WASHINGTON, D.C. — A trade dispute with Mexico over sugar imports has ended, with the United States winning a deal likely to lift prices of sweeteners used by American food producers and consumers, the U.S. Department of Commerce (DOC) and the Mexican government announced June 30.
The agreement was signed between U.S. Commerce Secretary Wilbur Ross and Juan Cortina Gallardo, representing both the Mexican sugar industry and Mexico’s minister of economy, Secretary IIdefonso Guajardo Villarreal.
Had the two countries not reached a deal, the nasty spat could have erupted into a broader trade war, blocking efforts to renegotiate a new North American Free Trade Agreement (NAFTA) among the United States, Mexico and Canada.
“We have gotten the Mexican side to agree to nearly every request made by U.S. industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners,” said Ross. “I’m glad to say that Minister Guajardo and his colleagues to have been honest and collaborative partners in seeking a fair and sustainable solution – this bodes well for our long-term relationship.”
The agreement increases the price at which raw and refined sugar is sold to Mexican mills by 3/4-cent per pound, reduces Mexico’s refined sugar exports to the U.S. and suspends U.S. duties on Mexican sugar imports. Following the announcement, President Donald Trump took to Twitter to say the pact was “a very good one for both Mexico and the U.S.”
Among those pressing for the new tradedeal was the Corn Refiners Assoc. (CRA), which issued a statement praising Ross for an agreement “that concluded in improved protections against unfair trade practices for sugar and protection of nearly 4,000 jobs depending upon maintaining a vibrant corn products market in Mexico.”
When the preliminary deal was first announced last month in the renegotiated Suspension Agreement, The Coalition for Sugar Reform – which represents Coca-Cola, Nestle, Kraft Heinz and hundreds of other food companies – blasted the agreement as “a bad deal for hard-working Americans, and exemplifies the worst form of crony capitalism.
“U.S. sugar policy should empower America’s food and beverage companies
to create more jobs, not put hundreds of thousands of good-paying U.S. jobs at risk to benefit one small interest group.”
Since 2013-14 trade between the two countries has been anything but sweet after the U.S. government found Mexico guilty of violating America’s antidumping and countervailing trade provisions.
A 2014 agreement struck with Mexico failed to stop the country, which in recent years was said to cause U.S. food producers to lose hundreds of millions of dollars to illegal trade practices.
The new agreement suspends antidumping and countervailing duties against Mexican sugar imports and sets new price and export terms favorable to the U.S. marketplace. It’s a complicated agreement, but there are a few elements drawing the most attention, according to the DOC. These include:
•Increasing the price of raw sugar sold at Mexico’s mill to 23 cents per pound from 22.25. For refined sugar at the mill, the increase goes to 28 cents from 26. These hikes exclude packaging and shipping. These prices should protect the U.S. sugar market from harm caused by Mexico “dumping” sugar in the United States.
•The agreement further reduces the percentage of refined sugar approved for imports from 53 to 30 percent. This is a significant increase of raw sugar available to U.S. refiners while ensuring that subsidized refined Mexican sugar imports does not injure U.S. refiners.
•The dividing line between refined and raw sugar was reduced to 99.2 purity from 99.5, referred to in the industry as “polarity.” This means that estandar, a common variety of Mexican sugar, will count against the 30 percent limit on refined sugar. This is to protect the U.S. sugar market against unfair competition from subsidized refined Mexican sugar imports.
•To step up U.S. trade enforcement measures, Mexico has agreed to accept significant penalties for trade violations, including a reduction in the amount of sugar allowed for imports equal to twice the amount of any sugar found in violation. In addition, the DOC can increase this reduction to three times the amount, if necessary, to deter further violations.
•In a boost to Mexico, if the USDA finds that U.S. firms need more imported sugar in any given year, raw or refined, Mexico has been granted the right of first refusal to supply 100 percent of U.S. sugar needs.
Of the enforcement provisions, Phillip Hayes of the American Sugar Alliance (ASA) said, “Trade agreements and U.S. trade laws don’t work without strong enforcement. For too long, Mexico was allowed to sidestep our trade laws, but those days are over.
“Our trade laws will be enforced. The U.S. market should return to a level playing field, and U.S. farm and producer jobs will be saved from unfair Mexican trade. It’s important that Suspension Agreements work as intended this time, to completely eliminate the injurious effects
of dumping and subsidized sugar from Mexico and support the operation of U.S. sugar policy.”
(ASA members include both cane and sugar beet producers and processors. In Mexico, sugar is produced only from cane, according to the ASA).
The new agreement aims at preventing the dumping of Mexican sugar on the U.S. market and corrects subsidies the Mexican sugar industry receives. It further addresses concerns raised by the U.S. sugar industry and will prevent harm to related industries – including confectioners, beverage producers and corn growers – that might have resulted if no agreement were reached.
Mexico is the top foreign supplier of sugar to the United States, with a 12 million-ton sugar market where the Mexican government doles out export quotas to about 40 sugar-producing countries each year through its trade agreements. The U.S. receives about a third of those sugar exports.
The trade dispute escalated further last year when the U.S. sugar industry pressed the DOC to withdraw from NAFTA over sugar prices and quotas.
White House Press Secretary Sean Spicer told reporters in January that because of a nearly $60 billion trade deficit with Mexico, the Trump administration was considering imposing a 20 percent tariff on Mexican imports. The new arrangement puts to rest for the moment any suggestions of a tariff and opens the door to expanded negotiations for a new NAFTA deal.
According to U.S. Census Bureau data, for the first 11 months of 2016 total imports from Mexico were worth $270.6 billion. Last year, the United States bought $5 billion in vegetables and fruits from Mexico, an increase of more than 4 percent from the year before. Mexico is the world’s sixth-largest sugar producer.
The American Heart Assoc. says Americans each consume 19.5 teaspoons of sugar every day in various forms. That’s about 66 pounds each year per person.