US, Mexico Announce Draft Deal on Sugar Trade Probes
US and Mexican officials announced on Monday that they had reached draft deals that could – if finalised – resolve a contentious row between Washington and Mexico City over sugar trade.
The draft “suspension agreements,” which have been initialled but not formally adopted, would halt two ongoing US investigations into whether Mexican producers have been selling sugar onto the US market at prices below their normal value – a practice known in trade jargon as dumping – and whether these producers have also received unfair state aid.
“The agreements should provide critical stability in a market that is important to both countries, while also ensuring that farmers and sugar refiners in the United States have an opportunity to compete on a level playing field,” said Stefan Selig, US Under Secretary of Commerce for International Trade.
Mexico’s Secretariat of the Economy similarly welcomed the move, noting that the deal will bring “certainty and stability” to its country’s sugar and sweeteners market via ensuring continued preferential access for Mexican exports.
The US Commerce Department began its anti-dumping and countervailing duty investigations in April, in response to a late March request by the American Sugar Alliance, a US-based coalition of sugarcane and sugar beet producers. The industry group has suggested that these alleged practices have cost American producers over US$1 billion this year alone.
Under the North American Free Trade Agreement (NAFTA) – a 20-year-old deal that includes the US, Canada, and Mexico – sugar from Mexico benefits from duty-free, tariff-free export to the US. Exports of Mexican-produced sugar were worth US$1.1 billion last year, according to Commerce Department statistics.
“We believe that US sugar producers and consumers alike will benefit if an agreement is finalised,” said Phillip Haynes, a spokesperson for the coalition. “Like our counterparts in Mexico, we want NAFTA to operate as intended and to foster free and fair trade in sugar between the countries.”
The draft suspension agreement for the countervailing duties, Commerce says, features provisions that “ensure there is not an oversupply of Mexican sugar that could cause price declines that threaten the US industry and farmers.”
What these provisions themselves would involve was not outlined in detail in their press statement, though US officials have said that there will be mechanisms put in place aimed at preventing imports from being concentrated at certain points during the year. There will also be limits on how much refined sugar can enter the US market.
In a statement of their own, Mexican officials explained that the quota established in the deal is based on a formula that guarantees that Mexico will continue to have preferential access to the US sugar market.
There will also be a minimum reference price mechanism put in place for Mexican exports of raw and refined sugar to the country’s northern neighbour, which US officials say is meant to protect against “undercutting or suppression” of prices in the latter’s market.
News of the potential agreements came the same day as the US Commerce Department, which is the government agency tasked with Washington’s trade remedy investigations, confirmed that it was ready to impose hefty duties on Mexican-produced sugar, given the preliminary results of its anti-dumping investigation.
According to the preliminary determinations released on 27 October, the US agency found that Mexican-produced sugar has been dumped at margins between 39.54 to 47.26 percent, depending on the producer involved.
The actual cash deposits that US customs officials will collect will be slightly lower, however, in order to account for any export subsidies.
Meanwhile, preliminary results of the countervailing duty probe, which were released in August, had led to duties of 2.99 to 17.01 percent.
Final deals pending
The months-long saga is not formally over, however, with interested parties now being given until 10 November to provide their comments on the two proposed deals.
Should final versions of these suspension agreements then be signed – which must occur by 26 November at latest – any cash deposits that have been collected by US customs officials in the time since the preliminary determinations were issued must be refunded to importers.
If final deals are not signed, however, then the Commerce investigations will proceed, as will those under the US International Trade Commission (ITC). While Commerce focuses on whether there is evidence of illegal subsidies or dumping, the US ITC is tasked with determining whether such practices – if found – have caused material injury to domestic injury.
Affirmative determinations under both the Commerce Department and US ITC are required to impose final duties.