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WTO panel rules against Mexico corn sweetener tax

Agriculture.com Staff 03/06/2006 @ 2:14pm

After a World Trade Organization appeals panel on Monday ruled against a Mexico tax on soft drinks sweetened with anything but cane sugar, the U.S. might be a step closer in returning to the Mexico corn sweetener market.

When the Mexican market is fully restored for corn sweetener, the price per bushel of corn in the U.S. could rise by $0.10 in key corn states, or $0.06 nationally, according to the U.S. Corn Refiners Association (CRA).

The tax has created the longest standing dispute in agriculture between the U.S. and Mexico.

The 20 percent tax, enacted by the Mexican Congress effective in January 2002, has shut down U.S.-owned sales of high fructose corn sweetener (HFCS) to Mexico for nearly four years. Losses of $944 million in HFCS sales, equivalent to 168 million bushels of corn used to make HFCS, are sustained every year that the tax is in place, with additional sizable losses to investments, according to the CRA.

Audrae Erickson, CRA spokeswoman said, it's in Mexico's best interest to eliminate this trade barrier.

"The corn industry has experienced heavy losses from the closure of our top foreign market for U.S.-owned high fructose corn syrup sales and bulk corn sales for HFCS production in Mexico," Erickson said. "As far as Mexico's restrictive actions, this decision is the end of the line for litigation. It's good news for the U.S. corn industry."

She added, "Contrary to many reports in Mexico, the Mexican sugar industry enjoys significant preferential access to the U.S. sugar market, but that access could be jeopardized if Mexico fails to comply with this WTO ruling or substitutes a new measure to restrain corn sweetener trade. Farmers and consumers on both sides of the border stand to gain from prompt elimination of the soda tax."

The WTO's dispute settlement body will now formally ask Mexico to bring its measures into line with trade rules. The decision can't be appealed, according to the Dow Jones newswire. Mexico has insisted its actions are in keeping with trade rules, and the tax is used to protect its sugar industry.

After a World Trade Organization appeals panel on Monday ruled against a Mexico tax on soft drinks sweetened with anything but cane sugar, the U.S. might be a step closer in returning to the Mexico corn sweetener market.

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