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US and Mexico announce sweetener free trade deal

By Lorraine Heller , 31-Jul-2006

The US and Mexico have concluded an agreement under which access will be granted for US high fructose corn syrup exports to Mexico, a move that begins to address the decade long dispute between the two countries.

The US Department of Agriculture (USDA) last week announced a 15-month high fructose corn syrup (HFCS) tariff-rate quota to Mexico, as part of its sugar program provisions for 2006 and 2007.

The agreement, which covers the period October 1 2006 to December 31 2007, provides for 250,000 metric tons dry basis of HFCS access into Mexico for the first twelve months and a minimum of 175,000 metric tons, or up to a maximum of 250,000 metric tons, for the remaining three months.

An equivalent amount of access will be granted for Mexican sugar exports to the United States.

The move follows the shut-down of US sales of HFCS to Mexico for over four years, after Mexico introduced a 20 percent tax on the product in January 2002. The tax was designed to protect the country's struggling sugar industry, and to retaliate against US curbs on imports of surplus Mexican sugar after anti-dumping duties introduced in 1998 were declared illegal by the WTO in an earlier ruling.

According to the Corn Refiners Association (CRA), 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.

The industry body has said that the price per bushel of corn in the US could rise by $0.10 in key corn states, or $0.06 nationally, when the Mexican market is fully restored for corn sweeteners.

The recent agreement is set to lead to free trade on US and Mexico sweeteners as from January 1 2008.

Mexico and the US also submitted a joint letter to the WTO Dispute Settlement Body regarding the elimination of Mexico's soft drink and distribution taxes. The soda tax is due to be eliminated in January 2007.

According to Audrae Erickson, president of the CRA, the deal is an "important breakthrough", which "sets in motion an irreversible path to free trade in January 2008, as the NAFTA intended."

"Although the deal does not fully compensate our industry for the more than $4 billion in losses over the past ten years, or fully resolve all outstanding disputes, it solidifies the promise for increasing US-owned corn sweetener presence in Mexico," she said.

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