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US, Mexico sugar agreement positive development in NAFTAUS, Mexico sugar agreement positive development in NAFTA

Industry sees the final agreement as an excellent sign for the coming NAFTA negotiations.

Jacqui Fatka

June 6, 2017

5 Min Read
US, Mexico sugar agreement positive development in NAFTA

A new agreement was reached Tuesday between the United States and Mexico regarding the importation of Mexican sugar. Agricultural groups were quick to praise the deal, as well as the positive tone it sets going forward regarding the renegotiation of the North American Free Trade Agreement.

The agreement addresses the concerns of the U.S. sugar industry and prevents harm to other U.S. industries, including confectioners, beverage producers, and corn growers, that might have resulted if no agreement were reached.

“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,” said Secretary of Commerce Wilbur Ross. “I am glad to say that Minister Guajardo and his colleagues have been honest and collaborative partners in seeking a fair and sustainable solution – this bodes well for our long-term relationship.”

Secretary of Agriculture Sonny Perdue said the agreement prevented potentially significant and retaliatory actions by the Mexican sugar industry and sets an important tone of good faith leading up to the renegotiation of the North American Free Trade Agreement. “I maintain that if the rules are fair and the playing field is level, American agricultural products will succeed, thrive, and lead the way,” he said.

Related:Mexican sugar deadline deal extended by 24 hours

John Bode, president and CEO of the Corn Refiners Assn., said the success of the negotiations is an excellent sign for the coming NAFTA negotiations, saying the announcement “sets a thoughtful tone and positive posture for modernizing NAFTA.”

Bode said in this Administration’s first major negotiation with Mexico, Ross succeeded in protecting against unfair trade practices and maintained vulnerable export markets. “With both sides demanding more, he coolly pursued the broader public interest. Thanks to his leadership, U.S. sugar interests have much stronger protections than the previous Suspension Agreements without threatening the $500 million in U.S. corn sweetener exports to Mexico that support 4,000 U.S. jobs,” Bode said.

Tom Sleight, president and CEO of the U.S. Grains Council, said the agreement is part of a “necessary foundation for negotiating with our neighbors and customers in good faith while helping to protect our existing duty-free access, high market share and U.S. jobs.”

Sleight said the agreement is an important milestone “as we work to maintain our existing, robust trade of U.S. grains and related products while awaiting the beginning of NAFTA modernization negotiations.”

The National Grain and Feed Assn. president Randy Gordon said the “positive outcome shows what can be accomplished when trade negotiators engage in good faith discussions and share a mutual commitment to reach a successful outcome that preserves food and agricultural trade and enhances economic growth and job creation in North America.”

"In addition to preserving corn, corn products, meat and other U.S. food and agricultural trade with Mexico, Secretary Ross's and Minister Guajardo's success in reaching this agreement in principle is highly significant in creating a conducive, can-do environment as the United States, Canada and Mexico prepare to begin vitally important talks to modernize NAFTA in mid-August," Gordon said.  

Sugar deal details

The U.S. Department of Commerce has been reviewing a 2014 agreement with the government of Mexico and the Mexican sugar refiners that suspended anti-dumping and countervailing duties on the import of Mexican sugar into the U.S. This 2014 Suspension Agreement contained limits on the amount and type of Mexican sugar that could be imported each year.

The new agreement suspends antidumping and countervailing duties against Mexican sugar imports into the United States.

Perdue explained the agreement protects American workers and consumers and marks a dramatic improvement for the U.S. sugar industry.  The accord sharply reduces the percentage of Mexican refined sugar that may be imported into the United States and also lowers the polarity dividing line between refined and raw sugar.  Perdue explained the deal also achieved better pricing agreements for the industry.  And significantly, the agreement requires that raw Mexican sugar be shipped flowing freely in the holds of ocean-going vessels, rather than being shipped in packages or by land. 

“Finally, it is of great importance that USDA will have the flexibility to protect the U.S. sugar industry by making polarity adjustments in the event of extraordinary or unforeseen circumstances,” Perdue said. 

Mexico has been granted a right of first refusal to supply 100% of any “additional need” for sugar identified by USDA after April 1 of each year.  Additional need is defined as demand for sugar in excess of the demand USDA had predicted for that crop year.  USDA will specify whether the additional need sugar is raw or refined without regard to the 70/30 split.  The dividing line between raw and refined additional need sugar is 99.5 polarity, but raw sugar must be shipped in bulk in an ocean-going vessel, increasing the likelihood it will enter a U.S. refinery for further processing. 

However the sugar industry said the deal falls short.

“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,” continued Ross. “We look forward to continuing discussions with them as we finalize the agreement. We remain confident that this deal defends American workers across many industries and is the best way to ensure stability and growth.”

Phillip Hayes, spokesman for the American Sugar Alliance, warned Mexico could exploit a loophole created when allowing Mexico to supply additional needs. “This loophole takes away the existing power of the U.S. government to determine the type and polarity of any additional sugar that needs to be imported and cedes that power to the Mexican government,” Hayes said.

“We will work with Secretary Ross in the coming days to see if that loophole can be effectively closed so that the basic provisions of the agreement are not undermined and USDA can effectively manage the sugar program,” Hayes added.

For more details, click here to read the fact sheet.

About the Author(s)

Jacqui Fatka

Policy editor, Farm Futures

Jacqui Fatka grew up on a diversified livestock and grain farm in southwest Iowa and graduated from Iowa State University with a bachelor’s degree in journalism and mass communications, with a minor in agriculture education, in 2003. She’s been writing for agricultural audiences ever since. In college, she interned with Wallaces Farmer and cultivated her love of ag policy during an internship with the Iowa Pork Producers Association, working in Sen. Chuck Grassley’s Capitol Hill press office. In 2003, she started full time for Farm Progress companies’ state and regional publications as the e-content editor, and became Farm Futures’ policy editor in 2004. A few years later, she began covering grain and biofuels markets for the weekly newspaper Feedstuffs. As the current policy editor for Farm Progress, she covers the ongoing developments in ag policy, trade, regulations and court rulings. Fatka also serves as the interim executive secretary-treasurer for the North American Agricultural Journalists. She lives on a small acreage in central Ohio with her husband and three children.

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