During its recent annual convention, the American Sugar Alliance unveiled two educational videos to illustrate the ever-increasing rates of foreign sugar subsidization that are destroying the free market.
The first video described the stagnant, low-price environment in North America and steps taken by the U.S. sugar industry to increase its efficiency to survive, including new technology, plant modernization, farmer cooperative arrangements, vertical integration, and investments in workforce training.
“But not everyone in North America favored these same business models,” the ASA video explained. “[Mexico’s] inefficient producers stayed in business and aren’t making needed improvements…because the Mexican government bailed them out, taking control of half the country’s sugar mills to avoid bankruptcies.”
In addition to government ownership, ASA said other Mexican subsidies, including preferential loans, debt forgiveness, and cash to cover operating losses, are being used to “further coddle inefficient producers.”
With the aid of these subsidies, Mexican producers are now dumping sugar onto the U.S. market and harming U.S. farmers, workers, and taxpayers, ASA said.
“American producers and American consumers deserve better than being trampled by foreign treasuries and unfair trade practices,” the video concluded. “They deserve a market where hard work and ingenuity are rewarded, not punished.”
Of course, the North American market isn’t the only one being wrecked by subsidies. The second ASA video described the global dump market, which is widely considered the most distorted commodity market the world.
Specifically, ASA discussed the subsidy run-up currently underway by the world’s biggest sugar producers: Brazil and India.
“Brazil is no stranger to sugar subsidies,” the video explained. “Using $2.5 billion a year worth of government involvement, the country has achieved an OPEC like stranglehold on the world market.” On top of that, Brazil recently added new preferential loans, ethanol industry bailouts, and direct subsidies.
Not to be outdone, India also created new subsidies, ASA continued. In addition to government price control, tariffs, and export mandates, India has added “direct subsidies to boost exports, a doubling of import duties, and new sugar ethanol blending requirements to expand domestic sugar use.”
ASA explained that the result has been “a complete annihilation of free trade” and a “new market environment [that] is creating a sinking tide that’s flushing everyone down the drain.”
Global sugar production costs hit 27 cents a pound in 2013, up sharply from 15 cents in 2002.