| The European Union's sugar regime has remained largely unchanged since its inception in 1968. With the current regulation expiring in June 2006, the European Commission has focussed discussions on a series of possible reform options. The aim of our inquiry was to consider these options, before making recommendations on the position the United Kingdom should adopt in negotiations on the new sugar policy.
The current system is highly complicated, involving a mixture of price supports, supply control and protection against imports. These policy instruments combine to inflate consumer prices in the European Union to around three times world levels. They also restrict competition, limit market access and encourage over-production, with surpluses having to be dumped abroad using export subsidies. The rules are under increasing pressure from the European Union's international commitments. Recent changes to other agricultural sectors have only served to highlight the distorting nature of the sugar regime.
We believe that reform should lower the import tariff rate and include significant reductions to the internal market price, phased in over time. We also recommend that production quotas should be eliminated, after a market balance has been achieved. This change is vital if competition and efficiency are to be improved.
Decoupled payments to European Union sugar producers will help them adapt to the new market conditions. Similarly, transitional aid programmes can assist the economies of African, Caribbean and Pacific States, whose benefits from preferential import arrangements will be eroded.
A timely decision to move to a more liberal sugar policy will help in bringing the WTO Doha Round to a successful conclusion. We therefore urge the Government to use all its influence in negotiations to press for significant reform.
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