The Week in Europe
By David Jessop
As each week passes, the options for restructuring the Caribbean sugar industry lessen.
This week the European Commission (EC) published outline proposals for the reform of Europe’s sugar regime. In doing so Europe began formally a process that will determine the viability or otherwise of cane industries throughout the Caribbean and other nations in the African, Caribbean and Pacific group of states (the ACP). This is because the price that European farmers of beet receive is linked under preferential agreements to that paid for agreed volumes of sugar coming from the ACP.
Vastly over simplified, the EU is initiating a debate on three main options for its producers. An extension of the present European regime beyond 2006 involving flexible quotas and price intervention. A reduction in the EU internal price involving the phasing out of quotas once the levels of imports and production have stabilised. And a complete liberalisation of the current regime involving the the removal of import tariffs and quantitative restrictions on imports. Each option has implications for all sugar producers not least in relation to the price that will be paid in future to Caribbean farmers.
Even though the sugar industry in the region has been declining for decades and now contributes relatively small amounts to the Caribbean’s GDP, significant numbers remain employed by the industry in Guyana, Jamaica, Belize, St Kitts and less so in Trinidad and Barbados. In some of these nations a precipitate decline or collapse in the industry could result in social instability on a scale not previously seen.
Last week in Miami the Chairman of Jamaica’s Sugar Industry Authority, Derick Heaven, began to spell out the implications if nothing were done and the industry were to suffer collapse.
Speaking at the World Sugar 2003 conference, he made clear to participants that closing down the sugar industry in Jamaica and in other Caribbean economies, without the development of meaningful alternatives, will spell economic disaster.
He noted the challenges facing the industry in international trade negotiations were extensive. Brazil together with Australia and Thailand were challenging Europe’s sugar regime at the WTO. This was, Ambassador Heaven noted, undermining the deliberative process of the phasing out preferences. The challenge was being mounted in a manner that was likely to harm Caribbean sugar producing countries. This, he said were going on without any special consideration for small and vulnerable economies such as those in the Caribbean.
The Chairman of the Jamaican industry went on to note that the negotiations for the Free Trade Area of the Americas (FTAA) and the Central American Free Trade Area also have the potential to threaten to the survival of sugar in the Caribbean. Brazil, Columbia, and other low cost sugar producers in the Americas are expected to demand equal or better access to the US and Canadian markets to that granted previously to Mexico for sugar. While the lobbying for and against may result eventually in it being agreed to have sugar the subject of a multilateral agreement at the WTO, Ambassador Heaven saw little sign that the countries involved were showing any consideration for the impact on the Caribbean.
These challenges, he told delegates, were matched by other significant threats to the industry in Europe. These included the mid term review of Europe’s common agricultural policy (CAP); the long term effects of the enlargement of the EU to twenty-five member states; the implications of the EU’s Everything But Arms initiative that grants quota and duty free access for sugar and other commodities from the least developed countries; and the uncertain outcome of the proposed Economic Partnership Agreements (EPAs), in which the EU will try to re-negotiate the terms and conditions of the existing sugar protocol.
From Ambassador Heaven remarks and those of others it is clear that trade negotiations are having a profoundly negative effect with much of the regional industry unable or unwilling to make robust long-term investment decisions, or activate fully the restructuring that is necessary to survive.
Worse, it seems as if the social and by extension political implications are being glossed over. In Jamaica about 0.2m people derive their livelihood directly and indirectly from the sugar industry. About one half of the population lives in sugar dependent parishes and areas. If the sugar industry continues to decline, rural–urban migration from sugar parishes to urban areas would be aggravated increasing poverty and crime. This will have negative consequences for social stability in Jamaica as well as, by extension, for Europe and North America.
The industry in the Caribbean needs an adequate period of adjustment to properly confront these challenges. It requires Europe to think hard about the development of flexible, rapidly delivered appropriate compensatory and other mechanisms. Equally Governments and the industry must decide on a clear course of action based on a realistic appreciation of future price levels and begin now the tough process of restructuring, ideally with support from external donors.
The truth is that it can no longer be business as usual in sugar. The challenges to existing trade arrangements may make life uncertain but it is very clear that the only direction for prices presently paid under preferential arrangements, is down. Governments and the industry need to agree rapidly on how they will restructure their industries, how they will encourage new economic activity and how in negotiations they will ensure that the money required to rationalise their cane industry is forthcoming.
David Jessop is the Director of the Caribbean Council and can be contacted at [log in to unmask]
September 26th, 2003
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