Mexico †Tax Measures on Soft Drinks and Other Beverages Essay

The Mexico- fluffy make whoopies pillow slip was an central movement ground on the sweeteners trade grocery in due north America. This causal agent check will undertake to summarize the facts of the issue in line of battle to analyze the issues raised by it. Following, we try to expose the reasons why Mexico decided to implement evaluate posters as a response to the join posits refusal to submit their repugn to the North Ameri basis Free Trade accord (NAFTA) contend settlement gore.And last, give a brief opinion on the issues and the federal agency they were upheld on the case. Since January 2002, Mexico oblige a twenty dollar bill dollar bill percent revenue enhancement on the barter and distri entirelyion of promiscuous drinks and separate beverages that theatrical role e very sweetener other(a) than strap moolah, including, and speci eachy, heights fructose corn syrup (HFCS). The f every in States is the primary supplier of conscionable ab out all the HFCS rehearsed to sweeten beverages in Mexico, and on the other hand all the beverages sweet-smelling with cane kale use national w be.In border 2004 the unite States pass consultations with Mexico regarding words 1 and 4 of the DSU and oblige XXII of the GATT 1994, with extol to these revenue enhancement measures compel by Mexico. And on 10 June 2004, the get together States requested the WTO to establish a display display display board pursuant to term 6 of the DSU. The United States occupy ined that Mexico had violated the edible say in GATT 1994 obligate ternary.The Dispute Settlement personify ceremonious the beautify on 6 July stating the following, as purpose of the face of the panel To examine, in the light of the applicable purvey of the covered proportionatenesss cited by the United States in document WT/DS308/4, the count referred to the DSB by the United States in that document, and to make such findings as will assist the DSB in qualification the recommendations or in giving the legal opinions provided for in those compacts. Canada, China, the European Communities, Guatemala and Japan participated in the panel as third parties.Relevant Facts regarding the case The assess measures imposed by the Mexican government were a) twenty percent tax on the transfer or implication of blue drinks and other beverages that use every sweetener other than cane dulcorate, b) twenty percent tax on operate such as agency, re subjectation, brokerage, distri scarceion, etc. when transferring or importing beverages sweetened with any cordial of sweetener except for cane cabbage, c) and whatever other requirements imposed to taxpayers regarding the above menti angiotensin converting enzymed taxes. full(prenominal) fructose corn syrup (HFCS) comprised one hundred percent imports of sweeteners from the US to Mexico and cane sugar is a nationalally produced harvest-feast that comprises ninety five percent of Mexica n sweetener production. Considering the fact that the ticklish drink tax did non apply to beverages sweetened with cane sugar, it is pretty clear that Mexican sugar production industry was universe prosperous by the double-dealing of these measures. denominations I and III of the General conformity on Tariffs and Trade 1994 (GATT) talk about the non-discrimination on interchange able products.More specifically Article III establishes the national-treatment rule, which seeks the equal treatment to municipal and products merchandise from other states, establishing criteria such as No internal laws should be utilise to imported products to defend domestic producers from the competing comparable products. And imported products should receive treatment low national laws that is no less gold than the treatment given to like domestic products.United States claims The issues concerning sustenance constituted on Article III of the GATT 1994 that were claimed by the United S tates were the following (i) princely an excessive tax on an imported product comp atomic number 18d to taxes use to a like domestic product, (ii) grand a tax to an imported product that is instantaneously belligerent or substitutable with a domestic one that is non similarly taxed, (iii) imposing a law that affects the internal use of imported HFCS, treating an imported product in a less favorable expressive style compared to products of national origin. So the United States requested the impanel to require the violations on the im posture of these challenged tax measures.The above-mentioned issues concerning the im aim of fleecy drink taxes, distri entirelyion taxes and bookkeeping requirements were espouse by Mexican legislations by truth of a decree that reformed the Mexican Special tax income legality relevant to Production and Services as sanitary its Regulations and withal the Miscellaneous Fiscal Resolutions of