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U.S. Urges Dominican Over Corn Syrup Tax

Associated Press

U.S. Urges Dominican Over Corn Syrup Tax

24 September 2004

A U.S. lawmaker urged the Dominican president Friday to veto a 25 percent import tax on corn syrup, warning it could bring an end to a free-trade agreement between the two countries.

Dominican President Leonel Fernandez "has the political capital to tell Congress it’s a mistake ... that it jeopardizes our free-trade agreement," said U.S. Rep. Jerry Weller, an Illinois Republican who helped negotiate the free-trade pact reached in August.

In a 20-10 vote, the Dominican Senate passed the tax Thursday, bucking warnings from U.S. trade officials that it violated the trade agreement.

Fernandez, who has spoken out against the tax, has not decided whether he will veto it, said Roberto Rodriguez, a presidential spokesman. The president has eight days to sign or veto the bill before it becomes law.

Dominican lawmakers said without the tax, corn syrup competition would devastate the Caribbean nation’s sugar cane industry, one of its largest and most lucrative.

"To protect our production of sugar cane we need to impose this tax," said Sen. Ramon Albuquerque from the opposition Dominican Revolutionary Party.

Proposal detractors said losing the free-trade agreement would weaken the Spanish-speaking nation against competing countries in Central America.

Free-trade zones are areas where companies can manufacture goods without having to pay import taxes on raw materials or export taxes on the final product.

Companies operating in free-trade zones are a leading employer in the Dominican Republic, with 530 of them employing 170,833 people in 2002.

The syrup import tax is part of a larger fiscal reform package that includes 10 to 20 percent tax hikes on domestic beer and tobacco sales, international travel and the general sales tax.

The legislation presents a major dilemma for Fernandez because he needs passage of the reform to restart negotiations with the International Monetary Fund for some $600 million in loans to give the struggling economy a boost.

But losing the free-trade agreement would be seen as a major political defeat, and it could damage relations with the United States, the Dominican Republic’s No. 1 trading partner.

In 2003, the United States exported 32.85 tons of corn syrup, or $25,000 worth, to the Dominican Republic, according to the U.S. Census Bureau.

In a letter to Fernandez last week, U.S. Trade Representative Robert Zoellick said if the corn syrup tax becomes law, "I could not recommend including the Dominican Republic in the free-trade agreement package for consideration by U.S. Congress."