Farm Groups Seek Further HFCS Relief from Mexico

April 10, 2002

Major U.S. farm groups continue to urge the U.S. trade representative to seek a commitment from the government of Mexico to take whatever steps are within its power to prevent this tax from going into effect.

Mexico's Congress voted last week 255-198, with two abstentions, to challenge in the country's Supreme Court the executive branch's recent suspension of a 20% tax on beverages made with high fructose corn syrup (HFCS). President Vicente Fox was able to get the tax suspended in March for seven months, in hopes of striking a sweetener deal with the United States.

The tax, imposed Jan. 1, was an attempt to aid Mexico's debt-ridden sugar industry and increase the government's tax collection revenues. Mexico's Congress argued that strict U.S. sugar quotas, which limit total imports to 1.2 million metric tons annually, force the Mexican sugar industry to sell its excess sweetener elsewhere below market prices for a loss of $600 million each year. Mexico conducts nearly 90% of its commerce with the United States.

National Corn Growers Association President Tim Hume points out the tax will reduce U.S. corn sales by $66 million and will reduce sales of HFCS by U.S. firms by $240 million. "U.S. firms, along with the U.S. corn growing and processing industry, won't stand for such action. The security in their investments in Mexico is at stake," Hume, a farmer from Walsh, Colo., said.

The sweetener dispute centers on different interpretations of the sugar chapter under the North American Free Trade Agreement. In response to U.S. limits on Mexico's tariff-free sugar imports, Mexico imposed heavy antidumping duties in 1997 on fructose imports and then created the special beverage tax this year. At the start of the year, beverage companies began canceling fructose orders to escape the tax, stocking up on sugar instead.