Reform of the sugar regime in the European Union

This paper proposes a pro-development reform of the EU sugar market order. It highlights that such a reform needs to take into account that sugar cane production and processing from developing countries is more efficient than that of sugar beet, and that the latter has only been able to build its position on the world market thanks to state support.

In order to build a pro-development reform approach, the paper first introduces key elements proposed for a EU reform strategy, and the examines their shortcomings. Key elements include:

• a significant cut of one-third in the sugar support price over three years, from the current guaranteed level of € 632/tonne to €421/tonne in 2007-2008
• reduction in domestic production quotas of 2.8m tonnes over four years
• partial compensation (equivalent to 60 per cent of estimated income losses) for EU producers, in the form of a direct decoupled payments
• restructuring of the EU sugar sector, by making quotas transferable between member states. In this way, production will become concentrated in the most efficient – and prosperous – areas.

These elements, however, demonstrate a number of shortcomings:

• first, they fail to address the concerns of developing countries. They ignore the LDCs’ proposal to amend the EBA initiative to give them adequate time to build their sugar industries, and fail to offer increased aid and technical assistance to help LDCs develop their supply capacity and improve it on an economically, socially and ecologically sustainable basis. There are no concrete proposals to assist ACP countries to adjust to EU reform
• second, the EU will remain a major subsidising exporter: the proposals will not end all directly subsidised exports, let alone all indirectly subsidised exports. As a result, sugar will remain a source of dispute at the WTO
• third, the distribution of benefits within Europe will be further concentrated in favour of large-scale sugar producers and processors, at the cost of small-scale farmers in the least prosperous areas.

The pro-development approach suggested by the paper includes:

• EU sugar reform must eliminate the use of export subsidies and dumping
• EU sugar reform should see EU sugar production levels cut substantially to a level at which EU production is lower than EU consumption, minus preferential imports
• the costs of the sugar reform (price and quota reduction) should be covered to a considerable proportion by the beet sugar processing industry, and the farmers, not the industry, shall be in future the beneficiaries of the protection
• the necessary reduction of quotas within the EU should follow social criteria, e.g. remaining quotas should be redistributed to small sugar producers
• the bilateral agreement with the LDC, which derived from the postponed EBA, must include social minimum standards for the livelihoods and working conditions of the plantation and sugar-processing industry workers
• the agreement must also take environmental standards on board, especially with regard to the farming methods applied to sugar cane, its processing, and the way of extending the sugar area.