A SURVEY OF THE COSTS OF WORLD SUGAR POLICIES

Abstract

The world sugar market has long been characterized by volatile prices and widespread intervention. Controls on domestic prices, demand, and supply have created an inefficient pattern of world production, consumption, and trade. Without government controls, production would shift from the countries with higher cost, subsidized production (especially the European Community, Japan, and the United States) to the countries with lower costs (such as Australia, Brazil, and Thailand). The resources saved could then be directed to other activities. Sugar policies in countries with high costs reduce world sugar prices quite substantially in the long run and increase price variability significantly; production controls in countries with low costs increase world prices somewhat and also increase their variability. What would happen if all interventions ceased? Average world sugar prices would probably— but not definitely— rise. World prices would definitely vary less, and economic conditions would definitely improve, especially in developing countries that depend heavily on sugar exports. But the prospects for substantial reform of the sugar market are not promising, even though the GATT Uruguay Round continues. This article puts forward some modest proposals for changing the existing interventions to lessen economic distortions and reduce costs.