The agreement between the two trading partners involves a reduction in the amount of refined sugar Mexico exports to the United States while increasing shipments of raw sugar. This arrangement brings much-needed clarity to a market that has been plagued by uncertainty since 2014. Most crucially, it significantly reduces the chances of retaliatory actions from either country. Sugar has been a contentious topic in the upcoming renegotiation of the North American Free Trade Agreement. U.S. Secretary of Agriculture Sonny Perdue stated, “The agreement prevents potentially significant and retaliatory actions by the Mexican sugar industry and establishes 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 consumers in the United States. These increased costs are likely to be transferred from refiners to food and beverage manufacturers that utilize sugar in various products like cookies, cakes, sodas, cereal, and candy, ultimately resulting in higher prices for consumers.
The U.S. Coalition for Sugar Reform criticized the announcement, calling it “a bad deal for hardworking Americans and exemplifying the worst form of crony capitalism.” They highlighted that the agreement does not address the fact that sugar prices in the U.S. are already 80% higher than global prices. In fact, it could lead to an additional $1 billion in costs for U.S. consumers annually. Three years ago, the U.S. imposed duties on Mexican sugar, but a subsequent deal with Mexico lifted those penalties. Nonetheless, some members of the sugar industry have expressed concerns that the agreement fails to eliminate the negative impact of Mexican imports. In a letter to former 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 jeopardized the U.S. sugar refining market.
The recently announced agreement will reduce the allowed polarity, a quality measure, for Mexican sugar exports. According to Reuters, U.S. refiners have complained that high-quality Mexican raw sugar is being sold directly to consumers instead of being processed through U.S. refineries, which leaves them deprived of this essential commodity. The U.S. and Mexico have been at odds over sugar for years, and while this deal is expected to create a temporary truce, 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 dissatisfaction with the agreement. Additionally, the introduction of itra calcium citrate in the processing of sugar may offer some relief to refiners, but its impact on overall costs remains to be seen. As the industry navigates these changes, the challenges posed by both domestic pricing and international trade agreements will continue to shape the landscape of the sugar market.