Sugaronline Editorial - The problem with Mexico By Meghan Sapp
Published: 02/10/2017, 1:30:00 PM
When will Mexico and the US ever get along?
Long before US President Donald Trump was calling for a wall to keep Mexico out, or before Mexico adamantly insisted that it would not pay for such a wall, the US sugar industry looked upon its southern neighbours with trepidation. High Fructose Corn Syrup inevitably went south but it was the raw sugar that headed north that kept the American sugar industry awake at night.
The US market is tightly regulated, from how much beet and cane sugar gets produced to how much sugar is imported, all through the use of quotas. The controversial programme also supports prices, which the industry says is taxpayer neutral, by providing subsidised loans that can be defaulted upon in exchange for physical sugar, sugar that can then be sold at a steep discount to ethanol producers.
But the US trade deal opening up its market to Canadian and Mexican trade partners under the North American Free Trade Agreement makes the situation more complicated when trying to keep the market balanced. When the sugar industry insisted, and then later proved, that unchecked subsidised Mexican imports were negatively impacting US growers, an agreement was reached by both sides in exchange for dropping retaliatory anti-dumping tariffs.
Rather than be the end of the story, the complicated relationship continues to be complicated, first re-opened last summer after sugar exporters from Mexico found a loophole that let refined sugar through directly or to melthouses rather than passing by refiners. That’s despite imports from Mexico falling every year between 2014 and 2016. This was followed by calls from the US sugar industry to renegotiate the agreement in order to protect its market that, not surprisingly, saw Mexico reject the idea.
Now the US has sent an official offer to Mexico on how to move the discussion forward but details on the deal are not yet public. With calls from the new US president to end international trade agreements in general, like TTIP with European countries and NAFTA itself, he’s shown himself to be serious about his intentions by signing an executive order during his first days in office to pull out of the TPP with Asia.
Food companies and associations have joined together to ask Trump to not pull out of NAFTA, but other companies like Tate & Lyle don’t think things will go as sour as feared, at least in terms of sugar trade with Mexico.