Seeking certainty for sugar
By Sara Wyant
© Copyright Agri-Pulse Communications, Inc.
ORLANDO, Fla., Feb. 9, 2015 - What a difference a year makes for the U.S. sugar industry.
When Michael Scuse, USDA Under Secretary for Farm and Foreign Services, spoke at the 2014 International Sweetener Colloquium in California, he talked about “re-export swaps,” “sugar for ethanol,” and “high volume of sugar.”
This year it was all about “Anti-dumping/Countervailing Duties,” “Suspension Agreements,” and “Requests for Continuance,” according to his prepared remarks at the same convention, held in Orlando.
With regard to the ongoing anti-dumping and countervailing duty investigations of Mexican sugar imports, Scuse continued to call for “a negotiated settlement that protects our domestic sugar producers, permits our Mexican friends to export to us duty-free, all the sugar that we require, and allows the U.S. sugar program to be administered as intended.”
Scuse said he understands positions taken by the Sweetener Users Association “that sugar is but one commodity traded between our two countries." Scuse said that a managed trade arrangement with Mexico can help because these agreements specify how much and when to expect more imports, rather than sudden and unexpected inflows of Mexican sugar.
He said USDA supports the suspension agreements for 2 reasons: 1) there should not be a repeat of Fiscal Year 2013 that required a significant expenditure of funds to address the volume of sugar in the marketplace, as required by law; and 2) we do not want a trade dispute with our third largest trading partner - Mexico.
Without suspension agreements, he foresees two possible outcomes, neither of which are manageable. These include:
--One in which it is finally determined that imports from Mexico indeed injured the U.S. sugar industry, such that anti-dumping and countervailing duties are permanently applied, or….
--Another outcome which it is finally determined that imports from Mexico did not injure the U.S. sugar industry, such that Mexican sugar once again flows unrestricted into the U.S.
Scuse said that having duties permanently applied “might sound appealing to some who think that USDA could just go back to managing the sugar program like the pre-NAFTA days and increase the WTO tariff rate quotas if more sugar is needed in the marketplace.”
However, in that scenario, USDA would be concerned about jeopardizing the good trade relationship it has formed with Mexico.
One outcome that Scuse does not want to see: unrestrained trade from Mexico which could increase the risk of a repeat of 2013.
“I do not want a repeat of that episode” Scuse highlighted. USDA is required by law to ensure adequate supplies at reasonable prices. However, the uncertainty resulting from the ongoing investigation has created challenges to ensure an adequate supply of imports to meet our domestic needs, he said.
Scuse said that, although the signed suspension agreement puts restrictions on the flow of imports from Mexico, “it gives USDA enough flexibility to continue to manage the domestic sugar program.”
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“Mexico has sugar, the U.S. needs sugar, so let's get this agreement finalized,” Scuse emphasized. “If uncertainty lingers on, at some point USDA will be forced into serious consideration of where needed supplies, on a timely basis, will come from,” Scuse noted.
“The Jan. 27 announcement by the Department of Commerce on retroactive duties during the review of suspension should help reduce a bit of uncertainty, but only in the short run," he noted.
The Sweetener Users Association (SUA) commended Scuse for trying to balance competing interests, while renewing its calls for comprehensive sugar reform. It said ti welcomes his remarks ton U.S. sugar policy and the anti-dumping and countervailing duty investigations of Mexican sugar imports.
“As the under secretary noted in his remarks, USDA is required by law to provide adequate supplies of sugar at reasonable prices, and we commend the under secretary for his efforts to manage the flawed U.S. sugar program over the years. Balancing the interests of both sugar users and sugar producers while providing transparency and addressing the continued market uncertainty the program brings is no easy feat, and Under Secretary Scuse and his team at USDA have faced that challenge head on.”
“Unfortunately, as the under secretary noted, the recent anti-dumping and countervailing duty investigations of Mexican sugar imports have led to uncertainty in the market, making it even more difficult for USDA to ensure adequate supplies of sugar to meet our domestic needs. With total imports of sugar to date down significantly this year, the investigations have had a lasting, negative impact on the already unstable U.S. sugar market.
“What's worse, the subsequent suspension agreements in the cases will only contribute to the many problems resulting from current U.S. sugar policy through increased restrictions on the flow of imports. We are encouraged by the under secretary's recognition that USDA may need to consider tariff-rate quota adjustments if uncertainty in the market continues."
Meanwhile, sugar growers were quick to point out that U.S. sugar policy is expected to cost taxpayers zero from FY 2015 to FY 2025, according to projections released last week by USDA, and they strongly supported the suspension agreements.
“Sugar policy is the least expensive major commodity policy in the farm bill because farmers repay loans with interest instead of receiving subsidy checks. It ran at no cost to taxpayers from 2003 to 2012 and again in 2014,” according to their association.
There was a net cost of $259 million in 2013 when USDA had to take emergency action to prevent the market from collapsing after Mexico dumped a record amount of subsidized sugar onto the U.S. market.
"If the estimates hold true, it will mean that sugar policy would have run without cost for 22 of 23 years. That's an incredible track record," said Jack Roney, an economist with the American Sugar Alliance.
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