Memorandum submitted by the LDC London
Group (O 48)
THE LDC LONDON
GROUP
1. The LDC London Group represents the sugar
industries of Least Developed Countries signatory to the Framework
Agreement on EBA Sugar. It works under the direction of the Brussels
LDC Sugar Group comprising LDC Brussels Ambassadors, and the LDC
Sugar Producers Group comprising senior personnel in LDC sugar
companies and/or organisations. Members of the LDC London Group
are appointed by LDC sugar companies and/or organisations to represent
their commercial interests in London and elsewhere in Europe as
required.
2. The countries currently signatory to
the Framework Agreement include Bangladesh, Benin, Burkina Faso,
Congo DRC, Ethiopia, Guinea Conakry, Madagascar, Malawi, Mali,
Mozambique, Nepal, Sierra Leone, Senegal, Sudan, Tanzania, Togo,
Uganda and Zambia. Any LDC is eligible to sign the Framework Agreement,
but not all produce sugar.
3. The LDC sugar group is founded on the
cardinal principles of unity and solidarity amongst the billion
people who live in abject poverty in LDCs, and is legally constituted
in the Framework Agreement.
4. The LDC London Group is pleased to present
its submission herewith to the Commons Select Committee on Environment,
Food and Rural Affairs on behalf of the wider LDC sugar group.
The United Kingdom has a unique, deeply historical and profoundly
influential role to play in the current debate on EU sugar, particularly
its international aspects. The LDC group wishes the Select Committee
well in its endeavour and trusts that the views of the LDC group
will be taken to heart in the eventual committee report and in
the outcome for the EU sugar regime.
THE LDC PROPOSAL
REGARDING ADAPTATION
OF THE
EBA INITIATIVE IN
RELATION TO
SUGAR AND
THE ROLE
OF THE
LDCS IN
THE FUTURE
ORIENTATION OF
THE EU SUGAR
REGIME
5. On 3 March 2004, an LDC proposal on the
EU sugar regime was put to Commissioners Pascal Lamy and Franz
Fischler at ACP House in Brussels by Ministers of Trade, Commerce
and Agriculture from Bangladesh, Ethiopia, Malawi, Mozambique
and Sudan. Twelve other LDCs were represented by their Brussels
ambassadors. Thus 17 of the 21 LDC countries which produce sugar
were represented at the highest level at the meeting with Commissioners
Lamy and Fischler, and all 49 LDC governments were consulted about
the proposal.
6. In presenting the proposal to the Commission
on behalf of the LDCs, the Honourable Abd al-Hameed Musa Kasha,
Minister of Trade of Sudan, said:
"The benefits of EBA in sugar are not sustainable
without remunerative prices so that EBA can be meaningful for
our economies".
"The options of total liberalisation [of
the EU sugar regime] and the price fall option would ultimately
torpedo EBA. Without a managed market which gives remunerative
prices, we would have great difficulty to reap the benefits of
EBA in the sugar sector".
"It took us five months of consideration
to arrive at our proposal, which also takes account of the interests
of farmers in Europe, cane sugar refiners, sugar manufacturers
and our ACP colleagues; our proposal responds favourably to other
stakeholders".
"We're not saying no to duty and quota free
access, but we want to delay that for 10 years to give us time
to attract investment in our sugar industries . . . [whilst] the
fall in prices would be gradual, modest and predictable. Our proposal
is fair, practical and intellectual".
8. The Honourable Girma Birru, Minister
of Trade and Industry of Ethiopia, said, "Much can be achieved
by the Commission and other stakeholders to avoid the disaster
of the coffee market in another commodity".
9. The Honourable Amir Khosru Mahmud Chowdhury,
Minister for Commerce of Bangladesh said, "We need a timeframe
to be ready for free trade, time to bring down our costs of production,
and protection until then. The Doha Round is the development round;
the only way to ensure development is on a preferential basis".
10. The Honourable Sam Mpasu, Minister of
Commerce and Industry of Malawi, said, "To fight poverty,
we, vulnerable LDCs, need a transitional period so that at the
end of the day we become more competitive and can develop our
economies".
