Solving the Global Sugar Trade Problem

NCPA November 25, 2013

Agriculture subsidies and trade manipulation have long been among the most intractable of policy problems. In developed countries, agricultural interests often become powerful and sympathetic interest groups. This results in a web of harmful and market distorting agricultural trade policies across the globe. But of all these distorted agricultural commodity markets, sugar is almost certainly the worst, says Tom Giovanetti, president of the Institute for Policy Innovation.

As a response to the massively manipulated global sugar market, the U.S. government preserves its domestic sugar industry through a complicated maze of import quotas and loan programs. Viewed in isolation, these programs are hard to defend and certainly distort whatever the status quo would be without them. But that leaves open the question of what the long-term result of eliminating these programs would actually be, and whether Americans would truly be better off as a result.

• When you realize that both developed and developing countries produce sugar and subsidize its production and export, it's easy to see how the global sugar market has become a maze of policies so distorting that it's hard to even refer to it as a market.
• The developed countries of the European Union, for example, comprise the third largest sugar producer in the world, while Brazil, a developing country, is the first.

The sugar problem is a global problem, and it requires a global solution.

• More than 100 countries produce sugar, and they all subsidize its production in various ways.
• The solution to the sugar problem is, at its core, the same as the solution to many other agriculture policy problems: a renewed effort through the international trade process to liberalize trade.
• Congress and the president should commit to the elimination of subsidies and trade barriers for sugar and other agricultural commodities through a renewed process under the auspices of the World Trade Organization (WTO).

Nobody thinks it will be easy, and the United States will have to make some politically painful concessions, but such is the nature of trade agreements. Far better for the United States to surrender some of our harmful protectionist policies to achieve greater gains through a WTO process than to unilaterally drop them and gain no long-term market improvements in exchange.

Source: Tom Giovanetti, "Solving the Sugar Subsidy Problem," Institute for Policy Innovation, October 2013.