- A study of the postponing of the Everything But Arms proposal by the European Commission.
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Dept. of Economics and Natural Resources - FLEC Project in Scientific Theory and Method. |
Stud. agro. Rowan Nidd(L10242)
Stud. agro. Henrik Strøh(L10271)
Stud. hort. Benno Hansen (Hg1997)
Stud. agro. Pernille Strårup (L10269)
Stud. agro. Henrik Peter Ølgaard Lassen (L10065)
Teacher: Søren Brier (M.Sc. Biology / Ph.D. Philosophy of Science)
Scientific tutor: Christian Friis-Bach (M.Sc. Agronomy / Ph.D. International Economics)
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The Royal Veterinary and Agricultural University, Copenhagen. May 2001. |
This report investigates the reasons for the rejection of the Eveything But Arms proposal put forth by the European Commission and some Non-Governmental Organisations, that seemingly would have made up for some of the obvious injustices of the Sugar Regime that is upheld by the European Union to protect its overproducing sugar industry. In particular, close attention is shown to the price of maintaining the Sugar Regime, its relation to future WTO-rules and the highly questionable role it plays as development aid.
In working with the problem we have read practically everything ever written on the subject by the involved parties. This materials includes a report written by the sugar industry to the European Commission, a number of newspaper articles, mainly supporting the Everything But Arms proposal, and of course a lot of other sources, a large part found on the Internet. Always, of course, with thoughts on in which direction the source is biased. We have also described some of the involved parties: Different countries in different situations and a European sugar company.
In short we conclude that the European sugar industry won the debate in the Commission simply because they were so much stronger than their counterparts.
The origin of this paper dates back to the formation of the project group. The overall aim was “something about development” and the group gathered around that. Individual wishes such as “sugar”, “economics”, “EU” and “writing in English” decided the path for us to follow. Our common wish also was to concentrate on something present. At the time EU was negotiating the “Everything But Arms” proposal and we chose that as our starting point. The obvious conflict of interests between the different parties in the negotiations became our point of interest.
The aim of this paper is to present fellow students and other persons with interest in this vast and complex subject, with a paper that presents the issue in an easy and understandable way. Also we wish to use it as an example of a way to work with a subject rather than a problem.
The purpose of this paper is, to teach us the noble art of project writing, and how to avoid many of the associated problems. Furthermore we wish to learn more about the problems with working in a group. Besides that we hope to gather knowledge about the different levels of understanding you can face when working with a scientific paper.
During the process we have had the pleasure of receiving help and guidance from different persons. We wish to thank Søren Brier, Dept. of Economics and Natural Resources – FLEC, Institute for Learning for preventing us from cutting corners. Also we would like to thank Christian Friis Back, Dept. of Economics and Natural Resources – FLEC, Institute for Economics for helping us understand the complexity of the subject. And last we thank Klaus Sørensen, Landbrugsrådet for his assistance. And last thanks to our opponent group for good thought through and useful comments at the halfway seminar.
Benno Hansen Henrik Strøh Rowan Nidd
Pernille Strårup Henrik Peter Ølgaard Lassen
Non-Governmental Organisations
CIIR, Oxfam and Christian Aid recommendations for the reform of the EC Sugar Regime
Consumer prices and the sugar using industries
Invisible strings being pulled?
The precise objective of this report is to unravel why the Sugar Regime upheld by the European Union was not reviewed in accordance with the Everything But Arms proposal, when it so obviously seems to be the right thing to do. The analysis will be done on an international political level, without much thought as to how the different countries involved will choose to handle the inevitable changes internally.
We have decided to concentrate on one product, namely sugar, as it is a very interesting example, due both to the legislation and countries involved. Sugar is also the agricultural product that has been the most hotly debated recently.
Although European sugar legislation is extremely complicated, and far reaching, we have decided to examine it, as we feel that although the sugar debate is very political and economic, it is of great importance, as it affects the agricultural production of over a quarter of the worlds countries. When first confronted with the world sugar market, one is overwhelmed by the complexity of it, as there are so many different interest groups involved, that it makes it very hard to find a clear boarder to the problem. After much discussion and guidance, we decided that it would be best to concentrate on the political and economic aspects of the sugar problem, as they where the best documented, and the information was readably available. Not only that, but we also felt that it was impossible to begin to speculate over the social consequences that European sugar policies have, and will have in countries on the other side of the world. That said, it is impossible to separate economy and social consequences, as the two are unavoidably linked. To overcome this problem, we agreed that we would only briefly name the most obvious social consequences, and those that are directly related to the world sugar market.
Although we had decided to concentrate on the political and economic aspects involved with the EU’s sugar policies, we still needed to define the situation, as a way of coming into the problems involved with the EU’s sugar policies. After researching and looking at the situation from different angles, it became clear to us that the only reason for the current sugar policies is because of the different European interest groups who are earning large amounts of money due to the current EU legislation We therefore feel that the best way to look at the sugar situation, is to examine the different interest groups, both within and outside of the European Union. By attacking the problem from this angle, we have the opportunity to look both at the situation in Europe as well as the rest of the world.
It has also become clear that the interest groups are very divided, as those involved in the EU’s sugar agreements, are earning very well from it, where as those who have been kept out, are slowly being strangled economically. To best illustrate the problem and the related complexities we have decided to use concrete examples, and in some cases, concrete examples. By tackling the project in this manner, we believe that we can best analyse the problems related to the EU’s sugar policies, while still keeping the project interesting and to the point.
The background to the problem is the Lomé Convention. The origins of this arrangement now, advantageous to the ACP (Africa Caribbean Pacific) countries, stem from the period in which England joined the EC. England was a large importer of raw cane (sugar cane) and possessed ample refinery capacity and thus wanted a guaranteed supply. Prices on the world market at the time were extremely high, and the reason that the rest of the EC were to have no qualms about the arrangements. The EC was fighting with serious sugar shortages at the time and wanted to cover itself against further possible price increases. The result was an agreement for the contractual supply of 1.3 million tons of sugar per year. The lower world market prices became in subsequent years, the more attractive this agreement became for the ACP countries exporting sugar to the EU. The situation has since become so askew that the EU must sell the largest part of the imported sugar on the world market.
The European sugar industry is a protected market, as farmers are paid three times the world price for their sugar, they thus have no interest in a opening of the borders to the free import of sugar from the rest of the world. The ACP countries involved in the Lomé Convention also have no interest in seeing the borders opened, as they are receiving EU prices for their sugar, and with the opening of the borders, they will have to compete on the open market with the rest of the worlds sugar producing countries. The third and possibly most powerful opposition group to the opening of the European boarders to sugar imports is the European sugar producers, for example DANISCO, who have a total monopoly on the Danish and Swedish sugar industry, and charge three times the world sugar price for their sugar. The strength of the European sugar industry can be seen by the fact that sugar, which should have been allowed onto the European market in 2004, is the only agricultural product whose entrance on the European market has been pushed to 2009.
Due to the monopoly on the European sugar industry, the European consumer is paying 50 billion Dkr. more a year for their sugar than if it was bought on the world market. Due to these high prices, the European sugar producers can afford to dump their excess sugar on the world market, thus bringing the world sugar price down, and hurting sugar producers throughout the world, most of whom cannot compete with the heavily subsidised sugar being exported from Europe.
