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TRADE: EU Sugar Decision Not so Sweet for Caribbean

Dionne Jackson Miller

KINGSTON, Aug 5 2004 (IPS) - For the small, developing economies of the Caribbean, the world trade body’s preliminary ruling against European Union sugar comes as more bad news for a beleaguered sector, and highlights a seeming paradox these countries often face in the global trade arena.

The ruling has been met with widespread acclaim and the assertion that it is a victory for the developing world – but it is not so simple, according to politicians and producers.

The interim report of the World Trade Organisation (WTO) presented Wednesday found that roughly 2.7 million tonnes of non-quota or ‘C’ sugar that the EU exports contravene trade rules because of the high guaranteed prices that are paid for quota sugar.

The report also ruled that the bloc subsidises re-export of 1.6 million tonnes of sugar, the equivalent of imports from the African, Caribbean and Pacific (ACP) countries (with whom the EU has long had an agreement to buy sugar quotas at guaranteed prices) and India.

These subsidised exports further exceed the amount permitted under WTO rules, the report found.

Oxfam’s Jo Leadbeater called the preliminary ruling a “triumph for developing countries,” and urged the EU to “reform the (sugar) regime in a way that benefits poor countries.”

But that perspective overlooks the fact that the sugar regime benefits Caribbean producers because of the guaranteed price at which the EU purchases ACP sugar.

As a major foreign currency earner, the sugar industry is critical to several Caribbean countries, with Guyana, Jamaica and Belize being major producers in the region.

The Jamaican sugar industry employs some 41,000 people, and earned 71.5 million dollars in export earnings in 2001 and 66.8 million dollars in 2002, a bad crop year, according to government figures.

Guyana in 2002 produced 331,000 tonnes of sugar, earning the country 121 million dollars, according to the country’s agriculture minister, Navin Chanderpal, quoted in the ‘Guyana Chronicle’ newspaper.

In 2001, Belize produced 102,408 tons of export sugar, worth 33.5 million dollars, according to the Belize Sugar Industries.

“It’s a very difficult situation,” Jamaican Foreign Trade Minister Keith Knight told IPS.

Though reluctant to address the specifics of the WTO preliminary ruling until details are made public in September, Knight acknowledged the negotiating difficulties that face the region.

“We’ve always said that it’s a delicate one for us, because we benefit from subsidies. The internal pricing mechanism that gives rise to the price at which our sugar is bought is said to be based on subsidies, so that is why we keep saying that there are certain special products that have to be given special treatment,” said Knight, who is chairing the ACP group of countries for the next six months.

Oxfam, for example, calls the sugar sector one of the “most distorted markets in European agriculture,” and argues that by producing an export surplus, sugar is dumped overseas through a system of direct and indirect export subsidies, in the process destroying markets for more efficient developing-country producers.

“Meanwhile, high trade barriers keep imports out of Europe. The livelihoods of agricultural labourers and small farmers in developing countries suffer both as a consequence of the EU’s exports to world markets, and because of restricted access to European markets,” says the development organisation.

Ambassador Richard Bernal, director general of the regional negotiating machinery for the 15-member Caribbean Community (CARICOM) says the region’s situation illustrates the need for great care in international negotiations.

The argument that subsidies in developed countries can harm developing states by distorting global markets and excluding exports from developing countries is a justifiable one, he says. But in some cases, and not just concerning sugar, the same countries benefit from subsidies, he adds.

For example, while subsidies that reduce food prices can hurt developing country producers, they could have the opposite effect on countries that are net food importers.

“For those who are purchasing the subsidised exports from the EU it may be beneficial to them, so in looking at a subsidy we have to look at both sides of it,” Bernal told Radio Jamaica.

“Many people in developing countries and certain development agencies have argued that these subsidies and special trade arrangements have harmed developing countries, but in some cases they are beneficial to a subset or some developing countries, so we have to be careful that in trying to adjudicate and apply the rules clearly for all concerned that we don’t end up with a zero-sum game, which is that some developing countries will gain by increasing their exports while some may lose,” he added.

This is where the concept of special and differential treatment, becomes important, suggests Knight.

“If you take it that you’re dealing with small and vulnerable economies, and if you take it that it’s accepted that special and differential treatment must be accorded to small and vulnerable (economies), then it’s not a conflicting situation because there’s the general rule, then there’s the exception based upon certain criteria,” he said.

Although the WTO ruling is a preliminary one, with the final ruling expected in September, and the possibility remaining of a further appeal process, no one expects any real change in the trade body’s final position.

Coming against the recent news of a EU proposal to cut prices paid to ACP sugar-exporting countries by 37 percent starting in 2005, the news of this week’s WTO ruling has given more urgency to the Caribbean project to improve the competitiveness of its sugar sector.

“We’ve had a double blow,” trade unionist Vincent Morrisson told IPS.

“The WTO ruling is preliminary but I don’t see that changing, so I think we’re going to have to bide for time; we’re not going to be able to turn the process back,” says Morrison, who is island supervisor of Jamaica’s National Workers Union. “If we have the time we can improve the industry.”

Morrison suggests that 10 years is a reasonable timeframe to expect Caribbean producers to become more competitive, and diversify into producing such value-added products ethanol and refined (white) sugar.