On 24 November, after three days of negotiations, a council meeting of EU agricultural ministers in Brussels reached an agreement on the reform of the European Union sugar regime.
The EU ministers agreed to:
– a 36 per cent cut in prices over the next four years,
– a compensation of 64.2 percent of income loss to farmers leaving the sector,
– a restructuring fund which would pay a basic €730/tonne in the first two years for factories quitting the industry, with at least €73/tonne going to ex-growers (the fund would be paid for by a levy on continuing processors), and
– farmers and processors will have access to €7 billion in compensation to help them to adjust.
The European Commission for Agriculture said that the historic deal changes the 40-year old sugar regime, offering the possibility for the sector to become more efficient and competitive. It is expected that the EU would become a net importer, instead of being a net exporter. Approving the sugar reform, said the European Commission for Agricukture, would strengthen the EU’s position in the upcoming WTO ministerial meeting on 13-18 December in Hong Kong.
International press reported that some countries (e.g. Italy, Sweden and Austria) obtained specific concessions for their sugar industries, as the European Commission slowly negotiated down a group of 11 member states opposed to the reform. Details and technical matters of the reform are still to be publicised but, for instance, the Italian minister of agriculture said that his country was “moderately satisfied” with the final package, explaining that it keeps half of its sugar production, providing that the other half goes towards conversion for bio-fuel production. He also said, that “not one job will go,” but his country has agreed to hand over half of its current sugar production quota.
Finnish sugar sources were somewhat happy to see that production would be reduced by about one third, as they had feared a complete destruction of the sector. The Irish sugar industry would most probably disappeared in the short run. Irish beet farmers complained that the €310 million assistance offered to them is “totally inadequate and highly unsatisfactory.” The package included compensation of €121 million over the next seven years, a one-off payment of €44 million for growers if production ceases in Ireland, and a €145 million payout to processor Greencore to assist restructuring. (There are about 3,700 beet farmers in Ireland.)
Poland was in complete opposition but, along with Greece and Latvia, was left in the very small minority against the reform. Press reports quoted the Polish representative as saying that the new cabinet “probably” did not have enough time to study the whole sugar dossier. Marianne Fischer Boel, European Commissioner for Agriculture replied that Poland has to restructure its agricultural sector, and the restructuring fund “provides an excellent opportunity.”
Earlier studies suggest that EU’s production will be reduced by about one quarter (some others think the drop may be up to 40 per cent), after the price cut is fully implemented, with an estimation of between 90,000-100,000 jobs – out of the current 325,000 – will be lost in the sector.
France, the EU’s top sugar producer is seen as the major winner, as has the chance to substantially increase her market share –once the less profitable areas go out of production. The UK sugar sector also appears to benefit from the reforms, as UK beet farmers are reckoned among the most efficient in the EU.
Immediate negative international reactions came from Guyana and Mauritius, two of the beneficiaries of the EU/ACP Sugar Protocol. The countries said that the reform would destroy their sugar industries. Besides the €40 million assistance offered to ACP sugar producers in 2006 (additional support in subsequent years), and the 4-year period for implementing the price cuts, there was nothing new for the ACP.
Brazil’s reaction was/is still subdue, with a cane growers association in Sao Paulo, the largest sugar producer region in the world’s largest sugar producing country, said that the EU reform was an important progress for international free trade in one of the “deepest trenches, the EU.” Australian cane farmers also hailed the agreement as it would end subsidies for the EU sugar producers and would make their sugar “more competitive” in the international market.
The IUF’s opinion on the EU sugar reforms from May 2005 is available at http://www.iufdocuments.org/www/documents/sugarreforms-e.pdf