Monday, December 09, 2002

Sugar Wars-There was a rumor floated during the Loiusianna Senate campaign that the US was about to liberalize imports of sugar from Mexico, displeasing the sugar cane industry there. Rob Dreher’s working on a piece on the issue, and I sent him this quick write up. Here's a quick history of the sugar issues; American sugar producers were afraid of increased US exports of corn syrup to Mexico would lessen the sugar consumption in Mexico and create a surplus that would head to the US. A side-deal was arraigned prior to the passage of NAFTA in 1993 that limited sugar imports from Mexico to the US through 2008. John Breaux was a big backer of that side deal, seeking to protect the sugar cane growers in Louisiana. Agricultural economics aren't my strongest suit, but this deal seems to be bad for the US consumer, driving up the cost of sugar. Sugar is a product that is highly tariffed, so that the world price of sugar sans tariffs is much lower than what we pay domestically. This will be a small step in driving the price of sugar down, which helps the economy but makes the sugar industry have to work a bit harder and smarter for their keep. Here's a list of agracultural tariffs that will are covered by NAFTA-quite a few tariffs will be eliminated at the first of the year, including quite a few US specialties such as wheat, soy and poultry. If you look at the 2008 list, frozen orange juice and peanuts are due to have Mexican tariffs lifted in 2008, while US tariffs on corn, sugar and dried beans are due to expire then as well. If the Bush administration is looking to move the 2008 list up, that would be positive for both economies. It will make sugar less expensive here and give the frozen OJ market a boost (nice for central Florida). The sugar cane producers to the south of here won't like it, nor will the cane growers in Louisiana. It is a good move for practically every state save Louisiana. Florida has a sugar/OJ trade-off while Michigan will have a sugar beet/bean trade-off. The Midwest will love the lifting of the corn tariffs. This is good politics in most places and lukewarm in Florida and Michigan; it's only bad politics in Louisiana.

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