Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Tuesday 07/29/14

U.S. Sugar Growers Make Case Against Mexican Imports

From DTN's Washington Insider column:

US 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 US sugar farmers and processors.”

The new allegations, filed on July 24 with the US Department of Commerce (DOC), detailed two components of a subsidy meant to support Mexican sugar mills and facilitate exports.

First, according to the American Sugar Alliance (ASA), 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, ASA said, 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 US competitors.”

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

Besides the export subsidy, ASA said 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 US 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 US 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.

US 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, ASA charges, also cost US taxpayers $278 million last year after the USDA took steps to keep the US market from collapsing under a surge of subsidized sugar.

A Dept. of Commerce (DOC) preliminary determination on the countervail case will come no later than August 25, sources advise. The DOC preliminary determination on the dumping base is scheduled for early September, but is expected to be delayed until late October.

Follow me on Twitter @ChrisClaytonDTN.

Posted at 6:34AM CDT 07/29/14 by Chris Clayton
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