The Canadian Sugar Institute (CSI) supports the pursuit of free trade initiatives by the Government of Canada that will lead to significant gains in export market access for sugar and sugar-containing products from Canada as well as increased transparency and predictability in trade rules and administrative practices.
Sugar remains a highly sensitive commodity in key markets where production and trade continues to be dominated by significant government intervention. Restrictive tariffs, tariff rate quotas and rules of origin in export markets prevent meaningful export access for Canadian refined sugar. Comprehensive liberalization of sugar trade through multilateral (WTO) negotiations offers the best prospect of reforming sugar policies and securing predictable and meaningful market access for Canadian refined sugar.
Since the delay of the WTO Doha Round, the Government of Canada has accelerated its work to negotiate a number of regional and bilateral free trade ("FTA") agreements. The Canadian Sugar Institute evaluates all FTA negotiations for the potential to create export opportunities for Canadian sugar and sugar-containing food products as well as the potential to transfer foreign market sugar distortions into the Canadian market.
Central and South America
Central and South American countries such as Brazil and Guatemala are the main source of raw sugar for Canada’s sugar refineries. This supply of world priced raw sugar is essential to maintain a competitive sugar refining industry to serve Canadian consumers as well as food manufacturers who use about 85% of Canada’s refined sugar production.
Central and South American raw sugar suppliers to Canada are not logical export markets for Canada’s refined sugar. On the other hand, surplus refined sugar from these countries can pose a threat to Canada’s open sugar market while other markets, notably the United States, continue to restrict imports.
One of the first bilateral FTAs to have a significant impact on the Canadian sugar industry was the Canada-Costa Rica FTA. This FTA included the phase-out of Canada’s $31 per tonne duty (about 5-8% duty) for Costa Rican exports of refined sugar to Canada but did not provide for meaningful access to the Costa Rican market. Given the negative impacts of this agreement and strong objection of Canada’s sugar industry, the Government of Canada continues to take the specific concerns of the industry into account to ensure that this agreement does not serve as a model for future negotiations.
Canada has concluded and continues to negotiate a number of other FTAs in the Central/South American region. FTAs with Colombia, Honduras, Peru and Panama have specific sugar provisions such as transitional tariff phase-outs or small, reciprocal quotas that help avoid the immediate negative effects of a duty-free quota on the Canadian sugar industry.
The Canadian Sugar Institute continues to inform government officials and politicians of the threat to Canada’s sugar industry of trade agreements with surplus sugar producers in South and Central America where there is no commercial export opportunity for Canadian refined sugar.
The European Union is the world’s largest producer of beet sugar benefiting from a highly regulated and protectionist system that guarantees producers high prices. EU sugar policy includes a production quota system, a reference price for sugar and a minimum guaranteed price to growers, as well as trade measures to prevent imports from upsetting the domestic system.
The EU sugar program underwent a partial reform beginning in 2006, however the program continues to guarantee sugar producers a price for sugar that is higher than the world price and new payment schemes were defined to compensate producers for loss of quota. EU beet sugar production is now more concentrated in countries with the highest sugar yields and most efficient production. The EU continues to be a large surplus sugar producer and exporter of subsidized refined sugar.
Although the EU partially reformed its domestic market, it did not reduce its prohibitively high import duties that continue to block imports of refined sugar from Canada. The EU import duty on refined sugar is 419 Euros per tonne, almost 20 times the Canadian duty of $30.86 per tonne. As a result of this high duty level, EU imports are mostly raw sugar and are from least developed and developing countries with special preferential agreements.
In 2005, a WTO panel found that the EU had been exceeding its export subsidy commitment by millions of tonnes. To comply with the panel ruling, the EU had to reduce its subsidized exports to a maximum of 1.374 million tonnes. However, this volume is still massive – it is more than the size of the Canadian sugar market. The EU has also allowed additional exports above this limit arguing special world price circumstances justified these exports. This EU perspective has been denounced by the Global Sugar Alliance for Sugar Trade Reform and Liberalisation. Read more
For more information on EU sugar policy, see European Commission, Agriculture and Rural Development on Sugar
Canada-EU Trade Negotiations
The CETA negotiations were launched in 2009 and concluded in 2014. The Canadian Sugar Institute sees this as a potential market opportunity for sugar and sugar-containing products from Canada; however, the trade distorting nature of the EU sugar program continues to generate surplus refined sugar for export which poses a threat to Canada’s sugar industry. It is critical that this imbalance is not worsened in the CETA and that Canada achieves meaningful gains in exports which are currently restricted by prohibitive tariffs and restrictive EU rules of origin.
Trans Pacific Partnership Negotiations
On October 9, 2012, Canada joined the Trans Pacific Partnership (TPP) negotiations. The TPP is a negotiation among 12 countries, now including Canada, Mexico and Japan. The other members are Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States and Vietnam. The Canadian sugar industry welcomes Canada’s participation in the TPP which has the potential to address sugar and sugar-containing product market access barriers among TPP members. The TPP countries are extremely diverse in terms of sugar policies and trade but collectively represent an important opportunity to advance trade in refined sugar and sugar-containing food products. The Canadian Sugar Institute is closely following these negotiations given the potential to address quota and tariff barriers, particularly in the U.S. The CSI is also closely monitoring negotiations with Japan which is a potential market for Canadian sugar-containing products.
Other FTA Negotiations
The Canadian Sugar Institute monitors and provides input to all other FTA negotiations based on the potential for export gains as well as anticipated Canadian market impacts. Every negotiation is unique given differences in market geography, size and development as well as unique sugar market policies, many of which distort domestic production and trade. The Institute supports the WTO as the best mechanism to achieve comprehensive sugar market liberalization in sugar to ensure the long-term stability and growth of the Canadian sugar industry.
For a listing of Canada’s trade agreements and negotiations, visit Foreign Affairs, Trade and Development Canada, Negotiations and Agreements