Memorandum submitted by the Global Alliance
for Sugar Trade Reform and Liberalisation (Brisbane, Australia)
(O32)
SUMMARY
1. The EU sugar regime is import averse,
discriminates between developing countries, prevents competition
between domestic suppliers, penalises its own industrial sugar
users, has escaped all domestic reforms, and damages the incomes
of other sugar producing countries.
2. The Global Sugar Alliance seeks an integrated
approach to the reform of policies affecting sugar trade—market
access, domestic support and export subsidies.
2.1 Substantial and meaningful increases
in market access.
2.2 The elimination of the special agricultural
safeguard for sugar.
2.3 Substantial reductions in the sugar
tariff.
2.4 The elimination of all forms of trade-distorting
domestic support.
2.5 The elimination of export subsidies.
3. The Global Sugar Alliance believes it
is important that the special and differential needs of all developing
and least developed countries are taken into account as a new
EU sugar regime is developed.
THE EU SUGAR
REGIME IS
IMPORT AVERSE
4. Imports are tightly controlled by prohibitive
tariffs:
4.1 Quota access is less than 2 million
tonnes.
4.1.1 EU sugar imports account for around
4% of developing country sugar exports.
4.1.2 Developing countries accounted for
65% of global sugar exports in 2001[15]
4.1.3 In the Uruguay Round the EU refused
to provide WTO tariff quota bindings to ACP sugar exporters at
the levels they were actually exporting in 1995.
4.2 Imports are subject to special safeguards
and the effective tariff level is 339% for raw sugar and 419%
for white sugar[16]
4.3 Following domestic lobbying, sugar imports
from least developed countries under the "Everything But
Arms" (EBA) initiative will not be liberalised until at least
2009 and may be subject to special safeguards.
4.4 The EU is possibly the only WTO Member
which reserves to itself the right to subsidise the export of
the equivalent quantities of sugar that it imports[17]
THE EU SUGAR
REGIME DISCRIMINATES
BETWEEN DEVELOPING
COUNTRIES
5. ACP sugar quota holders are allocated
a total quantity of 1.295 million tonnes and India 10kt under
a WTO duty free tariff quota.
6. The EC allocates quotas to some, but
not all, ACP sugar producers.
6.1 Kenya, a major sugar producer, has only
recently been allocated a quota.
6.2 Other developing countries must compete
for a WTO tariff quota of 85kt.
6.3 Least developed countries are subject
to very tight quota controls under EBA arrangements.
6.3.1 EBA sugar has displaced some ACP imports
under EC preferential access arrangements relating to the maximum
supply needs of refineries.
THE EU SUGAR
REGIME PREVENTS
COMPETITION BETWEEN
DOMESTIC SUPPLIERS
7. Quotas are allocated at Member State
level and there is little or no internal trade in sugar.
7.1 national quotas are predicated on self-sufficiency
in each Member State and special subsidies are given to encourage
production in marginal sugar producing regions.
8. The regime is in direct contradiction
to the Community's Single Market and Competition policies.
8.1 It is a common regime only in the sense
that it maintains a single high wall against imports and guarantees
common support price and export subsidies.
9. To quote from a 1991 Court of Auditors
Report:
9.1 "[It is] a market organisation
which has become so self-contained that it has practically closed
itself off from any movement in the direction of the main initial
objective, ie to create a common market, with all its economic
advantages.
10. The regime requires that non-quota sugar
be exported.
THE EU SUGAR
REGIME PENALISES
EU INDUSTRIAL SUGAR
USERS
11. Industrial sugar accounts for over 70%
of EU domestic sugar consumption, yet EU food and other sugar-using
industries are forced to purchase domestic EU sugar at more than
three times the world price.
11.1 with adverse effects for employment
and investment in the processed foods sector[18]
11.2 access to imported sugar under inward
processing arrangements is tightly controlled.
12. EU sugar processing is one of the few
EU manufacturing operations to receive subsidies[19]—the
mechanism is effectively a local content subsidy to manufacturers,
of a type which the EU has challenged when maintained by developing
countries.
THE EU SUGAR
REGIME HAS
ESCAPED ALL
DOMESTIC AGRICULTURE
REFORMS
13. Sugar is known as the "white gold"
of European agriculture.
14. Effective levels of support for sugar
are far in excess of support for cereals.
14.1 EU expenditure on price support for
white sugar is nearly
6 billion[20]
15. The intervention price is currently
more than three times the world price and because of the closed
nature of the regime, producers typically command prices some
10-20% above the world price.
15.1 no-one can explain the basis for establishing
the intervention price level and the court of Auditors has been
highly critical of EU accounting methods in this regard[21]
16. The regime is virtually unchanged since
its inception over 30 years ago.
16.1 it was excised from the most recent
review of the Common Agricultural Policy.
17. The regime is not self-financing.
17.1 in terms of direct budgetary outlays—the
EU spends
1.6 billion on export subsidies, but recovers only
around half that amount from producer levies.
17.2 the EU has avoided intervention buying-in
over the last 15 years through export subsidies on quota sugar
and by forcing the disposal of surplus to quota production on
world markets.
17.3. effectively, the world market is used
by the EU to dump its sugar surpluses.
