Editorial: America depends on Mexican sugar – and NAFTA to make it affordable. There’s a larger lesson here.
There are many cautionary tales to be told about the folly of protectionism.
This one goes granular – literally – to show how important free trade is.
We’re talking sugar grains and the North American Free Trade Agreement. Your soda. Your convenience. Your nation’s economy.
Our story is not specifically about Donald Trump’s newly announced tariffs on steel and aluminum, which Arizona Republican Sen. Jeff Flake denounced on Twitter as “a marriage of two lethal poisons to economic growth – protectionism and uncertainty.”
But our story is related.
Arizona stands to lose big without NAFTA
As efforts to renegotiate the North American Free Trade Agreement kick off this week, Donald Trump will have an opportunity to take action he’s been promising since he started his campaign for President.
NAFTA talks are ongoing (uncertainty), and Trump has suggested his decision to exempt Canada and Mexico from the new metal tariffs is meant to be leverage in those negotiations (protectionism).
Trump has long portrayed NAFTA as a bad deal for America, and that could lead to another lethal poison to economic growth – one that could hurt Arizona.
“Terminating NAFTA would permanently reduce U.S. employment, exports and economic output, while benefiting our economic competitors at the expense of American workers and businesses,” Joshua Bolten, president and CEO of the conservative Business Roundtable, said in February.
Arizona would lose between 34,000 and 68,000 jobs within the first year after NAFTA ends, and the United States would lose between 1.8 million and 3.6 million, according to a report from the group.
American demands for sugar imports at risk
Now about the sugar.
Mexico exports about 1.3 million tons of sugar to the U.S. annually, which helps keep U.S. sugar refineries running, according to articles in the online trade publication Agri-Pulse.
Under NAFTA, these imports are tariff-free.
If NAFTA ends, tariffs are reimposed and Mexican sugar imports would likely return to the pre-NAFTA quota of about 8,000 tons, Pat Henneberry, a senior vice president for the Imperial Sugar Company, told Agri-Pulse.
Mexico would have to look for new places to sell its sugar and the U.S. would have to look for new sugar suppliers. That likely means the U.S. Trade Representative would increase the quota for other major sugar-exporting countries, such as Brazil, Australia and Thailand.
No sweet options without NAFTA in place
There would be disruptions and experts say it might be tough to meet the demand for imported sugar in the short term. Agri-Pulse uses the word “chaos” to describe the process.
The easy solution would be for the Trump administration to simply lower the tariffs on Mexican sugar for the sake of maintaining established supply routes.
But you can’t do it without NAFTA.
That’s because countries with a trade agreement can lower tariffs among their partners, but countries outside trade agreements play by World Trade Organization rules.
“Within NAFTA we can go to zero and we don’t owe anyone else anything,” William Reinsch of the Center for Strategic and International Studies told Argi-Pulse. “If we went to zero on Mexican sugar outside NAFTA, every other producing country in the world would demand the same thing and under WTO rules, we’d be obliged to do that.”
Hmm. More complicated than “One lump or two?”
The trade agreement goes way beyond sugar
What’s more, NAFTA is about much more than sugar – and even the distinct issue of Mexican sugar has unexpected ripples.
The United States exports about 1 million tons of high-fructose corn syrup to Mexico annually, and that would likely end if NAFTA goes away, Craig Ruffolo, a vice president and commodity expert for the McKeany-Flavell Company, told Agri-Pulse.
Trump’s rhetoric aside, free trade is the way the world works now and free-trade agreements – like NAFTA – are carefully balanced to benefit trading partners.
There are complex, multiple advantages to the agreements and plenty of unforeseen consequences of moving away from free trade.
Flake vows to do his best to get his colleagues in Congress to nullify the newly announced tariffs on steel and aluminum.
Here’s hoping he or others can also convince Trump not to sabotage NAFTA.
MORE ON NAFTA:
Read or Share this story: http://azc.cc/2p2xEYu