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American Shipper

A sweet deal

U.S. and Mexican officials discuss ways to resolve ongoing Mexico sugar subsidy saga

   U.S. Commerce Secretary Wilbur Ross and Mexico’s Secretary of Economy Ildefonso Guajardo Villarreal last week announced an effort to resolve an ongoing dispute over Mexican sugar exports and “anti-bunching” limits.
   “I hope that this represents the beginning of a working relationship that will bear fruit for both our nations,” Ross said in a statement. “It is important that we quickly begin our work together on the day-to-day issues that arise from our important bilateral relationship.”
   Mexican sugar exports to the United States were recently halted when the country met its agreed upon export volume ceiling. The Trump administration praised Mexico’s sugar producers for complying with the existing suspension agreements once the limit had been reached.
   The battle at the U.S. and Mexican border over sugar dates back many years. Mexico has long been among the world’s largest sugar producers and is often counted on as a major sugar source to feed America’s veracious appetite for sweetened products when domestic sugar stocks run low. However, U.S. sugar producers have often blamed their Mexican counterparts of overplaying their hand.
   In April 2014, the Commerce Department under the Obama administration took up a U.S. sugar industry petition and initiated antidumping and countervailing duties investigations against Mexican sugar exports. In December 2014, Commerce entered into so-called “suspension agreements” with the Mexican government and sugar producers that suspended these investigations in exchange for Mexico limiting its exports and imposing minimum export prices on sugar sold to the United States.
   U.S. stakeholders quickly “raised fresh concerns about a shortage of raw sugar supplies and price suppression in the refined sugar market allegedly caused by flaws in the suspension agreements,” the department said.
   In February 2016, Commerce initiated an administrative review of the agreements, and four months later re-entered negotiations with Mexico and its sugar industry, as well as the U.S. sugar industry and other stakeholders, to try to reach a long-term solution.
   Yet, there is lingering concern that while U.S. negotiations continue with Mexico they won’t be able to reach a final decision on the suspension agreements by the original April 4 deadline, and Commerce pushed it back to May 1.
   Sugar has become a hot button commodity between the United States and Mexico in recent years.
   The United States lifted its long-held sugar trade restraints against Mexico at the start of 2008. By 2013, Mexico sugar exports to the United States doubled to 2 million tons, which the U.S. industry blamed for the collapse of domestic sugar prices.
   In March 2014, the Commerce Department and International Trade Commission initiated antidumping and countervailing duty cases against Mexican sugar imports. The investigations found both dumping of Mexican sugar on the U.S. market at less than fair value and that Mexico had been subsidizing sugar producers to encourage their exports.
   According to the American Sugar Alliance, sugar producers lost $2 billion in 2013 and 2014 due to price drops caused by Mexico’s dumping, and the U.S. industry damage was bad enough to effectively end Hawaii’s production of sugar after more than a century in the industry.
  Despite the findings by the U.S. antidumping and countervailing duty investigations against Mexican sugar imports, in October 2014, the United States reached an agreement to suspend duties and resume duty-free sugar trade by setting up the suspension agreements (SAs), which allow the Mexican sugar producers to essentially fulfill U.S. import requirements. Yet U.S. sugar producers allege abuses of the SAs by the Mexican sugar exporters.
   “Absent these restraints, American producers and taxpayers are harmed and consumers see no benefit,” the American Sugar Alliance said. “Economic gains accrue to subsidized foreign producers and, domestically, only to the sweetened-product sector which is already one of the most profitable and robust sectors of the U.S. economy.”
   A group of more than 35 sugar-producing countries, which are allowed to ship a certain volume of sugar annually under tariff rate quotas (TRQs) put in place by the U.S. Department of Agriculture, have complained that Mexico’s sugar producers have also harmed their businesses.
   “When surging imports from Mexico threatened to overwhelm the U.S. market, the TRQ holders voluntarily reduced their exports to assist USDA’s efforts to maintain market stability,” Paul Ryberg, president of the Washington-based International Sugar Trade Coalition, wrote in a March 4 statement for the ITC’s “Economic Effects of Significant U.S. Import Restraints” investigation. “These efforts came at considerable cost to the TRQ quota holders, both in terms of lower volumes of exports and sharply lower prices.”

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