The opening of the EU borders to world sugar imports is meant both as a way of helping the worlds poorest countries sell their sugar, and as a way of reducing overproduction of sugar in Europe, but the free import of sugar will financially hurt both the European sugar producers, and the farmers in the ACP countries. On the other hand the opening of the EU borders will mean a lower sugar price for the European consumer, and a chance for many of the poorer countries to compete for higher sugar prices on the open market.
Why has the European Unions Sugar Regime not been reviewed in accordance with the Everything But Arms proposal?
As the issues concerning European sugar policy are so complex, and can be seen from so many different angles, we have tried to define the different points of view held by the members of this group. The reason that we have decided to do it in this way is so that the reader can get an insight into our motives for writing this project, and from that, decide how much personal bias is shown in the project. We feel that this is necessary, as although we would like the project to remain totally objective, we realise that this is almost impossible, and therefore feel that by making our points of view clear from the start, we will make the project more objective. Deciding which angle to address the problem from was not an easy task, as there was a great deal of discussion within the group as how we best should confront the problem. We eventually decided that it would be best if we could combine all our different points of view within the project, as looking at the issues from as many different angles and points of view as possible will help keep the project well rounded and objective. As it turns out, however, in spite of the diversity of our general opinions, with regards to the sugar debate our views were more or less the same as what can best be described as the “general media consensus”.
Seen from this consensualized humanitarian point of view, it seems obvious that the EU’s sugar policy is unfair and harmful towards the rest of the world, but mainly for the world’s poorest countries, many of whose economies are extremely dependent on sugar production. This also brings up the issue of social responsibility - the question of if we are responsible to help and protect the world’s poorest countries. As a group, we agree that the rich Europe does have a social responsibility to help the world’s poorest countries, and this point of view will be evident in the project.
Financially the EU’s sugar policy is unsound, as it is based on a false market, with the European consumer effectively funding a business that wouldn’t otherwise have been profitable. Although we realise that they are protecting themselves, it seems unreasonable, that European farmers and agricultural organisations are once again complaining over EU policy, even though they receive huge subsidies for their sugar. These subsidies are paid not only for production, but also for overproduction, which in general agreement is “wrong” – and certainly in this case as it promotes a false market, and leads to the situation where the EU is forced to dump its excess on the world market, thus lowering the world sugar price, and again hurting the worlds poorest countries. Globalisation and liberalization are subjects that have been completely neglected in this story. As will become evident this is a serious problem to the quality of the debate.
Lobbyism is an issue that we have mixed feelings over, as although we realise that it serves a purpose, in many cases, we feel that in the case of sugar it is the main reason that the EU’s sugar policy has not been changed in the last 30 years. Due to the fact that we hold the view that the EU’s sugar policy should be changed, we are therefore against lobbyism in this case. Due to the strength of the European sugar lobby, the EU as an organisation is almost powerless to change its sugar policy, even though it may not agree with the present sugar policy. This is a situation that we do not agree with, as it can best be described as ‘the tail waging the dog´. The Non-Governmental Organisations however has a similar kind of influence that must be addressed. Sometimes it seems this blurry group has attained a kind of monopoly on having the “right” opinion. This can be problematic as well.
As said before, these as our points of view on the above mentioned issues, and have been included to give the reader an insight into our thoughts on these issues, in the hope that it will keep the report as objective as possible.
The real morale of this analysis however, is to fittingly criticise our sources of information. This report is written with respect to the directly opposed opinions of the two sides. Any material from the sugar industry or the beet growers must be reviewed with thoughts on their goal of sustaining the current market conditions regardless of any consequenses others might claim it has elsewhere in the world. It is also important to remember that the agricultural sector has a very tainted profile in the consensualized media debate and sometimes opt to say nothing rather than increase their unpopularity. On the other hand, the NGOs have very little to none direct financial interest in this case, and seems to neglect the possible harms to some of their countrymen. They show zero confidence in the honesty of their opponents, rather the opposite, and are equally guilty of using incoherent figures. Also one needs to read news articles remembering their object of having the “right” opinions and selling papers.
Some biennial plants store nutrients for the forthcoming season. Many plants lure animals into aiding them in dispersal of their seeds by encapsulating these in sweet tasting and energy rich fruits. This is done with sugars.
In this chapter the current situation on the world sugar market is outlined, beginning with the cultivation of the two sugar crops.
Homo sapien is no exception from its competitors and has always desired for these
sweet and readily available nutrients. This led to the discovery and spread
of the giant grass sugar cane (Saccharum officinarum) from the southern
Pacific to China, Indonesia and India and of course ultimately to the rest of
the tropical world. Not too far out of the tropics however, as the sugar cane
plant both photosynthetically and otherwise biologically is a pronounced tropical
species (Raven, p. 146 & 747).
By 500 B.C. Mesopotamia and Persia had become important sugar cane growing areas and over the course of the years the Persians developed a technique for purifying the sugar by dissolving and re-crystallizing it repeatedly. About a millennium later the Arabs went to war in the name of Islam and thereby further spread sugar to the lands surrounding the Mediterranean. About 700 A.D. the Egyptians profoundly enhanced the purification process, which increased the popularity of the product. Sugar did not reach Northern Europe until the Crusades. Venetian merchants dominated this market of an imported exotic for years but slowly refineries were built all over Europe.
Finally Columbus brought sugar cane with him to The New World where mass production was established on basis of ruthless exploitation of slave labour from Africa. This dumped the price and by the year 1800 sugar was a common household grocery item. (DANISCO, p. 1-6)
In 1747 the Berlin chemist A. S. Marggraf discovered he could isolate
sugar identical to that obtained from sugar cane from various species of beet
(Beta vulgaris [Chenopodiaceae]). The sugar content of these plants was
low however, and the discovery was not found financially important. But one
of Marggraf’s students, F. K. Achard, continued the studies and expanded them
to include breeding of the beet species.
When the slaves on San Domingo rioted
in 1791 Europe experienced a sugar shortage and prices went up. Such conditions
surely helped F. K. Achard in persuading the German king into supporting him
financially when he in 1799 presented him with a gift of 5 kilos of German beet
sugar. In 1802 F. K. Achard opened the worlds first beet sugar refinery. Just
in time: In 1806 Europe was cut off from overseas sugar supplies due to the
Napoleonic Wars - and thus in spite of a sugar content of only 3% European sugar
beet growing flourished. When Napoleon was beaten at Waterloo 1815 the overseas
trade routes were reopened and the cheaper cane sugar returned. In the course
of 10 to 15 years every single European refinery had closed – except in France
where Napoleon had strongly supported the industry by funding agricultural and
technical research and imposed high tariffs on imports. By the mid-19th
century the French sugar industry was able to compete with cane sugar and the
cultivation of sugar beet spread to the rest of Europe once again. By 1860 the
sugar content of the cultivar had risen to 8% - almost a tripling! (DANISCO,
p. 1-6)
Thus the world market is split between sugar cane areas in the tropics and sugar beet areas in temperate regions. Sugar cane contributes roughly two thirds.
