U.S. sugar producers get favourable trade ruling against Mexican imports

23/11/2015

U.S. Sugar Producers Trade with Mexico

U.S. Sugar Producers Trade with Mexico

A long-running trade dispute between the United States and Mexico over the American sugar market has been resolved by the U.S. International Trade Commission (U.S. ITC), which ruled in late October that Mexican imports of the commodity had hurt U.S. sugar producers.

Though the two states had reached an agreement in December 2014 to reduce Mexican imports of raw sugar to the U.S., the American Sugar Alliance – which represents the interests of American sugar farmers and producers – kept up the pressure for an independent investigation to determine whether Mexican exports counted as “dumping”.

Harmful drop in sugar prices attributed to Mexican imports

The alliance pointed to a significant drop in sugar prices, which fell by more than US 40 cents per pound, as a reason for the investigation.

The U.S. ITC found in favor of U.S. sugar producers, saying that the American industry is “materially injured” by Mexican sugar imports.

The full report from the trade body will be available soon.

The decision will impact sugar producers in 10 U.S. states which produce sugar beet, and four states which produce sugar cane.

Mexican imports account for a significant proportion of the U.S. sugar market. According to the U.S. Department of Agriculture, U.S. sugar producers are expected to produce 8.8 million tons this year, of which 5.1 million tons will be beet sugar, and 3.7 million tons will be cane sugar.

The U.S. is also expected to import 3.4 million tons of sugar, of which 1.5 million tons will be imported from Mexico.

In 2013, total U.S. sugar production amounted to 8.5 million tons. Imported sugar amounted to 3.6 million tons, 2.1 million tons of which were imported from Mexico.

Opinion split on ITC ruling

One U.S. legislator from Louisiana wholeheartedly supported the decision.

The “unanimous ITC decision confirms what we already know – Mexico’s sugar industry has been cheating on our agreements for some time, hurting sugar producers across South Louisiana,

Representative Charles Boustany said in an Oct. 20 statement.

“If other countries want to sell in the U.S. market, they need to play by the rules.”

The Sugar Alliance insists that it is open to free trade, as long as all participants compete fairly.

The ruling “helps accomplish that goal by upholding the governments’ agreement and addressing the unfair trade practices that were injuring American farmers, workers, and taxpayers,” spokesman Phillip Hayes said in the statement.

Not everyone in the U.S. is thrilled with the ITC decision, however. The Sweetener Users Association – which represents the interests of companies who use sugar in their products – said the ruling is a ‘missed opportunity’.

Sugar policy reform badly needed according to SUA

“The idea that domestic producers were suffering at a time when they made record profits is confounding,” the SUA said in an Oct. 20 statement.

“What is clear, however, is that the temporary decline in U.S. sugar prices in the 2012/13 and 2013/14 crop year was attributable to the United States’ failed sugar policy, excess supply in the combined U.S.-Mexican sugar sector, and the normal working of commodity markets – not by imports from Mexico.”

The sugar policy criticized by the SUA was first implemented in 1981 with the Farm Bill, and rests on a combination of price supports, tariff-rate quotas, and a domestic marketing allotment overseen by the U.S. Department of Agriculture.

These measures are used to keep the price of sugar artificially high.

The SUA vowed to step up its efforts to knock down the sugar program in a bid to lower prices for its members.

The SUA said in the statement:

Changes made to the sugar program in the 2008 farm bill caused U.S. sugar prices to soar well above the already high world price between 2009 and 2012,”

“SUA and sugar-using industry representatives will redouble our efforts to work with Congress to enact meaningful sugar program reform.”

Do you think this ruling will benefit sugar production in the U.S.? Or is it the U.S. sugar policy that needs to be updated?

Disclaimer: The opinions expressed in this article are those of the contributing author, and do not necessarily reflect those of the Forum for International Trade Training.

About the author

Author: Jacqueline Côté

I am a working journalist, with experience as SNL Financial’s Canadian correspondent for its Mining and Metals vertical. I also served as the Managing Editor for Central Asia Newswire – covering daily economic and investment news in the region – as well as Features Editor for the Washington-based Magharebia.com, which covers developments in the North Africa region. I have been published in The Montreal Gazette, The Guardian (UK), The New Statesman (UK), Red Pepper (UK), Geopolitical Monitor and CNN.com.

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