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Contributions from
the Column
Monitor
Tsunami relief: Too much of a good thing
Merits and limts of contract farming
EU sugar regime: Double-edged pledge
Afghanistan’s drug cultivation at a record high
US government agency assesses Millenium Challenge Account
More votes for emerging nations at IMF
Oil: World Bank and Chad reach agreement
Slow progress in fight against desertification
Private sector: Making money in peace
10/2006
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[ EU sugar regime ]
Double-edged pledge
When the EU Commission promised that least developed countries will be allowed to export sugar free of tariffs and quotas to Europe from 2009 on, that pledge was probably less charitable than became apparent at first glance. According to research done at the German Development Institute (DIE), the EU should indeed compensate poor countries, as their sugar revenue will not rise as expected.
There is much to suggest that the Commission included sugar in its “Everything but Arms” (EBA) trade initiative for inner-European reasons. DIE researcher Michael Brüntrup considers the promise to the least developed countries a “Trojan horse”, as it was meant to help the Commission to reduce Europe’s guaranteed price for sugar by 39 % by 2010 against the stiff opposition from Europe’s sugar lobby. The lower price should scale back production in Europe.
The reform of the EU sugar regime has been on the agenda since the early 1990s. It became a matter of urgency when the World Trade Organisation ordered the EU to reduce exports of subsidised sugar last year (see D+C/E+Z 6/2005, p. 225). According to Brüntrup, the Commission’s central aim is to make Europe’s sugar industry more competitive internationally, by limiting production to the most efficient locations.
From the Commission’s point of view, such a market shakeout is best achieved by a price cut. Fixing quotas for production in Europe and imports from developing countries would have been an alternative option. But it would have meant difficult political negotiations, especially with the European sugar producers. The EBA initiative provided the Commission with an undeniable reason for not defining new quotas – doing so is ruled out by the EBA, would seem detrimental to development, and harm EU credibility.
However, Europe’s sugar lobby was not alone in speaking out against the reform and in favour of allocating new quotas – so did the governments of some least developed countries. After all, the chosen path will harm their economies more than new quotas would have done with the subsidised guarantee-price still at its old level. The lower price will worsen the profit prospects of potential sugar exporters in the least developed countries and curb their readiness to invest, says Brüntrop. It is estimated that the people who live off sugar production in these countries will miss out on up to $ 250 million annually.
The Commission has held out the prospect of compensating 22 preferred ACP sugar exporters. The ACP is a group of countries in Africa, the Caribbean and the Pacific with historical ties to Europe’s former colonial powers. Of the 22 countries listed, however, only three belong to the group of least developed countries. The Commission has also promised to compensate European sugar producers. Brüntrup is in favour of compensating the least developed countries for their expected losses too, at least in part. Should that not happen, then the paradox will remain that the EU legitimises its sugar market reform with the interests of the least developed countries, while at the same time, it is these countries that will suffer most from the reform. (ell)
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