There is little doubt that India’s ever-growing sugar export subsidies are a violation of World Trade Organization (WTO) rules. The new subsidies, detailed here by the USDA, have come under heavy scrutiny by other major sugar producers like Thailand.
The Thai Sugar Millers Corporation recently asked its government to take formal action against India at the WTO level. One news article on the situation quoted the chairman of the sugar organization:
“The Indian export subsidy is completely distorting the market and is against WTO rules. It adversely affects world sugar prices, hurting other major sugar exporters including Thailand, which is the world’s second biggest sugar exporter. So we asked our government to do something to stop India from subsidizing exports.”
Talk about the pot calling the kettle black. Thailand is also facing WTO scrutiny over its sugar subsidies. A late-February report from a global sugar industry trade publication, FO Licht, notes:
Given that Thailand has increased its sugar exports by 50% in recent years amid a drop in global sugar prices, Brazil will question the country’s subsidies at an informal consultation of the WTO Agriculture Committee scheduled for March 4 in Geneva. Unica recently presented a preliminary report prepared by Agroicone, a consulting firm specialising in international disputes, to Brazil’s Ministries of Foreign Affairs and Agriculture which comes to the conclusion that this increase in shipments is due in large part to the minimum price for sugar sold in the domestic market (so-called Quota A sugar). This equated to 30 cents/lb late last year, while the international price of the commodity was around 15 cents/lb on ICE Futures US. According to Luciane Chiodi, one of the authors, the inflated domestic price is a cross-subsidy, allowing Thai producers to export.
So Thailand complains about India, and Brazil complains about Thailand. All that’s left to complete the circle is for India to lodge a complaint about Brazilian subsidies. And it has lots of good ammo to do just that.
In addition to the standard $2.5 billion a year in sugar subsidies and the numerous industry bailouts, Brazil has just upped cane ethanol blending requirements while levying a tax on competing fuels – proving that it truly is the OPEC of sugar.
Or, instead of forming a circular firing squad, the globe’s biggest sugar producers could endorse a U.S. proposal of a global subsidy cease-fire, which would allow a true free market to form.
That proposal is embodied by Congressman Ted Yoho’s Zero-for-Zero sugar policy that was reintroduced to Congress on Feb. 27.