The Costs of Maintaining Sugar
Mr. Brewster in his contribution has addressed himself to some of the problems of efficiency and costs of the present sugar industry. To complete this picture I would like to begin by directing your attention to those costs which the economy bears and which are indirectly created by the sugar industry particularly the plantation sector.
The first of these costs is financial. Partly because of long historical association, partly because standards derive much of their inspiration from the U.K., the plantation sugar sector is considered one of the banks best customers. The consequence of this is that they receive an undeservedly large share of their working capital from local banks in preference to other customers; and these other customers are mainly the small farmers and the local peasantry. In addition to this, since some of these sugar companies are U.K. owned they can borrow alternatively on the local money market or that of the U.K. This structural factor induces a strong link between the U.K. money market and ours and contributes in large measure to understanding our inability to follow an independent monetary policy. This reached its most notorious climax in the recent devaluation. This “policy”, if such a positive term can be put to it, was pursued with the position of sugar as the nation’s top priority. The consequent rise in the cost of living, the capital loss suffered in the value of our reserves, the disruption of economic activity are all some of the indirect costs we are made to bear on behalf of sugar.
The second indirect cost represents one of the most infamous sleight of hand tricks ever exercised against an economy in the history of international economic relations. The guaranteed price we receive for sugar has been used and overused by our governments, those of the U.K., and the sugar producers as evidence of the U.K.’s contribution to our economic well being. Certainly the U.K. is appearing to support the sugar industry, and in fact is doing so but the real burden of these payments lie with us and is paid for by the local farmers who produce for the domestic market. In so far as the preferences maintain the price of sugar at artificially high levels, the structure of our internal rural prices becomes distorted and a strong bias is introduced against domestic agriculture. This bias is further underwritten when one bears in mind the proliferation of incentives, tax concessions, and other forms of subsidy given to foreigners to establish industry here. And nowhere is there an equally comprehensive programme for domestic agriculture
The third set of indirect costs is the high proportion of Government administrative costs which are attributable to the sugar industry because so much of Government’ diplomacy and foreign economic policy is directed towards fighting for more and yet more of these disastrous sugar preferences.
There are several other indirect costs but the last I’ll mention here is the legislation which makes the sugar manufacturers the sole distillers in the economy. There is no earthly reason why this should be so and I cannot think of another country where it is so. However it has benefited the sugar plantations, as net earnings from distilling etc. (to quote the Mordecai report) between 1959-65 was equal to £8 million whilst net income from sugar sales for the same period was £9.2 million. Having had a fairly comprehensive view of the sugar industry’s efficiency and its cost both direct and in-direct let us now turn to some of the guide line for a diversification programme.