WTO Ministerial Conference 13-18 December 2005 - Hong
focus by the United Nations Office of the High Representative
for Least Developed Countries, Landlocked Developing
Countries and Small Island Developing States
EU bolsters stance in trade talks with sugar subsidy cut
By Raphael Minder in Brussels
Published in the Financial
Times on November 25
European Union agriculture ministers yesterday bolstered the
EU's negotiating stance in world trade talks by agreeing the
first significant cut in European sugar subsidies in almost
After three days of negotiations, the ministers decided to phase
in over four years a 36 per cent cut in the EU's guaranteed
sugar price - rather than a reduction of 39 per cent over two
years as initially envisaged - and a more generous compensation
scheme for inefficient European sugar producers who will be
forced to halt production because of the price drop.
The last-minute softening of the European Commission's initial
proposals helped whittle down - from 11 to three - the countries
opposed to the overhaul. Of the 25 EU states, Poland, Latvia
and Greece refused to endorse the compromise.
The expected production drop is designed to reduce EU dumping
of sugar on world markets, after the practice was successfully
challenged by Brazil, Australia and Thailand at the World Trade
In the run-up to next month's WTO ministerial meeting in Hong
Kong, the EU has been under pressure to help break the deadlock
in the Doha round of global trade talks by allowing more farm
exports into its market. Brazil, the world's leading sugar producer,
has led the attack on the EU.
Mariann Fischer Boel, the EU's agriculture commissioner, said
yesterday it would have been difficult for EU negotiators to
travel to Hong Kong without a sugar agreement to demonstrate
that the EU could tackle one of the bastions of its common agricultural
policy as well as respect WTO rulings.
"If we didn't have a proposal in the pocket, we would have
nothing to defend," she said. "This will strengthen
our hand at next month's WTO Hong Kong ministerial." The
EU has 312,000 sugar beet farmers and Brussels currently buys
sugar from European producers at €632 ($745, £432)
per tonne, three times the world market price.
The UK Industrial Sugar Users Group yesterday deplored last-minute
concessions that would still leave the EU price about double
that in the rest of the world."This deal takes the easy
way out by simply dumping increased compensation costs on consumers
and industrial users," it said.
Still, Margaret Beckett, the agriculture minister, said it was
"a historic day" for the EU, given the political sensitivities
surrounding European agriculture and how entrenched practices
had become in the European sugar sector. "Although there
has long been the recognition of the very strong case and logic
of reforming the sugar sector, this was a decision of considerable
difficulty and complexity," she said.
Sugar companies were last night assessing the impact of the
revised proposals, but are expected to welcome them as being
less severe than those tabled in June. Tate & Lyle, Europe's
only large cane sugar refiner and a leading isoglucose producer,
had feared in June that it would lose up to £85m in profits
by its financial year to March 2009. Associated British Foods,
which owns British Sugar, the beet refiner, had predicted its
profits would be as much as £40m lower in its 2007-08
Greencore, the Irish sugar group, said last night that it welcomed
"the improved phasing of the new pricing arrangements".
It said it would "continue to produce sugar..as long as
it is commercially viable". Many analysts think Greencore
could decide to close its remaining sugar refining factory and
take compensation on offer.
Sugar has become one of the most hotly contested issues in international
farm trade and the deal will have a significant impact on many
developing countries, especially sugar cane producers among
the African, Caribbean and Pacific (ACP) group of nations.
These producers, who have become reliant on the EU's generous
sugar pricing thanks to the preferential trade terms they receive
from the Union, have denounced the proposed compensation, envisaged
at €40m for 2006. The ACP producers have warned that the
sugar reform could devastate their economies, especially when
coupled with planned reform of the EU's import rules for bananas.
Changes to this regime are also being discussed this week.
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