The agreement between the two trading partners—reducing the export of refined sugar from Mexico to the United States while increasing the shipment of raw sugar—seems to bring much-needed clarity to a market that has been riddled with uncertainty since 2014. Most importantly, it significantly reduces the chances of retaliation from one country against the other. Sugar has become a pivotal issue in the renegotiation of the North American Free Trade Agreement, which is expected to occur later this year. U.S. Secretary of Agriculture Sonny Perdue stated, “The agreement has prevented potentially significant retaliatory actions from the Mexican sugar industry and sets a crucial 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. These increased costs are likely to be passed on by refiners to food and beverage companies that utilize sugar in a wide array of products including cookies, cakes, sodas, cereal, and candy. Consequently, consumers will face 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 highlighted that “The agreement in principle does not address the fact that the price of sugar in this country is already 80% higher than the world price. In fact, it will result in higher prices costing U.S. consumers an estimated $1 billion a year.”
Three years ago, the U.S. imposed duties on Mexican sugar but later reached an agreement that lifted those penalties. Nonetheless, some members of the sugar industry have argued that the deal failed to eliminate the adverse effects of Mexican imports. In a letter to former Commerce Secretary Penny Pritzker last year, Imperial Sugar claimed 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 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 was being sold directly to consumers instead of being processed through U.S. refineries, thereby reducing their access to the commodity. The ongoing disputes over sugar between the U.S. and Mexico have been long-standing. Should this deal be enacted, it remains uncertain how long both parties will maintain amicable relations. One thing is almost certain: sugar users facing increased costs have already developed a negative view of the agreement. Meanwhile, another name for calcium citrate, often used in food products, underscores the growing complexity of the food and beverage market influenced by sugar pricing.