Brussels, 14/07/2004 (Agence Europe) - On Wednesday, the European Commission adopted a communication by Commissioner Franz Fischler on the reform of the sugar sector. A 33% reduction in the support price for sugar is proposed, as are a 37% reduction in the minimum price for sugar beet, a drop of 2.8 million tonnes of production quotas, a compensation of 60% for loss in revenue to producers, restructuring aid for processing units, and lastly the observation of the EU's international commitments on imports. The Commission will present legislative proposals at the beginning of 2005. It wants the changes being brought in to be implemented on 1 July 2005.
Nearly 800 sugar producers (mostly Spanish, plus Italian, Portuguese and even Irish) protested against the Commission's plans in Brussels the same day.; "Irish producers reject reductions in prices and quotas", "Portugal wants to keep producing sugar beet", read the placards, according to AFP. During his press conference, Mr Fischler demonstrated his refusal to be intimidated by such reactions: "It is clear that this reform will necessitate restructuring. Listening to the prophets of doom in the sugar lobby predicting how many thousands of jobs the reform is putting at risk, I can only say this: the facts tell a different tale: the existing sugar regime in no way guarantees jobs", he said. He said that in the last ten years, 17,000 jobs had been lost and hundreds of refineries have had to close. "That trend will carry on even without the reform, because part of production will increasingly lose competitiveness as a result of the gradual quota reduction", he argued.
The proposals (to be implemented in the 2005/6 marketing year) are as follows:
Price: the public purchasing system and the intervention price (currently 632 EUR/tonne, over three times the world price) will be abolished. The intervention price will be replaced with a sugar reference price, used to determine the minimum price of sugar beet for production, the level of private storage release, border protection and the guaranteed price for preferential imports.
The institutional support price for sugar will be reduced from 632 to 506 EUR per tonne (t) in 2005/6 (-20%), then to 421 EUR in 2007/8 (-33% overall). The minimum sugar beet price will go from 43.6 to 32.8 EUR/t in 2005/6 (-25%), then to 27.4 EUR in 2007/8 (total reduction of 37%).
Quotas: the volume of the Community production quota will be reduced to correspond to the level of consumption. The quota, currently 17.4 million tonnes, will be reduced by 1.3 million tonnes in 2005/6, then by 0.5 million tonnes a year to reach a total reduction of 2.8 million tonnes in 2008/9. A and B quotas will be merged (current provisions for C sugar will be maintained)/ the Commission proposes to bring in isoglucose quotas of 100,000 tonnes a year over three marketing years as of 2005/6. Furthermore, transfers of sugar quota between Member States will be authorised (the vendor would be responsible for the environmental state of the production site and re-deployment of work force).
Compensatory aid: 60% of producers' lost revenue will be offset by a single payment per holding for all Member States. The total sum of this envelope would be 895 million EUR in the marketing years 2005/6 and 2006/7,and 1.340 billion EUR from 2007/8. Germany will receive 154 million EUR (2005/6) and 241 million EUR (from 2007), followed by France, with 150 and 234 million EUR respectively, Poland (99 and 142 million EUR), Italy (80 and 119 million EUR), the United Kingdom (64 and 93 million EUR), and Spain (60 and 86 million EUR).
International commitments: the provisions of the ACP sugar protocol and the agreement with India would be kept in place (annual purchase by the EU of 1.3 million tonnes equivalent of white sugar at a guaranteed price). However, the guaranteed price would be reduced to the level of the Community reference price (329 EUR/t). As part of the "Everything But Arms" initiative, EU operators will be able to buy sugar from the least developed countries at a lower price than that guaranteed to the ACPs. The Commission also proposes to bring in a tariff quota for preferential imports for the western Balkans.
According to Mr Fischler, the reform would offer several "concrete advantages": -the level of sugar production in Europe would be stabilised; -producers of sugar beet would have many opportunities for restructuring; -the industry would become more competitive; consumers would be able to buy sugar for less. He also pointed out that the planned changes to the regime would allow the EU to send out "a clear signal" to out international partners and the developing countries. "The last bastion of an old agriculture policy has fallen, and the new policy will be much more conducive to trade", said the Commissioner. This message "passed five out of five at the WTO", and will give
extra impetus to the current negotiations of the Doha cycle with a view to a framework agreement, said Mr Fischler. He repeated that "the status quo is untenable". The current regime, which "has gone on for three decades without reform", takes no account of trade and has been fiercely criticised throughout the world, especially in developing countries (under the subsidised exports heading), he continued.
The Commissioner acknowledged that there was no "magic formula" to reconcile the often contradictory interests of consumers, sugar producers and the sugar industry in the EU and developing countries. He felt that simply liberalising the Community sugar market "would deal a deadly blow" to sugar production in Europe, and would run entirely counter to the interests of developing countries of Asia and the West Indies, which could not rival powerful exporting countries such as Brazil. A "third way" is therefore needed to square the circle and find a balanced solution. For this reason, the Commission has proposed a reduction of 2.8 million tonnes of sugar production, a steep drop in prices on the internal market and a massive reduction in the volume of exports and the related refund amounts. "In other words, not much will remain of the 1.3 billion EUR currently earmarked by the EU to pay for sugar export refunds", explained Mr Fischler. He pointed out that two factors could not be taken into consideration in the reform scenario: the results of the Doha round of negotiations and the WTO's verdict on the complaint brought by Brazil, Australia and Thailand. However, Mr Fischler continued, the proposal currently on the table would allow the Commission, if necessary, to "complete what has to be done in terms of production or export refunds".
The ten new Member States will be able to take full advantage of the compensatory aid, like the other countries of the EU. According to Mr Fischler, "it is only fair", given that since 1 May 2004, these countries have been fully integrated into the "old" sugar regime. Among the other measures planned, the Commissioner spoke of the possibility of Member States negotiating production quotas (transfer of rights), and setting up Community programmes to ensure the restructuring of refineries which need it.
Mr Fischler promised that the EU would stand by its commitments to the ACP countries under the sugar protocol. Before the end of 2004, the Commission will present an action plan to make sure that concrete development programmes funded by the EU and specifically designed for them would be drafted with the ACP countries in question.
Development and environment NGOs feel reform proposal is too modest
Oxfam and the WWF (World Wide Fund for Nature) feel the measures proposed do not go far enough, and have stated in a press release that these "will not end poverty or achieve higher environmental standards", because, they say, it will not end the dumping the EU practises on the world market to the tune of 3 to 4 million tonnes of sugar a year, destroying the means of subsistence for poor populations, it will not increase market access for developing countries, but will reduce the price they receive for their modest imports to Europe. They call for: the removal of export subsidies, direct and indirect, which are responsible for export dumping; -an increase in imports from poor countries at a decent price; -a reduction in European production by 33% -40% to end artificially sustained overproduction; support for DCs to improve sustainable and social environment standards in their sugar industries; an urgent action plan to compensate lost income for ACP producers and implement transition agreements; -protection for small farmers in Europe against unaffordable adaptation costs; -reorientation of the agriculture policy of the EU in favour of small farmers, the environment and social justice. Both NGOs underlined that for sugar, Europe is much less competitive than many DCs, and that European producers keep going largely due to subsidies and market intervention (and mass irrigation in Spain and Portugal, which pollutes the underground water and rivers), mainly to the benefit of large sugar producers and big processors.
They point out that Europe currently produces 20.4 million tonnes of sugar a year, imports over two million, but consumes just 15.5 million. The result is that every year, the EU exports a surplus of 5 million tonnes by dumping it on the world market.