Smuggling of sugar is not a new phenomenon. At the turn of the 19th century when Russia was a major global producer, sugar was smuggled from the country to as far as Japan1. Whereas in the distant past smuggling sought to bring the sweetener to new consumers, in the recent past, it has simply served to damage local sugar industries. Several recent press reports2 from West Africa note that sugar industries in Senegal, Chad, Cameroon and Cote d’Ivoire have confirmed these. The Senegalese Sugar Company (CSS) has been unable to sell even a kg of its sugar output for over seven months due to smuggling. The Compagnie Sucriere du Tchad (CST) sugar company of Chad (CST) has only managed to sell locally 5000 tonnes of the 29 000 tonnes of sugar produced in 2017. The company has already closed its N’Djamena production unit in recent years, putting many permanent and temporary employees out of work. In Cameroon, the local sugar company Sosucam has told the government to act resolutely against smuggling which is hitting its business and may subsequently result in bankruptcy and factory closure and loss of over 8000 direct and indirect jobs. The company has amassed sugar stocks of more than 45,000 tonnes (more than 3 months of domestic consumption) due to lack of sales. It will stop producing sugar once its stores are fully filled.
Indeed, in the recent past, other relatively small industries in Africa (e.g. Uganda, Kenya and Tanzania) and Asia (e.g. Philippines and Vietnam) have also complained of sugar smuggling.
Arguably, the source of the problem lies with the major sugar exporting countries Brazil and Thailand. For these countries, amidst global sugar glut times are desperate as they try to shift their product. Not long ago, China, which used to be a major importer of Brazilian sugar, introduced prohibitive import duties to protect its local sugar industry. Brazilian sugar exports to China fell from 2.15 million tonnes in 2016/17 to only 115,000 tonnes in 2017/18, according to figures from the industry body Unica, as a result of the additional 45% duty on top of the previous 50% duty on out of quota imports.
Press reports from countries suffering from smuggling consistently identify illegal imports from Brazil and Thailand.
The global sugar industry is not informed by a level playing field. When any of the top sugar producing countries breach the World Trade Organization (WTO) rules on subsidies whether overt or covert, Brazilian sugar industry is quick to make a formal complaint to WTO to seek redress. Last year, Thailand changed its sugar policy following the complaint by Brazil to the WTO. In 2005, WTO ruled EU to stop dumping subsidized sugar on the global market following the joint complaint by Brazil, Thailand and Australia prompting the reform of EU’s sugar regime. But there is no loss of irony, that Brazil’s own industry is blind to the excesses of those who seek to illegally dump or allow it to, in markets whose local industries are vulnerable to unfair competition.
There is a compelling case for the sugar industries adversely impacted by smuggling to band together and seek redress from the likes of WTO. 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.
1 This is documented in International Sugar Journal (ISJ) published at the time.
- These news pieces feature in the May issue of ISJ.