NCPA - National Center for Policy Analysis

Sugar Subsidies Are a Global Deterrent To Development, Says U.N.

September 16, 2002

Sugar is a crucial export for many poor tropical countries. It also attracts government subsidies like flies in the U.S., the European Union and other developed countries. Those subsidies create mountains of sugar for export at low prices -- and the entire process undermines sugar markets crucial to farmers in the developing world.

Now those countries have wised up to their victimization and want the subsidies stopped. Whether they will get their wish is another question entirely, observers say, because wealthy sugar producers have become hooked on their government payments.

  • In the EU, sugar subsidies have encouraged its cultivation even in such unlikely places as Sweden and Finland to such an extent that there is now a six million ton annual surplus.
  • The U.S. also protects its sugar growers with tariff and quota barriers -- but we export very little.
  • EU countries supply about 20 percent of world exports -- and all that dumped sugar depresses prices worldwide.
  • The United Nations estimates that the cost to poor nations is about $50 billion in lost export revenue annually.

That effectively negates the $50 billion given annually in aid to the developing world.

Subsidies and other forms of support to EU farmers last year totaled $93 billion -- or almost twice as much as the $49 billion doled out in the U.S.

Under pressure from developing countries, the EU had been making efforts to cut its agricultural subsidies. But when the U.S. adopted its massive farm bill earlier this year, the rug was pulled out from under those efforts, observers explain.

Source: Roger Thurow and Geoff Winestock, "How an Addiction to Sugar Subsidies Hurts Development," Wall Street Journal, September 16, 2002.

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