2205 final report.pdf - Agra CEAS Consulting

IMPACT OF THE EU SUGAR REGIME ON BCCCA MEMBER COMPANIES
balance of sugar product exports. Analysis of industry employment data reveals that this induced
concentration has resulted in a loss of up to 16,278 jobs (22%) in the entire biscuit, cake, chocolate
and confectionery sector between 1998 and 2002.
S1.2. Likely future impact of a reformed EU sugar regime
The European Commission’s Communication to the Council of Ministers and the European
Parliament in September 2003 on the future prospects of the EU sugar regime identified four sets of
options for reform. The first two reform options (the so-called ‘status quo’ and ‘fixed quota’
options) provide for an extension of the present regime beyond 2006. Both these options are
characterised by the fact that they effectively maintain high prices through continued border
protection and the regulation of supply by means of production quotas. The third reform option
(the so-called ‘price reduction’ option) foresees the maintenance of a lower EU internal price and the
phasing out of production quotas once the levels of imports and production at this lower price have
stabilised. Finally, the fourth reform option (the so-called ‘liberalisation’ option) envisages complete
market ‘liberalisation’ via the abolition of both the price support system and production quotas.
Looking at the impact on the supply of industrial sugar for the sugar using industry, only the fourth
reform option (i.e. complete market ‘liberalisation’) would lead to a significant and rapid change in EU
sugar supply conditions. Analysis suggests that ‘liberalisation’ would lead to a reduction in EU
production to around one third of present levels and, depending on the access conditions agreed
with third countries, the EU would become a net importer of sugar from countries with a
competitive advantage for sugar production. This would potentially have important considerations
for the sugar-using sector, as the regularity and consistency of supply could be affected by weatherinduced
production fluctuations as well as potential economic and political problems in these
countries.
Nevertheless, the complete market ‘liberalisation’ option is expected to provide industrial sugar
users with the ‘lowest’ price for industrial sugar, as the internal market price would be allowed to adjust
to the price of non-preferential imports. This would create a level playing field in terms of the sugar
price between the UK and both the EU and non-EU industrial users. However, under the
‘liberalisation’ option, there would be a greater risk of price volatility for industrial sugar users as the
market will no longer be ‘protected’.
Under the ‘price reduction’ option, the UK sugar using sector will also benefit from a reduced price
for industrial sugar as tariff protection would diminish and the gap between the internal EU price and
the world price would reduce. However, unlike the ‘liberalisation’ option, the EU market would
retain some protection from the volatility of industrial sugar prices on the world market.
The UK industrial sugar using sector would have most protection against price volatility on the world
market in the two policy options with quotas (i.e. ‘status quo’ and ‘fixed quota’ options). But this
would come at a high cost to the sugar using sector as the industrial sugar price would be maintained
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