Select Committee on International Development Appendices to the Minutes of Evidence


Memorandum submitted by Tate and Lyle


Duty Free and Quota Free Access for the Least Developed Countries, the "Everything But Arms" (EBA) proposal; the EU Sugar Regime

  1.  Tate & Lyle Europe operates the world's largest cane sugar refinery at Silvertown in the east end of London. Its capacity as recognised by the EU is 1.130 million tonnes. The plant operates 24 hours a day, 7 days a week and for about 360 days per year. Its raw sugar supplies are drawn from African, Caribbean and Pacific (ACP) countries which are signatories to the Sugar Protocol of the Lome Convention, now succeeded by the Cotonou Agreement. The EU Sugar Regime governs the commercialisation of the sugar.

  2.  First may we say how pleased we are that the European Scrutiny Committee and the Agriculture Committee of the House of Commons are considering the two sugar proposals side by side.


  3.  Tate and Lyle is fully sympathetic to the wish to find a way of helping the world's 48 poorest countries. Our difficulty with this proposal lies in the way in which it has been handled and the lack of policy coherence between this proposal and the Sugar Regime proposal. This may stem from an apparent lack of coherence within the Commission and this may now extend to the UK Government also. There are many Departments involved in both proposals.


  4.  On 28 September 2000 the EBA proposal was made by the Commission (on the initiative by DG External Trade). Only one week later the Sugar Regime proposal was announced by the Commission (on the initiative by DG Agriculture). The two proposals are contradictory. Uncontrolled imports are incompatible with the Sugar Regime proposals for the internal market and export programme.


  5.  EU policy has traditionally excluded sensitive commodities, eg sugar, from Free Trade Agreements. The wording used has been "essentially all". The EBA proposal gives no justification for the policy change. It contradicts the letter and spirit of the Cotonou Agreement negotiated between the EU and the ACP as recently as the middle of this year.


  6.  No impact analysis of the effect on existing stakeholders and potential new stakeholders has been made. The capability of the proposal being administered efficiently and correctly has not been examined. No assessment was made of exposure of the EU budget to large unpredictable costs arising from uncontrolled imports. The EU budget funds available for CAP spending were capped at the 1999 Berlin European Council through to 2006.

  7.  Surpluses arising from the EBA initiative could not be exported because of the EU's Uruguay Round constraints. The cost of intervention of surplus sugar would be around

630 million per million tonnes. The EU would need to finance this and find a way of disposing of it. If these imports resulted in reduced prices, compensation claims, on the basis of Agenda 2000 levels, would amount to around

1,125 million per year based on 50 per cent compensation for each 25 per cent price cut. Additionally the existing ACP suppliers could demand equality with internal producers and annual compensation of around

250 million per year.


  8.  The EBA proposal is being considered by the General Affairs Council (Foreign Ministers). The Sugar Regime proposal is being considered by the Agriculture Council. No arrangements were made to cross-refer the two proposals. The Sugar Regime has been referred to the European Parliament for an opinion. The EBA proposal is not legally required to go to the Parliament and no opportunity has so far been made for Parliament to consider the two proposals side by side.


  9.  Until such time as there is coherence between the EBA proposal and the Sugar Regime proposal then we believe sugar should be excluded from the EBA proposal. The EBA proposal could then go forward to WTO. However we believe there may also be problems with the other sensitive commodities. An in depth impact analysis of quota free and duty free access for sugar should be conducted alongside the other studies required by the Sugar Regime proposal in preparation for Regime reform. This analysis should not be superficial, uninformed or hurried and should be open to public scrutiny. Only then can a sugar policy be developed which is coherent with all its components—imports, internal production and market, and exports.


  10.  The existing Sugar Regime expires at the end of June 2001. Under the Regime the cane sector already operates at a disadvantage to the beet sector. One of Tate & Lyle's main concerns is therefore to ensure that no changes are made to the Regime which would increase that disadvantage.


  11.  It has been proposed that the Storage Levy/Rebate mechanism be abolished. This is a mechanism for ensuring the orderly marketing of the beet crop, which is produced in three months and marketed over twelve months. The abolition of this mechanism could have three adverse knock-on effects for cane refining.


  12.  The Storage Levy is the benchmark for establishing the quantity of the Margin Aid received by Tate & Lyle. This is designed to correct an anomaly in the pricing structure of the Regime which was not resolved on UK entry to the EU in 1973. Without that benchmark it is not clear from the proposal and the draft regulation what substitute arrangement will apply.


  13.  The UK beet sector markets the whole of its A/B quota sugar on the UK market. The weaker cane sector exports all the sugar surplus to UK requirements (currently about 25 per cent of production). It is the Commission's intention to use the abolition of the Storage Levy/Rebate to reduce the restitution given on exports. If the Commission is successful this would further increase the disadvantage under which cane operates.


  14.  To the extent that the abolition results in the beet sector attempting to market its sugar earlier than it otherwise would, then cane stocks will increase as a result. This could result in Tate & Lyle being forced to increase its capital spending on storage and its working capital.


  15.  The Minister of State has given Tate & Lyle an assurance that maintenance of the balance between beet and cane will be central to UK sugar policy and Tate & Lyle remains grateful to the Government for this assurance. Tate & Lyle is therefore concerned that the implications of the abolition of Storage Levy/Rebate could result in the cane disadvantage increasing unless it is possible for adequate alternative arrangements for cane to be negotiated.


  16.  The Council of Ministers may reject the Commission's proposal on Storage Levy/Rebate and the Commission may subsequently propose the retention of the scheme. In this case it is essential that the British Government obtains an assurance from the Commission that the cane arrangements which currently apply will continue to apply.


  17.  Tate & Lyle is also concerned about the transfer of powers from the Council to the Commission. This concern particularly relates to the annual establishment of the Margin Aid. At present this is arithmetic and automatic and is set out in a Council regulation. The transfer of deficit area pricing from the Council to the Commission also gives concern. This is another instance where the cane disadvantage to beet could increase and without reference to the Council.

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