After centuries in which the production of sugar was a mainstay of the local economy, the Manning administration took a decision to scrap the industry which was such an integral part of the society and culture of T&T. The decision by the Government was prompted by both internal and external factors. Internally, the cost of production of sugar in this country had skyrocketed as a result of small acreages under sugar, the sharp increases in labour costs and the slowness of the industry to introduce mechanisation. This increase in the cost of production meant that there was a substantial subsidy from the Government on every tonne of cane being produced in the country.
The main external factor driving the Government's anxiety to get out of sugar was the decision by the European Union (EU) to scrap its preferential trade deal with the African, Caribbean and Pacific (ACP) countries. Under the Sugar Protocol, sugar from ACP countries, including T&T, received duty-free access at subsidised prices to the EU. The background to the decision by the Government to replace T&T's production of high-cost, uncompetitive sugar with sugar purchased from our Caricom neighbour, Guyana, and from the world market is particularly important now given the fact that the price of sugar on the world market has gone through the roof.
On Thursday, the spot white sugar contract in London surged to an all-time high at US$589.90 ($3,745) a tonne while the New York raw sugar futures hit a 28-1/2-year peak at 23.33 cents a pound.
Global sugar prices have surged as India, the world's largest consumer of sugar, has been forced to import the commodity as a result of the failure of the monsoon.
Some of the largest food manufacturers in the US–household names such as Mars, Nestl�, Krispy Kreme Doughnuts, Kraft Foods and Unilever–along with trade bodies and sugar importers wrote a letter to the US Secretary of Agriculture stating that unless the US agreed to loosen its quota restrictions on sugar imports "our nation will virtually run out of sugar." Down the road, there may be a need for the T&T Government to apply for an exemption to the Common External Tariff which provides some tariff protection for regional producers of sugar, which are mostly Guyana, Jamaica and the Dominican Republic. At the margins, the surge in the price of sugar is likely to have a small negative impact on the cost of imported and locally-produced processed foods. As the reality of the external price rise hits the T&T economy, the local beverage and snack food sectors are likely to seek to pass on the increased input cost. The sugar surge may reverse the recent moderation in the increase of food prices on the local market and may increase the survival pressure on some manufacturers.
The sugar surge is also likely to cause some to lament the fact that T&T chose to stop sugar production when it did. The argument is likely to be that this country would have been able to access some supplies of sugar for the local market if T&T had continued to produce the commodity. The would-be retentionists have a point, of course. But the bigger point is that there has been no change in the factors that led to the closure of the sugar industry in 2007–T&T is still likely to be one of the highest-cost sugar producers in the world and the subsidies, quotas and privileged duty-free access for ACP producers are unlikely ever to resurface.
