March 25, 2013

EU commissioner Cioloş talks sugar

Dacian Cioloş, EU Commissioner for Agriculture (photo: European Commission)
Sweet complexity: Dacian Cioloş, EU Commissioner for Agriculture, tackles the sugar quota question (photo: European Commission)
Good news for sweet tooths – the Council of the European Union has agreed its negotiation position on sugar quotas. The bureaucrats would like them to expire as from October 2017.

The hopes and prayers of the sweets industry could thus be heard at last – or at least in part.

Three main scenarios remain and reflect the interests involved: The Commission wants the sugar quota to end in 2015; Parliament desires an extension of the quota until 2020; and the Council wishes expiry in 2017.

In typical Brussels fashion, what everyone could get in the end is a compromise.

So what happens now? The Commission, the European Parliament, and the Council have to hammer out a deal as part of the CAP reform package. As EU Commissioner for Agriculture Dacian Cioloş says, it's clear that the quotas will go, the only question is when.

30 trialogue meetings

According to Brussels sources, the three institutions have roughly 30 “trialogue” meetings foreseen between April 11 and June 20 in which they hope to clarify their differences on all elements of the CAP reform package.

Then a marathon meeting (in Luxembourg) starting June 24 will probably see various political trade-offs and a political agreement.

Based on past experience, the final date is unlikely to be 2015 or 2020, but could be any one of the four years in between, depending on the importance attached to this issue by the different parties during the course of the negotiations.

As Karsten Daum, spokesman of the sugar users' information centre, InfoZentrum Zuckerverwender (IZZ), points out, expiry in 2017 would avoid renewed debate on the extension of the sugar quota in 2020 when the next Common Agricultural Policy reform is due.

Sugar price hike

This would be greeted with a sigh of relief by sweets and bakery goods manufacturers who are groaning under the 50 per cent hike in EU sugar prices since 2011, as calculated by the IZZ.

"At the time, a drought in India and other factors reduced supply on world markets so that prices exceeded the EU level for the first time in 30 years," explains Christoph Kind, head buyer at German biscuit maker Bahlsen. This duly depressed sugar supply in Europe and pushed up prices.

Europe relies on sugar imports. Market regulations for 2012/13 have set a maximum production quota of 13.8m tonnes whereas local requirements are estimated at 16.8m tonnes.

"Until the sugar quota ends manufacturers will dictate the prices to us," says Kind. Bahlsen can meet its own requirements on the European market, but the company finds it hard to grow when sugar volumes are so tight.

"Theoretically, users can meet their demands by buying on the world market, but high import duties make this financially impossible."

Duties galore

Every tonne of imported sugar currently attracts €419 of protective duties. With prices on world markets currently at around €400 per tonne, this means that EU prices of roughly €730 per tonne are exceeded.

The IZZ also demands lower import duties. Daum feels that such high protective barriers are no longer necessary.

German sweets manufacturer Storck criticises the negative effect current regulations have on international competitiveness. Non-European rivals can buy sugar more cheaply on the world market.

"In the current situation Europe can't afford to be less competitive," says one insider.

But what does EU Commissioner for Agriculture Dacian Cioloş think?

"Keeping quotas would have burdened any chance of developing the European sugar sector" 

Dacian Cioloş, EU (photo: EU)
Dacian Cioloş, EU Commissioner for Agriculture (photo: European Commission)
Mr Cioloş, you have spoken out against the sugar quota. Aren't you contradicting yourself?
No. The idea behind the 2006 reform was to make the European sugar sector more competitive. This was important within the context of the "Everything-But-Arms" agreements. These provide free access to the EU market for raw and processed sugar from Least-Developed and ACP countries.

This was also important within the longer-term context of the WTO Panel ruling. The ruling limits EU exports because all exports are deemed to be “cross-subsidised” where quotas are in place.

The restructuring scheme was completed in 2010, and we believe that five more years of consolidation should be sufficient to prepare the sector for the next step — the end of quotas.

We believe this would give the sector more opportunities to develop and to benefit from the investments made. Not proposing to extend the quota system beyond 2015 is therefore a logical sequence of events.

