Our Weblog: Excerpts of Exports
Tuesday, January 22, 2008
Sugar, Freer Trade and NAFTA
The source of sugar, considered a commodity, can be traced back thousands of years to India and China. Key promoters of the sweet stuff are Alexander the Great and Marco Polo, the great trader and explorer from Venice. Nearly three centuries later, tropical America became a manufacturer of sugar cane.
During the Napoleonic Wars, England blockaded sugar imports from the Caribbean to Continental Europe. Napoleon, a creative problem solver, found another source of sugar; the sugar beet. Sugar cane was no longer the sole source of the commodity. Nor could it be used to force surrender in time of war. And long before the turn of the century, sugar cane and sugar beet were competitors in Continental Europe.
The modern sugar industry of today enjoys the intervention of governments throughout the world. (I guess we gotta have that sugar with a worldwide consumption of 120 million tons per year and a growth rate of 2 million tons per annum.) That the sugar trade is among the last planks of the fifteen year old NAFTA bears that out. And a NAFTA market of 425 million consumers is reason enough.
Sugar,a protected commodity in the U.S for decades, benefitted from guaranteed pricing, import quotas and allotments to growers. This has resulted in the greatly inflated price of sugar in the U.S. But, according to NAFTA, all is about to change. But will it? Since Mexico can now sell virtually unrestricted in the U.S., there are two farm bills introduced in the U.S. Senate and House.
The bills would have the U.S. Department of Agriculture buy sugar imports from Mexico and sell them to ethanol producers at a much lower rate than what they paid. Sugar producers from Mexico have the opportunity; U.S. taxpayers will make up the difference.
Domestic sugar producers want sugar exports from Mexico “restrained.” In effect, they want to “keep it the same” regarding exports on both sides and to disallow any new producers. Since sugar is a warm weather commodity, Canada would not be included and it would be a sidebar binational agreement.
I will let you decide what you think of all this. This is not a political blog. However I want to show how important it is to be aware of different treaties and their effects on your industry both domestically and globally.
I worked with a specialty cheese producer in Michigan who increased her business by 25% because I told her about a trade dispute. In the 1990s, there was an import restriction of cheese to the U.S. This restriction was in response to another restriction; U.S. beef into Europe. My client viewed the RFQs she was receiving on a daily basis as coming from “shoppers”. Once I told her this bit of timely information, they were “shoppers” no more but rather customers. And she increased her sales and her workforce. Good for her company and good for the economy.
This is an example where exporting was not the way to increase sales. And I suppose there will come a day when there is truly free trade; where it will be best price, best product. But until there is real free trade, knowing where there is opportunity is what to do. Subscribe to my blog and return to my website to get informed and up-to-date and learn about opportunities for your company.