| MEXICO CITY/WASHINGTON
MEXICO CITY/WASHINGTON Aug 26 The United States
is set to slap import duties on Mexican sugar in a move that
could push up candy and soft drink prices for U.S. consumers and
incite retaliation from Mexico, which is keen to agree a deal to
avoid the new levies.
The duties announced by the U.S. Department of Commerce on
Tuesday will bolster prices for U.S. sugar but mean companies
like sweet makers Hershey Co and Mondelez International
Inc will have to pay up to 5 cents per pound extra for
imported sweetener, based on current refined sugar prices of
around 30 cents per pound.
The preliminary decision in favor of U.S. sugar producers,
who complain of unfair competition from subsidized Mexican
sugar, could still be overturned but marks an early win for the
powerful U.S. sugar lobby in the industry's first trade case in
Sugar shipped from state-owned Mexican mills faces duties of
17.01 percent, while the Commerce Department set a rate of 2.99
percent for private sector producer Tala, owned by Grupo
Azucarero Mexico, and 14.87 percent for all other producers, the
department said in a statement.
Mexico nationalized many struggling sugar mills in 2001 and
government-owned mills provide a fifth of the country's sugar.
U.S. sugar producers, who themselves benefit from an
intricate network of government supports and managed trade, say
a sharp rise in Mexican imports drove a collapse in local
prices, hurting local growers, mills and refiners and costing
them nearly $1 billion in net income.
Juan Cortina, president of the Mexican sugar chamber, said
the Mexican sugar industry is prepared to agree to a deal that
limits sugar exports to the U.S., but said any agreement would
have to fix an export minimum of at least 1 million tonnes per
He said the chamber believed a deal could be reached before
the U.S. resolves the anti-dumping section of the case in
October -- which could lead to more duties.
CONSUMERS PAY THE PRICE
U.S. Agriculture Secretary Thomas Vilsack has said he would
encourage a settlement, but U.S. lawmakers, food manufacturers
and commercial users of sugar have warned a deal would inflate
food prices and threaten U.S. food manufacturers.
They argue the case could also prompt Mexico to retaliate on
other products like high-fructose corn syrup, inflating the cost
of a key raw material, and undermine free trade across the
continent under the North American Free Trade Act. The United
States is a net sugar importer.
Mexico's Economy Ministry described the U.S. decision as a
setback in trade relations between the neighbors and said Mexico
will defend its rights and exhaust the legal options to protect
its interests under the aegis of NAFTA and the World Trade
"I think this is an area where consumers would be a lot
better off if the market were simply allowed to operate freely
without either government intervention or deals being cut by the
growers," said Bill Reinsch, president of the National Foreign
"The likely result is that the growers, particularly in the
United States, will make more money, and the consumers will pick
up the tab."
Concerns about tightening supplies in the United States,
even as the global market remains in surplus, have pushed
domestic prices up 18 percent since the case was filed in March.
One U.S. sugar importer described the duties as
"devastating." "We're apparently going to be short of sugar in
the United States market, so prices will come up to a level that
compensates for any duty," he said.
Still, traders had expected the Commerce Department to find
in favor of U.S. producers, who complain Mexican sugar is sold
in the United States at prices 45 percent or more below fair
Second-month U.S. domestic raw sugar futures traded
in New York jumped 2.7 percent to a two-week high of 26.75 cents
a lb in thin trade after the news but pared the gains by its
In one sign of early fall-out from the case, U.S. sugar
supplies are forecast to fall to critically low levels in the
2014-15 season as state-owned Mexican mills sell sugar to
The U.S. International Trade Commission is conducting a
parallel investigation into whether the imports injure local
growers. The ITC found in favor of U.S. producers in its
preliminary decision, and a final verdict is due in February.
(Additional reporting by Chris Prentice in New York; Writing by
David Alire Garcia and Krista Hughes; Editing by Simon Gardner,
Marguerita Choy and Andrea Ricci)