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Rough going for D.R. free-trade agreement

Caribbean Business, Puerto Rico

Rough going for D.R. free-trade agreement

21 September 2004.

By John Collins

U.S. corn producers complained to U.S. Trade Representative Robert Zoellick after the Dominican Republic (D.R.) Congress decided to impose a 25% surcharge on imports of cheaper U.S. corn syrup for use as a sweetener.

The American Chamber of Commerce of the D.R. and U.S. Ambassador to the D.R. Hans Hertell objected to the provision, but it emerged as a controversial issue because sugar is the D.R.’s leading agricultural commodity. Some members of the U.S. Congress have complained loudly about pressure being exerted on them by the U.S. embassy.

D.R. President Leonel Fernandez became embroiled in the controversy when Technical Secretary to the Presidency Temistocles Montas asked Senate leader Andres Bautista to remove the 25% tax on corn-syrup imports from the bill. Montas had requested the Senate not to make any changes in the version approved by the chamber so as to hasten its passage.

Most observers in Washington and in Santo Domingo believe the proposed free-trade agreement (FTA) between the U.S. and the D.R. won’t be enacted this year because free trade and the protection of domestic agriculture are hot-button issues in the U.S. presidential and congressional election campaigns. If the pact isn’t enacted before the end of the current session of the U.S. Congress, depending on who the next president is, it could be held until the next session next year.

“D.R. legislators are clearly trying to shield their sugar producers from import competition just as the U.S. is poised to consider an FTA with that country,” said Andrae Erickson, president of the U.S. Corn Refiners Association. Conversely, D.R. sugar producers point to the situation in Mexico, where U.S. corn syrup is subject to duty. U.S. corn producers don’t want the same thing to happen with the D.R.

The D.R. sugar industry is hanging tough and remains adamant in its opposition to the FTA unless corn-syrup imports from the U.S. are subject to the 25% duty. “We are very aware of the problem that the sugar industry in Mexico experienced as the result of corn-syrup imports from the U.S.,” said Campos De Moya of the Cristobal Colon refinery. “Since Mexico agreed to U.S. corn-syrup imports under the North American Free Trade Agreement, 27 refineries have had to close in that country.”

Dominican sugar producers object to the merged D.R.-Central American FTA, now called the U.S.-D.R.-Cafta, on the grounds that it would affect their local sales and profitability. Some Dominican producers using sugar in their products, however, complain that Dominican sugar is uncompetitive in price and has resulted in a 50% decline in their production. They insist the higher cost of Dominican sugar prevents them from competing with cheaper imports and thus makes their products uncompetitive for export.