IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Impacts Of The U.S.-Central America Free Trade Agreement On The U.S. Sugar Industry

  • Koo, Won W.
  • Taylor, Richard D.
  • Mattson, Jeremy W.
Registered author(s):

    - The U.S.- Central American Free Trade Agreement (CAFTA) is a free trade agreement with five Central American Countries: Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua. - Because of differences in resource endowments, size, and income between the United States and the Central American countries, trade between the two regions has generally been complementary, inter-industry trade. The United States exports wheat, corn, soybeans, and rice, and imports coffee, bananas, and fruits and vegetables. CAFTA will enhance the U.S. trade volume with Central America through trade creation and diversion effects. - One of the largest exports by the Central American countries is sugar. The region exports about 1.5 million tons of sugar annually, and currently exports less than 10% of its sugar exports to the United States. - If the United States imports more than 500 thousand tons of additional sugar, a limited number of sugar producing regions in the United States would be able to remain viable. Wholesale price of sugar would be about 20 cents in the United States with an additional import of 500 thousand tons, and would decrease further as additional imports increase. For a sugar price less than 20 cents/pound, U.S. domestic sugar supply would become much more elastic. This implies that the U.S. domestic sugar supply would decrease much faster if the price of sugar was lower than 20 cents/pound: domestic supply would decrease 25% for sugar beets and 15% for sugar cane for every 10% decrease in price. Sugar beet processors could lose their economies of scale as a result of reduced supply of sugar beets and would be less competitive. However, this may not be a major problem for cane sugar refiners since the United States imports raw cane sugar for domestic processing. - The current U.S. proposal on sugar under CAFTA could permit the Central American countries to export more than one million tons of sugar to the United States within a few years. Even if the second tier tariff is not included in the final agreement, incremental access, as requested by the CAFTA countries, could be in the range of 300,000 tons per year. In addition, with expected additional imports of sugar under various FTAs, such as NAFTA and FTAA, total additional U.S. imports of sugar could exceed one million tons, which would hurt the U.S. sugar industry significantly. - If the United States imports more than 2 million tons of additional sugar from the CAFTA countries, the world price of sugar would increase from 8 cents/pound to 10 cents/pound and the U.S. domestic wholesale price would decrease to 13 cents/pound. At this price level, the United States would import more than 80% of its domestic consumption. - CAFTA may be good for both the United States and the Central American countries. However, the U.S. sugar industry may become a victim of the agreement. U.S. sugar imports from the Central American countries should be limited to protect sugar beet and cane growers in the United States until worldwide, multilateral free trade for sugar is established.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://purl.umn.edu/23069
    Download Restriction: no

    Paper provided by North Dakota State University, Center for Agricultural Policy and Trade Studies in its series Special Reports with number 23069.

    as
    in new window

    Length:
    Date of creation: 2003
    Date of revision:
    Handle: RePEc:ags:ndapsr:23069
    Contact details of provider: Web page: http://www.ag.ndsu.nodak.edu/capts/

    More information through EDIRC

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Benirschka, Martin & Koo, Won W. & Lou, Jianqiang, 1996. "World Sugar Policy Simulation Model: Description And Computer Program Documentation," Agricultural Economics Reports 23432, North Dakota State University, Department of Agribusiness and Applied Economics.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:ags:ndapsr:23069. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.