EU Commission proposes sweeping sugar reform
By Jeremy Smith
Guyana Chronicle
July 15, 2004
BRUSSELS, (Reuters) - The European Commission backed plans yesterday for a thorough overhaul of EU sugar policy, recommending huge price cuts for a regime barely changed in 35 years and repeatedly attacked for distorting global trade.
The move comes after other reforms of the EU's 43 billion euro ($52 billion) farm support programmes as the bloc has come under pressure in world trade talks. The sugar regime also faces a legal challenge at the World Trade Organisation (WTO).
"We cannot afford to lose time," EU Agriculture Commissioner Franz Fischler, author of the reform plan, told a news conference. "If we wait, things will certainly not improve."
"There is a lack of competition, while consumers and sugar-consuming industries pay over-high prices," he said. "And the way we subsidise sugar production has been the subject of fierce criticism, particularly from developing countries."
EU sugar policy has barely altered since its launch in 1968.
Fischler called for cuts of around 40 per cent in internal prices and abolition of the EU's safety-net intervention system. This is expected to lead to thousands of job losses as less competitive sugar operations are forced to close.
Quotas for subsidy-eligible output would be merged from two into one, with gradual cuts in overall volume by 2.8 million tonnes from 17.4 million over four years. The reforms would start in July 2005, one year before the current regime expires.
Sugar subsidies cost the EU around 1.7 billion euros a year, but critics say the true cost of the system is much higher due to the inflated prices charged to consumers based on minimum prices that are more than three times world market levels.
Hundreds of farmers marched through Brussels' EU quarter to protest against the plan, brandishing placards such as "EU beet reform to slash growers' incomes" and "Fischler divides Europe."
Negotiations on sugar reform will run for many months and will face strong opposition in several quarters in the EU.
Although Fischler's blueprint calls for reform to start in July 2005, several EU states such as France want to delay this.
EU farm ministers are due to hold their first discussion on the Commission's sugar proposals at a meeting on Monday.
One of Fischler's trickiest problems will be to persuade reluctant governments, particularly of poorer EU states, to accept thousands of job losses as the result of price cuts.
While Germany's sugar industry said the plan jeopardised the future of European beet and sugar production, Berlin welcomed the proposals, saying they were a "good basis for discussion."
Earlier this week, Dutch Farm Minister Cees Veerman told Reuters the reform plan was too radical and would put the sugar processing industry out of business in a number of countries.
Finland, fearing the end of its sugar industry, might reject the proposal, according to national news agency STT which quoted Prime Minister Matti Vanhanen during a trip to the Netherlands.
Vanhanen said accepting the proposal would mean serious problems for Mediterranean countries, Slovakia, Slovenia, Lithuania, Latvia, Finland and Ireland, STT reported.
Apart from beet growers, who would receive compensation for some lost income, Fischler will be taking on the EU's entrenched sugar industry -- which has painted a grim picture of the reform's effects and will fight hard to protect its interests.
Europe's sugar industry body CEFS gave a guarded welcome to the plan, saying in a statement it had serious concerns about scrapping intervention "in a highly capitalised sector with a large number of listed companies."
The EU has been under relentless pressure over its sugar policy, with critics accusing the regime of distorting world markets and harming Third World interests. EU subsidies allow producers to export sugar and displace cheaper competitors.
Last year Australia, Brazil and Thailand filed against the EU at the WTO, saying the bloc's sugar subsidies had driven world prices below production costs. Fischler said the reform plan would go some way towards mollifying the EU's critics.
"This proposal gives us additional flexibility in the WTO," he said. "(It) sends a very clear signal to our international partners and developing countries."
But aid agencies disagreed, saying Fischler's proposal had nothing to do with environmental concerns or reducing poverty.
(Additional reporting by Tarmo Virki in Helsinki, Anna Mudeva in The Hague, Michael Hogan in Hamburg)