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Puerto Vallarta News NetworkNews Around the Republic of Mexico 

Sugar War Threatens US, Mexico Trade Relations

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April 30, 2014

A sugar war is brewing and it isn't sweet. The American Sugar Alliance is fuming over soaring competition from Mexico and argues that a doubling of Mexican imports is triggering a collapse in market prices.

Mexico City, Mexico ó Thereís nothing sweet in the sugar war thatís unfolding between Mexico and the United States.

The US industry, sometimes called "Big Sugar," simmers over soaring competition from Mexico and argues that a doubling of Mexican exports triggered a collapse in the market price of sugar.

A reluctant Obama administration has opened a formal investigation into those exports that could result in new import duties on Mexican sugar - and ignite a broader trade dispute over sweeteners that might affect other US industries.

A spokesman for the American Sugar Alliance, Phillip Hayes, said the sugar industry faces losses of up to $1 billion this year because of what it alleges is dumping - selling at prices lower than what it costs to produce - by Mexican sugar producers.

"We are far more efficient than Mexicoís sugar industry, yet we are losing market share because of Mexicoís predatory trade practices," Hayes said.

The dispute ricochets to the far corners of both countries, involving hundreds of thousands of jobs and affecting sugar cane fields in Florida, Texas, Louisiana, and Hawaii and sugar beet farms in the Red River Valley of Minnesota and North Dakota, along with California, Idaho, and the Pacific Northwest.

It also lays bare some of the competing agricultural and industrial interests around sugar, the complex trade relationship between Mexico and the United States over sweeteners and the influence of Big Sugar on Capitol Hill.


"This is a very big battle," said John W. Bode, the president of the Corn Refiners Association, a trade group with offices in Washington, D.C. "The political influence of the US sugar industry is legendary. . . . They may be only 4 percent of US agriculture but when you look at political contributions, they account for a third."

The US International Trade Commission is due to vote May 9th on whether Mexican imports harm the US sugar industry, and a positive vote could lead to anti-dumping duties on Mexican sugar.

Mexico denies that it dumps sugar in US markets.

"The government of Mexico does not subsidize the sugar industry," said Economy Secretary Ildefonso Guajardo on April 17th.

Under the North American Free Trade Agreement, Mexico has the right to export sugar to the United States without quotas or tariffs. Itís the only nation in the world with such unlimited access to US sugar consumers. The last restrictions on Mexican sugar were lifted under NAFTA in 2008.

"Since NAFTA was implemented, sugar acres in Mexico are up 66 percent, while total sugar acres in the US are down 11 percent," Hayes said.

Hayes said Mexico shipped 1.5 million tons of sugar to US markets in 2011, hit a record 2.3 million tons last year, and is on pace to reach 2.5 million tons this year.

"Mexico has collapsed the US market, and Mexico appears to be accelerating these disputed exports to the US," Hayes said. "US producers are going to be hard-pressed to survive under these conditions. . . 142,000 jobs could be in jeopardy if corrective action isnít taken."

Mexico also has much at stake. Its sugar industry employs 500,000 people, and the 54 sugar mills in the country are spread across nearly half its states, primarily in the south.


If the United States' government imposes punitive duties on Mexican sugar, analysts say Mexico might reciprocate with duties that would hit other sectors of the US economy, and even make moves that would sour Pacific Rim trade talks.

"Thereís a high potential for retaliation, which could cause a deterioration in the agricultural relations between the two countries," said Tom Earley, an economist at Agralytica, a food and agricultural consulting firm in Alexandria, Virginia.

Agriculture Secretary Tom Vilsack voiced dismay over Big Sugarís request for anti-dumping action at a House of Representatives hearing April 3rd, calling it "a bit ill-timed."

"We are at a very delicate circumstance with Mexico on a variety of issues. I am sure they donít see this as a particularly friendly gesture. In a perfect world, I would liked to have seen this perhaps not occur or not occur at this time," Vilsack said.

Mexico has rallied support from US candy makers and corn growers who fear that the issue may ignite a broader trade dispute.

While Mexicoís sugar exports to US markets have risen, so have its imports of US-made high fructose corn syrup, used to sweeten soft drinks, baked goods, confections, ice cream, and other products.

Mexican imports of high fructose corn syrup from US suppliers hit a record high of $636 million in 2012, falling to $474 million in 2013.

Some turmoil is hitting sugar markets already.

"You have a hesitant marketplace," said Pablo Lugones, a sweeteners specialist at McKeany-Flavell, a consulting firm based in Oakland, California.

"There could be preliminary duties imposed as early as August or September," echoed Earley. "Who wants to take the risk of buying sugar now and having to pay $100 more a ton later on," if retroactive duties are imposed.

Sugar is perhaps the most highly protected and tightly regulated sector of US agriculture. Among its protections is a government guarantee that the price will not drop below a certain level.

"They have the Rolls-Royce of safety nets," said Irwin P. Altschuler, an attorney at Greenberg Traurig who represents the Mexican Chamber of Sugar Producers.


Altschuler said that while Mexico exports more sugar to US markets than it used to, "the US industry is not contracting. Over the last three years, the US industry is getting a bigger share of a growing market."

"The petition for anti-dumping duties on Mexican sugar is totally without merit," Altschuler said. "It is the very definition of nerve for an industry that is so coddled by the government."

Altschuler said Mexico might well retaliate against US exports of high-fructose corn syrup if it faces duties on its sugar exports.

"The fact of the matter is right now US corn syrup exports to Mexico have no restriction," he said. "There would seem to be a kind of inherent unfairness there."

Bode, of the Corn Refiners Association, said, "Broader US economic interests are watching this with concern" because it could spill into other economic areas.

Rather than retaliate against corn syrup, Mexico could attack the US sugar price-support program, saying it doesnít meet World Trade Organization standards.

Or, Bode said, Mexico could sandbag the Trans-Pacific Partnership trade talks - which involve the United States and 11 other nations - accusing Washington of touting free trade while it launches "highly protectionist initiatives on a commodity-by-commodity basis."

Original Story