Canada Eliminates Retail Packaging Requirement for SCP Exports; US-Mexico Set August 1 Deadline for Resolving Sweeteners Dispute

On June 19, 2000, the Canadian government announced that it was terminating its value-added retail packaging policy for sugar-containing products shipped into the US tariff-rate quota. In a June 19, Notice to Exporters, the government stated that:

"In order to maximize the economic benefits to Canada of the limited US Tariff Rate Quota for SCP's, a policy was approved in 1998 whereby beginning in the 1999/2000 quota year, and for each of the next three years, 6 percent of the quota of each bulk quota holder was to be transferred to a value-added retail packaged pool. The policy has since been overtaken by unrelated business decisions. In consequence, this policy has been discontinued."

As noted in earlier issues of SugarNews, the US published a proposal to licence imports of SCP's covered by the US TRQ on March 17, 2000. The proposed licencing scheme would give preference to US imports of bulk SCP's and substantially limit Canadian exports of higher value-added retail SCP's. The rule would give a small number of US companies the power to dictate terms and sources of supply, depriving Canadian exporters of their historical access. While Canada's "value added" policy has frequently been cited by US officials as a justification for the proposal, Canadian exporters had shifted to increased retail products for commercial reasons prior to implementation of Canada's policy. The Canadian government removal of this policy reflects Canadian market developments and removes any potential US argument for the import licence rule.

The US proposal has been widely viewed as political interference in the marketplace and has received strong opposition from the Canadian government and a wide range of Canadian and US food producers. The proposed rule would violate US bilateral and international agreements. If the US proceeds with this rule, the Canadian government will have little choice but to initiate WTO dispute settlement proceedings and resume a NAFTA challenge of the US Re-export program for SCP's.

The status of the US import licence proposal itself remains in doubt. USDA's comment period ended on May 17. Despite the strong opposition, there has been no word if the proposal will be withdrawn.

US-Mexico Set August 1 Deadline for Resolving Sweeteners Dispute

At a June 9 meeting, US Trade Representative Barshefsky and Mexican Trade Minister Blanco made an informal pledge to try to resolve their related disputes over sugar and high fructose corn syrup (HFCS) by August 1, 2000. The disputes centre over Mexico's antidumping duties on US HFCS (which the US challenged with limited success in the WTO) and the US desire to limit Mexico's preferential access to the US sugar market.

Depending on one's interpretation of the NAFTA, Mexico may soon have unlimited access to the US sugar market. It is clear, however, that in the absence of a bilateral settlement on sugar/HFCS, Mexico's access will increase significantly to 250,000 tonnes this October 1 (see table). This huge increase in sugar imports comes at a time when overproduction in the US has already forced the US government to announce that it will buy 150,000 tons of sugar and put it into storage in an effort to preserve the Sugar Program. The US Sugar Program attempts to keep US prices higher than world prices by restricting imports. According a June 9 report released by the US General Accounting Office (GAO), the Sugar Program costs US consumers nearly $2 billion annually.