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From the time of the birth of European sugar beet growing and up until modern times a number of things profoundly changed the world. Monarchies became democracies, colonies became countries and the slaves were emancipated. Former colonies were still dependent on the European market though; caught in a situation as raw-material producers and buyers of finished products. (Pedersen, p. 9)
In 1976 the first Lomé Convention was signed to replace previous trade agreements between certain European countries and their former colonies. The agreement was to be renewed every five years, except for the 4th that ran for ten years and expired on 29 February 2000. With every new Convention more developing countries joined, and in 1998 it included 48 African states, 15 Caribbean states and eight Pacific states (African/Caribbean/Pacific-countries) totalling 71 states[1] worldwide - 75 percent of the worlds Least Developed Countries (LDC). The Lomé Conventions are by far the most advantageous deal any developing country has ever acquired. By fulfilment of the goals of the conventions – to boost ACP-exports and reduce their dependency on production of a limited number of raw materials – Europe hoped to help their former colonies develop. The basic principle of the Lomé Conventions is toll free access to the European market for the ACP countries. It also deals with development aid and is a forum for political debate. Of course it’s a bit more complicated than that – and sugar has its own protocol!
Under Lomé the European Union agreed to buy set quotas of various products without charging tolls. The important exceptions were agricultural products already subsidised internally by the EU, products imported from non-ACP countries and the Safeguard Clause, which has never been used but potentially allowed a EU country to impose quotas on a given product. Lomé also included price support schemes – such as STABEX (certain agricultural products) and SYSMIN (mining products) – to protect the vulnerable economies against fluctuating incomes. Sugar, rum, banana and (since Lomé IV) meat had their own protocols.
Protocol 3 of the Lomé Convention indefinitely pledged the EU to buy set amounts of sugar every year at a price linked to that paid to European farmers. The ACP-countries considered this a small revolution. Also the Safeguard Clause cannot be used against sugar. Under Protocol 3 the ACP-countries has sometimes gotten double the world market price for their sugar. One of the basic problems with this sugar (and meat) deal was and is that the EU already produces more than it consumes. Therefore the EU heavily subsidised sugar exports thereby forcing the world market price down. This also lowered the income received from the ACP-countries exports not included in their EU-quotas. The export-subsidies paid by the EU soon exceeded the net financial advantage to the ACP sugar producing countries – in other words it would be cheaper for the EU to just hand over the money (Pedersen, p. 16)!
(Pedersen, p. 1-16 and Jayasekera)
So did it work? Did the ACP-countries get their export running and their industry diversified? No. Actually the African countries had their global market shares halved and even on the European market they lost shares. The pattern of the Colonial Age still existed: Export of raw materials, import of processed wares (Pedersen, p. 10-11). Thus the Lomé Conventions has received criticism from both ACP-countries and Non-Government Organisations.
Figure 3: African ACP
to EU exports1976-‘92. Squares are value in billion € (left scale), crosses
are market share in percent (right scale). (Eurostat from Pedersen, p. 11)
January 1995 the World Trade Organization was founded to rid the world of trade barriers. The Lomé Conventions violates the rules of the WTO in several ways and is therefore illegal. Most developing countries are or have been very reluctant to join the WTO– yet the majority of them have.
An example of the forces at play is The Banana War. In 1993 four Latin American countries complained to GATT (General Agreement on Tariff and Trade), that there were imposed high tariffs on their banana exports to the EU. The EU however successfully bought off three of these countries with only Guatemala holding its case. The real players in this story though are the USA banana-multinationals. So since late 1995 USA has run its case in the WTO backed by Mexico, Honduras and Guatemala. Several Caribbean islands are outright dependent on the existence of the Banana Protocol of the Lomé Conventions that the EU now seems unable and unwilling to defend. The Banana Wars took the headlines a few years ago – today it’s sugar. (Pedersen, p. 49-53 and Jayasekera)
On the 5th of October 2000 the European Commission led by the Commissioner of Trade announced their “Everything But Arms proposal”. This would open the European market to the world’s poorest countries – with the one exception, weapons – thereby indirectly but effectively supporting the weak economies of these countries. The proposal was heavily opposed by the European sugar industry assisted by the Commissioner of Agriculture. Thus the case became a subject of internal Commission quarrelling. The proposal, initially supposed to be implemented in the course of three years (2002 to 2004), was postponed until the year 2009. Why, and if this was a reasonable decision is what this report seeks to clarify.
In this paragraph we will take a very brief look at players in this game, and how they stand as opposed to each other. The different levels of influence are numerous and too complex to be dealt with in detail. Among the players, are the The Non-Government Organisations (NGO) who participate on both sides, the European sugar industry and the European sugar farmers. Also instrumental are the differences of oppinion within EU and between its members, plus there are the ACP and LDC countries who are outside the EU..
As described earlier the E.U. sugar policy favours certain groups, and place others in less favourable situations. In between are the very powerful and important lobbyists and NGOs who are either working for status quo or a complete change of the situation. In this case change is a complete or partial removal of trade barriers. It will later be seen that the position of the various players on either winning or losing sides is almost solely decided by the point of view held.
The sugar producing farmers within E.U. benefit from E.U’s sugar agreement because of the much higher sugar prices in EU. They are not subjected to open competition and are thereby protected by trade barriers. Because of the agreement (Lomé and EU sugar policy) the farmers receive a price for their sugar, which is way above the world market price. Sometimes the prices they are paid by the EU are more than three times the world-marked price. If the EU sugar policy did not exist these farmers would have great difficulty competing on the world marked, and competition would become harsh even on the domestic marked. This is partially due to rising in land prices in areas producing sugar beet. ( Politiken Feb. 12 2001, “Pengene kan ligeså godt ligge I min lomme”)
All the EU member states have a sugar quota (Danske Sukkerroedyrkere, 2000). The European governments benefit from the high prices through more tax income gained from those earning from the high prices. But some of this income is put right back into to EU budget to pay for the sugar. Some claim that this agreement is neutral to the taxpayers. (CEFS/The European Sugar Regime, Aug. 2 1999, and Politiken Feb. 12 2001)
An aspect that blurs the image is the fact that the sugar agreement secures employment and working places and therefore is beneficial to the countries in other ways.
If these countries did not have the import guarantees from the EU they would be forced to sell their sugar on the world marked with both its unstable prices and demand. Because of the Lomé agreement The ACP- countries receive both the same high price as the EU-farmer for their sugar and they also have an export guarantee. The buying power pr. ECU in these ACP countries is much higher than in the EU. Therefore this agreement is extremely favourable to these farmers.
A lot of these countries are very poor and they are more or less mono economic and often their most valuable crop is sugar. They have based almost their entire economy on this one crop and therefore they are very economically vulnerable and dependent on their export of sugar to the EU. Because of the EU import guarantee these countries have a secured income and therefore they are able to invest in developing their economics, and thus raising their level in education, infrastructure and health care. Therefore even though they are outside EU they are fighting vigorously to maintain the current situation (Press release, Sugar Association of the Caribbean, Nov 3 2000).
There are a few very big companies within the EU, who both buy or refine all the sugar produced within the EU plus the imported quotas. These companies have more or less monopolized the sugar trade within the EU. These companies make a lot of money on the sugar regime and are therefore understandable concerned about any changes. One of their concerns is the risk of foul play, they fear that the EU will be flooded with sugar from countries that transit their sugar through the LDC-countries.
