CHAPTER 5: conclusions and recommendations
Chapter 2: Developments since the 2006 reform
69. In assessing the impact of the reform, we
are particularly mindful of the Court of Auditors' concerns about
the extent to which any benefits of the reform have been passed
on to consumers. The key message moving forward is that the market
cannot be predicted with any degree of certainty and therefore
that the EU's sugar policy must be sufficiently agile to respond
appropriately. (paragraph 21)
Chapter 3: Future reform- internal policy
70. We are very concerned that the 16 per cent
net increase in the EU price for sugar since 2006 has not been
reflected in consumer prices for sugar and related goods, which
have risen by over one third in the UK. We find the argument that
the consumer price could fall if production quotas and tariffs
are removed compelling but this requires monitoring by the European
Commission. It is disappointing that the recent evaluation by
the Commission of Common Agricultural Policy measures applied
to the sugar sector assesses the impact on all groups except consumers.
In line with the objectives of the Common Agricultural Policy
as set out in the Treaty, we urge the Commission to put the consumer
much closer to the heart of its sugar policy and, specifically,
to put in place a mechanism to assess not only the market price
of sugar but the price paid by consumers. (paragraph 28)
71. We conclude that neither the beet nor the
cane sectors should continue to be protected. We therefore agree
with the UK Government both that production quotas should be abolished
in 2015 as proposed by the Commission and that import tariffs
on raw cane sugar should be eased as appropriate in response to
the world market. The easing of tariffs should, in our view, be
extended to the import of refined cane sugar, bearing in mind
the need to provide some security of supply, world trade discussions
and support measures applied by other countries to support their
sugar markets. The current restrictions on exports from the EU
should be lifted to allow the EU to compete on the world market
and to provide balance in the EU market if imports were to increase
further. (paragraph 31)
72. While we urge the Government to continue
to advocate a more liberalised approach as early as possible in
negotiations, we recognise the political reality of the agricultural
reform negotiation. However, we would consider a simple continuation
of the status quo to be unacceptable. (paragraph 32)
73. In the event that a compromise should be
necessary, we would recommend the following elements:
- a clear date for the ending of production quotas
between 2015 and 2020. We would resist any promise of a future
review in order to establish a final date as this fails to give
the industry the certainty that they claim to require in order
to make appropriate investment;
- an immediate recalibration between Member States
of production quotas to recognise changes made both pre-2006 and
since 2006; and
- support to remove inefficient production. (paragraph
33)
74. From the consumer's perspective, though,
funding has already been used to dismantle some of the sugar quota
capacity and we therefore recognise the lack of consistency in
any move to increase sugar quota gradually. We would not recommend
an increase in sugar quota as a form of compromise. (paragraph
34)
75. We remind the Council and the European Parliament
that the reform of the sugar sector must be seen in the broader
context not only of Common Agricultural Policy reform but also
of the future cohesion policy. The potentially large-scale alternative
use of beet sugar in bio ethanol production—rather than
for human food or animal feed—is another important consideration
on which we would welcome the Government's response in the UK
context. When designing future rural development plans and operational
programmes for structural funds, the nature of Member States'
sugar sectors might usefully be borne in mind. (paragraph 35)
76. One justification for continued protection
of the sugar beet industry is the difficulty of facing the volatility
of the world market, a danger that could be mitigated by greater
use of risk management tools, such as insurance but extending
also to future pricing. We understand that such tools are under
developed in the sugar sector and we therefore recommend that
the European Commission submit a report, with recommendations,
on the use and development of private sector risk management tools
in the sugar sector. (paragraph 36)
77. Whilst the market remains regulated at EU
level, there is clearly a role for market management measures,
including tariffs and import quotas. There is dissatisfaction
with the manner in which the Commission has discharged its responsibilities.
We observe that the Commission has at least attempted to balance
the interests of the beet production and cane refining industries.
