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DEVELOPMENT: EU Set for Showdown on Sugar

Stefania Bianchi

BRUSSELS, Jun 21 2005 (IPS) - The European Union will face a showdown Wednesday over its controversial sugar regime when the European Commission presents its vision for the future of sugar production inside and outside the bloc.

The European Commission, the European Union (EU) executive, will announce proposals to reform its sugar regime Wednesday (Jun. 22), but a leaked draft has been widely criticised by developing country governments and their sugar industries, as well as development and environmental groups. They say the measures will have devastating effects on some of the world’s poorest countries.

According to the leaked document, agriculture commissioner Mariann Fischer Boel is set to recommend cutting the guaranteed price of white sugar imported by the EU from African, Caribbean and Pacific (ACP) countries by 39 percent and the beet price by 42 percent between 2006 and 2008.

The Commission is also set to propose a so-called restructuring fund or “buy-out scheme” which is designed to help European sugar producers leave the sector.

Many expect only eight of the EU’s 25 member states to see their industries intact after the sugar reform, while the other 17 will see their industries either severely reduced or eliminated altogether. Ireland, Italy, Greece, Portugal and parts of Spain are expected to be hit the hardest.

But European member states are not the only countries set to lose out under the new proposals. Developing countries which depend on the EU’s high sugar price to help their economies develop are set to be the biggest losers.

The preferential access of ACP countries to the EU market currently represents some 70 percent of the revenue of their sugar sectors.

The loss of those privileges when the EU starts paying prices closer to market rates is expected to have a huge economic impact on many ACP countries that are dependent on sugar exports to the EU.

In developing countries where sugar companies support school systems and heath programmes where the governments cannot afford to, EU price cuts can be particularly damaging.

Although the Commission is set to propose 40 million euros (48.3 million dollars) compensation in 2006 for sugar-producing ACP countries, and an unspecified amount for a further seven years, many experts say this will not go far enough to lessen the effects of the sugar reform.

The international relief agency Oxfam says the EU should give ACP countries at least 500 million euros (604.4 million dollars) a year from 2005, and also adequate adjustment assistance to all Least Developed Countries (LDCs) likely to be affected by EU sugar reform. Oxfam is also calling for shallower price cuts and a longer implementation period than those proposed by the Commission, and increased market access for LDCs at remunerative prices.

Oxfam acknowledges that sugar reform is needed to end export dumping and improve access to the EU market for poor countries, but says the EU proposals would “badly hurt” some of the poorest countries in the world.

“They won’t get the investment desperately needed to build up their sugar sectors over the long-term because the EC’s price cut is too steep. This proposal will only profit the biggest farmers and large processing companies,” Oxfam spokesperson Luis Morago said in a statement Monday (Jun. 20).

“There is no guarantee that this approach will reduce over-production and end dumping on poor countries. Ahead of the WTO ministerial in Hong Kong later this year, the EC has again failed to live up to its pro-development rhetoric,” he added.

APRODEV, a group of 17 European development and humanitarian aid organisations working closely with the World Council of Churches and CIDSE (Coopération Internationale pour le Développement et la Solidarité), an alliance of 15 Catholic development agencies, says that plans to use price cuts to reduce production are wrong.

“Cutting the EU production price by 39 percent will at the same time reduce the intervention price for those developing countries which were granted preferential access to the EU market. Most of them will no longer be in the position to benefit from preferential access. It would be much better for the EU simply to use reduced quotas,” the group said in a statement Tuesday (Jun. 21).

APRODEV insists that ACP countries are included in the buy-out scheme. It argues that ACP countries are legally entitled under the international sugar protocol to the same treatment as European beet farmers.

“This is a clear case of unequal treatment where ACP sugar farmers receive no compensation for losses occurring whereas European beet farmers receive 60 percent compensation,” Gunnel Axelsson from policy adviser for the Church of Sweden, an APRODEV member, said Tuesday.

The EU sugar proposal is the latest in a long line of reforms since 2003 to bring the EU’s large agriculture subsidies more in line with world trade rules. The subsidy programmes, which stem from the 1950s, make up nearly half the EU’s annual budget.

As part of its development policy, which has been criticised for unfairly discriminating against sugar producers from other developing countries, the EU currently pays above market rates for sugar from a number of ACP countries, many of them former colonies of European countries.

The EU was forced to change its policies after complaints from major sugar producing countries such as Brazil and Australia which argued that EU subsidies were unfair. The World Trade Organisation (WTO) upheld those complaints in part in October last year.