House of Commons portcullis
House of Commons
Session 2004 - 05
Publications on the internet
Standing Committee Debates
European Standing Committee A Debates

Cap: Reform of the Sugar Sector

Column Number: 3

European Standing Committee A

Wednesday 15 December 2004

[Mr. Eric Forth in the Chair]

Common Agricultural Policy: Reform of the Sugar Sector

3 pm

The Minister for Rural Affairs and Local Environmental Quality (Alun Michael): As I have a sense of humour, I wish to start by saying how grateful I am to the Committee for a further opportunity to discuss the European Commission's plans for reform of the European Union sugar regime. We last debated the issue in Committee on 29 January, when we looked at the communication issued by the Commission at the end of September 2003, which set out three broad options for reform. There was also some discussion of a so-called missing, or fourth, option—a return to fixed quotas—which had been included in the Commission's comprehensive impact assessment studies, but not carried forward to the communication itself.

We are now considering a further Commission communication issued in July, which sets out its preferred approach to reform in the light of reactions to the earlier paper, both in the Council of Ministers and from a range of interested stakeholders. In essence, the Commission is advocating a variant of its earlier option 2 price-cut model. We must be absolutely clear that the latest communication is not a proposal; it is an explanation of the measures that the Commission believes best meet the various criteria for a sustainable future regime that have emerged from the analysis and discussion to date.

Some of the recommended measures set out specific terms and are quantified. Others are described only in general terms, and without the detail that would be needed either to make a proper assessment of their effects or even to understand how they would operate in practice, comment is difficult at this stage. Indeed, the Commission says that the necessary further information will be provided when formal legislative proposals are made, but in the meantime it offers ideas for further political debate on the best way forward. The communication also makes clear that there are factors affecting the future sugar market that will not be known before initial decisions are taken. It is therefore proposed that there should be a review of the new regime in 2008 to make any adjustments that have become necessary by then.

Before outlining the main features of the Commission's approach, I wish to comment briefly on another related issue. It concerns the World Trade Organisation panel that examined complaints made by Australia, Brazil and Thailand against the existing European Union sugar regime. Earlier this autumn, the panel upheld all the essential elements of the
Column Number: 4
complaints. The Commission has since decided to appeal against those findings, and says that it would be premature to move to the stage of translating its current ideas into formal legislative proposals ahead of the outcome of that process. Clearly, we cannot predict the outcome of the process.

The new Agriculture Commissioner, Mrs. Fischer Boel, has said that that is likely to mean that proposals will not now be tabled until May or June next year. That, in turn, means that the previously envisaged start date for reform of July 2005 is almost certain to be deferred, probably until the start of the next sugar marketing year in July 2006. We cannot be certain of the timing, as the right of initiative lies with the Commission, which will make its own judgment about when and in what form proposals would be appropriate. In addition to the panel, there have also been developments in the World Trade Organisation's Doha round.

Shortly after the Commission issued the sugar communication, there was a major breakthrough in Geneva on a framework agreement for agriculture. Again, the problem is that the detail remains to be determined—a process due to be completed in time for the next ministerial meeting in Hong Kong in December next year. There is, however, a clear commitment to cut tariffs and eliminate export subsidies, both of which are relevant to the sugar debate. It is important that the Committee must be aware of representations that the Commission has received from the LDC—least developed countries—sugar producers and from the EU's traditional African, Caribbean and Pacific suppliers, towards which the UK has a particular interest and responsibility, about preference erosion.

Although existing preferential arrangements would remain unaffected by the Commission's current approach to reform, a reduction in EU prices would have significant economic repercussions, particularly for high-cost producers. The Commission has therefore undertaken to examine those impacts and to come forward with an action plan for appropriate adjustment aid. The United Kingdom has already made clear the importance that it attaches to that work, and the need for progress to be made between now and the emerging of final reform proposals.

I draw the Committee's attention to the excellent report on sugar reform produced by the Select Committee on Environment, Food and Rural Affairs shortly before the Commission's July communication. Many of the Select Committee's recommendations found echoes in what the Commission put forward.

The main features of the July communication are as follows. First, there are to be cuts of around one third in price support for both EU beet growers and preferential suppliers. It should be noted that that would still leave EU prices at double world levels. Secondly, there is to be a merger of existing A and B production quotas and cuts in the resulting national totals. Thirdly, there is to be abolition of the intervention system and the introduction of a new reference price, private storage and carry-over mechanism. Fourthly, some form of quota transfer
Column Number: 5
will be introduced. Fifthly, payment of decoupled direct aid is to be made by way of compensation for beet growers. Sixthly, there is to be a reconversion scheme for excess beet-processing capacity. Seventhly, there are to be increased quotas for isoglucose production.

As I have said, some of the ideas are more specific than others, particularly those relating to prices, quota cuts and the amount of compensation payable. The arrangements for quota transfer and the operation of the reference price system are less well defined and therefore more difficult to comment on in detail.

All those points have been the subject of significant further technical examination at working group level in Brussels following the initial Council discussion in July. The results of that technical work were reported back in the Council meeting on 22 and 23 November, which my right hon. Friend the Secretary of State attended, and about which she made the usual statement to the House.

The Government welcomed the Commission's approach to sugar reform as outlined in its July communication, because we believe that it is an important step in the right direction towards a market-based liberalised regime, and that it is on similar lines to the other CAP reforms already enacted by the Council.

Although views differ as to how far and how fast reforms should proceed, there is now general consensus in the UK industry—and more widely in Europe—that there is no do-nothing option. No one's interest will be served by prolonging uncertainty about the conditions that will apply in a future regime. We certainly do not want to delay decisions; we need early progress to find sustainable solutions to the many difficult problems on which I am sure hon. Members will now wish to comment. It is important to be clear that there are areas on which there will be uncertainty until we have specific proposals from the Commission.

I can offer a clear view only on issues that are themselves clear. I understand that the Committee had doubts about whether this debate was timely. Exchanging views is always helpful, so I welcome the Committee's interest—but, having clarified the position as best I can, I have to warn the Committee that I cannot give certainty where there will be only uncertainty until we have a proposal from the Commission to which we can respond fully and in detail. None the less, I welcome any comments and suggestions from Committee members that may help us in thinking things through.

The Chairman: I thank the Minister, and remind the Committee that questions are appropriate at this stage. We have until 4 o'clock, if need be, for Committee members to question the Minister. After that, we will enter a period of debate.

Mr. James Paice (South-East Cambridgeshire) (Con): Obviously, some questions arise, but as the Minister implied, many of them are relatively immaterial as we do not know the final proposals. However, I welcome the opportunity to ask a few questions.

Column Number: 6
I am slightly puzzled about the issue of conversion, and I wonder whether the Minister would address it. Page 7 of the Commission's document refers to quota not being taken up by another operator under the heading ''Conversion Scheme'', but page 11 refers to the cancellation of quota. That is a key issue, because a quota being cancelled before quota cuts were made across the board would be significantly different from its being cancelled after quota cuts. Does the Minister believe that the Commission intends that where there are conversion schemes, quota cancellation would take place before any across-the-board cuts were made?

Alun Michael: I am afraid that I cannot offer a great deal of clarification, because the implications of the proposals are not yet clear. As I say, we have only an indication. The hon. Gentleman is right to say that this is an important issue, and we look forward to its being clarified in the proposal. I would like to take that matter further with the hon. Gentleman, and I will discuss the question further with officials to see if I can add anything and come back to him. However, I cannot offer any clarification on the intentions of the Commission until we have the firm proposal.

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2004
Prepared 15 December 2004