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IPC Position Paper No. 1

Sugar Policy in the
Post-Uruguay Round Era

An Overview

Sugar was one of the principal agricultural sectors left largely untouched by the Uruguay Round Agreement of GATT when it was concluded in December, 1993. This omission inspired the International Policy Council on Agriculture, Food and Trade to develop recommendations to advance the reform of global sugar policies. In order to determine the challenges facing the industry and to better formulate its recommendations, the IPC conducted several years of consultations with farm leaders, government officials and industry representatives from important sugar producing and importing countries around the world. Meetings were held in the United States, Australia, Ukraine and Western Europe. The IPC Position Paper, "Sugar Policy in the Post-Uruguay Round Era" is the product of these extensive consultations.

The high level of support and protection it receives in many countries has made sugar one of the most distorted agricultural sectors in the world. As a result, world sugar prices are low and consumers face high domestic prices. Meanwhile, producers in countries where sugar is not supported are denied the opportunity to advance their economic growth through fair competition.

Sugar is a unique and complex industry and it is hardly surprising that the Uruguay Round Agreement fell short of alleviating these problems. However, it is unlikely the sector will be similarly left out in future multilateral negotiations. This fact, plus the effects of continued industry consolidation and restructuring, technological progress, competition in value-added products, political change in key producing countries, and fast-paced developments in global marketing and investment, make a strong case for policy reform. The consultations carried out by the IPC have shown that, while there is widespread reluctance to challenge the status quo of the sugar sector, there is also a growing recognition that present policies are unsustainable.

It is therefore essential for governments to begin the discussion of the future of global sugar policies now. A gradual evolution in sugar policy will be necessary in order to avoid upheaval in the developing world and instability in the world sugar market. With this mind, the IPC believes that sugar policy should be based on the following foundations:

  • The gradual reduction of high domestic support prices with the substitution, as necessary, of direct, decoupled compensation payments;
  • Parallel reductions in tariffs;
  • The progressive elimination of export subsidies;
  • The freeing up and eventual elimination of production and import quotas;
  • Safeguards for the interests of existing preferential suppliers; and
  • A level playing field with other sweeteners.

The IPC recognizes that the transition to more open and competitive markets will be arduous and painful, and that these recommendations will pose difficulties for numerous governments. However, in a world of ongoing trade liberalization, there is no real alternative. The choice is therefore clear: Countries can either continue to insulate their dairy producers from the world market -- leaving them to supply a declining market share -- or they can implement policies that will encourage their producers and processors to compete in a growing global market.

The IPC advises governments and highly protected sugar sectors to prepare themselves, along the lines suggested in its Position Paper, for the inevitable changes to come over the next few years. The IPC proposes that one result of the first WTO Ministerial Conference in Singapore in December be an invitation to the WTO to initiate discussions on a timetable and basis for multilateral reform of global sugar policies.

FULL TEXT (.pdf format)

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