US sugar reexport programs, established in 1984, are another policy for bolstering the sugar market. There are two reexport programs—one is the Refined Sugar Re-Export Program for licensed raw sugarcane refiners; the other is the Sugar-Containing Product Re-Export Program, which benefits food processors.96 Both reexport programs are controversial because raw cane sugar imports under these programs are not subject to TRQs.97 How- ever, these reexport programs allow the US processors to remain competi- tive in world markets. Of the two programs, the US Sugar-Containing Product Re-Export Program is more contentious for Canada because ben- efits extend to a broader range of industrial sugar users and affect a greater volume of sugar exports.98 In 1996, Canada initiated a NAFTA Chapter 20 consultation with the United States over the reexport programs. In 1997, Canada dropped the NAFTA consultations in exchange for a mutual un- derstanding that preserved a fixed share of existing quotas. The bilateral agreement did not, however, address Canadian market access concerns. As of 2001, Canada’s access to the US refined sugar market was significantly lower than Mexico’s—10,300 tons compared with Mexico’s 140,742 tons.
The Mexican government subsidizes sugar through a combination of high import tariffs, domestic sugar production quotas, debt restructuring ini- tiatives, and tax breaks. As a result, Mexico increased sugar production from 3.8 million metric tons in 1994 to 5.3 million metric tons in 2003. As of 2003, Mexico was exporting about 0.4 million metric tons of sugar per year. 99
96. The Refined Sugar Re-Export Program allows licensed firms to import sugar at world prices (i.e., below US sugar prices) for refining and export, or for sale to licensed manufac- turers of sugar-containing products that will be sold on world markets. While there are no limits on the quantity of sugar imports, the program had only eight licensed raw sugarcane refiners. Under the US Sugar-Containing Products Re-Export Program, US firms can buy sugar from any licensed refiner (refiners that will use world-priced sugar) for use in prod- ucts that will be reexported onto the world market. According to the USDA’s Foreign Agri- cultural Service, about 325 food-processing firms are licensed to participate in this program. See Haley and Suarez (2002) and USDA FAS (2002).
97. Imports and exports under the two programs averaged between 300,000 and 400,000 short tons raw value between fiscal years 1995 and 1999.
98. Eligible participants under the Sugar-Containing Products Re-Export Program include major industrial sugar users, small firms, and agricultural cooperatives. The total number of food processing firms benefiting from this program increased from 150 during the 1980s to 325 in 2002. During the same period, the volume of quota-exempt sugar exports jumped by about 160 percent from 50,000 tons to 130,000 tons. See also USDA FAS (2002).
99. Based on average Mexican sugar exports since 1998. See David Orden’s testimony (July 26, 2000). See also LMC International (2003).