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Sugar Economics Under NAFTA

Jeffrey Frankel, a Harvard Professor has penned a great article on econbrowser about the sugar business. He starts us off by pointing out that Canada, United States and Mexico will be meeting soon to start re-negotiation of NAFTA. This may be by August and sugar is on top of the agenda.

Being a Kenyan and considering that sugar is one of the scarce products, I was attracted to this article to make sure I’m well versed on the international sugar politics and current affairs. It’s our sincere hope that the 3 countries will strike a SWEET deal at the end of the day.

The largest producers of sugar have a habit of protecting their home industry through use of quotas and tariffs. This effectively keeps their sugar prices relatively higher that what is offered by leading suppliers of low-cost sugars such as Mexico, Brazil, Dominican Republic and Philippines.

After the deal we will see NAFTA member countries buying more sugar from MEXICO. Mexican sugar exports to the United States remain insignificant until 2013 when it experienced a bump. Immediately this happened the sugar producers in the US asked for protection.

Consequently, trade tariffs shot to 80% for sugar. Many examples globally have shown that protection of sugar industry is not a good idea. Sugar farmers in the United States are mostly based in Florida plus the sugar beet farmers operating from Dakotas and Minnesota.

Large sugar farmers in America have always been close to politicians. For instance, US Sugar has made it a habit to donate to Rick Scott, the Florida Governor.






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