ECONOMY

EU members divided on sugar producer prices; July cuts likely

BRUSSELS (Reuters) – The European Commission is almost certain to suggest price cuts as the best way to overhaul the EU’s much-criticized sugar regime when it fleshes out its reform intentions in July, diplomats said yesterday. Sugar is the EU’s last key farm regime to survive virtually untouched since its launch in the late 1960s. The Commission is now planning a huge shake-up – something critics of the policy have demanded for many years. Last year, Brussels floated three reform options: to maintain the status quo, to cut internal prices while gradually abandoning national production quotas eligible for subsidy or a complete liberalization of the regime. Farm Commissioner Franz Fischler, due to leave office at the end of October, has pledged to say more on his plans for sugar in July. His successor will be left a challenging task, as he or she will have to find common ground among 25 EU governments. Fischler’s favored option is to cut prices, a view he again confirmed last week. «Keeping the status quo is not on… equally, total liberalization is not a real option,» he said in a speech last week. «A cut in EU production and probably also in prices seems to me unavoidable.» The EU’s support system keeps internal prices at more than three times the international market. «What everyone is expecting is that the old options, one and three… will be eliminated,» one EU diplomat said. «So we’ll be looking at Option Two.» The price-cutting path would go some way toward mollifying EU critics, such as Australia, Brazil and Thailand, which have together filed a suit against EU sugar policy at the World Trade Organization (WTO). A ruling is expected in September. The Commission says that the deeper the price cut, the more countries will see their sugar industries forced to close. Its own analysis suggests a possible cut of up to 40 percent. Greece, Ireland and Italy are most vulnerable to price cuts, Commission studies show. The next to suffer would be Spain, Finland, Latvia, Lithuania, Portugal, Slovakia and Slovenia. Sugar is one of the most heavily subsidized sectors under the EU’s Common Agricultural Policy (CAP), which eats up close to half the EU’s annual budget of some 100 billion euros. It was not included in last year’s radical CAP reform. Most EU governments are reluctant to reveal their hands until the result of the WTO dispute against the EU is known. Several states, led by top producer France, have already played down the need for reform before mid-2006, when the current regime is due to expire. Others, such as Britain, say they are still in consultations with their domestic industries. Denmark and Sweden are standing firm on their demands for full liberalization, while others, such as Spain, want to keep the status quo.