To the tourists who fly into Grantley Adams International Airport, Barbados is pretty much heaven on earth. It has gentle bays of fine pinkish-silver sand, calm turquoise waters, miles of manicured golf courses, a crime rate so low as to be the envy of the rest of the Caribbean, and water clean enough to drink straight from the tap. While it caters handsomely for visitors of more modest means, the rich and famous are especially fond of the island because it excels in impeccable hotels where they can be indulged with the utmost discretion. At the world-famous Sandy Lane, where 800 staff attend to the needs of guests occupying just 112 rooms, accommodation, in season, starts at $2,800 a night. Some visitors, like Cliff Richard, and Cherie and Tony Blair, prefer exclusive property developments such as Sugar Hill, or mock-colonial condominiums. Those with a taste for heritage head up north to Fustic House, an ethereally beautiful old plantation house that sits in luxuriant tropical gardens offering breathtaking views over the sea. Pierce Brosnan, Oprah Winfrey, Rowan Atkinson, Catherine Zeta-Jones, Rio Ferdinand, Glenn Close, Tiger Woods, Hugh Grant ... they just can't keep away.

With a platinum-plated visitor list like this, you might think that everything was hunky dory in Barbados. But there is trouble brewing in paradise. Barbados's tourist scene, the island's top source of income, is predicated not only on sea and surf, but also on sugar - its second-biggest source of revenue. Tourists love Barbados for its lushness, a verdant landscape carpeted with rolling green hills of sugar cane - an erect, elegant grass with bamboo-like stems that stands as high as 12ft at maturity, swaying and rustling in the breeze of the trade winds.

In pre-colonial times, Barbados was covered with abundant natural forest, but early settlers felled it to make way for sugar cane. So nowadays, without that carefully cultivated, grasshopper-green cane, much of Barbados would turn into brown, scrubby bush. This is what has happened in Antigua, where the sugar industry fell apart in the 1970s. Stripped of sugar cane, Barbados simply wouldn't look like that gorgeous paradise island of travel brochures, and tourists might defect to greener pastures.

Until the early 1990s, the idea that Barbados might no longer grow sugar cane was unthinkable. For Barbadians, or 'Bajans', the familiar sweet scent of newly cut sugar-cane fields is the very essence of home. The highlight of the island's calendar is Crop Over, a festival that runs from July to August, celebrating the end of the cane-harvesting season with fairs, calypso contests and competitions. It kicks off with a symbolic ceremony representing the delivery of the last canes, and the crowning of the King and Queen of the festival - the season's most productive male and female cutters. Sugar is woven deep into the cultural and social fabric of the island and deeply engrained in its psyche. With its brutal history of slavery, sugar cane has supplied the bitter-sweet lifeblood of the Barbadian economy for nearly 400 years, and in that time it has also generated enormous wealth for Britain. But soon it could disappear entirely because Barbados, and other former colonies of European countries, are losing their preferential trading relationship with their former colonial powers.

By 2009, in the name of creating a level playing field for free trade, the price that countries like Barbados will be paid by the EU for their sugar will be slashed by 40 per cent. Coming after decades when Caribbean cane producers have been struggling to compete with sugar produced from the turnip-like beet by Europe's heavily subsidised farmers, this looming cut has been taken by many as the final blow, a death sentence for West Indies sugar. Sugar is relatively expensive to produce on islands like Barbados because it is grown on small, labour-intensive family plantations where the undulating land and fragile soil is not suitable for mechanisation. Now these islands are being told to compete, not only with the EU, but with countries like Brazil where plantation-based, intensive cane growing with its huge economies of scale and low-cost labour produces a cheaper product. It is an impossible challenge. The entire island of Barbados is the same size as one typical sugar plantation in Brazil.

Barbadians are smarting with the injustice of it. 'The big corporations who own plantations in lower-cost countries are using the World Trade Organisation to force us out of the sugar market, and the European Union has sold us out, just as it has already done with Caribbean bananas,' says Dr Anthony Kennedy from the island's cane-breeding station. 'Here we have a national health service, trade unions and pay a living wage. If we paid the same wages as those companies do, our workers would starve within a week.'

Now that Caribbean producers have got the message that there is no longer any place for their sugar in the cut-throat world market, some islands - St Kitts, and Trinidad and Tobago - have decided to give up the ghost and close down their sugar-cane industries. But in Barbados, sugar is so embedded that the consequences of abandoning production would be dire. Thousands of islanders would lose their livelihoods and this would inevitably cause crippling hardship.

