Examination of Witness (Questions 140-158)
MR WUBBO
WAGE
24 OCTOBER 2005
Q140 Mr Williams: You have a relatively
inefficient processing sector compared to other European countries.
Would you agree with that?
Mr Wage: You say our industry
is inefficient?
Q141 Mr Williams: It is not as efficient
as some other countries.
Mr Wage: I think that we have
perfect extraction rates, I think we have in sugar beet a very
low input of labour, we have a high efficiency on energy, but
we have a high slicing capacity because in the three factories
we have about 16,000 tonnes a day. I think, and perhaps I am a
little proud of my industry, with this high slicing capacity of
16,000 tonnes a day we are there.
Q142 Mr Williams: So your processing
sector will not have an adverse effect on the whole sugar production
in Holland?
Mr Wage: We transport sugar beet
six and a half days a week, we have optimalised nearly everything,
and it will be very difficult to increase profit even a little
bit. This is really a problem. What we can do is only on the growers'
side to have bigger volumes and so on and so on. Our industry
is very, very efficient and they are very disappointed about these
high energy prices, so we are throwing away two or three years
by these energy prices. So from my point of view we can be proud
of our industry and the ability of our industry. I do not have
remarks on my industry.
Mr Williams: Thank you.
Q143 Sir Peter Soulsby: Following
on from that, can I ask if you are able to quantify some of your
predictions and the effects of the reform of the regime? At the
moment, as I understand it, you have about 37,000 hectares of
sugar beet production, are you able to give any prediction of
what that might reduce down to as a result of the changes? Similarly,
you have got, I understand, somewhere in the region of 400 people
working in sugar factories and perhaps 9,000 others involved in
related employment. Again, are you able to quantify what might
be the effect of the changes?
Mr Wage: First of all, I heard
37,000 hectares of sugar beet, I think we have 92,000 hectares
of sugar beet.
Q144 Sir Peter Soulsby: That is a
significant difference.
Mr Wage: Yes. 92,000 hectares
of sugar beet is the figure for this year. We always had 100,000
hectares of sugar beet. Our industry says, and our growers are
saying, when we get the beet price of €25, it is not really
€25, because we have a production levy, we can discuss
lower minimum prices and so on and we can get compensation of
60%. There are many farmers who go out of business, who are stopping
with sugar beet growing, because it is not profitable to grow
sugar beet for €25 a tonne and in our situation we get about 10,500
kilograms of sugar per hectare so we stop with sugar beet growing.
Then we get the problem that the industry needs about 30,000 hectares
for one factory and we have the problem that we have 20,000 hectares
for one factory, and we have a short campaign and then it is over.
So this is really a disaster. We are in a strong area, not the
strongest but we are in the top five, and then we will have really
a problem, and not only for the farmers but also for the jobs
in the countryside. For the local economy in the countryside sugar
beet growing is very important—for the contractor, for the
seed company, for all the people who are involved with equipment
and so on. The sugar sector is a very important economy for the
countryside. We do not have so many economies in the countryside
and the sugar sector in the future has to be sustainable. It is
a very important crop because until now it is profitable.
Q145 Sir Peter Soulsby: So very broadly
what proportion of reduction might you anticipate in the area
of sugar beet production? Very broadly?
Mr Wage: It is a very good question,
but if we want to go on with sugar beet production in Europe we
must do it in the best areas, so I think we are in favour of the
restructuring fund because then we can stay in production in the
best areas. Otherwise we will have to import and so on. It would
be a pity if we reduce quotas in the strongest area and I would
not like it. We are very much in favour of the restructuring fund
and we think it is a very good thing but it is not easy for the
people and the employers in the factory and the growers in the
industry to take the decision, "We are going out of business";
that is a very difficult decision.
Q146 Sir Peter Soulsby: Can I ask
about factories? As I understand it, there are currently four
factories operating in the Netherlands. Do you expect any of those
Dutch factories to close as a result of the reforms?
Mr Wage: Yes. Last year we closed
a factory and we have now three factories, so we have a campaign
length of 100, 105 days, so we have more results from the investment
for our industry. So we are moving forward to optimalise slicing
capacity.