Other companies like Carlsberg A/S and Toms Chokoladefabrikker A/S use a lot of sugar as raw material. They buy it from the sugar producers at the high EU price but are compensated for the difference between the world marked price and the intervention price by the EU. However these companies are still concerned about this monopolistic situation (Politiken, Feb. 11 2001).
These countries are often mono economic and therefore forced to produce and sell their sugar to the world marked price. With the EU dumping of subsided sugar on the world market, the world-sugar price is below the prodsuction cost, these countries therefore cannot compeat. This means, that the EU politics are preventing these very poor countries from earning on the crop most suitable to their climate and technical expertise. In other words the EU sugar policy is helping to keep the LDC at their present level.
EU consumers pay overprize for their sugar because of the monopoly on sugar production in Europe. The sugar producers argue that the consumer will not see a fall in prices as a decrease will not reach the consumer but be eaten up by increased profits earned by the companies using sugar as raw material e.g. Coca-Cola. (CEFS, 1999) On the other hand the consumers are also the taxpayers and thereby finance the EU sugar policy and thus pay twice for their sugar.
These organizations are neither directly winners nor losers. But they work to support either those who want to maintain the present situation, or those working to better the conditions for the worlds poorest countries. In Denmark we have Landbrugsrådet and The Danish Sugar beet farmers organisation supporting the farmers. On the European level, CEFS support a restrictive policy in favour of the European farmer. On the other hand organisations like Mellemfolkelig Samvirke and IBIS are striving to support the removal of the trade barriers and thereby hopefully help the worlds poorest countries to develop.
Most of players in this very complex game are now presented. Most of them have a firm idea of what they belive is best. Some of them have a very sharp, simple and not so broadminded way of seeing the problem. Others view the situation in a larger and more global perspective. The NGO´s are fighting what could be called the just cause. The farmers and others who are involved in the situation belive that they also have a right to continue making a living, and therefore they will fight against any change, as they have no interest in inviting the competition inside.
Concluding who is right or wrong is decided almost entirely by the point of view and we will discuss this problem later.
To better illustrate the different types of sugar producing countries, and how they are affected by the EU’s sugar policy, we will look at an ACP-country, a Least Developed Country, and finally a developing country.
The case studies will help us see that the situation is totally different for each of these countries and how a change in EU sugar-policy will affect them differently.
Finally a European sugar company is described.
If a country like Mauritius did not have the beneficially agreements (Lome convention) with the EU, the income recieved from its agricultural exports would fall significant and hereby effect the national economy. As the price received for sugar by the countries within the Lomé-convension, is three times higher than the world market price, and the countrys income depends more than 40 percent on sugar, the economy is very elastic to price changes.
The Lome convention has made many of the APC-countries totally reliant on sugar, so a scraping of the convention will seriously affect the economy and socio-economic aspects of a country like Mauritius. The ACP countries will therfore be forced to either find alternative agricultural products, or accept the fact that they now have to compeat on the world market at lower prices. This would be an extremely serious situation, as the countrys whole infrastructure is concentrated on sugar-cane production, and other agricultural production is almost impossible due to climatic and geografical conditions.
In the period 1972-73 sugar exports were more than 25 percent of all exports, from ACP-countries (Hine, 1985). Mauritius’ economy has become very dependend apon sugar exports, which total 13 percent of GNP which equals almost one third of all exports. In 1988 the sugar industry employed 15 percent of the work force, and using allmost 90 percent of all agricultural land. Sugar exports have now risen to 40 percent of all exports. A sign of hope for Mauritius is that since 1968, when it gained independence, The revenues earned from tourism, and the export of cloth has risen by 5% anually.
Brazil as opposed to the other sugar producing countries is not dependant on sugar exports, and has the possibility of selling more sugar on the world market if the prices go up.
Compared to the other sugar producing countries, Brazil actually uses their sugar production themselves. This is due to the fact that in the nineteen eighties Brazil started using ethanol for fuel instead of petrol, because of the high oil prices. The ethanol was made out of sugar, and for this reason Brazil was not dependent on selling their sugar on the world market, but had an opportunity to focus on the domestic market. This domestic market is very important, as if the world sugar price is low, they will decrease their exports in favour of the domestic market. (EF´s sukkerpolitik i et internationalt perspektiv, september 1989).
The Brazilian government allocates annual production quotas to farms, mills, and distilleries to regulate the location, size, and distribution of the sugarcane crops. (The World Bank Research Observer, July 1992). Ethanol production is not cost-competitive enough compared to imported oil, but the ethanol price is high enough to ensure that distilleries fulfil their quotas.
The empirical evidence suggests that Brazil’s capacity to shift between sugar and ethanol in response to changes in oil and sugar prices is greatly limited under current policies.
Studies indicate that the production of sugar and ethanol only changes when quotas changes, so the change can only happen by government intervention. (The world Bank Research Observer, July 1992).
Potentially Brazil can increase their sugar production, even at low world market prices, due to their low production costs. In the absence of government intervention, a model used by Wong, Sturgis, and Borrell, indicates that for every one percent increase in sugar exports by Brazil, the world market price is lowered by 0,3 percent. (The world Bank Research Observer, July 1992).
But what can Brazil gain from a change in sugar market? Studies indicate that there will be an overall gain in utility for producers and consumers if these intervention policies were removed.
If trade barriers were removed the world market prices would rise by 13 to 30 percent. This possible sugar liberalization could lead to a gain for low- and middle- income developing countries of up to $5 billion in revenue (The world Bank Research Observer, July 1992).
In Brazil, the consumption of sugar is twice as high as in other countries, almost 45 kg pr. Capita. Agricultural production employs one third of working force. In Brazil domestic sugarcane, sugar, and ethanol prices are fixed, and exports are controlled. These interventions insulate producers and consumers from changes in world market conditions. (The world Bank Research Observer, July 1992).
Mozambique is different from the other two countries in many ways.
The country has just come out of a 20 yearlong civil war, which has decimated their sugar-production. The lack of infastructure, and huge areas still unusable due to landmines makes it very hard for farmers to produce and freight sugar cane, on top of this there are no mills or sugar reffinerys, and due to the war and lack of infrastructure there is no money left to build them.
Mozambique has great potential to become a large sugar producing country. The tropical weather means that there is sufficiant water supply, and the flat land makes harvesting easy. Not only is the conditions for producing sugar-cane perfect, but the salaries are also very low compared to the other sugarproducing countries. This mean that if the EU-trade bariers are removed they will be able to compete equaly with the other sugar-producing-countries.
The three countries that we have looked at are affected by the EU-trade policies in different ways. If we look at the ACP-countries we can see that the Lome agreement is very important for them. Most of them are mono-crop-producing (sugarcane) and the removal of the sugar barriers means that they will loose a great deal in export income. Some ACP-countries, like Mauritius, have an interest in things staying unchanged, because of their huge dependence on the export of sugar to the EC.
Brazil´s situation is much more different. The domestic demand for sugar and sugar used to make ethanol is the largest amount of sugar per capita in the world. The Brazil goverment can set the qoutas up if they want or need to, thereby the sugar-industri can adjust to the worldmarket. Brazil is the largest sugar-producing country in the world and a removal of EC-sugarpolicy will mean that Brazil will be very competive in this market due to low cost in generel.
