Foreign sugar subsidies outlined
By Scott Kraus, Ag Weekly correspondent
Friday, October 3, 2008 1:40 PM CDT
TWIN FALLS, Idaho - A new study will help American sugar producers press their case in world and regional trade talks to reform subsidies in foreign countries that are major producers of sugar, industry officials said.
“There is a lot of distortions on the sugar market,” said Jack Roney, director of economics and policy analysis for the American Sugar Alliance in Arlington, Va. “It is going to take a lot of effort to get at all these subsidies.”
The Sugar Alliance, a coalition of sugar producers and processors, commissioned the study by LMC International, a commodities research firm in Oxford, England. The Sept. 22 report, which updates a similar study done in 2003, was in response to a request for information from the Office of the U.S. Trade Representative, Roney said.
In the United States, the sugar program depends on the government balancing sales to demand to ensure producers get their profits from markets, not subsidies. Currently, the sugar program costs U.S. taxpayers nothing, he said.
But other countries extensively bolster their sugar industries with direct and indirect subsidies, according to the study. These include Mexico, Brazil, China, India, Columbia and Thailand. Several are among the world’s largest sugar producers.
“The sugar industries are very, very important to these countries,” Roney said. “And they are just not going to let them die. So they intervene in a lot of ways.”
Brazil, which is the world’s largest sugar exporter, benefits from an ethanol infrastructure built on decades of subsidies and mandate. Growers get credit at below-market rates, and in the past have received regional subsidy payments and massive debt relief, the report said.
Thailand, another leading exporter, has offered state price fixing, tariffs, debt restructuring and supplementary subsidy payments.
And in Mexico, the government owns nearly a third of the country’s sugar mills. It also keeps prices high through tariffs on imports and taxes on alternative sweeteners.
That puts U.S. growers at a disadvantage, said Luther Markwart, executive vice president of the American Sugarbeet Growers Association in Washington, D.C. American producers welcome fair competition, Markwart said. Their cost of production is lower than nearly two-thirds of the 64 countries that produce sugar. And the cost of production for U.S. beet growers alone is the third lowest in the world, according to the Sugar Alliance.
But it’s hard to compete against heavy subsidies provided to growers in other countries, Markwart said. The study pinpoints and provides data about those subsidies, he said. So it should help in trade talks.
In fact, it should prove useful not just in world talks but also in regional and bilateral trade deals with smaller groups of countries, Roney said. Particularly when it comes to indirect subsidies.
“It’s valuable to be able to show what subsidies the bilateral and regional free-trade agreements don’t touch,” Roney said. “That’s our big beef about those.”
Even as foreign competitors are subsidized, U.S. growers struggle to improve profits. Fuel and fertilizer costs have skyrocketed even as sugar prices have declined, he said. In 1980, food manufacturers paid an average price for sugar of 38 cents a pound. But in 2007, they paid an average of just 25 cents a pound, a drop of 13 cents, according to the Sugar Alliance. And since 1996, 35 U.S. sugar refineries have closed. That is nearly half the U.S. total, Roney said.
For a copy of the entire study on foreign sugar subsidies, e-mail to subsidyhandbook@aol.com.
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