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.