Mozambique is one of the Least-developed-countries and not included in the sugar-agreement like the ACP-countries. If we only look on the trade and not how the difficult situation in the country really effect the farmers, we will see the increasing prizes on worldmarket effect the country for the good. We think that worldmarket prices will increase if the EC cancel sugar-policy.
A lot of things have to be done before Mozambique can compete equally with major sugar producing countries but Mozambique has all of the things to become one of the majors in this industry due to tropical weather, flat landscape and cheap labour.
Everything But Arms is new proposal that will benefit least developed countries similar to the agreement the ACP-countries got. Lower tariffs for these countries exporting to the first world but we will not go into this proposal right now.
DANISCO is the Danish sugar giant holding a monopoly on the Danish market.
Its history goes back to 1872 with the founding of DDS (“The Danish Sugar factories”) by C. F. Tietgen the Danish magnate of the times. The following years the company very aggressively expanded and bought other Danish sugar companies the last of which succumbed in 1989. The same year DDS fused with DDSF (“The Danish Alcohol Factories”) – their common interests obvious - to become DANISCO A/S. Also a rationalization of the overall production was implemented. In 1991 factories in Germany and Sweden were bought and DANISCO had risen to a 4th place on the European market! When the Polish sugar industry was to be privatised DANISCO also bought 49% of the stocks in “Rolimpex Cukier Sp.z.o.o.” which is one of the largest companies in the Polish agro-industry dealing with much more than sugar – also DANISCO has plans for Lithuania (danisco.com). DANISCO Sugar includes a Food & Beverage Sector (wines, alcohol, frozen ready-prepared dishes, jam, mustard and much more), an Ingredients Sector, a Packaging Sector and of course a Sugar Sector (not only sugar but also beet seed production). DANISCO is constantly adjusting itself so for example the alcohol sector has already been sold. Besides sugar DANISCO also produces many related products for the foodstuffs industry – they are the 3rd largest producer of artificial sweeteners in the world. (DANISCO, p. 6-13 and http://www.danisco.com)
Holding a monopoly on the Danish market DANISCO is watched by the authorities to ensure there is no foul play – as are other companies holding large market shares (Carlsberg, Skandinavisk Tobakskompagni). Managing director of DANISCO Henning Brüniche-Olsen has said that: “I will not hide that we are very happy with the Sugar Regime, and that we have made a lot of money due to it in recent years.“ – in fact they’ve even profited from renting storage capacities for the excess sugar to the EU (Andersen, p. 62). And DANISCO does make a lot of money. In 1982 “Monopoltilsynet” – the governmental institute for investigating companies dominating a market – wrote in a report: “The profit from sugar sales on the home (Danish) market exceeds what we usually accept. But an intervention in the pricing could violate EU-laws.” DANISCO was the first Danish company to open a lobbyist office in Brussels. (Andersen, p. 59)
In short DANISCO is a very powerful company. It is well established, its production system is highly technological, its activities are widely branched and they are economically powerful.
There are many Non Governmental Organisations (NGO’s), involved in the sugar debate, as they believe that the sugar regime, and the European sugar policies are unfair towards foreign sugar producers, and especially the worlds 48 poorest countries. There is also the feeling that it is absurd that the European Union gives away money in the form of foreign aid to the worlds least developed countries, but at the same time strangles the same countries economically, by keeping them out of the European market. This sugar policy, which the European sugar Lobbyists claim is self-supporting, is to the NGOs far from self-supporting, as the money comes from the European consumer (Politiken, 14th of February 2001). Opening the European borders to sugar imports would not only lower the price paid for sugar by the European consumer, but it will also give a boost to the economies of many third world countries, many of whom are totally reliant on sugar production for their livelihoods. ”The money comes from the European consumer, who must give nearly 50 billion more for their sugar products than if they where bought at the world sugar price. This is equal to 4,5 times Denmark’s foreign aid” (Politiken, 14th of February 2001. Our own translation).
If the sugar price is so low, and the production of sugar being made unprofitable for many third world countries by the EUs dumping of millions of tonnes of sugar onto the world market, why is it then that they continue to produce sugar? The reason is that many developing countries have no option but to produce sugar, as their thin top-soils and severe weather make other crops unviable, while their lack of natural resources makes diversification away from sugar extremely difficult (Ian Linden, Reform of the EC sugar regime 1992). In many of these countries, the soil, the terrain and especially the climate are adapted only for sugar production, and they are not in a position to simply switch into doing something else. When a hurricane hits some of these countries, sugar cane seed happens to be the only crop that can resist the destruction that hurricanes cause. In most cases, sugar would not have been planted in the first place if something else could have been (Mr Hagelberg Reform of the EC sugar regime 1992). For countries where diversification from sugar is an option, the EC has in some cases actually stood in its way. Mauritius, which has made every effort to adapt to changing economic pressures, had a voluntary export restraint agreement imposed on it in 1979, because its clothing exports were seen as a threat to EC industry (Ian Linden, Reform of the EC sugar regime 1992). These countries can therefore be described as being stuck on the sugar treadmill.
The problem with the sugar issue, is that sugar production is extremely closely linked to the livelihoods of the populations of many developing countries, most of whom already live on the brink of poverty, so for many developing countries the sugar issue is literally a question of life or death. Ambassador James Matherson of Guyana states: ”In the social and economic context of my country, Guyana, the sugar sector can be described as the backbone of the country’s economy. It is the largest earner of foreign exchange”. The affect that the sugar industry has on the lives of the country’s population can be futher gauged in another of Ambassador James Mathersons quotes, ”Yesterday I was told by the sugar union in my country that, while there are 20 000 people employed in sugar, there are 120 000 people directly affected by these workers. And when one extends it further, in terms of people who are employed in ancillary occupations, you’re talking about over 200 000. That is in the order of a quarter of the population of the country (Ambassador James Matheson of Guyana, Reform of the EC sugar regime 1992). This total reliance on sugar production for ones livelihood is a far cry from the situation within the EU, where sugar production, because of the present sugar regime, is the most profitable crop to grow. Earnings on Sugar Beet are two to three time higher than those on corn crops, and Sugar Beet growers have been able to take home between 3000 – 6000 Dkr. more per hectare, than farmers growing wheat or barley (Thomas Hundsbæk Politekens net avis sønday 11. Feb 2001).
The aim of the “Everything But Arms” proposal should be to reduce sharply domestic production while protecting the interests of the African, Caribbean and Pacific states signatory to the Sugar Protocol. To this end they propose the following measures:
The withdrawal of price support for any sugar beet production in excess of domestic self-reliance minus the preferential imports provided by the ACP countries – equivalent to around 9.5 million tonnes. This reduction should be achived over a five year period through the abolition of B quota support and a 1.3 million tonne reduction in the A quota
The creation of a financial mechanism to compensate ACP exporters for price cuts introduced as a result either of CAP reform or a GATT Uruguay Round agreement. The aim of the Mechanism should be to facilitate investment designed to raise the competitiveness of ACP industries, and promote diversification within the sugar industry and into other economic activities.
Any compensatory package should be made conditional on commitments by governments to implement programs designed to protect the poorest and most vulnerable sugar producers from the effects of price cuts. This could be achieved through the participation of local trade unions, associations of agricultural producers and NGOs in the country concerned.