What's more, Barbadians don't see any alternative. Barbados is a coral island, with little water. Its soil is thin, barely two inches thick at some points, and liable to erosion. Islanders have tried out alternative crops but found nothing else that can replace it. Sugar cane is ideal because its fibrous roots stabilise the soil and the 'trash' leaves left after harvesting put back beneficial organic matter. It thrives here without irrigation or synthetic fertilisers and is very near to organically grown. Better still, it cleans up carbon dioxide in the atmosphere. Furthermore, nothing in Barbadian sugar production is wasted. The 'bagasse', or fibre left over after cane crushing, fuels the island's two sugar-cane factories. Both this and the 'mud' produced by the manufacturing process make ideal natural fertiliser and compost. The residual sticky molasses extracted from the raw sugar is an indispensable ingredient in the island's feted Cockspur and Mount Gay rums. While in countries such as Brazil and Australia sugar cane has been denounced as an ecological disaster, on Barbados it is a green and sustainable crop.

Barbadians are also wary of putting all their eggs in the tourism basket, however tempted they might be to convert loss-making sugar-cane fields into luxury condominium complexes with golf courses and swimming pools. 'It would only take a hurricane to pass near Barbados like it did in Grenada, or another September 11 when tourists are too scared to travel, and our tourism industry would be seriously upset. We need our sugar-cane industry,' says minister of agriculture, Senator Erskine Griffith.

So Barbados has come up with a novel idea to save its sugar. The island has always been a byword for excellence in sugar and, rather than fighting a futile battle to compete on the bulk-commodity sugar market, it intends to capitalise on its strong historical reputation and go for broke by making nothing less than the best sugar in the world. With the clock ticking away towards the 2009 deadline, it is developing a new generation of sugars that it hopes will distinguish it from its competition, and allow it to provision niche markets around the globe.

The first of these is Plantation Reserve, a unique, straw-coloured sugar with large, sparkling crystals. Stick your nose in a tin and you inhale the most remarkable butterscotch-and-fudge aroma. In the mouth, Plantation Reserve is reminiscent of the slightly green, sugar-snap pea-like sweetness you will find in freshly squeezed sugar-cane juice. It is not to be confused with dark, treacly muscovado sugars, or the nondescript 'brown' sugars that are simply ultra-refined white sugars, re-coloured with molasses. 'If you smelled and tasted Plantation Reserve blind against other golden sugars, you would definitely spot the difference. It has a buttery caramel taste and a more intense, deep flavour and aroma than any other sugar. It is very, very different,' says Cameron Steele, Sandy Lane's executive pastry chef.

Unlike white sugar, which is made mainly from sugar beet, and refined until it consists of 100 per cent chemically pure sucrose, the superior taste properties of raw cane sugar come from the black molasses that remain in it. These contain the collection of esters and amino acids that give the sugar its bouquet, along with a superior nutritional profile because health-giving micronutrients like potassium, zinc, iron and magnesium are retained. Among the world's raw cane sugars, Barbados has always had the finest reputation. Scientists still cannot pin down exactly what gives Barbadian sugar its celebrated qualities, although they think that the calcium-rich coral-island soil, and scarcity of water as the cane ripens, must have something to do with it.

Now, with Plantation Reserve, Barbados has cranked up its sugar to a whole new level. It has done this by making a very stringent selection, after daily sampling, of the purest, cleanest, ripest canes at the optimum point in the harvest - neither too early nor too late - and manufacturing the sugar on the same day as the cane is squeezed. Since the juice is extremely pure, it takes much longer to produce crystals when boiled. While a standard Barbados sugar takes three hours to crystallise, Plantation Reserve takes eight, hence its more pronounced caramel personality.

Plantation Reserve is a standard-bearer for the Barbadian government's radical strategy of reinventing its sugar-cane industry. It reckons that, as well as producing premium sugars, cane has a green future in producing electricity and biofuels that will keep the island running, and cut down its need for costly imports of oil and gas. But to give sugar cane a new future, it has to involve and enthuse younger generations of Barbadians, and attitudes towards sugar in Barbados are mixed. 'Many Barbadians don't want to cut sugar,' says Dr Karl Watson, a historian at the University of the West Indies. 'Even though it is quite well paid nowadays, they see it as a relic of slavery, an undesirable job.' Sentiments captured in the lyrics of this Barbadian folk song: 'Sugar cane growing in me native land/ Cut de sugar cane 'till um burn me han'/ Well I work out in de field from morn till night/ Cut de sugar cane 'till um burn me han'.'

