only Canadian concern is the absence of parity with Mexican access to the US refined sugar market, which is a consequence of the absence of US- Canadian agricultural liberalization. 84
Since NAFTA, Mexico has successfully adapted technology and incen- tives to boost sugarcane recovery rates. Mexican sugar exports to the United States increased in raw value from an average of 2,000 metric tons per year during 1990–93 to 32,000 metric tons in 1994–2000.85 Neverthe- less, Mexican exports have been held back by the long-standing dispute over the NAFTA side letter agreement on sugar and the sugar-sweetener dispute. Mexican sugar producers want to gain completely free access to the US sugar market, and the US sugar producers want to prevent the projected flood of Mexican sugar into the United States. 86
Similarly, US sweetener exporters want to gain free access to Mexico’s market for soft drink sweeteners (table 5.9). Sweeteners, mainly HFCS, are a sugar substitute.87 HFCS becomes progressively more popular as domes- tic policies push up the price of cane and beet sugar. Before January 2002, when the Mexican government imposed an HFCS tax, US sweetener pro- ducers successfully exported a small amount of HFCS to Mexico.88 Since then, US exports of HFCS have dwindled. These sugar and sweetener dis- putes under NAFTA are direct offshoots of domestic sugar policies.
Domestic Sugar Policies
US sugar policy is based on three mechanisms: loans that support do- mestic sugar production; TRQs, which restrict foreign sugar imports; and
84. In 1997, Canada’s refined sugar exports to the United States were capped at 10,300 tons compared with Mexico’s allocation of 27,954 tons. See Canadian Sugar Institute (2003). Both quotas gradually increase over time.
Based on US cane and beet sugar imports from Mexico. According to Haley and Suarez
at the USDA, new technologies have led sugarcane recovery rates to rise from 9.08
percent in 1992 to 10.77 percent in 1997. See also Zahniser (2002).
86. Total Mexican sugar exports to the world declined from 1.1 million metric tons raw value in 1998 to 66,000 metric tons in 2004, mainly because of rising Mexican consumption. In the same period, total US sugar exports (which are historically small in absolute terms) declined from 162,000 to 124,000 metric tons. Canada is even less of a sugar exporter than the United States, and Canadian sugar exports declined from 21,000 to 14,000 metric tons in this period. Based on USDA Production, Supply, and Distribution database, November 2003. See Haley and Suarez (2002).
87. Other sugar substitutes include crystalline fructose, and high-intensity low-calorie sweeteners (aspartame).
88. From 1991 to 2001, the value of US exports to Mexico of HFCS and crystalline fructose increased from about $5.3 million (8,634 metric tons) in 1991 to $42 million in 2001 (117,124 metric tons). See Haley and Suarez (2002).