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Mexican and US governments. The result is a tangled web of claims and litigation with no resolution in sight. Indeed, Mexico cites the failure to re- solve the sugar question as an argument to scale back its NAFTA com- mitments in other key commodities. 124

Our recommendation differs sharply from the prevailing direction of NAFTA policy, which is focused, as we have said, on dividing the pie of protection and subsidy benefits between producer groups. In view of the significant adverse health effects of excessive sugar consumption, we urge NAFTA members to appoint a commission to recommend an appropriate excise tax on sugar and HFCS designed—like cigarette taxes—to both cur- tail consumption and raise revenue to offset the healthcare burden. Once the excise tax is imposed, free trade should be allowed in sugar and HFCS, but a portion of the excise tax revenue should be devoted to helping farm- ers and processors adjust, over a period of about 10 years. The excise tax should also provide significant funding for environmental purposes, in- cluding a reduction of sugar acreage in the ecologically sensitive Florida Everglades. Excise tax funds could be used to purchase sugar acreage and return the land to its natural condition. The funds could also be used to compensate sugar plantations that do not use environmentally harmful phosphorous fertilizers. 125

To manage the transition toward free trade in HFCS and sugar, the United States and Mexico should also establish a comprehensive interim agreement. As an example, the United States could agree to a higher quota for Mexican sugar exports of 268,000 metric tons (compared with the ex- isting 250,000 metric tons), starting in 2006, with an equivalent amount of US HFCS exports to Mexico. To mollify US sugar industry concerns, Mex- ican sugar shipments could be split 60 percent raw and 40 percent refined. Similarly, US HFCS exports could be split as 60 percent soft drink indus- try and 40 percent bakery industry. 126

124. As of January 2003, all tariffs on pork, poultry, and rice were eliminated under NAFTA. However, Mexico recently hinted that without a sweetener deal allowing Mexican sugar ex- ports duty-free into the United States by 2008, Mexico might impose trade barriers on pork and poultry. See “Mexico Weighs Request for Roll-Back of NAFTA Farm Tariff Cuts,” Inside US Trade, January 3, 2003.

125. For a detailed analysis of the environmental harm caused by sugar cultivation, see Humphreys, van Bueren, and Stoeckel (2003).

126. So far, transition proposals have been stalemated by US efforts to protect cane refiners and Mexican attempts to limit the presence of US HFCS in Mexico’s soft drinks industry. The United States, for example, prefers that Mexican sugar exports to the United States be split 80 percent raw and 20 percent refined; Mexico proposes that US HFCS exports follow a 50/50 split between soft drinks and bakery industries. See Jurenas (2003).



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