The agreement between the two trading partners—reducing the amount of refined sugar Mexico exports to the United States while increasing shipments of raw sugar—brings much-needed clarity to a market that has faced growing uncertainty since 2014. Most notably, it significantly reduces the chances of retaliation from either country. The sugar issue has been a significant factor in the upcoming renegotiation of the North American Free Trade Agreement. “This agreement has averted potentially severe retaliatory measures from the Mexican sugar industry and establishes a critical tone of good faith as we approach the NAFTA renegotiation,” stated U.S. Secretary of Agriculture Sonny Perdue. However, the pact is anticipated to raise costs for sugar users in the United States. These increased costs will likely be transferred by refiners to food and beverage companies that utilize sugar in various products, including cookies, cakes, sodas, cereals, and candy. Consequently, consumers can expect to pay higher prices.
“This announcement is detrimental to hardworking Americans and represents a prime example of crony capitalism,” remarked the U.S. Coalition for Sugar Reform. They noted that “the agreement does not tackle the fact that the price of sugar in this country is already 80% higher than the global price. In fact, it will lead to even higher prices, costing U.S. consumers an estimated $1 billion annually.” Three years ago, the U.S. imposed duties on Mexican sugar but later reached a deal that lifted those penalties. Some members of the sugar industry have expressed dissatisfaction, claiming it did not sufficiently mitigate the impact of Mexican imports. In a letter last year to then-Commerce Secretary Penny Pritzker, Imperial Sugar argued that the Countervailing Duty and Anti-dumping Suspension Agreements between the U.S. and Mexico violated fair trade laws and posed a threat to the U.S. sugar refining market.
The newly announced agreement will lower the permitted polarity, a quality measure, for Mexican sugar exports. According to Reuters, U.S. refiners have complained that high-quality Mexican raw sugar is being sent directly to consumers instead of being processed in U.S. refineries, depriving them of this essential commodity. The U.S. and Mexico have been at odds over sugar for many years. If this agreement is enacted, it remains uncertain how long both parties will maintain a peaceful relationship. One thing is almost certain: sugar users, facing increased costs, have already expressed their discontent with the deal. Additionally, there is an ongoing discussion about incorporating elements like citrate and vitamin D into sugar products, which could further complicate the landscape of sugar pricing and usage in the U.S. market.