Prospects for bilateral and regional free trade agreements and the economics of sugar

The 2002 U.S. Federal Farm program sustains the domestic price of sugar through: (1) an import quota or a tariff-rate quota (TRQ) placed on the quantity of foreign sugar that can be imported into the U.S. sugar market, and (2) marketing allotments. Marketing allotments have by far surpassed the TRQ as the balancing tool for the U.S. sugar market In 2004, the United States was and continues to be involved in international trade negotiations with other countries to establish free trade agreements (FTAs), including major sugar-producing and sugar-exporting countries. If these agreements are ultimately signed and if sugar is included in the FTAs, there exists the possibility that a substantial increase in U.S. sugar imports could cause substantial oversupply situations in the U.S. sugar market and could significantly depress prices received by U.S. sugar growers. We estimate the impact of added U.S. sugar imports that are possible under future agreements. The potential losses for U.S. sugar producers from added imports are significant. As a result the U.S. sugar industry is lobbying intensively to have sugar excluded from future FTAs.