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Last Updated: Wednesday, 22 June, 2005, 04:39 GMT 05:39 UK
Sugar firms at risk as EU subsidies shrink
By John Moylan
BBC News Europe business reporter in Brussels

Sugar cane
Brazil has spearheaded complaints on sugar subsidies

For the best part of 40 years the EU's regime for supporting its sugar industry has remained untouched.

Now it is in the firing line for reforms that could wipe out production in many EU countries and beyond, according to internal Commission documents seen by the BBC

The reforms would aim to cut the link between production and subsidies, a similar approach to the one the EU has taken to reforming other subsidies to farmers.

The level of farm subsidies provided by the EU Common Agricultural Policy - or CAP - is central to the ongoing bitter budget row that last surfaced at a recent summit of European leaders.

Minimum price

The forthcoming reforms are needed to bring the EU in line with global trade rules.

Sugar beet
European sugar beet farmers may go out of business

In mid-2004, the World Trade Organisation upheld a complaint from Brazil, Thailand and Australia that EU sugar subsidies were unfair.

The price of sugar in Europe is three times that of the world market.

That is because European farmers are guaranteed a minimum amount for their sugar beet, and firms that process the beet are guaranteed a minimum price for white sugar.

The subsidies have long been criticised by poor countries and aid agencies as unfair to growers in the developing world, and now the European Commission agrees that the continent's sugar sector is unsustainable in the longer term.

It says the current system will attract more imports, as well as threatening to harm the competitive parts of the industry.

Reform plans

The Commission is proposing huge changes.

The guaranteed prices for growers and processing firms will be slashed by up to 42% over a three-year period.

Farmers and firms that can no longer make money from sugar production will be offered compensation to leave the industry.

But the impact on some EU member nations will be severe.

The BBC has seen an internal Commission report assessing the outcome. It says that in Ireland, Greece, Italy and Portugal "sugar production is likely to be drastically reduced or even phased out".

In other countries including Denmark, Finland and Spain, sugar production is likely to fall to significantly lower levels.

But in more efficient producing countries - including the UK, France and Germany - it is likely that overall production will be broadly unchanged.


Sugar has been grown in Ireland for 80 years and the country has about 3,700 sugar beet farms.

A young worker on a sugar cane plantation in El Salvador
Developing countries are angry at EU sugar subsidies

Jim O'Regan, national chairman of the sugar beet section of the Irish Farmer's Association, believes livelihoods are now under threat.

"It's the wipe-out of the industry" if the reform goes ahead, he says.

He wants Brussels to scale back the price cut and fully compensate farmers for any loss of income.

Those developing countries with long standing traditional links to European markets have similar concerns.

The Africa, Caribbean and Pacific (ACP) grouping of countries say the reforms will have a devastating impact upon many economies.

In Guyana, for example, sugar production provides 17% of the economy, and employs about 35,000 people.

The changes could close two factories and lead to 8,000 direct job losses, says Riyad Insanally, senior trade adviser on sugar at the Guyana High Commission in London.

"The reforms are too fast, too deep and too soon," he says.

The ACP countries - which include many former European colonies - will still have access to European markets.

But they will face lower prices in Europe. The EU plans to announce an assistance programme to help them adjust.


But the reforms are needed for the EU to meet global trade rules.

This reform could mean that some European countries no longer export sugar at all.

But Michael Mann, the EU's Agriculture Spokesman, says that the sugar regime is an anachronism.

"If we sat around and did nothing it would lead to the slow death of the European sugar industry," he says.

We have to act now and we have to act decisively, to cut prices and cut surplus production. Only in that way have we got a competitive future for EU sugar-growers."

Hear the views of an Irish sugar beet farmer

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