After the EPA: Lessons to be learnt
There is a wise old adage: ‘Ne-ver cry over spilt milk.’ Like Humpty-Dum-pty, once it has spilt, it cannot be “put together again.” Disregarding this wisdom, on the occasion of the 11th Special ACP Ministe-rial Conference on Sugar to be held here in Guyana on May 17-21, 2009 I shall address the ACP’s forfeiting of the 1975 ACP-EC Sugar Protocol (SP) to the EPA Sugar Arrangements, not in the spirit of ‘crying over spilt milk,’ but to see what lessons can be learnt.
Georgetown Agreement
To remind readers, the ACP was established in Guyana through the Georgetown Agreement (1975). Its General Secretariat, based in Brussels, exercises responsibilities in a wide range of ACP-European Commission (EC) relations, including the SP (1975). The SP originated as a World War II (1939-1945) ‘imposition’ by Britain on its colonial possessions to ensure the continual flow of raw sugar to Britain’s refiners as part of its war-time efforts against Nazi Germany.
Following further measures introduced at the end of the war, this evolved into the Commonwealth Sugar Agreement (CSA). The CSA was re-negotiated as a condition for Britain’s entry into the EEC in 1973. It was extended to embrace its European partners and their Africa, Caribbean and Pacific colonial and ex-colonial sugar-producing possessions and became known as the ACP-EC Sugar Protocol (1975).
As an intergovernmental plurilateral commercial contract of indefinite duration, the SP was a stand alone agreement. This was admitted to in Protocol 3 of the First Lomé Convention, its three successors (Second, Third and Fourth), and the replacement Cotonou Agreement (2000).
The ACP’s forfeiting of the SP was the end product of one of the most cynical and self-serving manoeuvres by the EC. Its execution was brilliant, as judged by the behaviour of Caribbean states with which I am familiar. Almost without exception they were far too willing to accept the EC’s interpretation of what the SP constituted, as well as their own economic conditions, needs and priorities, in the face of startling evidence to the contrary. The SP was forfeited to facilitate the EC inspired, EPAs.
At present, and at the time of the forfeiture, no meaningful progress towards the multilateralisation of sugar as a commodity traded under the WTO had been achieved. One of the most important reasons for this failure is that, on a global scale, the cost of beet sugar production in the EU is several times the cost of cane sugar, produced on competitive farms. Because of this, the global rationality (efficiency) of the EU sugar industry (one of the world’s largest) is deeply suspect.
Sugar Reform Programme
The EU’s Sugar Reform Programme, which includes among other things ongoing changes in the methods of aiding (subsidising) sugar production, the management of production quotas, the mechanisms for regulating imports and exports of sugar, and as a consequence of all these, ACP-EC relations, have been portrayed by the EC as an effort to move in the direction of significantly liberalising the EU’s sugar market. Right from the start in 2005-06, using data provided by the EC, I had shown in a study of the negotiating options for sugar that the outcome “after-Reform” was less liberalising than that with “no-Reform”! This was ignored. Instead the emphasis was lopsidedly placed on the lack of rationality (efficiency) in Caricom sugar production under the SP.
Beyond a shadow of doubt this is a real concern and it would have been decisive if one did not take into account what the SP represented. The SP was a commercial trade agreement between developing country cane sugar suppliers and developed country purchasers. It provided for commercial obligations by both parties. Thus the ACP was to supply assured annual quantities of sugar, subject to penalty, over an indefinite period, based on a price that assured “a reasonable return to a reasonably efficient producer of cane sugar (white or raw) in the objective conditions prevailing among the ACP suppliers.” The EC obligated itself to purchase a quota of about 1.3 million tonnes “raw sugar equivalent” annually.
At the time the Protocol was signed the price for sugar on the world market was about 2½ times that paid under the Sugar Protocol and shortly after peaked at four times. Yet the ACP suppliers honoured their commercial obligation, as they appreciated the indefinite nature of this obligation and that sugar price trends might be reversed.
At that time there was no talk of the ACP subsidising Europe with cheap sugar. We may therefore ask: What has changed to allow Europe to get away with promoting so successfully the notion that the SP was a “preference arrangement” and not a commercial agreement? The main reason is that at the time the Protocol was signed into effect the world seemed to be facing the threat of permanent and imminent commodity shortages. This was the time of the Club of Rome and its doomsday forecasts of acute global resource scarcities. At present, however, largely through subsidisation, the EU’s domestic sweetener supplies are assured for the foreseeable future. Its supply capacity exceeds its domestic demand. And of importance too, the threat of a world shortage of sugar no longer hangs over the market as it did in 1975.
Accompanying measures
If further proof of my argument was needed, consider that the accompanying measures tied to the EU’s Sugar Reform Programme will generate, when fully totalled, benefits amounting to between US$8-10B annually, mainly to its beet farmers and processors. Annual benefits flowing to the ACP sugar suppliers will be about 1.4 to 1.7 per cent of this amount. The EU’s ‘Outermost Regions,’ which are sugar-producing colonies, possessing similar production and structural conditions to many ACP states will also enjoy substantially greater benefits.
EC officials frequently boast to their ACP colleagues that they have no offensive interests in the restructuring of ACP-EC economic relations. There is little doubt, from the evidence, that the EU has had an offensive interest in scuttling the SP preparatory to completing the EPAs. This was achieved with such ease that future historians writing about these events will marvel that an asset of such potential value to the ACP was ceded so easily in exchange for “good faith” and “best endeavour” assurances from the EC. If ever a trade arrangement should have been taken to arbitration, the ACP-EU Sugar Protocol was one.
Of course other issues are involved, including 1) the EU’s broader agricultural reform programme, 2) its production of non-sugar caloric sweeteners (isoglucose) 3) the position of least developed countries (LDCs) exporting sugar to the EC, in light of Europe’s ‘Everything But Arms’ trade arrangement and 4) the challenge to the SP at the WTO.
Next week I shall extend the discussion to cover these considerations.
