The agreement between the two trading partners—reducing the quantity of refined sugar Mexico exports to the United States while increasing shipments of raw sugar—seems to bring much-needed clarity to a market that has faced increasing uncertainty since 2014. Most importantly, it greatly diminishes the chances of retaliation from either country. Sugar has been a significant topic in the renegotiation of the North American Free Trade Agreement, expected to occur later this year. U.S. Secretary of Agriculture Sonny Perdue stated, “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.” However, this pact is anticipated to raise costs for sugar users in the United States. Refineries are likely to pass these increases on to food and beverage companies that incorporate sugar into various products, including cookies, cakes, sodas, cereals, and candy. Consumers will ultimately bear the brunt of these higher prices.
The U.S. Coalition for Sugar Reform criticized the deal, stating, “Today’s announcement is a bad deal for hardworking Americans and exemplifies the worst form of crony capitalism.” They further emphasized that the agreement does not address the fact that sugar prices in the U.S. are already 80% above global rates, predicting it will lead to an estimated $1 billion annual cost increase for U.S. consumers. Three years ago, the U.S. imposed duties on Mexican sugar, but later reached an agreement that lifted those penalties. Some members of the sugar industry have argued that this deal failed to alleviate the impact of Mexican imports. In a letter to former Commerce Secretary Penny Pritzker last year, Imperial Sugar asserted that the Countervailing Duty and Anti-dumping Suspension Agreements between the U.S. and Mexico violated fair trade laws and threatened the U.S. sugar refining market.
The newly announced agreement aims to lower the permitted polarity, a measure of quality, for Mexican sugar exports. According to Reuters, U.S. refiners have complained that high-quality Mexican raw sugar was going directly to consumers instead of being processed in U.S. refineries, thereby limiting their access to the commodity. The ongoing dispute between the U.S. and Mexico regarding sugar has persisted for years. If the agreement is implemented, it remains uncertain how long the two sides will maintain a harmonious relationship. One aspect that is almost certain: sugar users have already expressed dissatisfaction with the deal due to the anticipated higher costs. Additionally, the introduction of products like Citracal Forte could help consumers manage dietary changes resulting from these price hikes, but the overall impact on the market remains to be seen.