8 December 2005

European Union sugar reform

Small developing nations will need help to deal with proposed changes to the European Union's sugar sector, Trade Negotiations Minister Jim Sutton said today.

Mr Sutton welcomed the European Union's agreement last week to reform its highly distorted sugar sector.

"The EU has demonstrated real commitment to reforming its "Common Agriculture Policy" over the last few years. Sugar is a necessary and important part of that story."

The EU sugar market is highly distorted, shielded from world markets by prohibitive tariffs and with guaranteed prices around three times the world price. The agreed reforms include lowering the EU price for sugar by 36 percent over four years. This has not been an easy decision for many EU countries and some will face adjustment. But it has long been needed and the reforms should assist the EU to accept the rapid elimination of its export subsidies, which they use to dump surplus product on world markets.

Mr Sutton cautioned, however, that the reform process was complex.

"Substantial reform of all trade distortions is critical to global prosperity, but we need to be sure that the process is managed to minimise negative impacts on small vulnerable developing countries."

The EU has long offered African, Caribbean and Pacific (ACP) sugar producers preferential access to its high-priced market. While this has delivered economic benefits to many ? including Pacific neighbours such as Fiji ? it has also meant that they have become highly dependent on the inflated EU market. The lower EU sugar price will mean a considerable reduction in their revenues from that market.

Mr Sutton said it was understandable that small ACP countries feel vulnerable.

"Commonwealth Heads of Government, including the Prime Minister, met recently in Malta and highlighted concerns if this process is not managed carefully. They urged the EU to provide transitional financial arrangements and other compensation."

The Prime Minister also reflected these concerns in her discussions in Brussels last week and asked the European Union to reconsider its proposed level of assistance.

Mr Sutton said Fiji and others would need help to adjust to the impact of reduced prices.

"These countries will need to think about diversification, value-adding and other ways to ease the transition with the assistance of the EU and other development partners. In the case of Fiji, New Zealand may be able to help the government to address some of the social implications of this adjustment."

He noted that the agricultural trade reforms under negotiation in the WTO Doha Round would also deliver significant benefits to many developing countries.

Mr Sutton said it was important to work through the ACP sugar issue.

"We would not want this issue to distract from the Doha Round negotiations. An ambitious outcome on agriculture there will provide developing countries with an excellent platform for sustainable economic growth into the future."

WTO Ministers, including Mr Sutton and Trade Minister Phil Goff, are scheduled to meet in Hong Kong from 13 to 18 December to take stock of progress in the negotiations and consider a work programme for concluding the Round at the end of next year. Reforms in agriculture, including domestic support, export subsidies and market access, are at the heart of the Doha Development Agenda.

ENDS

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