2205 final report.pdf - Agra CEAS Consulting

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IMPACT OF THE EU SUGAR REGIME ON BCCCA MEMBER COMPANIES • A complete liberalisation of the current regime, known as the ‘liberalisation’ option. Under this reform option, the domestic EU price support system would be abolished and production quotas and quantitative and tariff restrictions on trade would be abandoned. The first two reform options are characterised by high prices through the regulation of supply by production quotas. In contrast, the latter two reform options regulate the market by maintaining a balance between prices and costs with and without tariff protection. 4.2. Timetable for reform The Commission’s reform options were presented to the Agriculture Council and the European Parliament at the end of September 2003, with the first substantive Council discussion held on 17 November 2003. The Commission presented a further Communication in support of its preferred approach in July 2004. Progress to agree a reform has been slow, particularly given the European Parliamentary elections in May 2004 and the change in Commission personnel in November 2004. However, the examination of the Commission’s Communications was completed at the Agriculture Council of 22-23 November 2004. The Commission is currently in the process of preparing a new proposal to reform the EU sugar regime, which is due to be published in June 2005. As a result, the Commission’s Communication deadline for implementing the reform in June 2005 will be delayed. 32
IMPACT OF THE EU SUGAR REGIME ON BCCCA MEMBER COMPANIES 5. Impact of the reform options on the UK BCCC sector 5.1. Impact of the reform options on the EU sugar sector and its implications for the UK BCCC sector As presented in Section 3, the current CMO for sugar has not created the competitive conditions necessary for a level playing field vis-à-vis other Member States; in the UK the industrial price for sugar is higher and more volatile although sugar is typically in surplus. In an environment of production quotas, this relatively high sugar price has tended to accelerate and amplify the process of structural change within the industry, through a series of merger and acquisition activities and divestment of production facilities out of the UK. Any reform to the current CMO should therefore address these issues and encourage and enable change for the long-term sustainability of the sector. According to our industry survey, if reform of the present regime results in no change in the current differential between the UK price of sugar and the world price over the next five years, then in general UK BCCC production and employment is likely to decline further (Figure 5.1). This trend would result from further concentration within the industry and divestment from the UK. Of those companies interviewed, over three-quarters believe that employment would continue to decline (with over a third believing that this decline would be major or considerable), with the remainder believing that there would be no change. Looking at the individual product sectors, the survey results revealed slightly different trends: • in the biscuit sector, half of the respondents suggested that there would be some production decrease, with the other half believing that there would be no change; • in the cake sector, the majority considered that there would be no change in production, although a quarter suggested that there would be a considerable decrease; • in the chocolate sector, all respondents were concerned that production would fall, with over a third believing that this decrease would be major or considerable; and, • in the sugar confectionery sector, over three quarters of respondents claimed that production would decrease. As one would expect a priori, these results indicate that those product sectors where sugar accounts for a greater percentage of raw material costs, namely chocolate and sugar confectionery, are more concerned about the cost of sugar and its impact on UK production and employment. 33
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2205 final report.pdf - Agra CEAS Consulting

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