Thursday, June 15, 2017

Wall Street Journal says latest sugar deal with Mexico is good for producers, bad for consumers

A sugar cane field in Mexico (Photo from Reuters)
The business-friendly Wall Street Journal editorial page thinks the Trump administration was too friendly to sugar producers last week when it cut a new trade deal with Mexico "to guarantee that sugar prices in both countries will remain well above the world market price. Commerce Secretary Wilbur Ross framed the deal as a big win—and it is, for the few sugar producers on both sides of the border. The losers are millions of consumers," the editorial says.

The deal continues a trend, the editorial says: "No industry has enjoyed as much protection under the North American Free Trade Agreement as sugar producers and refiners. . . . While most of the U.S. economy had to adapt to competition from Canada and Mexico starting in 1994, the U.S. market remained heavily protected from Mexican sugar until 2008. Even when the market opened, U.S. sugar interests refused to adapt and filed anti-dumping and countervailing duty suits against Mexican exports. In 2014 the Commerce Department ruled in their favor. Mexico could have fought that ruling at a NAFTA arbitration panel, but its sugar lobby also likes high prices. So instead it agreed to comply with a U.S.-stipulated minimum price and quota, and to restrict the amount of refined sugar it ships. In other words, both sides conspired to run a sugar cartel."
The latest deal is an attempt to keep it going, the editorial says: "In March Mexico voluntarily suspended permits for exporting sugar to the U.S. as a precaution against the possibility that the U.S. would cancel the 2014 agreement and impose tariffs. Last week’s deal is an attempt to avoid those new duties in exchange for further limits on Mexican sugar exports to the U.S. The new minimum price for raw sugar will be 23 cents per pound, up from 22.5 cents. The world market price is about 14 cents. Refined sugar will now be set at 28 cents per pound, up from 26 cents. Mexico sugar exports to the U.S. will now be 70 percent raw and 30 percent refined, up from 53 percent raw and 47 percent refined."

The editorial concludes, "If this is a glimpse into Team Trump’s trade policy, it isn’t pretty. The deal suggests the strategy is to use government power to enforce cartels that protect politically powerful producers, and Mexico’s decision to roll over may encourage White House protectionists to ask for more. So much for the little guy."

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