India’s 32-Percent Solution to Subsidy Addiction

(Chuck Muth) – When you take away an addict’s drug of choice, painful withdrawal symptoms naturally follow.  Thus is the case with refiners in India after that nation’s Ministry of Agriculture cut sugar export subsidies by 32 percent last week.

According to a report in Business-Standard.com, the Indian sugar market “is currently facing over-supply of 5 million tonnes of which the government allowed 2 million tonnes of exports this year.”

However, the 32 percent cut in the government subsidy has the Indian Sugar Mills Association (ISMA) crying foul, claiming the cut “without any notice or any ground” violates law and “has created massive confusion in the market and a sense of betrayal amongst the millers of the country.”

Tamil Nadu, president of the ISMA, told the Hindu Business Line that “the government’s decision to reduce the sugar export subsidy was “shocking” and would make exports “unviable.  He added that the decision would push sugar mills “into deep distress” in the face of the large existing sugar surplus.

Bravo to India’s government for taking this step in the right direction despite the heat from those who have come to rely on what is essentially market-distorting welfare.  The next step should be to eliminate the export subsidies completely.

Indeed, if other nations would follow India’s lead and zero out not only their export subsidies, but production and refining subsidies as well, then the U.S. could zero out its own sugar program of tariffs and import quotas.

Zero for zero.

Just as Rep. Ted Yoho (R-Florida) has proposed in HCR 39 “expressing the sense of Congress that all direct and indirect subsidies that benefit the production or export of sugar by all major sugar producing and consuming countries should be eliminated.”

Or as Seton Motley of Less Government put it, “You get rid of your trade barriers, and we’ll get rid of ours.”

Zero for zero.

“It won’t be easy to get an agreement through the World Trade Organization process,” writes Tom Giovanetti of the Institute for Policy Innovation, “and the United States itself will have to make some politically painful concessions, but such is the nature of trade agreements.”

With India’s decision last week, maybe now is a good time to Congress to take a closer look at Rep. Yoho’s proposal.