APPENDIX 15
Memorandum by UKISUG, the UK Industrial
Sugar Users Group
1. UKISUG represents the UK's manufacturers
of food and drink, including companies both large and small. Overall,
they employ some 80,000 people in the UK, with consumer sales
of around £15 billion per annum. They use 70% of UK sugar
consumption (1.2 million tonnes) and are therefore an important
stakeholder in the sugar regime.
THE EU SUGAR
REGIME IS
AN ANOMALY
THAT MUST
BE REFORMED
2. The sugar regime stands in defiance of
all the principles of policy that the EU, in other contexts, tries
to promote.
3. It rests on national quotas rather than
European competition—there is in effect no single market
in sugar.
4. It keeps ACP countries in relationships
of dependency rather than enabling them to establish relationships
of equality with the EU.
5. It stands in opposition to the broader
long-term trend of world trade free from tariffs, quotas and subsidies.
6. We recognise that there are considerations
other than those of immediate economic welfare in the debate about
reform of the sugar regime, so we do not suppose that it will
or should be abolished overnight. However, the EU needs to demonstrate
to the other members of the WTO that it is a serious and reliable
negotiating partner and shares the same long-term vision for the
world trading system; it cannot do this if the sugar regime is
unreformed.
7. In particular, this means that the dumping
of European sugar production on world markets, distorting them
and harming the interests of other countries, must come to a rapid
end. This in turn requires a reduction in European sugar prices,
as it is only the inflated EU price that makes such dumping affordable.
DECLASSIFICATION
OF PRODUCTION
8. We are dismayed but not surprised at
the decision in September 2005 to declassify substantial quantities
of EU sugar production. This will lead to more dumping on world
markets, depressing the price and claiming markets at the expense
of sugar producers in some of the world's poorest countries. This
is hardly consistent with the objectives of raising the living
standards of the world's poor.
9. However, this decision was the natural
consequence of the sugar regime and the high price that encourages
production to meet the quota rather than production to meet demand.
Under the Commission's current proposals, this structure will
remain in the new regime. If this structure is not changed, we
are likely to see a renewed round of dumping in a few years' time.
EXPORT REFUNDS
10. Within the context of the WTO Doha Development
Round the EU has already made the commitment to the ultimate abolition
of export refunds. UK government ministers have gone on record
as stating that export subsidies should be phased out by 2010.
This is a laudable ambition, but the government must respect the
principle of coherence between the three pillars: domestic support;
market access; export competition.
11. Export refunds are intended to bridge
the gap between higher European and world raw material prices
so that EU exporters of processed food products can remain competitive
in third country markets. In the case of the current negotiations
on reform of the EU sugar regime, it is imperative that export
refunds are only removed once EU domestic prices are in balance
with world prices. As export refunds disappear, the EU domestic
support price for sugar must approximate towards world prices
so as to allow EU exports of processed foods to remain competitive
in third country markets.
12. The sugar reform proposals do not say
much about the mechanism for export refunds. We welcome the recognition
that export refunds for processed foods (Non-Annex I) will be
necessary, but it is not clear how they will be calculated. As
it is, sugar export refunds for processed foods do not reflect
the full differential between EU and world market prices. Will
the new sugar reference price act as a trigger in the relationship
to world prices? Furthermore, if this is the case, will the calculation
be on the full reference price or that net of the restructuring
levy to be imposed for financing the restructuring scheme. This
is particularly significant for sugar users/exporters, who will
have to bear the burden of the restructuring amount while it is
in place.
CONCLUSION
13. Reform of the sugar regime is a necessary
part of the EU's contribution to the future of the world trading
system. The Commission's proposals are a step in this direction
but more needs to be done.
30 September 2005
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