Thursday, June 23, 2005


EU sugar regime

Well the EU has managed to upset everyone with its proposed reforms of the sugar regime. It has to do something as the exports currently involve a subsidy that exceeds WTO commitments. Too much money is being spend subsidising export of surplus sugar.

The chosen path is a dramatic 40% price cut, which is expected to put several EU countries out of the sugar business. Unfortunately it will also impact heavily on developing countries that have preferential access to the premium price EU market - either former colonies in the ACP (African Caribbean Pacific) group or the Less Developed Countries (LDC's) who were progressively gaining access to EU markets for everything but arms (EBA) exports including sugar.

So the poor folks in Guyana, Barbados, Swaziland, Fiji, Mozambique et al will get to share the pain with the EU farmers and processors. I guess they're just collateral damage from Oxfam's intensive lobbying efforts, so I hope they know who to blame. Similarly if I were a beet farmer with a trailer load of beet it would be tempting to clamp it in the doorway of an Oxfam shop :-)

The price cut is of course just one way to achieve the WTO obligations. Oxfam is now in a tyre smoking U-turn crying out for prices to be maintained so that its customers in the developing countries keep their access to the premium price market. Well tough shit guys, you should have thought of that when you were mouthing off about the price so much. Put "EU sugar price" into Google and see who's to blame for raising the profile of the price issue.

Something we haven't heard much about is the detail of the subsidised exports. The EU regime is complex, but doesn't involve handing wads of cash to beet growers or to beet processors, so its not a direct subsidy. Instead its a rigged market with a high price for sugar and for sugar beet, so the farmers and processors get their rewards from selling at artificially high prices.

To keep a lid on this there are production quotas, limiting how much can be sold within the EU as these prices. Surplus sugar produced outside of quota is sold at the world market price, quota sugar that is surplus to consumption requirements is also sold onto the world market but in this case the seller gets an export subsidy funded by a levy on all the quota sugar beet grown and produced. The idea is that the levy pays for all the subsidy and its self financing.

In addition to this mechanism the EU imports over 1m tonnes of raw cane sugar and some of this is also surplus to consumption requirements and so gets exported. The export subsidy on this is paid by the EU budget out of taxpayers money. Tate & Lyle received £100m in one year from the EU for subsidised exports of surplus cane white sugar.

So part of the current problem is not just the price but the surplus of quotas over demand. The French, to pick one example, have a beet sugar production quota that exceeds their national consumption by 1.7 million tonnes. The UK by comparison produces about half its needs from beet. So the UK beet farmers & British Sugar have traditionally paid for the export subsidy on French surpluses without getting any export subsidy themselves, but nevertheless enjoying the fruits of the high internal prices.

So the French sit there with a production quota of 3.8 million tonnes, hoping we won't notice, waiting for Ireland's sugar industry to go bust so that its 200,000t quota can be grabbed by the French as an outlet for its huge excess of production over consumption.

Germany, The Netherlands and Belgium are other countries with ample surpluses of production over consumption - total 1.2m tonnes - that get exported with a subsidy. Strange isn't it, another Old Europe vs new Europe situation. Rather than addressing the institutionalised excesses of Old Europe the EU come up with a severe price cut that will hit many coutries in the EU hard, including the new entrant Eastern countries and as a side effect dump on our overseas friends struggling to make ends meet.


<< Home

This page is powered by Blogger. Isn't yours?