Urgent examination of trade restrictions the European Community imposes through tariff escalation, quotas, minimum price controls and rules of origin criteria in sectors where ACP exporters enjoy a competitive advantage. They note with concern that, despite Lomé preferences, many Caribbean countries continue to find it easier to export horticultural products and textiles to the US markets than to the EC.
The creation of a freight assistance fund to compensate ACP exporters for the high transport costs incurred in supplying the EC market.
(Reform of the EC sugar regime 1992)
Due to the climate, soil type and infrastructure of many of the world’s developing countries, they have no choice to but to grow sugar cane, even if the low world market price is making sugar production unprofitable. This is a vicious circle, as due to the unprofitability of sugar production for the worlds developing countries, due to the present European sugar regime, these developing countries do not have the monetary resources to diversify there agricultural production and therefore their economies to produce anything else, they are therefore trapped on the sugar treadmill. The everything but arms proposal will not only give the worlds least developed countries a chance to compete on the world market with a product that they are climatically suited to growing, but it will also give them the resources to build up their economies and infrastructure, and therefore making them less reliant on foreign aid.
We now take a closer look at the reasons for sustaining the Sugar Regime. Some of these points of view are unspoken, because the beet growers and the sugar industry prefers to keep quiet rather than risk
The European Commission has made an early estimate of the costs to themselves of the Everything But Arms proposal to total just over 1 billion €. This estimate is calculated from an estimate of post-liberalized LDC-imports of some 2,7 million tons per year and relies on some quite optimistic assumptions, i.e. the budget-neutral transition to ethanol production and cane sugar refining by the European sugar industry (EC, 2000). Three months later a more pessimistic assessment was done – pessimistic with regards to the ability of the developing countries to improve and adjust their infrastructure. This estimated a cost to the EU of 263 million €. (Landbrugsraadet, 2001) Both of these are short-term estimates and imports are likely to increase over the coming years.
The European sugar industry lobbies through their organization CEFS[2] their case in the report The European
Sugar Regime. According to this paper as described below, the so-called
Sugar Regime (Common Agricultural Policy plus the Lomé Convention) is of vital
importance to the EU and it’s rural employment situation, it’s environment,
it’s farmers, taxpayers, consumers and agri-foodstuffs industry. Many of these
issues are beyond the scope of this report due to our methodical neglect of
internal EU affairs. However, for various reasons some of these points will
be briefly thouched upon.
First and foremost, CEFS argues, that the Sugar Regime is a success. During it’s thirty years it has effectively fulfilled every objective (CEFS, p. 2):
Making products of high quality available to the European consumer at
reasonable prices.
Funding the quota sugar exports to third world countries through levies
paid by producers.
Providing some of the sugar-producing developing countries
with guaranteed export quotas.
Ensuring sufficient incomes to farmers.
We now take a closer look at the position of the EU on the world sugar market. The media coverage of the sugar review, the general market conditions of the sugar industry and the fiscal implications of the Sugar Regime as seen from CEFS’ point of view.
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This instability has led to price protection policies virtually everywhere around the world: Mexico imposes 156%, South Africa 105%, Japan 103 yen per kilo and USA 36 cents per lbs just to name a few. In other words the EU toll of 419 € per ton is by no means exceptional. On average the world market price is 50% of production price (CEFS, p. 9). Consequently the world market is really a dumping market for excess production. To compete on these terms would be unrealistic. If a Free World Market is to be constructed the EU cannot do it alone – such problems must be addressed in a global forum, i.e. WTO. (Sørensen, 2001)
The EU exports only some 20% of its production while other exporters go as high as 85%. The resent growth of the world market has been covered by Cuba, Thailand, Brazil and Australia. Not by the EU. It is a most dubious claim, therefore, to say that the European Union’s exports are having a negative influence on the world market prices to the detriment of the poorest countries. In CEFS’ own words, it’s outright nonsense. (CEFS, p.7)
Reading the daily paper these days can be a harrowing experience for a beet-grower. The beet-grower feels threatened financially while having to endure massive opposition from leading media, humanitarian organizations and in Denmark from a newly appointed Minister of Foreign Affairs. Seen from the growers’ point of view, this complicated issue has been wrongly or misleadingly covered in mass media because some politicians needed exposure and a message easily swallowed by the masses. Hopefully there really is no conspiracy to bring the European sugar beet growers to their knees, but it’s worthwhile to look at the way the (Danish) media have been covering the issue.
Mogens Lykketoft, newly appointed Danish Minister of Foreign Affairs: “It is regrettable that opposition from the Commissioner of Agriculture, the South European farmers and the sugar industry lobbyists seems to hinder a sufficiently far-reaching proposal to the poor countries.” (Politiken, 14th of February 2001. Our own translation.) Notice how only South European farmers are attacked despite their obvious common case with the Danish farmers.
In an article about the war in Congo, Danish beet growers are all of a sudden involved: “As long as the EU is taking away the necessities of life from African farmers with heavily subsidised meat exports, as long as the fat sugar beet growers of Lolland-Falster has interests in keeping away i.e. Zimbabwean farmers’ cheap cane sugar from the European market, […] we should be ashamed.” (Weekend Avisen, 23rd-29th of March 2001. Our own translation and italics.)
Also, an early estimate of the possible LDC-exports of about 100.000 tons is repeatedly used in the debate despite the fact that this number is completely incoherent with the estimates made by the European Commission.
Generally there’s a tendency towards demonising the beet growers. It is at least understandable that a beet grower might be offended, and such debate can only further polarize the parties.
“The sugar regime […] is a gift to the European sugar industry and beet growers […] paid for by the European consumers, that pays almost 50 billion Dkr more for their sugar than if it’d been bought at world market prices” (Politiken, 14th of February 2001. Our own translation.) But recalling the structure of the world sugar market previously explained, it’s hard to imagine the EU relying on such unreliable supplies. And the figure of 50 million Dkr does not correspond directly to what the consumers could possibly save – first of all because it isn’t possible to produce sugar that cheap. Also, the European prices are not only stable, they’re also relatively low – each year the average expenditure of the sugar consumer is equivalent to what he spends filling the tank of his car just once. Expressed in purchasing power parity sugar is comparatively cheaper in Europe than in various developing countries. (CEFS, p. 4)
Should sugar prices drop the ordinary consumer is rather unlikely to notice any change. Because while sugar prices have been declining in recent years, sugar-containing products have gotten more expensive. This is true for both the EU and in USA it is emphasised by CEFS, CIBE[3] and The American Sugar Alliance[4] alike. Interestingly The American Sugar Alliance is up against the sugar using industry, not NGO’s primarily, when debating the issue of shutting down the American sugar price policy.
