DALLAS, TX: The global sugar market has become a distorted maze of tricks, rather than treats, with more than 100 countries producing and subsidizing sugar production and exports. A new publication from the Institute for Policy Innovation (IPI) says it’s time for the Obama administration to commit to eliminating subsidies and trade barriers for sugar and other agricultural commodities by pushing for such an agreement at the World Trade Organization (WTO).
In “Solving the Sugar Subsidy Problem,” IPI President Tom Giovanetti exposes the harmful web of market-distorting agricultural trade policies worldwide, which include subsidizing exports and keeping domestic prices artificially low. Of all the distorted agricultural commodity markets, sugar is almost certainly the worst.
As examples, Giovanetti cites trade practices of Brazil, Mexico and Thailand. “The world’s leading sugar producer, Brazil, has used aggressive policies for decades to gain control of over half of all global sugar exports, and today spends at least $2.5 billion on sugar subsidies,” he writes. “Brazil has repeatedly bailed out a domestic sugar industry that struggled despite all these subsidies.”
And since 2010, sugar producers connected with the Mexican government have flooded the U.S. market with subsidized sugar, while making it difficult for U.S. producers to get their sugar into Mexico, writes Giovanetti. Unfortunately, the U.S. government has no free market bragging rights. It subsidizes its domestic sugar industry through a complicated maze of import quotas and loan programs, writes Giovanetti.
But he cautions against ignoring world trade realities by unilaterally dropping all sugar restrictions and subsidies, because domestic sugar producers would likely be put out of businesses, leaving consumers at the mercy of foreign producers that without U.S. competition would immediately raise their prices. The EU learned that lesson after its 2006 sugar policy reforms. Giovanetti says U.S. policymakers should take a long-term approach by encouraging the WTO to support an end to all direct and indirect subsidies. A resolution sponsored by Congressman Ted Yoho (R-Fla.) takes this approach.
It’s in the best interests of the U.S. to have a vibrant, competitive domestic sugar industry that doesn’t rely on government subsidies, concludes Giovanetti. Rather than getting caught up in a “free trade vs. fair trade” or “subsidies vs. no subsidies” debate, a free and functioning global market for sugar would be best for both producers and consumers, and would have the additional benefit of stabilizing the sugar market.
The Institute for Policy Innovation (IPI) is an independent, nonprofit public policy organization based in Dallas, Texas. Copies of Solving the Sugar Subsidy Problem are available at www.IPI.org. Tom Giovanetti is available for interview by contacting Erin Humiston at (972) 874-5139, or erin@ipi.org.
October 31, 2013