Factors Affecting Trade of Sugar Assignment Example | Topics and Well Written Essays - 1000 words

Factors Affecting Trade of Sugar - Assignment Example 70% of this production is for domestic consumption while 30% is traded in the world. Since only a small portion of the production is being traded freely, it is subjected to government policies and production so that any change affects the trading practices of the commodity. These are trade barriers such as quota and bilateral agreements that limits trading opportunities of least developed countries. As 120 countries partake of sugar allocations imposed by importing countries, it is important to understand if trade barriers create equal opportunity. Sugar producers believe that by removing these restrictions and opening of markets, supply is ensured, rational pricing will be maintained, and smaller countries can have an equal share of sugar quota ( GATRL, 2009). The top sugar producing countries in the world are Australia, Brazil, China, Columbia, European Union, India, Mexico, Pakistan, Thailand, and United States. World production as of 2010/2012 estimates is 168,647 metric tons raw value. BraziL has the biggest share of production followed by India and next by China. The rest is accounted for by Asian production (SUCDEN). With a global population of 7 billion, sugar consumption is estimated at 171.4 million tons and a per capita consumption of 21.kg. Per capita sugar consumption is highest in Brazil, Australia, and Cuba. ... 1, and has not changed ever since (Sugarcane.org) Tariff quotas and bilateral agreements limit the free trade of small producing country with the US while farmers support policy is addressed to maintain the domestic farmers. Quota system controls the volume of sugar imports by limiting amount of sugar that enters US on a zero rate tariff rate. The amount set for import must meet the US World Trade organization requirement which is 1,117,195 tons of raw sugar and 22,000 tons of refined sugar. Any over quota export under the system is not advisable since US imposes a higher tariff rate. (Edwards, Chris, 2009). Bilateral arrangement disenfranchises smaller producing countries as they are out on agreements. For instance, the North American Free Trade Agreement with Mexico gives it a distinct advantage over other countries since US provided them with tariff free and attractive provisions including a guaranteed quota that increases yearly.(Office of The United States Trade Representative, n.d.) For fair treatment, the recent talks of world organizations such as the Uruguay rounds, AEFA, and APEC are all aimed toward trade liberalization. (Economic & Research Services, USDA, 1997) Simulations and five scenarios have been expounded to know effects. The Uruguay Rounds will expand global trade and social welfare of countries and regions, except China. AEFA trade liberalization would increase social welfare of ASEAN in limited way. All APEC members tend to gain in the liberalization since high import protection is eliminated. (See FAO Explanation (Annex 1) Koo, Woo ‘s scenario of trade liberalization of both US and EU, and retaining of sugar subsidies will allow most sugar producing countries to survive. However, if only the U.S. eliminates the program, Koo said all U.S. sugar