(Chuck Muth) – Despite cornering over 50 percent of the world’s sugar market, Brazil’s sugar industry last week was singing the blues over India’s decision to provide a reported $128 million worth of direct financial aid to its sugar exporters “to subsidize freight and transportation costs.”
In a press statement released on February 6, The Brazilian Sugarcane Association (UNICA) “expressed grave concerns” that India, the world’s #2 sugar producer, “has been making use of sugar export subsidies for several years, further distorting the global sugar trade.”
UNICA worries that India’s export subsidies will “artificially force down prices, punishing exporters that don’t resort to similar practices.”
This is quite hypocritical coming from an industry that enjoys an estimated $2.5 billion (and rising) worth of government support to Brazilian sugar farmers which has also artificially forced down global sugar prices, punishing growers who don’t enjoy similar financial aid.
This fight over government subsidies between the world’s two top sugar producers further exposes the fiction that American sugar growers are competing in a “free market.”
While the worlds #1 sugar producer is providing government subsidies to its growers, the #2 producer is providing government subsidies to exporters – both artificially lowering the global cost of sugar below the true market cost of production by U.S. farmers who receive no such direct government financial support.
Indeed, if Brazil had to sell its sugar for true market prices that reflect actual production costs, and Indian had to export its sugar at the true cost of shipping and transportation, then U.S. sugar producers would be competing on a level global playing field and would have no need for import quotas and tariffs to protect them from artificially cheap foreign sugar.
In its release, UNICA maintained that “Brazil has a long tradition of defending global agricultural trade that’s free from all forms of distortive subsidies.” Admirable. However, to be consistent, Brazil needs to adopt a new tradition of defending global agricultural PRODUCTION that’s free from all forms of distortive subsidies.
This is the essence of Rep. Ted Yoho’s (R-Florida) “zero for zero” proposal in which the U.S. would “zero out” our current sugar program in return for a similar and simultaneous elimination of production and export subsidies by other global sugar producers.
UNICA is correct in noting that the World Trade Organization (WTO) frowns on export subsidies “because of their widely recognized negative impacts on global commerce.” Perhaps it’s time for the Obama administration to begin pushing the WTO to not only enforce bans on export subsidies for sugar, but production subsidies as well.