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Industry applauds Government action at WTO on Indian sugar

The Australian sugar industry strongly supports this week’s definitive action by the Australian Government to lodge a counter notification at the World Trade Organisation (WTO) to rein in the trade distortive subsidies being paid by the Indian Government to its sugar industry.

“The market is currently awash with subsidised sugar and the subsequent low prices are causing hardship to the Australian sugar industry” said David Pietsch, CEO of the Australian Sugar Milling Council (ASMC).

ASMC’s Director of Economics, Policy and Trade, David Rynne said “Looking specifically at India, industry analysts estimate that the global price impact of their government’s mandated 5 million tonnes of subsidised exports will result in revenue losses of around $360M for the Australian sugar industry over 2017/18 and 2018/19.

If the subsidised exports were to continue even greater losses could be expected past 2019.”

“With world sugar prices already depressed, these additional subsidised exports from India will exacerbate the Australian industry’s operating losses” added Mr Rynne.

“Further adding to the potential losses would be the situation where India’s subsidised exports were displacing Australian sugar from a number of our traditional markets” he noted.

John Pratt, ASMC Chair said “Australia is a low-cost and efficient exporter, but we are struggling to compete at current global prices.”

“Sugar milling operations cannot sustain losses indefinitely, and distortions caused by government interventions in the global sugar market must be challenged” he added.

“Given that India is a WTO signatory, it should expect to be challenged if the financial support it provides to its sugar industry exceeds its agreed entitlements” said Mr Pratt.

Australia’s analysis demonstrates that India’s highly regulated cane prices and export subsidies are not consistent with their entitlements and obligations under the WTO Agreement on Agriculture and the Subsidies and Countervailing Measures Agreement, noted ASMC Deputy Chair, Mike Barry.

“Australia’s sugar exporters want to compete fairly on the open market.

Subsidies distort the balance of global supply and demand; they depress prices and threaten the viability of sugarcane farming and milling operations.”

“ASMC thanks the Minister, Simon Birmingham, the Department of Foreign Affairs and Trade and the Department of Agriculture, Water and Resources for their commitment to this extremely serious issue and we look forward to their continued support” concluded, ASMC CEO, David Pietsch.

ASMC fully supports the counter-notification.

However, if it does not elicit a satisfactory response, we encourage the Australian government to commence formal WTO dispute proceedings.

Recommended next steps:

  • Sustained international pressure on the Indian government to agree to store rather than export the current surplus of subsidised sugar onto the world market
  • In response to the counter notification, the Indian government to commit to sugar industry reform, including a move to market-driven cane prices, removal of export assistance, and development of an improved welfare safety-net for growers, and
  • WTO parties to pursue reforms for greater transparency and stronger disciplines to follow the rules.

WTO Counter Notification Process

The Australian government has lodged a counter-notification with the World Trade Organisation (WTO), whereby a WTO Member sets out its understanding of another Member’s subsidy program, including the scale and extent of all government interventions.

While not part of the formal WTO dispute settlement process, the counter-notification details India’s sugar subsidies and show the seriousness of Australia’s concerns.
Counter notification represents the first step in the process that, if successful, will hold India to account for exceeding its entitlements.

For further information see Sugar Policy Insights on the ASMC website (asmc.com.au)

16 November 2018

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