WASHINGTON—American businesses and taxpayers have been harmed by the unfair trading practices of Mexico's sugar industry, which has dumped subsidized sugar onto the U.S. market, according to a preliminary ruling May 9 by the U.S. International Trade Commission (ITC).
U.S. sugar producers filed antidumping and countervailing duty petitions with the ITC in March claiming that Mexico's actions will cost the industry $1 billion this year. The petitions further noted that efforts by U.S. government officials to keep the market from collapsing under the surge of subsidized Mexican imports cost taxpayers $278 million in FY2013.
"The ITC made the right decision today and validated our complaints," said Phillip Hayes, a spokesperson for the American Sugar Alliance. "Mexico's actions have harmed hardworking sugar producers as well as taxpayers. U.S. trade laws are designed to stop such injury, and we hope corrective actions will be taken soon before the situation deteriorates."
Hayes said losses would compound unless U.S. law is enforced and Mexico stops dumping and subsidizing its sugar exports.
Budget estimates released by the Congressional Budget Office (CBO) in April confirm his warning. CBO predicts an oversupplied sugar market plagued by low prices and $390 million in resulting government expenditures from FY2015 to FY2024.
U.S. sugar policy, which is designed to help keep the U.S. sugar market in balance, ran without any taxpayer cost for the 10 years prior to the acceleration of disputed imports from Mexico.
The ITC vote, which was 5 to 0 with one commissioner not participating, comes on the heels of an April 18 announcement by the U.S. Department of Commerce (DOC) that it will investigate Mexico's sugar industry amid strong evidence of sugar dumping and subsidization.
"It is clear that the U.S. government recognizes that there is a problem, and we believe the independent government process should proceed expeditiously without interruption," Hayes said.
The DOC is expected to make a preliminary ruling about Mexican subsidies and dumping later this summer, and preliminary duties could be levied at that time. Final rulings by DOC and ITC may not occur until 2015.
The Mexican sugar industry-20 percent of which is owned and operated by the Mexican government-has rapidly increased exports to the United States in recent years, rising from 9 percent of the U.S. market in FY2012 to nearly 18 percent in FY2013. Mexican sugar acreage and production has likewise expanded significantly in recent years.
Mexico's sugar industry is far less efficient than America's, Hayes said, and its market gains were fueled by dumping margins of 45 percent or more and a variety of subsidies.
U.S. sugar prices have fallen 50 percent since late 2011, forcing U.S. producers to plant fewer acres of sugarbeets for the fourth consecutive year.
Mexico and the United States enjoy free trade in sugar under the North American Free Trade Agreement (NAFTA), and Hayes explained that U.S. producers want the trade pact to work as intended. He said that under NAFTA the most efficient producers, not the most subsidized, should be rewarded, but that questionable actions by Mexico are eroding a free and fair market.
This sentiment was echoed in the sugar producers' original filing, which stated that NAFTA "gives Mexico the right to export sugar to the United States on a tariff-free and quota-free basis-but that does not give the Mexican industry the right to export its surplus to the U.S. market at dumped prices, nor does it permit the [Mexican government] to subsidize its sugar industry without regard to the impact of those subsidies on U.S. producers."