Sugar and Sugar Containing Products

Taber 2006-259 for CAFTAThe Canadian sugar industry was established principally to serve the growing food processing industry in Canada as an alternative to importing more expensive refined sugar. Canada’s lower sugar prices continue to serve as an incentive for sugar-containing product manufacturers to locate in Canada for the domestic and export markets. Today the sugar industry produces approximately 1.2 million tonnes of refined sugar in 4 plants in Vancouver, Toronto, Montreal and Alberta (beet sugar). About 90% of Canada’s refined sugar is produced from raw cane sugar imported from South and Central America and the balance from domestic sugar beets in Alberta. Approximately 85% of Canadian refined sugar production is sold to industrial users including confectioners, bakers, biscuit and breakfast cereal manufacturers as well as beverage and dairy processors. The remaining 15% is sold to the small but more profitable retail and food service sectors.

There is a high degree of intervention in sugar economies around the world through domestic and export subsidies and prohibitive import barriers. Compared to other countries Canada’s sugar market is very open. Canada has no tariffs on imports of raw sugar from developing economies (like Brazil and Guatemala) and has a small $30.86 per tonne (about 5-8% ad valorem) tariff on imports of refined sugar.

The Canada – US FTA and NAFTA had a significant impact on Canada’s sugar industry. Canadian tariffs on refined sugar and on sugar-containing products were reduced to zero while the U.S. maintained restrictive quotas and prohibitive over-quota tariffs on the same products. These quotas were then entrenched in the WTO. Today the Canadian sugar industry has a small 10,300 tonne quota for refined beet sugar into the U.S. A wide range of sugar-containing food products also face quotas. The EU, Japan and most other high-value markets similarly restrict imports of refined sugar and sugar-containing products. Multilateral trade reform through the WTO is the best mechanism to address these trade disparities. Bi-lateral trade deals with surplus sugar producing countries can threaten Canada’s sugar industry in the absence of new export market access.

It is critical that the rules of origin in bilateral negotiations recognize that “refining” raw sugar confers origin. In the absence of this rule, Canada’s export market access will be limited to the small volume of beet sugar produced in Canada. Canada’s exports of sugar-containing products will also be restricted if restrictive rules of origin extend to product ingredients.

For further information on Canadian sugar and sugar containing products please visit our member site

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