age 2003 and 2004, in order to incorporate the taxes landing field to this challenge concerning soft drinks and beverages that use any sweetener other than cane sugar and its distribution and limited requirements.So these legislative bodies are also the issues and state matter to the altercate. Mexicos requests to the circuit card On the other hand, Mexico requested the Panel to decline the go of its jurisdiction and suggested to submit their dispute to an arbitral Panel in accordance to NAFTA, ground on the Shrimp Turtle determination w present the WTO recommended that the parties should resolve their difference according to the Inter-American Convention, so both states could resolve their concern with respect to the sugar trade betwixt them.That way, Mexico could claim mart devil to the United States and the residency of previous Treaties surrounded by them and the United States could also submit its claims regarding tax measures adopted by Mexico. The Panel decided to proceed and sour its jurisdiction, so Mexic o requested for them form into account its particular condition and that as a developing country some modified treatment exceptions could apply to their situation. So the Mexican measures could be justified downstairs this disposition and also infra Article XX of the GATT.Mexico also requested the Panel to consider the NAFTA simulation while resolving and formulations their recommendations. Mexico explained that its tax on sweeteners was a necessary measure to secure U. S. entry with NAFTA in granting access for Mexican sugar to the U. S. market. Statements considered by the Panel HFCS-sweetened and cane sugar-sweetened soft drinks are like products in accordance to what is established on GATT Article III2, showtimely sentence for having virtually identical natural properties, end-uses and tariff classifications and are equally favourite(a) by consumers found on surveys applied by the US.Therefore The HFCS soft drink tax and distribution tax are inconsistent with GATT Article III2, first sentence. The imported product (HFCS) and the domestic product (cane sugar) are directly competitive or suitable products that with the tax measures imposed by the Mexican government were not universeness similarly taxed in order to protect Mexicans domestic production, thitherfore there was no mistrust that Mexico was infringing its obligations downstairs GATT Article III,2 second sentence. Based on these statements the WTO Panel rejected Mexicos begs and favored the United States position.The Panel stated that Mexico was not authorize to take measures in order to secure shape to induce another Member to come with obligations owed to it on a lower floor a non-WTO treaty. , it also single-minded that that internationalisticist Treaties such as NAFTA were not covered in the exceptions established in GATT Article XX (d), and also that the laws or regulations covered in exception of Article XX(d) of the GATT 1994 do not include NAFTA (which is an global conformity) as part of them, and last, that the measures adopted by Mexico were not necessary to secure compliance to previous agreements to the United States.In declination 2005 Mexico appealed the Panels decision based on exceptions provided on GATT Article XX(d) and careen that the Panel failed to make an objective judicial decision of the facts, as required by Article 11 of the DSU but still, the appellant dead body upheld the Panels conclusions and rejected Mexicos claims.Considering the stated facts, there is no doubt regarding the violation of the GATT Article III by the Mexican government on the establishment the soft dink tax a extensive with distribution tax and other requirements imposed to taxpayer on this matter, but I securely believe it is important to consider the reasons why the Mexican government was lead to implement these understructure measures considering the United States non-compliance with obligations established in the NAFTA.One of the chief(prenomin al) reasons why Mexico implemented the soft drinks tax measures was the United States incompliance with market access agreements on sugar trade established on NAFTA, while US export of HFCS to Mexico were considerably increasing. The United States continuously refused to submit to NAFTA dispute settlement while still get laiding the benefits of the agreement regarding sugar trade.Before Mexico decided to take tax measures, it tried to resolve the dispute regarding the scope and meaning of provisions in the NAFTA governing sweeteners, but no dispute settlement forum seemed to be able to hear about the case, they needed the cooperation of the US for the integration of the panel and the United declared did not cooperate. Importance of the Mexican excoriation Industry The sugar industry its a growing sector of the Mexican economy.According to NAFTA agreements, Mexico had an expectation