Q147 Sir Peter Soulsby: Would you
expect the number of factories to drop still further?
Mr Wage: We need finally 85,000-90,000
hectares of sugar beet for three factories, and that means in
our situation we need 30,000 hectares around one factory, that
is the optimum, with a slicing capacity of about 16-17,000 tonnes
a day. That is the optimum from our point of view.
Q148 Chairman: Can we ask you about
the compensation regime that is proposed under these proposals?
The Commission are talking about compensating growers to the tune
of 60% of losses as a result of the proposed price reduction.
Do you think that is a fair regime of compensation? Secondly,
in terms of the Netherlands, how would that compensation package
be introduced? Would it be in some way coupled to production or
would it just be a free-standing payment to the growers?
Mr Wage: Yes, we are also looking
to the other products in a Common Market organisation, and I have
mentioned rice which has a compensation of 88%, and there are
several other products which are highly compensated. We think
the 60% is not really 60%. We have our financial discipline, we
have our modulation and perhaps other things, and it also disregards
the mix between A and B quotas, and there is also a point of discussion
on what is part of €47 or €
43.9. So we say we need at least 80% compensation
in line with other products which are reformed in Brussels. So
at least 80% we need to stay in business. The second question
is a very interesting question, we want not a calculation based
on the period 2000-02 but on a younger period closer to 2006.
We would like to have our reference period as 2004-05 because
we have a lot of quota transfer, a lot of farmers are going out
of business, and we want that people who grow sugar beet in the
future have the right of compensation. So very close to 2006.
The discussion on decoupled payments or coupled payments is a
very interesting discussion. We have a very good relation with
our industry in the Netherlands. The industry needs sugar beet
and growers need the industry. We think for €25 our growers will stop sugar beet growing. When
we have a decoupled payment, they stop their business, and we
are thinking at this moment—and I cannot answer very clearly
what we are doing—for a short period of coupling on production
but I know that most countries say, "We want to decouple
payments" but we are in discussion about it.
Q149 Chairman: In discussion with
the growers?
Mr Wage: With the growers and
with the industry saying, "How are we managing the payments?"
Finally, I think it becomes decoupled but we are consulting the
arguments for a 40% coupling to deliver enough sugar beet to the
factory, but we say the money is owned by the growers and at the
moment that the industry goes out of business, we go direct to
decoupling, it is no part of the beet price, it is only an insurance
for delivering enough beet. But it is in discussion, and I am
being very open here in this meeting, and it could be said on
the other side a decoupled payment. But it belongs to the growers
who stay in business after 2006. That we will try to arrange.
Q150 Lynne Jones: What you are saying
then is that you want payments to be based on production but based
on recent figures so that those farmers who have already gone
out of business would not get any compensation, it is only those
who are staying in the business?
Mr Wage: There are a lot of farmers
in the Fischer Boel proposal in the reference period 2000-02.
We have about 15, 20% of our quota at this moment in 2006 that
belongs to other farmers, so we think it is not done to pay growers
who have stopped before this new sugar regime to give them compensation
because they were growing sugar beet in 2000-02. So we say very
shortly before 2006.
Q151 Lynne Jones: Our figures indicated,
as was discussed earlier, that your processing industry was not
as efficient as in other parts of the EU. You have contradicted
that. Is that because our figures are based on you having four
factories and you now only have three and therefore you are producing
the same amount of sugar from three factories and therefore you
are more efficient?
Mr Wage: Yes. From my point of
view, inefficiency is a low extraction rate, too much labour,
not very efficient with energy and so on and so on. I say we are
on a technical very high level and when we visited Eastern Europe—and
I was there the week before—they have an extraction rate
much lower.
Q152 Lynne Jones: Talking about those
most efficient countries though, you say you have a very good
relationship with the processors?
Mr Wage: Yes.
Q153 Lynne Jones: Do you think that
the relationship is similar to the relationship within perhaps
the UK? The farmers in the UK say that the processors have all
the power. Would you say that is not the case in the Netherlands?
