October 1, 2009

Where to Now for Fiji Sugar?

Where to for sugar?
By Patricia Garcia-Duran, Elisa Casanova and Montserrat Millet,
Wednesday, September 30, 2009
ON September 30, 2009, the Sugar Protocol will officially expire. Following a six-year transition period, the Protocol -- which provides a group of ACP countries with guaranteed access to the EU market for fixed quantities of sugar at preferential prices -- will be replaced by a non-reciprocal duty and quota-free preferential trade system on October 1, 2015.
This article examines these changes to the EU-ACP sugar trade regime.
The Sugar Protocol
The Sugar Protocol has been a feature of EU policy to ACP countries since 1975.
The Protocol, which was attached to the first LomÚ Convention, granted non-reciprocal, preferential conditions regarding sugar exports to a group of ACP countries.
These conditions were retained in the later LomÚ Conventions and the Cotonou Agreement.
Under the Protocol, only 19 of the 77 countries which comprise the ACP group were to benefit from these privileged trade relations.
Eleven were from Africa, seven from the Caribbean region, and only one (Fiji) is located in the Pacific.
Of these countries, six are Least Developed Countries (LDCs) and 13 non-LDCs. These countries have had quota-based access to the EU market.
Under the Protocol, the European Community undertook to import, duty-free, specific quantities of cane sugar (raw or white) from these countries, which in turn undertook to deliver it.
The tariff quota has always been around 1,279,700 million tonnes (mt) per campaign.
Since 1995, other additional quantities of sugar have been allowed into the EU under preferential conditions in amounts which vary in each campaign, depending on the "basic supply needs" of European refineries; on average, they have amounted to 300,000 mt per campaign.
Last, but not least, the Protocol has also offered producer countries a guaranteed price.
The quota of the 19 ACP countries can only be purchased at a price negotiated for each campaign that is close to the internal intervention price set by the Common Market for Sugar.
The transition period
Provisions have been made to allow for a gradual adaptation to the new reality from October 2009 to October 2015.
During this period, three major changes will be introduced: guaranteed prices will decrease and finally disappear, quotas will be increased, and the number of ACP countries which can benefit from preferential relations with the EU for sugar will tripple.
After 30 September 2009, the EU will offer preferential non-reciprocal treatment to sugar originating from any ACP country that has signed or initialled an Economic Partnership Agreement (EPA) with the Community and, as a result of the 'Everything But Arms' (EBA) initiative, from any country of the world recognised as an LDC by the United Nations.
Taking into account the number of ACP countries involved, the EPA regime will apply to almost half the ACP countries (36), and the EBA regime to 31.
All 19 ACP beneficiaries of the Sugar Protocol will come either under the EPA (17) or the EBA regime (2).
The only ACP countries excluded from the preferential regime will be the 10 non-LDCs that have neither signed nor initialled an EPA with the EU.
In both the EPA and EBA initiatives, the provisions regarding sugar during the transition period are the same.
Guaranteed prices will be reduced but maintained until September 2012 and limits on imports will apply until October 2015.
Regarding the guaranteed prices, imports of sugar from the ACP countries concerned will be subject to a minimum price between 1 October 2009 and 30 September 2012.
This price shall be no lower than 90 percent of the EU reference price for the marketing year in question. After September 2012, prices shall be determined by the market.
As the EU reference price for sugar is being reduced as the result of the 2006 reform, the guaranteed price for ACP raw sugar has already been reduced by at least 33 per cent during 2008 and 2009.
Quotas will be maintained until 2015 but in an indirect way and, in principle, only for EPA non-LDCs imports.
Country-specific quotas and immunity from safeguard measures will no longer apply.
During the period between October 1, 2009, and September 30, 2015, there will be no country or EPA quotas.
Access will be duty free within automatic safeguard ceilings.
The EC may impose the applied Most Favoured Nation duty on products originating in EPA non-LDCs, of tariff heading 1701 sugar, if they are imported in excess of two volume-safeguards at the same time.
The first ceiling is based on ACP non-LDC imports: 1.38 tonnes in 2009/10; 1.45 tonnes in 2010/11; and 1.6 tonnes in the following four marketing years.
The second ceiling concerns the sugar imports from the whole ACP group: 3.5 tonnes in a marketing year. If both ceilings are exceeded in the same marketing year, the EU may decide to impose duties on EPA non-LDC imports.
LDC imports do not necessarily need to be subject to the same treatment.
It is important to emphasise that although the second ceiling takes into account all ACP imports -- that is, imports from both EPA and non-EPA ACP LDCs and non-LDCs -- EPA and EBA LDCs imports will only be subject to a regular safeguard clause.
After the transition
As of 1 October 2015, sugar from EPA and EBA countries will have non-reciprocal duty and quota-free access to the EU market.
In principle, both regimes will be compatible with WTO rules: The EBA regime on the grounds of the so-called World Trade Organization's "Enabling Clause", and the EPA regime on the grounds of Article XXIV of the GATT.
After the transition period, the only remaining language regarding sugar will be a safeguard clause.
Under the EPA regime, this clause will no longer be defined on the grounds of the volume of imports but rather on the sugar price.
In other words, there is a move away from a preferential system based on quantitative limits, as seen in the Sugar Protocol or the transition regime, to a system of control based on price.
Both EPA LDCs and non-LDCs will be subject to the same safeguard mechanism: The EU will be able to impose duties "in situations where the European Community market price of white sugar falls during two consecutive months below 80 per cent of the European Community market price for white sugar prevailing during the previous marketing year." As for non-EPA LDCs, the present General System of Preferences (and thus EBA) Regulation does not provide for any specification of the general safeguard clause.
Nonetheless, as the Regulation covers the period from 1 January 2009 to 31 December 2011, it would not be surprising if the EPA safeguard specification were to be included in the EBA regime in the near future.
Sugar Protocol legally expires in October 2009 but some of its benefits will continue until 2015 through the EPA and EBA regimes.
These benefits will no longer be limited to the 19 beneficiaries of the Sugar Protocol: under the EPA regime they will be offered to all 36 countries that have signed or initialled an EPA, and under the EBA regime, they will be offered to 31 ACP LDCs (as well as to 9 LDCs that are not ACP countries).
At the end of the day, sugar originating in 67 ACP countries, rather than 19, will benefit from preferential access to the EU market.
As of 1 October 2015, the only restriction on their sugar access to the EU market will be a price-based safeguard clause.
From October 2009 until October 2015, the access for LDCs will, in principle, be freer than for EPA non-LDCs.

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