The Week in Europe
  By David Jessop   
  On St Valentines Day or shortly afterwards, the European Commission (EC) will send to the Europe’s member states and the European Parliament a proposal that will be less than welcome in the Caribbean.
   
  Then the EC is expected to propose in the European Budget a significantly smaller sum than the estimated Euro250m per annum needed to fund the restructuring of the sugar industry in African, Caribbean and Pacific (ACP) sugar producing nations.
   
  How this has come about and its implications for the region are an object lesson in how little leverage the Caribbean now has with Europe and its institutions, especially if the region’s concerns conflict with inter-European priorities.
   
  Ever since the European Union decided in November 2005 to cut sugar prices by 36 per cent over three years starting in 2007, officials in Brussels have been working to create what are known as accompanying measures. This is the financial support that Europe will provide to help ACP sugar protocol nations to transform their industries or to go out of sugar. 
   
  In parallel most but not all ACP Governments with sugar industries have been developing multi-annual programmes indicating how they will adapt to lower prices and the sums they need to restructure.
   
  For example the Jamaican Government has completed a detailed strategy and presented this to the European Commission. 
   
  This Jamaican document, produced with support from independent consultants, calls for funding at the level of €555.7m between 2006 and 2015. It recognises that the cost of cane production must be reduced to competitive levels and proposes transforming the business model of the industry. It envisages a significant role for the private sector based on three main products: raw sugar, molasses and ethanol. It also envisages significant social transformation programmes. But while some of the required funding will come from multilateral loans and private sector investment, a significant part is expected to be provided by Europe. 
   
  Other Caribbean industries are proposing different approaches. These range from making existing cane sugar production and the export of raw sugar competitive so as to continue to take advantage of the EU’s preferential price and the possibility of open access under an Economic Partnership Agreement, to going out of sugar altogether.
   
  However, what is now emerging in Europe is that the sum that may be made available to all eighteen ACP sugar-producing nations is unlikely to be anywhere near the Euro 250m per annum that one EU member state estimates is required. It may not even be close to the Euro190m per annum promised by the European Commissioners for Trade, Peter Mandelson and the Agriculture Commissioner, Mariann Fischer Boel in the run up to the World Trade Organisation Ministerial meeting in Hong Kong. Instead the figure could be as low as Euro 120m per annum rising over a ten-year period to around Euro 150m.
   
  This downgrading has come about as a result of a purely inter-European process aimed at reducing the EU’s overall budget. In December the United Kingdom brokered a deal that resulted in Europe’s member states agreeing reluctantly to significant financial realignments. This resulted in a 20.4 per cent cut in the EU’s overall external budget. The consequence is that despite the promises made last year by the Trade and Agriculture Commissioners, the EC’s Development and External Affairs Commissioners are now struggling to find the money for sugar.
   
  A further outcome is that the sum is likely to be back loaded: that is to say only funded at a more substantial level long after the price cuts have taken effect. 
   
  If this is what emerges it is the worst of all worlds. The Caribbean requires substantial support at the beginning of the restructuring process. Without this industries cannot hope to develop viable business plans they can take to the private sector, multilateral institutions and bankers. 
   
  While all of this has been going on, a further critical development has been taking place. This is the passage of the implementing measure for the Euro 40m in support that is to be made available for sugar transition in 2006.
   
  As this is being written, this document is being finalised in Brussels. It is expected to introduce criteria as to how much each sugar-producing nation will receive
   
  Two broad criteria are expected to be adopted. The first involves assessing the impact of the reform on the sugar sector by using a calculation that takes the total revenues of the sector obtained from exports to the EU in relation to the estimated variation after full implementation of sugar reform in 2010, assuming no restructuring. The second that will be applied involves relating the proportion of the national workforce employed in the sugar sector to the weight of the sugar sector’s contribution to GDP. 
   
  In addition it has been proposed that no more than 15 per cent of the overall available budget be made available to any one country.
   
  Despite all of this the battle on accompanying measures remains political and is far from over. The final decision on the quantum of support from Europe has to be made by Europe’s member States and the European Parliament not the European Commission. While the numbers to be agreed on sugar will be a function of a much broader decision on the EU’s financial perspectives (budget) there is still significant room for lobbying member states and key committees of the European Parliament such as the Budgets Committee.
   
  Some nations are already active. For example, the Deputy Prime Minister of Mauritius has been on a high level tour of European capitals and Jamaica’s Ministers, Ambassadors and Diaspora have been making their views known to those in Europe who will be taking the decisions. But much more needs to be done.
   
  Speaking about the challenge that the region now faces, the Chairman of Jamaica’s Sugar Industry Authority, Ambassador Derick Heaven noted that Europe was engaged in a retreat on how it will treat the accompanying measures that it has agreed are necessary to assist ACP countries adjust and diversify. “As a consequence”, he said, “significant efforts are being made at the highest political levels in our country and the region to ensure that equity and the protection of our legitimate rights are upheld. We believe much more is possible than what seems to be emerging from Europe. Once again the term collateral damage seems applicable to us, consequent on the EU’s internal disagreement over its budget. Our region therefore must in the shortest possible time, summon all its resources against what appears to be the inability of Europe to keep its word”.
   
  In the next few days the Sugar Association of the Caribbean, Caricom’s Committee on Trade and Economic Development (COTED) and the Caricom Heads will meet. Sugar will be high on everyone’s agenda.  There is little time to influence Europe’s decision-making process. It is now or never on sugar.
  . 
  David Jessop is the Director of the Caribbean Council and can be contacted at [log in to unmask]
  Previous columns can be found at www.caribbean-council.org
  February 3rd, 2006
   

		
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