Mr Wage: No, we do not have one
industry but two and I deliver to the private industry. We have
one industry, there is a co-operative, they are shareholders and
they are the people who deliver the sugar beet, but also I deliver
to the private company, CSM, and they have a stakeholder mentality.
People who work in the factory are very important, the growers
are important, also the shareholders are important, and when you
make a mix together of these three elements you have people who
are proud of their industry. So it is very strong and then you
are strong for the future.
Q154 Lynne Jones: So do you think
having the farmers' co-operatives has made a difference in your
relationship with the other processors?
Mr Wage: That is a very interesting
question. I do not know. I cannot answer because it is very difficult
to answer. We have countries with monopoly sugar processors and
that is perhaps more difficult than our area where we have a stakeholder
mentality. That is very important.
Q155 Lynne Jones: It is important
that you continue to farm 92,000 hectares in order to keep those
three factories open?
Mr Wage: Yes, 85-90,000 hectares
we need to have a production of around 100 days. We think that
is absolutely necessary otherwise when you drop your production
to 60-65 days, it is too short and a new factory costs at least
400 million, so you have to use your equipment very
well.
Q156 Mr Kawczynski: Could I ask about
the general position of the Dutch Government in all of this and
what their position is? How has your organisation managed to influence
their official line?
Mr Wage: I said at the beginning
that our Minister of Agriculture invited us to do a better proposal.
We had a lot of comments about the proposals of Mr Fischler and
later Mrs Fischer Boel, so they said, "Come with an alternative."
Then we were talking with the ACP and LDC countries and we know
those countries have visited all the capitals in Europe and have
been in Brussels asking for a price guarantee and a quota system
to earn some money for market access. We were discussing with
the NGOs, with Oxfam and Novib, and so we made our plan which
I have announced here to stop subsidised exports, a quota system
for the least developed countries and ACP countries. We could
also defend our point of view that we do not like imports but
we accept a place from the least developed countries and ACP countries
in our new sugar regime. That was a very important approach to
our Dutch Parliament. They had never seen before us working together
with NGOs, with all actors in the playing field, and they underlined
as Parliament our approach, they thought it was fantastic. "We
have never seen before so many organisations underlining an alternative
plan." They pressed also the Government to follow this line
but in the discussions in Government it is not completely clear
if they are following the wishes of our Parliament. They say,
"Yes, we know about it. Yes, it will be very difficult to
come with a new sugar regime in November. We need a little bit
of place and don't fix me except on figures." That is the
position of our Government. But they also know that our sugar
companies and our sugar beet growers are at risk; they know that
very well. I cannot understand that when we make a place for the
least developed countries and the ACP countries—and this
is a little bit of a personal remark—that we destroy the
European sugar sector. I cannot understand that. I told you that
20 years ago we had the same amount per tonne of sugar beet in
this period and now we are doing things better, and now politicians
ask, "Can you work cheaper", it is amazing for me. We
do not have inflation correction, we do not have anything, only
through increasing the yield and doing things better. If I may
make a personal remark, we were also discussing with the unions
in the Netherlands that we have to create a win-win situation,
that we can stay in business in Europe, look for a place for the
least developed countries and the ACP countries, and from our
point of view we should think about bioethanol-production, bioethanol
in the least developed countries and the ACP countries and probably
export to the EU, and then we create a win-win situation, and
our labour organisation is very in favour of this idea. Perhaps
this idea, to keep local economies in the countryside in Europe
at a good level can make a place for the least developed countries
and ACP countries. So we create a win-win situation and that is
what I would wish.
Q157 Mr Kawczynski: As a follow-up,
does the Dutch Government see sugar production as a strategic
sector? Does it feel agriculture is strategically important and
is prepared to subsidise it? Does it have the political will to
do that?
