Future of sugar looks rough
The news broke on Friday that the World Trade Organisation had ruled against the European Union on the issue of sugar subsidies. Now that the news has sunk in, Belizeans ranging from farmers to factory executives are beginning to take stock of the situation and plot a unified strategy. We asked Minister of Foreign Trade Eamon Courtenay to explain–in layman’s terms–exactly where we stand.
Eamon Courtenay, Minister of Foreign Trade
?As you know, Australia, Brazil, and Thailand brought a case against the European Union challenging the way they organised their sugar regime in Europe and in a very simple way, the way the European Union does it, is that their farmers produce beet sugar and they?re subsidised; heavily subsidised in order to produce this sugar. This sugar is then–some of it is consumed, some of it is used industrially, some of it is exported. Australia, Brazil and Thailand are saying the amount of subsidies that you give is in excess of the commitment you gave. In 1995 when the Uruguay round of trade negotiations concluded, each country had to produce a schedule of its subsidies and it was agreed how it was going to be reduced. Brazil, Australia and Thailand now look at that and say you all are exporting more sugar with subsidies in excess of your commitment and therefore you are distorting the market more than you should. European Union says that is not so. The European Union has lost the case on each one of those points.?
?Now, in so far as Belize is concerned the European Union is the most important market for our sugar. We export about forty-nine to fifty percent of our sugar there. The price is anywhere from three to five times the world market price. So we are guaranteed access, we are guaranteed a high price and we have a quota of forty-two thousand tons into the European market. So it is very important to us. How did we become involved in this issue? It is because when the European Union set out its schedule of commitment for subsidies it put what was called a footnote and said we import one point six million tons of sugar from A.C.P. (Africa Caribbean and Pacific) Countries and India and we are not counting this one point six million tons as a part of the sugar that is produced in the European Union and therefore we did not include it in our subsidies reduction commitment. The problem with that is twofold. What the European Union does is it allows us to export that sugar, one point six million, into the European Union and then they export an equivalent amount, one point million onto the world market. Now it is not the same sugar. It is subsidised beet sugar that they send out. So the WTO panel has said that it was wrong for the European Union to say that we are exempting ourselves from one point six million. So that affects us because in effect what it is saying is that European Union–you have been sending out one point six million more than you should of subsidised sugar. Directly, we expect the European Union to appeal that decision. The decision if it?s appealed will be finalized in about March or April of next year. What that means, assuming the European Union loses again, they would have to reduce the amount of subsidies they give. How does that affect Belize? The subsidised price that they pay to their farmers, the beet sugar farmers, we?ll get the same thing. So if they reduce the price to their farmers, they are saying they?re going to reduce the price to us, which brings us, much closer to the world market price, which is a dumped market, but it means that about fifty percent of our sugar will receive significantly less than we are currently receiving.?
Stewart Krohn
?A number of questions come up¼can they give us that preference or that subsidy in another way? And would they want to?
?Yeah, a very good question. The answer is yes in so far as giving us the subsidy and the preferential market access and the preferential price they can give us. Without getting into too much detail, we export our sugar to the European Union under what is called a sugar protocol. The sugar protocol dates back to 1975, it is WTO compatible. We are going to renegotiate that between now and 2008 into what is called economic partnership agreement. The details of which we don?t need to get into to. But we are going to put it in a way that is absolutely WTO compatible. What am I saying? I am saying that the European Union does not have to take away any of their preferences that they currently give us nor the market access that they currently give us because of any WTO position. In fact, what we have been arguing for in Cancun, you?ll recall where the Cancun talks failed and in July in Geneva what is called the July Package is a special carve out, special and deferential treatment for specific products, we are contending that sugar is one of them. Whereby, there is a carve out where existing preferences will be recognize. They will phase out over a much longer period of time and therefore, the implementation of any reform that the European Union wants to put in place, they cannot say to us we have to do it because the WTO is insisting. We have already negotiated in the July Package a carve out for the benefit of sugar.?
?Now, specifically to your question would they want to do it? We conducted a very intensive lobby last week in six countries in Europe and just over half of those countries indicated that they are very much committed to keeping their preferences. They maybe slightly reduced, but their committed to keeping the preferences. There are some that are not all committed to it and so if you are not competitive in sugar you must go out. The political difficulty is twofold and I say it very quickly. Firstly, it?s difficult for the Ministers in Europe to give the A.C.P. farmers a higher price than they would give to their beet farmers. So we have that political difficulty. The second difficulty is the European Union as you know has enlarged from fifteen to
twenty-five members. They have a budget fro agriculture and a budget for subsidies which you know has to be split among twenty-five countries rather than fifteen and therefore certainly the amount of money they have available to pay all those farmers is less and its difficult for them to continue to give us a preference of the order that we are getting now if they are going to reduce it to their farmers?
To have any chance to remain competitive Belize’s sugar industry must rationalize transportation of cane and sugar and deal with the inefficiencies of small farms and low yields. Studies show that in CARICOM, only Belize and Guyana have the ability to survive in the cutthroat world of global sugar production.
