Sugar: Costs of Protection and Taxation

In recent years there have been many calls from the governments of economically poorer nations for more liberal treatment of their countries' exports. In the world's sugar industry, an industry in which there is direct competition between developed and less-developed countries, protection is given by the wealthier countries to their own producers, and also by some of these countries to their overseas suppliers. Some of the less-developed countries therefore gain in that they have access to preferential markets, but, as a whole, sugar exporters lose in so far as their markets are restricted. In this article we explore some of the consequences of removing both national and international forms of protection and also of removing taxation of sugar consumption. This paper arises from a study by Professor Harry Johnson2. His calculations, which were largely based on statistics presented in an earlier article of mine,8 are of the following: (1) The additional import cost to purchasers from the world's sugar market if they paid as much for foreign sugar as for that grown in their own countries; (2) the net benefit to exporters (on two different rent estimates) of removing import tariffs and revenue charges on sugar, and replacing tariff protection by equivalent direct subsidies to producers; (3) the consumption cost of the restriction of consumption caused by sugar taxes, including import duties; and (4) on the assumption of infinite long-run elasticities of domestic supply of sugar in importing countries, the gain which universal free trade (and the abandonment of non-protective taxes) would bring to eight importing countries and to their overseas suppliers In the present study the calculations under (4) above are developed in a number of ways. First (and most important), explicit account is taken of the fact that sugar production involves not one productive process but three: production of cane or beet, extraction of raw sugar, and the refining of raw sugar.4 Second, the availability of more data now permits improved estimates of the average price received for raw sugar production and of other elements in the final price of sugar. Third, calculations