India certainly got the international community’s attention when it recently announced a slew of new sugar subsidies, including a direct export subsidy that is likely against World Trade Organization (WTO) rules.
Brazil was so enraged that it demanded the elimination of India’s new sugar programs at a recent WTO meeting. Then Brazil promptly announced a new government handout of its own.
Brazil’s new program, introduced in late March, consists of roughly $2 billion worth of loans for sugar growers, mills, and ethanol storage facilities. A loan program sounds innocent enough until you consider Brazil’s track record for forgiving repayment of government loans.
It’s a pretty sweet deal, and it’s on top of the standard $2.5 billion a year in Brazilian sugar subsidies; a $480 million sugar ethanol bailout package announced last summer; $65 million in direct subsidy checks to certain growers last year; and a $620 million state-funded investment program announced in February.
Unfortunately, Brazil and India’s sugar subsidy arms race – along with trade-manipulating policies of other major producers and exporters like Mexico and Thailand – are further distorting the global sugar market, which has long been a dumping ground for subsidized excess.
America’s sugar producers have a clearer path forward. India should end its government sugar programs, which are fueling the dumping on the market. So should Brazil. So should all other sugar producers that subsidize and dump.
The plan is called the zero-for-zero sugar policy, and it calls for a subsidy cease-fire followed by true free-market competition where the most efficient, lowest cost producers win.
But America can’t go it alone. And we can’t unilaterally disarm while foreign competitors are busily expanding their war chests with new subsidy schemes.