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Sugar Taxes To Trade Agreements: Good News, Bad News This Week For Cola Companies

Sugar Taxes To Trade Agreements: Good News, Bad News This Week For Cola Companies

The United States and Mexico reached a preliminary sugar trade agreement on Tuesday, preventing the Department of Commerce from implementing antidumping and countervailing duties. Mexico made significant concessions, including cutting back exports of refined sugar the the U.S.

At a news conference, Commerce Secretary Wilbur Ross said, “We have gotten the Mexican side to agree to nearly every request made by the U.S. sugar industry to address flaws in the current system and ensure fair treatment of American sugar growers and refiners.”

Despite this, the American Sugar Alliance opposes the deal, and released a statement saying that it leaves open a loophole that would allow Mexico to dump subsidized sugar in the U.S., harming American refineries.

Sweet Relief

The deal will ease concerns held by major U.S. beverage companies, which depend on Mexico to meet their sugar needs.

Representatives from The Coca-Cola Co (NYSE: KO) met with White House officials in May to lobby for the deal’s completion, Reuters reported.

Failure to reach a deal was also a concern of high fructose corn syrup producers including Archer Daniels Midland Company (NYSE: ADM) and Bunge Ltd (NYSE: BG), which feared retaliation against that and other sweeteners.

A Bittersweet Week

Although the trade agreement was a relief to cola companies, the week also saw Seattle join a growing number of cities with taxes on sugary drinks.

Seattle’s new tax, which will begin next year, will charge 1.75 cents per ounce, about $1.18 for a 2-liter bottle of soda.

The tax, which is expected to raise $15 million for Seattle, will affect sports drinks, energy drinks, non-diet sodas, and fruit drinks. Diet sodas, 100 percent fruit juices, baby formula, medicine, and weight-loss beverages will not be affected.

Sugar Stocks

Sugar ETFs are down between 25 percent and 30 percent this year on concerns over the U.S.-Mexico trade agreement, but saw a slight uptick after the preliminary agreement was announced.

Sugar prices have also fallen since February, down 35 percent since the year’s high.

The market has been lifted though, by a winter frost that hit sugar-growing regions in Brazil.

Related Links:

WHO Is Calling For A Global 'Sugar Tax'

Here's Why Monster Has Little Upside Going Into Earnings


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