Two Sugars, Please!
Two Sugars, Please! Author: King Sugar has been the legacy of the Caribbean since its introduction to the region over 300 years ago. In particular, the rich brown crystals extracted from stalks of luscious cane fields, have served to shape our economies and impact the cultural and social landscapes of most islands across the Region. From being a major foreign exchange earner for several territories to being the inspiration for at major Caribbean festivals – like Barbados’ Crop Over and Sugar and Rum Festivals – cane sugar carries huge cultural and economic significance for Caribbean economies. The Caribbean’s sugar legacy stems from its extended SRC Trading Thoughts May 13, 2019 King Sugar has been the legacy of the Caribbean since its introduction to the region over 300 years ago. In particular, the rich brown crystals extracted from stalks of luscious cane fields, have served to shape our economies and impact the cultural and social landscapes of most islands across the Region. From being a major foreign exchange earner for several territories to being the inspiration for at major Caribbean festivals – like Barbados’ Crop Over and Sugar and Rum Festivals – cane sugar carries huge cultural and economic significance for Caribbean economies. The Caribbean’s sugar legacy stems from its extended history as a primary producer of raw sugar which was traditionally shipped to the EU for refinement from sugar colonies in the Caribbean. In fact, in its heyday, sugar exports from the Caribbean accounted for almost 80% of colonial economic profits. Unfortunately, today, the English-speaking Caribbean is a mere shadow of its former economic prowess, producing less than 0.3% of the world’s sugar. With just four remaining sugar-producing countries left in the Region, i.e. Belize, Guyana, Jamaica and Barbados, only an estimated 418,000 tonnes of sugar were produced during 2016-2017. This is compared to Brazil’s 28.15 million metric tons of sugar for the same period ranking it as the leading sugar exporter in the world. In addition to its dwindling share of the world sugar market, the sugar legacy of the Region has essentially left the Region as a primary producer of raw sugar for export, leaving much of the Region’s demand for refined sugar to be met by extra-regional imported sugar. Fortunately, in more recent times, the Region’s sugar manufacturers have begun producing quality, higher value-added, food grade brown sugars for both regional consumption or exportation. In Guyana, the largest of the remaining sugar producing territories in CARICOM, the Sugar Corporation has branded its sugar with the trademark Demerara Gold, Demerara Brown, Enmore Crystals and Blairmont Crystals. Barbados too offers value-added sugar with its Plantation Reserve Brand. However, the Region’s sugar manufacturers aim to go a step further with the production of quality plantation white sugar within the Region, thereby providing two offerings of sugar i.e. both brown and white sugars to the regional market. In a position paper recently submitted to Caricom’s Council of Trade and Economic Development (COTED), the Sugar Association of the Caribbean (SAC) gives assurance that its members are prepared to produce value-added plantation white sugar for sale to the Region. The paper, entitled, Reforming the CET for A Sustainable Future for the Caribbean Sugar Industry, outlines the proposed strategy to reform the sugar industry in an effort to ensure its viability in the future. The paper also highlights the producers’ capacity to meet the annual regional demand of 270,000-290,000 metric tons of food grade sugar as its manufacturers already produce an average of 450,000-500,000 metric tons annually. As he addressed the media in September this year, SAC President Karl James said, “We are confident that we can meet the demand for refined sugar in the Caribbean, but we want governments to restrict the white sugar imports. We spend $300 million to import white sugar. This is a lot of foreign exchange leaving the region.” Protection though the CET The SAC is appealing to the Region’s governments to provide white sugar with the same protection as brown sugar i.e. with a 40% Common External Tariff (CET) imposed on all white sugar imported into the Region. The CET refers to the duties imposed all goods which originate from outside the Region and which do not qualify for Community treatment in accordance with plans and schedules set out in relevant determinations of COTED. If supported by the Region’s governments, an imposition of a 40% CET on white sugar is projected to reduce imports into the Region by US $132.5 million and US $271.7million. However, this is not without its implications. The increased duties could force the price of white sugar to increase which will impact both end-user consumers and manufacturers who use these sugars as inputs; an event which is expected to be countered by the increased supply from the Region’s producers. Even so, the imposition of the CET on white sugar could potentially trigger objection by extra-regional exporters of the product and locally placed franchises who argue they have no flexibility to vary the ingredients used. According to a Report for the Inter-American Development Bank in 2017, entitled, Implementing a Regional Sugar Market in Caricom – An Economic Assessment, these companies justify the use of imported sugar by contending that they operate within an international supply chain which extends beyond the Region of CARICOM and in an effort to maximize volume purchasing capacity, “they source one type of sugar for the whole of their operating region”. However, the Report points out that as is the case of larger countries such as Mexico, Brazil and India, the multinational companies operating in these countries have generally accepted that they will incur a 35% to 40% tariff for importing such sugars and in many instances have opted to substitute this input with a local source of plantation white sugar. This can be the case for CARICOM as well. In order to achieve this, Caricom’s governments must “assert their rights to set tariffs and duty rates” both to “raise fiscal revenues and to guide policy outcomes which are beneficial
Reducing the Region’s Food Import Bill by sector and by country: Who says you can’t “spot reduce”?
