Mexico, US reach deal in sugar trade

7 June, 2017

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The United States and Mexico have reached a preliminary agreement that averts steep tariffs on imports of Mexican sugar. “The Mexican side has agreed to nearly every request by the U.S. industry to address flaws in the current system and to ensure fair treatment of American sugar growers,” Commerce Secretary Wilbur Ross said at a news conference.

However, Ross said the U.S. sugar industry considers the new agreement in its present form unacceptable, “but we remain hopeful that further progress can be made in the drafting process," he added.

U.S. sugar producers said the current agreement leaves open a loophole that would allow Mexican exports to continue to dump subsidized sugar on the U.S. market and short U.S. refineries of raw sugar supplies.

"We will work with Secretary Ross in the coming days to see if that loophole can be effectively closed so that the basic provisions of the agreement are not undermined and USDA can effectively manage the sugar program," Phillip Hayes, spokesman for the American Sugar Alliance, said in a statement.

Ross said he was hopeful industry leaders to change their minds as the deal was drafted into its final form. "It should be days, not weeks or months," Ross said.

Ross had set a deadline of June 5 for talks on a new agreement to be completed, otherwise Mexican producers could have been subject to anti-dumping duties, totaling a combined rate of more than 80%.

“This two-months-and-half of dialogue in terms of trying to get an agreement to keep on exporting sugar to the U.S. market and avoiding tariffs above 40% on Mexican sugar has given us the opportunity to know each other better and really get to trust and develop a strong relationship," Mexican Economy Secretary Ildefonso Guajardo Villarreal said at the joint press conference.

Under the deal, Mexico will export the same amount of sugar to the U.S., while other aspects of the trading relationship will change.

The price of Mexican raw sugar will rise to 23 cents per pound, up from 22.25 cents, while refined sugar will increase to 28 cents a pound from 26 cents, which Ross said would protect U.S. sugar from dumping by Mexico.

Guajardo said the price increases would not affect the volume of sugar Mexico will be permitted to send to the U.S. He added that the prices would allow small growers and workers in Mexico to better profit from sales.

While the deal doesn't change Mexico's access to the U.S. sugar market, the agreement reduces the percentage of refined sugar to 30% from 53% of overall imports.

The two nations solved another prickly issue over polarity level, which is the difference between raw and refined sugar. The U.S. pushed for and received a decrease to 99.2% purity from 99.5, which will likely restrict Mexican importers from selling their product directly to U.S. beverage companies and other businesses.

New shipment requirements will force Mexican raw exports to be shipped in bulk on ocean-going vessels into U.S. ports, where it is more likely the product will pass through U.S. refineries.

The deal would also put in place new enforcement measures that would allow the U.S. to deny entry to at least two times the amount of Mexican imports that are found to be in violation of the agreement. Commerce will have the discretion to increase that to a factor of three if it sees fit.

Mexico won new concessions in becoming the supplier of "first refusal" for any extra U.S. sugar demand after April 1 that exceeds the annual projected needs determined every year by the Agriculture Department.

Under the terms of the deal Mexico can supply extra demand with sugar that has a 99.5% polarity, which U.S. producers fear will create similar conditions of raw supply shortages that led to the renegotiation of the deal. USDA can specify whether raw or refined sugar is needed for sugar needs after April 1.

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