15. Memorandum submitted by Mr David Willers,
Overseas Representative, South African Sugar Association
IMPACT OF
CURRENT EU REGIME
ON SOUTH
AFRICA AND
NON ACP PRODUCERS
The CAP continues to supply extremely high levels
of support to European farming; this encourages overproduction,
thereby distorting world trade in agricultural products, especially
sugar.
Studies show that the importance of the EU to
world sugar can be gauged from a calculation that each 10% fall
in the intervention price would raise the world price by around
3% and each 10% increase in EU net imports would raise the representative
world price by around 0.5%.
When the US EU and Japanese impact is assessed
together the representative world sugar price would be 63% higher
with full reform than it is today.
The current preferential system is also damaging
to those countries that benefit from it, such as the ACP's: it
encourages a dependency relationship on a single commodity and
results in a discriminatory system to the non recipients of those
preferences. Granting developing countries preferential access
to otherwise protected developed country markets has been seen
as a strategy to help their development by increasing the value
of their exports, promoting industrialisation, and ultimately
accelerating economic growth. The preferences have been used as
a form of aid by the European Union for some of their former colonies.
But trade preference schemes have had distorting effects on world
commodity markets, as well as on the developing countries that
they are supposed to assist.
The current EU regime imposes severe sugar import
restrictions on countries like South Africa and by protecting
itself with export subsidies and production quotas, is also responsible
for EU domestic prices being well above world prices. This encourages
surplus production of EU sugars, which are then dumped on the
world market, depressing the world market price. This protection
is on the rise as the world price of sugar has fallen and is currently
some 250% for sugar in the EU, a percentage which is well above
other agricultural protection averages in the EU.
EU agricultural reform would be most beneficial
for South Africa and other developing non preferential sugar producers,
where agriculture provides a potential to develop their economies
and grow themselves out of poverty. Because of the distortions
in global export markets caused by EU protectionist policies,
this potential has been limited and stifled, and in some cases
the livelihoods of small farmers have been decimated. There are
many recent case studies that show this. The developing world
wants trade not aid. We in the South African sugar industry can
speak with some feeling on this issue since we have 50,000 small
scale cane growers dependent in part on world sugar prices for
their income. It is another good reason why fundamental reforms
in the CAP are needed; to remove these distortions and so create
a level playing field to enable the potential comparative advantages
of developing countries to be achieved.
The best way to full liberalisation in the EU
would be to half the intervention price by 2012. This would have
the effect of lowering EU producer prices for refined sugar to
the world market price; effectively liberalising the EU sugar
market; increase EU consumption by 10% and decrease production
by 64%; increase EU net imports to 9.3 million tons a year and
increase the world price by an estimated 16%.
WHAT REFORMS
WOULD YOU
EXPECT AND
LIKE?
We would like to see the elimination of export
subsidies on sugar, a substantial improvement in market access
with tariffs on sugar being brought into line with tariffs on
other goods, and all non tariff barriers to sugar imports being
eliminated. We would like to see as well the elimination of all
domestic support arrangements. We would like to see the de-coupling
of direct payments to farmers in Europe which would break the
current link between the receipt of direct payments and production,
and so reduce the incentive for farmers in the EU to overproduce
certain agricultural products.
Although the provision of unilateral developing
country preferential access arrangements can play a role in supporting
growth and development in those developing economies which benefit
from them, it is not a permanent viable solution on its own. Multilateral
liberalisation is essential to stimulate competitive agricultural
sectors in the developing world. Concerns about eroding benefits
for existing beneficiaries of preferential access schemes should
be addressed by those countries that grant them in other ways
eg by providing complementary programmes such as rural infrastructure
development, capacity building, poverty alleviation, and implementation
of food security and diversification schemes.
The Nadi Declaration of ACP countries in Fiji,
June 2002 (and I quote) "reiterates the need to improve the
market access for all agricultural products originating from ACP
States by inter alia, addressing export subsidies and domestic
support in accordance with the Doha WTO Ministerial Declaration,
while preserving existing preferential arrangements". Unquote.
We believe that all preferences must be seen
as a temporary measure while developing countries are in transition
to a subsidy free production of sugar. South African sugar is
not calling for extension of preferences to all developing countries,
rather we are highlighting that existing preferences and domestic
support are extensive and damaging to developing economies. We
have numerous examples of these single product reliance cases,
which reduce world prices to below production costs in most efficient
production areas.
We would also like to see more ambitious proposals
for price cuts in the EU in order to bring internal prices of
sugar closer to world market prices. The Commission's current
CAP reform proposals have short comings in this regard since very
high levels of support will be maintained, prices for some major
commodities like sugar will remain above world market prices and
the sugar regime will once again not have been addressed. CAP
reform should also be designed to reduce the current significant
negative impact on the development of agriculture in developing
countries. As things stand, EU export subsidies by lowering world
market prices reduce the prices received by farmers in developing
countries, while low price EU exports in receipt of export subsidies
directly compete in developing country markets with domestic production.
