Memorandum submitted by the Tennant Farmers
Association (O2)
INTRODUCTION
1. The TFA is the only body dedicated to
representing the interests of those who rent agricultural land
in England and Wales. Established since 1981 we support the tenanted
sector through advisory services, information and through our
lobbying. The Association is particularly concerned with highlighted
the differential impact that new policy can have on farmers depending
on whether they are owner-occupiers or tenants. The Association
welcomes the opportunity of making a submission to the Select
Committee on this policy area.
SUGAR REFORM—THE
OPTIONS
2. The EU has proposed three options for
reform of the sugar sector.
— The first option is a "stable
market" option. This assumes that the main elements of the
current system are maintained but issues such as subsidised exports
need to be addressed. This would involve both cuts in sugar quota
for individual member states and internal EU prices for sugar.
— The second option involves the removal
of all quotas and the reduction of sugar prices to a "market
clearing level". The Commission has proposed that this would
be about two-thirds of the current EU price but British Sugar
estimate that it could be as much as half the current EU price.
Import tariffs would still apply and the Commission would consider
compensation to producers for the price cut. However compensation
is not guaranteed.
— The third option is complete liberalisation
which would involve a free market solution.
THE UK POSITION
3. The UK produces about 1.1 million tonnes
of sugar from beet each year and imports about the same amount
to meet domestic consumption of 2.2 million tonnes. The UK does
not therefore contribute to EU sugar surpluses. This is reflected
in the existence of an agreed set of coefficients for quota reductions
in member states which take into account domestic market balances.
The coefficient for the UK is 4% therefore for every 100 tonne
quota cut imposed by the EU the UK would suffer only a 4 tonne
cut.
LESS DEVELOPED
COUNTRIES
4. The EU has committed to importing sugar
from its old African, Caribbean and Pacific allies and other less
developed countries under the Everything But Arms Agreement. Taking
that into account with EU production, the EU sugar surplus is
some 2.5 million tonnes. British Sugar have estimated that over
time there would have to be a quota cut of a level similar to
this overproduction coupled with a 20% price cut to bring the
EU market back into balance.
5. The less developed countries under the
Everything But Arms Agreement need access to EU markets at reduced
tariffs and can only do so if the internal EU market price remains
attractive. If the EU market price is allowed to drop to two-thirds
or half its current level, then LDC's who are covered by the Everything
But Arms Agreement, will be unable to export competitively to
the EU any of their domestic production. However, this leaves
the way open for one major producer, Brazil, to come into the
market. With low costs of production and virtually unlimited land,
the Brazilians would be able to take over a large part of the
international sugar trade as they have done with coffee. LDC's
under the Everything But Arms Agreement would be forced to export
to the EU by using import/export swaps. That is importing sugar
from Brazil on the world market and exporting that again to the
EU using tariff preferences. This could lead to the EU being flooded
with sugar from the world market and provide no specific benefit
to less developed country producers.
6. The LDC's under the Everything But Arms
Agreement have all agreed that they do not wish to do import/export
swaps. However, in a thinly veiled threat, they have told the
EU that if it reforms its sugar regime to the extent of either
Option 2 or Option 3 then they will have no option but to use
import/export swaps with severe damage to the EU market.
TFA VIEW
7. The TFA has therefore concluded that
the best option for reform of the sugar regime is Option 1.
10 March 2004
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