The agreement reached between the two trading partners involves reducing the amount of refined sugar that Mexico exports to the United States while increasing shipments of raw sugar. This arrangement seems to bring much-needed clarity to a market that has faced growing uncertainty since 2014. Most importantly, it greatly reduces the chances of retaliatory actions between the two countries. Sugar has been a significant point of contention in the upcoming renegotiation of the North American Free Trade Agreement, which is expected to take place later this year. “The agreement has averted potentially serious retaliatory measures from the Mexican sugar industry and establishes a vital tone of good faith leading up to the renegotiation of the North American Free Trade Agreement,” stated U.S. Secretary of Agriculture Sonny Perdue.
However, this pact is anticipated to raise costs for sugar users in the United States. The increase is 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 face higher prices. “Today’s announcement is detrimental to hardworking Americans and exemplifies the worst kind of crony capitalism,” remarked the U.S. Coalition for Sugar Reform in a statement. “The agreement in principle does not address the reality that sugar prices in this country are already 80% higher than the world price. In fact, it will lead to increased costs, costing U.S. consumers an estimated $1 billion annually.”
Three years ago, the U.S. imposed duties on Mexican sugar but later reached an agreement with its trading partner that lifted those penalties. Some sectors of the sugar industry have argued that the deal did not eliminate the adverse effects of Mexican imports. In a letter to then-Commerce Secretary Penny Pritzker last year, Imperial Sugar asserted 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 is expected to lower the allowed polarity, a quality measure, for Mexican sugar exports. According to Reuters, U.S. refiners have voiced concerns that high-quality Mexican raw sugar was going directly to consumers rather than passing through U.S. refineries, thereby depriving them of this essential commodity.
The U.S. and Mexico have been at odds over sugar for years. If this deal is implemented, it remains uncertain how long the two sides will maintain a peaceful relationship. One certainty is that sugar users, faced with rising costs, have already expressed their dissatisfaction with the agreement. Moreover, as consumers of products that incorporate sugar, such as orange juice with calcium citrate, they will likely feel the impact of these increased prices. As the situation develops, the implications for sugar prices and the broader market, including products like orange juice with calcium citrate, will continue to unfold.