Gerard Scimeca Co-founder, CASE
March 29th, 2021
The U.S. sugar industry for years has been hammered by a cascade of unfair trade practices around the globe, with American growers competing against massively subsidized sugar industries in Brazil, India, Thailand, the European Union and elsewhere.
But the emerging policies of the nascent Biden administration provide some measure of hope for the sugar industry — and other sectors — that fairness might once and for all be instilled as a guiding principle at the World Trade Organization.
Katherine Tai, President Biden’s newly minted U.S. trade representative, the top trade post in the administration, is certainly casting herself as something of a WTO reformer. “We must do the hard work and secure the necessary reforms that allow the world to come together and address common threats like climate change, the COVID pandemic, and a global economic downturn,” she told the Senate panel considering her nomination.
The WTO trumpets its lofty mission “to ensure that trade flows as smoothly, predictably and freely as possible.” The reality is far different from the glitzy WTO website with its pronouncements of fairness.
The Atlantic Council succinctly sums up the bipartisan and global beef against the WTO. “The World Trade Organization, the largest multilateral trade organization and the foundation of the global trading system, has increasingly drawn the ire of the United States and other countries that view the organization as outdated and complacent as other countries skirt the rules to get ahead,” it said.
Sugar would be a powerful test case for the new administration to address with a reformed WTO. That’s because the world sugar market is highly dysfunctional, driven by production and trade distorting practices employed by nearly all sugar-producing countries. Fixing the sugar dysfunction would demonstrate the WTO’s seriousness about a return to fairness in assessing international trade practices.
The U.S. government’s response to foreign subsidies is interest-bearing loans to U.S. farmers and import quotas to protect U.S. consumers and farmers from a glut of subsidized sugar, thus operating without taxpayer cost. It is not the ideal response from a free market perspective, but the shear breadth of foreign subsidies leaves little choice.
Instead, what the administration should do is press meaningful reforms on the WTO and then advocate for a so-called zero-for-zero policy, which would eliminate U.S. sugar quotas — but only in exchange for the end of foreign subsidies across the board. Such reciprocity would allow price to be based on actual costs, not twisted out of shape by government tariffs and subsidies.
The WTO claims for itself an honored role among nations, comfortably ensconced in scenic Geneva and surrounded by the postcard-perfect Jura Mountains where it is “the only international organization dealing with the global rules of trade.”
“By lowering trade barriers through negotiations among member governments,” it posits, “the WTO’s system also breaks down other barriers between peoples and trading economies.”
Successfully arm-twisting other nations to once and for all drop their sugar subsidies would allow the organization to make good on what is now an ill-deserved job description.
