Government Intervention and Support
The Thai sugar industry is highly regulated and government-controlled—it is overseen by the Thai Office of the Cane and Sugar Board, consisting of government, mill, and producer representatives. Thai sugar policy regulates domestic and export marketing, domestic sugar prices, and the distribution of revenue between growers and millers.
The government stipulates that each mill can sell a set amount of sugar on the domestic market at a guaranteed, artificially high price, sheltering Thai cane producers from the volatile world price they help to depress through indirectly subsidized exports. Imports are tightly controlled by a tariff of 94% and a restrictive licensing scheme; until 1995 they were completely banned.
After the crisis in 1997, under government supervision, banks agreed to postpone and reschedule $1.1 billion of industry debt. Though technically not a form of direct payment, the debt rescheduling provided a largely recourse-free cash infusion to the industry.
Moreover, in 1998, the government initiated a program of supplementary payments to growers. Although supposedly loans, there is no clear mechanism for repayment. Debts accumulated under this program total over $500 million.
Production and Price
About a third of Thailand's sugar production is consumed in the country; the remaining two thirds is sold on the world dump market.
Thailand produces nearly 8 million metric tons of sugar a year, of which about 5 million tons are exported. This makes Thailand the world's sixth largest producer and second largest exporter.
From 2004-2007, average wholesale sugar prices in Thailand were 16.8 cents per pound, more than 40% above world dump market prices.
Despite having a highly sophisticated domestic sugar industry, Thailand enjoys labor and environmental standards far below those in the United States.
Thailand, like Brazil, India, and other countries with sophisticated production agriculture sectors, has designated itself a "developing nation," in World Trade Organization (WTO) negotiations in order to minimize reforms to its trade distorting policies.
Trade with America
Thailand is one of the 41 countries from which the United States imports sugar duty free, under its WTO-mandated tariff-rate quota (TRQ) system. Thailand normally fills 100% of its TRQ allocation. The United States must take this sugar regardless of the needs of the market. In addition to the 14,743 metric tons exported to the U.S. under the TRQ, Thailand has been seeking additional access to the U.S. in WTO and bilateral FTA negotiations.
The U.S. market is already oversupplied with subsidized foreign sugar, driving down prices, forcing facilities to close, and threatening 146,000 U.S. jobs. Further unneeded increases in subsidized sugar exports to the U.S. could jeopardize the operation of the U.S. sugar program and threaten the livelihood of efficient U.S. sugar farmers.
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