U.S.-Mexico sign sugar trade agreements

by Laura Lloyd
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WASHINGTON — The U.S. Department of Commerce late Dec. 19 said it had signed agreements to suspend the antidumping (A.D.) and countervailing duty (C.V.D.) investigations of sugar imports from Mexico that would prevent an oversupply of sugar in the U.S. market.

“The C.V.D. agreement contains provisions to prevent an oversupply of sugar in the U.S. market,” the D.O.C. said. Export limits will be based on calculations using U.S. Department of Agriculture information, will prevent imports from being concentrated at specific times of the year, and will limit the amount of refined sugar that Mexico may export to the United States, the D.O.C. said.

Under the agreement, refined sugar is defined as sugar with polarity of 99.5% or greater, while “other sugar” is sugar that does not meet the refined definition.

The 99.5% polarity requirement was a major sticking point for U.S. sugar producers as the original draft agreement announced in late October had the definition of refined sugar at 99.9% or above. U.S. refiners were concerned that sugar with less than 99.9% polarity (but above 99.5%) would be exported directly to U.S. end users under the original agreement, while sugar below 99.5% polarity will have to be further refined.

“Mexico’s export limit is set at 100% of U.S. needs after accounting for U.S. production and imports from tariff rate quota countries,” the D.O.C. said. The agreement caps exports of refined sugar at 53% of total sugar exports to the United States from Mexico. The Mexican government will allocate the amount of sugar each Mexican sugar producer/exporter can export to the United States, and will establish export licensing. Sugar from Mexico cannot enter the United States without an export license. The signatories of the C.V.D. agreement are the D.O.C. and the government of Mexico.

The A.D. agreement establishes minimum prices at 26c per lb dry weight, commercial value, for refined sugar and 22.25c a lb dry weight, commercial value, for all other sugar. The signatories of the A.D. agreement are the D.O.C. and Mexican sugar producers and exporters that account for “substantially all” of the subject sugar exported to the United States, the D.O.C. said.

“Commerce and the relevant Mexican government agencies have agreed to establish information exchanges and consultative processes in relation to the operation and enforcement of the agreements,” the D.O.C. said.

The D.O.C will instruct U.S. Customs and Border Protection to refund any cash deposits collected as a result of the preliminary A.D. and C.V.D. investigation consistent with U.S. laws.

The agreement does not change the U.S. sugar agreement or obligations under World Trade Organization sugar quotas, the D.O.C. said.

U.S. sugar producers and refiners agreed with the new agreement while U.S. sugar users expressed deep concerns.

“The final suspension agreements should achieve U.S. sugar producers main goal by stopping Mexico from dumping subsidized sugar onto the U.S. market and violating U.S. trade law,” said Phillip Hayes, spokesman for the American Sugar Alliance, which represents U.S. sugar producers, processors and refiners. “It is a good deal for U.S. producers, U.S. taxpayers and U.S. consumers, and we would like to thank officials at the D.O.C. and U.S.D.A. for their hard work in negotiating the agreements. Like our counterparts in Mexico, we want NAFTA to operate as intended and to foster free and fair trade in sugar between the countries. This settlement helps achieve that objective.”

But U.S. sugar users, who have opposed any trade agreement that limit U.S. sugar imports had an opposing view.

“With the stroke of a pen, these agreements dismantle the unrestricted free trade of sugar between the United States and Mexico since 2008 and undermine the core principles of the North American Free Trade Agreement,” the Sweetener Users Association said. “While sugar is but one commodity traded between our two countries, these suspension agreements set a horrible precedent by undoing trade flows that have been established over two decades after NAFTA was first negotiated.

“We are also deeply concerned about the implications of the suspension agreements for the U.S. sugar market, American consumers and manufacturers. Between the time the U.S. sugar producers filed the A.D./C.V.D. petitions in March and the end of September, the uncertainty surrounding the cases cost American consumers an additional $837 million and put in jeopardy thousands of U.S. manufacturing jobs. These suspension agreements significantly limit the supply and raise the price of sugar from Mexico.”

A group of U.S. sugar producers and refiners petitioned the D.O.C. on March 28 claiming Mexico had dumped subsidized sugar on the U.S. market at a cost of about $1 billion in 2013-14, the marketing year that ended Sept. 30, 2014. Mexican sugar exports to the United States were record high in 2012-13 and again in 2013-14. Under NAFTA, sugar from Mexico could enter the United States duty free and without volume restrictions, as could sweetener exports from the United States to Mexico, resulting in soaring exports of U.S. high-fructose corn syrup to Mexico since NAFTA has been in effect. Preliminary rulings in the case all were in favor of U.S. petitioners, including combined preliminary A.D. and C.V.D. duties in excess of 50% on exports of Mexican sugar to the United States.
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