Select Committee on Environment, Food and Rural Affairs Written Evidence


Memorandum submitted by WWF-UK

EXECUTIVE SUMMARY

  WWF welcomes the opportunity to contribute to this Environment, Food and Rural Affairs committee inquiry. WWF have long called for changes in EU sugar policies to end export dumping, to improve market access for poor countries and to improve environmental management. Whilst WWF welcomes the commitment to reform the sugar regime, we have serious concerns about the European Commission's 22 June proposals. Europe has a unique opportunity to create a more just and sustainable global sugar market but without changes to the current proposals, that chance could be missed.

  The distortion of the EU sugar regime on world markets harms people and nature across the world. European over-production damages the environment in the EU as well as depressing the world price for sugar. Along with restricted access to the EU for developing countries and unfair competition from dumped sugar, this results in lower earnings for sugar exports. In developing countries this translates into lower environmental and social standards.

  There must be genuine cuts in European production and an end to all the hidden, in-direct and complex subsidies, refunds and grants that will continue to allow the European industry to compete unfairly with developing countries and cause environmental damage in Europe. Europe needs to import at least twice as much sugar from developing countries as it does now. The EU must extend meaningful help to both traditional "sugar protocol" importers, and non-sugar protocol least developed countries (LDCs).

Specific recommendations

    —  There must be a review of these reforms in 2010.

    —  Total EU production must be cut to c 12 million tonnes a year.

    —  Quota cuts should be based on environmental criteria.

    —  No additional quota should be created.

    —  All market management tools should be reviewed to ensure there is no cross-subsidising of production, use or export.

    —  The Single Farm Payment should not over-compensate beet farmers; it should be modulated and must include tougher environmental standards.

    —  Budget savings must be re-directed to the development budget aimed at helping developing countries adjust to reform.

    —  There should be no public support for bioethanol in the EU.

    —  Europe should open its markets fully to sugar imports from LDCs now rather than only in 2009.

    —  The EU should seek to implement the price cut over a longer time period to allow LDCs to adjust.

    —  Europe should offer significantly more assistance to the 18 ACP countries that are exporting to the EU now, recommending a target of

    500 million a year.

    —  Europe should offer adjustment help to non-Sugar Protocol LDCs.

1.  INTRODUCTION

  1.1  WWF have long called for changes in EU sugar policies to end export dumping, to improve market access for poor countries and to improve environmental management. Whilst WWF welcomes the commitment to reform the EU sugar regime, we have serious concerns about the European Commission's 22 June proposals. Europe has a unique opportunity to create a more just and sustainable global sugar market but without changes to the current proposals, that chance could be missed.

  1.2  Firstly, the EU must guarantee an end to the negative impacts the sugar regime has on the world by reducing its production significantly and ending the dumping of European sugar. Secondly, Europe needs to increase the import of sugar from developing countries and invest substantial resources in improving the environmental, social and economic sustainability of the sugar sector in those countries. Unfortunately there is no guarantee that the first of these will happen and there is little evidence that the EU is willing to do the second.

  1.3  The EU produces some 20 million tonnes of sugar a year yet consumes only 16 million tonnes. It imports 2 million tonnes and regularly exports 5-6 million tonnes. The EU sugar market is heavily distorted and as a consequence distorts world markets. This distortion harms people and nature across the world. As an international environmental organisation WWF is concerned about the negative impacts of policies such as the EU sugar regime on sustainability globally.

  1.4  Europe over-produces sugar, stifles demand for imports and directly and indirectly subsidises the dumping of sugar on world markets at below the true costs of production. As a result developing countries, in particular, face depressed world prices, restrictions on their access to the EU market and unfair competition in third countries.

  1.5  In Europe the environmental consequences of over-production result from the high level of soil erosion, pesticide and water use associated with beet cultivation particularly when grown in inappropriate regions. The nature of the sugar regime, the high guaranteed price and the allocation of quotas across the EU, means that sugar beet is unsustainably irrigated in a number of Mediterranean river-basins.