THE EU SUGAR
REGIME DAMAGES
THE INCOMES
OF OTHER
SUGAR PRODUCING
COUNTRIES
18. EU sugar legislation makes the objectives
of the sugar regime clear. They are internally focussed, reflecting
the objectives detailed in Article 39 of the Treaty of Rome for
the Common Agricultural Policy, and include:
18.1 the promotion of improved incomes;
18.2 the promotion increased technical and
economic efficiency;
18.3 the stabilisation of markets;
18.4 guaranteed regular supplies to consumers
at reasonable prices.
19. The regime's objectives do not purport
to be an instrument of development policy.
19.1 It is predicated on controlling import
access through quotas.
19.2 The EU Commissioner for development—and
many others—question whether the sugar access arrangements
for a select number of ACP members constitute good development
policy[22]
20. Developing countries in Africa and Asia
account for the bulk of EU sugar exports (around 13% of French
exports go to Africa).
20.1 With benefit of export subsidies, France
even exports to Jamaica and other ACP sugar producing countries.
20.2 The self-sufficiency of developing
countries in sugar has declined substantially, from 80.9% in 1992
to 60.18% in 2001[23]
20.3 The EU provides a guaranteed price
to ACP sugar quota holders, with an estimated total value of
450 million, but provides export subsidies of
1.6 billion to its own producers, including around
8-900 million to export the so-called equivalent
of its imports from ACP sugar exporters.
20.4 The EU is a self-acknowledged high
cost producer, yet is exporting at record levels (around 6 million
tonnes[24])
at a time of record low world sugar prices, in a period when far
more efficient producers are having difficulty in covering production
costs.
20.4.1 Over half of EU exports are surplus
to quota sugar, which the EU claims is not subsidised, but which
are clearly exported at well below production costs.
THE EU SUGAR
REGIME AFFECTS
ALL SWEETENERS
21. Iso-glucose and high fructose corns
syrups, alternative sweeteners to sugar, have developed market
niches in heavily regulated and high priced sugar markets such
as the US and Japan. In the EU the cost of isoglucose production[25]
is less than sugar. In Europe the market penetration of these
alternative sweeteners is constrained by quota.
22. The Commission[26]
has concluded, in the absence of quotas on iso-glucose production:
22.1 if the price of sugar were set at
450/tonne, the drinks sector would be totally absorbed
by isoglucose, reducing the sugar market by a third;
22.2 The price of sugar would have to be
reduce to
370/tonne to act as a disincentive to investment
in isoglucose production.
REFORM OF
THE EU SUGAR
REGIME IS
A PRIORITY
23. The Global Sugar Alliance seeks an integrated
approach to the reform of policies affecting sugar trade—market
access, domestic support and export subsidies.
23.1 Substantial and meaningful increases
in market access.
23.2 The elimination of the special agricultural
safeguard for sugar.
23.3 Substantial reductions in the sugar
tariff.
23.4 The elimination of all forms of trade-distorting
domestic support.
23.5 The elimination of export subsidies.
24. The Global Sugar Alliance believes it
is important that the special and differential needs of all developing
and least developed countries are taken into account as a new
EU sugar regime is developed.
29 March 2004
350/tonne (
150 for raw material and
200 for processing costs) while the production cost
of isoglucose 55, which has the same sweetness as sugar, is approximately
380/tonne (average EU cost). In general, the production
cost of isoglucose varies from
330 to 460/tonne depending on the circumstances (cost
varies according to the country and the cost of the raw materials
used), while the average cost in the acceding States is less than
300/tonne. EC Report (6547/04) from Working Party
on Sugar and Isoglucose to: Special Committee on Agriculture,
18 February 2004.
15 FAOSTAT database. Back
16
Source: About ACP sugar, European sugar statistics www.acpsugar.org.stats.
Exclusive of the SSG, The WTO bound rate is 228%. Back
17
A footnote to the EU's WTO schedule provides that the EU will
not observe its WTO export subsidy reduction commitments in respect
of quantities equivalent to those imported from the ACP and India. Back
18
In a letter to the Financial Times of 12 June 2003, the Director-General
of the UK Biscuit, Cake, Chocolate and Confectionery Alliance
advised that, for the first time in living memory, the UK imported
more biscuits and confectionery than it exported, due to high
EU sugar prices. Back
19
40% of the intervention price is delivered as a subsidy to sugar
processors, on condition that they purchase raw sugar or sugar
beet harvested in the EU. That subsidy cannot be characterised
as a "measure in favour of agricultural producers" as
provide in the WTO Agreement on Agriculture. Back
20
EC Notification to the WTO: G/AG/N/EEC/38, Supporting Table DS:5. Back
21
ECA Special Report 20/2000 (C50 of 15/02/01). Back
22
See ABARE studies. Back
23
Source ISO: Self-sufficiency in sugar-trends and prospects. Back
24
Latest figures are around 4 million tonnes; EU average is 5 million
tonnes. The EU exports around three times as much as it imports. Back
25
The production cost of isoglucose 42 is around Back
26
EC Report (6547/04) from Working Party on Sugar and Isoglucose
to: Special Committee on Agriculture, 18 February 2004. Back
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