May 18, 2000

Delegates from 13 countries met in Honduras, May 2-5, to set an agenda to push for liberalization of global sugar markets. The meeting was sponsored by the Association of Honduran Sugar Producers for members of the Global Alliance for Sugar Trade Reform and Liberalization. The group, formally launched at the WTO Ministerial in Seattle, has struck a chord with sugar producers from around the globe who share a common interest in improved access and reduced export subsidies for sugar. Members from India, Thailand, Brazil, Australia, South Africa, Canada and various Central American countries, among others, identified the highly distorted sugar policies of the US, EU and Japan as the main reason for the depressed global sugar market. A combination of price supports, non recourse loans, subsidies and high tariffs in these countries negatively impact producers who produce and trade at the world price.

Global Alliance members stressed the need for WTO Ministers to "refocus"on the fundamentals of sugar trade liberalization for developing countries who want their economies to grow through "trade not aid." Global Alliance members are especially concerned over recent sugar policy developments in the US and want to send a strong message to the US as it seeks to resolve its current domestic sugar policy dilemma.

The group plans to meet next in Banff Canada alongside the Cairns Group Ministerial in October (full Alliance press release available by email from CSI).

US Import Licencing Proposal Threatens Canadian Exports of SCP's

On April 17, the US published proposed new import licencing rules for sugar-containing products (SCP's) giving interested parties 30 days to comment (the comment period was later extended to May 17). If implemented, import licences would be required for SCP's under quota containing over 10% sugar.

Companies on both sides of the border will be negatively affected by the change which would give preference to bulk imports over finished products and grant import licences only to a small number of US companies who meet the highly selective criteria.

The proposed rule would also breach several bilateral trade agreements with Canada. In particular, it threatens the 1997 agreement in which Canada agreed not to challenge the US SCP Re-export program in exchange for a Canada-specific allocation under the global SCP quota. Import licencing would completely undermine the benefits Canada obtained in that agreement leaving Canada no choice but to challenge the SCP Re-export program. The Canadian government has stated that the proposed rule is "discriminatory, arbitrary and unjustified,"and would significantly change the import policy that has prevailed for the last five years.

US Government to Buy Sugar

The US Department of Agriculture announced, May 11, that it will purchase 150,000 tons of US sugar and put it into storage. The action will remove some of the excess sugar from the US market, and is aimed at preventing the costly forfeiture of sugar pledged as collateral under the CCC's loan program. US production has continued to expand in recent years under price supports which have maintained the US price at roughly three times the world price.

The announced purchase falls far short of the estimated surplus of at least 265,000 tons. In addition, it does not address next year's production surplus or the additional imports from Mexico of up to 250,000 tonnes.

Not everyone is pleased with the purchase. The (US) Coalition for Sugar Reform said the move, will cost US taxpayers about $60 million and will be one of the "most expensive band-aids in history." It is not clear what will become of this sugar. Larry Graham, President of the Coalition's steering committee said that the USDA will not be able to do anything with the sugar. He said that sugar cannot go overseas for fear of a trade war, cannot be given as humanitarian aid because no country wants it, and cannot be refined as ethanol for fear of reducing corn prices.