Project Syndicate: Written by Jeffrey Frankel. June 22, 2017.
CAMBRIDGE – As the United States, Mexico, and Canada prepare to renegotiate the North American Free Trade Agreement, as US President Donald Trump’s administration has demanded, much attention is being devoted to one item in particular: sugar. The negotiations will probably produce a sweet deal for the US sugar industry, highlighting the emptiness of Trump’s promises to “drain the swamp” of special-interest influence over policymaking.
Sugar producers’ political clout is nothing new, in the US or other industrialized countries. They have often received trade protection, in the form of import tariffs and quotas, to ensure that domestic sugar prices far exceed those in supplier countries like Australia, Brazil, the Dominican Republic, the Philippines, and Mexico.
In fact, sugar was one of the few goods facing high US barriers that had to be dismantled under NAFTA. (Mexico had to eliminate high import barriers in many areas.) But the required liberalization was delayed long after NAFTA took effect in 1994. Mexican sugar exports to the US did not rise substantially until 2013.
At that point, US producers and refiners quickly sought protection. And the Commerce Department agreed to give it to them, in the form of tariffs on sugar imports of up to 80%. To stave off the tariff hike, Mexico agreed in 2014 to limit its sugar exports and prop up US sugar prices. This month, it agreed to even stricter limits. According to Commerce Secretary Wilbur Ross, “We have gotten the Mexican side to agree to nearly every request by US industry.”
Continue reading "Trump’s Sugar Swamp"