  1.6  Outside of Europe, in addition to the negative impact caused by the distortion of world sugar trade on earnings, poverty alleviation and labour conditions in some developing countries, there are also significant environmental consequences. Where sugar is grown irresponsibly valuable habitat is lost, water is overused, soil eroded and degraded and land, air and water are polluted by pesticides, fertilisers from sugar fields as well as by smoke and waste products from sugar mills. In some regions inefficient irrigation of sugar means that unnecessarily large amounts of water are used. In others, water becomes polluted with silt or chemicals.

  1.7  Better management practices are widely available. These practices address many of the environmental impacts, so that sugar can be grown in ways that are good for nature. If production is well managed, cane can help prevent soil erosion and wildlife can co-exist in well-managed plantations. Unfortunately, due to the depressed nature of the world market and unfair competition from subsidised sugar exports, the sugar industry in many countries is unable to invest in these practices.

2.  REFORMS MUST END EUROPEAN OVER-PRODUCTION, ENVIRONMENTAL DAMAGE AND DUMPING

  2.1  WWF welcomes the reforms as a first step towards ending the over-production and dumping of European sugar. However we need assurances that the voluntary and market led measures designed to cut production will work. There is some question as to whether they will when efforts to restructure are combined with very generous compensation, expanded quota and new payments for renewables (bioethenol) from beet.

  2.2  Particular concerns are that:

    —  European farmers will be compensated for 60% of the price cut in the form of a Single Farm Payments—a total of

    1.54 billion a year. There is some indication that this will over-compensate producers for price falls which in reality may be lower than predicted.

    —  In addition private storage and withdrawal subsidies will still be paid in cases of low market prices.

    —  Production refunds will continue to be paid to high sugar using industries, such as confectionery and pharmaceuticals.

    —  1.3 million tonnes of extra sugar and sweetener quota is being created and over-production is being further legitimised by continuing to `turn a blind eye' to sugar for chemical and alcohol uses.

    —  Sugar beet will qualify for set aside payments and for a

    45 per hectare payment for renewables.

    —  A restructuring aid worth over

    4.2 billion will be made available to encourage the industry to give up quota.

  2.3  All this amounts to a very generous offer of compensation and continuing support to the European sugar industry which has already benefited massively from 40 years of market management. It is likely to continue to encourage over-production in the European Union which must not be allowed to occur. These reforms will need to be monitored carefully to make sure that EU over-production and dumping ends and whether the voluntary restructuring alone is sufficient.

  2.4  Continued over-production will perpetuate the harm done to wildlife in Europe.

  2.5  Unsustainable irrigation: Excessive water usage for irrigation is the single most important environmental impact from sugar beet in Europe, particularly in Mediterranean regions. However, as climate changes, this is becoming an issue increasingly in northern Europe as well. The high guaranteed price for European sugar has meant that irrigation of beet, even in highly unsustainable situations, has been a profitable option for producers. The allocation of sugar production quotas across the EU has meant that irrigation persists where it would not otherwise.

  2.6  WWF would like to see an end to unsustainable irrigation of beet and any other crop within the EU.

  2.7  WWF wants environmental criteria, rather than market decisions alone, to play a part in decisions to give up quota production as is the case in the reform of the olive oil regime. The EU Water Framework Directive is introducing a system of river basin planning and this should be used to determine whether irrigation within a particular river is environmentally damaging or not.

  2.8  Whilst environmental cross-compliance (environmental standards which the farmer has to meet before they get their payment) will be introduced to the single farm payment for beet producers, it does not currently include any obligations linked to sustainable water use or to the Water Framework Directive. Therefore, it is unlikely to address issues like irrigation where sugar production continues or, where decisions are made to shift into alternative crops. Although a larger question than sugar reform alone WWF wants to see the Water Framework Directive incorporated into the cross-compliance system within the CAP.

  2.9  Tackling unsustainable irrigation also requires special investments. WWF would like to see restructuring aid targeted at areas where sugar has environmental problems—for example in southern Member States.

