The Courier

Plantation Reserve sugar reaches new markets.

© West Indies Sugar & Trading Company

Sugar is just one of two products omitted from the EU’s April 2007 duty-free quota-free offer for ACP states under the proposed EPAs for six regions, the other being rice. Sensitivities were raw at recent ACP high-level talks, 12–14 September, on how to manage this transition to a free market.

“The Sugar Protocol is par excellence, a model North-South trade agreement with a strong development,” read a statement from the ACP Group. Enshrined in successive ACP-EU development agreements since 1975, it has meant economic and social growth for many sugar producing countries.

EU officials put the need for dissolving the Protocol in the wide context of reform of its own Common Agricultural Policy (CAP). It can no longer justify high prices for ACP sugar when it is lessening support to its own farmers and reducing its domestic intervention stocks.

Explains Belgium-based economist Paul Goodison: “The ultimate aim is to establish a floor price for sugar, which will allow the EU market prices to be determined by price trends on the world sugar market.”

Price cut

A 36% price cut over four years affecting ACP sugar producers was already announced in 2005, starting with the 2006–2007 campaign, in tandem with cuts to the EU’s own domestic raw sugar price. ACP states say this already means annual loses of €250 million for its 18 Protocol members.

Another factor propelling change is the need for the EPA, due to come into force from 1 January 2008, to comply with World Trade Organisation (WTO) rules. Under it, a free trade area must cover substantially all trade. For many ACP regions, raw sugar is a hefty share of trade with the EU including with the Southern African Development Community (SADC), the Caribbean and Pacific.
A spokesman added that the EU also has to honour its commitments to Least Development Countries (LDCs) under its free access for all exports from LDCs from 2009 pledged under the ‘Everything but Arms Initiative’.

Already in place are EU-funded so-called Multi-Annual Strategies to offset price cuts These are tailor-made packages for individual ACP sugar producers such as to improve production, diversify into other areas like biofuels and for social schemes to support those leaving the industry. The eight-year (2006–2013) package totals €1.24 billion.

EPA access

The EU is in the midst of discussing transitional arrangements for sugar under regional EPAs. As it stands, its 4 April offer will up the level market access for all sugar producers up to 2009, meaning the Dominican Republic will gain duty-free access to the EU market for the first time. A second phase from October 2009 will apply strict safeguards of up to 3.5 million tonnes from all exporters and 1.3 million tonnes from ACPs over which tariffs must be paid. Up to 2012, the EU has offered an “attractive and remunerative floor price”. The phased transition will ensure that change is not at the expense of the poorest, say EU officials.
Lionel Jeffries, Minister of Foreign Trade and International Cooperation of Guyana, stated at a special ACP Sugar Ministerial in September that ACP states were seeking more clarity and improvements to the offer such as a higher level of exports before safeguards are applied, regional quotas and remunerative prices to continue until 2015.

In the midst of negotiating, ACP states say they received a side swipe by the EU’s end of September decision to “denounce” the Protocol. Peter Power, spokesperson for trade commissioner, Peter Mandelson, explained that the EU needs to give two years notice by the end of September, ahead of the second phase of the market access offer for sugar in EPAs coming into force in October 2009. “The Sugar Protocol cannot co-exist with these new arrangements, so the Protocol has to end by that date,” he explained.

“The EU is reneging on its previous commitments to the ACP countries with a pre-emptive strike at a time when we are still negotiating the EPAs in good faith. Unless the guarantees of the Sugar Protocol are transposed into the new agreements, it will leave us significantly worse off than we are already; that would be a complete contradiction of the stated goals of the EPAs,” retorted Ambassador Patrick Gomes, Ambassador of Guyana to the EU and Chairman of the Consultative Group on Sugar.

Paul Goodison predicts that further rounds of sugar price cuts in 2013 and 2015 in the wake of CAP reform and mounting freight and insurance costs in ACP states will leave just a handful of southern African nations – Swaziland, Mozambique, Malawi, Zambia and Zimbabwe – able to make a profit from sugar exports by 2015.

In this sunset for the Sugar Protocol, he says onus should be placed on making the most of market advantages while they’re there. “For every 10,000 tons of sugar exported to the EU in the 2008/2009 season, rather than the 2009/2010 season, extra revenue would be nearly €1.14 million,” calculates Goodison.

And there must be fast delivery of aid to the industry so far pledged. Quoting the success of Plantation Reserve, he says that a lot more innovative aid and low-cost loans are required in future such as to develop luxury goods and fair trade products in the sector to create new revenue for millers and growers alike.

A sugar above the rest

Open the lid of the tins and the sweet Caribbean breeze playing on the silvery canes waft from the pale brown crystals inside.

Retailing at US$10 for 500 grams, the pale brown Plantation Reserve sugar, ‘Made in Barbados’, has won over gourmets in the UK and English-speaking Caribbean gracing the tables of the royal enclosure at this year’s Ascot race meeting, and shelves of Harrods, Fortnum and Mason, Selfridges, Waitrose and Tesco.

The 1 million Barbados (Bds) dollars investment over two years seems to have paid off.

It was the Barbados government that agreed almost to double the EU price for the island’s best sugar. Only one in every hundred canes makes the grade.
“This is milled using only selected canes which produce a sugar with larger crystals and a distinctive taste and aroma which can be used more sparingly than other sugars,” explains Chris Docherty, Managing Director of the West Indies Sugar & Trading Company. He says that his company is now looking at developing other products, though they will not be available until 2008.
There are other winners. The production process backs the sugar heritage of Barbados. The Barbados National Trust where a small quantity of Plantation Reserve is milled is owner of the only remaining wind-powered sugar mill in Barbados.

“Only through providing a product of superior quality backed by a world class new product development and marketing expertise can smaller countries compete, Plantation Reserve demonstrates that it is possible to compete commercially on a global scale and against much larger competitors in sophisticated retail markets such as the UK,” says Docherty.

2 Barbados dollars = 1 US dollar