The View from Europe
  By David Jessop
   
  As this is being written, the ACP group of nations is meeting in Brussels to determine their response to the European Commission’s proposals on the future of the sugar. 
   
  There, ACP Ministers and officials have been discussing how to respond to the European Commission’s recent announcement that it intends denouncing the EU/ACP sugar protocol and introducing in its place a new liberalised market access regime through the medium of region-specific Economic Partnership Agreements (EPAs).
   
  In early August the EC announced that it would table this month a proposal to end unilaterally the arrangement that provides the eighteen ACP sugar protocol producing nations with a wide range of legally guaranteed benefits. 
   
  These include duty free access for named ACP nations for agreed quantities of sugar; quota transferability; a guaranteed price approximating to that applied for European beet farmers; exemption from the safeguard clause contained in the Cotonou Convention, thus ACP enabling producers to ship sugar irrespective of supply levels in Europe; an obligation by Europe to buy agreed quantities as the buyer of last resort; and an agreement of indefinite duration.
   
  This unique preferential arrangement was intended originally to provide continuity when Commonwealth preference ended on Britain’s entry into the European Community in 1972. The effect over the years since has been to provide a stable basis for the continuing production of raw sugar in the Caribbean and elsewhere in the ACP.
   
  In its place the EC is proposing in the context of the EPA negotiations, a variation on an arrangement that will grant duty free and quota free access for all ACP products from January 1, 2000. 
   
  In the case of sugar, the EC’s is proposing retaining the present sugar regime until October 2009. During this time the quotas for existing protocol suppliers would be increased; producers in all least developed ACP nations - mainly in Africa - would have their transitional ‘Everything but Arms’ quotas increased by fifty per cent; and quotas would be opened for a number of ACP nations that are presently not sugar protocol suppliers such as the Dominican Republic. At the same time the guaranteed price paid by Europe would decline in line with the reduced price being paid to EU beet producers.
   
  Then after October 2009 the EC envisages the abolition of country quotas and guaranteed prices and the introduction of a special safeguard mechanism for the more developed ACP sugar producing nations (in the case of the Caribbean every country other than Haiti). 
   
  Over simplified this would mean that if the supply were over a certain figure this would result in the excess being subject to tariffs at Most Favoured Nation rates up to 2015 and thereafter to GSP tariff levels. The EC also is offering to pay an as yet undetermined price for ACP sugar up to 2012 but offered no certainty from 2013 on; the year in which further reforms are likley to take place in the EU Common Agricultural Policy and Europe’s own sugar regime.
   
  These proposals for fundamental reform of a regime are to put it mildly, creating real anxiety in the Caribbean and other ACP sugar producing nations. 
   
  Senior figures connected with the industry in the region point out that for the last few years sugar producers have been undertaking the almost impossible task of reorienting their industries to accommodate a thirty seven per cent price cut, while only very slowly receiving the transitional assistance for restructuring promised by the EC. They are now, they point out, to have the additional burden of having to adapt against a background of uncertain future market conditions, a lack of information on the price that will be paid and the entry into the EU market of new lower cost ACP producers.
   
  They argue that what seems to be little understood by officials in Brussels is that the approach now being suggested has the practical effect of undercutting existing commercial arrangements: that is to say creating in the short to medium term credit problems with those who extend finance to the industry.
   
  Producers in the Anglophone Caribbean also suggest that while they are comfortable with the decision to afford the Dominican Republic a 100,000 tonne quota in the short term, the probability is that once there is duty free and quota free access to the EU market for all ACP producers, Santo Domingo’s ability to produce low cost raw sugar may come to challenge the viability of raw sugar production in other parts of the region.
   
  In private some senior figures in the industry accept that the region and the ACP should have come to terms with the inevitability of change long ago and by now be well advanced with the restructuring of their industries. They describe ACP discussions on the legality of the EC’s action in renouncing the sugar protocol as ‘rearranging the deck chairs on the Titanic’ and accept that the industry and Governments have become too comfortable with present arrangements. 
   
  However, they couple such remarks with anger that the EC has failed to be transparent in its approach. They complain about the sheer complexity of trying to adapt in a short time a preference based industry to one that is commercially based. And they are highly critical of European Commissioners who in their view see the effect of sugar reform in the Caribbean as collateral damage along the road to achieving the reform of Europe’s own sugar regime.
   
  Although Europe’s approach may have been brutal and poorly thought through, it is clear that it is having an effect and has galvanised an industry that has tended to look back rather than forwards. So much so that there is now a long overdue movement towards an integrated cane sugar industry able to produce raw and refined sugar, ethanol, molasses, rum and energy. More importantly perhaps there is recognition at the highest levels of Government that there is the need for a new regional approach to agriculture.
   
  All of which is not a moment too soon as lurking on the horizon is a potentially much bigger threat that Caribbean agriculture must meet.
   
  In a recent interview with the London Financial Times, Jacques Diouf, the Director General of the UN Food and Agriculture Organisation warned that surging prices for wheat, corn and milk had the “potential for social tension leading to social reactions and eventually political problems” especially in developing nations. 
   
  Mr Diouf was speaking against a background of growing demand for food from nations such as China and India, a rising global population, climate change; the biofuel industry’s currently insatiable appetite for grain; and burgeoning speculation in international markets in foodstuffs. 
   
  Put another way today’s problems in managing a way forward for Caribbean sugar may rapidly be overtaken by the far more significant and potentially destabilising issue of food security. 
   
  Reform of the sugar sector is challenging and essential but diverting. It should not detract from the urgent need to restructure the whole Caribbean agricultural sector if the region is to be able to afford to feed itself in the coming decade.
   
  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
  September 14th, 2007
   
   
   

       
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