11. The Honourable Salvador Namburete, Vice-Minister
of Industry of Mozambique, said, "We are asking you to change
the [sugar] regime in order to protect the LDCs or we could witness
production shifting to more developed countries such Brazil and
Thailand".
DEVELOPMENT BENEFITS
OF SUGAR
IN LDC COUNTRIES
12. The sugar industries in LDC countries
are generally large scale industries and require large capital
investment (eg about $120 million for a new sugar mill and estate).
Where there's a sugar factory, one almost finds a complete civilization
in rural areas of LDCs. They are substantial motors for socio-economic
development and positive contributors to food security and the
environment. They provide reliable opportunities for small growers,
field and factory workers, and they bring ancillary industries
and services to rural areas which without sugar are more often
than not the areas of the most abject and degrading poverty. In
LDCs, each worker and farmer typically supports ten dependents,
and there are additionally hugely beneficial economic multiplier
effects in the local economy, the external balance of payments
and trade.
13. In more developed countries, infrastructure
(eg water and sanitation, roads, housing, electricity, etc), health
care, education and other social services are provided by the
state or the private sector. LDC governments often lack the fiscal
basis to develop such services to a high standard. In the absence
of other suppliers, LDC sugar industries provide these services
from their own funds or bear the cost of private sector service
providers. They provide these services not out of charity, but
because a healthy, well-educated and motivated community within
a reliable infrastructure is an essential component of their success.
14. Sugar is unique in LDC countries for
ensuring the transparent flow of benefits from the markets to
both producers and cane farmers, often by means of single desk
marketing authorities established under a sugar act and democratically
managed by a committee of millers and growers, or monopoly sugar
producers regulated by the state.
15. Also uniquely, as amply demonstrated
by a recent UN report [UNU/WIDER Discussion Paper No 2003/47 of
June 2003], sugar has by far the greatest potential to most benefit
from the EBA initiative compared with other agricultural commodities
produced in LDC countries. Most development potential will come
from private sector investment, thereby ensuring a continuing
flow of benefits to the productive sector in the country concerned.
Sugar thus provides an excellent means of ensuring that the benefits
demonstrably reach the people who need them.
16. LDCs are not proud of being least developed,
but sugar millers, sugar cane growers, rural communities and LDC
governments are able to combine to achieve their potential to
uplift skills, health and prosperity. The trade opportunities
implicit in the LDC proposal on sugar would provide the key to
further investment and development, and lift LDCs out their unfortunate
predicament.
CONSIDERATION OF
THE OPTIONS
FOR REFORM
OF THE
EU SUGAR REGIME
17. In its submission of 23 September 2003,
the Commission presented three "families of options"
for reforming the EU sugar regime after the current regime expires
on 30 June 2006.
18. The Commission's paper certainly provoked
a healthy debate about the EU sugar regime, however, it is now
widely recognised that important parts of the political and economic
analysis contained in the paper were incomplete and flawed, and
the debate has now moved on.
19. In terms of the general debate between
those advocating free trade and those advocating managed trade,
a paper published by the European Network of Agricultural and
Rural Policy Research Institutes (ENARPRI) (Policy Brief No 1
September 2003: "The Future of Trade Preferences for Sugar"
concluded that the removal of preferences would disadvantage the
least developed countries. Liberalisation of the EU sugar regime
would benefit only a few countries; the losers would be the ACP
countries and the world's poorest countries because these countries
would not be able to compete due to high production costs or scarcity
of resources available for establishing the necessary infrastructure.
As a result, "the rural poor will incur the bulk of the burden
of structural change" to the EU sugar policy. "This
will be working against the United Nations Millennium Development
Goal of reducing poverty and hunger", the report said.
20. Although the Commission will not now
revise its consultation paper, and although the issue remains
remarkably complex, it seems clear there is a fundamental choice
between two options for the long term: (i) to manage the EU sugar
market by means of quotas for all suppliers to that market, or
(ii) not to. For LDCs, this choice essentially amounts to (a)
exporting their net exportable surpluses of sugar to the EU, or
(b) whilst the slightest trading margin exists and providing the
EBA safeguard clause is not invoked, exporting as much as possible
to the EU and substituting from the world market.
