Economy & Trade, Europe, Headlines

TRADE-EU: Bitter Pill for Developing Countries

Stefania Bianchi

BRUSSELS, Jul 13 2004 (IPS) - International aid campaigners have attacked a proposed overhaul of controversial European Union sugar subsidies due to unveiled later this week.

The European Commission, the European Union (EU) executive, will release its proposals for reform of the sugar regime Wednesday (Jul. 14). This will determine the way sugar is traded across the world and will have an impact on the lives and the environment of millions of people.

Under the current regime, which has been criticised for unfairly discriminating against sugar producers from developing countries, Europe produces 20.4 million tonnes of sugar a year, imports about two million, but consumes only 15.5 million.

As a result, the EU has to export a surplus of around six million tonnes of sugar every year. Some of this gets specific export subsidies but all of it is dumped on world markets at prices which development groups say undercut local farmers and deprive them of their livelihoods.

The sugar regime has undergone no major reform since 1968, but the current system is due to come to an end in 2006.

According to recent media reports and leaked documents, the anticipated reforms will include cutting the guaranteed sugar price by one-third between 2005 and 2007, and reducing sugar quotas. The European Commission hopes these changes will reduce subsidised sugar exports.

However, campaigners argue that the reforms do not go far enough to redress the imbalance between sugar farmers in the EU and developing countries.

The aid groups Oxfam and WWF say the EU reform will not end the dumping of much of the subsidised sugar, nor increase developing countries’ access to the European market. They believe the new regime will in fact cut the price they receive for their current modest exports to Europe.

– These first ever changes to the regime must result in Europe’s sugar having less impact on the global environment and ensure it helps reduce poverty," they said in a statement Tuesday (Jul. 13).

ôBeyond that the EU also has a responsibility to favour developing countries and the environment with its policies, at least in the short term, in order to redress the historic imbalances created by the regime. After a period of re-adjustment the sugar regime should be revisited to pursue liberalisation," they added.

The groups say that the overall aim of EU sugar reform should be to ôincrease sugar earnings in developing countries, with the objectives of reducing poverty and achieving higher environmental standards."

Campaigners recommend quota cuts of 5.2 million tonnes, or one-third of the EU quota and an end to all sugar exports.

They say EU export subsidies need to be cut, and stress that there needs to be an increase in exports from developing countries, especially from the 50 least developed countries (LDCs).

Oxfam and WWF are also calling for other changes to the regime, including greater transparency with the provision of basic information about who gets what and assistance for developing countries to improve the environmental sustainability of their sugar sectors.

The groups say that because the reform of the sugar sector will involve certain transaction costs, African, Caribbean and Pacific (ACP) countries must be compensated for the losses they incur due to reform and ôshould be helped to improve standards or even diversify away from sugar if appropriate."

Within the EU, Oxfam and WWF say small farmers in Europe should also be protected from sharp adjustment costs. They say that this should not necessarily take the form of compensation but ôshould be part of a wider move to shift the payment of farm subsidies away from production or land holdings towards specific social and environmental benefits, even if not delivered by beet farming."

Although Europe is a very inefficient sugar producer compared to many developing countries, France produces almost five million tonnes a year, Germany four million, Poland almost two million and Britain and Spain 1.4 million tonnes each.

But European farmers need high subsidies and a managed market to remain in business. The EU system costs the European taxpayer 1.8 billion dollars (1.5 billion euros) a year in direct subsidies to sugar farmers. It is estimated to cost those who consume sugar a further 9.2 billion dollars (7.5 billion euros) in higher prices.

ôThe proposed reform package will not end the dumping of sugar which destroys poor people’s livelihoods," Jo Leadbeater, head of Oxfam International’s EU advocacy office, said last month. ôThis shows that Brussels is not listening to developing countries and is not serious about genuine sugar reform."