Memorandum submitted by the Consumers'
Association (O11)
1. CONSUMERS'
ASSOCIATION
Consumers' Association (CA), publisher of Which?
and other consumer magazines and information, is the largest
independent consumer organisation in Europe. At EU level, we are
members of the Bureau Europ«en des Unions de Consommateurs
(BEUC). We are also members of Consumers' International.
2. SUMMARY
The EU sugar regime is inefficient and anti-competitive
and its costs are ultimately met by consumers in the form of higher
prices. It is also highly damaging to less-developed countries.
CA wants to see full liberalisation of the sugar regime provided
that there are adequate measures to address the transitional problems
that it could cause to the ACP countries, and that competition
policy is applied robustly to the sugar processing industry.
3. COST OF
THE SUGAR
REGIME TO
CONSUMERS
3.1 In relation to the CAP generally, CA
has campaigned for an end to price support, direct and indirect
agricultural production subsidies, quotas, export subsidies and
set-aside. Instead, we want to see targeted green subsidies designed
to encourage environmentally friendly agricultural practices,
and non-agricultural policies designed to maintain rural communities
and promote tourism.
3.2 In the case of the sugar regime, we
favour a similar approach. The sugar regime has been severely
criticised by the EU's own Court of Auditors in 2000, which noted
that it imposed a substantial cost on consumers and that production
quotas were set at around 25% more than the EU needed.
3.3 This overproduction has led to significant
levels of subsidised exports. The cost of the export subsidies
is met through a levy on the sugar industry, and the Commission
therefore claims that the regime is self-financing. This is true
in the sense that, unlike other agricultural export subsidies,
it is not a major charge to the CAP budget: however, the cost
of the levy is passed on to EU consumers through higher sugar
prices within the EU. In addition, the regime encourages increased,
rather than efficient, production and the cost of these inefficiencies
and its restraints on competition is ultimately met by consumers
in the form of higher prices. This is particularly regressive
in its effects.
3.4 The extra price paid by consumers can
be calculated from the EUROCARE report that estimates that full
liberalisation would result in an overall gain of some five billion
euros accruing to consumers and to the food industry which of
course passes on its increased costs to consumers.
4. IMPACT ON
LESS-DEVELOPED
COUNTRIES
4.1 This money taken from consumers is used,
among other purposes, to dump sugar on the world market. The impact
of export refunds on the world poorest countries should not be
underestimated. In the case of sugar, the market monopoly allows
refiners to overcharge consumers by at least 60% of the proper
international price and to use the
2 billions a year thus gained to subsidise the dumping
of some four to five million tonnes of sugar a year on the international
market.
4.2 Even though the EU imports 1.3 million
tonnes of sugar at preferential prices from developing countries,
EU surpluses are still a major factor in depressing world prices.
As Oxfam has noted, more than 50 developing countries depend on
three or fewer primary commodities for more than half of their
export earnings, and over one billion people still subsist on
less than $1 a day. Everyone who consumes EU-produced sugar in
Europe is currently being forced to support an unethical policy
of dumping, and the priority in any reform must be to end that
dumping.
4.3 As the Secretary of State for Trade
and Industry, Patricia Hewitt, said at a trade policy seminar
at Consumers' Association on 5 June 2003:
"Take sugar in Mozambique. It costs us twice
as much to make sugar here in the EU as it does in Mozambique.
Yet, because of our subsidies on sugar exports, their industry
employs half the number of people it should—in a country
where 75% of the rural population live in abject poverty generates
$150 million less than it should—in a country the EU is
giving $136 million a year. We are giving with one hand and taking
away with the other. Instead of trade, they get aid. The same
with fruit and vegetables. We levy on imports when our domestic
crop is in harvest and only remove them when it's out of season.
We then impose tariffs on products like processed pineapples,
fruit juices and jams to compensate for the high prices manufacturers
have to pay for sugar".
4.4 It must also be questionable whether
an EU regime that encourages economic dependence on a single crop
is the long-term development interest of many African, Caribbean
and Pacific (ACP) countries.
5. THE CASE
FOR LIBERALISATION
5.1 The Commission Staff Working Paper on
reforming the European Union's sugar policy notes that liberalisation
would improve competitiveness, reduce world market distortions,
facilitate WTO negotiations, and eliminate costs to consumers.
CA agrees. Full liberalisation would address most of our concerns
about the regime. European consumers currently suffer all the
disadvantages of a protectionist external policy, and none of
the advantages that might be expected if there were a competitive
internal market in sugar.
5.2 We question the Commission's underlying
assumption that a sugar regime is necessary to maintain rural
communities. The production of sugar beet is a relatively recent
addition to Europe, and as the Commission's own analysis shows
it has only survived as the result of ever greater tariff production.
