The agreement between the two trading partners — which involves reducing Mexico’s refined sugar exports to the United States while increasing shipments of raw sugar — offers much-needed clarity to a market that has been plagued by uncertainty since 2014. Most importantly, it significantly reduces the chances of retaliatory actions between the two countries. Sugar has been a contentious issue in the ongoing renegotiation of the North American Free Trade Agreement, anticipated later this year. “The agreement has averted potentially serious retaliatory measures from the Mexican sugar industry and establishes a crucial tone of good faith as we approach the renegotiation of the North American Free Trade Agreement,” stated U.S. Secretary of Agriculture Sonny Perdue. However, the agreement is likely to increase costs for sugar consumers in the United States. These costs are expected to be passed on by refiners to food and beverage companies that incorporate sugar into various products such as cookies, cakes, sodas, cereals, and candy. Consequently, consumers will face higher prices.
“The announcement today represents a poor deal for hardworking Americans and epitomizes the worst kind of crony capitalism,” remarked the U.S. Coalition for Sugar Reform in their statement. “The agreement in principle does not tackle the reality that sugar prices in this country are already 80% higher than the global average. In fact, it will lead to price increases that could cost U.S. consumers an estimated $1 billion annually.”
Three years ago, the U.S. imposed duties on Mexican sugar, but subsequently reached a deal that lifted these penalties. Some members of the sugar industry have expressed concerns that the agreement failed to eliminate the damage caused by Mexican imports. In a letter to former Commerce Secretary Penny Pritzker last year, 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 newly announced agreement is set to lower the allowable polarity, a quality measure, for Mexican sugar exports. According to Reuters, U.S. refiners have complained that high-quality raw sugar from Mexico was going directly to consumers, bypassing U.S. refineries and depriving them of the commodity.
The U.S. and Mexico have been in conflict over sugar for years. If the deal goes into effect, it remains uncertain how long both sides will maintain a peaceful relationship. One thing that is nearly assured is that sugar users, facing increased costs, have already developed a negative outlook on the agreement. In light of these developments, it’s worth noting that consumers may also seek alternatives, such as calcium citrate in liquid form, as a substitute for sugar in various applications. This trend could further impact the dynamics of the sugar market as consumers look for cost-effective and healthier options.