Pascal Lamy, the EU’s Trade Commissioner, started a debate last autumn that may inadvertently threaten the EU’s sugar industry. He suggested that the EU should help the least developed countries (LDCs) by sweeping away all trade restrictions on farm products – the so called “Everything but Arms” proposal (EBA). He envisaged that this would happen within two years starting from January 2001. Last week, however, the EU retreated from this bold position and “transition” is now the word that Lamy’s Directorate General uses to describe the liberalisation of trade in certain products – namely, sugar, bananas and rice. 2006 is now the earliest date by which free trade in these products will occur.
The alarm bells rang in the last three months of 2000 when Lamy made his EBA proposal out of the blue. The Directorate General for Agriculture was quick off the mark with calculations showing how disruptive the liberalisation proposals would be for the internal market in the EU: in particular for the three sensitive products, sugar, bananas and rice. The adjustments costs for sugar alone were estimated at €1bn. You can see a full copy of the Agriculture DG’s study on EBA at the EU website for DG Agriculture (http://www.europa.eu.int/comm/dgs_en.htm).
Some estimates suggest that UK sugar producers were facing a 25-40% cut in their production quota because of EBA. Furthermore, no guarantees could be found that the benefits of free trade in these farm products would be realised by the least developed countries. Importantly, there would be winners and losers in the group of least developed countries and these raised questions about the equity of Lamy’s proposal. The sugar-producing LDCs campaigned alongside the EU sugar industry to resist Lamy’s proposals.
It now appears that in the period 2001-2006 the EU will give out global import sugar quotas to the LDCs at zero tariff based on their best production figures to date, increasing by 15% per annum over the period. From 2006-2008 the tariff for any extra imports will be reduced to reach zero by January 1 2009. This implies that the EU’s sugar policy will need to be reformed by this date and in a way that will allow for millions of tonnes of sugar imports. Final decisions on all of this will not be made until the EU sees the full results of a joint EBA impact study from DG Trade and DG Agriculture. This will probably be ready by February/March.
So, the moral from all of this is clear. If you throw a stone in the EU farm policy pond it doesn’t take long before the ripples reach the side… or reach someone who is likely to throw a stone back. That’s just what’s happened here. Lamy was either innocent or underestimated the strength of feeling of those who were affected by his proposals or didn’t realise the full effects of his ideas on assistance for the LDCs. It was probably a combination of all three. “Everything but arms… was Lamy’s proclamation but it might be more accurate to say “Everything but arms”. And sugar, bananas, and rice”.
By Dr John Strak, Euro PA