The level of protection has been wholly excessive and, as the
Commission itself acknowledges, ". . . support is enjoyed
by the sugar industry and a minority of farmers, often better-off
than the average taxpayer, to the detriment of other social categories".
5.3 The Commission Staff Working Paper also
claims that liberalisation would have disadvantages in other areas.
5.4 Firstly, it claims that the "regularity
of supply and price stability (would) no longer (be) assured to
the same degree". The Commission has long regarded security
of supply and self-sufficiency as synonymous, when they are not.
Given current levels of international sugar production and consumption
and the scope for the further expansion of production, we do not
believe that security of supply would be threatened. Indeed, the
Commission itself somewhat contradicts its own proposition when
it notes elsewhere in the same report that the security of supply
is not likely to be seriously challenged. It is of course the
case that self-sufficiency has only been achieved at a cost that
is wholly disproportionate. Price stability offers few benefits
to consumers where the stable prices are permanently at a high
level.
5.5 Secondly, the Commission notes that
sweeteners would be less competitive. Its argument against liberalisation
here is singularly unconvincing, given that the Commission has
consistently tried to prop the sugar regime up by making competing
products as uncompetitive as possible. It is not the job of an
EU sugar regime to manipulate the market in other products.
5.6 Thirdly, the Commission points to the
impact on ACP countries. CA agrees that this is one of the most
important issues that needs to be addressed, and it is disappointing
that the Commission Staff Working Paper does not discuss what
type of transitional measures might be necessary to assist ACP
countries, and over what timescale.
5.7 Of the options set out by the Commission,
full liberalization is our preferred option provided that there
are adequate measures to address the transitional problems that
it could cause to the ACP countries, and that competition policy
is applied robustly to the sugar processing industry. However,
given the history of previous EU transitional measures—such
as dairy quotas and the Multi-Fibre Arrangement, both of which
were supposedly temporary—we would want any transitional
measures to include a clear and binding timetable.
5.8 It is possible that the Commission's
proposals will reflect the approach set out for the CAP generally
in the Mid-term review and adopted in June 2003. In our view,
this left many of the most objectionable features of the CAP untouched.
While CA welcomed the decision to break (at least partially) the
link between support for farmers and support for production, we
regret that farmers will continue to receive more or less the
same subsides as they do now, in return for compliance with existing
legal requirements. This does not in our view amount to a coherent
environmental and rural policy.
6. QUALITY AND
NUTRITIONAL CONSIDERATIONS
6.1 We do not agree with the Commission
that the EU sugar regime plays a role in guaranteeing that the
sugar reaching the EU market is of sufficient quality. CA campaigns
for legislation that provides high standards of food safety and
enforcement, but judgments on the quality of produce (other than
in order to ensure authenticity or to protect against fraud or
misleading practices) are better made by wholesalers, processors,
food manufacturers, retailers and consumers in a competitive market.
6.2 Economic protectionism is no guarantee
of either quality or safety—after all, BSE occurred in the
EU under an EU beef regime, and not from third country imports.
Other major food safety crises in recent years have also often
originated in Europe.
6.3 It is sometimes argued by apologists
for the sugar regime that it acts in the interests of public health
as it creates artificially high sugar prices in the EU and thus
discourages consumption. In our view, public policy objectives
are best achieved by specific measures that are targeted, effective
and proportionate. We cannot accept that a policy based on market-distorting
quotas, overproduction, subsidised exports and damage to some
of the world's poorest countries can be justified on nutritional
(or indeed any) grounds.
6.4 CA is fully committed to policies that
enable consumers to make healthy choices. We have been concerned
by the failure of government to take a more pro-active and co-ordinated
approach across departments in order to tackle the poor quality
of many people's diets and the associated long-term health implications.
A range of policy approaches needs to be explored to tackle the
growing problem of obesity and associated diseases, such as type
2 diabetes which is now being identified in adolescents.
6.5 CA has recently published recommendations[2]on
how to tackle the barriers that make healthy choices difficult.
These recommendations include the need for manufacturers, retailers
and caterers to work to reduce sugar (as well as fat and salt)
levels in their products. We also believe that the government
should examine financial incentives to the food industry to discourage
products high in fat, sugar and salt and to promote healthier
products.
6.6 If there were a case for keeping sugar
prices at an artificially high level in order to discourage consumption,
then our preference would be for the same approach as applies
to tobacco production, which also currently receives EU subsidies:
that is, the price paid by consumers should be adjusted transparently
through taxation, and not by protection for producers. In our
report Health Warning to Government we recognise that a
"fat tax" is likely to impact adversely on low income
consumers, and the same would apply to a sugar tax. Our report
therefore suggests that other possibilities should be explored,
including for example tax breaks and a review of which foods are
subject to VAT.
22 March 2004
2 Health Warning to Government: Consumers' Association's
12 demands to government and industry to tackle obesity and diet
related disease. February 2004. Back
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