Jamaica is pretty good at growing sugar. They’ve been doing it since the 1600s, and sugar has largely fueled Jamaica’s economy ever since.
But that proud history could be coming to a bitter end, wrecked by global prices that have been grossly depressed by subsidies. Here’s how Jamaica’s sad sugar story has unfolded.
Jamaica historically has sold most of its sugar to Europe through a preferential trade relationship Europe has with its past colonies. After importing Jamaica’s sugar, the European Union (EU) used to ship some of its domestically produced sugar abroad with the aid of export subsidies.
EU sugar policy kept Europe fully stocked with an essential ingredient, kept Europe relevant in the export market, kept less efficient EU sugar farmers in business, and kept prices high for Jamaica and other developing countries.
Europe was happy because it had plenty of sugar, plenty of trade, and plenty of good karma for being so generous with the impoverished vestiges of colonialism.
But other players in the world market weren’t in such a giving mood. The world’s biggest exporters – including Brazil and Thailand – cried foul, charging that the EU policy was in violation of Europe’s World Trade Organization (WTO) commitments.
These exporters wanted a leg up on a major competitor even though they enjoyed subsidies of their own. Ironically, Brazil’s more than $2.5 billion a year in government programs and Thailand’s more than $1.3 billion a year in subsidization are less vulnerable to WTO challenge.
Brazil and Thailand won their case, and in 2006 the WTO ruled that Europe must rewrite its subsidy laws or face international trade retribution. That’s when a more than 10-year policy transition in Europe began, along with the demise of Jamaican sugar.
As part of its reform, Europe had to cut back its sugar production and sharply lower its sugar prices, bringing its market more in line with the distorted, heavily subsidized world market and making it less attractive to former colonies.
Europe tried to cushion the blow. A recent article in The Guardian about the plight of Jamaican sugar noted, “the EU has since 2007 granted €142m ($158 million) to the Jamaican government to privatise the sugar mills, improve productivity and pilot schemes to use cane for renewable energy.”
Unfortunately for Jamaica, those payments weren’t permanent and didn’t correct the underlying problem. Europe’s new sugar policies will leave the former colonies increasingly vulnerable to prices depressed by Brazil, Thailand, and other big subsidizers.
Of course, Europe is not leaving its own industry quite so vulnerable. The price supports and export subsidies that were hallmarks of the old sugar program are being replaced with direct payments to EU farmers. When the policy transition is complete in October 2017, EU sugar farmers can expect roughly $665 million a year in aid.
In other words, Europe’s remaining beet farmers will, to some extent, be protected from foreign subsidies while countries like Jamaica will be left in the cold.
As The Guardian explained:
[The] change in EU policy will likely force these cane farmers and hundreds of thousands like them across Jamaica and beyond out of traditional work and into subsistence poverty… The shockwaves will be felt far beyond Jamaica. Britain’s own Department for International Development (DfID) predicts that a perfect storm of the new EU beet policy and the current low sugar prices could force 6.4 million people into poverty by 2020 in [former colonies] where cane is a staple crop.
Seems like an awfully steep price to pay so that other countries can continue to bankroll their inefficient sugar industries with subsidies. That’s why the world needs a Zero-for-Zero sugar policywhere all the world’s subsidies are eliminated and all growers are given a chance to compete in a fair market.