The economics of cane and beet sugar: A reappraisal

For a hundred and fifty years and more the production of sugar from beet behind protective trade barriers in temperate zone countries was held to be justified on political and strategic grounds. The strategic importance of beet sugar has been frequently exaggerated, probably on account of its association with the Napoleonic blockade. Although it continues to be invoked in support of protectionist policies the strategic argument is no longer convincing, and the case for protection has shifted from the political to the economic front. It is argued that technical improvements in the production of beet sugar in industrialized countries have reduced costs to the point where it is competitive with cane sugar produced in tropical and sub-tropical countries. Thus Mr. G.B. Hagelberg, in an article in this Journal, argues that the balance of advantage in terms of money production costs has shifted in favour of beet sugar.1 More specifically, Hagelberg claims that “the Caribbean cane sugar industries do not now enjoy an advantage of lower costs of production over their principal competitors”, which include the beet sugar industries of the European Community.2 Harris and Hagelberg have taken the argument a stage further and asserted that the cost of producing beet sugar in the United Kingdom has fallen below the average of the cane sugar exporting countries of the Commonwealth Sugar Agreement, which included Australia, Mauritius, Fiji, India and Swaziland as well as the West Indies.3 All these assertions are based on a single empirical investigation by Dr. F.G. Sturrock of the University of Cambridge, which purports to show that the cost of producing beet sugar in the United Kingdom is comparable to that of cane sugar produced in Jamaica, which he takes as representative of the West Indies in genera1.4 More recently, Sturrock and Thompson have argued that U.K. beet sugar costs “appreciably less” to produce than Jamaican cane sugar.5 The purpose of this paper is to draw attention to the limited policy implications of an analysis of money production costs derived from accounting data. It contends, moreover, that claims made for the comparability of beet sugar costs with those of cane sugar have been grossly exaggerated. We begin, however, by discussing the difficulties inherent in making economic comparisons between countries at different stages of development.