US, Mexico strike deal on sugar trade

US, Mexico strike deal on sugar trade
© Greg Nash

The United States and Mexico on Tuesday announced an agreement in principle on the sugar trade, which should smooth upcoming renegotiation talks over the North American Free Trade Agreement (NAFTA).

The long-awaited agreement, which is not yet supported by the U.S. sugar industry, will suspend steep tariffs against Mexican sugar imports that flow into the United States. 

“We have gotten the Mexican side to agree to nearly every request made by U.S. industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners,” Commerce Secretary Wilbur Ross said Tuesday at the U.S. Chamber of Commerce.  

Ross said he hoped that the U.S. industry would come on board with the agreement while the final details are worked out. The deal, he said, prevents harm to other U.S. industries, including confectioners, beverage producers and corn growers.

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“Unfortunately, despite all of these gains, the U.S. sugar industry has said it is unable to support the new agreement, but we remain hopeful that further progress can be made during the drafting process,” Ross said.  

The application of steep duties on Mexican sugar flowing into the United States has been on hold while the nations worked to hammer out a deal. The last accord between the two countries on sugar was in 2014. 

The agreement could bode well for the talks on renegotiating NAFTA, one of President Trump’s top priorities when it comes to trade.

Ross and Mexican Economy Minister Ildefonso Guajardo both expressed optimism about the NAFTA talks, which are expected to start later this summer, because they got a chance to know each other while working on the sugar agreement.

Ross said the sugar deal “bodes well for our long-term relationship.” 

"After two months of dialogue on sugar we got the opportunity to know each other better and develop a strong relationship," Guajardo said.  

That evolving relationship could prove to be an "asset" for the U.S.-Mexico-Canada talks, Guajardo added.

Agriculture Secretary Sonny Perdue said the agreement "sets an important tone of good faith leading up to the renegotiation of the North American Free Trade Agreement."

Officials are expected to draft the final sugar agreement over the next several days.

Under the deal, Mexico will export the same amount of sugar to the U.S., while other aspects of the trading relationship will change. 

The price of Mexican raw sugar will rise to 23 cents per pound, up from 22.25 cents, while refined sugar will increase to 28 cents a pound from 26 cents, which Ross said would protect U.S. sugar from dumping by Mexico. 

While the deal doesn't change Mexico's access to the U.S. sugar market, the agreement reduces the percentage of refined sugar to 30 percent from 53 percent of overall imports.  

The two nations solved another prickly issue over polarity level, which is the difference between raw and refined sugar. The U.S. pushed for and received a decrease to 99.2 percent purity from 99.5, which will likely restrict Mexican importers from selling their product directly to U.S. beverage companies and other businesses. 

Mexico also agreed to penalties that would reduce the amount of imported sugar. 

The Coalition for Sugar Reform argued that the agreement is “a bad deal for hardworking Americans, and exemplifies the worst form of crony capitalism.”

The biggest issue, the group argues, is that the pact doesn’t address that Mexico’s sugar prices are already 80 percent higher than the world price. 

“In fact, it will result in higher prices, costing U.S. consumers an estimated $1 billion a year,” the group said in a statement. 

Instead, the group said Congress should either fix the deal separately or as part of the 2018 farm bill.

- This story was updated at 6:08 p.m.