It is also not possible currently to export many products protected
by the CAP to the EU. We need the appropriate benefits that multilateral
reform of markets can provide and the growth that would result
from improved market access.
EU agriculture should integrate more fully into
the multilateral trading system. But there is little sign of this
happening; the EU's WTO agriculture negotiating proposal tabled
in January this year is deeply disappointing, as it fails to provide
a basis for genuine reform of the world agricultural trading system
and in our view it fails to live up to the mandate agreed to by
all WTO members at Doha in 2001.
The EU's negotiating proposal is based on the
Agenda 2000 reforms and the EU is looking for an outcome that
would not require any further reform on the part of the EU. For
the negotiations to move forward greater negotiating flexibility
is required from the EU.
The European Parliament and Community can demonstrate
their commitment to the Doha Declaration by doing their bit. That
is, by doing what needs to be done, namely to ambitiously reform
the CAP.
IMPACT OF
REFORM
It is the perception that the EU dumps sugar
on the world market that has led Oxfam to bluntly point out that
EU consumers and taxpayers are inadvertently destroying the livelihoods
of farmers and setting back the prospects of others including
in my own country.
The impact of reform, and there are studies
by the World Bank, FAO, Oxfam to demonstrate this, shows that
reform that results in better access to markets and better world
market prices will be worth more than the perceived benefits from
preferences offered to selected poor countries; preferences that
are in any event unsustainable. Liberalisation and reform resulting
in greater market access could be an effective development strategy
for countries that need development assistance.
The rewards of sugar trade liberalisation will
be great for every sugar producer reliant on world prices. There
are various studies which show for example that with full liberalisation
in the EU, US and Japan by 2012 the world price of sugar would
be 63% higher than it is now. However this is a price which will
not be sustained since as efficient sugar producers increase production
prices will again decline in the medium to long term, but I believe
the greatest benefits of reform will be in the poor countries,
reducing rural poverty and perhaps even benefiting the ACP sugar
producers. After all, existing EU preferential policies have not
been successful in increasing growth and exports from these countries.
The ACP share of total EU imports actually declined from 7% in
1976 to 2.8% in 2000. Tariff escalations in the EU have also discouraged
these countries from shifting into higher value added export products
and has restricted their diversification possibilities.
One study has calculated that most regions of
the world except the EU and US and Japan would increase their
sugar production as a result of full OECD sugar market liberalisation.
Even regions currently receiving preferential access would maintain
and even expand production as their industries become more efficient.
ADEQUATE CONSULTATION
To date we have been very well received by the
European Commission and they have always been interested in our
views and we in theirs. South African sugar has always taken the
view that discussions surrounding the reform of the sugar regime
need to be undertaken in a non adversarial climate taking into
account the special and differential needs of the ACP countries.
This we believe can best be achieved at the level of multilateral
negotiations.
WHICH COUNTRIES
ARE SASA ALLIES
Our allies are those sugar producers who are
reliant on world market prices and who feel the need to advance
the merits of free competition in sugar. Australia, Brazil, Thailand,
Chile, Colombia, El Salvador, Guatemala, Honduras, India and Panama,
all think as we do. We have banded together in the Global Sugar
Alliance in order to seek positive liberal reform of world sugar
policies through the WTO process. The Global Sugar Alliance is
not a formal organisation; it is a kind of virtual organisation.
In its 1999 communique and 2000 Call for Action the GSA identified
sugar as a priority area in the WTO agenda. Within the context
of the three pillars of Doha, namely export subsidies, market
access and domestic supports, we have tried to tailor a sugar
specific set of target objectives. Tariffs, tariff rate quotas,
tariff differentials, special safeguard mechanisms, export credits,
price support subsidies, export competition and so forth are all
in our sights where they inhibit free trade.
I should mention that many of our allies, including
ourselves, enjoy some tariff protection and occasional subsidy
support. We do not think this inconsistency matters however since
we all agree where we would like to be heading and that is in
the direction of greater liberalisation. We are all willing to
reduce out own protection where it exists as agreements are achieved
at the WTO.
RESPONSIBILITY OF
WINNERS OF
REFORM TO
ASSIST LOSERS
Your true laissez faire economist would say
that no such responsibility exists; it all comes down to efficiency
of production.
However we recognise the need to deal with the
inescapable fact that the preferential access of many developing
countries is bound up in the complex regime of protection in the
North, and that dismantling this protection could result in economic
losses for these poor countries, requiring a corresponding need
for adjustment.
We do not want any low income developing country,
including the preference dependant, vulnerable and small island
economies to bear the burden of this reform process in the North.
This is why we support the need for a creative set of WTO modalities
to take into account the need to protect these benefits and build
the capacity of these preference dependent and other vulnerable
low-income countries, to enable them to compete in a more competitive
environment.
The question is how to move forward in a way
that does not undermine their development, and we are looking
at the problem sympathetically.
David Willers
South African Sugar Association
May 2003
|