FOR IMMEDIATE RELEASE: June 3, 2015
CONTACT: Phillip Hayes, 202-507-8303
WASHINGTON – Despite a collapse of global sugar prices, Thailand has been able to maintain high levels of sugar production thanks to at least $1.3 billion a year in subsidies and other policies – all of which has only exacerbated the glut of sugar currently distorting the world market.
That’s according to a new study released today by the American Sugar Alliance (ASA), which details the complex web of Thai sugar policies.
“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 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 World Trade Organization (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.
“Thai government support for its sugar industry amounts to at least $1.3 billion per year,” the study revealed. “That includes about $775 million or more in indirect export subsidies through a price pooling system, which boosts subsidies when world prices decline, and $500-525 million per year in direct payments. In addition, Thai sugar producers benefit substantially from soft loans and input subsidies the Thai government makes available to all of agriculture.”
Jack Roney, ASA’s director of economics and policy analysis, unveiled Meriot’s work in testimony prepared for the House Agriculture Committee.
“American sugar producers are among the world’s most efficient, and most socially and environmentally responsible, but they cannot compete in a world sugar market badly distorted by foreign subsidies,” he testified. “So called ‘world market’ prices are running barely half the world average cost of producing sugar. Foreign sugar subsidies are expanding as governments seek to protect their industries against the low world prices.”
In addition to Thailand, Roney pinpointed Brazil’s $2.5 billion a year in sugar subsidies, India’s WTO-illegal export subsidies, and Mexico’s government ownership of 20% of its industry and dumping on the U.S. market as areas in need of reform.
U.S. sugar producers believe they would excel in a free market because of their efficiency and have publicly endorsed the zero-for-zero sugar policy introduced by Congressman Ted Yoho (R-FL). Yoho’s plan would target foreign subsidies and roll back U.S. policy once a free market takes shape.
For more information about the American Sugar Alliance, U.S. sugar policy, and foreign sugar subsidies, visit www.sugaralliance.org.