Washington - A new deal between the US and Mexico on sugar exports may
have averted a costly trade war. But it's also sparked a fierce battle between
the Trump administration and some of America's largest food companies, who
claim Tuesday's agreement will harm their businesses and ratchet up food costs
for consumers.
Under the preliminary agreement, Mexico will accept a new
minimum price for the sugar it sells to the US and restrict the amount of
refined sugar it exports, measures that will maintain high sugar prices for
domestic producers.
But while those concessions were immediately celebrated as a
victory for the US and for US sugarcane and sugar beet farmers, in particular -
it's been panned by representatives of the processed food, confectionery and
soda industries, who have long fought federal protections of domestic sugar.
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The dispute pits some of America's largest food companies
against one of its most powerful agricultural lobbies and against the Trump
administration itself. In doing so, it also exposes a central paradox in
President Trump's aggressive, "America first" trade approach: Any
policy that benefits some US firms will also, inevitably, hurt others.”
"Today's announcement is a bad deal for hardworking
Americans and exemplifies the worst form of crony capitalism," said the
Coalition for Sugar Reform which represents Coca-Cola, Nestle, Kraft Heinz and
hundreds of other food companies in an incendiary statement. "US sugar
policy should empower America's food and beverage companies to create more
jobs, not put hundreds of thousands of good-paying U.S. jobs at risk just to
benefit one small interest group."
From the food industry's perspective, this agreement and the
controversial US sugar-support policy that it represents artificially inflates US sugar prices to
points far above the world market. According to the Department of Agriculture's
Economic Research Service, which measures price according to futures contracts,
the world price for both raw and refined sugar is lower than the respective US
raw and refined sugar prices.
That is no accident, economists say: Since 1981, the U.S.
government has guaranteed a minimum price for US sugar through a system of
quotas, buy-backs and price-support loans. Restrictions on imports are key to
the program, as any increase in cheap foreign sugar could cause prices to drop
below the guaranteed minimum for US producers.
Facing such a situation in 2013 and 2014, the US and Mexico
agreed to a deal that set minimum prices for Mexican sugar and limited the
amounts of both raw and refined sugar it could sell into the US. Tuesday's
agreement is an extension of that deal, and will increase both the import
limits and the minimum prices. That will have the practical effect of
maintaining sugar prices for US farmers and refiners said Phillip Hayes, a
spokesman for the American Sugar Alliance.
He characterizes the agreement as a "law enforcement
issue" that was needed to protect US producers from Mexican dumping. "Hawaii's
sugar industry shut down last December because of the uncertain market,"
Hayes said. "That was largely driven by Mexico's predatory trade
practices."
But higher sugar prices also come with costs not to farmers,
but to companies that use sugar in their products. Higher ingredient costs cut
into manufacturers' margins, which has prompted several to relocate outside of
the US.
The makers of Life Savers, Dums Dums and Jelly Belly beans
have all opened factories overseas, citing the high cost of American sugar. It
was implicated in the closure of a Chicago Nabisco plant last summer, which
resulted in the layoff of 600 people.
"From a jobs perspective, there are 600 000 people
working in the sugar-using industry," said Rick Tasco, the president of
the Sweetener Users Association, which represents manufacturers. "The
sugar-processing sector only employs 18 000 people."
Consumers also appear to purchase fewer sugar-sweetened
goods when sugar prices are up. A 2011 report by the US. International Trade
Commission found that liberalizing America's sugar trade policies would give
the economy a $49 million boost, largely in the form of increased food sales.
That same year, the American Enterprise Institute, a
conservative think tank, calculated the consumer cost of higher sugar prices at
almost $3 billion a year.
"That's a cost of between $10 and $11 for every man,
woman and child in the US," said Robert Kudrle, a professor of
international trade policy at the University of Minnesota.
"It's why US sugar policy is used in textbooks to
illustrate the political economy of protectionism. A very small group of people
have managed to get public policy to favour them - basically by taxing the rest
of the population."
The sugar industry vehemently disputes these claims, and
disagrees that trade restrictions like those announced Tuesday have any impact
on consumer prices. It points out that food companies rarely pass on savings to
consumers: Candy bars did not suddenly get cheaper in 2013, for instance, when
US sugar prices plummeted.
But the Sugar Reform Coalition has promised to press its
case on the issue even if the preliminary deal with Mexico is approved. The
organization has the support of a number of prominent food industry trade
associations, as well as a bipartisan group of lawmakers who in May asked
Commerce Secretary Wilbur Ross to liberalize US policy on Mexican sugar.
A number of food companies, including Coca-Cola, Cargill,
and corn syrup maker Archer Daniels Midland, also met with the White House's
agricultural advisor, Ray Starling, to lobby against the sugar industry in May,
according to Reuters.
But while those campaigns appear to have failed, the food
industry will have another chance to address sugar trade soon. The issue has
historically drawn extra attention around the Farm Bill, which is due for a
2018 renewal.
The Sugar Reform Coalition is already asking lawmakers to
push for reforms in those negotiations.Tuesday's agreement "[solidifies]
that it's time for Congress to shoulder the responsibility of fixing this
broken program," the group said in a statement.
WASHINGTON POST