It must continue to do so and to ensure that its decisions are
taken in a timely and transparent manner. Transparency is important
as tariffs form part of the EU's budget and therefore substantial
reductions in tariffs have wider implications for the financing
of the EU budget. (paragraph 40)
78. We observe, as have others, that the nature
of the sugar market is unusual and that the EU's sugar regime
is a contributory factor. As already highlighted in this report,
the prices paid by consumers for sugar and related goods have
not, at least in the UK, followed the trends in the EU market
price for white sugar. We accept, as do the Court of Auditors,
that pricing in a market such as sugar with a complex supply chain
is far from easy to disentangle. It is our view that greater clarity
and transparency is required. We therefore recommend that the
Competition Authorities at EU and national level, namely the Office
of Fair Trading in the UK, in collaboration with Competition Regulators
in other EU Member States, investigate the market as it applies
to UK and EU consumers, to assess the extent to which the consumer
gets a fair deal. (paragraph 43)
79. We consider it unlikely that the Commission
desires to undermine the position of growers in their contractual
relationships with processors but we think it essential that the
Commission communicates its intentions. It would be helpful to
amend the text of the new Regulation to include the same specificity
as is reflected in the current legislation, which might also remove
the need to confer the power on the Commission to adopt a delegated
act. (paragraph 45)
80. In our view, basic and applied research in
the sugar sector, supported by knowledge transfer, are a key component
to driving forward a sugar sector throughout the EU that can stand
on its own. We believe that industry must invest in order to boost
both research and its competitive position. We therefore recommend
that the Government assess whether research efforts in this industry
are in line with the needs of consumers. (paragraph 48)
Chapter 4: ACP/LDC countries and the EU Sugar
Regime
81. We strongly urge the Commission to ensure
that delegations in the ACP/LDC countries are sufficiently resourced
and to monitor closely the progress of disbursement of funding.
(paragraph 52)
82. We recommend that Action Plans for the affected
ACP/LDC countries should be revisited as soon as possible. Such
Action Plans need to be started in the period before 2015 but
sufficient time should be allocated to design appropriate plans
and build the capacity in recipient countries to implement them.
We further recommend that Action Plans should be targeted at issues
identified by the countries themselves, such as increasing their
competitiveness and efficiency or, where appropriate, moving away
from sugar production altogether. (paragraph 54)
83. We consider that the future price of sugar
on the world market is uncertain and that increased exposure to
volatility for ACP and LDC countries is likely. (paragraph 59)
84. The Commission will need to work closely
with the ACP and LDC countries to determine what mitigation measures
are needed beyond 2015. We recommend that such work should be
part of decisions on the pace and detail of further reform and
that this should involve extensive consultation with representatives
of the countries concerned. (paragraph 60)
85. We recommend that it will be necessary for
the Commission not just to consider matters on a country-by-country
basis, but to look at the localised impact of changes and support.
(paragraph 61)
86. We recognise that it will be necessary for
some countries to move away from sugar production altogether and
that others will need support to improve their competitiveness
and efficiency. We therefore recommend that in determining what
mitigation measures are needed beyond 2015, the Commission should
consider support for retraining, drawing inspiration from existing
best practice where relevant. (paragraph 62)
87. Ultimately, support for developing countries
is a matter for development policy rather than agricultural policy.
We agree with the Minister that plans for further reform of the
EU Sugar Regime have not sufficiently accounted for the likely
impact on ACP and LDC countries and appear to have been taken
in isolation from discussions on future development policy. We
recommend that the Government vigorously pursue this issue during
negotiations on the Commission's agriculture and development proposals
for the period 2014-2020. (paragraph 64)
88. We are not convinced that importing an additional
300,000 tonnes of cane sugar will have significant consequences
for ACP and LDC producers. However, more Free Trade Agreements
are likely to be signed. In preparation for the negotiation of
such Agreements, we recommend that the Commission should produce
an Impact Assessment of the likely effect on these countries and
the EU sugar market before making any further commitments relating
to the trade of sugar. (paragraph 68)
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