SUGAR is the next casualty of President Trump’s ‘push them to the edge’ negotiating tactic with his neighbours, Mexico and Canada.
Trump and his Commerce Secretary, Wilbur Ross, threatened to kill the North American Free Trade Agreement (NAFTA) over cheap cars and sugar from Mexico and timber and dairy from Canada.
But the abolition has been stayed pending further negotiations on individual items (including building a wall to stop the illegal Mexican immigrants who underpin the US Agriculture (such as cheap chickens and vegetables).
Subsidised Canadian dairy products are undercutting subsidised US dairy, with both governments being rorted, as the latest investigation shows, by big dairy processors and supermarkets which don’t want their profit margins sacrificed, so are threatening to squeeze farmers.
Now, the same is being threatened in the sugar market, with June 5 the deadline Trump has set for Mexico, the biggest sugar exporter to the USA.
US growers get a base price, which is about 30 per cent more than the current world price, which both Australia and Mexico accept.
Australia is given a small share, about five per cent of its exports at this elevated subsidised price, under a special agreement with the USA. It was supposed to increase under the new agreement, which Trump canned.
But Mexico, which is a far bigger sugar exporter to the USA, rorted the rules and is sending more than the entire Australian sugar export volume. Food manufacturers in the USA have been happy with the rort, but the privileged US cane and beet farmers aren’t — nor is Trump.
The Mexicans worked-out that while the limits were on raw and refined sugar, to international standards, nothing could stop them sending semi-refined sugar in unlimited volumes. It might not be quite 99.5 per cent purity, but close enough for cake, confectionary and soft drink manufacturers for a 30 per cent discount on US prices.
But if Trump stops the Mexican exports to the USA, there’s another four-plus million tonnes of sugar hitting a fragile world market, possibly crashing the global price on which Australian farmers are paid.
The result — free market sugar exporters, such as Australian farmers, get hit in the pocket, US farmers get their $73-plus dollars a tonne with US government guaranteed subsidised price, and Americans pay more for candy, cookies and Coke.
Some level playing field!