(Adds comment from Mexico)
By Ros Krasny and Chris Prentice
WASHINGTON/NEW YORK, March 28 U.S. sugar
industry groups on Friday accused Mexican exporters of dumping
cheap, subsidized supplies on the U.S. market, firing the
opening shot in a potential trade war after months of growing
tension in the sweetener industry.
In a petition to the U.S. International Trade Commission,
which experts have called the first of its kind, the sugar cane
and sugar beet groups said that "dumped and subsidized" imports
would cost U.S. producers nearly $1 billion in net income in
The U.S. domestic sugar industry is reeling from record low
world prices and unfettered shipments from Mexico thanks to
The petitions filed with the ITC and the U.S. Department of
Commerce allege that the Mexican industry has shipped sugar to
the United States at dumping-level prices, and has also received
subsidies from Mexican federal and state governments.
"It is hard for U.S. farmers to succeed when a subsidized
industry that is largely government-controlled is dumping its
product," said Phillip Hayes, a spokesman for the American Sugar
Alliance, which represents U.S. producers.
The dispute arrives against the backdrop of a struggling
world sugar industry. A price rally early in the year has
stalled and prices currently languish near the cost of
production for many of the world's millers amid four
back-to-back years of surplus.
Mexico's Agricultural Ministry said the complaint flew in the
face of the countries' trade agreements and it said it would use
every legal measure available to defend its producers' rights.
The ministry also noted that Mexico allowed imports of
high-fructose corn syrup, made with U.S.-subsidized corn.
The move by U.S. groups is expected to kick off an escalated
dispute, especially after political pressure prompted Mexico's
sugar industry to begin exporting to the world market.
"It is highly probable if this proceeds Mexico will
retaliate," said Kevin Combs, partner with sugar brokerage and
consulting firm McKeany-Flavell in Oakland, California. "Mexico
is absolutely going to bring high-fructose into the
The move has already triggered staunch criticism from U.S.
sugar users, who have said that existing sugar supports inflate
The ITC will begin its investigation immediately and make a
preliminary determination within 45 days. The U.S. Commerce
Department will launch its own investigation within 20 days.
The U.S. sugar market, where Americans consume more sugar
than they grow, is highly regulated through an array of measures
that include import quotas.
Mexico, however, has open access as a signatory to the North
American Free Trade Agreement. But until the past year or so,
the slow implementation of NAFTA and the disruption of U.S.
supplies in the wake of 2005's Hurricane Katrina prevented it
from taking full advantage of that access.
Now tensions between the two countries' sugar industries are
growing as production hits record levels, Mexican sugar imports
into the United States soar and the region's supplies balloon,
pressuring prices to historic lows.
U.S. sugar companies defaulted sweetener to the U.S.
Department of Agriculture (USDA) for the first time in nearly a
decade rather than repay their government-backed loans in cash
during the 2012-13 crop year that ended Sept. 30.
The forfeitures and a string of USDA efforts to bolster
prices and erode excess stocks cost the government an estimated
The USDA estimates sugar imports from Mexico in 2013-14 at
1.745 million short tons, and in a preliminary forecast in
February said shipments would jump in the 2014-15 marketing year
to 2.26 million short tons.
MORE THAN 'SHOTS OVER THE BOW'
These anti-dumping complaints are often successful and have
a chilling effect on trade even before they are decided because
duties can be retroactive.
"Well over 60 percent of these cases are successful," said
Joe Dorn, a partner with King & Spalding in Washington, who has
handled NAFTA trade cases with other products.
"In my experience, U.S. producers file these because they
are getting harmed by the imports ... these aren't generally
shots over the bow for negotiating; they are seeking relief from
This may be the first trade case of its kind in sugar, but
not for the coveted sweetener products market, which saw Mexico
launch an anti-dumping investigation on high-fructose corn syrup
from the United States in the late 1990s.
Since then, high-fructose corn syrup exports into Mexico
from the United States have surged alongside sugar exports into
the United States from Mexico.
Mexico, the United States and Canada have prosecuted over
100 anti-dumping and countervailing duty cases since NAFTA went
into effect, according to the ASA.
The move from the sugar groups may complicate the U.S.
government efforts to balance supplies as the USDA is expected
to face another year attempting to whittle down excess supplies
and prevent forfeitures.
USDA propped up the sugar market in 2013 by purchasing
excess supplies and selling them at a loss to ethanol producers
and others. It has already warned that similar action might be
needed this year.
The industry groups urging ITC action included the American
Sugar Cane League, American Sugarbeet Growers Association,
American Sugar Refining Inc, Florida Sugar Cane League, Hawaiian
Commercial and Sugar Company, Rio Grande Valley Sugar Growers
Inc, Sugar Cane Growers Cooperative of Florida and the United
States Beet Sugar Association.
Front-month U.S. domestic raw sugar futures on ICE Futures
U.S. closed at 22.35 cents a lb on Friday, above
estimated forfeiture levels.
The bid to prevent excessive imports and bolster prices
faces criticism from a coalition of sweetener users that fought
for changes to the U.S. sugar program ahead of the 2014 farm
"The U.S. sugar-producing industry is amazing in its quest
to further enhance the un-level playing field against
competitors," said Larry Graham, chair of the Coalition for
Sugar Reform and president of the National Confectioners
Association, which represents candy makers and other sugar
"Now it appears they're looking to further limit what little
competition they have in the form of legal imports from our
neighbor Mexico, which the law allows," he added.
(Additional reporting by Adriana Barrera in Mexico City.
Editing by Susan Heavey, Jonathan Oatis, David Gregorio, G
Crosse and Lisa Shumaker)