Critics of the U.S. sugar program continue to beat a dead horse about ending domestic import quotas and tariffs in the name of “free markets.” But the last few weeks of roller-coaster policy decisions in India over its own sugar industry demonstrate why the “free market” argument when it comes to sugar is as shallow as a parking lot puddle.
In mid-May, the new Indian government announced a 32 percent cut in government export subsidies for sugar. Zeroing out the subsidies altogether would have been the real “free market” thing to do, but at least it was a start in the right direction.
Not surprisingly, the howls of protest from the Indian Sugar Mills Association could be heard in Baton Rouge.
Then on June 12, 2014, Reuters reported that the Indian government reversed itself and “increased the subsidy for raw sugar to boost output and exports,” restoring the rate that had been cut just a few short weeks earlier.
So much for the 32% Solution.
Less than two weeks later, the Financial Times reported that “India has more than doubled its sugar import duty in an attempt to improve the fortunes of the country’s heavily indebted milling industry.”
In addition, the government “raised the mandatory level for blending cane-based ethanol in petrol to 10 percent from 5 percent.” Government. Raise. Mandatory. No mention of “Free” or “Market” in there anywhere.
Indeed, the Times reported, “The move comes after intense lobbying from local sugar producers, who have struggled in the face of foreign competition.”
And to further impede such competition, the government is also “expected to halt sugar imports from countries such as Brazil almost entirely, and push domestic prices sharply higher.”
Apparently Brazilian sugar is even more heavily subsidized than Indian sugar. Regardless, it is clear that the new Indian government’s schizophrenic sugar policies are anything but a move to a free and fair open market.
As the Times noted, “Sugar is among the most political of commodities.”
Yes it is. And critics of U.S. sugar policy who dream of a true, global free market need to recognize the reality of the present distortion of sugar prices thanks to government subsidies such as those in India. The only responsible way to zero out U.S. support for its domestic sugar producers is for India and the rest of the world to do the same at the same time.