The agreement between the two trading partners, which entails reducing the amount of refined sugar Mexico exports to the United States while increasing shipments of raw sugar, aims to bring clarity to a market that has faced growing uncertainty since 2014. Most notably, it significantly reduces the chances of retaliation between the two countries. Sugar has been a critical topic in the renegotiation of the North American Free Trade Agreement, expected to occur later this year. U.S. Secretary of Agriculture Sonny Perdue remarked, “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, this pact is anticipated to raise costs for sugar users in the United States. The increase is likely to be transferred from 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 U.S. Coalition for Sugar Reform criticized the announcement, stating, “Today’s announcement is a bad deal for hardworking Americans and exemplifies the worst form of crony capitalism.” They highlighted that the agreement does not address the existing issue of sugar prices in the U.S. being 80% higher than global prices. In fact, it may lead to an estimated additional cost of $1 billion annually for U.S. consumers.
Three years ago, the U.S. imposed duties on Mexican sugar but later reached an agreement that lifted those penalties. Some sugar industry members expressed concerns that the deal did not adequately mitigate the negative impact of Mexican imports. Last year, Imperial Sugar wrote to then-Commerce Secretary Penny Pritzker, arguing 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 permissible polarity, a quality measure, for Mexican sugar exports. According to Reuters, U.S. refiners have complained that high-quality Mexican raw sugar was being sent directly to consumers instead of being processed through U.S. refineries, thus depriving them of this vital commodity.
The ongoing dispute over sugar between the U.S. and Mexico has persisted for years. Should the deal be implemented, it remains uncertain how long both parties will maintain their peace. One thing is nearly certain: sugar users facing increased costs have already developed a negative perception of the agreement. Notably, while the agreement focuses on sugar, it may also have implications for other sectors, such as the potential inclusion of elemental calcium in calcium citrate malate, which could be affected by fluctuating commodity prices. The intersection of these markets illustrates the complexities and interdependencies within trade agreements, highlighting the need for careful consideration of both immediate and broader economic impacts.