Select Committee on Environment, Food and Rural Affairs Written Evidence

Memorandum submitted by the Consumers' Association (O11)


  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.


  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.


  3.1  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.


  4.1  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.


  5.1  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.


  6.1  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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