West's sugar policy condemned

West's sugar policy condemned

CEBU, Philippines (Reuters): Asian sugar millers and planters urged rich nations on Friday to scrap protectionism, accusing them of hurting sugar industries in developed countries.

In a "cry for understanding", industry delegates from India, Pakistan, Indonesia, Thailand and the Philippines resolved at the end of a sugar conference to lobby for "harmonized" tariff cuts.

A manifesto signed by heads of delegations called on their governments to pursue the issue in world trade talks in November.

"A dialog should be started that will allow the survival of average cost producers and prevent... protectionist policies and the extension of export subsidies that undermine the objectives of the WTO (World Trade Organization)," the manifesto said.

WTO members are to meet in Seattle, United States, in November to kick start a new round of free-trade negotiations.

Agriculture -- still a highly protected industry in rich countries -- will be high on the agenda.

Philippine Sugar Millers Association executive director Jose Maria Zabaleta said the manifesto was a cry for understanding from Asian sugar producers who were swamped by a flow of subsidized sugar into world markets.

"Sugar is the most distorted commodity in the world and many negotiators, ministers of agriculture included, do not realize this," Zabaleta told Reuters in an interview.

Asian delegates to the conference in the Philippine city of Cebu said sugar prices, which tumbled to around 13-year lows this year, should not be used as a benchmark for further tariff cuts because they did not reflect production costs.

The manifesto blamed volatile prices on "fluctuations in prices of residual sugar from countries where production was distorted by subsidies and other political and non-economic factors".

Industry analysts said the manifesto was a wake-up call for governments in the region to come to terms with how to shape their industries as world trade became more liberalized.

"Any proposal on how to proceed with these negotiations is welcome," said Peter Baron, executive director of the International Sugar Organization, a group of producer and consumer governments.

A core theme at the conference was that heavily subsidized sugar from the European Union had found its way into Asian markets such as India, causing world prices to weaken.

The United States and Japan also have highly protected sugar markets.

"Both the EU and the U.S. have sugar regimes which have contributed substantially to undermine the world sugar market, which is currently in crisis," said Mike Young, from Britain's state-controlled Commonwealth Development Corporation.

But already, some Asian governments are coming under pressure to reverse sugar tariff cuts made in the last round of world trade talks, or as a condition of soft financial aid, and to rebuild protectionist walls around their struggling industries.

In Indonesia, where sugar tariffs have been cut to zero as a condition of International Monetary Fund aid, the sugar industry is also lobbying the government to rebuild tariff walls.

Consumption

In a related development an industry economist said in Cebu on Friday that sugar consumption in the Far East is unlikely to recover to pre-crisis growth rates for some time yet.

Warren Males, principal economist at the Queensland Sugar Corporation, told a sugar conference in the Philippines that Asia had been described as the engine of growth for sugar consumption.

But it had been "severely affected by declining incomes" and sugar consumption fell by up to 15 percent in some countries, with Indonesia and South Korea among the hardest hit, he said.

A fall in ocean freight rates because of the economic crisis opened up the opportunity for Brazil and other Western hemisphere sugars to flow into the Asian region.

"Brazilian export destinations now include Singapore, Malaysia, Indonesia, Vietnam, China and South Korea...," Males told the conference in Cebu city.

"Brazilian exports to Indonesia, for instance, in the year to April 1999 were 687,000 tons compared with 95,000 tons in the previous year."

Males partly attributed a recent firming in physical sugar prices in Asia to a recovery in the freight market associated with a recovery in Asia.