  2.10  Possible wildlife benefits from beet: In some cases sugar beet offers environmental benefits to wildlife, as is the case for a number of UK farms. Where this is the case, WWF believes that these should be delivered through cross-compliance requiring crop rotations beneficial to wildlife and/or targeted agri-environmental schemes rather than through a system of price support.

  2.11  Bioethanol: WWF is not convinced of the desirability of investing in the production of bioethanol for renewable transport fuel from beet in the EU. The carbon gains from beet derived alcohol is not as favourable as the use of agricultural or forestry biomass for direct heat and power production, or even bioethanol derived from sugar cane. The option to include sugar beet in the existing limited budget and area of crops attracting EU support for renewables poses the danger of swamping the scheme and distorting the future growth of the sector due to the existing capacity to grow sugar beet. In addition, as with any intensively produced crop, WWF is concerned at the biodiversity, pollution and habitat impacts of large scale beet production whether for sugar or alcohol.

2.12  Reform recommendations within the EU

    —  Duration of the sugar regime without review until 2014-15:

    A review of the regime at the mid-term will be needed to ensure that it is having the desired effect of reducing production, environmental damage and exports.

    —  Cutting production:

    The overall level of production needs to be matched more closely to EU consumption minus current and desirable imports of some 4-5 million tonnes a year, ie at something like 12 million tonnes. The current proposals will not achieve this. European producers must not be able to produce over quota.

    —  The need for compulsory quota reductions:

    WWF is disappointed that there is no managed quota cut proposed now. There must be a strong commitment from the EU to the use of compulsory cuts if the voluntary restructuring scheme fails to operate as expected.

    WWF advocates the use of managed quota cuts specifically tied to environmental criteria such as the impacts of beet on freshwater to ensure a smaller and more environmentally rational level of production within the EU.

    —  The creation of additional sugar and sweetener quota:

    WWF strongly disagrees with the creation of a further 1 million tonnes of sugar quota and 300,000 tonnes of isoglucose quota in order to maintain, what has been deemed by the WTO to be illegal, over-production in certain Member States.

    —  The retention of market management tools:

    It is the whole package of market management tools within the sugar regime that, in sum, enables the European industry to dump sugar on the world market and reduces the potential demand for cane imports from developing countries. There must be a substantial reform which removes these indirect drivers of over-production which in turn lead to damage done to the rest of the world.

    —  The proposed Single Payment Scheme:

    WWF accepts the principle of compensation for beet growers for the price cut. However we have a number of concerns that need to be addressed:

      —  Compensation should be of a similar level as currently received by other arable producers. There is no justification on public benefit grounds for beet growers to receive substantially more payments to meet cross-compliance standards than other farmers.

      —  Savings resulting from these reforms must be shifted to the development budget of the EU aimed at strengthening the contribution sugar makes to the environment and poverty alleviation in developing countries.

      —  Restructuring aid, within the EU, should be targeted at areas where beet has had severe environmental consequences—such as through unsustainable irrigation in southern Member States.

      —  As is the case with existing Single Farm Payments the sugar payments must be modulated to fund rural development measures under the CAP.

      —  Where wildlife benefits can be attributed to beet they should be delivered through the use of cross-compliance standards for things like crop rotation and the retention of winter cover and/or targeted agri-environment schemes aimed at creating valuable habitat and food for wildlife.

    —  The proposed renewables payments:

    WWF does not support investment in the use of sugar beet for biofuels. The small existing area limit and support budget would be better spent on supporting the production of woody biomass for energy production.

3.  REFORMS MUST OFFER HELP TO DEVELOPING COUNTRIES

  3.1  Many of the world's poorest countries have the potential to maintain or develop sustainable sugar industries, which could benefit the environment and help alleviate poverty. The impact of regime reform on developing countries is closely linked to internal changes within the EU, and cannot be considered separately.

  3.2  The proposals from the European Commission singularly fail to address the need to ensure that sugar contributes to environmental improvement and poverty alleviation in developing countries. This must be addressed urgently.

