End of sugar quota would make EU unattractive to ACP producers

– PI Gomes

While African, Caribbean and Pacific (ACP) countries will continue to have access to the European market after the end of the sugar quota in 2017, Guyana’s Ambassador to the European Union (EU) PI Gomes says it will “hardly be commercially attractive” and this country could be one of those starved out of the arena.

“What we as exporters are concerned about is the impact of the removal of quotas in 2017 rather than about 2020 that will result on the price of sugar,” he told Stabroek News in an invited comment, while adding that the EU’s decision to end the quotas will see the price of sugar fluctuate on a continuous basis.

Ambassador Gomes noted that the European Commission has conducted research establishing that “the price will drop so low that it will hardly be remunerative for ACP exporters by 2022.” He noted that cane sugar cultivation required a seven year ratoon period and that the planning and investment required in the cultivation of cane sugar needed stabilised prices.

“The core point is that ACP exporters, in general, need time. Since most are in the process of restructuring, diversifying, improving efficiencies, etc precisely to deal with a liberalised EU sugar market by 2020, to introduce the likelihood of a drop in prices, fluctuations and speculation in 2017 will mean our duty free/quota free access will hardly be commercially attractive,” he explained.

He said that Guyana would continue to have access to the EU market but the end of the internal quotas meant that a more lucrative market was being made for European beet farmers.

Ambassador Gomes added that by 2017, small ACP sugar producers, including Guyana, are likely to be starved out of the market.

Following the EU’s decision to extend the original quota deadline from 2015 to 2017, after  a tripartite agreement between the European Parliament, the EU Council of Ministers and the European Commission, the ACP states released a statement registering their disappointment.

The ACP states noted that the EU Commission’s impact study suggested that global sugar prices could decrease by 45 percent compared to 2012 prices.

According to the ACP group, the price level forecast meant many sugar industries had no hope for survival. “The analyses of independent consultants and academic researchers supported these devastating predictions if the Commission’s proposal for EU’s 2015 abolition of beet quotas sugar is adopted,” it said.

The end of the internal quotas could see the European region becoming self sustaining. The ACP    stated that Europe could even become a sugar exporter. The ACP stated that “when CXL imports are factored in, the inescapable conclusion was that ACP sugar exports would drop to a negligible fraction of what they are today, or be wiped out altogether (from) the EU market.”

In alignment with the Economic Partnership Agreement, the ACP is calling on the EU to review the decision in 2018. The ACP stated that the time lag is too short and that a 2020 deadline would have given countries the needed time for sector reforms. However, since 2006 the ACP countries have known about the original 2015 deadline, which has critics asking why Guyana and other ACP countries have failed to act quicker and more aggressively on sectoral reform.

President Donald Ramotar recently stated that the sugar industry was at a crisis level—the first such admission by a sitting president. The Guyana Sugar Corporation is awaiting a decision at Cabinet level on possible changes to the board of directors and management. Finance Minister Dr Ashni Singh recently noted that GuySuCo’s strategic plan 2013-2017 is to be finalised soon. He made the announcement at a the signing of the Financing Agreement for the Guyana Annual Action Programme 2012 on Accompanying Measures on Sugar, valued at $6.4 billion.

Trade relations expert David Jessop in a recent column in the Sunday Stabroek said  it is quite possible that in less than 10 years Caribbean raw sugar will cease to enter the EU.

Jessop said that news of the likely end of the EU market for regional sugar first emerged in a European Commission report entitled ‘Prospects for Agricultural Markets and Income in the EU 2012-2022.’ This document assessed the future of Europe’s own agricultural regimes, to which the fortunes of sugar from ACP countries are linked. Jessop said that the report confirmed that the planned expiry of EU sugar quotas in 2015 would lead to a reduction in the price in the European market for sugar. This would then make the EU market less attractive  to the ACP and other higher cost exporters. He added that the report made it clear there would be a fall in European imports from an estimated 3.5 million tonnes in 2012 to 1.5 million tonnes in 2022 and projected that Europe would then move to self-sufficiency, possibly even becoming a net exporter.

“The inescapable conclusion of this for the ACP, which currently exports some 2.3 million tonnes of sugar a year to Europe, was that it is likely that its market in Europe would become negligible. Worse, it was also recognised that as competition from low cost sugar producing nations increased, as a result of the access gained to the EU market under recently negotiated free trade agreements and other special arrangements, the Caribbean would cease to have a place in the EU market”, Jessop wrote.

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