallen to almost zero." Grassley, who has led the effort in U.S. Congress to get Mexico to drop its tax, said he hadn't seen the decision and was reacting to reports about it. The WTO's decision is expected to be made public next month.
MEXICO-U.S. TIES
The Mexico ruling could curb some of the anti-trade sentiment that has grown among U.S. farmers, lobbyists say.
"There is a sense among corn farmers, just as there is among everyone in agriculture, of misgiving over these trade agreements," said Jon Doggett, vice president for public policy in Washington at the National Corn Growers Association. "This is a response to that kind of concern." Mexico won't open its market to U.S. high-fructose exports without being able to export sugar to the United States because it would cripple Mexican sugar mills, Perezcano said.
"As long as we don't resolve the problem of sugar access to the U.S., we can't resolve the problem of fructose access to Mexico," Perezcano said. "If it's not a tax, it will be other measures."
NAFTA RULES
Under NAFTA, the United States is allowed to limit Mexican sugar imports. Those caps are scheduled to be lifted in 2008, and the potential increases in imports has become a stumbling block in negotiations for a U.S.Central American Free Trade Agreement (Cafta).
The U.S. administration is seeking a compromise with lawmakers from U.S. sugar-producing states to win their support for Cafta. An increase in U.S. corn sweetener exports may help balance out the anticipated increase in imports of sugar, says the American Sugar Alliance, an industry lobbying group.
The WTO ruling "means nothing for us in the medium term, but in 2008 it can mean a great deal," said Philip Hayes, an association spokesman. "This just underscores the problem of including sugars and sweeteners in trade agreements."
U.S. FEARS
U.S. sugar growers want a comprehensive solution to the threat of Mexican imports and related trade issues before they support Cafta, said U.S. Republican Senator Craig Thomas of Wyoming.
"The sugar people, and I'm with them, are looking for a longer term" deal, Thomas said in an interview. "It's part of Cafta; it's part of what will happen with Mexico in two years." |
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