Sugar subsidies are spinning out of control on the global stage and one country, ironically, has had enough. Mega-subsidizer Brazil said last week that it was filing an international trade case against Thailand for manipulating the world market with trade-distorting policies.
According to a Reuters article on the case:
“Brazil will challenge Thailand at the World Trade Organization (WTO) over subsidies for sugar producers that it says have dragged down global prices for the sweetener, the Trade Ministry said.
“Brazil said the Thai government has given support to cane growers and sugar mills that is inconsistent with international trade agreements, allowing the Asian country to win market share at the expense of Brazilian producers.
“‘These subsidies have been subject of several questionings at different committees in the WTO, but we saw no signs of changes,’ the Brazilian Trade Ministry said in a statement.”
Way to go, Brazil. America’s sugar producers agree with you completely. Thailand’s bad acts have harmed the global sugar market and every sugar producer in the world is suffering as a result. In fact, we commissioned a study last year into Thailand’s actions, which found, among other things, at least $1.3 billion a year in Thai sugar subsidies.
“From 2011 to 2014, world sugar prices dropped by 40%. Yet during that same period, sugar exports from Thailand rose by 70%, solidifying Thailand’s position as the world’s second largest sugar exporter. And, further rapid sugar production expansion – 50% in five years – is planned,” wrote the study’s author, Antoine Meriot.
Meriot, a French agricultural economist who traveled to Thailand to examine its industry and sugar policies, explained that subsidies fueled expansion in Thailand, a country that is less efficient than other major sugar exporters and is hampered by excess mill capacity and adverse weather conditions.
Thailand’s sugar policy is patterned after the old European Union quota system, which was declared illegal by the WTO in 2005. Supplementing this quota system are other subsidies, such as direct payments to growers when prices fall; preferential government loans; subsidies to offset input costs; government control over prices and planting decisions; ethanol subsidies; and tariffs to block imports.
Of course, Thailand isn’t the only bad actor. Some would argue that its accuser, Brazil, is far worse. Brazil’s devalued currency is crippling its global competitors, who were already on their heels after decades of Brazilian subsidies that helped it gain an OPEC like stranglehold on the sugar market.
We commissioned a study into Brazil, too, which we’d encourage Thailand to review. It might be useful if they ever decide to file a WTO case against Brazil in retaliation.
And let’s all hope that during this little spat between scorned subsidizers the two countries don’t forget about the third leg of the trade-distorting stool: India. Armed with WTO-illegal export subsidies and massive loan forgiveness packages, India is probably worth a WTO review as well.
Who knows, if enough of these cases get filed and publicized then the bad actors may be ready to do what American sugar producers have long supported. A global subsidy cease fire rather than unilateral disarmament of U.S. policy.