CARICOM trade meeting to address future of sugar

-following end of EU regime, likely lower world prices

CARICOM’s trade ministers are to meet in George-town today and will consider several recommendations which will determine whether the sugar industry in the region has a future, according to expert on the Caribbean, David Jessop.

Writing in his column in the last Sunday Stabroek,   Jessop said that this long overdue discussion by CARICOM’s Council for Trade and Economic Development (COTED) will examine whether there are ways in which the region’s cane sugar producers, via tariffs and other measures, can redirect output towards meeting the regional market’s requirements.

He pointed out that just over a month ago, on October 1, the industry lost the last element of its longstanding preferential market in the European Union (EU) which abolished national sugar production quotas in Europe. He said that according to industry analysts the result will be that the price paid for African, Caribbean and Pacific (ACP) cane sugar will “very rapidly reduce and, as Europe becomes self-sufficient in beet sugar and begins to export, cane sugar imports into Europe will fall to zero”.

He said that the experts also suggest that the new European sugar regime will depress world market prices.

“Once EU production rises to more than 3m tonnes per annum, they say, the price of its sugar will converge with, and depress already low world market prices, reducing global demand for cane sugar from high-cost producers in the ACP and the least developed by around 1m tonnes per annum.

David Jessop

“This, and the expected return of the global sugar market to surplus next year means that CARICOM will, before long, cease to have any significant export market”, he warned.

He said that although some industries are developing coping strategies via mechanical harvesting, sugar refining and the production of food grade sugar for export, this is unlikely to be enough.

Guyana is in the midst of a contraction of its sugar estates and is pursuing diversification. Progress has however been slow and hundreds of people have already lost their jobs as a result of the closure of the Wales estate at the end of last year and hundreds more are expected to be affected in a matter of weeks when operations at the Enmore estate are halted.

Jessop said that in a belated response to what is an existential threat, the industry in the Caribbean has developed recommendations on the way in which CARICOM can now address the issue, avoiding the likely crisis that will occur if nothing is done.

He said that their thinking largely stems from a sugar industry workshop held in Jamaica earlier this year which assessed the future for sugar in the four remaining CARICOM sugar-exporting countries: Barbados, Belize, Guyana and Jamaica.

Jessop said that at this workshop all participants agreed that without some form of remedial action at a regional level, the revamping of the EU market would eventually result in an end to the production of raw sugar in CARICOM, unless nearly all of its future production can be sold into the regional market.

He said that at present, some 0.2m tonnes of the 0.3m tonne of the CARICOM market for food grade sugars and white sugar is met from external sources. This is despite there being a common external tariff which, in theory, is meant to offer a high degree of protection to the region’s sugar producers.

Jessop said that why the regional market has failed on this score varies from country to country, but generally reflects governments setting aside the present common external tariff on imported sugars under pressure from domestic food and soft drink producers on the grounds of the failure of regional supply for the specific sugars they require.

“It is true that in the past the sugar industry has not been a reliable supplier to regional industrial users – it chose to prioritise supplying Europe where prices were higher – but that situation has now changed dramatically.

“There is a surplus of regional supply available and as one recent unpublished independent study suggests, up to 99% of the refined sugars presently imported into the region could easily be substituted by regionally produced ‘plantation white’ with no or low-level investment by industrial users”, Jessop stated.

To protect and give a future to the regional sugar industry and the 200,000  people who depend on it, Jessop said that the industry is proposing that COTED agree to apply on a uniform basis, a common external tariff (CET). This, it is suggested, should be fixed at 40 per cent on all imported raw and brown sugar and refined sugar from outside the Caribbean single market. He said that the industry also believes that the time has come for the regional market to be managed and policed rigorously.

However, he said that key to the future success or failure of development of such a protected market, will be achieving a wider understanding of the likely price impact on soft drinks, confectionary, sweetened milk, and bakery products, and the consequent reaction of the industries concerned and their consumers.

Jessop said that according to sugar industry sources, initial independent studies suggest that although the uniform imposition of higher duties would increase prices to industrial users, this should not affect the market for locally produced soft drinks. This, they say, is because such producers’ finished products are already protected against external competition by a high tariff.

According to Jessop, the sources say that the same studies indicate that the additional cost to consumers would be marginal: between US$1 to US$10 per annum, or an additional six cents on a locally produced two litre bottle of Coca-Cola, presently costing US$3. They do however acknowledge that other users of imported sugar, such as the sweetened milk industry, may need extra tariff protection and technical support.

Jessop said that those involved in making sugar’s case believe that the imposition of a CET on all sugar entering CARICOM would mitigate the adverse impact of EU reforms.

“If what is proposed is to work, it will need the four CARICOM countries concerned, the sometimes-fractious sugar industry, and the food and soft drink manufacturers to jointly recognise the benefits that could flow from integration, and the practical steps required to achieve this”, Jessop asserted.

A release from the CARICOM Secretariat on the meeting yesterday said that trade in sugar is one of the main agenda items.

“Those discussions will be held against the backdrop of the elimination, effective 1 October, 2017, of production quotas as part of the European Union’s sugar regime reform. The end of EU’s quota management for sugar is expected to lead to a fall in prices towards the international sugar price and a decrease in sugar imports from the African, Caribbean and Pacific (ACP) states, with particular impact on Caribbean producers. Securing more remunerative markets, value addition and an enabling policy regime within the CSME are identified as critical to the industry’s survival”, the release said.

 

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