TRADE: Thailand Eyes Sweet Deal with Sugar Exporting Countries

By Marwaan Macan-Markar Reprint | | Print |

Marwaan Macan-Markar

BANGKOK, May 23 2003 (IPS) - Thailand hopes to rally the support of the world’s leading sugar-exporting countries in a meeting later this month, in a bid to push up the price of this commodity on the international market and help local farmers.

Officials at the Cane and Sugar Board are still working out the final details of the meeting to take place on May 30 in Phuket, a resort town in the south, between Australia, Brazil, Guatemala, South Africa and Thailand.

But the agenda includes the Thai government’s effort to get these countries to agree on a mechanism to lift the global price of sugar, after taking into account trends in the world sugar market.

Brazil is currently the largest sugar exporter, with a volume of 10 million tonnes a year, while Thailand exports 4.5 million tonnes a year. Australia exports four million tonnes, South Africa three million tonnes, and Guatemala, two million tonnes a year.

The global sugar market, though, is fed by 132 countries that produce the commodity, and reports on the Food and Agriculture Organisation’s (FAO) website forecast that world sugar production for 2003 could reach 140 million tonnes.

According to the U.N. food agency, the price of sugar on the international market is close to eight U.S. cents per pound, which is a marginal increase from the price it was being traded at in mid-2001, at 6.69 cents per pound.

Thai authorities have told the local media that the price needs to be set at 12 U.S. cents per pound for sugarcane farmers to enjoy a profitable return on their harvests.

Thailand’s faith in such an organised mechanism to lift the price of sugar – rather than let the forces of free trade in the international market determine it – comes seven months after it pursued a similar policy to stabilise the price of rice.

Governments at a meeting in October last year, attended by the world’s leading rice exporting countries – China, Vietnam, India, Pakistan and host Thailand – struck a deal to coordinate the world’s rice trade, but a mechanism to achieve price stability was not as easy to come by.

This initiative by Thailand reflects a problem that persists in global trade of agricultural products, says Francis Perez, trade policy advisor at the East Asia office of Oxfam, the British development agency running a global campaign for fair trade.

The subsidies being poured into the same agricultural products harvested in the developed countries have heightened this problem, he adds. ”Sugar is the single sector in European Union agriculture that is in most need of reform.”

”EU taxpayers contribute 1.7 billion U.S. dollars every year to subsidies to the sugar industry. This is in the form of extremely high guaranteed prices for EU sugar producers that (lead to) overproduction,” he explained.

Studies done by Oxfam, such as the one titled ‘The Great EU Sugar Scam’, reflect this bitter truth. ”European consumers and taxpayers are paying to destroy livelihoods in some of the world’s poorest countries,” it pointed out.

”They are paying for a system that rewards a handful of sugar producers in Europe, while undermining markets and opportunities for farmers and agricultural labourers in the developing world,” it added.

This reality has not been lost on Thai officials, who have identified the touchy issue of the EU subsidies for sugar as an area that needs to be discussed during the May meeting.

However, EU officials think otherwise, saying that the EU sugar regime has little impact on world sugar prices. They say this cannot account for the drop in world prices because ”EU exports made up only 11.5 percent of all world exports in 2002”.

”The EU export subsidies do not undermine world market prices,” Carlos Bermejo-Acosta, trade counsellor of the delegation of the European Commission, said in an interview. ”Responsibility for depressed world sugar prices rests essentially with other countries, which are leading sugar exporters, notably Brazil.”

According to an FAO projection of the sugar sector until 2005, the world will see production keeping pace with consumption. ”In aggregate, the developing countries are projected to account for virtually all of the global increases in sugar production, thus raising their share of world production from 63 percent in 1993-1995 to about 70 percent by the year 2005.”

It adds that developed countries are ”projected to have virtually no net increase in their sugar production”.

The projected increases in production will emerge from Brazil – expected to be producing 11 million tonnes of sugar by 2005 – and Thailand, due to see an increase of up to 5.5 million tonnes of sugar by 2005.

But the FAO’s forecast for sugar prices may not be a sweet fact for Thai trade officials to digest: ”The world free market price projected for the year 2005 shows practically no change in real terms.”