Sugar growers, users spar over Mexico fix as Congress comments
June 8, 2017
The American Sugar Alliance explained its concerns about the agreement in principle that the U.S. and Mexico reached on May 31 to resolve the dispute over Mexican sugar imports, while the Sweetener Users Association discounted their concerns and members of Congress urged the Trump administration to hang tough on the negotiations.
Commerce Secretary Wilbur Ross acknowledged that the U.S. sugar industry has not accepted the agreement and said that negotiations are continuing in hopes of resolving the final issues in a few days.
To address U.S. growers' concerns that Mexico has been sending subsidized sugar at dump prices and refiners concerns that they are not getting enough raw sugar, the agreement requires that Mexico increase the proportion of raw sugar that it sends to the U.S., raise the prices of Mexican sugar, and makes changes to the polarity or purity level of sugar in most shipments. But it also gives Mexico the right to export more sugar to the U.S. after April 1, if the Agriculture Department determines that more sugar imports are needed.
"We are specifically concerned with a loophole in the section pertaining to additional market needs after April 1 — a loophole that Mexico could exploit to continue dumping refined sugar into the market and starving refineries of raw sugar," said Phillip Hayes, a spokesman for the American Sugar Alliance, which represents beet and cane growers.
"Closing the loophole should be easy," Hayes continued. "The agreement's language should give the secretary of agriculture the authority to specify the type and polarity of any additional sugar needed. Such language makes sense. The secretary currently has this authority, the USDA closely monitors market conditions, and Secretary (Sonny) Perdue is dedicated to ensuring that the market operates effectively and fairly. The way the language is currently written, we are concerned that the USDA would be stripped of its authority, and Mexico wouldn't have to send in raw sugar when we have additional raw sugar needs. Remember, the current suspension agreements failed because Mexico shipped too much refined and shorted our refineries of raw sugar."
The Sweetener Users Association, which had already said the agreement will result in higher prices that will be detrimental to U.S. candy, soda and other industries that use sugar, said, "It is ironic that after the administration conducted exhaustive negotiations with Mexico, and obtained virtually every demand of the U.S. domestic sugar industry, the sugar lobby still refuses to endorse the modifications. Their ostensible reason — that provisions for Mexico to supply additional U.S. needs after April 1 of each year constitute a 'loophole' — is absurd on its face and demonstrates that the sugar lobby is simply trying to extract additional concessions, despite having gotten what it asked for.
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"The sugar lobby's argument is that since post-April 1 additional supplies will be categorized as raw or refined sugar on the basis of a polarity break-point of 99.5 — not 99.2, as in other modifications to the agreements — this is somehow a 'loophole' that will allow Mexico to sell its major product, estandar, as raw rather than refined sugar," the SUA said. "But the fact is, a 99.5 dividing line is not a loophole; it is the law. The Harmonized Tariff Schedule of the United States follows international conventions in defining raw sugar as having less than 99.5 polarity. It is the 99.2 polarity breakpoint in the U.S.-Mexico deal that is the exception and inconsistent with international trade conventions. Although nothing prevents the United States and Mexico from establishing a special polarity measure for purposes of this agreement, the sugar lobby's claims of 'loopholes' should not be taken seriously."
But Hayes of ASA said, "The definition of sugar in an unrelated statute is irrelevant to this issue. Suspension agreements are supposed to end the injury caused by unfair trade actions, and the proposed modifications make great strides toward that goal except for one provision that Mexico could exploit to again short the U.S. market of raw sugar. We remain hopeful that this provision can be strengthened so the loophole is closed and the secretary of agriculture maintains the authority to specify the kind of sugar the U.S. market needs."
House Agriculture Committee ranking member Collin Peterson, D-Minn., said, "This deal is an improvement over current agreements that have hurt U.S. sugar growers, but the details will be important. It is disappointing that the agreement in principle appears to leave in place a loophole that keeps the door open to dumping. Mexico and sugar users could annually petition for excess refined sugar to be allowed into the United States. Leaving this loophole in place doesn't make sense. It needs to be closed to adequately address unfair Mexican trade practices.
"I encourage the Department of Commerce to follow its commitment to strictly monitor and enforce the agreement and the Department of Agriculture to continue its management of the sugar program in the best interest of the U.S. sugar industry," added Peterson, whose district includes many beet growers. ❖