Figure 6: Recent study of sugar and sugar-containing product prices in Germany. While sugar prices drop, sugar-containing products gets more expensive. (Sørensen, 2000)
CIBE, the European beet growers association, has looked at studies done by independent researchers. They conclude that due to a situation of “imperfect competition” only about 60% of a cut in the sugar price is passed on to the end consumer. The imbalance arises from the fact that a few powerful companies dominate the market of sugar-containing wares. “As the food chain becomes less competitive because of a higher concentration, the greater the firm’s profit and the lower the change in consumer surplus following a raw material price cut.” The sugar consuming industry simply has got the upper hand in its relations to the sugar (producing) industry. (Cuni, p. 6)
The annual subsidised export of 1.2 million tonnes of sugar and 0.6 million tonnes of processed sugar products costs the EU and it’s taxpayers absolutely nothing, stresses CEFS, because these are entirely financed by the beet-growers and the sugar industry. This figure averages 760 million € annually. (CEFS, p. 10)
Future enlargement of the Union will pose no problems or major expenses either. Previous incorporations of new countries into the Sugar Regime have given the EU experience in this field. And although the first group of countries to join have a sugar surplus the next group have an overall deficit that should level it out. The main Eastern European sugar producing countries either already have a sugar policy similar to that of the EU or are currently preparing one. (CEFS, p. 11) When these countries first left their communist planned economy behind, most opted for a very liberal capitalist model. Romania can be seen as an example of what happens without protection of the sugar sector: It’s relatively weak sugar industry was crushed on the open market, and today the countrys sugar industry is not self sustainable. Apparently that was the price of not having a protective policy. (Sørensen, 2001)
It is quite clear that the European sugar issue is extremely divided. One side would like to maintain or build on the present sugar regime, whereas the other side would like to see a new trade agreement drafted, one based on free trade. The hardest job of all, is deciding how to look at the sugar situation.
The European sugar Industry is a multi billion Dkr. industry, and therefore immensely powerful. Not only is it made up of the huge sugar companies, but it is also backed by the agricultural organisations of all the European countries. Because of this, the European sugar industry can not only, afford huge lobby campaigns, but are in many cases, backed by the agricultural ministers and departments of many of the European countries. Compared to this, you have a group of countries, many of which are among the worlds poorest countries, who are not organised into any form of organisation, and who definitely do not have the same funds to direct towards lobbying for their case in Brussels.
To agree with the present sugar situation, one needs to believe the European sugar farmers, and sugar producers’ argument that the consumer will not come to feel any reduction in the sugar price, or that the present situation is the only way to maintain a reliable supply of high quality sugar to the European market.
One may ask, why should Europe give up its sugar production, and therefore be reliant on foreign countries for their sugar. This is not what is being proposed by the NGO’s, all that they are saying is that by opening the European market to sugar imports, it will force the European sugar producers to be more competitive, and force them to compete on a fair and free market. This means that the European sugar producers who are competitive enough to compete on the world market will still have a market for their sugar.
Sugar production makes up only 3% (Eurostat, 2000) of the total agricultural production in Europe, compared with 80% in some of the worlds developing countries, due to this ratio, the sugar industry in these developing countries is far more important for their economies, and livelihoods in general, than the sugar industry is for the European economy. Due to the present European sugar regime with its inflated prices and extremely high subsidies, the European sugar farmers are riding the gravy train, as they are paid overprice for their sugar. This is in sharp contrast to the sugar producers in developing countries, who are forced to fight, on the world market, for every cent that they earn. And it is really a fight, as many of them are already on the breadline, so every cent, means the difference between survival or bankruptcy and starvation.
The NGO’s are also fighting for the rights of the European consumers, who are paying overprice for their sugar, so that the European sugar industry can make a profit off a system that they themselves created, and which they claim is self supporting. This system is not self-supporting; the European consumer and the world’s poorest countries are paying it for.
The Media coverage of the Everything But Arms debate has been very one-sided and biased. Most commonly the NGO arguments have been described as common sense and generally “good”. And arguments in favour of The Sugar Regime have been neglected or disloyally covered. This is of course a problem but not an excuse for anything in itself. The sugar industry is not the first victim of populist politicians or the scandalmonger press. The media themselves have probably been misled – but it’s not satisfactory to see the same figure vary by a factor of nearly 30 from one article to the other. It is sad to see that most people have a quite distorted and incomplete idea of the situation.
One of CEFS arguments is totally waterproof: It would be really foolish of the EU to all of a sudden expose one of its industries to brutal and unfair competition by a decision based on a wrong description of the market conditions. Should something go wrong, the EU would risk the existence of this entire sector to other sugar giants. According to the sugar industry this has already happened in the sugar deal with Croatia. If things go as planned, however, the financially very strong sugar companies in Europe will face no challenge at all by the Least Developed Countries. Also, is it reasonable that rich countries selfishly seal themselves off from poor countries?
The claim that Europe isn’t dropping the world market prices seems quite sought out. Other large sugar producers might have gotten hold on new market shares, but still the EU is continually pressing the price downwards by forcefully oversupplying. When CEFS further argues that recent investments to improve competitiveness will be lost with the Everything But Arms proposal one might loose patience with them.
The facts about the sugar using industry are very interesting indeed, but the sugar industry has exploited their market possibilities as well. If CEFS was stressing this point it would resemble whining but they aren’t, the growers are. Still, this is a point completely neglected by NGOs and media alike. In whose interest is Everything But Arms and market liberalization in general really? Who will make the most money: The sugar cane field workers or Coca-Cola? We imagine many an NGO-activist would turn quite pale in response to this question! The multinational corporations and the rich countries push the worldwide transition to neo-liberal WTO conditions forward, while most developing countries for obvious reasons are most sceptic to its consequences (Balanyá et al, p.133-147). Is the implementation of the Everything But Arms proposal by the European Commission really just clever PR-stunt in favour of liberalization and globalisation? It is speculation only but to the agricultural sector it’s logical – the EU is simply trying to sell the idea of WTO to the LDCs (Landbrugsraadet, 2001).
When we look at the removal of EC-sugar policy we can see some obvious advantages for the sugar producing countries mentioned in the case studies. But will they be able to manage on their own? This question is very difficult to answer but we think that a country like Brazil will gain a lot from the removal of this sugar policy. Mauritius and Mozambique could be losers in the short and maybe also the long run, especially Mauritius where it is hard to see what they should produce or do instead of producing sugar. Mozambique is very poor because of poor infra structure and all of the effects of the civil war, and need a lot of investment to actually produce and export sugar. In the long run Mozambique can be a large sugar producing country because of the potentially perfect conditions for production sugar.
In general we will get a bigger utility for all the worlds sugar producing countries. Not only will the price for sugar decrease in Europe but the benefits to the Second- and Third World will be relitavialy large - especially for the very sugar dependent economies.
As we can see there are huge differences of opinion and interests involved for each of the countries involved. But is it not the EUs responsibility to help all the worlds poorest countries and not only just a few? It should be, especially now that the whole situation within the Euhas changed so drasticaly within the last 30 years.It is to some extend therefore that the Everything But Arms proposal should help The Least Developed Countries, by lowering tariffs for exports to the EC. The goal should be not alone to remove the EUs sugarpolicy but also help these countries to compete on the world marketby also continuing development aid. A lot of these countries still needs help to build up their countries in the fields of education, technical expertise etc.
The main point that we have come to is that it is impossible to decide who is right and who is wrong, as it is totally dependent ones point of view, and how one will be personally affected by any policy changes. What makes the issue even more volatile, is the fact that any changes to the current policy will seriously affect millions of people. Although we understand that the way ones self will personally be affected by any changes, and therfore ones point of view on the matter will be the deciding factor in the end, there are certain points that we feel that the project has highlighted.
