US and Mexican governments reach deal in a dispute over trade in sugar

Mexico City: The US and Mexican governments reached a deal in a dispute over trade in sugar on Monday, sources said, averting steep US duties and Mexican retaliation by Mexico on imports of American high-fructose corn syrup ahead of the renegotiation of Nafta.
Two sources, speaking on condition of anonymity, said the two sides were working on final details of a deal in Washington that would end a year of wrangling. The latest talks began in March, two months after President Donald Trump took power vowing a tougher line on trade to protect US industry and jobs.
They are seen as a precursor as well as significant hurdle to the more complex discussions on the North American Free Trade Agreement (Nafta) between the United States, Mexico and Canada, which are expected to start in August.
One source said the sugar deal would benefit both the United States and Mexico, with another saying Mexico will agree to export less refined sugar and send a lower quality of crude sugar to the United States than it previously did.
Both sides also would avoid potentially inflammatory tariffs that could have kicked in if a deal was not reached.
Some members of the US sugar industry, however, are not happy with the reported deal and were pressuring the Trump administration to stop it, one source said. Some of their Mexican counterparts also expressed anger at what they see as unfavorable terms.
ICE US domestic raw sugar futures for July delivery finished down 2.9 per cent at 27.66 cents per lb, in the largest one-day loss in over a year.
The risk that failure to reach a deal would a trigger a rapidly escalating tariff battle ahead of the Nafta talks added pressure to Mexico to reach a deal.
"If it had melted down, the Nafta conversation would have been more difficult," said Daniel Pearson, a senior fellow at the conservative think-tank Cato Institute and a former chairman of the US International Trade Commission.
"The fact that an agreement could be reached on a sensitive topic like (sugar) bodes well for dealing with sensitive talks in Nafta," he said.
US Commerce Secretary Wilbur Ross came close to hammering out a compromise deal before an earlier deadline in May, but it fell through as the US sugar lobby upped its pressure on US lawmakers, said two sources familiar with the talks.
The powerful lobby includes the politically connected Fanjul family, Imperial Sugar Co, owned by Louis Dreyfus, and US cane and beet growers.
Mexico had free access to the US sugar market under Nafta, but US sugar refiners accused it of dumping subsidised sugar, undercutting their businesses. In retaliation, the United States slapped large duties on the Mexican sweetener, but a 2014 agreement suspended the tariffs in return for quotas and price floors for Mexican sugar.
The new deal would lower the proportion of refined sugar Mexico can export to the United States to 30 per cent of total exports, from 53 per cent, one source said. It also cuts the quality of Mexico's crude sugar exports to 99.2 per cent, from 99.5 per cent, the source said, tackling a key complaint of US refiners, who said Mexican crude sugar was close to refined and going straight to consumers.
The US sugar market is protected by a complex web of price supports and import quotas, which confection makers and other critics say artificially inflates domestic prices. Nafta opened the doors to Mexican sugar in 2008.