Select Committee on Environment, Food and Rural Affairs Written Evidence

Memorandum submitted by the Tennant Farmers Association (O2)


  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.


  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.


  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.


  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.


  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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