APPENDIX 6
Memorandum submitted by Tate and Lyle
SUGAR
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.
"EVERYTHING
BUT ARMS"
(EBA) PROPOSAL
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.
ANNOUNCEMENT OF
THE 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.
POLICY TURNAROUND
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.
OMISSIONS
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.
LACK OF
COHERENCE IN
EU NEGOTIATION AND
DISCUSSION
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.
THE WAY
FORWARD
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.
SUGAR REGIME
PROPOSAL AND
CANE DISADVANTAGE
TO BEET
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.
STORAGE LEVY/REBATE
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.
MARGIN AID
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.
EXPORT RESTITUTION
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.
STORAGE
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.
ASSURANCE FROM
MINISTER
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.
RETENTION OF
STORAGE LEVY/REBATE
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.
TRANSFER OF
POWER
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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