But wasn't the whole idea behind the sugar quota the protection of investment in sugar beet farmers?
They have received a decoupled payment as part of the reform in 2006. And surely it is in the interests of sugar beet growers to be able to take advantage of growth and development opportunities on both EU and non-EU markets?

Keeping quotas would have been burdened any chance of developing the European sugar sector.

The European Parliament has voted to let the sugar quota regime run until 2020, while allowing for a prior review. Isn't your demand for more liberalisation going in the wrong direction?
I have explained the reasons for our proposal, and I certainly do not think that it is in the wrong direction. It is a logical next step after the 2006 reform. It is consistent. You should ask the European Parliament, why it does not want to follow the logic of the 2006 reform.

Some of the 27 Agriculture Ministers in the European Council have called for an extension of the quota system until 2020...
This week’s Council debate highlighted the differences — where Member States were clearly split between those who want to preserve the quota system and those who want greater liberalisation.

The debate underlined the different considerations that we have to take into account, and the Council finally agreed to seek an end to quotas in 2017.

What are the chances of the forthcoming 'EU trialogues' reaching a compromise? For instance, one where quotas expire, for example, in 2017/18, as proposed by the liberal ALDE group in the European Parliament?
After this week’s negotiation mandate for the Council, and last week’s negotiation mandate for the European Parliament, it is clear to me that the sugar quota system will end within the next few years.

During the course of the forthcoming negotiations between Council, European Parliament and Commission, it will simply be a question of agreeing the date — and I say sooner rather than later.

What will happen if the price falls on the world market and protection is no longer there?
I should also like to stress that I am not proposing any change to the import tariffs for non-preferential countries. The Commission's proposal maintains the contractual obligation between beet farmers and sugar producers.

It also allows private storage, if prices drop considerably below the reference price of €404 per tonne, or where there is a sharp decrease in margins.

Eliminating the quota only removes internal rigidities and offers opportunities for sugar processors, without one additional kilogram of sugar import from non-preferential country suppliers.

The sugar-processing industry is relying on you. Will these companies continue to be forced to rely on chance emergency measures, or are there other ways to manage the artificial shortage in Europe?
Indeed, in the market situation we have had over the last few years, the Commission has been obliged to take measures to increase the supply of sugar on the EU market — either by additional imports or by allowing the sale of 'out of quota' sugar on the market.

This sugar is available in Europe, but sales volumes are limited because of the quotas. I don’t believe that this sort of decision should be taken by someone sitting in a Brussels office.

In the absence of quotas, supply will not be determined by the Commission, but by the market and the relative competitiveness of the different players. The chances of shortages are far less without quotas.

Supply on the world market is dominated by cheap cane sugar. The USA also protects its sugar beet manufacturing. In this context, can Europe afford to renounce a quota scheme?
US policy differs from the EU system in that it follows price developments on the world market more closely.

Prices were higher than in the EU during international shortages, and prices have fallen by more than 40 per cent this year in reaction to oversupply on the world market in general and a good harvest in Mexico in particular.

I would like to judge the EU policy on its own merits and not copy other regimes.

Nevertheless, could price-intensive sugar beet production in Europe be in danger?
The EU sugar sector has undergone a very thorough and expensive restructuring programme.

Therefore, it is ready to face competition from Least-Developed and ACP countries on the EU market — which will still benefit from a high external tariff — but it is also ready to compete on the world market in the longer term.

The EU is home to some of the largest sugar companies in the world, and I am optimistic that the EU sector is ready for an end to sugar quotas.


Lebensmittel Zeitung print and digital (photo: LZ)
photo: LZ
Our German B2B newspaper, Lebensmittel Zeitung, in print & digital
Read in German: 'Bittere Zeiten für Zuckerverwender' on page 12 of 
Lebensmittel Zeitung, no. 11, 15.03.2013; and 'Süßer Kompromiss' on page 18 of Lebensmittel Zeitung, no. 12, 22.03.2013, by news editor Nicole Jagusch

German Retail Blog

Sign up for your FREE newsletter now!

Comments for this article are closed.

This is an English-language blog, please write all comments in English!
Thank you.