Dominican Republic considers following Mexico with HFCS tax

Food & Drink Weekly, Sept 13, 2004

Reports that the Dominican Republic is considering a proposal to levy a tax on soft drinks made with high fructose corn syrup (HFCS) as a sweetener has gotten the attention of the Bush administration. Deputy USTR Peter Allgeier has warned the Dominican Republic (DR) that the introduction of such a tax could lead the United States to delay any action on a free-trade agreement (FTA) the two countries have negotiated but not yet enacted. The DR is considering a 25-percent tax on all beverages sold in the country that are sweetened with HFCS as part of a larger tax reform bill approved by the country's House of Representatives last month. That measure currently is being debated by the DR Senate.

In a letter to DR Ambassador Hugo Guiliani, Allgeier said the tax would discriminate against imported sweeteners and would directly counter provisions in the bilateral FTA. The DR was a late addition to a larger FTA that included five Central American nations and which is known as DR-CAFTA. Under the terms of the U.S.-Dominican Republic FTA, the existing 14-20 percent tariff on HFCS is to be phased-out over 15 years, with a safeguard mechanism in place during the transition period.

Some trade policy observers speculate that the DR might have used the HFCS tax imposed by Mexico as a model to ensure that soft drink producers do not stop using DR sugar in favor of HFCS imports. The United States and Mexico have sparred for several years over Mexican barriers to imports of HFCS produced in the United States. Mexico's current barrier is a 20-percent tax on beverages sweetened with HFCS.