June 25,2003

Grassley Urges Mexico to Drop Trade Barriers to U.S. Agricultural Products

WASHINGTON – In a strongly worded, example-laden speech on the Senate floor last night,Sen. Chuck Grassley, chairman of the Committee on Finance, urged the Mexican government to stopimposing barriers on U.S. agricultural products – many from Iowa – and thereby undermining its commitments under the North American Free Trade Agreement. Grassley also urged the Bush administration to make the removal of Mexican barriers to U.S. agricultural products a top priority.

The text of Grassley’s speech follows.

MEXICAN BARRIERS TO IMPORTS OF U.S. AGRICULTURAL PRODUCTS

Mr. GRASSLEY. Mr. President, it has been almost 10 years since the North American FreeTrade Agreement – NAFTA – went into effect. Overall, this agreement has been a great success forAmerica's farmers and ranchers. Between 1994 and 2002, U.S. agricultural exports to Mexico grewby 95 percent. Mexican agriculture has benefited as well from NAFTA. Exports of Mexicanagricultural products to the United States increased by almost 97 percent from 1993 to 2001. At thepresent time, some 78 percent of all agricultural products exported by Mexico are sent to the UnitedStates, making the United States by far the largest market for Mexico's agricultural exports. Clearly,the agricultural sectors of both the United States and Mexico have on the whole profited fromNAFTA. For this reason, I am confounded by some of the recent actions of the Mexican governmentthat undermine the spirit, if not the letter, of NAFTA.

Allow me to elaborate on some of these actions. Mexico has recently imposed, or threatenedto impose, trade barriers to a wide variety of U.S. agricultural products. These products include pork, beef, corn, high fructose corn syrup, rice, apples, and dry beans. Apparently ignoring that increased competition in the Mexican market has benefited that country's consumers, some in Mexico havespoken of renegotiating the agriculture provisions of the NAFTA. Mexico's measures against U.S.agricultural products have certainly caught the attention of many members of the Senate, includingme.

Let me explain Mexico's actions that are directly impacting producers in my state of Iowa.

I'll start with high fructose corn syrup. It's true that U.S. producers of agricultural products have, onthe whole, benefited from NAFTA. And, at one point, that was the case with U.S. producers of highfructose corn syrup. Mexico was formerly the largest export market for U.S. produced high fructosecorn syrup. But in January 2002, the Mexican Congress imposed a tax of up to 20 percent on softdrinks containing high fructose corn syrup. This move was undoubtedly intended to provideMexican sugar producers with an unfair advantage in the Mexican market over U.S. high fructose corn syrup producers. As a result of this discriminatory tax, U.S. exports of high fructose corn syrupto Mexico are now at almost zero levels. Mexico's high fructose corn syrup tax was imposedfollowing WTO and NAFTA panel rulings that found that a 1998 Mexican antidumping order onU.S. high fructose corn syrup did not comply with Mexico's trade obligations. Clearly, Mexico isgoing out of its way to prevent the sale of high fructose corn syrup in its market. Mexico's highfructose corn syrup tax is causing great harm to U.S. corn producers and U.S. high fructose cornsyrup manufacturers. The U.S. corn refining industry estimates that it is losing up to $620 millionannually on account of Mexico's discriminatory tax. It estimates that U.S. corn farmers are losingover $300 million each year due to lost sales to both U.S. and Mexican high fructose corn syrupproducers. I find it especially ironic that Mexico, a country that is actively seeking foreigninvestment, is treating so poorly the U.S. high fructose corn syrup industry, an industry that hasinvested heavily in Mexico. Based upon the promises of NAFTA, U.S. high fructose corn syrupproducers made major investments in the United States and Mexico. Mexico has now pulled the rugout from under them. This certainly sends, at best, mixed signals to foreign investors.

Let me give you another example of Mexico's actions against U.S. agricultural products, thisone impacting Iowa's pork producers. In January of this year, Mexico initiated an antidumpinginvestigation on U.S.-produced pork. The petition that initiated this investigation has seriousdeficiencies. For example, the petition was filed by Mexican hog producers, not pork processors, soit is my understanding that the party bringing the case lacks standing under the AntidumpingAgreement of the WTO. While Mexico's antidumping investigation on pork is ongoing, I recognizethat Mexican officials last month terminated the Mexican antidumping order on imports of live hogsfrom the United States. I am pleased with Mexico's decision regarding the live hog order. I stronglyhope that this decision provides an indication that Mexican officials will act reasonably and notimpose an antidumping order on U.S. pork.

But there are other problems. Large quantities of U.S.-produced pork have been rejected atthe Mexican borer during the past year due to alleged sanitary problems. But millions of Americansconsume U.S.-produced pork each day, and we know that this product is safe. Mexico's rejection ofU.S. pork for non-scientific reasons violates Mexico's WTO obligations.

Iowa's beef producers are also being harmed by Mexico's actions. In April 2000, Mexicoimposed antidumping duties on imports of U.S. beef, and this trade measure remains in place.

Mexico's investigation resulted in numerous probable violations of Mexico's commitments underthe WTO Agreements. On June 16, the U.S. Trade Representative announced that the United Statesis filing a case at the WTO over Mexico's antidumping order. I fully support the U.S. tradeRepresentative's actions at the WTO regarding this matter. Despite the ongoing Mexicanantidumping order on U.S. beef, Mexican cattle producers earlier this year filed a safeguard petitionon beef from the United States. Mexican officials have neither confirmed nor denied the existenceof this petition. Lack of certainty with regard to this safeguard petition has made it even moredifficult for the U.S. cattle and beef industry to plan sales in Mexico.

White corn producers in Iowa are also threatened by potential Mexican trade actions.

Mexican officials are hinting at initiating a safeguard investigation on imports of U.S. white corn.In addition, these officials have suggested limiting import permits for white corn for periods of shortsupply. Such a policy would not comport with Mexico's NAFTA obligations. Mexico's actions, andthreatened actions, against U.S. agricultural products such as high fructose corn syrup, pork, beef,and white corn are having real effects on U.S. producers. Sales in Mexico are being lost orthreatened. Uncertainty is making it difficult for U.S. producers to plan for future sales in Mexico.But Mexico's actions are having a broader effect than lost sales. Mexico's policies are indirectlythreatening the entire U.S. trade agenda. Most of U.S. agriculture was solidly behind the passageof the NAFTA. But with Mexico failing to abide fully with its NAFTA commitments, many U.S.producers are beginning to question the worth of trade agreements.

If America's farmers and ranchers back away from their strong support for new tradeagreements, the U.S. trade agenda will lose its biggest proponents. And if the United States faltersin its support for trade liberalization, the whole world will suffer. Given the importance ofmaintaining the U.S. trade agenda, I urge the administration to make the removal of Mexican barriersto U.S. agricultural products a top priority. The U.S. government must not overlook systematicefforts by Mexico to keep U.S. farm products out of the Mexican market in disregard of Mexico'sinternational trade commitments. Finally, I urge Mexican officials to think twice about the effectsof their decisions involving U.S. agricultural products. Mexico's actions are threatening thatcountry's trade relations with its largest export market. Damaged trade relations between the UnitedStates and Mexico are certainly not in the best interests of either country. NAFTA can, and will,continue to provide great benefits to farmers, ranchers, and consumers on either side of the border.

But this trade agreement will work only if all parties to it abide by their NAFTA commitments.

-30-