WTO Rules Mexican HFCS Tax Illegal

Full resolution of this dispute would enable U.S. corn farmers to realize a $0.06 per bushel increase in the price of corn nationally, and up to $0.10 per bushel in key corn states. Compiled by staff

Published on: Aug 9, 2005

According to press reports, a World Trade Organization (WTO) dispute settlement panel yesterday issued a confidential final report in favor of the United States in the WTO dispute over Mexico's tax on beverages containing high fructose corn syrup (HFCS). This final report is reported to have upheld the panel's June preliminary ruling.

The 20% tax, enacted by the Mexican Congress effective in January 2002, has shut down U.S. sales of HFCS to Mexico for nearly four years. Losses of $944 million in HFCS sales, equivalent to 168 million bushels of corn, are sustained every year that the tax is in place, with additional sizable losses to investments.

Since 1997, the sweetener impasse with Mexico has resulted in more than $3 billion of lost HFCS sales, both HFCS exports and U.S. owned HFCS sales in Mexico, or 672 million bushels of corn production, including lost corn sales to Mexico intended for sweetener production, the Corn Refiners Association reports.

Audrae Erickson, president of the Corn Refiners Association, says, "Full resolution of this dispute would enable U.S. corn farmers to realize a $0.06 per bushel increase in the price of corn nationally, and up to $0.10 per bushel in key corn states."

"If the reports of the panel's ruling are accurate, Mexico should respond by immediately eliminating the tax," Erickson says. "We hope the WTO ruling will provide a basis for a resolution to this longstanding dispute."

Sen. Chuck Grassley, chairman of the Committee on Finance, has long urged Mexico to drop this discriminatory tax and comply with its international trade obligations. "I sincerely hope that the Mexican government doesn't engage in a game of hide and seek and replace this WTO-inconsistent barrier to imports of high fructose corn syrup with yet another barrier that violates Mexico's international trade commitments," he says.

The panel's final report will be circulated to WTO members and the public after it has been translated into the three official WTO languages. Circulation of the report is expected to occur in September.