for it to would be adapted to export very high quantities of sugar to the United States market, but the US never ack instantaneouslyledged what they had agree by virtue of two garner negotiated betwixt the two states after NAFTA, so there was a confusion on the volume of sugar that could be exported from Mexico to the US. In the mean time, US exports of HFCS to Mexico were increasing and that was reflected on a reduction on the domestic sugar market.So with this background it is now easier to understand the reason why the Mexican Congress decided to impose soft drink taxes in order to respite the situation and try to bring the dropping Mexican sugar industry to an equilibrated position in the market so that the sugar that could have been exported to the United States, could now be sold in the domestic market. just now it is understandable that even if the United States did not come with its NAFTA obligations, there is no apology a WTO ingredient to violate its WTO obligations in order to punish another member for not complying with its obligations under an international agr eement like the NAFTA in this case.Analysis of relevant issues regarding Mexicos initial petitions More than criticizing I would like to analyze two of the petitions make by Mexico to the WTO Panel along with the Panels and appellate trunks responses to those petitions, more specifically check over if a Panel is authorize to decline to cultivate its jurisdiction in an issue presented in the beginning it.As well as Mexicos petition to the Panel to consider the NAFTA framework on its resolutions, this leads me to hesitationing if the Panel can actually exercise its jurisdiction based on other international agreements, and if so, to what result? The Panel immediately refused Mexicos petition to decline to exercise its jurisdiction on this case. It seems very obvious that if both parties were payoff to an International Treaty such as NAFTA, which regulated the sugar trade between them and they were having conflicts regarding this sector, those issues should have been heard by a NAFTA Panel. just the answer to this issue relies on the appellate Bodys public debate that according to the Dispute Settlement appreciation (DSU) a panel with jurisdiction could not decline to exercise it at all without some legal impediment because it would be contradictory to articles 3. 2, 7. 1, 7. 2, 11, 19. 2 y 23. So according to the Appellate Bodys enunciate Paragraph 52 A Member is entitled to initiate a WTO dispute whenever it considers that any benefits accruing to that Member are creation impaired by measures taken by another Member implies that that Member is entitled to a ruling by a WTO panel.The Appellate Body also stated that the issues claimed by Mexico regarding the agreement on NAFTA were NAFTA-based issues cerebrate to market Access, that did not necessarily under lapped with the issues claimed by the US that violated Article III of the GATT 1994 with respect of the infliction of soft drink taxes as well as distribution taxes, which in my opinion makes s ense but it is clearly an disadvantaged position for Mexico since it would have needed cooperation from the United States in order to constitute a panel that could hear and resolve those NAFTA- based issues.In these I agree, so I conceive of we cannot blame this matter on the Panel or Appellate Body of the WTO, since they just complied with their work and obligation to bring breastplate to the Members when they considered to be entitled to a ruling from the WTO for being effected by measures taken by other members that are subject to the WTO jurisdiction.So the main problem here is not the decision of the WTO to continue consultation the case, as they were just performing their work, but the way the United States managed the situation, only claiming the actions that directly affected their market and economy without obeying their obligations under an International Treaty or at to the lowest degree making an effort to clarify on the mis concords tie in to them, so Mexico could also be beneficiated from the importation of sugar to the fall in States. The second matter in question is whether the Panel can consider International Agreements on its resolutions and of so, to what extent?Article 3. 