The International Center for Agricultural Competitiveness (ICAC) at Texas Tech hosts and maintains a database of subsidies and trade policy information for public use. The report summarizes the information obtained and housed in the database relating to sugar in key producing, consuming, exporting, and importing countries. Click here for the full report.
India’s latest export subsidy scheme blatantly flouts international trade rules, and it’s been receiving lots of attention lately.
Australia, Brazil, and Guatemala have all recently initiated formal proceedings against India under the World Trade Organization’s (WTO) dispute settlement mechanism. Leaders from Alvean, the world’s biggest sugar trader, singled out Indian subsidies for suppressing global prices. And earlier this month, Texas Tech University released a global sugar subsidy handbook that dedicated considerable space to India’s trade-distorting policies.
“India, a long-time sugar importer, is now making an unprecedented move to supplant Brazil as the world’s dominant supplier,” the Texas Tech study’s author noted in a recent column. “Through export subsidies that appear to be WTO-illegal, soft loans, tariffs, and other new policies, India increased production and more than made up for Brazil’s [production] decline.”
Now, the U.S. Department of Agriculture has provided updated insights into India’s extensive array of support programs. Its recently-released annual report about India’s sugar industry outlined several of the country’s subsidies. Among them:
And that doesn’t even count the $1.5 billion in preferential loans that the report mentioned, which are designed to help India’s industry cope with low prices amid surpluses. Nor does it include India’s ethanol program, which the USDA report says may benefit from proposed aid to improve production capacity.
India also guarantees high prices for sugarcane to boost farm revenue, making it more profitable than other crops and helping to fuel oversupplies.
With such an intricate web of subsidies one would think India’s industry would be flush right now. Wrong. Even with a generous subsidy system, the inefficient sugar industry is struggling. As the USDA observed:
Currently, sugar sold in international markets is selling at more than 33 percent discount to Indian sugar (wholesale), a gap which widened by 9 percent in the last seven months, driven in part by Indian rupee appreciation of 6 percent (relative to USD). Subsidies and supports have not made Indian sugar competitive on international markets.
And don’t expect the price situation to improve in the short term. The USDA report predicts that surplus stocks will reach a record 17 million metric tons in 2019 – that’s about 6 million tons more than the United States consumes in a year.
Clearly, India’s system is broken. It’s time for reform. It’s time for all countries to eliminate the subsidies wrecking the global sugar market. It’s time for a Zero-for-Zero sugar policy that prioritizes business smarts over subsidies.
U.S. trade negotiators and lawmakers gained access to a helpful resource about foreign agricultural policy today when Texas Tech University unveiled a report on global sugar subsidies.
The study – authored by Dr. Darren Hudson, director of the school’s International Center for Agricultural Competitiveness – included profiles of 22 foreign countries that account for 80 percent of global sugar production and 83 percent of exports.
He examined major market players like Brazil, India, and Thailand, as well as those with which America is currently engaged in trade talks, including China, Japan, Mexico, Canada, and the European Union.
“There’s one common thread connecting every country,” Hudson said. “They all subsidize their own country’s sugar production to the detriment of others.”
This, he explained, has made sugar one of the world’s most distorted commodity markets. And to protect their domestic sugar industries from the associated price volatility, countries are creating more and more subsidies, which is adding to the oversupply and depressing prices further.
“Government intervention in the world sugar market remains extreme and widespread with a wide variety measures to support domestic sugar producers,” read the report.
Tariffs were a commonality among all countries in the Texas Tech report, with some in excess of 100 percent. Domestic price supports, debt forgiveness, and handouts for inputs such as fertilizer and equipment were also widespread. Ethanol programs that subsidize the use of sugar as a feedstock act as a price support and are gaining in popularity, the report found.
Brazil has long been the world’s biggest sugar producer, riding an estimated $2.5 billion in annual subsidies to a dominate share of the global market. But their dominance is being challenged by India, which has dramatically increased government support and exports in recent years.
An export subsidy, supply controls, tariffs, and soft loans were among the new Indian policies the report identified. India, whose supports are estimated at more than $1.7 billion a year, is currently being challenged by several countires at the World Trade Organization for excessive subsidization.
The United States is not included in the report. U.S. sugar policy – a combination of import quotas and loans repaid with interest – operates without taxpayer cost and exists as a response to foreign subsidies.
The U.S. sugar industry has publicly endorsed a concept introduced by Congressman Ted Yoho (R-FL), known as the Zero-for-Zero sugar policy, which would end America’s no-cost policy in exchange for other countries eliminating their trade-distorting programs and letting a true free market form.