Fundamentals of the U.S. Sugar Program Page: 2 of 2
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Fundamentals of the U.S. Sugar Program
The national OAQ is split between the beet and cane sectors
and then allocated to processing companies based on
previous sales and production capacity. If either sector is
not able to supply sugar against its allotment, USDA has
authority to reassign such a "shortfall" to imports. Figure 1
illustrates the persistent gap between domestic sugar
production, the higher levels of the OAQ, and U.S.
domestic consumption for human use. As a result,
substantial quantities of sugar have been imported to cover
shortfall between domestic output and human consumption.
Key Program Element: Import Quotas
The United States imports sugar in order to meet total food
demand. From FY2012 through FY2014, imports accounted
for 31% of U.S. sugar used in food and beverages. The
amount of foreign sugar supplied to the U.S. market reflects
U.S. tariff-rate quota (TRQ) import commitments under
various trade agreements at low, or zero, tariff rates (Table
1), as well as sugar imported from Mexico.
. Major U.S. Tariff-Rate Quota Commitments
(Quantities are in short tons, raw value)
World Trade Organization
Source: U.S. Customs and Border Protection.
Notes: CAFTA-DR includes Costa Rica, Dominican Republic,
El Salvador, Guatemala, Honduras and Nicaragua.
Panama and Peru have smaller TRQs of 6,740 and 2,000
short tons, raw value, respectively, for 2015. High tariffs
discourage imports of over-quota sugar to help fulfill the
farm bill directive to avoid incurring program costs.
Policy Mechanisms to Counter Low Prices
In addition to domestic marketing allotments, import
quotas, limits and tariffs, USDA has several policy tools to
help prevent prices from slipping below effective loan
forfeiture levels that could result in budget outlays. These
include offering Commodity Credit Corporation-owned
sugar to processors in exchange for surrendering rights to
import tariff-rate quota sugar; purchasing sugar from
processors in exchange for surrendering tariff-rate quota
sugar; and purchasing sugar for domestic human use from
processors for resale to ethanol producers for fuel ethanol
production under the Feedstock Flexibility Program (FFP).
Agreements Recast Sugar Trade with Mexico
Events subsequent to the reauthorization of the sugar
program in the 2014 farm bill have materially altered the
U.S. sugar market. In December 2014, the U.S. government
signed so-called "suspension agreements" with the Mexican
government and with the Mexican sugar industry that have
fundamentally altered bilateral trade in sugar with Mexico,
with implications for the sugar program and sugar users.
The suspension agreements stem from parallel
countervailing duty (CVD) and antidumping (AD)
investigations initiated in the spring of 2014 by the U.S.
government at the behest of U.S. sugar industry interests.
Duties were applied to Mexican sugar imports in the fall of
2014, when preliminary findings in the investigations
concluded that Mexican sugar was being subsidized by the
government and dumped in the U.S. market and that these
actions were injuring the U.S. sugar industry. The
suspension agreements suspended the CVD and AD
investigations and removed the duties in exchange for a
number of concessions from Mexico, among which:
" Mexico agreed to relinquish the unlimited, duty-free
access to the U.S. sugar market it achieved in 2008 via
the North American Free Trade Agreement (NAFTA);
" Mexican sugar exports to the United States would be
subject to minimum references prices (at Mexican
plants) of 26#/lb for refined sugar and 22.25$/lb for all
other sugar, levels well above U.S. loan support.
Prior to the suspension agreements, imports of sugar from
Mexico amounted to about 15% of the sum of U.S. sugar
production plus imports during the three most recent years,
from FY2012 through FY2014, and represented the only
unmanaged source of supply under the sugar program. The
agreements impose an annual export limit on Mexican
sugar based on an assessment by USDA of U.S. needs after
taking into account domestic production and TRQ imports.
Suspension Agreements: Looking Forward
The changes ushered in by the suspension agreements are
expected to greatly facilitate USDA's task of operating the
sugar program at no cost to the government. Also, prior to
the agreements, Mexican officials had suggested that
retaliation could follow if the duties on Mexican sugar
remained in place. Critics, including the Coalition for Sugar
Reform, representing sugar user groups, contend the
agreements will result in higher sugar prices for sugar users
and consumers. Alternatively, the American Sugar
Alliance, which represents many elements of the U.S. sugar
industry, has voiced support for the agreements, contending
they will foster free and fair trade in sugar, while benefiting
farmers, sugar workers, consumers and taxpayers. A
measure of uncertainty has settled around the agreements
because two U.S. sugarcane refiners have persuaded the
Department of Commerce to continue the CVD and AD
investigations to final determinations, which are expected
by mid-September 2015. If the final determinations reverse
the preliminary findings that Mexican sugar was subsidized
and dumped, or if the International Trade Commission finds
the U.S. sugar industry was not injured by these actions,
then the suspension agreements would be terminated.
Mark A. McMinimy, firstname.lastname@example.org, 7-2172
www.crs.gov I 7-5700
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Fundamentals of the U.S. Sugar Program, report, May 8, 2015; Washington D.C.. (https://digital.library.unt.edu/ark:/67531/metadc812236/m1/2/: accessed March 19, 2019), University of North Texas Libraries, Digital Library, https://digital.library.unt.edu; crediting UNT Libraries Government Documents Department.