American Fructose vs. Mexican Sugar

Mexico tried imposing antidumping tariffs on fructose, but these were thrown out by the World Trade Organization. The soda drink tax was the next alternative.

"It has given the industry a break, but it is not an optimum solution," Mr. P�rez Cano said. "Nobody benefits from unilateral solutions."

The dispute reflects a larger issue about the world trade in sugar, one of the most policy-distorted of all commodities, according to the World Bank.

Governments everywhere use subsidies, artificial prices, inventories and tariffs to support their industries. No government will be the first to end protection because cheap sugar from the open world market would swamp its industry.

The NYTimes article cites every agency, worker, organization, and company involved politically in this issue, which is why it does not mention sugar and fructose consumers at all. Consumers have no clout and little financial interest, while Archer Daniels Midland and Mexican farmers have a lot riding on government intervention.

Everybody knows that the US sugar industry receives a generous subsidy from the federal government in the form of a guarantee to purchase domestic sugar at a minimum price. That's why all our soda is made from high fructose corn syrup--it's much cheaper than sugar.

Well, to support its own sugar industry, and protect it from American fructose competition, Mexico has nationalized failing processors and added a 20% tax on soft drinks made from fructose. Guess where those soft drinks come from--the US.

I grant you that the labor and social dynamics of the influx of fructose into the Mexican market was painful to Mexican farmers. And given the American sugar subsidy, I actually find it difficult to criticize the Mexican government. Are they only making things worse by keeping labor and capital in sugar farming? After all, if they keep their industry running until 2008, they might be able to profit madly by selling sugar in the US, displacing American producers, who will just sell to the US government at the minimum price.

Still, all sides do fear 2008, when sugar and fructose are supposed to be traded tarriff free:

Both sides are looking ahead to 2008, when Nafta envisions free trade in all sweeteners, an event American sugar producers want to head off in advance.

"Chaos would stem from that," said Jack Roney, director of economics and policy analysis for the American Sugar Alliance, the main industry group.

In a truly free market, Mexico's soft drink bottlers would import two million tons of corn syrup, he said, displacing that amount of sugar, which Mexico could then sell to the United States. Mexico would rather sell its surplus sugar to the United States, where the guaranteed price is as much as three times the world market price.

"That would collapse the U.S. market and destroy the sugar price," Mr. Roney said.

The Mexicans, for their part, want to avoid being swamped with corn syrup.

"There's enough space in Mexico for U.S. high-fructose and enough space in the U.S. for Mexican sugar," Mr. Cortina said, "but it needs to be managed so that there are no excesses."

No, Mr. Cortina, it needs to be managed so you can extort the Mexican and American consumer.


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This page contains a single entry by Kevin published on June 9, 2004 11:01 AM.

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