Select Committee on International Development Written Evidence

Annex 1

Address to the Council of Agriculture Ministers of the European Union, meeting in the margins with ACP and LDC Ministers on 24 January 2005, by Mr Graham Clark, Director, Illovo Sugar Ltd, Chairman of the LDC London Sugar Group

  Mr President, honourable Ministers, Excellencies, distinguished colleagues;

  The Everything But Arms initiative(EBA) in relation to sugar captures not only the true spirit and essence of sustainable development in the poorest countries in the world but is a working model of what the LDCs so desperately require in their fight to lift themselves from being the poorest of the poor.

  The European Commission proposals for the reform of the sugar regime pose a threat to the fundamentals of LDC development and have prompted the LDCs to propose what in their opinion is a reasonable and meaningful adaptation of EBA.

  Rural development, poverty alleviation, food security and the beginnings of a better quality of life for those who need it most can already be seen in the LDCs who have been able to take advantage of this opportunity to date.

  In countries as widespread and diverse as Mozambique and Malawi, Zambia and Tanzania, Ethiopia and Sudan, Togo and Benin, Bangladesh and Nepal, Burkina Faso, the Democratic Republic of Congo and Madagascar, sugar has been exported to Europe, in most cases for the first time, and is making a difference.

  A remunerative price and a predictable level of export earnings is enabling those sugar industries to consolidate and undertake expansion and modernization.

  The request of the LDCs for accelerated but managed market access over an extended transition period in conjunction with a more modest and gradual reduction in price, together with a plea to defer duty-free and quota-free entry for sugar of LDC origin, is a position which has not been taken lightly.

  Widespread consultations between LDC governments, sugar cane farmers, sugar producers, investors and NGOs have concluded that participation in an orderly managed market over an extended transition period, would create and enhance the predictable investment environment necessary to build capacity in these sugar industries and thereby transfer benefits to the widest number of people in these poor countries. Companies such as Illovo Sugar have already invested many millions of dollars in a number of LDC sugar industries. Having taken account of the high investment risks, and having evaluated EU market opportunities, they require the predictability envisaged by the LDC proposal to sustain their current investments and to enable them to commit further investment.

  The economies and in particular the administrative capacity of most LDCs are fragile and weak. Against this backdrop, and in a system of quota free and duty free access, the opportunities for arbitrage trading and carousel or swap trading would flourish. Improper trading practices and abuse of rules of origin would be difficult to control, and considerable disruption and instability could result in the EU sugar market, whilst in the LDCs themselves the financial benefits would be trapped in the hands of relatively few traders, rather than filtering down as returns to farmers and producers and the communities in which they operate.

  Managed market access under controlled conditions, over a meaningful transition period, would avoid this situation, limit market instability and enable the LDCs to build capacity at both the productive and institutional level. The ability to fully supply domestic and regional export markets could also be developed in this timeframe so as to further sustain and diversify sugar revenues in the LDCs.

  The level of price reduction proposed by the European Commission would nullify the LDC's proposal as presented. In addition it is our view that combined with a short implementation period and unchanged EBA regulations, the majority of small, vulnerable LDC producers will be excluded on a cost and freight basis, whilst other LDC producers in a position to do so would have no choice but to maximize export volumes adding further potential for instability in the EU market. Regulated and managed market access for LDCs, together with remunerative prices, would facilitate a fairer spread of market opportunity to all LDC producers through the internal allocation mechanism for quantities currently adopted by the LDCs in solidarity with each other. The ability to establish defined market access for LDCs will also support anti-fraud measures, strengthen rules of origin, and give fair opportunity to all farmers and producers internally within the EU, and in ACP and LDC regions.

  The LDCs have at all times held themselves available for negotiation and further clarification on their proposal. We wish to take this opportunity to re-state our readiness to play a meaningful part in the GSP review and in the debate on the reform of the sugar regime. Our view on price reduction is that this should be gradual and modest, which would be possible within the expected WTO commitments of the EU.

  Quantitative access for LDCs during the proposed transition period could be accommodated by a modest reduction in EU beet quotas. Furthermore, the raw cane sugar requirements of future new EU Member States will also offer an added market access opportunity.

  Our proposal is WTO compliant, within the findings of the WTO Disputes Settlement Panel which has ruled in favour of differentiation on behalf of Least Developed Countries. The maintenance and expansion of preferential access is also consistent with the Doha Development Agenda.

  The future prosperity of LDCs is largely dependent on investment from the private sector, reinforced by public/private sector cooperation.

  Predictable market opportunities as contained in the LDC proposal would create the right environment for investment and sustainable development.

  I thank you.

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