ECONOMY

EU to cut sugar subsidies

BRUSSELS – The European Commission yesterday approved a drastic overhaul of a sugar policy that has inflated EU prices to three times the global average and come under fire for years for distorting world trade. EU sugar policy has survived virtually all attempts at reform since its birth in the late 1960s, and is often attacked for harming Third World producers as it encourages millions of tons of EU sugar to flow onto world markets, lowering prices. Yesterday’s confirmation of the reform plans knocked share prices of major European sugar firms lower and angered producers and industry buyers who say the envisaged cuts are too harsh. Spain and other countries said the plan was unacceptable in its present form, while Third World producers who benefit from the old regime said they would lose thousands of jobs. Large producers like Australia said the EU did not go far enough to meet World Trade Organization demands to open up its market. Despite the flurry of criticism, the EU stuck to its guns. «It (EU policy) has been unchanged for 40 years and this has resulted in a European price three times as high as the world market,» EU Agriculture Commissioner Mariann Fischer Boel said. «This is going to hurt, that’s obvious, in some parts of Europe. I want to make this pain as short as possible,» she told a news conference. «Even if it’s tough, it is what is needed.» Fischer Boel’s plan, designed to have no effect on the EU’s overall budget, calls for sharp cuts to minimum prices and production quotas – slashing the EU’s white sugar support price by 39 percent and the minimum beet price by 42 percent. Both cuts would run over two years, starting in 2006-07. The Commission aims to achieve a radical change in the EU’s supply structure with lower production and exports, offset by more imports from developing countries. EU producers unable to cope with lower revenues will be offered generous compensation. Sugar firms struggling with sharply lower revenues that wish to leave the sector will be able to sell their annual production quotas to Brussels under a generous four-year buyback scheme. The plan will now be discussed by EU ministers, aiming to reach a deal in November. Even though the plan is expected to be approved, possibly in a diluted form, it is certain to receive a rocky ride, since several countries are likely to see their national industries collapse due to lower revenue, causing thousands of job losses. ‘Devastating’ Ireland’s sugar producers called the proposal «devastating» and said it would wreck its local industry. The Commission has singled out four countries whose sugar industries may disappear – Greece, Ireland, Italy and Portugal – as growing beet would become less profitable than other crops like cereals and oil seeds. A group of 10 mostly Mediterranean countries attacked the plan way before the Commission was forced to toughen up its proposals due to the World Trade Organization’s rejection of an EU appeal of its 2004 ruling against EU sugar policy. Led by Italy and Spain and backed up by four new member states, this group has enough power under the EU’s weighted voting system to block a deal. African, Caribbean and Pacific Countries (ACP) say the planned cuts will destroy many of their sugar industries and cause thousands of job losses. They say it will be difficult, if not impossible, to move away from sugar into other crops.