Brandishing the proposed transitional arrangements for the enlarged Europe as 'a bureaucratic nightmare,' CAOBISCO places the current EU sugar regime at the heart of the problem for food and beverage manufacturers who use sugar as a major ingredient in formulations.
"The EU sugar market regime is especially detrimental to the European consumer and the sugar processing food industry due to artificially high sugar prices arising from governmentally fixed prices and production quotas which are protected by high import duties," said David Zimmer, secretary-general of CAOBISCO whose combined members currently buy 30 per cent of the European production of sugar, a figure that tops three million tonnes.
Criticism of the 36 year old sugar regime is raining in on Brussels with manufacturers, consumer groups and international agencies calling for change to a system that supports internal market prices at three times the world level. For Zimmer, the high prices will serve as a barrier to trade for the new entrants into the EU.
"A market-managed and high priced sugar regime is inappropriate for East European countries where GDP per capita is low and where competitive raw materials have been essential to the growth of local industries," he added.
Brussels is due to change the regime by 2006 and is expected to put forward a concrete proposal in June. Last September the EU Commissioner Franz Fischler tabled three options to amend the sugar regime. The first option extends the status quo - based on flexible quotas and price intervention - beyond 2006 and would keep intact the current common market organisation.
The second scenario looks at the impact of reducing internal EU prices - undoubtedly severe on Europe's key sugar producers, among them British Sugar, Danisco and Tate & Lyle. To soften the blow, the Commission looked at the possibility of introducing the single farm payment - the backbone of recent CAP reform - into the sugar sector.
The third option embraces full liberalisation which in effect would mean abolishing the current domestic EU price support system, abandoning production quotas and totally removing import tariffs and quantitative restrictions on imports. Observers estimate this would translate as a 75 per cent loss in sugar production for Europe.
CAOBISCO, that represents European biscuit, chocolate and confectionery firms turning over €45 billion each year, believes that competitive progress in the accession countries will be hampered by the measures demanded from Brussels.
"It is clear that the transitional arrangements will cause, and are already responsible for, confusion and disproportionate pressure on companies which use sugar, market sugar, including sugar contained in finished products.
They are facing difficult measures in order to achieve a transition from a market economy to the managed anti-competitive structure for sugar which is the hallmark of the EU Sugar Regime," said the industry body, currently lobbying Brussels for change.
CAOBISCO quotes the example of Poland where the food industry "has worked hard to build business, attract investment and adapt to the free market." Application of the sugar regime quota system, says the organisation, will increase sugar prices overnight, thus reducing Poland's competitiveness. On top of that, producers will not be allowed to benefit from current EU export refunds before October 2004.
According to an Oxfam report published this week, EU taxpayers give €819 million in subsidies annually to six European sugar processing companies to 'dump unwanted sugar' on world markets. Beghin Say (France), Sudzucker (Germany), and Tate and Lyle are among the companies named in the agencies report 'Dumping on the World'.
Franz Fischler is due to table a proposal for change to the regime in June this year.