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Avoiding a NAFTA 'disasta'?

FARGO, N.D. U.S. sugar growers are pushing for new legislation they say is needed to further stabilize the flow of sweeteners across the U.S.-Mexican borders even as trade has officially opened.

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FARGO, N.D. U.S. sugar growers are pushing for new legislation they say is needed to further stabilize the flow of sweeteners across the U.S.-Mexican borders even as trade has officially opened.

A new "managed trade" quota concept is being promoted as a possible amendment to the 2008 farm bill, which soon will go into conference committee.

Trade in sweeteners between the United States and Mexico officially went duty-free Jan. 1 more than a decade after the North American Free Trade Agreement went into effect in 1994. It is too soon to know how much U.S. and Mexican sugar may be changing hands, and there are conflicting reports on how it is going.

Quota idea

U.S. and Mexican sugar producers and processors have agreed to promote an idea for quotas increasing during years when the United States has poor crops.

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Jack Roney, the American Sugar Alliance director of economics and policy, says the managed trade deal would "permit trade to come into fruition," even though the provision has been described in the press as simply "reinstating" quotas.

"We're trying to avoid the train wreck, as Jim Horvath has called it," Roney says, referring to the former American Crystal Sugar Co. president, who is still a lead consultant on the Mexican sugar trade issue.

The quota idea is promoted by the sugar industry on both sides of the border, he says. The Mexicans are concerned about an export of U.S. sugar into their country, as the U.S. is a low-cost producer, with superior packaging and quality.

American Crystal Sugar Co. President David Berg, who was in Washington the week of Jan. 14 making political contacts and talking to USDA officials about the implementation of 2008 sugar marketing allocations, says the provision is simply a "recommendation" from the industry for potential legislation. It was completed Jan. 10 by sugar leaders on both sides of the border.

He says the recommendation came out of the Mexico Task Force, one which Horvath helps lead, and which advises the corn interests.

"The key piece is that there are no restrictions on high-fructose corn syrup into Mexico," Berg says.

If sugar exports into either country became large, the price would spiral downward in either country, Roney says.

Should the excess sugar affect the U.S. market price, this country probably would initiate an anti-dumping and countervailing duty case against Mexico. The anti-dumping refers to sugar sold at below the originating country's production cost, while the countervailing duty case would relate to subsidization. About one-fourth of Mexico's sugar production is in government hands, he says.

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If all of this happens, Mexico likely would react by shutting down imports of high-fructose corn sweetener.

NAFTA flawsRoney says one of the flaws in the NAFTA is that it doesn't adequately prevent subsidized foreign sugar from coming into either country and then being exported to the other country.

"All we're doing is oversupplying the U.S.-Mexican market with third-country sugar and not helping the NAFTA partner at all," he says.

While the United States has come up with a farm bill provision that allows excess imported sugar to be converted to ethanol, the market management provision will "keep those volumes under control" or at least more predictable, Roney says. "We want to keep the U.S. sucrose-ethanol program as minimal and as cheap as possible."

It is difficult to say how much sugar may be starting to move into Mexico from the United States or vice versa.

Harold Kanarek, a spokesman for the Foreign Agriculture Service, says the issue of sweetener flow was a major part of a recent meeting in Mexico City, involving Mark Keenum, undersecretary of agriculture for farm and agricultural services. Keenum wanted to make sure "the word got to the ports and that there were no unnecessary impediments" to sugar trade.

Kanarek says Keenum learned that sugar trade, as part of the North American Free Trade Agreement, has been going "OK" since it's opened. He says that although trade currently is open, there were some early complaints that Mexican officials initially, at some ports still were asking for an import license, which no longer is required.

There initially was a one- or two-day delay at the Piedras Negras port of entry, in the northeastern Coahuila state, in northeast Mexico, just across from Eagle Pass, Texas, Kanarek says.

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Berg notes his company's sugar is marketed through United Sugars Corp., but says, "I would not say sugar has easily moved into Mexico." He says the current Mexican crop is large, so the market economics don't favor exports. Crystal has some surplus sugar available for export under the current market allocations and will do so if the economics are right, he says.

Berg says there are "people in Congress who understand that a "chaotic" trade war between the two countries would be negative for the U.S. and Mexican sugar industries, while there are people in the administration who are "more committed to complete and wide-open" trade.

He says the key is that a managed quota is an approach favored by U.S. and Mexican sugar industries.

"I wouldn't think there was a lot of chance for success if this was something the U.S. industry had hatched on its own," Berg says. He says the plan could make certain both industries are "healthy for the long term."

Crystal acreage decisionsOn a related topic, Crystal's board will decide "no later than March" whether to cut its beet acreage for 2008 perhaps up to 15 percent of its current acreage, which hovers around 500,000 acres. Last year, the co-op discussed possible destruction of beets in the field, up to 15 percent of its planted acres, but ended up selling two piles of beets and destroying no beets in the field.

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