Confectioners, bakers and chocolate bar makers are appearing in Ottawa this week to protest to the Canadian International Trade Tribunal, CITT, about the duty taxes on sugar entering Canada from the United States.
The CITT put up trade barriers around five years ago; placing 44% duty on sugar to prevent it being imported at prices domestic producers could not compete with. The trial run of the measure expires in November, however, and the Canadian Sugar Users Coalition will argue their case for an open boarder at a public tribunal.
David Ganong, CEO of eastern Canada’s confectioner Ganong Bros, explains: “My sugar cost is relatively higher today than it was five years ago. If the duty is extended, then that is likely to mean sugar will continue to be relatively more expensive.” And this is no small issue for a manufacturer whose product is made of more than 50% sugar.
Opposition to the end of duty comes from the Big Three of Canadian confectionary: sugar refinery owners Redpath, a subsidiary of Tate & Lyle of the UK, Lantic and Rogers, both controlled by the same CEO, Gregory Hoskins. For them, sugar duty has meant cutting costs, consolidating manufacture and virtual market domination as competitors from the USA and Europe were forced out. The Canadian Sugar Users Coalition argues that this has led to an inflated price of 10% for all Canadian sugar users. The joint coordinator said: “the world price fell in half… but the refinery prices went up. So where did the money go? It went right in their pockets.”
Sugar producers argue that an end to duty would make Canada a dumping ground for the excess, cheap US and European sugar, providing a price challenge that the three companies cannot compete with and demanding cutbacks in everything, including workforce. The US government controls its own sugar imports, guarantees a minimum price for domestic cane and beet farmers that is above the world average, and there are no limits on how much US farmers can grow. The crisis in America this year was a direct result of guaranteeing high prices: farmers kept producing while the glut in the market initiated a 20-year low in prices. Despite government intervention, the glut continued and the normal surplus has been augmented by 400,000 additional tonnes, an excess the Canadian sugar producers fear is coming their way.
An open boarder would mean significant changes for what has remained a very protected trade. Jennifer Nyberg of the UN’s Food and Agriculture Organisation said: “to date, very little substantive change has occurred in the sugar policy of most major producing and trading countries.” But the producers are going to need a persuasive argument for further restrictive duty in face of the modern arguments for trade liberalisation. For the consumer, low prices and aggressive market competition can only be a good thing.