Commentary

Not Everybody Thinks The U.S.-Mexico Sugar Deal Is So Sweet

The U.S. government says it got just about everything it wanted in a preliminary trade deal that would curtail Mexico’s “dumping” subsidized sugar north of the border but a sugar trade group claims there’s a loophole and has refused to endorse it yet. Manufacturers of sugary treats in the U.S., meanwhile, will see the price for that key ingredient rise, probably jacking up the retail price for that Oreo-filled ice cream concoction you crave.

“We have gotten the Mexican side to agree to nearly every request made by the U.S. sugar industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners,” Dept. of Commerce Secretary Wilbur L. Ross said yesterday at a joint press conference at the Chamber of Commerce in Washington, D.C., with Mexico’s economy minister, Ildefonso Guajardo, Vicki Needham reports for The Hill.

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But U.S. sugar producers, citing a “loophole,” aren’t buying it. 

“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,” charges Philip Hayes, a spokesman for the Arlington, Va.-based American Sugar Alliance, in a statement that opens by praising Ross for making “progress” in negotiations with Mexico.

“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,” the statement continues. The trade group says it will work with Ross “to see if that loophole can be effectively closed so that the basic provisions of the agreement are not undermined.”

Every deal takes its toll.

“Because the deal will raise the floor price for raw sugar, it will hurt cereal, beverage and candy makers, said Rick Pasco, head of the Washington-based Sweetener Users Association. Mr. Pasco estimated that U.S. raw sugar prices currently are about 80% above those elsewhere in the world, and Tuesday’s trade deal with Mexico would push that premium to 100%,” Anthony Harrup and William Mauldin report for the Wall Street Journal.

“‘If you’re a food company looking at long-term investment in the U.S. and you’re paying twice the world price, that’s got to be a consideration going forward,’ said Mr. Pasco, who said sugar-using companies support about 600,000 jobs in the U.S.,” the WSJ story continues.

Meanwhile, a trade group that represents a coalition of U.S. sugar buyers and other firms that are critics of the U.S. program said the deal favored the interests of U.S. sugar producers, and estimated the cost to the consumers in higher prices for food, drinks and confectionary at around $1 billion, report Reuters’ David Lawder and Chris Prentice. 

“‘Today's announcement is a bad deal for hardworking Americans, and exemplifies the worst form of crony capitalism,’ the U.S. Coalition for Sugar Reform said in a statement.

 “The negotiations were an attempt to settle an anti-dumping and anti-subsidy case brought by a coalition of cane and beet farming groups and ASR Group, the maker of Domino Sugar that is owned by the politically well-connected Fanjul family of Florida,” Lawder and Prentice continue.

“Meet the Sugar Barons Who Used Both Sides of American Politics to Get Billions in Subsidies,” posted last September by Guy Rolnik on Pro-Market, the blog of the Stigler Center at the University of Chicago Booth School of Business, provides insight into the Fanjul family. 

“Sugar is a commodity, which means its price is set in big international markets and is supposed to be pretty much the same all over the world. But in the U.S., the price of sugar has been greater than in other parts of the world, sometimes two or three times more. This significant markup is the result of U.S. laws and regulations,” Rolnik points out.

Looking at the big picture, a deal would avert a problem for corn growers in the U.S. “Mexico has threatened tit-for-tat duties on U.S. high-fructose corn syrup if Washington imposed tariffs on its sugar — a move that alarmed the U.S. corn industry,” observe Jude Webber and Demetri Sevastopulo for Financial Times.

And on an even bigger scale, “trade experts have kept a close eye on the sugar dispute to gauge the approach that Washington could take in talks to renegotiate [the North American Free Trade Agreement]. Although President Trump has backed away from his threat to pull the United States out of that regional trade accord with Mexico and Canada, the administration has given few clues as to how hard a line it will take,” Elisabeth Malkin points out for the New York Times.

Agriculture Secretary Sonny Perdue yesterday said the sugar agreement “sets an important tone of good faith leading up to the renegotiation.”

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