NCPA - National Center for Policy Analysis

Bittersweet Protectionism?

September 19, 2003

Observers say the recent World Trade Organization talks collapsed in Cancun, Mexico, recently because of the reluctance of developed countries to reduce subsidies for domestic agriculture production and lower tariffs against competing imports.

A good illustration of the level such subsidies can reach is beet sugar, which is supported by enormous subsidies as a part of the European Union's $50 billion-a-year Common Agricultural Policy (CAP).

Sugar subsidies, which were not eliminated or reduced during recent CAP reforms, hurt developing nations for whom sugar is the most profitable crop to grow, as a New York Times editorial points out:

  • In a truly free global market, Europe would produce no sugar at all, because it makes more economic sense to import it from poorer countries in tropical climates.
  • European farmers are paid 50 euros per ton of harvested sugar beets, five times the world market price.
  • As a result, Europe produces far more sugar than its consumers can use, and the rest is dumped on the international market, depressing prices for sugar farmers everywhere.

Source: Editorial "Napoleon's Bittersweet Legacy," New York Times, August 11, 2003.

 

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