The Global Sugar Regime - A Case For Reform
Speech by Minister for Trade The Hon Mark Vaile MP to the to the Sugar Industry Dinner
Seattle, 28 November 1999
(Check Against Delivery)
Thank you, Geoff [Mitchell, Chairperson, Australian Sugar Milling Corporation]; ladies and gentlemen.
And I'd like to congratulate this global sugar alliance for putting together these important functions to highlight the need for reform in world sugar markets.
It's great to see this alliance of sugar producers supported by consumers working together for wins for both.
The current distorted sugar regime
The world sugar market is anything but a normal market and commonsense plays no part in the current global sugar trade.
For example, the European Union - one of the world's highest cost producers - is also one of the largest exporters. The EU's policies hurt their own food processing industries and drive down global prices so that efficient farmers elsewhere suffer.
The damage caused by the sugar policies of rich countries is most acutely felt by efficient producers including those in developing countries that depend on agricultural exports for earning their way in the world.
For many developing countries represented here tonight, sugar is a critical industry that provides valuable foreign exchange to pay for health, education and vital infrastructure virtually all of which comes from the rich countries that are restricting imports of sugar.
As well, the sugar policies of the EU, the US and Japan are harming their own food processing industries.
One thing that's better in Australia than here is rum and coke, a favourite drink of mine. And the reason is that the coke in Australia is made from cane sugar and not from corn syrup. The result is that we enjoy a better product than here in the home of coke.
Studies show that processed food is the highest growth area in world agricultural trade. By the year 2000, 75 per cent of all agricultural trade will be in processed food.
US and EU food processing industries should be well placed to take advantage of this growth. They have some of the best known brands in the world, the best technology, and top products.
But despite these advantages their cost structure is unacceptably high because their Governments have handicapped them with staggeringly high input prices.
They pay around three times the world price for sugar. These prices act as a brake on the processed foods industries in Europe and the US.
The case for reform
All of you here are aware of the situation I have just outlined.
And you know that sugar producing countries have been calling for change to the world sugar regime for a long time, with no success.
Bilateral pressure has proved ineffective against the might of the agricultural lobbies in the EU and US.
And the GATT and the WTO are yet to provide the answer, with agriculture severely discriminated against under the rules of the world trading system.
But you have to be determined - some might say stubborn - to be in the sugar business. And you have to be an optimist as well. So I can still stand here and say that if we are determined - if we push hard - we can make things change.
This round of multilateral trade negotiations presents a golden opportunity for substantial liberalisation of the global sugar regime.
The Uruguay Round agreement provides a solid framework for further agricultural liberalisation, and our challenge is to ensure that sugar is fully included in the future agricultural reform.
In the context of the new round I also draw hope from the impressive way those with an interest in the sugar industry have gone about making sure their reform message is heard above the hype here in Seattle by:
The Global Alliance for Sugar Trade Reform and Liberalisation is an impressive coalition. Its very existence sends a very strong message that the sugar policies in rich countries are indefensible. I thoroughly endorse the sentiments in your Communique and believe the Alliance has made a strong case for reform.
Of course, the battle on sugar reform is not to convince those in this room, but rather the EU, US, Japan and others.
The challenge for us will be to get the message across that manufacturers of processed food and beverages, taxpayers and consumers in protectionist countries will also benefit greatly from the liberalisation of sugar markets.
To do this our case must be as persuasive and as intellectually rigorous as possible.
A report prepared for this meeting entitled Sugar: international policies affecting market expansion by the Australian Bureau of Agricultural and Resource Economics (ABARE) and US firm Sparks Companies Inc, provides a solid basis from which to argue our case.
The report concludes that correcting the policy induced distortions of the world's sugar markets (by 2005) would bring benefits to producers and consumers alike. For example, a multilateral approach to policy reform would result in world raw sugar prices increasing by over 40 per cent, while reform of the US market alone would lift world prices for raw sugar by an estimated 17 per cent.
At the same time costs for the sugar using industries in these countries would drop significantly.
These numbers highlight the case we are making and I will have more to say on the research side tomorrow afternoon when I formally release the ABARE/Sparks report.
Conclusion
But let us not underestimate the difficulty of the task that confronts us - taking on the might of the EU, US, Japan and others.
This week represents merely the opening shots in what will be a long battle.
Nevertheless I do believe that working together, the Global Alliance for Sugar Trade Reform and Liberalisation, and the Governments that are represented here tonight, can make a difference.
Our message to those who oppose reform of the global sugar regime is simple.
There will be no conclusion to a new round of WTO negotiations without a good outcome on agriculture. And no successful conclusion on agriculture will be possible without agreement on sugar reform. Your alliance is another step forward in building a worldwide coalition for reform.
ENDS