Impacts Of International Sugar Protectionist Policies On China's Sugar Industry

Sugar is a necessity of life and an important input in light industry. It plays a particularly significant role in an economy. Sugar price has directly influence on foodstuff and other light industry production's cost; therefore, sugar market is highly protected by many countries.Sugar industry is one of the most distorted markets because of the intervention of the government on sugar production, consumption and trade. China is an important participant in world sugar market; it is not only a major producer and consumer but also a major net importer and the most promising country in sugar consumption. Dominant sugar industry in China is almost located in minority regions in southwest of China, so to improve the development of China's sugar industry not only has a great effect on the development of economy in less-developed areas, but also contributes a lot to the stabilization of the national economy. China's sugar market is completely open to the external market, so any fluctuation of international sugar price has impacts on China's sugar market. After China's entry into the WTO, trade barriers to sugar imports in China decreased dramatically. Now, they are much lower than the world average, which means that China will directly face the fierce price fluctuation, prevailing protection and unfair competition in the world market. China's domestic sugar market will be greatly challenged due to inferior cost and sugar quality. Therefore, it is especially necessary to make deep analysis on international sugar protectionist policies. At present, there is little research on international sugar protection in China. Domestic research is focused on China's sugar industry competitiveness and the impacts brought by China's entry into the WTO. What is more, the research was mainly carried out in 2002-2005. Facing the ever-changing domestic and international environment, its guiding value is not great. In addition, few scholars did their research based on the fact that China's sugar industry is a part of the world sugar market and international competition. This paper will fill this blank to a certain extent. This paper takes the impact of international sugar protectionist policies on China's sugar industry as the research subject, and it is divided into six chapters.Chapter One introduced the purpose and meaning of the research and research status on this subject.Chapter Two is the empirical research on world sugar production and trade. Sugar can be divided into cane sugar and beet sugar. Developed countries produce most beet sugar while developing countries majorly produce cane sugar. Cane sugar constitutes most part of international sugar trade for its relatively lower production cost. There are 107 countries and areas which produce sugar, but developing countries produce more sugar than developed countries. The most striking feature of the world sugar market is that production and exports are relatively concentrated and imports are relative scattered. Brazil, EU, India, China, Thailand, Mexico and US are major sugar producers; Brazil, Thailand and EU are major sugar exporters; US, EU, Russia, India and China are major sugar importers.Chapter Three mainly analyzes sugar protectionist policies in countries which exert significant influence on world sugar trade. Research in chapter three shows that international sugar market is a policy distorted market. Most major sugar producing countries use trade protectionist policies to protect domestic sugar market. Thus, international sugar price is not determined by production cost; it is a result of policy distortion. The most frequently used sugar market protectionist policy tools are tariff quotas, domestic support and production subsidies and export subsidies. Sugar protection degree is much higher in developed countries compared with that in developing countries. EU, US and Japan are typical representatives of countries which provide heavy protection on sugar. EU implements the heaviest protection to sugar in the world. It's a major sugar exporter although its sugar production cost is much higher than the world average sugar production cost. Sugar protectionist regime in EU works like this:on the one hand, EU uses quote system and domestic price supportive system to encourage sugar production, then by providing heavy subsidies, EU supports sugar export; on the other hand, EU adopts strict import limitation policies, only a small amount of sugar from particular countries can be imported. Sugar protection degree in US is also high. Sugar protection system works through sugar loan policy and import-quota policy. Brazil, India and Thailand are three developing countries which play important roles in world sugar market. Although sugar industry's competitiveness in these countries are strong because of their low production cost and fully developed industry, they, for the purpose of protecting domestic economic interest, also use sugar protective price and export subsidy to protect sugar industry. So, in chapter three, the conclusion is made that international sugar market is protection prevailing market.Chapter Four is the core of this paper. There are two parts in chapter four, the first part states China's sugar production, consumption and trade development status. It also introduces China's sugar industry policies in detail. China is a major sugar producer in the world. The overall trend of China's sugar production tends to rise but fluctuate violently due to its poor factor endowment. China's per capita sugar consumption level is low, and its sugar market