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June 18, 2004

A sweet mess

NAFTA has been in force for 10 years, and all tariffs on Mexican goods are gone except for six products, according to the NAFTA representative at the Mexican Embassy, Hector Marquez. The six products: sugar, orange juice, powdered milk, peanuts, corn and dry beans.

It is an interesting list. There is no machinery on it, or anything high-tech. Itís all foodstuffs. Furthermore, most of the things on the list are items subsidized by the United States, like corn and milk, protected by quota (sugar) or special land restrictions (peanuts.)

Consider the case of sugar. The United States protects the sugar market by limiting imports, so that the U.S. price is more than triple the world price. For a free-trade attack on this policy click here.

As part of NAFTA, we agreed to let the Mexicans ship sugar here beginning in 2001, but only if surplus to Mexican needs. They were using sugar in their soft drinks. Our corn-syrup producers invested in capacity in Mexico, to be fed by American yellow corn. (The Mexicans eat white corn.) So in comes the corn, the bottlers switch to syrup, and suddenly the Mexicans have lots more sugar to sell in the United States -- and at that fancy price.

We slammed the door on the Mexican sugar, and Mexico retaliated by slapping a 20% tax on fructose-sweetened beverages.

Supposedly, Mexican sugar will be allowed completely free entry in 2008. It would be great for consumers, but Iíll believe it when it happens.

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Posted by Bruce Ramsey at June 18, 2004 01:51 PM



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