U.S. Secretary of Commerce Wilbur Ross and Mexican Secretary of Economy Ildefonso Guajardo announced yesterday a new agreement in principal to suspend anti-dumping and countervailing duties against Mexican sugar imports into the United States.
 
The deal aims at resolving complaints by U.S. sugar growers that Mexico was circumventing past agreements by dumping refined sugar into the U.S. market while simultaneously limiting raw sugar it exported to U.S. refineries.
 
“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,” Ross said. “I am glad to say that Minister Guajardo and his colleagues have been honest and collaborative partners in seeking a fair and sustainable solution – this bodes well for our long-term relationship.”
 
The Coalition for Sugar Reform (CSR), which includes the National Confectioners Association and the Retail Confectioners International as members, called the proposed agreement a “bad deal,” exemplifying the “worst kind of crony capitalism.”
 
In a statement released today, the CSR said, “The agreement in principle does not address the fact that the price of sugar in this country is already 80 percent higher than the world price. In fact, it will result in higher prices, costing 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. 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 just to benefit one small interest group.”
 
As CSR also noted in the release, “The United States is a net importer of sugar, and until the U.S. sugar industry filed anti-dumping and countervailing duty cases in February 2014, there was free trade in sugar between the United States and Mexico since early 2008. Mexico has become an integral part of the North American sugar trade and is a critical supplier of sugar to the United States.”
 
However, the Department of Commerce said the deal “… addresses the concerns of the U.S. sugar industry and prevents harm to other U.S. industries, including confectioners, beverage producers and corn growers, that might have resulted if no agreement were reached.”
 
“Unfortunately, despite all of these gains, the U.S. sugar industry has said it is unable to support the new agreement, but we remain hopeful that further progress can be made during the drafting process,” Ross added. “We look forward to continuing discussions with them as we finalize the agreement. We remain confident that this deal defends American workers across many industries and is the best way to ensure stability and growth.”
 
According to published reports, the negotiation — and subsequent finalization —of a sugar deal between the United States and Mexico does minimize the chance of a trade war between the two countries. 
 
Details of the agreement include these five major elements:
  • Price: 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. This will protect the U.S. sugar industry from harm caused by Mexico “dumping” sugar in the United States. 
  • Raw vs. Refined Split: The new agreement also reduces the percentage of refined sugar that may be imported 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.
  • Purity/Polarity: The dividing line between refined and raw sugar was reduced from 99.5 to 99.2 purity, referred to in the industry as “polarity.” This means that “estandar,” a very common variety of sugar from Mexico, will count against the 30 percent limit on refined sugar. This will further protect against unfair competition from subsidized refined Mexican sugar imports.
  • Enforcement: Mexico agreed to increased enforcement measures and to accept 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. In addition, the Department of Commerce can increase this reduction to three times the amount if necessary to deter further wrongdoing.
  • Additional U.S. Needs: Mexico accepted the above significant modifications on the condition that Mexico be granted a right of first refusal to supply 100 percent of any “additional need” for sugar identified by USDA 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.  USDA will specify whether the additional need sugar is raw or refined without regard to the 70/30 split.  The dividing line between raw and refined additional need sugar is 99.5 polarity, but raw sugar must be shipped in bulk in an ocean-going vessel, increasing the likelihood it will enter a U.S. refinery for further processing.
    • Importantly, when the Export Limit is increased pursuant to a request by USDA prior to April 1, such sugar shall be subject to the pre-April 1 70/30 split and the 99.2 polarity divide, an added protection for U.S. domestic refiners. Further, USDA retains the flexibility to specify the polarity of post-April 1 additional needs sugar specifically needed to rectify certain extraordinary and unforeseen circumstances that seriously threaten the economic viability of the U.S. sugar refining industry.