Memorandum submitted by The Biscuit, Cake,
Chocolate & Confectionery Association (BCCCA)
1. The evidence session will address key questions.
The following comments pertain specifically to question 4:
After the WTO ruling against the EU sugar regime
what can be done to help those ACP states heavily dependent on
preferential access to the EU market?
2. The Biscuit, Cake, Chocolate & Confectionery
Association (BCCCA) represents all the leading and many smaller
manufacturers of biscuits, cakes, chocolate and confectionery
in the UK - more than 90 companies, accounting for over 90% of
the industry's production. The sector as a whole employs some
60,000 people (although this number is falling - see below) and
has annual consumer sales of around £8 billion.
3. Although the European Commission has appealed
against the WTO ruling, it is clear that there will be significant
change in the workings of the world sugar market over the next
few years. Indeed, the Commission's own draft outline proposals
for reform of the EU sugar regime envisage considerable change.
4. Unfortunately, the decision to appeal against
the WTO ruling and not to take forward reform of the sugar regime
until that is resolved has slowed down the process of reform.
This is in no-one's interest, including the ACP countries. Almost
all stakeholders are agreed that the current regime is unsustainable,
and it is therefore in the interests of all participants in the
market to ensure an orderly transfer to a new regime, given that
there is no enthusiasm for complete liberalisation of the market.
5. A newly-agreed, reformed EU sugar regime offers
the best chance of an appropriate transitional regime being negotiated
with the ACP countries, and in view of the unsustainability of
the current regime the more rapidly a new regime can be agreed,
the better. The BCCCA supports the idea of a transitional regime
and acknowledges the special position of the UK vis-a-vis many
of the ACP countries. The BCCCA is therefore pressing the UK Government
to push the EU to move rapidly towards a new regime and to take
the lead in developing a protection package for ACP countries
during the transition.
6. In response to a recent Parliamentary Question,
the Secretary of State for International Development pointed out
that the EU sugar reform proposals would reduce the volume of
EU subsidised sugar exports dumped on world markets. In actual
fact, compliance with the initial WTO ruling against EU sugar
exports, coupled with the European Commission's intimation of
maintaining preferential status for existing ACP suppliers, could
result in the cessation of all future EU exports of sugar. This
would invariably lead to an improvement in world market prices
(from between 2% and 60% depending on whichever economic forecast
you believe). However, the question arises as to who will benefit
from these improvements in world market prices?
7. The WTO ruling and EU sugar reform will mean
that EU beet growers will only be supplying the EU market. EU
national quotas will be reduced and support prices cut, but EU
beet growers and processors are looking to a maintenance of the
quota system so as to preserve high internal domestic EU prices.
Those ACP cane suppliers with preferential entitlement to the
EU market will continue to receive the same prices as EU beet
growers.
8. The question has to be addressed as to why
sugar is grown? In the EU 75% of all sugar goes to industrial
usage i.e. as an ingredient in manufacturing food products. In
the UK the figure is around 70%. But what does this mean? Much
has been made in the EU sugar reform proposals of possible job
losses in the growing and refining/processing sectors. However,
with EU sugar prices at three times world levels and UK prices
some 10% higher than in other EU member states, BCCCA members
have witnessed in recent years an inexorable rise in imports of
biscuits and confectionery and a reduction in exports, so that
our once healthy positive trade balance has moved into deficit.
The result has been the closure of some 15 factories and around
10,000 job losses in our sector in the UK in the past five years
and a shift of production eastwards to the borders of the European
Union, where sugar costs are far lower. If that trend continues,
our traditional sugar suppliers (UK beet farmers and ACP cane
growers) will lose their market for industrial sugar - a market
which currently accounts for 70% of UK sugar consumption.
9. The ACP preferential suppliers want the guarantee
of high EU prices for as long as possible, but, as already stated,
such high prices seriously impact on the viability of UK/EU industrial
sugar users, where jobs are at stake. BCCCA members and EU industrial
sugar users need early access to sugar at world prices so as to
remain competitively viable. This is in the fundamental interests
of ACP sugar cane suppliers.
10. ACP cane suppliers should be compensated
via the EU Development Budget and not as a direct levy on sugar
users and consumers. However, politically ACP growers cannot expect
to receive more than EU beet growers. For the latter, there will
be decoupled payments and, in the case of ACP cane growers, this
principle should be observed and at a similar level of payment.
Importantly, there is a need for EU sugar users to gain access
quickly to sugar at world prices so as to remain competitive on
both domestic and in third-country markets. However, any programme
of restructuring for ACP economies will have to be a managed programme
over a realistic timescale. This means that the timetables for
reform of the EU Sugar Regime and the restructuring of the ACP
economies will not be of the same duration, the former hopefully
taking place by 2008, whilst the latter will take several years.
11. All existing ACP preferential suppliers must
be realistic as to their future ability to compete on the world
sugar market. If they are able genuinely to compete at world level
prices, then they should invest payments from the EU Development
Fund to develop their indigenous sugar industry, but if they are
not able to compete, then they must take these Development Fund
payments and invest in alternative industries. There must be no
scope for procrastination and the EU should be convinced that
the correct choices have been made by each of the existing ACP
supplier countries as to where these payments will be invested.
12. For those countries that can remain competitive
in the world sugar market, serious consideration should be given
to looking beyond sugar cane growing to higher added-value processing
and products. For example, there is no reason why major UK and
EU processors/refiners should not look to establishing such facilities
in the growing countries. Apart from the higher financial returns
from selling refined white sugar rather than raw sugar, there
could be scope to moving to other added-value production. Consideration
should also be given to developing biofuels as an alternative
option to food use for sugar. There is undoubtedly a market for
biofuels, which can deliver environmental benefits such as reduction
in greenhouse gas emissions. We are pleased to note the work that
has been commissioned by DFID from the Overseas Development Institute
"Forthcoming changes in EU sugar/banana markets: a menu of
options for an effective EU transitional assistance package",
which will include analysis of alternative uses for sugar. This
should prove very helpful in developing realistic proposals for
adjustment, because the absence of such robust programmes will
render political resolution for all interested parties virtually
impossible and, consequently, could be the impediment upon which
the whole EU sugar reform proposals will founder.
November 2004
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