1

FTAA, WTO, FARM

LEGISLATION

MAY23-24,2002 RESPONDING TO

OPPORTUNITIES AND

CHALLENGES

2

Regional trade

agreements…..opposed.

Global organization-preferable

venue for final, complete, and

positive results

Sugar program-protection

through tariff rate quotas[trq].

REGIONAL TRADE PACTS

FTAA

NAFTA

MERCOSUR

United States Industry

Size, efficiency

Reasons for U.S. Sugar Policy

– No cost to taxpayers, benefits to consumers

U.S.- Mexico Sugar Trade Issues

– Background on NAFTA sweetener provisions

– Developments since NAFTA began

– Contrast U.S. & Mexican sweetener markets

– Status of discussions

United States Industry

Size, efficiency

Reasons for U.S. Sugar Policy

– No cost to taxpayers, benefits to consumers

U.S.- Mexico Sugar Trade Issues

– Background on NAFTA sweetener provisions

– Developments since NAFTA began

– Contrast U.S. & Mexican sweetener markets

– Status of discussions

United States Sugar Industry

Size: Large, important industry

• U.S. world’s third or fourth largest producer, consumer of sugar

• Jobs: Major employer, critical in rural areas

• U.S.: 372,000 jobs nationally in sugar, corn sweetener production

U.S.Sugar Industry

Competitiveness: Efficient by world standards

• 28th lowest cost of 102 countries, mostly developing countries with low labor, environmental standards

• More than half of world’s sugar produced at a higher cost than in U.S.

World Dump Market: Dumping ground for subsidized foreign surpluses; does not reflect cost of producing sugar

• World price: 16-year average only half world average cost of producing sugar

Number of

Producing

Countries/Regions

Beet Sugar 2 40

Cane Sugar 26 63

All Sugar 28 102

Corn Sweeteners 1 19

All Sweeteners 21 112

Source: “A Worldwide Survey of Sugar and HFCS Field, Factory and Freight Production Costs: The 2000 Report,”

U.S. Cost of Production Rank Among

World Sweetener Producers, 1994/95 – 98/99

U.S. Rank

World Sugar Dump Market Price:

Barely More Than Half the World

Average Cost of Producing Sugar (16-Year Average, 1983/84 - 98/99)

9.52

16.26

0

5

10

15

20

Average World Dump Price* World Average Production Cost**

Cen

ts p

er

po

un

d,

raw

valu

e

*New York contract #11, f.o.b. Caribbean ports. Source: USDA.

**Beet and cane sugar w eighted average, raw value. Source: "The LMC Worldw ide Survey of Sugar and HFCS Production Costs:

The 2000 Report," LMC International, Ltd., Oxford, England, December 2000.

U.S. Sugar Policy: Consumer Benefits

• Low stable U.S. retail sugar prices

• 20% below developed-country average

• Virtually unchanged since 1990

• No pass through to consumers when

producer prices fall

86¢

84¢

83¢

75¢

75¢

67¢

67¢

62¢

55¢

54¢

53¢

53¢

51¢

45¢

44¢

43¢

37¢

33¢

0¢ 10¢ 20¢ 30¢ 40¢ 50¢ 60¢ 70¢ 80¢ 90¢ 100¢

Australia

Canada

USA

Netherlands

Germany

Portugal

OTHER DEVELOPED COUNTRIES

France

Ireland

Switzerland

Sweden

Italy

Austria

Denmark

Belgium

Finland

Japan

Norway

Source: LMC International Ltd., Ox ford, England, February 2000; 1999 prices.

"Other Dev eloped Countries" represents the w eighted av erage of 22 foreign dev eloped countries.

Cents per pound, refined

Developed Countries' Retail Sugar Prices:

USA 20% Below Average

-5.8%

-20.2%

3.9%

5.7%

8.2%

10.3%

12.8%

16.0%

Wholesale

Refined

Sugar

Retail

Refined

Sugar

Cereal Candy Cookies,

CakesIce

Cream

Raw

Cane

Sugar

Annual average prices, 1996 compared with 2001. Raw cane: Duty-fee paid, New York. Wholesale refined beet: Midwest markets.

