International Trade Commission votes in favor of U.S. sugar producers in dispute with Mexico

By Mikkel Pates
Forum News Service
MOORHEAD - Sugar producers in the Red River Valley cheered Tuesday as the International Trade Commission in Washington, D.C., unanimously voted in favor of the suspension agreements placed on Mexican sugar imports.
The ITC agreed that the subsidized dumping of Mexican sugar into the U.S. harmed U.S. sugar production.
It’s a multibillion-dollar industry in the Red River Valley region.
“That cloud has gone away,” said David Berg, president of American Crystal Sugar Co. in Moorhead. “The ITC has said the U.S. sugar industry was harmed by Mexico and that suspension agreements negotiated by the U.S. and Mexico several months ago will stay in place, regulating the supply of sugar coming to the U.S. market.”
Kurt Wickstrom, president and CEO of Minn-Dak Farmers Cooperative in Wahpeton, N.D., said his co-op is happy with the decision and always knew the facts and data would lead to this outcome.
“We hope it will bring some years of stability to our growers and years of good supplies for our customers,” Wickstrom said.
Phillip Hayes, a spokesman for the U.S. sugar industry, said the agreements will remain in effect for at least five years. The ITC and U.S. Department of Commerce launched antidumping and countervailing duty investigations into Mexico’s sugar industry shortly after the cases were brought. The Department of Commerce  inquiry concluded Sept. 16, finding that Mexico’s sugar industry had benefitted from subsidy rates up to 44 percent and had shipped sugar to the U.S. at dumping margins of more than 42 percent.
Meanwhile, the Sweetener Users Association, which has sought sugar program reform and lifting of restrictions on world sugar into the U.S. market, said the ITC had “missed a key opportunity to do the right thing for American consumers, taxpayers and businesses.”
The Sweetener Users Association, which represents the largest candy makers and industrial users of sugar, said it would redouble efforts to enact “meaningful sugar program reform” in Congress.
Stopping a flood
Berg said the ITC decision is a positive step toward preventing “unsustainably low” prices for U.S. sugar producers because it keeps the lid on the flow of subsidized Mexican sugar. He said that if not for the decision, unfair Mexican sugar imports could have pushed some producers out of business. He declined to speculate which companies might have been most vulnerable, or if Red River Valley companies would be among them.
“With prices we had in 2012 and 2013, all sugar producers were vulnerable,” he said.
Berg, who is a member of Mexico Task Force between the U.S. and Mexican sugar industries that helped shape the deal, said the ITC decision was just. He acknowledged the decision can be appealed, however, or the agreement administratively reviewed.
“We have mechanisms in the U.S. sugar program to make sure that supply is regulated so that prices stay above the statutory loan rate set by Congress,” Berg said. “Well, if the USDA can’t regulate the supply of sugar because one major component - in this case, Mexico - is out of control, which it was, prices crash. That defeats the purpose of having a sugar program, which is to maintain a domestic sugar industry.”
Notably, Berg said, the Mexican government wasn’t opposing the suspension agreements which regulate the flow of sugar into the U.S. The Mexicans argued that the agreements offer “much more stability, predictability” to the system.
Fair, not free
Sugar trade among the U.S., Mexico and Canada was supposed to be unregulated because of the North American Free Trade Agreement, which was initially agreed upon in 1994 but predated by some agreements between the U.S. and Canada in 1989.
Free trade agreements are really about “knocking down some trade barriers,” Berg said. The recent Trans Pacific Partnership agreement is more aptly named because it is “a way of opening trade, not completely making it free,” Berg said.
Hayes said, “U.S. sugar producers want NAFTA to operate as intended and to foster free and fair sugar trade between Mexico and the United States. Today’s ruling helps accomplish that goal by upholding the government’s agreement and addressing the unfair trade practices that were injuring American farmers, workers and taxpayers.”
Berg, who testified at some of the hearings during the dispute, said sugar is unusual among agricultural products because raw sugar has no value without a processing plant.
“The processing plant has to be maintained and operated on a continuing basis over a period of years,” Berg said. “You don’t just turn it on when the price of sugar is good. Even when the price of sugar is low, you have to keep going because you have to maintain it from a physical point of view and you have to have a staff that runs the place that knows what they’re doing.”
Save an industry
Most sugar producing countries subsidize their sugar markets in some way, Berg said. If the U.S. farmers had to compete with those subsidies, they’d go out of business, and “the moment we folded up,” the foreign governments would quit paying the subsidies and U.S. consumers would pay for higher-priced foreign sugar.
“Why don’t we maintain a domestic sugar industry so we make sure people have a safe, affordable and available supply of sugar?” he said, repeating one of the industry’s basic rationales for protecting the U.S. sugar industry.
Berg said the government loan rate for sugar is “generally at a break-even level” for farmers. The price of sugar often rises above that loan rate, depending on how the sugar program is being administered, as well as prices in the world market.
When the Mexican sugar flowed in, sugar prices were forced to 23 cents per pound, below the loan rate, which he said is alone evidence that there was damage to the U.S. industry. The marketing situation triggered forfeitures of sugar to the U.S. Department of Agriculture, which was a political hit because the U.S. Treasury spent $250 million to buy sugar.
Berg declined to specify how much the U.S. sugar producers have paid in legal fees to fight the case.
“For something this important, we hired good lawyers, and they’re being compensated for their good work,” he said.