USTR - U.S. Requests WTO Panel Against Mexico Over Beverage Taxes
Office of the United States Trade Representative

 

U.S. Requests WTO Panel Against Mexico Over Beverage Taxes
06/22/2004


WASHINGTON - United States Trade Representative Robert B. Zoellick announced that the United States today in Geneva formally requested that the World Trade Organization (WTO) establish a dispute settlement panel regarding Mexico’s 20 percent tax on beverages and syrups made with sweeteners other than cane sugar. The United States believes Mexico's beverage tax violates Mexico’s WTO obligations because it discriminates against U.S. products such as high fructose corn-syrup (HFCS), a corn-based sweetener that directly competes with sugar in many applications.

"Mexico's discriminatory beverage tax is the latest in a series of measures imposed to protect Mexican sugar producers from competition,” Zoellick said. "Our sweetener industries have tried hard to resolve this matter. However, it is now time to go to the WTO to ensure the rights of American corn refiners are respected. It is not fair that American HFCS producers are being denied access to the Mexican market.”

Only beverages and syrups that use HFCS and other non-cane-sugar sweeteners are subject to Mexico’s tax measures. The taxes have sharply restricted U.S. exports of HFCS. Elimination of this type of discriminatory treatment is an important issue for America’s corn refiners and corn growing states such as Iowa, Illinois and Nebraska. In this regard, Zoellick thanked Senator Grassley (R-IA), the Chairman of the Senate Finance Committee, for his efforts to resolve this problem.

The United States made its request for the establishment of a WTO panel at today’s meeting of the WTO Dispute Settlement Body (DSB) in Geneva, Switzerland.

Background:

In the 1990s, the U.S. corn refining industry began exporting significant quantities of HFCS to Mexico as Mexican soft drink bottlers began to substitute HFCS for sugar as a sweetener in soft drinks and other beverages. The U.S. industry also opened two facilities in Mexico to produce HFCS from imported U.S. corn.

In 1998, Mexico imposed antidumping duties on imported U.S. HFCS. The United States challenged Mexico's antidumping duties in the WTO and won that case. In late 2001, the WTO adopted the findings of a dispute settlement panel and the Appellate Body that Mexico's antidumping duties were inconsistent with the WTO Antidumping Agreement.

Shortly thereafter, in January 2002, Mexico imposed a 20 percent tax on soft drinks and other beverages, as well as on syrups and other products that can be diluted to produce soft drinks and other beverages, that use any sweetener other than cane sugar. At the same time, Mexico also imposed a 20 percent tax on the services related to the distribution of beverages and syrups, including the commissioning, mediation, agency, representation, brokerage, consignment and distribution of beverages and syrups. Beverages and syrups sweetened solely with cane sugar are exempt from the taxes. Mexico’s tax measures have sharply curtailed U.S. HFCS producers' access to Mexico's market for soft drinks and other beverages. As a result of these measures, U.S. HFCS exports to Mexico have been drastically reduced. In 1997, the year before the antidumping duties were imposed, U.S. exports of HFCS to Mexico were 193,519 metric tons, commercial basis, worth $63 million. In 2003, U.S. exports were 4,111 metric tons, commercial basis, and valued at $1.5 million.

The United States and Mexico have engaged in extensive efforts to find a negotiated resolution of this and other sweeteners-related issues, including WTO consultations prior to today’s request for the establishment of a panel.

Pursuant to WTO rules, Mexico may exercise its right to block establishment of a panel at today’s DSB meeting. If it does, the United States will renew its request, and a panel will be established at the next DSB meeting. The panel will consider the U.S. complaint and determine whether Mexico is acting in accordance with its WTO obligations. The WTO dispute settlement process takes about 18 months, if there is an appeal.

 
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