In the past, Dr Watson points out, sugar in Barbados has been responsible for great human misery. The island was settled by the British in 1627 and rapidly turned into a landscape of sweeping sugar-cane plantations, planted, cultivated and harvested by forced labour. By the 1660s it had become the jewel of English colonies; one commentator referred to it 'as the richest spote of grounde in the world' because of the fortunes that could be amassed. The opulent Palladian-style Harewood House outside Leeds, for instance, designed by Robert Adam and landscaped by Capability Brown, was built by the Lascelles family with some of the wealth accumulated from their slave-worked plantations on Barbados.

At first such plantations were worked by 'undesirable whites', mainly prisoners and those who were kidnapped and indentured or exiled, such as Jacobites from Scotland and Catholics from Ireland. But these 'redlegs', so named because their skin burnt in the sun, were deemed to be uneconomic because of their high mortality rate and were soon replaced by a workforce of enslaved African peoples from Ghana and Nigeria - mothers, fathers, sons and daughters - all shipped to the island against their will to work in barbaric conditions. In Barbados, you can still see slave registers, listing in immaculate copperplate handwriting a plantation owner's 'property', with births and deaths recorded as an 'increase' or 'decrease', occupation as either 'labourer' or 'domestic'. 'It gives me a terrible feeling to read these registers,' one islander told me. 'I keep thinking that those were my ancestors, that my great-great-grandfather was a slave.'

With such a painful and shocking history, you can understand why for decades there has been a movement to break with the past and cut Barbados's traditional dependence on sugar. Past governments took the attitude that the industry could wither and die. From its heyday in the 1970s, the island's sugar production has been allowed to dwindle to around one-tenth of what it was. It hit an all-time low in 1994, when it was in such a parlous state that there was no sugar to be had in the shops for local consumption. But then, in 1998, the present administration stepped in with a different attitude and leased ailing farms from growers. Now there is a strengthening consensus that tourism alone can't keep Barbados going, and a growing conviction among both white and black Barbadians that sugar cane could still have a future.

'Sugar has been very low,' says Michael Gill, descendant of a long line of white Barbadians, originally from Ireland, who owns the old Ashbury plantation in St John. He has grown sugar since he was 18 and it is the ambition of his son, Alexander, now aged 10, to take it over after him. 'Some people still say that it is on its deathbed. We just hope and pray that it's not too late to start trying alternatives like Plantation Reserve.'

You hear a similar sentiment from Charles Sobers, a black Barbadian who started in sugar when he was 17 and who now manages around 900 acres of government-leased sugar estates, several of which produce cane for Plantation Reserve. Each Sunday after lunch he tours the cane fields with his 16-year-old son, André, planning the coming week's work. He looks at some brown, unkempt fields where sugar cane used to be grown and shakes his head. 'They don't look good at all. Sugar is so important to our landscape and our culture. It holds the soil and employs a lot of people. One hurricane and the tourists don't come. Without sugar we'd struggle. To grow it for over 350 years, then have to import it from Brazil when we make the best sugar in the world, would be nonsense.'

You can't help thinking that, over the centuries, Barbados has been used and abused for its sugar cane - a crop imposed by British plantation owners who then enriched themselves on the proceeds of slavery. Now that ex-colonial powers like Britain can buy cheaper sugar elsewhere, they have effectively washed their hands of their former colonies and what they regard as an uncompetitive product. This is a conveniently short view of history, tantamount to saying, 'Your sugar is too expensive so find something else to do. It's your problem now'. To add insult to injury, they have done little to cushion the blow. 'The European Union has offered a pittance in compensation when you look at what it has gained over the years,' says Dr Kennedy. Morality apart, the ultimate irony is that, although its sugar is now produced in a demonstrably equitable manner, Barbados is ranked as too developed for it to qualify for Fairtrade status.

And yet, in the face of such adversity, Barbadians stubbornly refuse to give up their sugar, probably because they are so very, very proud of it. For a small island they have a remarkably big ambition to do something newer and greener with their sugar cane, and in this plan, Plantation Reserve offers a sparkling glimmer of hope. Every precious crystal represents the creative energy and aspiration of an island that just won't take no for an answer.

· Plantation Reserve costs £2.35 for a 500g box; £3.39 for a tin. Stockists include Booths, Waitrose, Fortnum & Mason, Selfridges, Harrods. Mail order merchant-gourmet.com