Mr Wage: Yes, it belongs to my
point of view that if your grandfather was involved with agriculture
and so on, so when you have a relationship with agriculture you
think that agriculture has a good place in the local economy—especially
flowers, vegetables, dairy farming and also arable farming—it
is very important for the local economy in the countryside. Our
Government has an approach that farmers have to manage the countryside,
so it is turning a little bit. When I speak about bird `flu, when
we are importing everything, it is very risky to be completely
importing everything all over the world. From my point of view,
we must think about the local economy. On the other side, we can
create unemployment in Europe but what are we to do with these
people? It is better they stay in business and also have workers
in the factories and they are fighting to stay in the sugar business.
They know they have a good job and they want to keep their good
jobs. Also in political meetings with our labour organisations,
the workers in the factories say, "Why do I have to go for
LDC countries and ACP countries? What do I do wrong?" Then
I say, "Why don't we create a win-win situation and perhaps
produce bioethanol additional to the sugar market." That
would be a good idea. Also our unions said, "That is a good
idea, that is a good solution, we will want to support it."
So at this moment there is a delegation of consultants in South
Africa to bring this idea to the attention of Tanzania, Mozambique,
South Africa and so on and so on and to say, "This is a challenge,
this is an opportunity, what do you think about it?" I am
free to bring it here to say that perhaps we can create a win-win
for the European sugar sector.
Q158 Chairman: Mr Wage, you have
put forward with passion your views and I want to conclude with
one political question. You laid out very clearly for the Committee
the importance of sugar beet production both from an environmental
and agricultural point of view in the Netherlands; you have laid
down the fact you thought 80% should be the level of compensation,
not 60; you have made it very clear that you wanted to have no
reference price mechanism; and you wanted a guaranteed price mechanism
for the ACP countries. Those are four very big issues. The politics
of the November Council of Ministers will be to try and get an
agreement prior to negotiations in the World Trade Organisation
at the end of the year in Hong Kong. What is your assessment as
to whether the coalition of those countries who presently disagree
with the Commission's proposals will hold firm when they have
to think about the wider picture of the agreement at the end of
the year? Because what you have described is a position which
normally results in the Council having to think a few times before
the regime is finalised, but the pressure in November is going
to be very great for an agreement to be reached. What is your
personal assessment about the politics of the November Council?
Mr Wage: I know there are many
countries who cannot agree with this proposal, so Mrs Fischer
Boel and Ministers will look for a little bit of movement in one
or another direction. It must be clear when this is going on that
without our amendments we will destroy the European sugar market.
I cannot believe that all the people who are involved in politics
will take this responsibility. I think this goes too far, too
deep, too fast and it is unbalanced. There are a lot of things
for the future of the sugar sector. That is why I am disappointed,
we are lobbying a lot, and day after day we give explanations
to agree with us but now it is to make a point and it is politic
to make a point. I refuse to believe that in November they will
take the decision that they will say it is over in Europe as a
sugar industry and only the French can stay in business, and furthermore
it is only import. Then we have the responsibility about unemployment,
capital, all investments will be destroyed and so on. I cannot
believe we will take such a ridiculous decision. Yes, also, you
must understand that the ACP countries and the LDC countries are
very, very disappointed in this proposal. I think political people
have to listen and to calculate more and not take decisions about
emotions because everyone likes to help the poor people in the
world, everyone, but then they come with a proposal which brings
nothing. The poorer people stay poorer and then you have to build
a factory for about
400 million in such a country and you deliver your
sugar cane to that factory and you earn nothing. It was the idea
to help the poorest in the world but then we have to make a sugar
regime where we do what we are saying. It is not in my interest
that is on the market but it is a political reality that is occurring
in the market. Yes, in the Dutch situation we agree with this,
but I would be for a win-win situation, to use bioethanol. Sugar
cane is the first product to use bioethanol, it will be a very
good approach from my point of view.
Chairman: Thank you very much indeed,
first of all, again, for coming, and secondly for answering our
questions with such clarity and for the passion with which you
put your growers' case. I think you already have a friend at the
back of the room because I notice, if body language is a communicator,
the President of our own National Farmers' Union was smiling at
points in your response. Thank you very much indeed, Mr Wage,
for coming to give evidence to the Committee. We very much appreciate
it.
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