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Mexican Export Subsidies Injuring U.S. Sugar Producers

CONTACT: Phillip Hayes, 202-507-8303

WASHINGTON—U.S. sugar producers have filed new subsidy allegations in their countervailing duty case against Mexico's sugar industry, including evidence that export subsidies are fueling a flood of Mexican sugar shipments and injuring U.S. sugar farmers and processors.

The new allegations, filed last Thursday with the U.S. Department of Commerce (DOC), detailed two components of a subsidy meant to support Mexican sugar mills and facilitate exports.

First, Mexico's government dictates the price that sugar mills must pay farmers for sugarcane. That government-set price incorporates a lower price for sugarcane destined for exports. Second, the government requires mills to export large quantities of sugar to eliminate surplus production in Mexico. This helps keep prices high for the sugar mills sell in Mexico while depressing the prices received by its U.S. competitors.

The benefit of the export subsidy scheme to Mexican mills is estimated to be 17 percent of the value of the sugar being exported to the United States.

"We want NAFTA to operate as intended, where trade is free and fair and the most efficient producers are rewarded... Unfortunately, Mexico isn't playing by the rules and its inefficient sugar industry is expanding at the expense of U.S. farmers, workers, and taxpayers."

Phillip Hayes, a spokesman for the American Sugar Alliance, said Mexico's highly managed market also benefits the Mexican government, which owns 20 percent of Mexico's sugar mills and is the country's single biggest sugar producer and exporter.

"We've been investigating Mexico's intricate web of sugar subsidization for months, and this is just the latest example we've found of Mexican trade abuses," he said.

In addition to the export subsidy, Mexican producers also benefit from preferential government loans coupled with debt restructuring and forgiveness, government cash infusions to cover operating shortfalls, and government grant programs to finance inventory, exports, and inputs.

The DOC and U.S. International Trade Commission (ITC) are currently investigating Mexico's sugar industry to determine if corrective actions are needed to level the playing field. In May, the ITC issued a preliminary ruling - by a 5 to 0 vote - that Mexico's unfair trading practices were harming U.S. sugar producers and taxpayers. The DOC is expected to issue its preliminary ruling about Mexican subsidies in August and will rule on dumping allegations this fall.

U.S. producers filed antidumping and countervailing duty petitions against Mexico in March and estimate that dumped and subsidized Mexican sugar will cost them $1 billion this year alone. Mexico's actions also cost U.S. taxpayers $278 million last year after the U.S. Department of Agriculture took steps to keep the U.S. market from collapsing under a surge of subsidized sugar.

"We want NAFTA to operate as intended, where trade is free and fair and the most efficient producers are rewarded," Hayes said. "Unfortunately, Mexico isn't playing by the rules and its inefficient sugar industry is expanding at the expense of U.S. farmers, workers, and taxpayers."

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

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