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 to its member states”.
Belize is one CARICOM member state that has already seen its soft drink producers using local quality sugar as a substitute in their products.
Protection through Classification
Another area for consideration is the classification of white sugar. In the position paper, the SAC cites the classification of raw sugar under the harmonized Commodity Description and Coding System (HS) of Tariff Nomenclature, as having less than 99.5 degrees polarity, and the definition of refined sugar as “where the ‘sugar content of sucrose by weight, in the dry state, must correspond to a polarimeter reading of 99.5 degrees or more”. This therefore confirms that ‘plantation-white’ sugar “should continue to be classified as ‘refined sugar’ in the CET under tariff heading 1701.99.90.” Under this heading, all imported white sugar would attract the imposition of the CET, which would serve as protection for regionally-produced white sugar against the influx of imported refined sugars.
This classification also impacts sugar-sweetened products. According to the 2017 Report, approximately “80,000-100,000 tonnes of sugar enter the region in the form of sugar-containing products. The application of the CET would need to take this into account to avoid creating an uneven playing field between sugar-containing products produced in the Region and those imported from outside.”
The Report also highlights that whilst “locally-produced plantation white sugar can be used to substitute imported refined sugar, in many cases there are some instances when this is not possible” namely with specialty sugars such as “icing sugar and refined sugar used by the pharmaceutical industry”. Estimates of the Report show such sugars account for 2000 tonnes annually.
It is critical that the stakeholders and the Region’s governments decide on the way forward for the sugar industry. In September 2017, the historical arrangement which allowed the Region to export raw sugar to the EU market for a guaranteed high price ended with the conclusion of the Sugar Protocol between the EU and African Caribbean and Pacific (ACP) states. These loss of trade preferences to the EU market is further compounded with the implications of Brexit as both the UK and EU states have to redefine their relationships with their respective trade partners. In addition, it is unlikely the Region’s sugar will be able to compete on the world market, given the volatility of the commodity price and the large “volumes of sugar being dumped onto the market below even the production cost [by] major-low-cost producers like Brazil.”
However, if the industry is allowed to expand its capacity then it can satisfy the demands of the Regional market, with locally produced alternatives at “long-term consistent pricing beneficial to both the buyer and seller”; thereby reducing the Region’s imports and its food import bill. This has already been achieved with one type of sugar, why not two?