Sugar Policy Issues Page: 4 of 20
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11-22-02
MOST RECENT DEVELOPMENTS
U.S. and Mexican negotiators continued discussions into early November 2002 to
further clarify their respective positions on resolving two sweetener trade disputes -the sale
of U.S. corn syrup to Mexico and the terms of access for Mexican sugar in the U.S. market.
While both sides have exchanged proposals and ideas, two major issues remain unresolved
- the time period that a prospective deal would cover and the terms under which Mexico
would sell sugar above its import quota level to U.S. cane refiners. The United States also
seeks the repeal of Mexico's tax of soft drinks containing corn syrup, which has significantly
reduced Mexican demand for the product imported primarily from U.S. suppliers. (For
general information, see also the CRS Electronic Briefing Book: Agriculture Policy and the
Farm Bill, "SugarProgram,"online at[http://www.congress.gov/brbk/html/ebagr27.html].
BACKGROUND AND ANALYSIS
Brief History of the Sugar Program
Governments of every sugar producing nation intervene to protect their domestic
industry from fluctuating world market prices. Such intervention is necessary, it is argued,
because both sugar cane and sugar beets must be processed soon after harvest using costly
processing machinery. When farmers significantly reduce production because of low prices,
a cane or beet processing plant typically shuts down, usually never to reopen. This close link
between production and capital intensive processing makes price stability important to
industry survival.
The United States has a long history of protection and support for its sugar industry.
The Sugar Acts of 1934, 1937, and 1948 required the U.S. Department of Agriculture
(USDA) to estimate domestic consumption and to divide this market for sugar by assigning
quotas to U.S. growers and foreign countries, authorized payments to growers when needed
as an incentive to limit production, and levied excise taxes on sugar processed and refined
in the United States. This type of sugar program expired in 1974. Following a 7-year period
of markets relatively open to foreign sugar imports, mandatory price support only in 1977
and 1978, and discretionary support in 1979, Congress included mandatory price support for
sugar in the Agriculture and Food Act of 1981 and the Food Security Act of 1985.
Subsequently, 1990 farm program, 1993 budget reconciliation, and 1996 farm program lawsextended sugar program authority through the 2002 crop year. Even with price protection
available to producers, the United States historically has not produced enough sugar to satisfy
domestic demand and thus continues to be a net sugar importer.
Prior to the early 1980s, domestic sugar growers supplied roughly 55% of the U.S. sugar
market. This share grew over the last 15 years, reflecting the price protection provided by
a sugar program. In FY2001, domestic production filled 88% of U.S. sugar demand for food
and beverage use. As high-fructose corn syrup (HFCS) displaced sugar in the United States
during the early 1980s, and domestic sugar production increased in the late 1980s, foreign
suppliers absorbed the entire adjustment and saw their share of the U.S. market decline. The
import share of the U.S. sugar market last year was 12%.CRS-1
IB95117
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Jurenas, Remy. Sugar Policy Issues, report, November 22, 2002; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metacrs2097/m1/4/?q=%22Sugar%22: accessed May 4, 2024), University of North Texas Libraries, UNT Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.