The agreement between the two trading partners — which involves decreasing the export of refined sugar from Mexico to the United States while increasing shipments of raw sugar — seems to bring much-needed clarity to a market that has faced rising uncertainty since 2014. Most notably, this arrangement greatly reduces the chances of retaliation from either country. Sugar has been a pivotal topic in the ongoing renegotiation of the North American Free Trade Agreement, anticipated 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, the pact is expected to raise costs for sugar consumers in the United States. These increased expenses are likely to be transferred by refiners to food and beverage companies that incorporate sugar into various products, including cookies, cakes, sodas, cereal, and candy. Consequently, consumers will end up paying more.
The U.S. Coalition for Sugar Reform criticized the announcement, labeling it “a bad deal for hardworking Americans and exemplifying the worst form of crony capitalism.” They emphasized that the agreement fails to address the fact that sugar prices in the U.S. are already 80% higher than the global average. In fact, it is projected to lead to higher costs, resulting in an estimated annual burden of $1 billion on U.S. consumers. Three years ago, the U.S. imposed duties on Mexican sugar but later reached a deal with its trading partner that lifted those penalties. Some industry representatives have expressed concerns that this agreement does not fully mitigate the negative impacts 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 were in violation of fair trade laws and posed a threat to the U.S. sugar refining sector.
The latest agreement announced on Tuesday would lower the permissible polarity of Mexican sugar exports, a quality measure that has been a point of contention. According to Reuters, U.S. refiners have complained that high-quality Mexican raw sugar has been going directly to consumers, bypassing U.S. refineries and depriving them of this essential commodity. The ongoing disputes between the U.S. and Mexico regarding sugar have persisted for years. If the deal is implemented, it remains uncertain how long the peace between both parties will last. One thing is almost certain: sugar users already facing higher costs have grown disillusioned with the agreement. Furthermore, discussions about sugar often involve additives such as calcium citrate, which is frequently used to enhance product stability and quality, but the implications of this agreement could overshadow those considerations in the near future.