Corn Refiners’ Association, the Mexican government encouraged domes- tic sugar and soft drink bottling industries to limit HFCS imports in ex- change for a 20 percent price discount on sugar for soft drinks.118 In Au- gust 2001, the NAFTA Chapter 19 panel decided Mexico should remove its tariffs against US HFCS exports and refund collected AD duties to the United States. Mexico complied with the NAFTA panel ruling but also limited the quantity of US HFCS exports. 119
The dispute did not end there. In January 2002, the Mexican Congress passed legislation that imposed a 20 percent tax on soft drinks made with HFCS, and the US-based Corn Products International, Inc. initiated a sec- ond sugar-related dispute under NAFTA Chapter 11. The consequences of the newly imposed HFCS tax were immediate. As of early 2002, US HFCS exports plummeted by 69 percent from 117,000 metric tons in fiscal 2001 to about 36,000 metric tons in 2002. 120
Arancia CPC, a subsidiary of Corn Products International, claims the HFCS tax costs the company between $35 million and $40 million in an- nual operating income and forced it to shut down its HFCS plant in Mex- ico.121 Arancia CPC claims the HFCS tax led soft drink bottlers to cancel
geted by SECOFI include A. E. Staley Manufacturing, Cargill, Inc., Archer Daniels Midland Co., and CPC International, Inc. In January 1998, SECOFI imposed permanent import tariffs on HFCS products. US producers argue that both the AD tariffs and the permanent tariffs are inconsistent with NAFTA. See Haley and Suarez (1999). See also “US Mulls WTO Case In Response to Mexican AD Decision on HFCS,” Inside US Trade, January 30, 1998.
118. A restraint agreement between Mexican sugar producers and soft drink bottlers was in- tended to limit the usage of HFCS to 350,000 tons per year. See Haley and Suarez (1999). See also “NAFTA Panel Finds Against Mexican Duties on US Corn Sweetener,” Inside US Trade, August 10, 2001.
119. Mexico allows US HFCS exports up to 148,000 metric tons at a low tariff rate of 1.5 per- cent. Any US HFCS exports above that amount will face an AD duty of 210 percent. This would adversely affect US HFCS producers as the United States historically exports more than 148,000 metric tons of HFCS per year into Mexico. See “Mexico Ends Antidumping Du- ties on Corn Syrup,” Kiplinger Agriculture Letter 73 no. 9, May 3, 2002. See also final NAFTA Chapter 19 panel decision, available at www.nafta-sec-alena.org/images/pdf/ma98010e. pdf (accessed in April 2003).
120. Even with duties applied between 1998 and 2001, US producers still exported about 120,000 tons of HFCS into Mexico per year. Mexico’s new HFCS tax does not apply to soft drinks made with cane sugar, which Mexico produces in excess. Under pressure from the USTR and US agricultural groups, President Fox temporarily suspended the tax until Mex- ico’s Supreme Court overturned his decision in July 2002. See “Mexico Reinstates HFCS Tax,” Food & Drink Weekly 8, no. 28, July 22, 2002. See Haley and Suarez (2003).
121. According to the US National Corn Growers Association and the Corn Refiners Asso- ciation, US corn producers have lost market opportunities for more than 20 million bushels of corn. Jaime Gallo of Arancia CPC claims that the HFCS tax potentially jeopardizes 18,000 direct and indirect jobs. See Josefina Real, “New Tax Forces Shutdown of Mexico Fructose Plant,” Reuters, January 10, 2002; BNA (2003b, 2003c).