WASHINGTON, Aug. 20, 2014 – The U.S. sugar industry is confident it will prevail in the unfair trading complaints it’s filed against Mexico with the U.S. Commerce Department (DOC) and the U.S. International Trade Commission (ITC), according to Phillip Hayes, a spokesman for the American Sugar Alliance (ASU).
Hayes commented at the recent International Sweetener Symposium in Vermont where most alliance officials were reluctant to talk about the Mexican situation, saying they didn’t want to prejudice their case. Several producers at the symposium, however, called the impending decisions – a preliminary ruling on one complaint is due next week – the “elephant in the room.”
The ASU, which represents beet and cane sugar growers and processors, in March charged the Mexican government with unfairly subsidizing its producers and with dumping its surplus sugar on the U.S. market at prices below the cost of production, harming the U.S. industry to the tune of about $1 billion a year. And it’s asking the U.S. government to take corrective action in the form of countervailing and anti-dumping duties.
“The Mexican sugar industry exported dumped and subsidized sugar to the United States, and as a result, it caused tremendous harm to a domestic industry that supports 142,000 jobs,” Hayes said earlier this year. “U.S. trade laws are designed to stop such injury.”
In a preliminary ruling in May, the ITC took the first step in possibly leveling the playing field by finding there was “reasonable indication” that the U.S. industry had been “materially injured” by allegedly subsidized Mexican sugar dumped into the U.S. at below fair value.
The next step in the case will be taken by DOC which is scheduled to issue a preliminary determination of subsidies in the countervailing duty investigation on Aug. 25. Preliminary duties could be levied at that time. A ruling on the dumping charge may come in September and final rulings by DOC and ITC may not occur until 2015.
There is also the possibility of a negotiated settlement before duties are assessed that would in some way limit U.S. imports of Mexican sugar. Dozens of U.S. lawmakers opposed to the U.S. sugar program, led by Senators Jeanne Shaheen, D-N.H., and Pat Toomey, R-Penn., have urged Commerce Secretary Penny Pritzker to reject any “suspension agreement” that would involve a quota on Mexican sugar. They say this would raise prices for U.S. consumers and businesses and harm the U.S. trade relationship with Mexico. According to the North American Free Trade Agreement, sugar trade between the two countries is supposed to be unfettered.
During the sweetener symposium in Vermont, sugar analyst Frank Jenkins suggested during a panel discussion that large Mexican sugar exports to the U.S. had resulted in the USDA losing control over the country’s sugar program, which the industry says had operated for years with almost no cost to U.S. taxpayers.
As part of the program, established in recent farm bills, the government sets a reference price for U.S. sugar, which is usually well below the domestic market price. Producers put their crop up as collateral for loans, and usually sell the crop later on the market. Last year, however, U.S. sugar prices, under pressure from Mexican imports, fell below forfeiture levels and the government had to buy the collateralized sugar for $278 million, and then sell the product later at a loss to ethanol producers.
Jenkins predicted the market would become “manageable” again once complaints against Mexico are resolved by the DOC and ITC.
Also speaking at the conference was Randy Green, a consultant to the Sweeteners Users Association, who called for reforms in the U.S. sugar program, which he said was the cause of the fluctuations in the U.S. supply.
“This fluctuation is not a sinister plot by Mexico, but rather the ramifications of an outdated, protectionist U.S. sugar program that is in need of reform,” he said.
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