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Workshop on future of sugar quotas

A workshop on “Future policy options for the EU sugar regime” was organised on 17 September by the Parliament’s Policy Department B. The future of the sugar sector regime is part of the broader debate over the future Common Agricultural Policy (CAP). As part of its package of proposals on the CAP, the Commission has proposed to end the sugar production quota system from 1 October 2015 [2011/281(COD)].

AB Smit, of theAgricultural Economics Research Institute (LEI) in the Netherlands, presented his study which describes thee scenarios (models) for the sugar quota system:

  1. The current policy, including quotas and import tariffs from the WTO’s Uruguay Round remains in place until 2020. In this scenario EU sugar production would decrease.
  2. The current policy remains but with decreased import tariffs (70% based on results from the Doha Round, July 2008). In this scenario imports from Brazil would increase and consequently imports from developing countries decrease.
  3. The “Quota free scenario” or an abolishment of the sugar quota system. In this scenario EU sugar production would increase.
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The models provide reasons for and against abolishing sugar quotas. Abolition is predicted to increase the sugar beet growing area in the EU, and would decrease the fixed cost per hectare of sugar beet and per kg of sugar, making both sugar beet growing and processing more efficient.

On the other hand, elimination of quotas is expected to lead to lower sugar beet prices in the EU, and thus lower margins for farmers. Furthermore, lower sugar price levels would make Member States (MS) more attractive for investment by sugar-based industries and subsequently the sugar market could be more flexible. 

He pointed out that this panorama must be considered in an international and interdependent context. To conclude, he recommended the establishment of minimum prices for MS or for the more disadvantaged regions.

Joan Noble,a UK-based consultant, presented her study of sugar market reform.

Reviewing the 2006 sugar sector reform [Regulation (EC)318/2006], she claimed that its objectives have not been fully achieved. For example, total production is still too high, market regulation has increased distortions and price reductions have not been passed on in full to sugar users.

The abolition of the production quota system from 1 October 2015 would bring both disadvantages and advantages. On the cons, she mentioned that it would protect inefficient producers, keep internal prices high, restrict competition, require complex market management and be contrary to the aim of single common market organisation (CMO). On the pros, she specified that it would protect farmers with lower yields, protect against internal market instability and provide more price stability, assuming sufficient supply availability.

She concluded that there are strongly opposing views. On the one hand, producers, supported by the African, Caribbean and Pacific (ACP) countries, demand the extension of the sugar production quota until 2020, arguing that they need more time to adapt. On the other hand, the sugar-using food and beverage industries and the isoglucose industry demand a free market. The EU’s refining industry is ambivalent.

See also: La réforme de la PAC et les quotas de sucre (EP Internal)

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