Features International Sugar Journal

Sugar industry’s powerful lobbies

One of the abiding features of the global sugar industry is that it is not informed by a level playing field. Various industries, through policy instruments from their governments are supported via variety of measures. These include: transparent support in the form of domestic market controls (namely guaranteed support prices, supply management/controls, market sharing/sales quotas); import controls (import quota/tariff rate quota, import tariff, import licences, quality restrictions); export support (export subsidies, single desk selling); and non-transparent support in the form of direct financial aid (namely state ownership, income support, debt financing, input subsidies); and indirect long term support (programs to improve efficiency, ethanol programs (mandates/tax breaks), consumer demand support). Arguably, the two most powerful sugar lobbies in the sugar industry that are successful in promoting their industries are located in the top sugar producing countries India and USA. While the lobbies in both these countries differ in their modus operandi, they are effective operators.

In the sugar industry, the phenomena of lobbying predates the term that is now widely used to describe the practice. In a paper, Marie Harbanski1 records how powerful interest groups in the sugar sector in Europe helped shape policy in the past. Citing an interview in European Commission’s DG Agri, April 2006, she quotes “in the 60s-70s-80s, they felt at home, they came, they went, they did more or less what they wanted, what suited them best and that… that lasted quite a while up to the beginning of the nineties, and then, it changed after that all the same, we said “enough”… but it’s true that if you talk a little with the old ones, they’ll tell you it was incredible, they were virtually writing the officials’ notes for them… today they’re still around, look, there’s one there just gone by in the corridor, but it’s not the same these days…”

Hrabanski notes that “even before the creation of the EU, the representatives of the sugar sector were thus largely associated with agricultural policy. When the EEC was created, beet growers and sugar manufacturers, armed with their technical skills, their knowledge of the international market, the local relays needed to set in place concrete measures for supervising the sector, and benefiting from a certain historical legitimacy, continued to jointly manage the sector with EU officials.”

While neither the American Sugar Alliance nor the some 50 million cane growers in India have such ready access at policy making as the interest groups in the past used to have in EU, they certainly wield a great influence nonetheless.

Despite repeated calls from the sugar millers in India to deregulate the industry, successive governments have not fully relented. Few years ago, the Indian government relaxed the market control arm of the sugar policy but not the production control, knowing full well the power of the votes at elections from this sizeable minority who continue to send politicians from their lot. The recent announcement of export subsidy by the Indian government of U$64/t sugar to help millers pay the arrears to cane growers is illuminating – rather than addressing the structural problems of the industry, the politicians are happy to placate cane growers with “pork barrel politics”.

Sugar represents about one per cent of the US agriculture sector, but accounts for about 20% per cent of the farm industry’s political campaign contributions. In the 2014 congressional election cycle, individuals and political action committees associated with the sugar industry contributed $US5.5 million, almost evenly split between Democrats and Republicans, according to OpenSecrets.org. Recently, the industry’s influence has prevailed in preventing Australia having market access for it sugar in the US through the TPP (Trans-Pacific Partnership). Not even the former Australian Premier John Howard could convince his good friend, the former President George W. Bush to remove the sugar import barriers in the 2004 US-Australia free-trade agreement.

Imagine, if there were more such powerful lobbies in the industry. Brazilian sugar industry would certainly be not down on its knees as it is currently. Smuggling that ravages some countries would perhaps be checked.

 

Reference

1 Marie Hrabanski (2012) Representation of sugar in Brussels: Historical sociology of the lobbying of European institutions since the early 20th century. Int Sugar Jnl, 114 (1367): 785-794