King sugar has been dealt another body blow by the European Union's (EU's) decision to abolish country quotas and price benchmarks given to African,Caribbean and Pacific (ACP) countries that are former colonies of Great Britain, France or Portugal.

"The EU Commission has declared that the Sugar Protocol, under the terms of which sugar has been exported to the EU by ACP countries since 1975, is to be renounced at the end of September 2007, with a view to its ending on 30th September, 2009," announced Karl James, president of the Sugar Association of the Caribbean.

Chairman of the ACP London Sugar Group, Mrinal Roy stated, "At a time when sugar-producing countries are making costly investments to re-engineer their sugar sectors in order to adapt to the 36 per cent price cut of the 2005 EU sugar regime reform, the absence of predictable prices and revenue flows undermines the successful implementation of the respective ACP restructuring plans."

Sugar producing nations fear that the elimination of the existing quota and price regime will create an economic free fall. "We believe that the essence of the Sugar Protocol, an outstandingly fair and beneficial trading arrangement, must be preserved if the EU is serious about advancing development and alleviating poverty which the Economic Partnership Agreements are intended to do," James stated.
The EU has proposed that in lieu of the current negotiated guaranteed prices, greater access to their markets would be offered to the ACP nations.

Importers of ACP sugar would be required to pay not less than a certain price level during the period October 2009 September 2012. After 2012, this unspecified price level would be replaced by a price information system based on the current system which monitors and reports on market prices at intervals of 6 months. In return, the EU would provide improved duty-free quota-free (DFQF) market access to both existing Sugar Protocol (SP) and LDC countries, as well as offering initial market access to ACP states which are not currently party to the Protocol, during the period January 2008 to September 2015.

"What may seem on the surface like a generous gesture by the EU actually represents a disadvantageous trade-off," Roy explained: "What they are being offered is enhanced market access opportunities - but without country quotas - for a short-lived period, at unspecified lower non-guaranteed prices, and at a lower return per tonne."

James is of the view that the final sign-off has not occurred.
"The SAC believes that in settling the terms for dealing with our sugar exports to its markets, the EU will respect what is a joint commitment to preserve the basis of our sugar industries as they adopt new strategies for modernisation and development. Indeed, SAC looks forward to receiving clear and specific details about how the EU intends to carry forward this commitment."

Roy is also calling for more discussions with the EU. "These concerns must be urgently addressed by the EU through the requested all-ACP negotiating forum in order to build on the acquis, safeguard the benefits of the SP, enhance market access and maintain the price predictability envisaged under the new EU sugar regime."

James adds, "In the meanwhile, it is, of course, impossible to conceive of one party, the EU, unilaterally renouncing a joint agreement which has stood for so long and which has served the purposes of development and poverty alleviation so valuably in the ACP countries signatory to the Sugar Protocol."

As a result of the impending changes Roy is calling on the members of the ACP to examine every option available to protect their interests "at a time when their priority remains the successful re-engineering of their sugar sector to tide over the adverse consequences of the EU sugar regime reform".

In August 2004, Brazil, Australia and Thailand were successful in their challenge to the sugar regime in the World Trade Organisation (WTO).

The WTO ruled that the EU was subsidising sugar exports excessively, in violation of their commitments in the WTO. The pressure led to a major reform of the sugar regime which included a 37 per cent reduction in the domestic support price for sugar over three years beginning in 2006.

In response, ACP beneficiaries requested a special quota for sugar at the level of current Lesser Developed Countries' net exports to the world market and an increase in that quota by 15 per cent each year until 2016. ACP countries fear that lower prices, with no quota restrictions, will exclude small, vulnerable producers from the market in favour of more competitive producers. The proposals were submitted in March 2004; no formal response has been given as yet.

Many ACP countries are high-cost producers which will not be competitive with the proposed prices cuts. Some, for example Guyana, had already begun to try to make their industries more competitive. Others, for example St Kitts, will not be competitive. They will need assistance to diversify outside of the sugar industry.

Additional reporting by the Guyana Chronicle and www.parliment.uk

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