is small and lacks export competitiveness, so China is a net sugar importer in the world. China belongs to low sugar protection countries. It even doesn't have a specific policy for the overall control of sugar industry, not to mention particular sugar protectionist policy system. After China's entry into the WTO, according to its WTO accession commitments, China has decreased its sugar import tariff to the lowest level of all WTO members and its import tariff is also the lowest one among all sugar producing countries. These measures further diminished China's ability to withstand international sugar price fluctuation. Sugar protectionist policies may have some positive effects, such as promoting domestic sugar industry development and improving employment rate in some countries, but seen from macroscopic view, its default overcomes benefit. First of all, many countries separate domestic sugar market from the world sugar market, using international sugar market as "reservoir" to transfer domestic market risks. In order to maintain domestic high sugar prices, many countries set laws to make sure domestic sugar surplus is exported to other countries. Government provides heavy export subsidies to makeup exporters lost, but that kind of export constitutes sugar dumping and will cause international sugar price fluctuation. Second, using protectionist policies to support sugar production in countries with high production cost will rise domestic price thus reduce customer welfare in those countries. Third, export supported by heavy subsidies will occupy developing country's export market, and damage their interest. For China, the competitiveness of its sugar industry is weak because of poor factor endowments, low sugar demand, superior supporting industry development and imperfect government policy issues. International sugar protectionist policies further diminished its competitiveness. First of all, with the opening of China's sugar market and China's entry into the WTO, the connection between China's sugar market and international sugar market become tighter and tighter. International sugar price fluctuation caused by sugar protectionist policies will cause domestic price fluctuation and market instability. Second, international sugar protectionist policies create an unfair market environment for China's sugar industry. China's sugar competitiveness is weak in itself, and low tax rate and heavy subsidies in other countries further enlarge the gap in sugar production cost between China and other countries. Third, subsidy supported export occupies China's sugar export market. China is a net importer in the world sugar market, but China should have a chance to export more sugar on condition of fair environment. Seen from the cost angle, although China's sugar production cost is high, it is still much lower than that in EU and US. Seen from the geographic angle, China's neighboring countries—Russia and Japan are major sugar importer. China has a geographical advantage in exporting to these countries. But EU, relying on heavy export subsidies, occupies a large proportion of export market. Chapter Five analyzes the reason for the lake of competitiveness of China's sugar industry based on Porter's "diamond" model and gives some advice on how to protect the healthy development of China's sugar industry. Sugar is a land-intensive product, and the current net import status meets China's comparative advantage, but because China's sugar market and international market are completely connected, sugar price fluctuation caused by policy adjustment works directly on China's sugar market. Therefore, China should take the following measures to develop it's sugar market so as to ensure the safety of domestic sugar supply and healthy development of domestic sugar market:improving sugar competitiveness by supporting the science and technology innovation in sugar industry and deepening taxes reformation on sugar industry; increasing domestic and overseas sugar need. On the one hand, large saccharin consumption is a major hinder factor in increasing sugar consumption. Because of its lower price and sweeter taste, saccharin occupies a large market in rural area, but saccharin is a chemistry combined product and it's not good for health. China can increase domestic sugar consumption by setting limitation to saccharin's production, sale and use. On the other hand, China should expand new external market by providing high-quality sugar on the basis of solidifying existed market. Third, Chinese government should establish a set of effective control system on sugar industry. Chinese government's bull management on sugar industry made sugar crops planting, sugar production, trade and storage controlled under multiple departments; it is very hard for these departments to carry out effective coordination. Therefore, China must establish effective and centralized management mechanism to enhance industry control. What is more, it is necessary to legislate on sugar production, consumption, storage and trade. Fourth, Chinese government must provide necessary protection for sugar industry. International sugar market is distorted due to protectionist policies, so China should cultivate protectionist policies to promote sugar industry development before the correction of the distorted market status. China can learn form successful sugar protection practices of foreign countries, using provisions of AOA and common used protectionist measures to protect domestic sugar market and sugar industry.Chapter Six is the conclusion of this paper. In this part, the author briefly summarizes the main content of this paper.