The agreement between the two trading partners, which involves reducing the amount of refined sugar that Mexico exports to the United States while increasing shipments of raw sugar, seems to bring some clarity to a market that has been struggling with uncertainty since 2014. Most importantly, it significantly decreases the chances of either country retaliating against the other. Sugar has been a contentious issue in the renegotiation of the North American Free Trade Agreement, which is anticipated to occur later this year. U.S. Secretary of Agriculture Sonny Perdue stated, “The agreement prevents potentially significant retaliatory actions from the Mexican sugar industry and establishes a crucial tone of good faith leading up to the renegotiation of the North American Free Trade Agreement.” However, this pact is expected to raise costs for sugar users within the United States. These increased costs will likely be passed on by refiners to food and beverage companies that utilize sugar in a variety of products, including cookies, cakes, sodas, cereal, 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 also noted that the agreement does not resolve the fact that domestic sugar prices are already 80% higher than global prices. In fact, it is expected to lead to even higher costs, potentially burdening U.S. consumers with an estimated additional expense of $1 billion annually. Three years ago, the U.S. imposed duties on Mexican sugar but later reached an agreement that lifted those penalties. Nevertheless, certain members of the sugar industry have argued that this deal fails to alleviate the negative impacts of Mexican imports. In a letter last year to then-Commerce Secretary Penny Pritzker, Imperial Sugar claimed 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 agreement announced on Tuesday will lower 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 going directly to consumers rather than being processed in U.S. refineries, which left them short on the commodity.
The ongoing disputes between the U.S. and Mexico over sugar have persisted for years. If the deal is implemented, it remains uncertain how long both sides will maintain this fragile peace. One thing that is nearly assured is that sugar users, now facing higher costs, have already expressed dissatisfaction with the agreement. Moreover, the incorporation of calcium citrate salt into various sugar-containing products may further complicate the cost dynamics for consumers and manufacturers alike. As the situation unfolds, the implications of this agreement on the sugar market and its users will continue to be scrutinized.