After months of deliberations, the US and Mexico announced an agreement, in principle, on sugar trade between the two countries.
The dispute comes as the two neighbors, along with Canada, are set to renegotiate the North American Free Trade Agreement (NAFTA). Importantly, when the export limit is increased pursuant to a request by USDA prior to April 1, such sugar shall be subject to the pre-April 1 70/30 split and the 99.2 polarity divide, an added protection for USA domestic refiners.
The U.S. government said a preliminary sugar deal with Mexico failed to garner the support of the American sugar-refining industry, though both sides expressed optimism the issues would be resolved soon. They have asked the US government to terminate the pact.
While this agreement is not yet being supported by the USA sugar industry, the government was positive that the Mexican side had agreed to every request made by the US industry to address the issues in the current system.
"'If you're a food company looking at long-term investment in the US and you're paying twice the world price, that's got to be a consideration going forward, ' said Mr. Pasco, who said sugar-using companies support about 600,000 jobs in the USA", the WSJ story continues. This results in a significant increase in the amount of raw sugar available to USA sugar refiners while ensuring that subsidized refined Mexican sugar imports do not injure US refiners.
"Today's announcement is a bad deal for hardworking Americans, and exemplifies the worst form of crony capitalism", the Coalition for Sugar Reform said.
Ross weighed in on efforts to reform NAFTA, telling Bartiromo, "NAFTA is an ancient agreement, it's really the first of the big trade agreements that the USA made and therefore it's a bit obsolete".
In return, Mexico has agreed to reduce the amount of refined sugar it sends to the United States, he said.
The agreement made significant revisions to the 2014 trade agreements between the two countries that suspended anti-dumping and countervailing duties totaling almost 80% on US imports of sugar from Mexico.
The pact reached between the two countries would require Mexico to reduce the share of refined sugar it exports to the USA and increase raw sugar exports.
"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", U.S. Secretary of Agriculture Sonny Perdue said in a statement.
In contrast, the Corn Refiners Association, which represents makers of corn syrup, supports the agreement which it said "maintained vulnerable export markets".
But a major sugar users group continued to oppose the trade agreement, as well as the USA sugar program that controls sugar imports and markets.
The agreement lifts the minimum prices for Mexican imports, which will likely be passed on by US sugar refiners to food companies and beverage and confectionary producers and ultimately to consumers. "The agreement in principle does not address the fact that the price of sugar in this country is already 80% higher than the world price. Thanks to his leadership, USA sugar interests have much stronger protections than the previous suspension agreements without threatening the $500 million in US corn sweetener exports to Mexico that support 4,000 U.S.jobs".
Last year, Mexico exported 1.1 million tonnes of sugar to the United States, some 40 per cent of which was refined. In fact, it will result in higher prices, costing US consumers an estimated $1 billion a year.
However, he said the U.S. sugar industry does not support the new deal.
Asked how long this would take, Ross said, "It should be days, not weeks or months".