Retail prices: BLS indices. Data source: USDA.

Other

Bakery

Products

Producer

Prices

Plummet

Consumer Prices Rise

From 1996 to 2001:

Producer Prices for Sugar Plummet,

Consumer Prices for Sugar and Sweetened Products Rise

Most Countries Mexico

Base 18.08 16.00

1994 -- 15.60

1995 17.62 15.20

1996 17.17 14.80

1997 16.72 14.40

1998 16.27 14.00

1999 15.82 13.60

2000 15.36 12.09

2001 15.36 10.58

2002 15.36 9.07

2003 15.36 7.56

2004 15.36 6.04

2005 15.36 4.53

2006 15.36 3.02

2007 15.36 1.51

2008 15.36 0.00Source: USDA

U.S. Sugar Imports: Second Tier Duties (Cents per pound of raw cane sugar)

443495585595520

246

30

1250

-480

-820

-360

-939

-162

-1200

-1000

-800

-600

-400

-200

0

200

400

600

800

1000

1200

1400

Th

ou

san

d M

etr

ic T

on

s

Source: USDA - Sugar Production Minus Consumption

NAFTA Begins

19

92

/93

19

93

/94

19

88

/89

19

89

/90

19

90

/91

19

91

/92

19

94

/95

19

95

/96

19

96

/97

19

97

/98

19

98

/99

19

99

/00

20

00

/01

Mexico Sugar Deficit/Surplus 1988/89 – 2000/01

Contrasting the U.S. and Mexican Sugar Industries

Both under severe financial stress from lengthy period

of market prices below production costs

United States:

• Open competition with HFCS: 50% of U.S. caloric sweetener market

• Casualties: 24 beet or cane mills have closed since 1993; no direct government support

Mexico:

• Government prevents competition with HFCS: only 10% of Mexican caloric sweetener market and could go lower

• Government does not allow sugar mills to go out of business: $2 billion in subsidies and only one closure

since 1993; expropriates 27 of 60 mills in 2001

BEET CLOSURES CANE CLOSURES

Delta Sugar

California, 1993

Columbia Sugar

Louisiana, 1994

Pioneer Mill Company

Hawaii, 1999

Holly Sugar, Betteravia

California, 1993

Hamakua Sugar

Hawaii, 1994

Talisman Sugar Company

Florida, 1999

Spreckels Sugar, Manteca

California, 1996

Hilo Coast Processing Co.

Hawaii, 1994

Amfac Sugar, Kekaha

Hawaii, 2000

Holly Sugar, Hamilton City

California, 1996

Oahu Sugar

Hawaii, 1994

Amfac Sugar, Lihue

Hawaii, 2000

Western Sugar, Mitchell

Nebraska, 1996

Ka'u Agribusiness

Hawaii, 1996

Hawaiian Commercial & Sugar, Paia

Hawaii, 2000

Great Lakes Sugar, Fremont

Ohio, 1996

Waialua Sugar

Hawaii, 1996

Evan Hall Sugar Cooperative

Louisiana, 2001

Holly Sugar, Hereford

Texas, 1998

McBryde Sugar

Hawaii, 1996

Caldwell Sugars Cooperative

Louisiana, 2001

Holly Sugar, Tracy

Califonia, 2000

Breaux Bridge Sugar

Louisiana, 1998

Holly Sugar, Woodland

Califonia, 2000

* In 2002, 28 beet and 25 cane mills remain.

24 Permanent Sugar Mill Closures Since 1993

U.S. and Mexican Sugar and Corn Sweetener

Consumption, 2001 -Million metric tons, Refined basis-

0

2

4

6

8

10

Sugar HFCS* Sugar HFCS*

United States

Mexico

*HFCS: High-fructose corn syrup

Data source: USDA

53

60

24

1

Source: Industry Estimates

Mills Closures Mills Closures

27 of Mexico's 60 mills

were expropriated by

the Mexican

Government, September

2001

U.S. Mexico

U.S. and Mexican Sugar Mills and Closures

Since 1993