US senator warns Dominican Rep. on corn syrup tax

Support in the US Congress for a controversial free-trade agreement with a group of Central American countries would be further eroded if the Dominican Republic enacts new barriers to American corn syrup exports, Senate Finance Committee Chairman Charles Grassley said.

Legislation is pending in the Dominican Republic that would protect domestic sugar growers with a new 25% tax on beverages sweetened with high-fructose corn syrup. Mexico has shut out US corn syrup shipments with a similar soft-drink tax.

In a letter to Dominican Republic President Leonel Fernandez, Grassley said that if the tax is enacted, it would "seriously jeopardize support in the US Senate for an FTA (free-trade agreement) between the United States and the Dominican Republic. I, for one, would be forced to reevaluate my stance."

Grassley's committee has oversight of trade agreements. The Iowa Republican represents the leading US corn-producing state.

Grassley said the tax would violate international trade rules, as well as the recently negotiated Central America Free Trade Agreement.

The CAFTA countries comprise Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua. A separate agreement, with the Dominican Republic, is expected to move through Congress attached to the CAFTA free-trade deal.

CAFTA is already under siege in Congress, with Democrats, including presidential nominee John Kerry, saying the deal's labor and environmental provisions are too weak.

Congressional debate on the agreement has been put off until after the November national elections.

Last month, Deputy US Trade Representative Peter Allgeier warned the Dominican Republic that enacting the corn-syrup tax "could prompt the United States authorities to suspend indefinitely action upon such an agreement." (Reuters)