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Brazilian Sugar Barons Threatening Courtroom War with India, Thailand over Government Subsidies

Brazilian sugarcane producers – which account for roughly half of the world’s sugar market – are threatening to launch a trade complaint against India and Thailand – the #2 and #3 global sugar producers – with the World Trade Organization (WTO) over government subsidies that Brazil claims are responsible for plunging prices.

Alonso Soto, writing for Hellenic Shipping News Worldwide, recently reported…

“Eduardo Leão, executive director of the Brazilian cane industry association Unica, said the group hired an international law firm to dig into the subsidy programs, which they estimate could cost the South American country $1.2 billion a year in lost revenue.

“’We are determined to challenge both countries,’ said Leão. ‘Our role now is to deepen our analysis and convince the government that we are getting hammered by these subsidies.’

“Brazil, the world’s largest sugar exporter, has brought questions about incentives for Thai and Indian sugarcane producers to the Agricultural Committee of the World Trade Organization. The country has grown more concerned about those programs at a time when global sugar prices are at six-year lows.”

This appears, however, to be a textbook case of the pot calling the kettle black.

An extensive study, “Agricultural Subsidies in Key Developing Countries, by DTB Associates last November found that Brazil itself was guilty of that which it accuses the Indian and Thai governments…

“Brazil establishes minimum guaranteed prices (MGPs) for twelve products.  The MGP is set prior to the growing season, and for some crops the level varies among growing regions. Brazilian officials use a number of different programs to ensure that returns to producers do not fall below the guaranteed level.”

A huge problem with government subsidies is that they become addictive.  Another is that as one country expands its subsidy programs, others feel compelled to follow suit, resulting in an “arms race” of market-distorting government handouts.

The growing dependence on government subsidy sweeteners makes it extremely difficult to kick the habit.  Indeed, the best way to break the addiction is to go cold turkey.  But the only way that’ll ever happen is if all competitors – including the U.S. – go cold turkey together.

Rep. Ted Yoho’s “Zero for Zero” proposal would do just that with the global sugar market.  It’s time has come.