Sugar Policy and Reform

Reviewing cross-country experience with
sugar policies, and policy reform, the authors conclude that
long-standing government interventions - rooted in
historical trade arrangements, fear of shortages, and
conflicting interests between growers, and sugar mills -
often displace both the markets, and the institutions
required to produce efficient outcomes. Arrangements rooted
in colonial eras, still shape policies, and trade in the
United States, the European Union (EU), and many developing
countries. Once policies, and institutions are put in place,
households, and the value of investments grow dependent on
them, even as their usefulness fades. Firms and households
make decisions that are costly to reverse. And the result is
a legacy of path-dependent policies, in which approaches,
and instruments are greatly influenced by past agreements,
and previous interventions. The cumulative effects of these
interventions are embodied in livelihoods, political
institutions, capital stocks, and factor markets - which not
only dictate the starting point for reform, but also
determine which reform paths are feasible. Experiments with
public ownership, common in many countries, have not
succeeded. So most countries have initiated some measure of
market reform. And events relating to NAFTA, Lome, and
expansion of the EU, may bring about significant changes in
the EU, and US sugar regimes, with cascading effects on
other countries. Common problems in the sector include
determining cane quality, finding methods for fairly sharing
revenues from joint production, finding ways to take
advantage of preferential trade arrangements with minimal
negative consequences, finding ways to finance, and
encourage research, and other activities with common
benefits, identifying practices that facilitate equitable,
sustainable privatization, and determining the relationship
between sugar market reform, and markets in land, water,
credit, and other inputs.