Sucrose - Trade and Economics

Trade and Economics

One of the most widely-traded commodities in the world throughout history, sugar accounts for around 2% of the global dry cargo market. International sugar prices show great volatility, ranging from around 3 to over 60 cents per pound in the past 50 years. About 100 of the world's 180 countries produce sugar from beet or cane, a few more refine raw sugar to produce white sugar, and all countries consume sugar. Consumption of sugar ranges from around 3 kilograms per person per annum in Ethiopia to around 40 kg/person/yr in Belgium. Consumption per capita rises with income per capita until it reaches a plateau of around 35 kg per person per year in middle income countries.

Many countries subsidize sugar production heavily. The European Union, the United States, Japan, and many developing countries subsidize domestic production and maintain high tariffs on imports. Sugar prices in these countries have often exceeded prices on the international market by up to three times; today, with world market sugar futures prices currently strong, such prices typically exceed world prices by two times.

Within international trade bodies, especially in the World Trade Organization, the "G20" countries led by Brazil have long argued that, because these sugar markets in essence exclude cane sugar imports, the G20 sugar producers receive lower prices than they would under free trade. While both the European Union and United States maintain trade agreements whereby certain developing and less developed countries (LDCs) can sell certain quantities of sugar into their markets, free of the usual import tariffs, countries outside these preferred trade régimes have complained that these arrangements violate the "most favoured nation" principle of international trade. This has led to numerous tariffs and levies in the past.

In 2004, the WTO sided with a group of cane sugar exporting nations (led by Brazil and Australia) and ruled the EU sugar-régime and the accompanying ACP-EU Sugar Protocol (whereby a group of African, Caribbean, and Pacific countries receive preferential access to the European sugar market) illegal. In response to this and to other rulings of the WTO, and owing to internal pressures on the EU sugar-régime, the European Commission proposed on 22 June 2005 a radical reform of the EU sugar-régime, cutting prices by 39% and eliminating all EU sugar exports. The African, Caribbean, Pacific and least developed country sugar exporters reacted with dismay to the EU sugar proposals. On 25 November 2005, the Council of the EU agreed to cut EU sugar prices by 36% as from 2009. In 2007, it seemed that the U.S. Sugar Program could become the next target for reform. However, some commentators expected heavy lobbying from the U.S. sugar industry, which donated $2.7 million to US House and US Senate incumbents in the 2006 US election, more than any other group of US food-growers. Especially prominent lobbyists include The Fanjul Brothers, so-called "sugar barons" who made the single largest individual contributions of soft money to both the Democratic and Republican parties in the political system of the United States of America.

Small quantities of sugar, especially specialty grades of sugar, reach the market as 'fair trade' commodities; the fair trade system produces and sells these products with the understanding that a larger-than-usual fraction of the revenue will support small farmers in the developing world. However, whilst the Fairtrade Foundation offers a premium of $60.00 per tonne to small farmers for sugar branded as "Fairtrade", government schemes such the U.S. Sugar Program and the ACP Sugar Protocol offer premiums of around $400.00 per tonne above world market prices. However, the EU announced on 14 September 2007 that it had offered "to eliminate all duties and quotas on the import of sugar into the EU".

The US Sugar Association has launched a campaign to promote sugar over artificial substitutes. The Association now aggressively challenges many common beliefs regarding negative side-effects of sugar consumption. The campaign aired a high-profile television commercial during the 2007 Primetime Emmy Awards on FOX Television. The Sugar Association uses the trademark tagline "Sugar: sweet by nature."