08.02.2021 0

Global sugar subsidies will only ever be eliminated reciprocally via trade agreements

By Rick Manning

On July 29, U.S. Rep. Kat Cammack (R-Fla.) and U.S. Rep. Dan Kildee (D-Mich.) introduced a bipartisan resolution that would have Congress consider eliminating U.S. sugar subsidies when “the President determines that all such subsidies by all such countries have been eliminated…” in a fair and reciprocal manner. At that time, per the legislation “the President should submit a report to Congress providing detailed information about how each of the countries has eliminated such subsidies; and after submitting such a report, the President should propose to Congress legislation to implement United States sugar policy reforms.”

Reciprocity is at the core of U.S. trade policy and in the long-term has led to freer and fairer global markets. When the U.S. works with trade partners to simultaneously reduce trade barriers, those reductions tend to be long-lasting. But when it comes to sugar, competitor nations have flooded markets for years, endangering U.S. and other producers.

In 2017, the U.S. Commerce Department successfully negotiated a settlement between the U.S. and Mexico, and Mexican sugar producers to “prevent dumping of Mexican sugar and corrects for subsidies the Mexican sugar industry receives… address[ing] the concerns of the U.S. sugar industry and prevents harm to other U.S. industries, including confectioners, beverage producers, and corn growers, that might have resulted if no agreement were reached.”

What this case shows is the only way to shore up U.S. producers when foreign countries subsidize their goods, whether manufacturing or agriculture, is with offsetting duties — or a reciprocal trade agreement where both sides agree to lower their subsidies. That is why U.S. Rep. Cammack and U.S. Rep. Kildee’s zero for zero legislation would urge the President to negotiate with trade partners a zero for zero reciprocal agreement to end global agriculture subsidies and eliminate dumping into U.S. markets with an initial focus on sugar.

U.S. sugar producers, like all farmers and most businesses today, are part of the global economy and are sensitive to the actions of governments around the world.  Those governments are currently ratcheting up sugar subsidies to levels well above those seen in the United States, and the world sugar market is fluctuating wildly as a result.

India, the European Union, Thailand, Pakistan, Brazil and Mexico have for years flouted global trade rules and distorted free-market prices with billions a year in handouts and subsequent dumping of subsidized surpluses, making sugar one if the world’s most volatile commodity market. Market-distorting policies abroad are the main reason that America has a sugar policy in the first place.

  • India has doubled its sugar import tariff to 100 percent, and subsize its domestic producers at $1.7 billion per year.
  • The European Union gives $665 million per year in subsidies to sugar producers.
  • Thailand subsidizes it sugar industry at $1.3 billion per year.
  • Pakistan too subsidizes 2 million tons of surplus Pakistani sugar, to transfer their domestic surplus problems on to the world sugar market.
  • Brazil subsidizes its sugar industry at $2.5 billion per year.
  • Mexico was found by the U.S. Department of Commerce to be subsidizing and dumping on behalf of Mexican sugar producers by 80 percent. Mexican subsidy and dumping margins that totaled a stunning 80 percent.

Unilaterally disarming U.S. sugar policy without addressing the larger problem of rampant global subsidization will lead to the outsourcing of yet another efficient U.S. business and will leave American consumers dependent on unreliable foreign suppliers.

The true free-market solution to this problem is being championed by U.S Reps. Cammack and Kildee to achieve sugar subsidy reforms abroad, and then when foreign competitors eliminate their subsidies, it would call for the elimination in the United States — once the free market forms. Unilateral disarmament in the interim is not an option. Only through reciprocity can global sugar subsidies ever be ended.

Rick Manning is the President of Americans for Limited Government.

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