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Dept for International Development

Answer

Paul Flynn: To ask the Secretary of State for International Development what his assessment is of the effects of the Common Agricultural Policy sugar regime on local sugar production in developing nations in (a) Africa and (b) Asia; and if he will make a statement. [192869] Hilary Benn: The EU's CAP regime for sugar is a heavily regulated, highly protected and discriminatory one. It is also extremely costly to the consumer and taxpayer. By maintaining high guaranteed prices for production which are well above world market prices, high tariffs on most imports, and heavily subsidising exports, the regime encourages over-production in the EU and dumps millions of tonnes of subsidised sugar onto world markets each year. It has the effect of depressing world prices, and it crowds developing countries out of local markets which they would otherwise be able to supply. Some traditional suppliers from the African, Caribbean and Pacific regions (ACP), do have preferential access to the EU market under an arrangement called the Sugar Protocol. Most of the countries in Africa and Asia who are sugar producers or potential sugar producers are currently denied preferential access to the EU market. For these and other reasons, reform of the regime is both necessary and desirable, and long overdue. The European Commission presented a Communication to the Agriculture Council on 19 July that set out their preferred approach to reform. The Communication proposes to substantially reduce sugar exports and export refunds, abolish intervention, restructure EU production at a lower level, reduce the internal sugar price and grant a de-coupled payment to sugar beet farmers. The reform process would start in July 2005. This should make the regime more market oriented and reduce the quantity of EU sugar exported to third markets. If the option were to be agreed, the Commission estimate that the combined, aggregate effect of the proposals on support price and quota reduction would be a significant reduction in the level of EU production under quota, from 17.3 million to 14.5 million tonnes per year. In turn, as a consequence of the substantial reduction in the overall level of EU production, EU subsidised sugar exports--dumping-- are projected to fall by around 2 million tonnes. The Commission Communication will be the subject of discussion between the EU member states over the coming months. However, there will be winners and losers from this reform, just as there are winners and losers from the current regime. Those preferential suppliers to the EU who receive prices very similar to EU producers will see these prices fall. DFID has always stressed the need to take account of the impact that reform of the EU sugar regime will have on our developing country preferential suppliers. We are conscious that substantial reform will give rise to transitional problems for the ACP counties, and for Least Developed Countries (LDC) seeking to develop an export trade to Europe under the Everything But Arms initiative. In order to help inform the debate and ensure the impact on developing countries is taken sufficiently into consideration, DFID commissioned a study last year with LMC International and Oxford Policy Management, `Addressing the Impact of Preference Erosion in Sugar on Developing Countries'. The study is divided into two sections. The first part assesses the economic and social impact on the ACP Sugar Protocol countries of the various reform scenarios suggested by the European Commission. The latter part of the study assesses alternative options for addressing the impact of preference erosion in sugar. The purpose of this analysis was to identify various options for debate by the ACP and the EU. DFID has recently commissioned two further pieces of work on this issue. The first report has been commissioned with LMC International, `EU Sugar Reform: the Implications for the Development of LDCs' and should be finalised very soon. The second report has been commissioned from the Overseas Development Institute, `Forthcoming changes in EU sugar/banana markets: a menu of options for an effective EU transitional assistance package' and should also be finalised very soon. This report should help those countries affected by reform determine their priorities for a transitional package. This report will include some analysis of alternative uses for sugar.

Secondary information

Type

Written question

Reference

425 c1146-7W; 192869

Session

2003-04

Subjects

Exports EU external trade Prices Reform Research Sugar ACP countries Common sugar regime Economic partnership agreements

Contains statistics

Yes

Link

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