How U.S. Settles Sugar Dispute With Mexico Could Signal Nafta Intent

By Anthony Harrup in Mexico City and Julie Wernau in New York Features Dow Jones Newswires

As the Trump administration sets the clock running for a renegotiation of the North American Free Trade Agreement, a deadline is fast approaching in a longstanding dispute with Mexico over sugar that some see as a harbinger of how those broader talks could play out.

Continue Reading Below

Unless the two sides reach agreement by June 5, the U.S. Department of Commerce will reinstate anti-dumping and antisubsidy duties on imports of Mexican sugar, risking a backlash from Mexico which denies that it subsidizes or dumps sugar in the U.S.

The duties were suspended in 2014 under agreements that limited imports and set minimum prices, but U.S. sugar producers say Mexican sugar is continuing to hurt their industry.

Mexican Economy Minister Ildefonso Guajardo discussed the matter this week with U.S. Commerce Secretary Wilbur Ross, but declined to give details of the talks. "We're advancing in that process and we think if we continue like that we'll be able, before two weeks are up, to narrow our differences," he told reporters.

U.S. President Donald Trump's administration on Thursday notified Congress that it intends to renegotiate Nafta with Mexico and Canada, setting in motion a 90-day consultation period for the negotiations to begin. Some see the handling of the sugar dispute as a dress rehearsal.

"I think the sugar situation is like a preamble, a starting point for entering the Nafta negotiations," said Carlos Blackaller, head of Mexico's sugar cane growers' union which represents some 180,000 cane producers in 15 Mexican states. "If our government accepts conditions, it would lose ability in those negotiations."

Continue Reading Below

Mexican producers say that if they are locked out of the U.S. market, they will seek actions against imports of U.S. high fructose corn syrup. U.S. corn refiners, who battled for years in the late 1990s and early 2000s over access to the Mexican market for HFCS, are concerned about fallout from a renewed trade spat in sweeteners.

"We think this has potential to be of great importance for Nafta and how the Nafta negotiation advances or doesn't," said John Bode, president and chief executive of The Corn Refiners Association. "If the U.S. acts against the U.S. jobs interest and halts the trade in sweeteners between the U.S. and Mexico, that would not only be bad for U.S. jobs but it would put Mexico in a position that they would need to show how tough and retaliatory they can be," he added.

U.S. refiners want Mexico to send more raw sugar and limit Mexican refined sugar imports. Their demands would lower to 15% from 53% the percentage of Mexican exports to the U.S. that could be refined sugar, said Juan Cortina, president of the Mexican sugar industry chamber.

There is still hope for an agreement, he said.

In addition to the $4 billion that U.S. sugar producers say they have lost in the past four years, refiners complain they aren't receiving enough raw sugar which they had expected to get from Mexico. Earlier this month, 38 members of Congress sent a letter to Mr. Trump urging him to use his power to impose duty on Mexican sugar "in response to the serious injury Mexico causes to U.S. sugar producers."

Mexico expects to produce 6 million metric tons of sugar in the 2016/2017 harvest, of which 4.4 million tons would be consumed locally and 1.6 million tons exported, including 950,000 tons to the U.S, according to Mr. Cortina of the Mexican sugar chamber.

Mr. Cortina considers there are grounds for Mexico to launch an antidumping investigation into HFCS imports from the U.S. Meanwhile, Mexico has been cleared by the World Trade Organization to impose $163 million in tariffs on U.S. goods after the WTO determined damage to the Mexican tuna industry over controversial U.S. labeling rules, he said.

"But it's not about retaliation," Mr. Cortina said. "For us as the sugar industry it's important to maintain the trade balance in sweeteners in the region."

Competing sweetener interests in the U.S., including producers and consumers, have also been pushing back against demands to limit Mexican sugar.

"This is about reducing competition. This has nothing to do with Mexico, " said Paul Farmer, president of CSC Sugar LLC, a New Canaan, Conn..-based refiner which supplies cane-based sugar for popular food and beverages such as Ben and Jerry's ice cream, Smuckers jelly and Snapple drinks.

The proposal would drive up prices for those customers and put CSC out of business, said Mr. Farmer, who is a big buyer of Mexican sugar. "Since when is it the government's job to decide which companies should do well and not do well in the United States?"

Write to Anthony Harrup at anthony.harrup@wsj.com and Julie Wernau at Julie.Wernau@wsj.com

(END) Dow Jones Newswires

May 19, 2017 05:44 ET (09:44 GMT)