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The U.S.-Mexico Sugar Deal Signals Good Intentions

June 9, 2017 3 minute Read
by Andrea Durkin

U.S. Commerce Secretary Wilbur Ross and Mexican Minister of Economy Ildefonso Guajardo Villarreal announced a preliminary agreement to avoid escalating a sugar trade war. Mexico will alter the composition of its sugar exports to the United States, agreeing to send more raw sugar and less refined sugar under its current quota limit.

U.S.-Mexico trade relations have been known to sour at various times over the terms of U.S. imports of Mexican sugar. Last fall, the U.S. sugar industry urged the Commerce Department to renegotiate the terms of a 2014 trade agreement that sets prices and quota for U.S. imports of Mexican sugar. They claimed Mexico was not respecting the terms of the agreement.

The Department subsequently issued a finding that Mexico was subsidizing its sugar imports, allowing exporters to dump product into the United States at prices below market value. To avoid the application of additional duties, Mexico agreed to cancel some export permits and enter talks with the Commerce Department toward a new agreement.

Meanwhile, both industries engaged in an arms race. U.S. industry threatened that American refiners would seek substitutes for Mexican sugar. Mexico began to prepare retaliatory barriers to U.S. exports of high fructose corn syrup.

After Commerce Secretary Ross twice extended the deadline, the Commerce Department and Mexico’s Economy Ministry appear to have reached a new agreement. It’s doubtful that all parties are very happy. Mexico is concerned that U.S. sugar continues to wield outsized political influence to protect its prices and that American refineries will leverage the new agreement to avoid competition from Mexican-produced refined sugar.

As negotiations to modernize NAFTA will get underway later this summer, observers worry that longstanding irritants such as sugar trade will take new talks off track from the get go. But the outcome, if not ideal in substance, at least signals a strong intent by both parties to find agreement. That shared intention should bode well for negotiations to expand and upgrade NAFTA.