Reducing the Region’s Food Import Bill by sector and by country: Who says you can’t “spot reduce”? Author: With a current Food Import Bill (FIB) in excess of US$4 billion, and projected to increase to $8 billion – $10 billion by 2020, CARICOM must act to curb spending of limited resources on food imports. A high FIB for CARICOM means that not only is scarce foreign exchange diverted away from crucial areas such as education and health services, but also that the Region’s food security is compromised. For CARICOM, the issue of food security involves not so much lack of food availability as inadequate access to proper food and diets. While reducing the FIB may seem daunting at SRC Trading Thoughts May 13, 2019 With a current Food Import Bill (FIB) in excess of US$4 billion, and projected to increase to $8 billion – $10 billion by 2020, CARICOM must act to curb spending of limited resources on food imports. A high FIB for CARICOM means that not only is scarce foreign exchange diverted away from crucial areas such as education and health services, but also that the Region’s food security is compromised. For CARICOM, the issue of food security involves not so much lack of food availability as inadequate access to proper food and diets. While reducing the FIB may seem daunting at the macro-regional level, the possibility exists to target reduction at sectoral or country level using a strategy of “spot reduction”. In health and fitness, spot reduction is the concept that applies when persons target particular group of muscles with the aim of reducing fat in a particular area. For example, exercising the abdominal muscles to lose weight in or around one’s mid-section. While fitness pundits remain divided on whether spot reduction with exercise is possible, it might well be worth exploring whether this strategy can be successfully applied in the area of the Caribbean’s food security. The Food and Agriculture Organisation (FAO) indicates that CARICOM’s high food import bill can be attributed to imports which account for more than 60 – 80 percent of the food consumed. It would have surprised many when, just last week, Kirk Humphrey, Barbados’ Minister of Maritime Affairs noted, with some concern, that 80% of the fish consumed locally is actually imported! In tackling the Region’s high food import bill, spot reduction can be used in the service of a food replacement strategy that would entail substituting imported processed foods with locally/regionally manufactured alternatives. The Journal of the Caribbean Agro-Economic Society for instance, identifies cassava as one of the crops with the immense potential to be one of the new pillars of development (2016). According to statistics from CARICOM and the FAO, wheat, maize and derived products are among the top ten major imports into the region, accounting for US$489 million in 2016. Not only could cassava replace at least 30 percent of the corn in poultry rations, but it also has the potential to replace other animal feed (Stewart, 2014). Further estimates show that cassava could replace approximately 1 million metric tons of imported wheat, which equates to 10 per cent of the regional food import bill. Another potential import to target for application of the spot reduction strategy is sugar. The demand for sugar in CARICOM is 300 000 tonnes, of which Caribbean countries import approximately 200,000 tonnes from outside the trade bloc due to the absence of refined white sugar production in the region. The Sugar Association of the Caribbean (SAC) has offered its sugar reform proposal to CARICOM’S Council for Trade and Economic Development (COTED) indicating the Association’s plan to increase sugar production across the Region in the near future. One of its main recommendations is the imposition of a 40 per cent CET on all white sugar imported into the Region. Noting this may result in a higher price and unfilled demand for white sugar, the SAC assures that its members are capable of producing enough sugar to satisfy the market demand. The Association expects these recommendations to result in a significant reduction in sugar imports of between US$132.5million and US$271 million annually. Some countries within CARICOM have also identified areas for spot reduction. The Organisation of Eastern Caribbean States (OECS) recently recognized the potential of aquaponics or the production of food that combines aquaculture (farming fish) with hydroponics (cultivating plants in water) as a means to reducing its FIB. An aquaponics facility and a mobile desalination plant have already been established in Saint Lucia to lead the way forward in aquaponics for the Region. Minister of Agriculture of Antigua and Barbuda, Dean Jonas, explained that “an aquaponics industry can facilitate the rearing of fish for high value protein concurrently with green leafy vegetables, beans, peas, radishes, onions, herbs and other produce which as an import substitution measure can help reduce dependence on these foreign imports.” In St. Vincent and the Grenadines, the Minister of Agriculture, Saboto Caesar, announced plans to establish a production platform that serves to reduce several commodity imports including spinach, broccoli, carrots, black eye peas and peanuts. The Minister also disclosed that the country’s food imports have already dropped to EC$119 million for the period June 30, 2018, as compared to EC$123 million last year. As CARICOM countries continue to strive towards lowering the import value of food into the Region, careful consideration must be given to its obligations within the multilateral trade system. As members of the World Trade Organisation, CARICOM members must abide by the prevailing Agreement of Agriculture which serves to establish “a fair and market-oriented agricultural trading system” through “reductions in agricultural support and protection”. According to these rules, countries would have to reduce or remove agriculture subsidies or other support mechanisms to agribusinesses that enhance local food production (through import substitution schemes), and protect domestic industries from the competition of imports. On the other hand, the Preamble to the Agreement makes particular mention of ‘food security’ and Article 20 of the Agreement also mandates that negotiations