Canada case study

11 March 2019

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Canada has only a small domestic sugar industry and imports the majority of its domestic requirements in the form of raw sugar. Processed by its portside refineries, located at Montréal, Toronto and Vancouver which supply over 90% of Canadian consumption. A small beet sugar plant is located south of Calgary at Taber in Alberta which produces about 100,000 tonnes/year and supplies local customers.

Although a minor player in global terms, Canada has been included as an example of a country which is almost wholly dependent on imports to satisfy domestic demand.

The Policy Environment

Canada often claims its sugar industry has little government support, and so is a ‘free market model’ for other global producers¹. However, Canada enforces an unusual system of additional duties on imports of refined sugar from its main competitors which effectively limits imports of refined white sugar² and protects their refining industry.

Canadian sugar industry structure

Canada has no known support arrangements for its domestic beet sugar industry having scrapped its subsidy arrangements as being superfluous as the industry. 

Import arrangements

Canada’s international trade arrangements also at first sight appear to be minimal. Imports of raw sugar enter the country duty free. A small duty of CAD$31/tonne³ (equivalent to 5% - 8% depending on world prices) is applied to imports of refined white sugar. But this doesn’t tell the whole story, as other policy restrictions have been put in place.

USA anti-dumping duties

Under normal circumstances the USA would be expected to be a significant sugar supplier to Canada as much of central Canada is within range of the competitive US beet sugar industries in the Red River Valley and Michigan. But in reality this does not happen.

Imports of refined white sugar to Canada from the USA are subject to ‘anti-dumping’ duties equal to 78% of the selling price to the importer in Canada⁴. At typical US supply prices this equates to an import duty of at least US$400/tonne which effectively prevents any significant import trade. Imports of white sugar from the USA are consequently negligible, averaging less than 1% of total imports in recent years⁵.

EU countervailing duties

Canada also applies countervailing duties to all imports of white sugar originating in or exported from the EU - another potentially competitive supplier. In September 2014 these duties were increased to €244/tonne⁶. As a result, white sugar imports from the EU are close to zero - less than 0.1% of total demand⁷.

This is significant in the context of the recently agreed Canada-EU Comprehensive Economic and Trade Agreement (CETA)⁸. Under CETA, trade in sugar between the EU and Canada theoretically becomes ‘liberalised’ after seven years⁹. However, the continued enforcement of the countervailing duties means that the trade agreement is not reciprocal for sugar – free trade will be possible from Canada to the EU, but not the other way round. 

European country additional duties

Canada applies both anti-dumping and countervailing duties to white sugar imports from Germany, the UK, Denmark and the Netherlands¹⁰ which similarly prevents any significant quantities of refined white sugar imports from these countries.

Our Analysis

The Canadian sugar model is less ‘free market’ than it first appears. Canada has introduced general and country-specific import tariffs which protects its refining industry by giving it unrestricted access to low cost raw sugar supplies from the world market at zero duty, while preventing imports of refined white sugar from Canada’s main competitors, and placing a small but significant duty on white sugar imports from all other sources. This system therefore also involves a form of government intervention, designed to be advantageous for Canada’s refining industry.

It does not, however, offer a sustainable basis for operating a competitive domestic industry. The only reason the small beet sugar operation in Alberta survives under such adverse circumstances is because of its remote location. Being 1,200km and the opposite side of the Rockies from the Vancouver refinery, and about 4,000km from the refineries in Montréal and Toronto, increases transport costs sufficiently to provide a small market niche for local customers for this operation¹¹.