Trade and Other Barriers of the US and EU Governments Essay

Trade and Other Barriers of the US and EU Governments - Essay Example NAFTA outlined that import tariffs on sugar imports from Mexico would, over a 15 year period, eventually be phased out, thereby allowing duty free imports to enter the country (USDA 2005). Since NAFTA’s inception in 1994, Mexico now enjoys a more liberal volume of sugar to enter the United States under this agreement whereby tariffs have been excised. As such, under this agreement, the United States is obligated to remove quotas on sugar imports into the country, giving Mexico a considerable export advantage. NAFTA is a trade agreement between Canada and Mexico that is unlike other trade agreements between other countries that import and export raw sugar and processed sugar-containing products. Obligations under NAFTA allow member nations to deliver fluctuating volumes of raw and processed sugar products when Canada and Mexico have achieved a surplus. This is regardless of the volume of sugar produced domestically in the United States. Brazil, being one of the largest sugar pr oducers in the world, is impacted by NAFTA in terms of the quotas established on sugar imports to the United States. The United States must abide by agreements that have been established with trading partners, whilst also attempting to protect its own domestic sugar-producing industry. The U.S. also signed an agreement in conjunction with the World Trade Organization referred to as the Uruguay Round Agreement that guarantees the country will accept a minimum of 152,691 metric tonnes of raw cane sugar from Brazil annually (Federal Register 2011). Hence, the United States has over-extended its obligations for delivery of in-quota raw sugar imports from Mexico and the United States. Brazil, unlike Mexico, is subject to very high tariff rates on sugar products in an effort to deter Brazilian exports from entering the country, which are imposed above the in-quota volume from Brazil at 152,691 metric tonnes. The out-of-quota tariff rate (on quantities over the specified in-quota volume) i s 78 percent (Hornbeck 2006), whilst in-quote amounts guaranteed under the Uruguay Round Agreement are subject to very low import duties. If Brazil and other trading countries are willing to pay the exuberant 78 percent tariff on sugar, there are no restrictions for exporters in terms of the volume allowed into the United States. However, Brazil is also a nation that consumes a great deal of its total production output of sugar, thus when Brazil achieves surplus, it is far more advantageous to export the surplus into neighbouring nations or other international buyers that do not have the internal sugar production capacity as in Brazil or the agricultural prowess in raising sugar beets and sugar cane. This 78 percent tariff is the United States’ methodology of ensuring that domestic production of sugar and sugar-related products is not negatively impacted by export volumes entering the nation. Outside of the in-quota volume guaranteed for allowance into the United States, Braz il is subject to varying tariffs depending on the type of sugar or sugar-containing product produced in the country.