Stung by a “recent flood of cheap imports because of low global prices,” India earlier this month increased the import tax on sugar from foreign nations to 15%. This is the same type of protection the United States provides for its own sugar industry to counter direct government subsidies to sugar farmers in countries such as Brazil…and India.
“Global sugar prices are close to three-year lows as a result of production exceeding demand for the past three years and the prospect of another big surplus in 2013-2014,” reported the Wall Street Journal last week.
“Sugar refiners in India, the world’s second-largest producer and biggest consumer, have seen both their domestic and overseas sales hit by an inability to compete at these levels as they need to pay high government-set prices to sugar-cane farmers.”
Gautam Goel – managing director for Indian-based Dhampur Sugar Mills – declared that “Imports will stop at these prices,” referencing the higher price with the new sugar tax added in.
The problem for India, according to Goel and other sugar industry executives is that “they are unable to sell down their abundant stocks at reduced prices, as they have to buy cane from growers at high state-fixed prices.”
It is significant to note that cheap, heavily-subsidized Brazilian sugar imports are threatening India, even though India is the #2 sugar producer and consumer in the world and subsidizes its own farmers at a level almost TWICE the amount Brazil pays its farmers.
Imagine the damage Brazil and India could do to the U.S. sugar industry should Congress eliminate our own import taxes on foreign sugar without a simultaneous end to government support subsidies by all countries which artificially reduce global sugar prices.
The obvious solution to all of this is a government-free free market for sugar.
As such, we encourage Congress to adopt, and encourage the Obama administration to pursue, a “zero for zero” strategy for world trade in sugar: Zero U.S. tariffs and quotas in simultaneous return for zero government subsidies to foreign sugar farmers.
Open, level-field market competition…and may the sweetest farmers win!