---

Jamaica: Sugar

Answer

We recognise the negative impacts that the reforms to the EU sugar regime agreed at the 24 November Agriculture Council will have on some African, Caribbean and Pacific (ACP) sugar producers—including Jamaica—with preferential access to the EU market. However, we welcome the overall reforms, particularly the benefits they will bring to many developing countries. Furthermore, the reforms will see a smaller price cut and a longer adjustment period than originally proposed. This will give the ACP a better opportunity to adapt to the reforms.The EU will provide transitional assistance to help ACP producers improve their efficiency in the sugar sector where feasible or diversify into more profitable sectors. Ensuring that credible and timely transitional assistance is in place remains a priority for the UK.In September 2003, the Department for International Development (DfID) commissioned consultants LMC International Ltd (LMC) to produce an independent report on the impact that EU sugar reform would have by 2015 on the ACP countries that are party to the sugar protocol. This work was updated in June 2005, after the Commission put forward its proposals but before agreement was reached on the shape of the reforms. It therefore assumes a 39 per cent price cut rather than the actual 36 per cent.The sugar industry in Jamaica currently contributes about 1 per cent to GDP (mainly through exports to the EU) and it employs around 30,000 workers (2.5 per cent of the workforce). On the basis of the limited information available to it, the LMC study forecasts that the sugar industry in Jamaica was likely to be unsustainable after the EU reforms. This conclusion was contested by the Government of Jamaica, who have since clearly stated that there will be a viable sugar industry after transition.A more recent assessment by European Commission funded consultants (who again assumed a 39 per cent price cut) concluded that this would reduce the value of sugar export revenues from 6.9 per cent of total exports to 4.9 per cent and a reduction of 0.8 per cent of GDP over four years. The consultants estimate redundancy costs of €10.5 million, assuming that the government decide to close two of the state-owned mills.A recent International Monetary Fund working paper estimated that a similar reduction in preferences would result in the loss of 1.4 per cent. of exports and a 0.6 per cent reduction in GDP for Jamaica. But these estimates should be viewed with caution, as they are based on a number of strong assumptions.Currently, DfID is collaborating with the World Bank to assess the implications of the EU reforms for the rural economy as a whole. We are also supporting the Planning Institute of Jamaica to carry out a study on the social impact of the erosion of sugar preferences and how best to help those affected adversely by the changes.

Secondary information

Type

Written question

Reference

2657; 676 c121-2WA

Session

2005-06

Subjects

Economic situation EU external trade Reform Sugar Jamaica Common sugar regime

Contains statistics

Yes

Link

View this Written question on www.publications.parliament.uk