The Canadian Sugar Institute (CSI) supports the pursuit of free trade initiatives by the Government of Canada that will lead to significant gains in export market access for sugar and sugar-containing products from Canada as well as increased transparency and predictability in trade rules and administrative practices.
Sugar remains a highly sensitive commodity in key markets where production and trade continue to be dominated by significant government intervention. Restrictive tariffs, tariff rate quotas and rules of origin in export markets prevent meaningful export access for Canadian refined sugar. Comprehensive liberalization of sugar trade through multilateral (WTO) negotiations offers the best prospect of reforming sugar policies and securing predictable and meaningful market access for Canadian refined sugar.
Since the delay of the WTO Doha Round, the Government of Canada has accelerated its work to negotiate a number of regional and bilateral free trade ("FTA") agreements. The Canadian Sugar Institute evaluates all FTA negotiations for the potential to create export opportunities for Canadian sugar and sugar-containing food products as well as the potential to transfer foreign market sugar distortions into the Canadian market.
Central and South America
Central and South American countries such as Brazil and Guatemala are the main source of raw sugar for Canada’s sugar refineries. This supply of world priced raw sugar is essential to maintain a competitive sugar refining industry to serve Canadian consumers as well as food manufacturers who use about 85% of Canada’s refined sugar production.
Central and South American countries that supply raw sugar to Canada are not logical export markets for Canada’s refined sugar. On the other hand, surplus refined sugar from these countries can pose a threat to Canada’s open sugar market while other markets, notably the United States, continue to restrict imports.
One of the first bilateral FTAs to have a significant impact on the Canadian sugar industry was the Canada-Costa Rica FTA. This FTA included the phase-out of Canada’s $31 per tonne duty (about 5-8% duty) for Costa Rican exports of refined sugar to Canada but did not provide for meaningful access to the Costa Rican market. Given the negative impacts of this agreement and strong objection of Canada’s sugar industry, the Government of Canada continues to take the specific concerns of the industry into account to ensure that this agreement does not serve as a model for future negotiations.
Canada has concluded and continues to negotiate a number of other FTAs in the Central/South American region. FTAs with Colombia, Honduras, Peru and Panama have specific sugar provisions such as transitional tariff phase-outs or small, reciprocal quotas that help avoid the immediate negative effects of a duty-free quota on the Canadian sugar industry.
The Canadian Sugar Institute continues to inform government officials and politicians of the threat to Canada’s sugar industry of trade agreements with surplus sugar producers in South and Central America where there is little to no commercial export opportunity for Canadian refined sugar.
The European Union is the world’s largest producer of beet sugar benefiting from domestic subsidies and high import tariff barriers. Support to the EU sugar sector dates back to 1968 with the first rules on the Sugar Common Market Organisation (CMO). Historically, sugar is the only agricultural sector in the EU where production was subject to a quota system, but also supplemented with price support significantly above world market price levels and high import tariff protection, encouraging surplus sugar production with remunerative and stable prices for farmers.
The EU sugar program underwent a partial reform beginning in 2006 that led to a gradual reduction of sugar support prices, the phase out of intervention buying of surplus production, and the end of export refunds. A generous restructuring scheme reduced production quotas and concentrated production in more competitive regions, but left substantial surplus capacity. EU sugar production quotas were removed on October 1, 2017 as part of another partial reform; however, high domestic subsidies and import tariffs continue to support surplus EU sugar production and distort import and export trade.
The EU import duty on refined sugar is 419 Euros per tonne, almost 20 times the Canadian duty of $30.86 per tonne. As a result of this high duty level, EU imports are mostly raw sugar and from least developed and developing countries with special preferential agreements.
The October 1, 2017 removal of domestic quotas led to a dramatic increase in EU beet sugar production and exports causing significant trade distortions in the world sugar market and adversely affecting many WTO Members. The maintenance of both direct payments and voluntary coupled support subsidies to the EU sugar industry contributes to these distortions. EU sugar production in 2017/2018 increased to 21.1 million tonnes, 24% above the average of the previous 5 years, following a 16% increase in area and high yields. Surplus EU production resulted in a surge in exports to 3.2 million and a reduction in imports to 1.2 million tonnes. A significant proportion of the reduction in imports came from ACP/LDC countries squeezed out by more competitive beet sugar and the collapse in prices. Although European sugar output has fallen in 2018/19 and 2019/20 given extreme weather events, the area under cultivation is practically unchanged despite the fall in EU prices, and EU preferential imports are forecast to remain at low levels.
For more information on EU sugar policy, see European Commission, Agriculture and Rural Development on Sugar
Canada-European Union Comprehensive Economic and Trade Agreement (CETA)
The Canada-EU Comprehensive Economic Trade Agreement (CETA) was provisionally applied on September 21, 2017. For many agri-food products including sugar, the EU maintained high tariffs and restrictive "rules of origin". Instead, the EU established "origin quotas" to allow imports of specific quantities of some products if certain conditions are met. An origin quota for "High sugar containing products" permits imports of 30,000 tonnes for the first five calendar years, however surplus EU sugar and low market prices have not made this access commercially viable. The quota will potentially grow to about 52,000 tonnes over 15 years if certain import thresholds are met. The ongoing use of subsidies to EU sugar producers makes this market access uncertain.
Origin quotas for "Sugar confectionery and chocolate preparations" (10,000 tonnes) as well as "Processed foods" (35,000 tonnes) also provide potential opportunity for the long term. To date, these quotas have not provided commercial market opportunity for Canadian exporters.
In contrast to the EU, Canada does not maintain any quota barriers and has phased out duties on sugar-containing products. The result is a worsening of the Canada-EU trade balance in SCPs since the CETA was implemented.
Canada-European Union Trade in Sugar-Containing Products
(Value in thousands of Canadian dollars)
|Source: Statistics Canada
Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)
The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is a partnership agreement among eleven countries. The CPTPP entered into force on December 30, 2018 for the first six countries to ratify the Agreement - Australia, Canada, Japan, Mexico, New Zealand, and Singapore, and for Vietnam on January 14, 2019. For the remaining countries (Brunei, Chile, Malaysia, and Peru), the CPTPP will enter into force 60 days after that country ratifies the Agreement.
The CPTPP provides certain market access improvements for refined sugar and SCPs that are CPTPP wide. There are no Canada-specific outcomes. Potential benefits to Canadian refined sugar and SCPs are linked to CPTPP wide tariff reductions, tariff rate quota (TRQ) volumes, and "rules of origin" for originating goods.
"Originating" refined sugar from Canada is beet sugar or sugar refined in Canada from raw sugar of a CPTPP country (e.g., Mexico, Australia, Peru), subject to certain inventory management methods. Depending on the product-specific rules of origin, non-originating sugar (cane sugar refined in Canada) can be used in the production of most SCPs.
Canada's refined sugar tariff of $30.86/tonne is being phased out in 6 annual stages, CPTPP wide.
Other FTA Negotiations
The Canadian Sugar Institute monitors and provides input to all other FTA negotiations based on the potential for export gains as well as anticipated Canadian market impacts. Every negotiation is unique given differences in market geography, size and development as well as unique sugar market policies, many of which distort domestic production and trade. The Institute supports the WTO as the best mechanism to achieve comprehensive sugar market liberalization in sugar to ensure the long-term stability and growth of the Canadian sugar industry.
For a listing of Canada’s trade agreements and negotiations, visit Trade and Investment Agreements.