EU ruminates on sugar regime

Related tags Sugar European union International trade British sugar

With the failure of WTO talks in Cancun last year, pressure has
intensified on Europe's heavily subsidied sugar regime - trading at
three times the world price- to change. While critics want to see a
fairer regime with Europe flinging open the doors to imports from
developing countries, European sugar producers are concerned that
full liberalisation would raze the industry to the ground, and
leave Europe open to fraud.

"Franz Fischler himself said that a system close to liberalisation would result in a 75 per cent loss of sugar production in the EU,"​ Jean-Louis Barjol, at the Committee of European Sugar Producers told

Barjol is referring to the third of three scenarios tabled by the Commission last September to amend the current 35-year-old sugar regime.

An option that embraces full liberalisation which in effect would mean abolishing the current domestic EU price support system, abandoning production quotas and totally removing import tariffs and quantitative restrictions on imports. A single payment system - the same as that tabled for CAP reform - has been proposed to cushion the effect on sugar producers.

The impact of losing 75 per cent of production would send ripples throughout Europe, with massive job losses across the EU-15.

The European beet growers' association (CIBE) estimates that 500,000 jobs in the EU depend on the current common market organisation (CMO) sugar regime, in place since 1968.

"The COM supports the income of numerous farmers, guarantees numerous jobs in rural circles thanks to 135 factories,"​ CIBE said in recent statement.

Job losses and massive restructuring are not the only concerns for the producers. "The third option would have to include management of imports, otherwise it would unsustainable and open to fraud,"​ said Barjol.

He referred to a recent Commission move to close EU borders on Balkan sugar imports after Brussels discovered the sugar had been 'doctored' with imported cane sugar.

"The Balkans are not a tropical country and do not produce cane sugar, yet this was detected in their EU sugar imports because they had mixed it with sugar,"​ he added, emphasising that there is currently no management system for imports from developing countries.

The first option that Fischler proposed last year extends the present regime - based on flexible quotas and price intervention - beyond 2006 and would keep intact the current common market organisation.

The second scenario looks at the impact of reducing internal EU prices - undoubtedly severe on Europe's key sugar producers, among them British Sugar, Danisco and Tate & Lyle. To soften the blow, the Commission looked at the possibility of introducing the single farm payment - the backbone of recent CAP reform - into the sugar sector.

In favour of a fourth option - not covered by the Commission - European sugar producers are looking to see controlled, managed imports. "We have asked the Commission to look at how to effectively manage an import, sugar-quota regime,"​ said Barjol.

Leaving the market open would also mean tough competition from ambitious non-EU sugar producing countries in possession of subsidies, such as Brazil, a country aiming to supply the world with 50 per cent of its sugar.

Global sugar prices are currently pretty flat due to a surplus on the market and according to a recent report from British Sugar the prices are low mainly because of the ten-fold increase in exports from Brazil (to over 10 million tons) in the last 10 years.

"Brazil has been able to expand its exports of sugar to the world market only because of repeated massive devaluations of its currency which have artificially reduced its production costs. The Brazilian sugar industry has also been supported by cross subsidy from their heavily government-supported bioethanol industry,"​ said the leading UK sugar company.

Although a key player on world sugar markets, the EU is lagging far behind Brazil, which now dominates exports. The EU-15's share of the world market amounts to 13 per cent for production, 12 per cent for consumption, 15 per cent for exports and 5 per cent for imports.

Its share in world production, consumption and exports has declined, whereas Southern Hemisphere countries have steadily gained importance. Australia, for instance, exports 85 per cent of its crop.

The next major step in the process towards sugar reform in Europe will be in March when agriculture ministers gather in Brussels to discuss the Commission's 'three-option' proposals, each bringing to the table national positions garnered through extensive stakeholder discussions. The Commission is expected to draw up a final proposal in June 2004.

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