Features International Sugar Journal

Scourge of sugar smuggling can’t go on – apathy continues to damage

Illicit trade ..is crowding out legitimate economic activity, depriving governments of revenues for investment in vital public services, dislocating millions of legitimate jobs and causing irreversible damage to … human lives.” Jeffrey Hardy, Director-General of the NGO TRACIT

Prostitution may be the oldest profession in the world, not far behind, at least in the modern world must be smuggling. For many sugar industries in the developing and emerging economies, smuggling continues to be a damaging distraction to their businesses. Ramifications are serious when the impact is adverse as sugar companies support rural development, plus, the government treasuries are poorer from the reduced collection of taxes and tariffs. Then there is also the spillover impact on businesses supplying goods and services to local sugar factories. I well remember talking to the CEO of a European company supplying an instrument for analysis and control for a sugar production process at the ATALAC event in Cali, Colombia in 2018. He said that the business in the region had subsided in the recent past. It became apparent that due to smuggling, local sugar companies could not compete in the domestic market for their sugar, as a result, did not have the financial means to upgrade their operations. What is risible is that no institution in the sugar industry has addressed smuggling head on – to choke off the source – after all, there are not that many countries that produce surplus sugar.

As for the World Trade Organization, it “appears pitifully equipped to deal with this problem. The WTO, which is the multilateral body responsible for regulating global trade, not only has rather limited tools to deal with illicit trade but also has the potential to impede or constrain states’ efforts in curbing illicit trade.”1 With smuggling perpetrated by corrupt individuals/organised bodies, it is, therefore, understandable why WTO is ineffective in prosecuting it.

I have been editing the journal for some 20 years now and have attended most of the sugar industry’s key and regional events on a regular basis. Not once has smuggling been on the agenda at these events. This is not too surprising as, more often than not, it is the small, fledgling industries that are affected and do not register a tremor on the radar. One exception was in 2014 when at the 4th Sugar Outlook Africa conference in Kenya (which I learnt from press reports) Rosemary Mkok, chief executive of the Kenya Sugar Board, pointed out that smuggling is a big problem, with large amounts of illegal imports leading to stockpiles and pushing down sugar prices – in the period between January and April 2014 sugar prices declined to a low of US$36 for a 50-kilogram bag, against an average industry break-even of US$43.

It’s a damning shame that the likes of the influential intergovernmental International Sugar Organisation have not addressed the smuggling scourge. Only time will tell if the newly formed African Sugar Development Task Force will be a force for good, or toothless, in attacking the problem.

While apathy reigns, small sugar industries continue to be victims. Simply put, smuggling amounts to unfair competition, damaging local industry. Recent press reports noted that the sugar producer Compagnie Sucrière du Tchad (CST) is on the brink of collapse as it has not been able to sell its sugar for more than eight months due to smuggled sugar flooding the local market (see2). Late last October, Germany’s Südzucker mothballed its factory in Fǎlesti, one of its two factories in Moldova until April 2021, as a result of the drop in sales from smuggling of tens of thousands of tonnes of sugar (see3).

While lax border control and corrupt officials at a local level are equally guilty of profiting from smuggling, it is the original sin of dumping that is of greater concern and should be prosecuted.4

Endnotes

1 https://globalinitiative.net/the-world-trade-system-must-arm-itself-to-fight-illicit-trade/

2 https://internationalsugarjournal.com/chad-local-sugar-company-verge-on-collapse-due-to-smuggling/

3 https://internationalsugarjournal.com/moldova-sugar-smuggling-sudzucker-to-mothball-it-falesti-plant/

4 https://internationalsugarjournal.com/sugar-industries-in-french-west-africa-on-the-verge-of-collapsing-from-smuggling/