2205 final report.pdf - Agra CEAS Consulting

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IMPACT OF THE EU SUGAR REGIME ON BCCCA MEMBER COMPANIES • Production. This reform option would entail a similar reduction in production quotas (20%) to that envisaged under the ‘status quo’ option, with preferential imports, although subject to import quotas again 25 , making up much of the shortfall in supply (Table 5.2). It is envisaged that this reform option could also provide a framework for regulating the transfer of production quotas between production areas according to comparative advantage. Such a system, if introduced, would facilitate industry concentration as production would move to those regions which have a comparative advantage in sugar beet production, including the UK. If production increases in the UK were significant, then this could result in lowering entry barriers for new sugar refiners to enter the market. This may result in a change to the competitive nature of the sugar processing sector, thereby reducing any hold that this sector has on price for industrial users of sugar. Thus, if the transfer of production quotas were to be allowed under this reform option, and the current industrial sugar price differential between the UK and other Member States were to disappear, then the rate of merger and acquisition activities within the industrial sugar using sector and level of divestments out of the UK (and hence employment) may lessen. • Other stakeholders. The impact of the ‘fixed quota’ option on other stakeholders would be similar to that of the ‘status quo’ option. However, the possibility of transferring production quotas between areas according to comparative advantage would likely have a positive impact on the environment, since quotas often maintain sugar beet production in less favourable regions from an environmental perspective. The expectation of positive environmental impacts will of course depend on the choice of alternative land uses and their location. In summary, as in the case of the ‘status quo’ option, this reform option maintains a long-term quota scheme thereby making it possible to continue EU sugar production at a higher level than would otherwise be under the reform options without quotas. However, this would come at a high cost to the industrial sugar using sector as prices would remain relatively high. Although this reform option provides the possibility for regulating the transfer of production quotas between production areas according, it would require the EU to go back on its international commitments such as the Everything But Arms (EBA) agreement. 25 The quotas to be negotiated would have to consolidate the highest export levels attained while taking into account the investment undertaken by a number of LDCs with a view to accessing the European market from 2009 onwards. 38
IMPACT OF THE EU SUGAR REGIME ON BCCCA MEMBER COMPANIES Table 5.2: Impact assessment of the ‘fixed quota’ option for the EU-25 in 2010-2015 Production Current sugar regime ‘Fixed quota’ option • quota (million tonnes) 17.5 14 • total (million tonnes) 20 16 Import • total (million tonnes) 1.9 3.5 Export • with refunds (million tonnes) 2.8 1.5 • total (million tonnes) 5.3 3.5 Price of EU white sugar (€ per tonne) 725 600 Drop in customs duties 0% < –36 % Beet prices • under quota (€ per tonne) 48 40 • C sugar (€ per tonne) 17 20 Direct aid (producers) No No Fall in ACP revenue (€ million) 150 Net expenditure on sugar (€ million) 1,000 – 1,200 600 - 800 Member States ceasing or substantially reducing production - Source: European Commission Greece, Ireland and Italy (Spain, Finland, Latvia, Lithuania, Portugal, Slovakia and Slovenia) 5.1.3. Impact of the ‘price reduction’ reform option The ‘price reduction’ option differs from the previous two reform options in that it aims to regulate production by maintaining a balance between prices and costs with some tariff protection (i.e. production quotas will be eliminated within a managed timeframe). • Price. This reform option presupposes that setting an adequate level of tariff protection supports prices on the domestic market. A market balance in sugar would thus be achieved by adjusting EU supply and preferential import supply to prices (at least in the long-term) free from production quotas 26 . In a context of an increase in non-quota preferential imports, market prices would then adjust themselves to the entry price of non-preferential imports to which the tariff protection (resulting from the negotiations in the WTO) would apply. The maintenance of adequate tariff protection would limit the extent to which the EU sugar industry is exposed to volatility in the world market price of sugar. The price of EU white sugar under this reform option is expected to fall to €450 per tonne between 2012 and 2015 (€600 per tonne between 2006-2011) (Table 5.3). Accordingly, the industrial sugar using sector producing for the internal market may benefit from this reduced price for industrial sugar. (Under the CMO for sugar, exporters of sugar containing Non-Annex 26 Intervention would be reduced to the role of a genuine safety net in the event of a sharp fall in domestic prices, within a given threshold. 39
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2205 final report.pdf - Agra CEAS Consulting

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