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DOC Initiates Investigation Into Mexican Sugar Subsidies, Dumping

Mexico Speeds Up Disputed Sugar Exports to U.S. Market

April 18, 2014

WASHINGTON—The U.S. Department of Commerce (DOC) today announced that it would initiate an investigation to determine if the Mexican government has subsidized Mexico's sugar production and whether that sugar is being dumped into the U.S. market.

A group of U.S. sugar producers filed antidumping and countervailing duty petitions against Mexico's sugar industry on March 28, and they applauded DOC's decision.

"It is clear that the petitions have merit in the eyes of the U.S. government," said Phillip Hayes, a spokesperson for the American Sugar Alliance. "Considering what's currently happening in the market, we are hopeful that corrective action will be taken as soon as possible."

The Mexican sugar industry—20 percent of which is owned and operated by the Mexican government—has rapidly increased exports to the United States in recent years, rising from 9 percent of the U.S. market in FY2012 to nearly 18 percent in FY2013. And, according to recently updated U.S. Department of Agriculture (USDA) data, Mexico is accelerating its rate of exportation in FY2014.

As of March 31, Mexico had already sent to America 1.15 million tons of sugar, putting it on pace to ship 2.3 million tons for the year. That is compared to last year's all-time record of 2.1 million tons. Unless the pace slows, imports of sugar from Mexico will be 500,000 tons more than U.S. government officials had expected this year.

U.S. producers say the growth in Mexico's exports to the United States is being fueled by substantial subsidies and by dumping margins of 45 percent or more. They also say Mexico is directly responsible for sinking U.S. sugar prices, which have fallen 50 percent since late 2011 and are back to the lows of the 1980s.

"We predict that Mexico's actions will cost domestic producers nearly $1 billion this crop year," Hayes explained. "The low-price environment has already forced U.S. farmers to plant less."

Earlier this month, the USDA announced an acreage decline of 4 percent for the U.S. sugar beet crop currently being planted. That marks the fourth consecutive year that U.S. sugar farmers have reduced plantings.

"If the Mexican sugar industry was gaining market share in the United States because it was more efficient than U.S. producers, that would be one thing," Hayes said, "but they are inefficient and are simply making advances because of unfair trading practices."

For approximately 100 years, the United States has maintained antidumping and countervailing duty laws to ensure predatory trade practices don't drive domestic industries out of business. If U.S. producers are harmed, these laws permit duties to be imposed on the imported products that benefit from subsidies or are sold below fair market prices.

The U.S. International Trade Commission is responsible for determining whether or not domestic producers are injured by dumped and subsidized imports. It is expected to make a preliminary determination in May.

The North American Free Trade Agreement (NAFTA) "gives Mexico the right to export sugar to the United States on a tariff-free and quota-free basis—but that does not give the Mexican industry the right to export its surplus to the U.S. market at dumped prices, nor does it permit the [Mexican government] to subsidize its sugar industry without regard to the impact of those subsidies on U.S. producers," read the petitions filed by U.S. sugar producers.

NAFTA explicitly permits the filing of antidumping and countervailing duty cases, and NAFTA countries have filed 114 antidumping and countervailing duty cases against each other since the trade deal went into effect. Of these 114 cases, Mexico has filed 31 cases against the United States, and the United States has filed 30 cases against Mexico, not counting the pending sugar petitions.

The American Sugar Coalition, which was created to take this legal action, officially filed the petitions. Its members include all U.S. producers of beet and raw cane sugar as well as nearly 70 percent of refined cane sugar. This membership mirrors that of the American Sugar Alliance, the U.S. sugar industry's primary trade association.

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Additional information about the antidumping and countervailing duty petitions is available at www.sugaralliance.org/mexico.


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