Sugar War Between Mexico, US Threatens Broader Trade Relations

MEXICO CITY (McClatchy Foreign Staff/MCT) -

There’s nothing sweet in the sugar war that’s unfolding between Mexico and the United States.

The U.S. industry, sometimes called Big Sugar, simmers over soaring competition from Mexico and argues that a doubling of Mexican exports triggered a collapse in the market price of sugar.

A reluctant Obama administration has opened a formal investigation into those exports that could result in new import duties on Mexican sugar – and ignite a broader trade dispute over sweeteners that might affect other U.S. industries.

A spokesman for the American Sugar Alliance, Phillip Hayes, said the sugar industry faces losses of up to $1 billion this year because of what it alleges is dumping – selling at prices lower than what it costs to produce – by Mexican sugar producers.

“We are far more efficient than Mexico’s sugar industry, yet we are losing market share because of Mexico’s predatory trade practices,” Hayes said.

The dispute ricochets to the far corners of both countries, involving hundreds of thousands of jobs and affecting sugar cane fields in Florida, Texas, Louisiana and Hawaii, and sugar beet farms in the Red River Valley of Minnesota and North Dakota, along with California, Idaho and the Pacific Northwest.

It also lays bare some of the competing agricultural and industrial interests around sugar, the complex trade relationship between Mexico and the United States over sweeteners, and the influence of Big Sugar on Capitol Hill.

“This is a very big battle,” said John W. Bode, the president of the Corn Refiners Association, a trade group with offices in Washington, D.C. “The political influence of the U.S. sugar industry is legendary. … They may be only 4 percent of U.S. agriculture, but when you look at political contributions, they account for a third.”

The U.S. International Trade Commission is due to vote May 9 on whether Mexican imports harm the U.S. sugar industry, and a positive vote could lead to anti-dumping duties on Mexican sugar.

Mexico denies that it dumps sugar in U.S. markets.

“The government of Mexico does not subsidize the sugar industry,” Economy Secretary Ildefonso Guajardo told the quasi-official Notimex news agency April 17.

Under the North American Free Trade Agreement, Mexico has the right to export sugar to the United States without quotas or tariffs. It’s the only nation in the world with such unlimited access to U.S. sugar consumers. The last restrictions on Mexican sugar were lifted under NAFTA in 2008.

“Since NAFTA was implemented, sugar acres in Mexico are up 66 percent, while total sugar acres in the U.S. are down 11 percent,” Hayes said.

Hayes said Mexico shipped 1.5 million tons of sugar to U.S. markets in 2011, hit a record 2.3 million tons last year and is on pace to reach 2.5 million tons this year.

“Mexico has collapsed the U.S. market, and Mexico appears to be accelerating these disputed exports to the U.S.,” Hayes said. “U.S. producers are going to be hard-pressed to survive under these conditions. … 142,000 jobs could be in jeopardy if corrective action isn’t taken.”

Mexico also has much at stake. Its sugar industry employs 500,000 people, and the 54 sugar mills in the country are spread across nearly half its states, primarily in the south.

If the U.S. government imposes punitive duties on Mexican sugar, analysts say Mexico might reciprocate with duties that would hit other sectors of the U.S. economy, and even make moves that would sour Pacific Rim trade talks.