Soft Drink Tax Questioned

USTR files WTO case against Mexico's tax on high fructose corn syrup after negotiations were unsuccessful. Compiled by staff

Published on: Mar 19, 2004

U.S. Trade Representative (USTR) Robert Zoellick announced that the United States would file a World Trade Organization (WTO) case against Mexico concerning the country’s discriminatory soft drink tax.

National Corn Growers Association (NCGA) President Dee Vaughan says the beverage taxes, which have significantly curtailed U.S. exports of high fructose corn syrup (HFCS), are nothing more than protectionist barriers to free trade. He says enactment of the taxes in 2002 dealt a significant blow to U.S. corn growers.

"Mexico was the U.S. corn industry’s top HFCS market before the tax," Vaughan says. "Corn growers are losing $300 million a year in corn sales because of this, and the tax clearly violates Mexico’s WTO obligations."

According to Vaughan, the provision discriminates against beverages that use HFCS or sweeteners other than cane sugar by imposing a cost prohibitive tax of 20% on sales and 20% on distribution.

Zoellick says he attempted to resolve the dispute through negotiations, but Mexican trade officials decided against reformation of the taxes.