Sugar: International Policies Affecting Market Expansion

Speech by the Minister for Trade, the Hon Mark Vaile MP at the release of the ABARE/Sparks Companies Sugar Report

Seattle, 29 November 1999

(Check Against Delivery)

Thank you Bruce [Vaughan, Chairperson, QSC].

Last night I addressed many of you who are either members of, or supporters of, the new global sugar alliance.

Now it is great pleasure to be here to formally launch the Global Alliance for Sugar Trade Reform and Liberalisation communique and to release the report by the Australian Bureau of Agricultural and Resource Economics (ABARE) and the US firm Sparks Companies, entitled Sugar: International Policies Affecting Market Expansion.

The Distorted Sugar Market

This report is a "must-read" for anyone who is not convinced of the cause for reform of global sugar markets or more generally of global agricultural markets. It clearly demonstrates the magnitude of the policy induced distortions affecting global sugar markets and the damage these policies do to efficient sugar producers worldwide.

You don't have to be an economist to work out that there is something seriously wrong with a market in which the European Union - one of the world's highest cost producers of sugar - is also one of the world's largest exporters of sugar.

In fact, subsidisation of sugar production, combined with non-tariff protection, keeps sugar prices for consumers and users in markets such as the US, EU and Japan at around three times the world price. And in the case of the EU that has also resulted in massive exports of highly subsidised sugar.

These policies severely depress the world price for sugar outside these countries. The result is that current world prices for sugar are just about killing some highly efficient cane farmers in the Australian sugar industry.

But the harm caused by the sugar policies of rich countries is more acutely felt by developing countries who rely on sugar as a crucial factor in their overall economic health. In these countries sugar could be providing additional valuable foreign exchange and making a much higher contribution to growth and development.

Instead, the sugar policies of the EU, US and others stifle much of this development potential.

Nor do EU, US and Japanese food processing industries and consumers get off lightly. Processed food is the highest growth area in world agricultural trade.

Higher domestic prices for sugar add substantially to the input costs for manufacturers of processed food, thus limiting their ability to exploit this lucrative sector.

In other words EU/US and Japanese sugar policies effectively shoot their own food processing industries in the foot.

I have just presented a brief outline of the problem, but the ABARE/Sparks report makes it patently clear that global sugar markets are in a mess. Reform simply cannot be put off any longer.

Cause for Hope

Fortunately there is cause for hope. The forthcoming round of multilateral trade negotiations presents us with a golden opportunity for substantial liberalisation of the global sugar regime.

The Uruguay Round agreement provides a solid framework for further agricultural liberalisation and the Cairns Group and others have made it their business to ensure that this liberalisation takes place. The challenge for sugar producers and users is to ensure that sugar does not miss out on reform.

This round of trade negotiations is an opportunity that we can't afford to let pass us by.

But our arguments must be rigorous and compelling if we are to convince others. And this ABARE/Sparks report provides a solid basis from which to argue our case for reform.

For example the report concludes that:

• a multilateral approach to policy reform would result in world raw sugar prices increasing by over 40 per cent; and
• the removal of government support measures in the EU, US and Japan would result in savings to consumers of around US$4.8 billion a year.

Conclusion

We know that reform of the global sugar regime will benefit not only efficient sugar producers in exporting countries.

The challenge is to get the message across that manufacturers of processed food, taxpayers and consumers in protectionist countries would also benefit greatly from the liberalisation of sugar markets.

The ABARE/Sparks report goes a long way towards helping us to achieve this goal, and I commend it to you all.

Ends