Capital Press

The European Union's recent decision to boost sugar exports by 500,000 tons this year could have ripple effects in North America, industry officials believe.

Brazil, Australia and Thailand quickly condemned the move as a violation of World Trade Organization rules. European authorities insisted the additional exports won't violate international trade agreements.

In the United States, industry officials said the additional EU exports could have an indirect impact on the U.S. if Mexico decides to purchase shipments.

Mexico could then turn around and export more of its own production to the United States, industry officials said, adding that they're not necessarily predicting it will happen.

Mexico is the only country with unlimited duty-free access to the U.S. sugar market.

"We're vulnerable to large imports from Mexico," said Jack Roney, an economist with the American Sugar Alliance. Additional European exports means "more sugar out there that Mexico could get its hands on," he said. "The danger is that Mexico could import that white sugar and send their domestic production to us."

Mexican sugar prices, which historically have been higher than U.S. prices, have been on the decline since last fall. Recent prices have been about the same in both countries.

Prices for Mexican standard sugar and U.S. raw sugar were 36 cents to 38 cents per pound in early January, according to the USDA.

"Many Mexican sugar mills face difficult financial conditions that make sales to the United States attractive compared with holding the sugar in inventory for domestic sales at uncertain prices later in the year," the USDA's Economic Research Service reported Jan. 14.

While it might be possible for Mexico to export its entire domestic production to the U.S. and substitute cheaper imports for its own use, the current global supply situation suggests it's unlikely.

"One thing that gives us hope that (Mexico) might not do that is that the world market is getting more and more tight," Roney said.

World sugar prices recently reached 29-year highs on tighter than normal supplies.

Mexico is expected to be a slight net importer for the fiscal year that began Oct. 1 and ends Sept. 30, according to the USDA.

But global supplies won't remain tight forever, and the U.S. sugar industry has been pushing for the elimination of a loophole that allows Mexico to substitute cheap imports for domestic production that it can ship to the U.S.

Such substitutions violates the intent of the North American Free Trade Agreement, Roney said.

"It's against the spirit of NAFTA," he said. "It bothers us and irks the 40 countries that have a share of the U.S. import quota."

Thirty-eight of the 40 countries that have a share of the U.S. sugar import quota are developing nations, Roney said. They include Columbia, Bolivia, Congo, Haiti, Jamaica, Zimbabwe and Mozambique.

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