Mexican Subsidised Sugar Dumped in US

The US Department of Commerce has been given a green light to proceed with its investigations of Mexican sugar being allegedly dumped on the US market, along with claims that the latter’s producers are benefiting from unfair subsidies.

Under the North American Free Trade Agreement (NAFTA) – which along with the US and Mexico also includes Canada – Mexican sugar benefits from duty-free, tariff-free export to the United States. American sugar producers say that the access provided by the 20-year-old trade deal does not justify the alleged dumping of underpriced products to the detriment of US businesses, jobs, and economy.

The investigations come in response to petitions filed earlier this year by the American Sugar Alliance, a US-based coalition of sugarcane and sugar beet producers. The group complained that Mexican sugar producers are benefitting from allegedly unfair subsidies, and that the product is being sold below its normal value on the US market – a practice known in trade jargon as dumping.

The industry group contends that the alleged dumping and unfair subsidisation of Mexican sugar could cost US sugar producers upwards of US$1 billion this year and will cost American taxpayers US$278 million to keep the industry afloat.

While the US Department of Commerce had already said in April that it planned to launch countervailing duty (CVD) and anti-dumping investigations into the respective claims, a formal sign-off from the US International Trade Commission was required for the probe to go forward.

The Commerce Department is expected to make a preliminary ruling on the countervailing duty investigation next month and on the anti-dumping investigation in September, at which points preliminary duties may be imposed. Those duties will then either be confirmed, amended, or withdrawn depending on the final results of the investigation.

US sugar producers claim that prices have dropped 50 percent since 2011, blaming the fall on a glut of Mexican-produced sugar crossing their shared border. For instance, they note, the US state of Louisiana saw record-high sugar yields in 2013, while seeing the value of its sugar cane crop drop by US$250 million that same year.

Philip Hayes, a spokesperson for the American Sugar Alliance, has similarly warned that these losses will only worsen without corrective actions by the US to level the playing field. Citing estimates by the US Congressional Budget Office (CBO), the group claims that the oversupply in Mexican sugar will lead to an increase of US$390 million in government expenditures over the 2015-2024 fiscal years.

“Prices have simply returned to historical levels,” said Juan Cortina, president of the National Mexican Sugar Chamber, in comments reported by Reuters. “This has happened the world over, a reality that sugar producers have to grapple with.”

In addition, they say, Mexico City has established a programme of sugar cane-based ethanol production with the goal of developing a sustainable market for biofuels, which government officials say will lead to the country increasing its consumption of domestic sugar cane.