Historically one of the most widely-traded commodities in the world, sugar accounts for around 2% of the global dry cargo market. International sugar prices show great volatility, ranging from around 3 to over 60 cents per pound in the past 50 years. Of the world's 180-odd countries, around 100 produce sugar from beet or cane, a few more refine raw sugar to produce white sugar, and all countries consume sugar. Consumption of sugar ranges from around 3 kilogrammes per person per annum in Ethiopia to around 40 kg/person/yr in Belgium. Consumption per capita rises with income per capita until it reaches a plateau of around 35kg per person per year in middle-income countries.
World raw sugar price for the calendar years 1960-2006 (click to enlarge)
World raw sugar price for the calendar years 1960-2006 (click to enlarge)
Many countries subsidize sugar-production heavily. The European Union, the United States, Japan and many developing countries subsidize domestic production and maintain high tariffs on imports. Sugar prices in these countries have often exceeded prices on the international market by up to three times; today, with world market sugar futures prices currently strong, such prices typically exceed world prices by two times.
Within international trade bodies, especially in the World Trade Organization, the "G20" countries led by Brazil have long argued that because these sugar markets essentially exclude cane-sugar imports, the G20 sugar-producers receive lower prices than they would under free trade. While both the European Union and United States maintain trade agreements whereby certain developing and less-developed countries (LDCs) can sell certain quantities of sugar into their markets, free of the usual import tariffs, countries outside these preferred trade régimes have complained that these arrangements violate the "most favoured nation" principle of international trade.
In 2004, the WTO sided with a group of cane-sugar exporting nations (led by Brazil and Australia) and ruled the EU sugar-régime and the accompanying ACP-EU Sugar Protocol (whereby a group of African, Caribbean, and Pacific countries receive preferential access to the European sugar market) illegal. In response to this and to other rulings of the WTO, and owing to internal pressures on the EU sugar regime, the European Commission proposed on 22 June 2005 a radical reform of the EU sugar régime, cutting prices by 39% and eliminating all EU sugar exports. The African, Caribbean, Pacific and least developed country sugar-exporters reacted with dismay to the EU sugar proposals, arguing for a fairer reform of the EU régime which would foster development and contribute meaningfully to the achievement of the Millennium Development Goals. On 25 November 2005 the Council of the EU agreed to cut EU sugar prices by 36% as from 2009. It now seems[citation needed] that the U.S. Sugar Program could become the next target for reform. However, some commentators expect heavy lobbying from the U.S. sugar-industry, especially from the Fanjul Brothers, the single largest individual contributors of soft money to both the Democratic and Republican parties.[9] [10]
Small quantities of sugar, especially specialty grades of sugar, reach the market as 'fair trade' commodities; the fair-trade system produces and sells these products with the understanding that a larger-than-usual fraction of the revenue will support small farmers in the developing world. However, whilst the Fairtrade Foundation offers a premium of USD 60.00 per tonne to small farmers for sugar branded as "Fairtrade", government schemes such the U.S. Sugar Program and the ACP Sugar Protocol offer premiums of around USD 400.00 per tonne above world market prices.
