A dispute with the United States over sugar poses a threat to the industry in Mexico but Economy Secretary Ildefonso Guajardo believes that negotiations for a new accord could be completed within two weeks.
The Mexican government is working to a tight deadline: June 5 is the date by which a new agreement must be forged to ensure that Mexican sugar continues to enter the U.S. market tariff-free.
Mexico has exported sugar without any protectionist constraints since 2008.
Last year, it exported 1.1 million tonnes of sugar to its northern neighbor. The industry represents 3% of Mexico’s Gross Domestic Product and directly and indirectly employs over 2 million Mexicans in 16 states.
However, the industry is now facing uncertainty that, until recently, didn’t exist.
While the government and the sugar industry agree that U.S. demands are “excessive,” Guajardo indicated that “talks have restarted…[and] we are moving forward in the process and believe that if things continue like this, within two weeks we could reach a point where we can settle our differences.”
If an agreement is not reached, there is a danger that the U.S. could impose a tariff of up to 80%.
Juan Cortina, head of Mexico’s national trade organization for the sugar industry, the CNIAA, sees tariffs as an existential threat to the industry’s export business.
“If they set tariffs, they’ll remove us from the market.”
The biggest barrier to the negotiations is a long-held belief among U.S. sugar producers that Mexico dumps subsidized sugar on the American market, making it difficult for them to compete.
While quotas on Mexican sugar exports were introduced in 2014, the issue remains a sticking point.
In March, sugar exports to the U.S. were temporarily suspended as the quota for the six-month period starting October 2016 had been filled.
Earlier this month, the Mexican Finance Secretariat stated that U.S. complaints were motivated, at least in part, by a desire to eliminate competition from sugar refined in Mexico.
For its part, the CNIAA has also accused the U.S. of dumping but with high-fructose corn syrup, of which Mexico imports 1.6 million tonnes annually, also tariff-free.
For workers in places like Atencingo, Puebla, the sugar industry has provided much-needed employment for generations.
Sugar cane laborers earn around 600 to 700 pesos (US $32-$37) a day during harvest months, a rate many times higher than most laborers’ wages, making the ongoing viability of Mexico’s sugar industry essential to their livelihood and that of their families.
Consequently, one farm union leader in the region predictably said, “We hope that . . . the negotiations reach a positive conclusion.”
The sugar dispute is seen by analysts as an interesting and perhaps prophetic precursor to wider trade talks between the two nations as well as Canada, with a renegotiation of the North American Free Trade Agreement, or NAFTA, expected to begin in August.
If negotiations on sugar break down or an outcome that is considered favorable by both sides is not achieved, trade officials could find themselves sitting down to talks in August with an unexpected bitter taste in the mouth.