Return towards free Trade in Cereals and Sugar

«The Economist», 25 giugno 1921, pp. 1370-1371

Turin, June 20

The two last remaining war excrescences on the economic structure of Italy are disappearing – namely, the State monopolies of cereals and sugar. The Government has issued decrees by which internal trade in Indian corn, oats, barley, and rye are made absolutely free, and the imports from foreign countries are only made subject to the old duties of 1.15 lire for corn, 4 for oats, and 4.50 for barley and rye. But for wheat the problem is somewhat complicated by promises given to wheat producers and consumers. To wheat producers the State promised by decree of June 4, 1920, that the price would be fixed from July 1, 1921, at 125 lire per quintal, with an additional premium of 21.50 lire for the wheat produced in the Southern provinces, in the Islands, and in the territory formerly occupied by the enemy. If the ports should be opened to the free imports of foreign wheat, the Government may run the risk of breaking its promise, made to induce producers to sow large areas with wheat. The price of North American wheat, c.i.f. Genoa, which had risen from 126 lire per quintal in September, 1919, to the maximum of 292 lire in May, 1920, fell to 140 in May, 1921. Some quantities were even bought at 110 lire; and today the c.i.f. price is fluctuating between 130 and 140 lire. A complicated system of variable duties and bounties would be, therefore, necessary to guarantee to wheat producers the promised prices. What will become, moreover, of the premium promised to Southern and other provinces?

The Government, therefore, has limited itself for the moment to a decree with which they declare that they will accept up to August 31, 1921, all offers of wheat from internal producers at the stated prices of 125 lire per quintal in the Northern and Central provinces, and of 146.50 in the Southern and other provinces. It is to be feared that the offers will be very much greater than in past years. In the nine months from August, 1920, to April, 1921, the State obtained with great difficulty and by means of forced requisitions 10,733,135 quintals of wheat. No producers would have freely offered a single quintal of wheat, as the free or clandestine price was higher than the State price. As the reverse situation will probably obtain in ensuing months, the free offers will be, it is feared, very abundant, thus greatly lessening the necessity for foreign imports.

But the troubles of the Government will not end there. If it were possible to free the price of bread from State regulation, State imports could be discontinued, and private traders could step in instead. No private trader, however, would dare to import a single quintal of foreign wheat at the present c.i.f. cost of 140 lire if the bread price is to remain fixed on the present basis of 115 lire for wheat. On this basis, the bread prices are at Turin, for example, 1.40, 1.70, and 1.90 lire per kilogram, according to quality. The State loses the difference between 140 lire, which is the price of foreign-bought wheat, and 115 lire, which is the sale price of the same wheat to the distributing consortiums.

Similar difficulties are handicapping the Government in the efforts made towards extricating themselves from the sugar difficulties. By a recent decree, sugar rationing is to be abolished from July 1, 1921. The consumption of sugar, which was about 2 million quintals in 1913 and 1914, was reduced by rationing only to 1,245,000 quintals in 1917. Today, the consumption is 2,500,000 quintals yearly. The individual monthly rations differ from the maximum of 780 grams for Leghorn, 770 for Turin, and 760 for Genoa to 175 grams for Avellino, 185 for Teramo, Campobasso, and Palermo. If the imports were free, foreign sugar could be landed at Genoa for less than 500 lire per quintal – viz., 200 lire for sugar proper, c.i.f. Genoa; 216 lire normal duty, equal to the internal excise; 22.85 gold-lire, corresponding about to 68 paper-]ire of protective duty; 3 lire for port dues and costs; making a total of 488 lire. But the Government cannot proceed at once to abolish the sugar monopoly, as they promised last year to beetroot producers a fixed price of 16.50 lire per quintal. It was a necessary guarantee, they said at the time, as they would not otherwise cultivate beetroot. But the consequences are today rather ominous.

As the foreign sugar can be landed for less than 500 lire, the sugar producers are clamouring that, if imports are made free, they cannot pay to beetroot producers the promised price of 16.50 lire per quintal. And so the Government are finding themselves in the predicament of having abolished the rationing system and of being forced to continue the State monopoly for some months, until, in October next, the agriculturists have delivered their production of beetroot. Then it will be possible to calculate the difference between the fixed price of 16.50 lire and the price at which the sugar producers would have found convenient to buy beetroot with a view of meeting competition of foreign sugar. And then, if we will return to free trade in sugar, the taxpayer will pay the piper.