By Craig Lang
American farmers count on Mexico to buy our corn, soybeans, pork, dairy, and other commodities. But those key exports may now be in jeopardy because of a dispute over sugar trade, which may have wide-reaching implications.
Mexico is now the third-largest market for U.S. agricultural products, thanks in large measure to the North American Free Trade Agreement (NAFTA), which eliminated tariffs on Mexican imports that were sometimes 30% or higher. In 2016, U.S. agricultural exports to Mexico, led by corn and soybeans, totaled almost $18 billion. In 1993, the year before NAFTA was enacted, exports hovered around $4 billion. Mexico now accounts for 13.2% of all U.S. ag exports, up from 8.4% in 1993.
June 5 deadline to settle this dispute
Now, just as some in Washington D.C. are working to improve NAFTA, it may be jeopardized due to the sugar dispute. The U.S. Department of Commerce has a deadline of June 5 to settle a dispute involving Mexican cane sugar imports to the United States. The U.S. sugar industry is demanding a cut to the proportion of refined Mexican exports from more than 50% (under a 2014 deal between the two countries, when this issue last arose) to just 15%, and to direct Mexican raw sugar to a small number of favored refiners.
Sugar is already a very much protected crop, with an array of federal policies often reducing competition and boosting prices. But my purpose is not to judge the merits of the current sugar protections. My concern is the threat it poses to agriculture in Iowa and the rest of the country. Sugar is not even a “top ten” commodity in this country, but it could easily trigger a U.S.-Mexico trade war that could negatively impact our farmers.
Corn producers are especially at risk
In 2008, after the end of U.S. sugar’s 14-year exemption from NAFTA, Mexico became a very significant market for corn sweetener, with U.S. exports soaring from 7,000 to over 1 million metric tons. Now, because of the sugar dispute, that market, representing 90% of corn-syrup exports, is at risk. Meaning that Iowa corn producers are at risk. If the U.S. Administration adopts the sugar industry’s position, Mexico will almost certainly retaliate against corn syrup, and potentially other commodities as well.
No wonder our Iowa agriculture advocates like Sen. Chuck Grassley are worried. In an opinion article last week for Fox News, he wrote, “We need to keep in mind that protectionist moves by our government on Mexican sugar may harm the U.S. corn market.” Last year, Mexico imported $2.6 billion worth of corn from the United States.
If Mexico retaliates, corn will be the first injured, but likely not the last. It is essential that our Department of Commerce and other trade leaders take action to prevent a trade war that could spiral out of control. NAFTA and trade with Mexico are too important to Iowa and American farmers to risk over a single commodity.
Craig Lang of Brooklyn, Iowa, is president of The Prairie Strategy Group, former president of the Iowa Farm Bureau Federation, and is a dairy and beef farmer.