In Russia the government fixes the amount of sugar required each year for domestic consumption and this quantity may be sold by the manufacturer. Then it determines what quantity shall be kept in reserve, to be sold when the price exceeds that named by the government commission (4.30 rubles[25] per pood[26] in winter, or 4.45 rubles in summer). Should the production exceed the amounts fixed for domestic consumption and reserve, exportation is permitted and the exporter gets back the excise, 1.75 rubles per pood, or if he elects to sell this excess at home, he may do so by paying double tax, or 3.50 rubles per pood. Of the alternatives, exporting the surplus is the more advantageous to the owner of the sugar, as the fixed price for domestic sugar is a profitable one. He therefore can afford to take a loss on the sugar he sells for export and still make money on the total operation. The stipulation that the contingent interest in the profitable home market shall keep pace with the growth of the output of the factory is also a substantial encouragement to manufacturers to increase their production. Regulations like these naturally have the effect of supplying foreign markets with cheap sugar. The manufacturer makes an excellent profit and the domestic consumer pays the entire bill.
Primarily, the intent may have been to keep the price of domestic sugar at one level and to enable the manufacturer to fill the home demand without having to go outside the country for his raw-sugar supply. But the plan in its actual working fosters exportation at the expense of the home consumer.
While in Russia the cartel was a government measure, the pooling of interests by German and Austrian manufacturers in their respective countries accomplished the same end. A cartel formed in Russia in 1890 came to grief after four years through the individual greed of its members. In 1898 a new combination of raw-sugar producers and refiners was formed, with the express proviso that the manufacturers of raws were to sell their product only to refiners who were members of the cartel. The domestic trade in white sugar was prorated among the refiners, in consideration of which they had to allow the producer a fixed price of 30 kronen ($6.08) per 100 kilograms (220.4622 lbs.) for raw sugar, the market price of which was paid by the buyer and the difference by the cartel, which got the money by notching up the price of domestic refined sugar.
With the cartel the only seller of refined, and sugar from foreign countries shut out by the high surtax (the difference between the impost on imported and domestic sugars), the consumer had to pay the price demanded by the cartel as long as the difference between the world’s price and that established by the cartel was less than the surtax.
The profit thus obtained constituted a working fund to be used in forcing into line such factory owners as remained outside the pool, either by reducing the price when a factory was about to begin to make white sugar, or by buying stock in the corporations that still held out. Out of the rest of the fund was paid the difference between the market price (with 22 kronen per 100 kilograms as a minimum) and the 30 kronen. Any amount remaining was the cartel’s profit. To illustrate and estimating that no kilograms of raw sugar produced 100 kilograms of refined:
Reference has been made to the abortive results of the London conference of 1886, when a deaf ear was turned to the appeal of the planters of the British West Indies on account of the advantage to the British manufacturer and consumer of securing all the sugar they wanted at a figure lower than it cost to produce.
In 1895, Joseph Chamberlain, then Colonial Secretary of Great Britain, appointed a royal commission to investigate conditions in the West Indian colonies. The facts brought out in its report came as a surprise to the statesmen of the mother country and remedial measures were undertaken.
The anxiety of the Austrian and German governments to get rid of the bounty incubus led them to sound France as to her views, and in 1898 the Belgian government invited representatives of Great Britain, Germany, Austria, the Netherlands, France, Russia, Spain and Sweden to meet in conference in Brussels, but no definite agreement was arrived at, chiefly because of France’s unwillingness to discontinue the giving of indirect bounty. The meeting adjourned on June 1st with the understanding that it would again convene at the call of Belgium, when the preliminary negotiations through Belgium’s good offices had progressed sufficiently to make unanimity possible.
Meanwhile, public opinion in England with regard to the West Indies had undergone a change, partly on account of the report submitted by the Chamberlain commission and partly owing to the fact that Britain, needing the support of her colonies in her South African war, was anxious to shape her policy to please them.