The United States and Mexico have reached an agreement on the terms of access for Mexican sugar and this will see the level of refined sugar that Mexico exports to its northern neighbor reduce possibly raising the prices of sugar for consumers and food processors in the U.S. Producers of sugar in United States, however, failed to give their endorsement of the agreement raising worries of the deal collapsing.

The goal of the agreement which was signed by the Economy minister of Mexico, Ildefonso Guajardo and the commerce secretary of the United States Wilbur Ross is to resolve a trade dispute that has been long-standing between the two neighbors. Without the deal Mexico would have been faced with the possibility of being slapped with steep duties in the products it imports to the United States as an act of retaliation. Besides the U.S. being faced with the risk of retaliation and a possible trade war, the conflict would also have made the renegotiation of the North American Free Trade Agreement, which is scheduled for this year, more difficult.

Raw sugar

While Mexico will cut the level of refined sugar exports destined for the United States sharply it will also raise the share of raw sugar exports.

“We have gotten the Mexican side to agree to nearly every request made by U.S. industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners,” Ross said at press conference.

While Ross acknowledged that sugar producers in the United States had declined to endorse the deal as it currently stood, the U.S. commerce secretary expressed hope that they would come around once some changes were made to the final agreement over the next couple of days. Ross did not, however, say what the Department of Commerce would do if the U.S. producers continued to hold out. It was also unclear if Ross could impose the agreement without the blessings of the U.S. sugar producers.

Steep cuts

Previously refined sugar limits sourced from Mexico stood at 53% but the deal has brought it down to 30%. The producers are understood to have been pushing for a deal which would see the limit brought down to 15%.

A trade group which represents various consumers of sugar argued that the deal was in favor of sugar producers in the United States and would hurt consumers since the combined added cost would be about $1 billion. The trade group labelled the deal a form of ‘crony capitalism’.