21. If the market is managed by means of
production and import quotas, there would remain the prospect
for the fall of prices in the EU sugar market to be gradual, modest
and predictable, and combined with reasonable access to the EU
market, this would provide a benign climate for much needed investment
and solidly based economic development in the LDCs.
22. The CAP reforms agreed in June 2003
rightly excluded sugar because this reform model ill suits the
specifics of sugar markets, the value chain (transmission of benefits),
and sugar's unique international dimension. In this context, the
LDCs have proposed that the reform in the EU sugar sector should
be focussed on development and the alleviation of poverty.
23. If the market is not managed by quotas,
the price of sugar in the EU would fall catastrophically in a
slippery slide towards liberalisation as potentially 30 million
tonnes of sugar and isoglucose would compete in the EU market
of 15 million tonnes. In this scenario, it is abundantly clear
the European consumer would not benefit from cheaper food prices,
the LDCs and their ACP colleagues would suffer enormously, European
farmers may also suffer unless new money is found in the FEOGA
budget, and the volatile international sugar futures prices would
still remain on a downwards trend.
24. Sugar is an efficient and transparent
development tool in LDCs, and whilst there is still time, the
LDC sugar producers are seeking to promote sustainable investment,
and to avoid the calamities of eg the coffee, cocoa, banana, rum
and rice markets.
PREPARATION OF
THE LDC PROPOSAL
25. Although the LDC proposal responds to
the Commission's consultation document of 23 September 2003, and
in particular to the Commission's request to the LDCs to come
forward with a proposal, the process of deliberation began well
before then.
26. The LDC ministers took the opportunity
to meet in the Cancun WTO conference centre in September 2003
specifically to consider sugar. At the main event, the LDC-ACP-AU
alliance (G90) of vulnerable developing countries advocated the
maintenance of preferential trade because this is demonstrably
the most efficient and transparent way for the rich to help the
poor. In the Derbez text, the G90 succeeded in having paragraph
2.11 included in the draft Doha agreement on agriculture; this
paragraph recognises the vital importance of tariff preferences
and includes mechanisms to protect these preferences. Meanwhile,
there is no meaningful concept emerging in the WTO about how to
compensate for preference erosion.
27. The process of LDC deliberation on the
EU sugar regime options ended with an LDC ministerial conference
in Brussels on 1 and 2 March 2004, at which ministers endorsed
the proposal on EU sugar on behalf of the LDC group.
28. The Commissioners welcomed the LDC proposal
on 3 March, congratulated the LDCs for their organisation, and
Mr Fischler asked the LDCs to continue an open and transparent
dialogue with LDC representatives in Brussels until he makes his
proposal before the summer break.
Details of the LDC proposal.
29. The LDC proposal of 3 March 2004 rests
on four "pillars": (1) accelerated access to the EU
market, (2) an extended timeframe, (3) customs cooperation, and
(4) remunerative prices.
The LDC proposal:
— maintains the concept of the original
EBA initiative, whilst improving the development potential for
the LDC sugar industries;
— would be considered WTO-compliant;
— would provide equal access opportunities
to all LDCs from the outset, guaranteeing a fair spread of the
EBA development benefits to the widest range of LDCs.
The full text of the proposal is available on
the internet at http://www.ldcsugar.org/
Analysis of Quantities and Impact on Other Stakeholders
30. The LDCs are asking for a "second
stream" zero tariff quota for all types of sugar in an amount
equivalent to the total of their current net exportable surplus.
The LDCs' net exportable surplus is the quantity of sugar LDCs
are exporting above the requirements of these exporting countries
for their local consumption, and this quantity amounts to to 578,860
tonnes according to International Sugar Organization (ISO) statistics.
