CAFTA Support Hinges on HFCS Tax

Corn groups express concern over inclusion of Dominican Republic in Free Trade Agreement (FTA) because of high fructose corn syrup tax. Compiled by staff

Published on: Sep 30, 2004

The acceptance of a Central America Free Trade Agreement (CAFTA) is in jeopardy over the Dominican Republic's decision to impose a 25% tax on high fructose corn syrup (HFCS).

In a letter sent to U.S. Trade Representative Robert Zoellick, three corn industry organizations expressed strong opposition approved by the Dominican Republic Congress taxing all beverages sold in the country that are sweetened with HFCS.

Under terms of the U.S.-Dominican Republic FTA, U.S. exports of HFCS already would not receive duty-free access to that market until the 15th year of the agreement. In addition they also are covered by a safeguard provision put in place by the Dominican Republic.

The letter was sent by the Corn Refiners Association (CRA), National Corn Growers Association (NCGA) and the U.S. Grains Council (USGC) states, "In light of these circumstances, the undersigned organizations strongly oppose the inclusion of the Dominican Republic in the Central America Free Trade Agreement (CAFTA)." The letter calls on the Bush administration to suspend all action on the Dominican Republic Free Trade Agreement (FTA).

Earlier this week the American Farm Bureau Federation (AFBF) also sent a letter saying AFBF supports the Dominican Republic-Central America Free Trade Agreement, but due to the new tax, the organization’s support of an FTA package including that nation would be "difficult."

NCGA President Dee Vaughan said the association strongly supports free trade agreements that increase access for corn growers and U.S. agriculture. "However, when agreements are negotiated in bad faith, they are not worth the paper they are written on," he says.

"The Dominican Republic has been a valuable customer for U.S. feed grains and we strongly hope this issue is resolved quickly and efficiently," said Paul Williams, USGC chairman. "We do not want this situation to impede progress of the CAFTA as it's a strong agreement for U.S. agriculture and provides for further expansion of demand in the region."

The CRA, NCGA and USGC have called on the Dominican Republic to repeal the provision and call upon other CAFTA countries to work with the United States to resolve the dispute. Leaders of all three organizations noted that failure to do so may not only jeopardize the Dominican Republic FTA, but could complicate overall passage of the CAFTA, an agreement that the corn industry otherwise supports.