Development & Aid, Economy & Trade, Europe, Headlines, Labour, Latin America & the Caribbean

TRADE: Collapse of St Kitts Sugar Sector Leaves Bitter Aftertaste

Peter Richards

BASSETERRE, St. Kitts, Apr 1 2005 (IPS) - The European Union says it will give St. Kitts-Nevis 3.9 million dollars to ease the pain of the tiny Caribbean nation’s reluctant decision to abandon its three-century-old ailing sugar industry.

Prime Minister Denzil Douglas, who is also the island’s finance minister, said that declining production, rising debt and an uncertain share of the European market meant that it had cost an estimated 12.9 million dollars annually "for many years" to maintain the industry.

"It is attempting to ruin the economy of the country and we have to bring that to an end," he said at a recent news conference.

"It is time for us to exit from the production of sugar to be sold to the European market. We are all aware of the importance of the sugar industry, which is the livelihood of many families in this country and it has been so for many, many years, and to exit now from the production of sugar has never been an easy decision," he said.

Sugar production last year fell by 12.9 percent from 2003, and the volume exported fell by nearly 11 percent. The St. Kitts Sugar Manufacturing Corporation now owes about 114 million dollars to creditors, Douglas said, and that debt is expected to increase by the end of the 2005 season.

During its heyday, sugar cane occupied nearly a third of arable land here. It was the mainstay of the economy until the 1970s, when tourism became the leading foreign exchange-earner.

St. Kitts-Nevis is one of several Caribbean islands that have been trying to get the European Commission to rethink the revision of its Common Agricultural Policy, which would cut sugar prices from 801 dollars per tonne to 651 dollars per tonne for the period 2005/2006. A further reduction to 542 dollars per tonne is proposed for 2007/2008.

"At these prices, no Caribbean country will be able to produce sugar profitably with their current levels of production cost. In St. Kitts and Nevis, in particular, this would result in the loss of over 1,200 dollars for each metric tonne of sugar we produce," Douglas said.

Caribbean sugar-producing countries worry that if the proposed revisions are adopted, the region could lose an estimated 90 million dollars annually.

At a summit in Suriname last month, regional leaders repeated the call for a regime that was equitable and said they would intensify efforts to safeguard the vital interests of the region in the European Union market.

"We are saying that the changes should be a less significant reduction, not 37 percent, and that the changes should start in 2008 and be implemented over an eight-year period, rather than three years," said Guyanese President Bharrat Jagdeo, who heads the agricultural committee of the Caribbean Community.

"We think that the European Union doesn’t just have a moral obligation, but also a legal one," he said.

Komal Chand, president of the Guyana Agricultural and General Workers Union (GAWU), said the European position was directly responsible for the closure of the industry in St. Kitts after 300 years.

"This is a message to the sugar-producing countries in the Caribbean of the devastating effect that the price cuts will have on the economies and the people, who are directly and indirectly involved in the sugar industry," Chand said.

St. Kitts’ quota of sugar to the EU is about 16,000 tonnes, and Caribbean trade union officials have suggested that the other regional sugar-producing states should lobby for a portion of this to be reallocated to them. Chand noted that when Barbados lost part of its quota, it was reallocated to African countries.

But Amos Tincani, head of the European Commission Delegation to Barbados and the Eastern Caribbean, insists that the new regime would be beneficial to the Caribbean.

Tincani said a meeting in Trinidad last month attended by members of the European Commission and a number of Caribbean sugar stakeholders had helped "to focus the debate on the need to work together towards national adaptation strategies, which the EU has committed to support."

Hr stressed that the reform of the EU Common Market Organisation (CMO) for sugar did not change the EU preferential policy towards sugar imports from the African, Caribbean and Pacific (ACP) trade bloc.

"The EU would continue to provide access at zero duty for the agreed quantity of sugar," Tincani said. "Specifically, the proposals do not violate provisions in the sugar protocol to the 1975 EC-ACP Lome Convention, incorporated (as Protocol 3) in the 2000 EU-ACP partnership agreement," he said.

While the sugar protocol stipulates that "the (European) Community undertakes for an indefinite period to purchase and import, at guaranteed prices, specific quantities of cane sugar, raw or white, which originate in the ACP States," Tincani insisted that the "protocol does not fix the level of that guaranteed price."

Tincani added that the reform of the sugar CMO was a very belated attempt to bring the "heavily distorted EU sugar market" in line with the EU Common Agricultural Policy reform and World Trade Organisation rules.

"Let’s not forget that the present CMO, governing the EU sugar market since the 1970s through a combination of national quotas and intervention prices, has resulted in EU prices currently three times higher than world market prices," the official noted.

He said the present CMO has also resulted in a surplus of some six million tonnes of sugar sold at subsidised prices in the international market, thus depressing prices and damaging competitive international producers, including those from ACP countries.

The proposal is still being discussed at the EU Council of Ministers, where it could be modified. The European sugar regime will almost certainly be reformed by Jul. 1, 2006, the date on which the existing legislation expires.

Meanwhile, on St. Kitts, the island’s trade unions want the Douglas administration to hold discussions to ensure that displaced sugar workers are retrained for jobs in other sectors.

Douglas says that his government has established a transition team to manage the process, and "we expect, therefore, that well before the end of this year’s crop we would be in a position to announce a comprehensive package of benefits for the sugar workers."

His administration has also sought assistance from a number of regional and international institutions to assist in implementing the transition programme.

"We have also been working with a number of entrepreneurs to explore the feasibility of using sugar cane for other purposes including the production of animal feed, the co-generation of electricity, and the production of ethanol- and alcohol-based products including rum," Douglas added.