| Author (Person) | Cronin, David |
|---|---|
| Series Title | European Voice |
| Series Details | Vol.10, No.25, 8.7.04 |
| Publication Date | 08/07/2004 |
| Content Type | News |
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Date: 08/07/04 IT MAY not be apparent as you stir the stuff into a cup of coffee but sugar is one of the most politically sensitive topics in world trade. According to critics of the EU's farm-support regime, sugar is a cosseted sector that policymakers have so far shielded from reform at the behest of big business. The critics berate the procedure for artificially propping up a system of sugar-beet production which could not hope to compete with trade in sugar cane on an open market. The sugar industry, on the other hand, emphasizes the importance the crop has for rural development and its role in supporting up to 500,000 jobs across the Union. Nonetheless, all sides in the debate seem to be chanting a common mantra: maintaining the status quo is not an option. Sugar was left untouched by the shake-up of the Common Agricultural Policy agreed by the Council of Ministers last year. Next week, however, the European Commission is scheduled to unveil long-awaited proposals on sugar reform. "At the end of the day, there is not much alternative to a major restructuring of the sector," says an aide to Agricultural Commissioner Franz Fischler. "The status quo is completely untenable. You can't not reform a sector that is not competitive, that is not environmentally friendly because of its intensive nature and is not trade friendly." Several factors have combined to make reform imperative. Among them is the likelihood that the Union will lose a challenge to its sugar regime brought at the World Trade Organization (WTO) by Brazil, Thailand and Australia. The panel adjudicating the case was expected to deliver its verdict this month but has now postponed the ruling until September. Just as significantly, Trade Commissioner Pascal Lamy has pledged to scrap farm export subsidies recently - on condition that other leading players do likewise - in an attempt to give a new impetus to the faltering Doha round of world trade talks. The Union's "Everything But Arms" (EBA) initiative, which came into effect in March 2002, commits it to allowing quota-free imports of sugar and other commodities from the 49 poorest countries in the world from 2009 onwards. At present, the EU is the world's second largest sugar exporter, after Brazil. But the sugar regime is hugely costly to the Union's budget. In a new report, the European Union committee in the UK's House of Lords calculates that sugar accounted for more than one-third of the €3 billion subsidies spent on exports of farm commodities in 2002; only dairy products were more lavishly supported. Earlier this year, Oxfam issued a study contending that the EU's sugar regime, introduced in 1968, disproportionately benefits large producers, rather than those in more peripheral regions in southern Europe. The anti-poverty group estimates that the six largest refiners in the EU received €819 million in subsidies during 2003. Top beneficiaries were France's Beghin Say, Germany's Sudzucker and the UK's Tate & Lyle. At the other end of the spectrum, the present application of the EBA system means that the least developed countries can export the equivalent of 1% of EU sugar contribution into the Union's markets. Oxfam calculates that imports of the commodity from Ethiopia and Mozambique into the EU are set at a joint threshold of 25,000 tonnes this year. Fifteen of the largest farms in England's Norfolk region produce more than that amount. Agriculture chief Fischler is hoping that the main tenets of a draft proposal he has sponsored will be left intact during the internal consultations in the Commission before the final version goes to the executive's top table on Wednesday (14 July). These envisage slashing the guaranteed sugar price by one-third in 2005-07; cutting production quotas for sugar from 17.4 million tonnes to 14.6m per annum, and; reducing the quantity of subsidized exports from the EU to 400,000 tonnes from the current yearly level of 2.4m tonnes. In the words of one Commission official, Fischler regards his blueprint as the "only way forward". "Over four decades, we have misallocated resources," the aide explains. "We can't correct the system without cutting back on production. But we also have to bear in mind that full liberalization is not an option. That wouldn't help developing countries. The only big winner from full liberalization would be Brazil." True, countries from the African, Caribbean and Pacific (ACP) bloc have made it clear they do not wish to be subject to the full rigours of international competition. At a summit in the Mozambique capital Maputo last month, the ACP heads of state and government urged the Union to grant least-developed countries increased market access "in order to build their future role as important sugar suppliers". But they advocated that any blows to least developed countries (LDCs) from price reductions should be cushioned with compensation paid out of the European Agricultural Guidance and Guarantee Fund (EAGGF). Jamaica, a high-cost producer, complains that Fischler's plans to reduce the guaranteed price by a third over three years would be a severe setback to its plans to restructure its sugar industry which include a €93 million farm modernization scheme. Whereas EU beet sugar farmers would be compensated by a direct payment from the CAP, Jamaica's sugar farmers would not. A Jamaican diplomat also criticized apparently conflicting messages in a draft of Fischler's blueprint. These refer to the expectation that ACP states will have an erosion of preferences granted by the EU, while at the same time continuing the so-called ACP Sugar Protocol designed to boost exports of the commodity to the Union. "This is contradictory, as the provision cannot be retained and at the same time be subject to preference erosion," he added. "The conclusion can only be that ACP countries like Jamaica have become the sacrificial lambs in spite of commitments made by the Commission." Oxfam believes that the Fischler plan will not go far enough to address how the supports heaped on Europe's sugar industry can flood poor countries with cheap imports, thereby threatening the livelihoods of small-scale producers. Furthermore, the charity reckons that the proposed cuts in production quotas will not create the space needed to raise imports to the Union from LDCs. It is calling for cuts of 5.2m tonnes - 2.4m more than those sought by Fischler. It also wants the Austrian commissioner to tackle the 3m tonnes of ostensibly non-subsidized sugar exports per year. Known in Brussels parlance as C-sugar, the group considers these as indirectly subsidized by the high prices guaranteed to European sugar producers. "Nothing is going to be resolved unless the EU changes the paradigm of agricultural protection," says Oxfam's Gonzalo Fanjul. "It is legitimate to intervene in the market for reasons of social and environmental protection. But it is grotesque to have a system to satisfy the richest farmers." Their potential earning losses notwithstanding, the big sugar companies have been reluctant to get embroiled in a battle with the Commission. The somewhat polarized nature of the Union's sugar producers - ranging from major firms to small growers in southern Europe, Finland and the new member states in central and eastern Europe - has meant there has been no cohesive lobbying campaign by the industry. "Some in the more peripheral areas of Europe see their very existence being questioned, whereas the bigger players in France, Belgium, the Netherlands and Germany say 'we can handle this'," explained one industry source. "We all recognize reform is going to happen. With Everything But Arms and the flow of imports it will lead to, things have been arranged in such a way that the status quo is not an option." A spokesman for British Sugar struck a sanguine note. He said that the paper due to be adopted by the Commission next week "will represent the start of the negotiating process, and therefore the most extreme of the range of reform outcomes". "Analysts are suggesting that the final reform outcome is likely to be consistently more moderate, reflecting compromises agreed in the Council of Ministers in the coming months." Yet the Committee of Agricultural Organizations, which traditionally defends farmers' interests in the EU, is arguing that the Commission should stall on publishing its reform recommendations until it knows the result of the WTO's deliberations on the sugar regime. "That would be the more logical thing to do," says Marie-Christine Ribeira, spokeswoman for the farm lobby. "In cases, where export refunds cause problems, we should examine the case and change the system if it is really harmful. But when you have a difference of price between the internal and world market, you need export refunds. "Everybody recognizes that something should be done in the sugar sector. The problem is when you go into the details and see what should be cut, the impact of that cut and who pays for it." |
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