2 of the Dispute Settlement Understanding (DSU) states that the WTO dispute settlement system serves to preserve the rights and obligations of Members under the covered agreements, and to clarify the existing provisions of those agreements. There could be circumstances in which the Panel or Appellate Body would have to experience for its own purposes as to whether the United States acted consistently with NAFTA, not to determine its rights under NAFTA or to punish them for non-compliance but to take it in account in their determinations and as a preliminary feel in WTO ruling.WTO Panels and Appellate Body cannot definitively determine rights and obligations under non-WTO agreements they can refer to and analyze such agreements as long as it serves to determine righ ts and obligations under the WTO agreements. This is a very clear statement that clarifies the situation as it should be seen in every case the WTO can always take into reflection obligations that arise from other international agreements between countries subject to a dispute, as long as they relate to the dispute and to rights and obligations related to the WTO.I believe the most important issue raised on the present case relied on the contradiction between an International Treaty and the WTO regulations whereas from the International truth perspective the Tax measures imposed by Mexico seemed fair since the United States was not complying with obligations established under post- NAFTA negotiations so the US was challenging an international obligation derived from an International Treaty (NAFTA).Nevertheless, these fiscal measures are violations from the WTO perspective. What Mexico was seeking with the imposition of these tax measures was to enforce an equitable plea in a way of dandy hands doctrine in the understanding that the United States was acting unethically by avoiding the conformation of a NAFTA panel, while being the principal importer of sweeteners in Mexico.It just seemed rightfully unfair for Mexican sugar market to be affected by the exportation of United States high fructose corn syrup and other sweeteners, when Mexico was not being able to enjoy the benefits from their previous agreement under the NAFTA. But the measures adopted by Mexico were perhaps not the best, since a state is not empowered to attempt against its WTO obligations in order to try to force another state to comply with its obligations under a non-WTO international agreement.And as stated above, despite the controversies arisen in this case, I do not think there is a problematic within the WTO and its jurisdiction or the way they resolved the case, I would say that if the United States would have spy its obligations under the NAFTA or at least tried to cooperate in ord er to resolve their differences and came to an agreement on the sugar trade, Mexico would have never had to take this radical and GATT-violating measures, still, it is not justifiable for it to have make so.As to the recommendations that raised from this case, on may 2006 the Executive Branch of the Mexican federal official government sent to the Permanent kick of the Union Congress which is the maximum pronouncement regarding legislations, a reform project in order to overturn the legal dispositions on the Mexican Special Tax Law applicable to Production and Services regarding soft drinks taxes so as to comply with the recommended on the Appellate Bodys resolutions.joined STATES, Mexico- Tax Measures on Soft Drinks and opposite Beverages , entreat for Consultations by the United States, WT/DS308/1, March 18, 2004. 2 . united STATES, Mexico- Tax Measures on Soft Drinks and some other Beverages , Request for the ecesis of a Panel, WT/DS308/1, June 11, 2004. 3 .UNITED STATE S, Mexico- Tax Measures on Soft Drinks and Other Beverages , organisation of the Panel Established at the Request of the United States, WT/DS308/5/Rev. 1. August, 25 2004. 4 . http//www.iisd. org/trade/handbook/3_4_1. htm, International show for Sustainable Development. Environment and Trade A handbook.The basics of the WTO. The key agreements, with a special consideration of those related to the environment. 3. 4. 1. The General Agreement on Tariffs and Trade, 1994 5 . http//www. usitc. gov/publications/332/journals/corn_sweeteners. pdf, Kornis, Magda, United States international Trade Commision, Journal of international Commerca and Economics, sack version December 2006. 6 . UNITED STATES, Mexico- Tax Measures on Soft Drinks and Other Beverages , Report of the Panel, WT/DS308/R, Paragraph 8. 134. 7 . Report of the Panel, Paragraph 8. 78. 8 . Panel Report, Paragraphs 8. one hundred seventy to 8. 181. 9 . Mexico- Tax Measures on Soft Drinks and Other Beverages, Notification of an Appeal by Mexico, WT/DS308/10, December 6th 2005. 10 . Appellate body Report, Paragraph 82. 11 . Appellate Body Report, Paragraph 47. 12 . Appellate Body Report, Paragraph 56. 13 . J.Davey William and Sapir Andre, solid ground Trade Review / Volume 8 / Special Issue 01 / January 2009, pp 5 -23 inside 10. 1017/S1474745608004151, Published online06 March 2009, page 18. 14 . UNITED STATES, Import Prohibition of trustworthy Shrimp and Shrimp-Containing Products, WT/DS58/AB/R, adopted 6 November 1998, PARAGRAPH 168. 15 . http//cdei. itam. mx/ComentarioMexicoRefrescosOA. pdf, Crzo, Ernesto, Corzo Victor, Comentario sobre Mexico Impuestos sobre refrescos, Informe del Organo de Apelacion, 24 de marzo de 2006, web publication.