Taking account of the first stream quota of 112,827 tonnes already
agreed, the LDC request is that the balance be granted as a second
stream quota of 466,033 tonnes, and that the second stream should
increase by 15% per annum as follows:
| First Stream
(tonnes)
| Second Stream
(tonnes) | Total LDC
Supply
|
| 2001-2002 | 74,185 | 74,185
| |
| 2002-2003 | 85,313 | 85,313
| |
| 2003-2004 | 98,110 | 98,110
| |
| 2004-2005 | 112,827 | 466,033
| 578,860 |
| 2005-2006 | 129,751 | 535,938
| 665,689 |
| 2006-2007 | 149,214 | 616,329
| 765,543 |
| 2007-2008 | 171,596 | 708,778
| 880,374 |
| 2008-2009 | 197,335 | 815,095
| 1,012,430 |
| 2009-2010 | 197,335 | 937,359
| 1,134,694 |
| 2010-2011 | 197,335 | 1,077,963
| 1,275,298 |
| 2011-2012 | 197,335 | 1,239,657
| 1,436,992 |
| 2012-2013 | 197,335 | 1,425,606
| 1,622,941 |
| 2013-2014 | 197,335 | 1,425,606
| 1,622,941 |
| 2014-2015 | 197,335 | 1,425,606
| 1,622,941 |
| 2015-2016 | 197,335 | 1,425,606
| 1,622,941 |
| |
| |
31. The LDCs have stated impact of the LDC proposal must
not impact negatively on the ACP states as happened with the first
stream EBA quota which was simply deducted from the ACP's SPS
quota, and the Minister of Trade of Sudan noted on 3 March, the
LDC proposal "takes account of the interests of farmers in
Europe, cane sugar refiners, sugar manufacturers and our ACP colleagues,
and it is fair, practical and intellectual".
Timeframe and "Early Harvest"
32. The LDC proposal covers the period between 1 July
2004 and 30 June 2019. The requested delay in implementing the
EBA liberalization of tariffs is for a period of 10 years, thus
the liberalisation foreseen between 2006 and 2009 would be delayed
until between 2016 and 2019. The possible expiry of the transition
period for the Cotonou EPAs could be 2020, and similar free trade
agreements could conceivably be agreed with non-ACP LDCs.
33. Although the current EU sugar regime does not formally
expire until 30 June 2006, the LDCs are requesting an "early
harvest" such that the second stream quota would begin on
1 July 2004 to enable them to benefit right away from the current
high prices for sugar in the EU, quickly alleviate the current
debilitating uncertainty, and kick start the investment process
in LDCs, however, the quantity of the second stream would be capped
on 1 July 2013 (expiry of the Berlin budget settlement for FEOGA).
Customs cooperation
34. Customs cooperation, prevention of fraud and maladministration,
and respect for rules of origin (including rigorous rules on cumulation
of origin), are critical to the LDC proposal on sugar.
35. The LDCs are aware of the recent Commission green
paper on customs formalities and preferential trade, and with
this in mind, the LDCs propose that authorised exporting companies
would be nominated by the governments of LDCs states via their
Brussels embassies. If any other company were to export sugar
of LDC origin to the EU, EU customs would not permit the consignment
to enter into free circulation until checks had been made with
the relevant authorities of the exporting LDC state. Copies of
the official stamps of authorised exporters would be communicated
to EU customs by the LDC embassies in Brussels.
36. The LDCs would stress that such system would rely
as much on the customs authorities of the Member States as on
the customs authorities of LDC states—"cooperation".
They are not wedded to any specific system of customs cooperation
for sugar provided that it ensured that the maximum benefits of
the EBA initiative reach the LDC sugar exporting economies as
intended.
Remunerative prices
37. The LDCs recognise that the price of sugar in the
EU market is bound to fall if the Doha negotiations result in
import tariff cuts, but just as the negotiated tariff cuts are
likely to be predictable and phased over a number of years, the
resulting EU sugar price cuts should be similarly predictable.
Moreover, the LDCs believe that paragraph 2.11 of the Derbez text
coupled with paragraph 16 of the Harbinson text, if eventually
agreed, would allow tariff cuts for EU sugar to be modest. Provided
market prices in the EU do not fall further than this formula
would imply, the LDC coalition on sugar would remain solid. The
LDCs do not insist on any particular price mechanism provided
the objective in the EU market for both white sugar and raw sugar
is achieved.
31 March 2004
|
