14 



HFCS. In the longer term, if Mexico were to develop HFCS 

 production capacity, it would inevitably have to depend on U.S. 

 corn as its raw material source. 



6. Q. How can you verify future claims by Mexico that it has 

 achieved net exporter status? How can you verify that it is not 

 "substituting" — importing foreign sugar for domestic use and 

 shipping Mexican sugar to the US? How can you verify Mexico is 

 not "transhipping" — importing foreign sugar and shipping to the 

 US as if it were Mexican sugar? What's to stop Mexico from 

 exporting all their domestically grown sugar to the US and 

 importing sugar for their own use? 



A. We will be meeting with Mexico to compare production, 

 consumption, and stock data. Over the last 20 years, USDA has 

 developed a robust data series on the Mexican sugar market which 

 we will use to compare with the Mexican data. The United States 

 will also have the right "to observe and comment on the 

 methodology" Mexico uses to prepare its data. The United States 

 will be completely assured that Mexico is indeed a net surplus 

 producer before we accept that claim. 



The NAFTA sugar component contains measures expressly designed to 

 prevent substitution and transhipment. NAFTA rules of origin for 

 sugar have been constructed to prevent Mexico from becoming an 

 export platform for either raw or refined world sugar. World 

 sugar refined in Mexico is not eligible for the NAFTA preference. 

 Also, by the end of the sixth year of the transition, Mexico is 

 required to adopt the same tariff level on sugar from non-NAFTA 

 countries as the United States maintains. From that point on 

 through the transition, a common U.S. -Mexico tariff on sugar, 

 together with the provision which links access to net surplus 

 producer status, will eliminate any incentive for transhipment or 

 substitution, 



7. Q. In regards to the import surge side agreement, would this 

 include sugar provisions? Would the US sugar industry gain 

 further protection through this side agreement? 



A. The side agreements are still being negotiated. Therefore, 

 it may be premature to indicate what will or will not be in these 

 agreements. However, we have made no product-specific proposals 

 at this time. Our current proposal is largely procedural in 

 nature. We want to make sure that the safeguard provisions 

 already contained in the NAFTA are well understood. In addition, 

 we are looj<ing at procedures which could provide an early warning 

 of the need for safeguard actions. In this regard, a Safeguards 

 Committee would examine trade and employment trends at the 

 request of a party to assess the likelihood of safeguard actions. 

 In addition to the safeguards that are already incorporated in 

 the sugar provisions of the NAFTA, the agreement has a general 

 safeguard which is available to the sugar industry or any other 

 import-sensitive industry. Depending on its final content, the 

 side agreement on import surges could facilitate access to the 



