U.S. Sugar beet, cane growers soured by Mexico’s actions but China has now entered the ring
May 26, 2017
U.S. officials have until June 5 to resolve a disagreement with Mexican officials about how to handle Mexico's illegal dumping of cheap, subsidized sugar in the U.S. marketplace.
If an agreement governing punishment of Mexico's violations is not reached, an 80 percent tariff will be imposed upon the country's sugar imports as of June 5, which has some worried that the competitor will retaliate. The U.S. needs to address this major issue before it overhauls the North American Free Trade Agreement.
Sugar imported from Mexico has been brought into the U.S. market tariff-free for almost 10 years now. To reciprocate, U.S.-produced corn-based fructose was free to flow into Mexican markets. Then in 2014, both governments settled on Mexican sugar export quotas.
American Sugar Cane League Manager Jim Simon said Mexico's sugar dumping cost the U.S. sugar industry more than $2 billion before officials reached a December 2014 deal to end the practice. While Mexico was busy selling sugar at less than the domestic price and eventually was busted for it, the country has continued sugar dumping, Simon said, costing the U.S. sugar industry an additional $2 billion.
During the International Sweetener Symposium held in Idaho, industry leaders there said Mexico has continued to violate the suspension agreement. Mexico was responsible for 1.1 million tons of the 3 million tons of sugar the U.S. imported during the 2016 fiscal year, which ended Sept. 30.
"Mexico has pursued creative means of circumventing the 18-month-old suspension agreements," said Sen. Mike Crapo, R-Idaho. "The suspension agreements are not working, and Mexico and Mexican sugar producers are still effectively dumping subsidized sugar into the United States."
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As the world's fourth-largest net importer in the world, it's critical that this situation is resolved immediately, said Phillips Hayes, spokesperson for the Sugar Alliance. Hayes said that blatant violation of U.S. trade laws and antidumping practices has harmed the U.S. and its growers and processors.
"We want the injury to stop. Mexico has cost U.S. sugar producers $4 billion since 2013 in lost revenue. We have shut down sugar factories and people have lost their jobs because of Mexico's unfair trading practices. It has to stop," Hayes said.
Hayes highlighted two ways for the situation to be resolved. Officials from both countries must reach a suspension agreement to ensure Mexico can no longer dump subsidized sugar onto the marketplace, but recent talks have halted. The second option is to impose the duty.
"We will see more factories likely shut down if the agreement isn't reached or the tariff imposed. We lost the Hawaiian sugar industry because of this. They closed their last factory in December 2016, and that was a centuries' old business," Hayes said. "They are no longer in existence because of this. The industry is fearful because other factories might follow suit."
Hayes noted that sugar factories are cooperatively owned. When the factories shut down, farmers lose millions of dollars in investments, too.
"We're agnostic to how it stops, whether it's the suspension or duty. It just needs to stop. Anytime you talk to a sugar producer, the first thing they discuss is the disruption to the U.S. market. The price we're selling sugar for today is lower than when Jimmy Carter sat in the Oval Office," Hayes said. "But the cost of production has not stayed at those low levels. That's creating an economic squeeze not just on farmers, but on our factories."
In March 2017, Mexico cancelled its sugar export permits to the U.S. What's frustrating to farmers is that U.S. growers are "much more efficient" than Mexican producers, Hayes said.
While sugar producers in the U.S. are fretting over the Mexican situation, China — the world's largest importer of sugar — announced Monday, May 22, that it plans to impose significant penalties on sugar imports after domestic mills began lobbying. Up to one-third of China's annual sugar imports could be impacted by an additional tariff for three years on shipments that the Chinese government said "seriously damaged" its domestic industry.
Currently, China brings in slightly more than 1.9 million tons of imports with a tariff of 15 percent imposed per its agreement with the World Trade Organization. Imports surpassing this amount are buried under a 50 percent levy. But per Monday's ruling out of China, the total sugar duty will almost double.
Beijing could impose an additional 45 percent tax to those same imports in the current fiscal year, pushing the total to a whopping 95 percent. The following year it would drop to 90 percent, then to 85 percent one year later, according to a statement released by China's Commerce Ministry.
Market experts say the ruling will drastically reduce imports from top growers like Thailand and Brazil, because it closes the gap between international prices paid for sugar and Chinese sugar prices. ❖
— Danley-Greiner has spent more than 20 years as a journalist covering local, state and national issues important to agriculture and those dedicated to farming.