Mexico Seeks to Tax Non-Sugar Drink Imports

January 7, 2002

The Mexican Congress has approved legislation that would place up to a 20% tax on soft drinks that contain sweeteners other than cane sugar. "The measure taxes high fructose corn syrup out of the market and severely hurts U.S. corn exports," said Tim Hume, a corn grower from Walsh, CO, and president of the National Corn Growers Association (NCGA).

"The levy will force soft drink manufacturers to use expensive cane sugar, effectively penalizing a large portion of the Mexican population by barring access to a clean, caloric rich food, through government caused price increases," Hume added. Annual U.S. exports of HFCS and corn processed into HFCS are valued at $300 million, using an estimated 60 million bushels of corn a year.

"Value-added corn products, like HFCS, make up a growing percentage of our corn exports," said Hume. "If we are to successfully expand new markets for corn, we must halt protectionist measures such as the proposed tax."

The imposition of the tax would violate the North American Free Trade Agreement (NAFTA), and the rules of the World Trade Organization (WTO). Hume continued, "Since the passage of NAFTA, Mexico has become our second largest corn customer - it is disappointing to see the Mexican government take action that violates our mutually agreed upon trade agreements."

The new revenue provision did more than levy a new tax on soft drinks, however, said Hume. The law also threatens bulk exports of corn to Mexico. Under NAFTA, Mexico agreed to import duty-free 3.2 million tons of corn annually. Imports above that level are subject to duties as high as 120%. Currently, the United States exports 5.76 million tons of corn to the nation.

Under the new law, U.S. exports would be subject to reduction by 500,000 tons of corn annually, and the law reserves the right to impose a duty on imports over the 3.2 million ton threshold. Mexican growers have requested placing a tariff of 30% on corn imports over the 3.2 million ton level.

"We have worked very hard over the years to create a system of free trade with Mexico that benefits both nations. What the Mexican Congress did was more like the blatant protectionist actions of the EU than what we have come to expect of our second most important export customer," concluded Hume.