Features International Sugar Journal

US-Mexico sugar trade pact – sense prevails despite machinations

Three children Anne, Bob and Clara are quarrelling as to who should get the flute. Anne claims the flute because she is the only one amongst the three who can play it – both Bob and Clara acknowledge this. Bob is quite poor – he has not had the luxury of having toys – therefore feels the flute would give him something to play with. Both Anne and Clara appreciate that Bob is not as well off as they are, and invariably understand his plight. Clara says she should have the flute because having spent several months making it, “expropriators came along to try to grab the flute away from” her when she finished her work. In his seminal work The idea of justice, Amartya Sen poses the problem where resolution requires impartiality when all parties have claims “and which nevertheless differ from – and rival – each other”. The US Secretary of Commerce Wilbur Ross doubtless had to juggle between the competing interests of sugar producers advanced by American Sugar Alliance (ASA), US sugar refiners and exporters of high-fructose corn syrup (HFCS) to Mexico in securing the agreement on 6th June. This agreement avoids a trade dispute whereby US would have slapped an 80% import duty on Mexican sugar, with Mexico probably retaliating with tariffs of its own on imports of over 900,000 tonnes of US HFCS mainly used in soft drinks.

At the outset, US sugar producers wanted punitive sanctions against Mexico when they persuaded number of legislators from congress to write to President Trump urging him “to utilize the United States’ antidumping and counterveiling laws in response to the serious injury Mexico caused to U.S. sugar producers.” Or in otherwise less tempered words, “Mexico broke U.S. trade law. U.S. sugar workers lost their jobs. Hold Mexico accountable,” the message that was placed in ads in several US media by the ASA. Wilbur Ross also had to contend with behind the scenes intervention from Florida’s Cuban-born “Sultans of Sugar”, the brothers Alfonso and José Fanjul from whom he and his wife have enjoyed gracious hospitality. Fanjuls, who own Florida Crystals (amongst other interests) have become major backroom players in US politics. In a rare interview in 2001, Alfonso told Vanity Fair: “We do not want what happened in Cuba to happen to us again”.

US sugar refiners complained for years that Mexico was shipping too much refined sugar into the country. They argued that Mexican producers were getting around quantitative restrictions that forced them to send nearly half of their exports to US refineries by exporting sugar that was technically raw but could be used directly in beverage and food production with minimal processing. They wanted a significantly larger portion of imports from Mexico being raw sugar. They wanted this figure to be 85%. During the suspension agreement in 2014, the split was 47:53 raw:refined. The core provision in the new deal requires that 70% of sugar imports from Mexico be raw and allows the remaining 30% to be refined.

This has not been a one sided affair. Around 11% of HFCS produced in the US is exported to Mexico. The main producers of HFCS Cargill, Archer Daniels Midland, Ingredion and Tate & Lyle, according to one analyst, could have seen their profits halve in the short-term from the loss of the market share in Mexico.

But it has to be said, Mexican sugar industry is paying the price for opportunism. In the sporting parlance, it was simply not good sportsmanship to take advantage of the existing trade agreement, to dump sugar in the US market following record harvests prompting US sugar industry in 2014 to petition US International Trade Commission and Department of Commerce for anti-dumping and anti-subsidy tariffs on Mexican imports. The principle is “why beggar my neighbour” and ‘if converse was true’.