Sweet deal?

U.S. reaches deal with Mexico on sugar subsidies, but it doesn't please everyone

By: Chris Gillis
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Photo: qoppi / Shutterstock.com
   The U.S. and Mexican governments reached tentative agreement Tuesday to suspend antidumping and countervailing duties against Mexican sugar imports entering the United States.
   “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 Commerce Secretary Wilbur Ross in a statement.
   The Commerce Department stated the new duty suspension agreement helps prevent dumping of Mexican sugar and corrects for subsidies the Mexican sugar industry receives.
   Specifically, the agreement increases the price at which raw sugar must be sold at the mill in Mexico from 22.25 cents per pound to 23 cents per pound. For refined sugar, the price at the mill must increase from 26 cents per pound to 28 cents per pound. These prices exclude packaging and transportation.
   The Commerce Department said this action will protect the U.S. sugar industry from dumped Mexican sugar. Dumping occurs when a foreign company’s product is sold in the United States at less than fair value.
   The new agreement also reduces the percentage of refined sugar that may be imported into the United States from 53 percent to 30 percent.
   “This results in a significant increase in the amount of raw sugar available to U.S. sugar refiners while ensuring that subsidized refined Mexican sugar imports do not injure U.S. refiners,” the department said.
   The Mexican government agreed to increased enforcement and significant penalties for violations, including a reduction in the amount of sugar allowed to be imported equal to twice the amount of any sugar found to be in violation of the modified agreements. Commerce can increase this reduction to three times the amount if necessary to deter further wrongdoing.
   In addition, Mexico will be granted a right of first refusal to supply 100 percent of any “additional need” for sugar identified by U.S. Department of Agriculture after April 1 of each year. Additional need is defined as demand for sugar in excess of the demand USDA had predicted for that crop year.
   In early May, the Commerce Department warned the Mexican government that it intended to resume collection of antidumping and countervailing duties on sugar imports, starting June 5, if a new agreement between the two countries could not be reached.
   In 2014, Commerce reached final affirmative determinations in antidumping and countervailing duty investigations regarding sugar imported from Mexico. In addition, the U.S. International Trade Commission found that domestic sugar producers were being unduly harmed by these imports from Mexico. It was estimated that the U.S. sugar industry lost $2 billion in 2013 and 2014 due to Mexico’s sugar dumping.
   An agreement was reached by the United States with the Mexican government and sugar producers in 2014 to suspend the U.S. antidumping and countervailing duties on these imports, averting a damaging trade war between the two countries.
   In 2016, the American Sugar Coalition, however, raised concerns with Commerce about the operation of the agreements, and petitioned the department to formally review whether the agreements continue to meet U.S. law. Commerce in December issued preliminary findings that the agreements were not working.
   After this latest round of sugar trade negotiations, Ross complemented Mexican Secretary of Economy Ildefonso Guajardo and his staff for being “honest and collaborative partners in seeking a fair and sustainable solution – this bodes well for our long-term relationship.”
   However, some members of the U.S. sugar industry said they will not support the new agreement.
   The Coalition for Sugar Reform, which represents consumer, trade, and commerce groups, manufacturing associations, and food and beverage companies that use sugar, called the agreement “a bad deal for hardworking Americans, and exemplifies the worst form of crony capitalism.”
   The coalition said the agreement fails to address the reality that the price of sugar in the United States is 80 percent higher than the world price, and will cost U.S. consumers an estimated $1 billion a year.

The Coalition for Sugar Reform said the agreement fails to address the reality that the price of sugar in the United States is 80 percent higher than the world price, and will cost U.S. consumers an estimated $1 billion a year.

   “What the agreement does do is solidify that it’s time for Congress to shoulder the responsibility of fixing this broken program in the 2018 farm bill if not before,” the coalition explained.
   While generally supporting the Trump administration’s action, the American Sugar Alliance, which represents domestic sugar producers, warned that “the agreement in principle contains a major loophole in the section dealing with additional U.S. needs. Mexico could exploit this loophole to continue to dump subsidized sugar into the U.S. market and short U.S. refineries of raw sugar inputs. This loophole takes away the existing power of the U.S. government to determine the type and polarity of any additional sugar that needs to be imported and cedes that power to the Mexican government.”
   Ross said the administration is “hopeful that further progress can be made during the drafting process. We look forward to continuing discussions with [these trade groups] as we finalize the agreement.”
   The Corn Refiners Association praised the commerce secretary for his balanced approach during the negotiations with Mexico and averting further erosion of U.S. trade relations with Mexico as the countries begin renegotiating the North American Free Trade Agreement.
   “With both sides demanding more, he coolly pursued the broader public interest,” said John Bode, president and CEO of the association. “Thanks to his leadership, U.S. sugar interests have much stronger protections than the previous Suspension Agreements without threatening the $500 million in U.S. corn sweetener exports to Mexico that support 4,000 U.S. jobs.”