Special edition: Global food trade

EU sugar reform sours at home and abroad

By Catherine Boal

- Last updated on GMT

Related tags Eu sugar reform European union International trade

Still in its initial stages of implementation, the EU sugar reform
effort appears dogged by problems - a significant quota cut in the
last few months left producers scrambling to keep up while
non-members seeking a stable trading partner remain concerned over
its long-term effects.

Reform was implemented at the start of July last year and will not be fully complete until 2009. The EU pledged to cut sugar production by 6 million tonnes over four years but slow restructuring and surplus supplies have dampened efforts to get the regime fully operational. EU agricultural minister Mariann Fischer Boel announced in November that failure of producers to cut production would have a detrimental effect on market reform. She said: "The quantity renounced so far is far below our expectations when we drew up the reform. If this is the end result, we will have a surplus of 4.5 million tonnes, corresponding to 25 per cent of the quota for the marketing year 2007/08." ​ In a bid to prevent this overproduction, the Commission announced at the end of January that a drastic cut in the amount producers can produce under their quota was necessary. At least 2 million tonnes or 13.5 per cent of the existing quota will be withdrawn as the EC makes use of article 19, regulation 318/2006. The exact withdrawal amount will be set towards the end of this year as more harvest information becomes available. While the EC attempts to impose greater restrictions on production, exporters outside the bloc have also been feeling the strain of reforms and fear its adverse effect on international trade. Originally, complaints by the WTO that subsidised production in the EU gave members an unfair advantage led to reform but, now that that reform is underway complaints continue to arise over the treatment given to sugar producers whose business has long relied on exporting into the bloc. The EU is a crucial market for sugar producers in African, Caribbean and Pacific countries (ACP) and, under the old system, these countries benefited from preferential terms - sending around 1.3 million tonnes of raw sugar at fixed high prices each year. In order to juggle ensuring long-term sustainability of the EU market with pacifying traditional exporters, the Commission introduced an eight-year Action Plan for the 18 ACP countries most affected. Last year, €40 million was set aside to help the ACP countries adjust to the new EU regime with further financial help scheduled for the 2007-2013 period. But international charity Oxfam has criticised the plans, saying they do not go far enough. The group said in a statement: "There is insufficient detail on how support measures will be financed and delivered in a timely and effective manner and to an adequate degree. Further, the Action Plan fails to address the adjustment needs of several sugar-producing Least Developed Countries which are not covered by the plan or which are unlikely to receive adequate help under it." ​ At the start of this month however, the Commission reiterated its commitment to ensuring a smooth transition, saying the sugar trade would be part of the full market access offered to ACP countries after a necessary 'phase-in' period. It is intended that ACP sugar will be duty and quota free from 2015. The Commission said waiting to apply the scheme, which eliminates all tariff and import quotas for ACP traders, would "ensure compatibility with EU market reforms and ensure stability to protect the interests of both the EU and ACP producers who supply those markets."

Related topics Commodities Cocoa & Sugar

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