EU: Sugar subsidies are not so sweet (COMMENT)
Ten EU member states have voiced concerns over proposed reforms to sugar production.
Following the World Trade Organisation (WTO) ruling that the sugar industry was unfairly subsidised in the EU, agriculture ministers are attempting to reform the sector. While this could lead to short term pain in the shape of sizeable European job losses, it may lead to the creation of a more sustainable global trade in sugar.
In anticipation of the meeting of ministers that will conclude the Doha round of trade liberalisation talks, Australia, Brazil and Thailand have lodged a complaint to the World Trade Organisation about the EU's subsidy system for the sugar industry, alleging that it breaches international competition rules.
Last month, the WTO ruled in favour of these countries, and highlighted the fact that these practices undermine producers in developing countries. As a result, the EU Council of Ministers is meeting in Brussels to decide on how to reform the sugar industry.
The Council of Ministers is now examining the European Commission's suggestions for reform, including a reduction of EU production quotas from 17.4 million tons a year to 14.6 million tons by 2008/09. In addition, guaranteed sugar beet prices could be reduced by a third by the end of 2007.
However, ten EU member states have complained to the Commission that these reforms could affect them disproportionately. Chiefly, they have asked for price reductions to be introduced gradually, and for the current distribution of sugar beet production to be maintained, to ensure that the greatest EU sugar producing countries such as France, Germany and the UK shoulder most of the burden of these reforms.
The EU sugar sector is indeed heavily subsidised. Sugar beet producers benefit from a guaranteed price that is approximately three times higher than the world market price. This is made possible by a system of quasi-monopolies in sugar refining in each member state. With the WTO pressing for reform of the European sugar sector, it seems that change will ultimately have to be forced through. While this could lead to thousands of job losses in surplus producing countries, it would create a more realistic world sugar trade.
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