How much Australian sugar should be allowed to enter the U.S. market? That’s a key question the U.S. government must answer prior to concluding the Trans-Pacific Partnership (TPP) negotiations. The United States is the largest sugar market in the TPP, consuming about 11 million metric tons (MMT) per year. It also is the largest producer (7-8 MMT) and importer (3 MMT) in the group. Australia generally is believed to be the most cost-competitive sugar producer among the12 TPP nations. It also is the largest exporter, annually shipping 3-4 MMT to other countries.
To complicate matters further, sugar liberalization was explicitly excluded from the 2004 Australia-United States Free Trade Agreement (AUSFTA) due to U.S. political sensitivities. Australian sugar producers understandably want to redress that omission. Failure to obtain commercially meaningful access to the U.S. sugar market could lead to rejection of the pact by the Australian parliament.
The U.S. sugar program includes a price-support level for raw cane sugar of 22.25 cents per pound ($490/MT), with refined sugar supported at 26 cents. Those levels effectively have been raised more than 10 percent to around 24.7 cents ($545/MT) and 30-32 cents, respectively, under the trade-restricting terms of the recent settlement agreement in the antidumping/countervailing-duty (AD/CVD) dispute involving imports from Mexico. (For more on U.S.-Mexico sugar issues, see here and here.) Mexico is the largest supplier of U.S. sugar imports, generally providing between 1.0-1.5 MMT per year. Suffice it to say that the agreement between the U.S. and Mexican governments will limit the amount of sugar Mexican producers can export to the United States, and also force that sugar to be sold at higher prices.
Read more at http://www.cato.org/blog/sugar-tpp
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