First of all, the Sugar Regime will be subject to drastic changes as the EU is intent on implementing WTO-rules. Therefore, the European sugar industry is facing some challenges Everything But Arms or not. Seen in this ligth some of their quarreling looks like a cover-up for squeezing the last possible subsidies out of the EU-system. Everything But Arms was postponed despite our WTO obligations. The role of the Sugar Regime as a means of justly distributing aid for developing countries has not been a central issue as the alternative proposed with Everything But Arms was seen as even better. In fact, focus was on the negative consequences the Sugar Regime inflicts on other poor countries. Lastly, it is questionable if the Sugar Regime really is so expensive to the European consumer. As demonstrated, the world market price is very inreliable and in this ligth some of the calculated figures looks unreasonable. There would be a price to pay for not maintaining the Sugar Regime too.
Having concluded that “Goliath is crushing David” one should consider the integrity of our political system. Who is really running the EU? How does this affect to our confidence in democracy? Our way of percieving development aid should also be revised – are we just building up alibies, blatantly closing our eyes to the real problems? When compared to issues such as our own financial security do poor people rearly matter at all?
A major issue completely neglected by this report is the possible environmental impacts. Both of the current situation and of the proposals. Production systems in developing countries are – especially with respect to sugar production –decades behind the modern systems in industrialized countries. While European farmers are subject to strict environmental laws, in developing countries practices and chemicals abandoned decades ago in Europe are still used. And while byproducts are simply burned elsewhere, the Europeans have a deeply integrated system of using every possible profitable molecule of the beet crop. Finally, transition to a globalized economy enevitably will lead to a massive increase in the burning of fossil fuels, when goods are transported from one region of the world to another – and sometimes back again!
The nutritional influence of refined sugar on our dietary is another issue completely neglected in this debate and in this report. A decrease in sugar consumption would probably have some positive fiscal implications as well. Ironicly in this respect is then the concern from CEFS that the quality of sugar might be in jeopardy. Be it a reasonable concern or not.
Sugar beet is grown on approximately 3% of the European Union’s arable land. (Eurostat, 2000) Thus this crop constitutes only a fragment of European agriculture and an even smaller part of the EU economy. Seen in this light it seems an affordable gesture towards the poorer countries to allow them sugar exports. But to the individual beet grower the situation is quite different as he can expect a loss in income of 15-20% without financial compensation. (Personal notification, Klaus Sørensen) Erik Thiesen, Chairman of Danske Sukkerroedyrkere (beet-growers organization) further argues that it’s “[…] unreasonable that we beet-growers as a single branch of trade are to fund the entire cost of improving the welfare of the developing countries. It must be a job for society as a whole to help poor countries, and everyone should contribute equally.” (Landbrugsmagasinet no. 8, 2nd of February 2001. Our own translation.) This could be the real reason that a review of the European sugar policy was postponed – the EU-countries opposing Everything But Arms might have much more reason to be concerned over their rural employment situation than relatively rich countries such as Denmark.
Social consequences outside the EU are another central issue beyond the scope of this project. Nonetheless a very interesting and relevant one. It brings us back to the question of who will really benefit from global liberalization – the multinational corporations or the peasants of the 3rd world. Also, is it reasonable to illustrate an article in favour of Everything But Arms with a picture of sugar cane field workers in rags swinging machetes when an increase in the welfare of these people is very much dependent on internal political adjustments in their countries? It is also important to remember that Everything But Arms also implies social consequences in those ACP-countries with a large part of their economy built on the sugar cane growing.
The situation is not easy to solve, but the EU may have to help anyway. The sugar policy is not sustainable in the long run. It is time for us to discuss the level of responsibility on a global scale. The world has become so small that welfare and social responsibility is an issue to be dealt with in a global perspective. This means we have a global problem, when the multinational corporations are spending large resources on playing cat and mouse with national governments in order to exploit the laws of the different states, thereby saving on taxes, wages, environmental expenses and many other things. They are trying to escape their social obligations. What we need is a change of paradigm in the corporate world. A larger and broader perspective is needed and the planning needs to be more farsighted. We need to balance financial growth with social standards. The goal for development has to be a revision of the international corporate laws and harmonization of national laws for the creation of a business environment which is fair for all.
This muddy discussion is tiring. The complexity and incoherence of all the different arguments and points of view can only perplex the objective reader. Perhaps there’s some underlying connexion really pulling the strings? Etnobotanist Terence McKenna has put forth one such theory: The industrialized world is hooked on the combination of sugar and coffee, callously forcing its access to the drugs of the addiction[5]. Maybe he’s stressing his point a bit, but both sugar and caffeine are mildly euphoric stimulants, possibly with synergistic effect. When industrialization changed the European way of life, the introduction of coffee enabled workers to keep working at repetitious tasks that demanded concentration. Still to this day, coffee breaks are among the only paid breaks allowed by employers. The rapid popularity of coffee is remarkable as it strictly speaking tastes like foul breath – it would probably never have happened if it weren’t for sugar! Why else revive a repulsive practice of using slave labour abandoned for centuries if not for quenching a subconscious need? (McKenna, p. 169-187)
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CEFS (1999): The European Sugar Regime. CEFS, Brussels. Report, 12 pages.
Cuni, Roland (2000): How much of a sugar price cut would be passed on to the final consumer? CIBE Report no. 6. 9 pages. CIBE, Paris.
DANISCO Sugar (1997): Sukkerproduktion. 370 pages. DANISCO Sugar, Nakskov.
Danske Sukkerroedyrkere (2000): Sukkerroestatistik 2000. Brochure by the Danish beet grower’s association (Danske Sukkerroedyrkere).
EC (2000): EU trade concession to Least Developed Countries. Everything But Arms proposal. First remarks on the possible impacts on the agricultural sector. European Commission, Brussels.
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Landbrugsraadet (2001): Kommissionens forslag om fri import fra de 48 fattigste ulande af alt andet end våben. Memorandum, 19th of February 2001. Landbrugsraadet, København.
McKenna, Terence (1992): Food of the Gods – the search for the original tree of knowledge. 310 pages. Bantam Books, New York.
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Sørensen, Klaus (2000): Verdensmarkedsprisen holder niveauet & Øget profit til USA’s sukkerforbrugende industri på bekostning af dyrkere og producenter. SUKKERROENYT. No. 4, 2000.
Sørensen, Klaus (2001): Personal notification. Consultant at Landbrugsraadet, Copenhagen. Axeltorv 3, 1. sal, København K. Email: <KS@landbrug.dk>.
Wederking, Birgitte (1989): EF’s sukkerpolitik I et internationalt perspektiv. Økonomisk Institut, KVL, Copenhagen.
Figure 7: Summary of the Sugar Regime (Eurostat, p. 7).
[1] Of which only some are exporting sugar to the EU.
[2] CEFS represents all beet-sugar manufacturers in the EU (plus Switzerland and Hungary) and refiners processing imported raw cane sugar.
[3] CIBE represents the European beet growers.
[4] The American Sugar Alliance represents U.S. industry and growers alike.
[5] Be careful not to misunderstand the word ”addiction”. We’re not talking of strongly addictive drugs like nicotine or heroine – but of much more intrinsic drugs subtly acting on a whole population instead of on individuals.
