ACP sugar producers concerns legitimate

The African, Caribbean and Pacific (ACP) sugar producers have legitimate concerns over the compensatory aid being offered by the European Union (EU) after its proposal to cut sugar prices, suggests a new research paper. Previous experience of EU compensation when the prices of bananas, cocoa and rum were cut "have been unpleasant, so they have reason for concern", said Calvin Manduna, a researcher with the nonprofit Trade Law Centre for Southern Africa, who wrote the paper. As part of ongoing reform the EU has proposed reducing the price of sugar in its domestic market to international levels, as it did for bananas some years ago. Sugar is sold in EU countries at three times the international price, and the proposed reduction will bring down the cost to Europe of ACP sugar. According to a proposal by the European Commission, ACP countries will continue to enjoy duty-free access to the EU, but the sugar purchase price will be reduced by one-third between 2005 and 2008. Regional sugar producers that stand to lose include Swaziland, Malawi, Mozambique and Mauritius. Sugar trade between ACP countries and the EU has been regulated by two agreements - the ACP/EU Sugar Protocol and the Agreement on Special Preferential Sugar - but the EU has been under pressure to revise its agri-policy regarding sugar quotas. The Sugar Protocol is an agreement between governments, in which EU member states undertake to buy specified quantities of sugar at guaranteed prices from ACP states. However, Australia, Thailand and Brazil, which are excluded from the Sugar Protocol, recently successfully challenged the agreement at the World Trade Organisation. The EU has offered to make up for the ACP countries' loss of revenue as a result of the changes. Manduna explained that in the past, compensatory mechanisms to ease price cuts - such as financial support to ACP banana producers via a programme called Special Framework for Assistance, which provided funds primarily to improve productivity and competitiveness, but also included diversification activities - had not worked well because they had not been properly planned. "The funds being offered to make up the loss arrived too late," he noted. In the case of diversification, particularly in the case of Caribbean producers, the emphasis had swung to building the tourism industry, which was seasonal. The EU has proposed a similar scheme to help Sugar Protocol ACP countries adjust to reforms in the EU sugar regime. "It is impossible to overstate the devastating impact the price cuts and timescale proposed by the EU will have on the ACP countries ... as far as the ACP is concerned, the proposed reform is too fast, too deep and too soon," Manduna commented. ACP countries have called for shallower and more gradual price cuts over eight years to allow them to adjust, he said. Besides, the proposed compensatory measures were considered meagre at not quite US $48 million for 18 countries, Manuna added. Some NGOs have called for compensation to the tune of more than $500 million, with adequate technical and financial adjustment assistance. "The ACP countries also feel that the offer made to them is unfair compared to the kind made to the EU farmers, who will be compensated for 60 percent of their losses, and there will also be a 'buy-out' scheme for those European factories that will go out of business," he pointed out. ACP countries anticipate a loss of at least $500 million as a result of lower prices. According to the Swaziland Sugar Association, the industry is expected to lose more than US $23 million in 2005/06 and more than $39 million in 2007/08 as a result of the price cut. However, Manduna told IRIN that regional sugar producers - Swaziland, Mozambique, Malawi and Zimbabwe - were "low-cost producers", who could survive "with some restructuring ... to become more competitive".