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Thailand case study

22 February 2018

Thailand is the world’s second largest sugar exporter. Thai sugar production and exports have greatly expanded in recent years and continue to do so today1.

This expansion has been driven by substantial government subsidy and protection for the industry for many years.


The Policy Environment

Until recently, Thailand operated a highly protectionist and subsidised sugar policy, with government intervention in almost all aspects of the sugar sector, which was based on the pre-2006 EU sugar policy. In response to a World Trade Organisation (WTO) challenge by Brazil, Thailand is in the process of reviewing these subsidy arrangements.

Their sugar policy worked like this:

Sales quota system

The Thai sugar policy model was based on sales quotas2.

Domestic sugar sales were controlled and limited by a fixed annual quota (Quota A – set at 2.4 million tonnes in 2014). Sugar produced in excess of this couldn't be sold internally and had to be exported (Quotas B and C). Quota B exports (currently set at 0.8 million tonnes of raw sugar) were controlled by the Thailand Cane and Sugar Corporation which had overall responsibility for pricing and selling. The average price from the Quota A and B sales determined the final cane price paid to farmers. Quota C represents the residual surplus which had to be exported, but under the direction of individual companies.

Fixed cane and sugar prices

The Thai government set both sugar sales and cane supply prices.

Sugar price

A minimum price was fixed annually for domestic sales of 'A' Quota sugar. For 2014/15 this was set at US$530/tonne – over 30% higher than the world market price at that time.

Cane price

The government fixed a minimum cane price annually for cane growers. This was based on the weighted average revenue expected from 'A' Quota sales and the export revenues under 'B' Quota. If final sugar prices were higher than predicted, mills had to pay part of the difference to the growers. If they were lower, growers did not have to pay back the deficit, but mills were compensated by the state run Cane and Sugar Fund, financed from government taxation and disbursed by the Bank for Agriculture and Agricultural Cooperatives3. Top-up cane payments were also sometimes authorised, e.g. a supplement of US$5.3/tonne of cane was introduced in 20134 because of weak domestic prices at that time.

Export subsidies

Thailand has no WTO commitments for sugar export subsidies and so is not allowed to subsidise its exports. In its last notification (2014) to the WTO, Thailand stated it had provided zero export subsidies from 2009 to 20135

Brazil WTO dispute challenge

Brazil is currently in the process of challenging this through its WTO claim, maintaining that Thailand cross-subsidises its sugar exports through its system of quotas and subsidised domestic prices. A comprehensive list of laws, regulations and reports is provided by Brazil to support its case.

In response to this challenge and to prevent Brazil from bringing a formal WTO dispute panel, Thailand has announced it intends to change its sugar support system6. It is not yet clear how, or when, these changes will be introduced.

Our Analysis

The Thai sugar policy model has been based on a combination of market differentiation using a quota system, domestic price support for cane producers and millers, and export subsidies.

Until recently Thailand operated one of the most protectionist sugar policies in the world. In April 2016, Brazil launched a WTO legal dispute case against Thailand which documents the subsidy and support measures practiced by the Thai government7. In the introduction to this, Brazil states: “By means of its sugar regime, Thailand strictly controls virtually every aspect of its sugar sector including the production, storage, transport, sales, import, export and other activities applicable to cane, raw sugar, white sugar, molasses and sugar by-products.”

Many observers believe that the expansion of the Thai sugar indutsry has been directly incentivised by the extensive level of government subsidy and support for the industry8. The government wants to expand the sugar industry further as it incentivises farmers to switch away from rice production where huge surpluses were generated by mistaken policy.

In response to a WTO challenge by Brazil, Thailand is in the process of reviewing these subsidy arrangements but it is not yet clear how or when any new arrangements will enter into force.


  1. Thailand Office of the Cane and Sugar Board announcement for government approval of 25 new sugar mill licences, 7 September 2016
  2. LMC International, Analysis of Support Measures in Sugar Industries, April 2011
  3. Thailand sugar annual report, 2013
  4. Antoine Meriot, Thailand’s sugar policy: Government drives production and export expansion, 3 June 2015
  5. WTO, export subsidy notifications, April 2014
  6. Reuters article, 1 January 2018
  7. Brazil notification to the WTO on Thailand subsidies on sugar, 7 April 2016
  8. F. O. Licht, International Sugar and Sweetener Report, July 2010

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