By Catharine Richert

Legislative language that would upend a long-standing trade agreement with Mexico to favor U.S. sugar growers is being circulated between House and Senate lawmakers involved in writing the 2007 farm bill.

Under the 1993 North American Free Trade Agreement, Mexico could export sugar to the United States tariff-free starting Jan. 1, ending quotas and costs associated with the trade.

But under a proposal written by the sugar growers and obtained by Congressional Quarterly, quotas on the sugar trade between the two countries would be reinstated in the farm bill (HR 2419). The quotas would be increased during bad crop years.

The proposal is designed to maintain support for U.S. sugar prices. But the effect would be to restore some of the trade barriers NAFTA was intended to eliminate. Also affected by the language would be producers of corn-based sweeteners.

Jack Roney, director of economics and policy for the American Sugar Alliance, said the proposal would help prevent a glut of American sugar in the Mexican market and vice versa.

“For the U.S. government, it avoids the headache of dealing with dumping” and the potential for trade litigation, Roney said. “It’s a way to avoid market chaos in the transition.”

But opponents and some lawmakers say managing sugar trade would topple NAFTA.

“We can’t go backward,” Sen. Charles E. Grassley , R-Iowa, said in a floor speech at the end of 2007.

Likewise, Audrae Erickson, president of the Corn Refiners Association, said her trade group supports NAFTA as it is. Managed trade could only lead to new tariffs and barriers for sweeteners or any other crop produced in the United States.

Lawmakers already anticipated excess sugar on the American market and included a provision in both the House and Senate versions of the farm bill to allow the government to help buy up extra Mexican sugar for conversion to ethanol. Roney says the new proposal would work side-by-side with current farm bill language.

The proposal also would impact corn refiners. Mexico would be allowed to send some excess sugar to the United States if the surplus was caused by high fructose corn syrup. For example, if Mexican soda makers use more high fructose corn syrup and less sugar, Mexico could send 70 percent of the displaced sugar to the United States.

Still, that means Mexico would be saddled with the remaining 30 percent of the unused sugar. With the prospect of having to dump or find a use for the excess sugar, opponents of the proposal worry it would encourage Mexico to block corn syrup imports from the United States.

The United States and Mexico have quarreled in the past over corn syrup. In 1998, Mexico imposed an antidumping duty on syrup imports. The American government challenged the order, which ultimately was struck down.

In 2002, Mexico imposed a 20 percent tax on soft drinks flavored with high fructose corn syrup, which was “designed specifically to discriminate against high fructose corn syrup imported from the United States” according to Grassley, who defended the corn syrup industry in his floor speech. His state is a leading corn producer.

That tax was challenged through the World Trade Organization and struck down in 2006.