Sugar talks hint at Trump’s Nafta strategy

THE sugar barons of Florida, Alfonso and José Fanjul, have been equal-opportunity political donors for decades, showering largesse on the campaigns of Democrats and Republicans alike to ensure that lawmakers will protect the US sugar industry.

When Donald Trump was preparing to take office as president, the Fanjul brothers wrote another check. Among the contributors to Trump’s inaugural festivities in January was Florida Crystals, a Fanjul-owned company that contributed half a million dollars.

The brothers most likely had more on their mind than a sumptuous ball. Led by the Fanjuls, large US sugar producers and refiners were eager for the new administration to tackle some business left unfinished by the Obama administration: an agreement to control imports of Mexican sugar.

Now, as a deadline for the United States and Mexico to settle on an accord, businesses on both sides of the border are watching to gauge what the sugar negotiations signal about Washington’s approach to renegotiating Nafta.

“In Mexico everybody is looking at the sugar agreement because it’s a thermometer of how things are going to be managed,” said Juan Cortina Gallardo, president of Mexico’s sugar chamber, which represents refiners. “It’s a politically sensitive and charged issue.”

The sugar industry has been at the center of the most contentious trade issues between Mexico and the United States since Nafta was negotiated in the early 1990s.

Even then, the protracted tussle over just one product raises questions about how quickly Nafta’s renegotiation could bog down if the Trump administration decides to open multiple fronts in rewriting the accord. Talks with Mexico and Canada could begin as early as August, and the administration has offered very little detail about what it hopes to accomplish.

Whatever the US sugar industry wrests from the negotiations will have effects that spread far beyond the cane fields of Florida and southeastern Mexico. The strands of the sugar story suggest just how intricate the weave of international trade can be.

It is up to Commerce Secretary Wilbur L Ross to find a compromise that Mexican negotiators will accept; otherwise, he risks a trade war.

And Ross must also balance the power of the sugar lobby – including his Palm Beach neighbours, the Fanjuls – against US food manufacturers who argue that any deal that raises the cost of sugar will drive away jobs.

Ross and his wife, Hilary Geary Ross, have had a long social relationship with José Fanjul, known as Pepe, and his wife, Emilia, and they are frequent guests at the Fanjuls’ pre-Christmas dinners in Palm Beach and at their 2,800-hectare resort, Casa de Campo, in the Dominican Republic, events that Hilary Ross gushes over in her society blog.

But in his transition from billionaire investor to public servant, Wilbur Ross has been listening to all sides, say people with a stake in the sugar negotiations.

The Obama administration “kicked the can down the road in order not to make a decision” on sugar imports, said Paul Farmer, president of CSC Sugar in New Canaan, Connecticut, who buys Mexican sugar to produce liquid sugar that competes with large refineries.

Now, Farmer said, he has found “a complete change in attitude to listening and wanting to understand” what is at stake in the negotiations.

Cortina agreed. “What I have seen in the current administration is that Secretary Ross and the chief of staff have dedicated a lot of time to understanding the underlying issues,” he said.

The US sugar industry has long been protected by a price guarantee held in place by import quotas and other mechanisms. When Nafta went into effect in 1994, the industry won special treatment that limited Mexican sugar imports for 14 years.

“These guys have been punching above their weight politically,” said Cortina, referring to US sugar industry executives.

In 2008, Mexico became the only country in the world with unrestricted access to the US sugar market. But when Mexican exports soared in 2013 after a bumper crop, US producers struck back, filing claims of unfair trading practices. The Commerce Department agreed, and prepared to assess punitive duties on Mexican sugar.

To head those duties off, the Mexican government and Mexican sugar refiners accepted limits on exports as well as a minimum price in two agreements signed at the end of 2014. Mexican officials face their own political pressure to come up with a strong agreement.

“If you cave on sugar if you’re Mexico, then what does that say about what you’re going to do in Nafta negotiations?” said Andrew Rudman, a former United States trade official, who is a managing director at ManattJones Global Strategies.