Specific environmental effects of trade liberalization: sugar

Oct 2006

This paper is the second in a series assessing the sustainability of any agricultural production increases that result from trade liberalization achieved through a conclusion to the WTO Doha Development Round of negotiations on agriculture. The purpose of this two-part series is to identify potentially adverse environmental impacts of trade liberalization so that relevant national governments can plan and implement efforts to ameliorate such effects.
Sugar is an interesting commodity to analyze in this context for two reasons. Sugar markets are among those most distorted by market access barriers and domestic subsidies, and therefore hold the potential for the greatest production, consumption, and trade changes resulting from a Doha Round agreement. As in the case of oilseeds, production of sugar crops is increasingly influenced by demand for biofuels linked to rising prices in energy markets.
Sugar is the world’s primary caloric sweetener. World consumption was about 144 million metric tons in 2004/05. Starch-based sweeteners produced from crops like corn or wheat, e.g. crystalline dextrose and glucose or fructose syrups, are the next most important caloric sweeteners, but are a distant second with annual consumption estimated at only about twenty million tons on a dry basis, with half of that being in the United States.
Roughly three-quarters of world sugar needs are produced from sugarcane in tropical or sub-tropical climates, and the remaining quarter comes from sugar beets grown in the temperate zones of Europe, North America, and Asia. On average, beet sugar is more expensive to produce than cane sugar, with production for the most part confined to industrialized countries whose support policies and import barriers keep internal sugar prices at levels high enough to maintain a beet industry. Trade liberalization and related reductions in domestic support would be expected to reduce world area planted to sugar beets in those industrialized countries but further stimulate sugarcane plantings.

By: J. Earley, T. Earley

 
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