Australia May Cut Sugar Tariffs

AUSTRALIA'S politicians are finding out that there is more to sugar than sweetness.

The country's 6,000 sugar farmers are mounting a bitter campaign to stop a 27.6 percent reduction in tariffs on imported sugar on July 1. The cane growers are flexing their muscles at meetings with members of Parliament and on May 5 will be meeting to try to convince federal Treasurer John Dawkins to hold off on the tariff reduction.

"It's our belief the Labor Party will review its policy," says Ian Ballantyne of Canegrowers, an industry lobby group. But on April 26, Mr. Dawkins indicated he was in favor of the reduction and was not opposed to even lower tariff levels on sugar.

The issue has already caused a dispute within the opposition Liberal party. John Hewson, the opposition leader, favors the cuts but some members of his party in Queensland are opposed. On April 27, the party agreed to support tariff reduction.

If Prime Minister Paul Keating reverses the tariff action, Mr. Ballantyne says it will signal a major shift in economic philosophy. Mr. Keating has long been known as an "economic rationalist" who says Australian industries should be able to compete without protectionism.

But during a recent battle over a by-election in Wills, former Prime Minister Bob Hawke's seat, Keating indicated he felt there should be continuing levels of protection for the textile, apparel, and footwear industries.

"There are fundamental changes in the Labor and National parties, which no longer accept that you have to expose Australian industry to the world, or if you do, you should do it more slowly," Ballantyne says.

The sugar tariff debate is coming at a time when Australia is arguing in the General Agreement on Tariffs and Trade negotiations that other nations should reduce their tariffs and other barriers to agricultural trade. Roger Camilleri, a spokesman for the European Community in Canberra, says the EC is watching the Australian sugar debate.

The sugar fight also comes on the eve of a report on sugar by the Industry Commission, a federal agency that advises the government on industry policy issues. In a draft of the report, the Industry Commission recommended tariffs be phased down to the equivalent of 5 percent by 1996 and eliminated altogether by 1998.

"The Commission has been unable to identify any factors which would warrant special treatment being afforded the Australian sugar industry," the draft report said. Imports account for only 1 percent of consumption.

Canegrowers, however, maintains the timing for reducing the tariffs is wrong. Profits have been sucked dry by a drought that has reduced yields to the lowest levels in 30 years. World prices are low, which has hurt exporters of raw sugar. In addition, most of the world's sugar producers protect their local industries with quotas or tariffs.

Ballantyne says the growers need some time to recover. "It's not like wheat, where you can go out and plant a harvest overnight. It takes five years to plant and harvest a crop," he explains.

The current tariff effectively gives Queensland's growers an extra $4,400 (Australian; US$3,300) in income and swells the pockets of New South Wales growers by $13,000 per year. (New South Wales growers do not export much sugar so their share of the tariff is higher.)

However, the Industry Commission's draft report found that the tariff subtracted $100 million from consumers' pocketbooks in fiscal year 1989-90.

The tariff then was $115 per ton. At that level, the tariff was causing factories to shut down, complained one trade group, the Sugar Users Group-Australia. In 1988, for example, the confectionary company Allen's shut down its licorice plant because of cheaper imports from countries where sugar could be bought at world prices.

If the government does not respond to the lobbying of Canegrowers, the tariff will come down to $55 per ton on July 1. This savings will be passed on to consumers.