Restructuring the EU–ACP sugar regime: Out of the strong there came forth sweetness

ABSTRACT

In 2005 the EU instigated the most substantial reform to the sugar sector since the UK acceded in 1973 and just two years later caused consternation among the African, Caribbean and Pacific (ACP) countries by denouncing the 34-year long Sugar Protocol. In contrast to existing literature, which has taken a snapshot of the post-reform period and identified ‘winners and losers’ accordingly, this article examines the processes of capital accumulation in the industry and the legacies these have left. It argues that despite defeat in a World Trade Organization (WTO) dispute case, concentration and diversification in the EU sugar industry has enabled its leading corporations to prosper after reform, while divestment in the ex-colonies has left producers in the ACP facing difficulties of adjustment far in excess of plain terms of trade losses. Further, it also reveals why EU reform was not solely a response to WTO legislation but rather, because of the relationship of sugar to wider economic fortunes, resulted from an assiduous attempt by the EU Trade Commission to press the sector into a WTO-compatible Common Agricultural Policy.

KEYWORDS:

• EU preferential trade
• ACP
• development
• WTO
• sugar
• capital accumulation

ACKNOWLEDGEMENT

I would like to thank Tony Payne, Tony Heron, Craig P. Berry, Matthew Louis Bishop and Duncan Wigan for their helpful comments on earlier drafts. Any mistakes remain my own.

Notes

¹ In 2004, a flat rate tariff was set at €419 per tonne of white sugar and €339 per tonne of raw sugar. The safeguard duty is a variable levy which is set when the world price drops below a trigger price set by the EU. Because this figure was based on the high price of ACP imports during 1986–1988, the world price has consistently set off the trigger and the safeguard has been constantly applied since the WTO Agreement on Agriculture in 1995. In 2003 it was listed at €115 per tonne of white sugar (European Commission, 2004; Swinbank, 2004).

² In Finland, Denmark, Sweden, Greece, Austria, Ireland and UK there was just one processor. In Portgual, Spain, Netherlands and Belgium there was either two or three. Only in Italy, Germany and France were quotas more fragmented (Swedish Competition Authority, 2002: 52).

³ By way of example, between 1994 and 2002 British Sugar's profit margins exceeded 20% in every year but one (Oxfam, 2002: 16).

⁴ The other two commodities were rice and bananas. For sugar, a quota was opened from 2001 and import duties fell from 2006, gradually removing barriers until complete quota-free duty-free access comes into force in 2009.

⁵ Although the Sugar Protocol had a separate legal identity, it was included in the Cotonou text and its survival as an independent agreement was closely bound with the evolution of the broader preferential trade regime, as was ultimately proved when it withered away following the expiry of the Cotonou waiver.

⁶ Based on author's calculations. According to the Department of Food and Rural Affairs (DEFRA) (2006: 111), the reduction in the intervention price will be imperfectly transmitted to consumers, who gain 60–70% of a price fall in sugar, the remainder being captured by food processors and/or retailers. Thus, the price of a kilo bag, taken as 72p, multiplied by intervention price reduction (36%) × consumer capture (65%), gives a saving of 16p.

⁷ Based on author's calculations. The average of world price across 2006–2002 (9.16 cents per pound) × pounds in a metric tonne (2204) converted into euros at the exchange rate $1 = €0.643.

⁸ In July 2007, however, both European Commission President, José Manuel Barroso, and EU Trade Commissioner, Peter Mandelson, agreed that tariffs on Brazilian ethanol, which then stood at around 70%, would have to be slashed. This is likely be used as a bargaining chip in any EU–Mercosur Free Trade Agreement.

⁹ The phrase is a biblical reference which adorns tins of Tate & Lyle's Golden Syrup. It comes from Judges 14:8, in which Samson returns to a lion he previously tore in half to find a swarm of bees in there producing honey. Samson took the honey home to feed his mother and father.

¹⁰ Special Preference sugar was a variable import allowance offered to traditional suppliers to meet the increased capacity of European refiners. Prices were slightly lower than Protocol sugar, at 85%, but attractive nonetheless.

¹¹ The volume safeguard is known as a double trigger. Trigger 1 is pulled if ACP imports exceed 1.3mt. Trigger 2 is pulled if ACP plus LDC imports exceed 3.5mt. If both are pulled, then non-LDC ACP sugar is guillotined.