A “sugar bomb” will detonate on June 5 unless the US and Mexico can reach an agreement on sugar imports within the next week.

If the US takes action, Mexico has threatened to retaliate. Corn and high fructose corn syrup are likely targets.

Mexico is the key buyer of US corn syrup.

Sweet Deals

Whenever manufacturers or growers cannot compete, they moan about “dumping”.

In a sweet deal for the express benefit of the sugar lobby at a huge expense to everyone else, sugar tariffs forced prices higher in the US than anywhere else in the world.

Absurd Dispute

On March 8, Reuters reported Mexico Cancels Sugar Export Permits to U.S. in Trade Dispute.

Mexico has canceled existing sugar export permits to the United States in a dispute over the pace of shipments, according to a letter seen by Reuters, in a flare-up industry sources said could temporarily disrupt supplies.

The cancellations are the latest dispute of a years-long trade row between Mexico – the United States’ top foreign supplier of sugar – and its neighbor at a time when cane refiners are struggling with prices and tight supplies, U.S. industry sources said.

The letter described as “absurd” an interpretation by “low-level” U.S. Commerce Department officials of a clause in so-called suspension agreements.

The dispute centers on an interpretation of how the Mexican government issues export licenses to ensure supplies enter the United States at a regulated pace.

The U.S. sugar industry late last year pressed the Commerce Department to withdraw from a 2014 trade agreement that sets prices and quota for U.S. imports of Mexican sugar, unless the deal can be renegotiated.

U.S. sugar prices have soared since late last year when Washington said the 2014 deal that suspended large duties on sugar from Mexico after a trade investigation may not be working as intended.

The U.S. domestic raw sugar contract on ICE Futures U.S. settled at 31.71 cents per lb on Tuesday, the highest in nearly five years.

The license cancellation by Mexico adds to protracted marketplace uncertainty, said Richard Pasco, president of the Sweetener Users Association trade group.

“We need adequate supplies and the lack of resolution is a problem,” he told Reuters in a phone interview on Tuesday.

Sugar Ship Stranded

On March 10, Reuters reported Mexican Ship Loaded with Sugar Stranded After US Export Spat.

A ship loaded with sugar was stranded in port on the east coast of Mexico because of the break down in stop-gap measures designed to ease a long-standing trade dispute with the United States over sugar exports.

The vessel, carrying between 20,000 and 30,000 tons of raw sugar, is stuck in a port in the eastern Mexican state of Quintana Roo after Mexico canceled permits to export sugar to the U.S., Mexican sugar chamber head Juan Cortina said on Thursday.

The Mexican government said it canceled the permits to avoid reaching seasonal export limits under trade accords with the U.S. though it disputes actually reaching the limits.

Cortina said the 54 permits canceled with 23 mills involve between 100,000 and 120,000 tons of sugar.

Both countries were in talks to renegotiate the deals, but they ended when former U.S. President Obama left office in January.

Still, he warned that if the U.S. cancels the agreements, Mexican sugar producers will insist that the Mexican government halt fructose imports from the U.S.

Cortina said that if sugar is dropped from NAFTA, the U.S. will suffer more because Mexico is the only market for its fructose.

Sugar Wars

Please consider Sugar Wars: Mexico VS U.S.A.

One of the main problems of NAFTA between U.S.A. and Mexico is the price of sugar. The producers of sugar in the United States are protected from the government and the sell their product in higher prices than the imported sugar. The government offers a domestic guaranteed price to the producers. For this reason, the price of sugar in U.S.A. is 40% higher than the rest of the world (PaulKrugman- International Economics). In 2014, the sugar growers in U.S.A. criticized that the government permitted the import of cheaper sugar from Mexico. In August 2014, the USA government set sugar tariffs in the Mexico, but after 3 months of negotiations, they decided to get rid of tariffs on the imports of Mexican sugar because it was a violation of NAFTA. The U.S.- Mexico sugar agreements establish limits on exports of Mexican sugar to the United States, including quantitative limits and minimum prices.

If NAFTA is canceled between Mexico and U.S., Mexico will take its business somewhere else. Mexico has started to strengthen its relations with Latin America countries, E.U. and China since November. However, the price of sugar may rise because of this situation between U.S. and Mexico. U.S. and Mexico are major sugar producers and the trade dispute on sugar will have a strong effect on the price. Furthermore, in October E.U. decided to remove limits on its own sugar beet and this will lead to the increase in production and probably the European growers will boost market supply and cut prices.

War on High Fructose Corn Syrup

In a different kind of Sugar War, D&C comments on Mexico’s national strategy to prevent and control obesity and diabetes.

Mexico’s sugar war is now being waged on the digital front. Attacks are being launched against health experts and activists who advocate for stricter laws and regulations because they want to prevent obesity and diseases like diabetes.

On 17 August 2016, Simón Barquera received a text message that his daughter had just had an accident and was in critical condition. The message contained a link that supposedly gave information about the hospital where she had been taken. But it was a trap. If Barquera, a respected health expert with Mexico’s National Institute for Public Health, had clicked on the link, it would have installed spyware on his smartphone. It was the latest message of this kind in an entire series. All in all, Barquera received nine messages with infected links, according to a report from the Citizen Lab at the University of Toronto.

In Mexico, soft drinks are as much a part of everyday life as meat and fast food. Mexico leads the world in per-capita consumption of sugar-sweetened beverages: on average every Mexican drinks 163 liters of so-called “refrescos” per year. That’s almost half a liter a day.

The country also has some of the highest rates of obesity and diabetes in the world. According to a UN report, over two-thirds of adult Mexicans are overweight or obese. Mexico has even surpassed the US as the country with the most overweight people. According to the OECD, Mexico has the highest diabetes rates of any developing country. Diabetes and heart diseases are among the leading causes of death.

Abelardo Ávila Curiel from Mexico’s National Institute of Nutrition assessed his country’s obesity problem as “a serious epidemic” in an interview with CBS. “Among the poor we have overweight parents and malnourished children,” the expert said. “The worst aspect is that children are being programmed to be obese.”

The marketing of soft drinks has been very successful. Companies like Coca-Cola and PepsiCo spend billions every year to make sure their drinks become an integral part of daily life for children, minorities and low-income people. Their distribution systems reach remote villages. Aggressive marketing campaigns guarantee bulk sales. The corporations are involved in political lobbying and fund research that glosses over the impacts soft drinks have on consumers’ health. In order to improve their image, companies also finance social campaigns or sporting events.

Sugar Showdown Video – May 31

“Mexico and the US are locked in a dispute over sugar exports. The US threatens to impose duties unless a deal is struck by next Monday while Mexico vows retaliation.”

Bad Policy

Trade wars are horrendous policy. If team Trump goes after NAFTA, Mexico is sure to retaliate. Both countries will lose. In this case for what?

The only beneficiary of sugar tariffs is the US sugar lobby (sugar growers). Consumers of cane sugar (individuals and manufacturers alike) all suffer from higher prices.

Allegations of dumping are nonsense. Regardless, health aspects aside, everyone but the sugar lobby would benefit if sugar was free.

If dumping and low prices benefit consumers, and they clearly do, it’s a good deal. Standards of living rise when prices drop.

Trump’s NAFTA Policy Maneuvers

Trump has changed his mind so many time and on so many things I have no idea which way this will break. Here is a series of articles up to this point.

Don’t Blame NAFTA

To understand the true source of trade imbalances, please see Disputing Trump’s NAFTA “Catastrophe” with Pictures: What’s the True Source of Trade Imbalances?

Mike “Mish” Shedlock