By Chris Prentice
NEW YORK (Reuters) - Soda giant Coca-Cola Co and major corn syrup makers have joined the political battle against the U.S. sugar industry in recent weeks, as the deadline to hammer out a years-long trade dispute with Mexico nears.
Representatives from Coca-Cola (N:KO), corn syrup makers Archer Daniels Midland Co (N:ADM) and Cargill Inc (CARG.UL), and others met on May 10 with White House official Ray Starling, special assistant to the president for agriculture, trade and food assistance, said a number of people who attended the meeting and some of the companies involved.
They warned against potential fall-out for their industries if the United States and Mexico cannot agree to a new trade pact and avert large duties on U.S. sugar imports from Mexico. The deadline for an agreement is Monday.
For sugar buyers like Coca-Cola, a failure to come to a new agreement could disrupt supplies and drive up prices. The United States does not produce enough sugar for all its needs and relies on imports to fill the shortfall. For U.S. corn syrup makers, the escalating tensions put them under threat of a trade war with their largest foreign market.
The two countries have been embroiled in the dispute for three years. Talks between U.S. President Donald Trump's administration and Mexico, which began in March, are seen as a precursor to more complex discussions over NAFTA.
Under NAFTA, Mexico had free access to the U.S. sugar market, but U.S. sugar refiners accused it of dumping subsidized sugar, undercutting their business. In retaliation, the United States slapped large duties on the Mexican sweetener, but a 2014 agreement suspended the tariffs in return for quotas and price floors for Mexican sugar.
The U.S. sugar industry has said the 2014 deal failed to control Mexican dumping and wants Washington to impose much stricter rules.
The sugar industry is known for its sway in Washington, especially the politically-connected Fanjul family. But its point of view on Mexican imports is not shared by sugar users such as confectioners and soda-makers.
The May meeting was held to emphasize that failure to reach a deal could threaten hundreds of thousands of jobs in sugar-using industries, said Bill O'Connor of the Sweetener Users Association, who attended the meeting.
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If a deal is not reached, and the U.S. imposes tariffs, Mexico has threatened retaliation, with corn syrup seen as a likely target. U.S. agricultural exports to Mexico totaled $18 billion last year, according to the U.S. Trade Representative. Mexico bought over 80 percent of U.S. fructose, or corn syrup, exports, government data show.
"From our perspective, if we meet our sugar import needs from elsewhere, we don’t gain any jobs, but if we lose our corn syrup market in Mexico – that’s irreplaceable,” said John Bode, head of the Corn Refiners Association, who also attended the meeting.
For Coca-Cola, an agreement is needed "so that we can continue to expand the range of affordable food and beverage choices available to consumers," Kate Rumbaugh, Vice President of Government Relations for Coca-Cola North America, said in an emailed statement to Reuters. The company confirmed it attended the meeting.
A spokesman for Cargill also confirmed attendance. ADM declined to comment. A White House spokeswoman declined to comment.
Lobbying from America's farm belt has intensified to combat "Big Sugar" as the deadline draws near, said two sources familiar with the discussions. A coalition of Iowa farming groups representing corn, soybean, pork and cattle industries recently wrote to Department of Commerce Secretary Wilbur Ross, saying agricultural exports are "in peril".
The U.S. sugar industry has said traditional cane refiners like ASR, the maker of Domino Sugar owned by the Fanjuls, and Imperial Sugar, owned by commodities firm Louis Dreyfus Co [AKIRAU.UL], are being starved of supplies because Mexico is exporting too much refined product.
Recent talks have centered on higher prices and ensuring that raw sugar reaches those types of cane refiners, the sources said. Critics say those terms would drive up prices and limit domestic competition.
Phillip Hayes, a spokesman for the American Sugar Alliance, rejected the assertion and said: "Mexico’s predatory trade practices have grossly distorted the domestic sugar market."