Economy & Trade, Europe, Headlines

TRADE: EU Makes It Sweet for Big Companies

Stefania Bianchi

BRUSSELS, Apr 13 2004 (IPS) - The EU’s sugar regime is not only harming developing countries, but is costing European taxpayers more than 900 million dollars each year, according to a new report by a leading non-governmental organisation (NGO).

The study by Oxfam International says that the sugar regime of the European Union (EU) "rewards the gross over-production of sugar by big companies and rich farmers with EU taxpayers’ and consumers’ money, while denying people in the developing world the chance to trade their way out of poverty."

The report, ‘Dumping on the World’ released Wednesday (Apr. 14) says that EU taxpayers are paying some 982 million dollars (819 million euros) in subsidies each year. Oxfam says this money goes to six main European sugar processing companies to dump unwanted sugar on world markets.

The EU dumps around five million tonnes of sugar on the world market every year, according to Oxfam.

Three sugar companies – Beghin Say (France), Sudzucker (Germany), and Tate and Lyle (Britain) – are the biggest winners, each receiving 283 million dollars (236 million euros), 241 million dollars (201 million euros), and 189 million dollars (158 million euros) respectively in EU export subsidies.

The report adds that other sugar companies – British Sugar, Raffineria Tirlemontoise, Danisco, Argana, Azucarera Ebro, Nordzucker, and Associated British Foods – are also benefiting from the regime.

Oxfam says that developing countries are losing out because of European sugar dumping. The NGO points to the case of Brazil and Thailand which lose an estimated 494 million dollars (411 million euros) and 151 million dollars (125 million euros) respectively each year.

The EU is the world’s biggest importer of sugar, and in 2000 bought 833 million dollars worth of sugar from developing countries – more than the combined total imports by the United States, Japan, Australia and Canada.

Under the current sugar policy, producers from the EU are guaranteed a minimum price two to three times the world market price (730 dollars a tonne at present compared to the market price of 243 dollars a tonne). But this is tied to quotas. For sugar produced above this quota, farmers receive the world market price.

High tariff levels stop cheaper sugar pouring into the EU, but the least developed countries (LDCs) receive preferential access. LDCs get preferential treatment at present under the 2001 Everything But Arms (EBA) initiative. This allows duty-free access for products.

But Oxfam’s report reveals that the total annual quota allowance for the 49 LDCs is equivalent to only three days’ EU consumption.

The EU currently spends 1.7 billion dollars a year supporting its sugar producers. The money guarantees internal sugar prices besides putting up tariffs.

Oxfam says that three of the world’s poorest countries, Mozambique, Malawi and Ethiopia, are estimated to have lost 238 million dollars (198 million euros) since 2001 in potential earnings from sugar because of limited quotas.

The European Commission, the EU executive, presented three possible scenarios for reforming its sugar sector last September – leaving the regime as it is, providing a price reduction, or full liberalisation of the sugar market.

Oxfam says these proposals will not help small farmers in Europe and will only allow big companies to continue to hurt developing country farmers by dumping subsidised sugar.

The EU’s sugar regime is a "scandal", says Jo Leadbeater, head of Oxfam International’s EU advocacy office.

Leadbeater agrees that the sugar regime is "long overdue for reform," but says that rhetoric on reform in Brussels must be matched with meaningful action to change the regime in a way that benefits developing country producers and puts a stop to EU overproduction and export dumping."

Oxfam is calling on the EU to propose reforms that will end dumping, reduce European production levels, and increase access to Europe’s markets for LDCs at fair prices.

The NGO says that efforts must also be made to protect sugar producers in the 77 African, Caribbean and Pacific (ACP) countries and small sugar farmers in the North from negative adjustment costs.

Last month EU farm commissioner Franz Fischler said that reform of the EU sugar regime was "unavoidable". He spoke of "internal criticism of the support system for lack of competition, high domestic prices, quota rigidities and no market orientation" as key factors in the moves to a more liberal regime.

He added that "reflection, based on extended impact assessment", was ongoing. Agriculture ministers are currently discussing the Commission’s proposals. A final proposal is expected in June.

Oxfam is calling on ministers to make reform a priority.

"Sugar is the one commodity on which Europe could make progress to make trade fair this year," says Leadbeater. "Yet it seems to be slipping off the European agenda. It is imperative that pressure from vested interest groups is not allowed to win the debate before it’s even started and that we don’t lose the impetus for meaningful reform."