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THE DOMINO EFFECT: What Foreign Sugar Producers have in Common with Cold War Communists

“The domino theory,” explains Wikipedia, “was a theory prominent from the 1950s to the 1980s, that speculated that if one state in a region came under the influence of communism, then the surrounding countries would follow in a domino effect.”

A similar domino effect appears to be spreading globally today when it comes to government crop subsidization, especially sugar cane, as nations fall prey to the lure of government interference in the marketplace.

Brazil – the world’s #1 sugar producer – has been generously subsidizing its farmers and refiners to the tune of billions of dollars for many years, artificially lowering the commodity’s price and allowing the South American nation to corner over half of the world’s market.

India – the world’s #2 sugar producer – has been similarly subsidizing its sugar industry in an effort to keep up with Brazil. In addition, the government is now weighing additional export subsidies, as well.

The European Union – the #3 producer of sugar – also has a history of export subsidies. And while such subsidies have fallen over the last ten years after the World Trade Organization (WTO) ruled them illegal, they have not disappeared completely and pressure is mounting to up the stakes again.

With the three sugar producing giants have come under the influence of government subsidies and market price manipulation, it should come as no surprise that smaller players are now starting to fall for the practice like dominoes, as well.

In fact, reported on April 30, 2014 that the Pakistan Sugar Mills Association was requesting a $40 per ton government export subsidy for 250,000 tons of surplus Pakistani sugar to compete with India’s planned $54 per ton subsidy.

Who’s next? And how much?

Critics of U.S. sugar policy continue to call for an end to import tariffs and quotas in support of the free market. A laudable objective. The problem is that other nations are distorting that very market with direct and indirect government subsidies that continue to expand and increase year after year.

Just as unilateral disarmament was no option during the Cold War against world communism, neither should unilateral disarmament be an option for Congress when it comes to the global sugar market. Only if foreign governments agree to zero out their production, refining and exporting subsidies should he U.S. consider zeroing out protections of our own domestic sugar industry.