WTO Dismisses Mexican Appeal in U.S. Corn Sweetener Dispute

Mexico lost an appeal against a World Trade Organization ruling ordering the end of a tax on high fructose corn sweetener used in soft drinks in a case the U.S. corn industry says has cost it $3 billion in lost sales.

Mexico's Congress imposed the 20 percent tax in January 2002 to protect its sugar industry from competition. The move came in retaliation for a U.S. measure that curbed Mexican sugar exports.

The WTO first ruled the Mexican tax illegal on Oct. 7. The tax has hurt sales of U.S. corn sweeteners and led Coca-Cola Femsa SA and the Mexican unit of Pepsi Bottling Group Inc. to buy more sugar, driving up prices.

``Mexico has not established that the challenged measures are justified,'' the WTO's judges said in a 45-page ruling published today on the Geneva-based organization's Web site.

The tax also sapped $944 million a year in exports from U.S. corn growers and makers of syrups such as Archer Daniels Midland Co. and Cargill Inc., according to the Corn Refiners Association in Washington. Scrapping the tax would lead U.S. corn prices to rise by 6 cents a bushel, the group estimates.

Corn syrup, made by processing corn starch, is used in products ranging from soft drinks to ketchup and ice cream. Consumption of the sweetener in the U.S. has risen to about 60 pounds (27 kilograms) per capita a year since corn syrup was developed in the 1970s.

U.S. exports of the syrup to Mexico fell to a low of just over 4,000 metric tons in 2003 from 206,347 tons in 2001, according to the U.S. Department of Agriculture.

To contact the reporter on this story: Warren Giles in Geneva wgiles@bloomberg.net

To contact the editor responsible for this story: Edward Buckle at ebuckle@bloomberg.net

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