  3.3  The European Commission hopes the reforms will lead to a 4 million tonne drop in quota production and the end of C production and dumping, which will be necessary to comply with the recent WTO ruling. That could amount to a total reduction of 8 million tonnes, which is the amount which WWF estimates is needed to end dumping and accommodate increased ACP and LDC imports. However, effective production drops will depend on the success of the voluntary restructuring. That is, whether the signals to withdraw from production out-weigh the signals to over-produce and, if not, whether the European Commission stands by its commitment to use quota cuts in 2010. As outlined above the EU must do more to ensure that over-production, market protection against developing countries and sugar dumping end.

  3.4  Beyond that minimum, any genuine pro-development reform must also result in increased sugar earnings in the poorest developing countries. Greater earnings in developing countries will help them raise environmental standards and contribute to alleviating poverty.

  3.5  The greatest threat from these reforms remains the one posed by the lack of help being extended to developing countries to invest in the sustainability of their industries. Without adequate help least developed countries, in particular, will not be in a position to benefit from increased access to the European market. Help must be given to ensure that this demand can be met by sugar produced to high environmental standards in countries where it can significantly contribute to poverty alleviation.

  3.6  Without such help the threat of unsustainable expansion in LDCs or in countries like Brazil, which is already geared up to export sugar, poses environmental threats which are not acceptable. These arguments should not be used to justify maintaining sugar production within the EU, but towards a better managed shift to greater imports of sustainably produced sugar from developing countries.

  3.7  A more sustainable world market in sugar will only come after an end to the unfair competition posed by EU exports, plus improved access to the EU market and adequate development support.

  3.8  Improved access: The EU should, in the medium term, be aiming at maintaining the level of imports from traditional suppliers and greatly expanding imports from LDCs to between 2-3 million tonnes a year. In reality however Europe will not fully open its borders to sugar from LDCs until 2009 (when the Everything But Arms agreement is to come into full force) and by then these countries will face a price 40% lower than their European counterparts have enjoyed since 1968.

  3.9  WWF accepts that a price cut is inevitable and also that the cut proposed still offers an attractive price to a number of developing countries. The question is whether those LDCs are in a strong enough position to reap the benefits of the reforms. The EU should explore ways in which it can manage the transition over a longer time period than proposed. This will give developing countries a period after 2009 at an attractive price. This should in turn attract investments in the longer-term sustainability of their industries.

  3.10  The EU must also offer assistance to non-Sugar Protocol LDCs to ensure that they are able to benefit from improved access to Europe after 2009.

  3.11  Better help: Many developing countries will be negatively affected by EU sugar reforms and they must be provided with adequate and timely assistance to adjust.

  3.12  However traditional ACP suppliers have been offered minimal compensation compared to EU farmers. They are being offered two years of slightly higher prices than their European counterparts to accept these reforms. In terms of adjustment assistance they are being offered only

40 million in 2006 (and an unspecified amount for the following seven years) for 18 countries—compared to the

1.54 billion per year earmarked for Europe's sugar farmers and

4.2 billion restructuring fund for European sugar factories.

3.13  Reform recommendations

  The EU must do more to ensure that developing countries are not only able to cope with these reforms, but to benefit from them. Given the very generous offers of compensation and restructuring aid to the European industry we believe that the EU is obliged to think as creatively and generously about how it can offer similar help to sugar protocol and least developed country sugar producers and exporters:

    —  Europe should open its markets fully to sugar imports from LDCs now rather than only in 2009.

    —  The EU should seek to implement the price cut over a longer time period to allow LDCs to adjust.

    —  Budget savings from the reform should be channelled into the development budget aimed at helping developing countries build sustainable sugar sectors. One approach would be for part of the restructuring levy on the industry to be directed to development.

    —  Europe should offer significantly more assistance to the 18 ACP countries that are exporting to the EU now, recommending a target of

    500 million a year.

    —  Europe must offer significant levels of support to the LDCs to raise the environmental and social standards in their industries.

WWF-UK

September 2005





 
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