Media Briefing ActionAid International

For immediate release: Monday 21st November

News hook: EU Agriculture and Fisheries Council on 22-24th November

SUGAR REFORM IN THE COMMON AGRICULTURE POLICY-

A DEVELOPMENT TEST FOR THE EU PRIOR TO THE WTO HONG KONG MINISTERIAL

"Sugar production is critical to many farmers in the developing world but the European Commission's proposals would undermine the industry in many countries. The EU should be adopting policies in both the Common Agricultural Policy and at the WTO that deliver development and eradicates poverty".

Angela Wauye, Trade Policy Analyst , ActionAid Kenya

At the EU Agriculture and Fisheries Council on 22-24th November, Ministers from the 25 EU member states will decide on the future of the current EU sugar regime that is due to expire in 2006. Before the 25 Ministers is a proposal from the Commission outlining their proposed changes to the regime. In summary the main changes are:

* The EU internal (intervention) price will be cut by 39% over two years (2006-2008);
* 'Compensation' will be given to developing countries affected by loss of preferences within the EU sugar market. Currently the Commission proposes that the level of compensation would only be EUR40 million in the first year (no figures are provided for following years)

ActionAid is critical of the proposals for the following main reasons:

* The internal (intervention) price is important because of preferential access to the EU sugar market for LDCs and some ACP countries. They currently get the higher internal price when they sell it into the EU. This price is due to fall quickly (ie in two years) making the sugar industry in some of these developing countries uncompetitive. At a final intervention price of EUR385.5/tonne, using European Commission figures, ActionAid anticipates that the following countries may well cease selling into the EU (or even cease production altogether), for example, Bangladesh, DR Congo, Jamaica, Madagascar, Burkino Faso, Tanzania, Cote d'Ivoire, Mauritius, Cuba, Congo Brazzaville and Guyana. Some countries, such as Malawi, Senegal, Swaziland, Belize, India and Fiji, are likely to struggle.

The internal (intervention) price cut is thus too fast and too deep. ActionAid recognises that the EU sugar regime needs to change but a real development test for the European Union is to reduce and minimise the developmental impacts overseas. Price cuts should be imposed more gradually and be less severe.

* A restructuring fund of EUR4.2 billion over four years has been set aside for use within the EU to lure less competitive producers to leave the industry, compensate for closure and provide funds for affected areas. In contrast, just EUR40 million has been set aside in the first year to assist with adjustment costs in developing countries - for example to enable uncompetitive sugar producing countries to diversify. No sum has been committed yet for following years. The EU Development Commissioner has already accepted that this would not be enough. ActionAid would concur with this view estimating that the total costs of adjustment will run into billions of euros (total losses in export earnings alone from a 39% price cut would be up to EUR300 million a year.) The European Commission should come forward with a remunerative package that goes well beyond covering the costs of adjustment to developing countries.

* The EU has an obligation to come forward with an end date for export subsidies as part of the Doha WTO Round. Sugar exports are a major recipient of these subsidies. As a development test, the EU should come forward with an early and specific end date for these subsidies as part of any change to the EU sugar regime. Cost savings from the elimination of export subsidies should be ring fenced to pay for the remunerative package.

ends

For more information and to set up interviews with ActionAid representatives, please contact:

Alexandre Polack, in Brussels, tel:+ 32 (0) 4 73 86 18 92, [email protected] mailto:[email protected]