Malta to support EU sugar reform

A new EU initiative aimed at reforming the protection offered to sugar growers across the EU will have Malta's support during sensitive discussions due to start next month under the British presidency.

The European Commission last week proposed sweeping changes to its 40-year-old system of protecting sugar growers in the EU. If they go ahead, the changes will prevent the consumer price of sugar in Malta from rising steeply over the years.

Sugar is produced in all the EU's member states with the exceptions of Malta, Cyprus, Estonia and Luxembourg. The EU both imports and exports sugar, but in net terms is an exporter. It is a key player on world sugar markets although it remains far behind Brazil which now dominates exports.

For the last 40 years the EU has a protective sugar regime in place. The essential features consist of support prices (a minimum price to growers of sugar beet and a guaranteed price to support the market), production quotas to limit overproduction, tariffs and quotas on imports from countries outside the EU, and subsidies to export surplus production out of the EU. Due to this system, the current EU sugar price levels are three times higher than world market prices.

The Commission is proposing a 39 per cent cut in the price for white sugar, some compensation to farmers linked to environmental and land management standards, a voluntary four-year restructuring scheme for farmers and the abolition of intervention. The assistance plan will earmark €40 million for 2006 and pave the way for further assistance.

The Commission says the changes will enhance the competitiveness and market-orientation of the EU's sugar sector, guarantee it a viable long-term future and strengthen the EU's negotiating position in the current round of world trade talks.

The new system would continue to offer preferential access to Europe's sugar market for developing countries at an attractive price well above the world market level. African, Caribbean and Pacific countries, which traditionally export sugar to the EU, will benefit from an assistance programme.

Although Malta does not grow any sugar it is expected that the proposed reform will have a positive effect on its consumers.

Due to the present system, the government, in agreement with the EU, is pumping millions of euros each year to subsidise the price of sugar bought from EU markets so that consumers can still buy sugar at the relatively low prices they enjoyed before EU membership. But these subsidies have to be reduced every year and unless the sugar reform takes place, sugar prices in Malta will shoot up.

Agriculture Ministry sources told The Times that Malta is supporting the Commission's proposal for a total revamp of the current system as this is in Malta's interests.

The sources explained that with the proposed reduction in prices suggested by the Commission, the price of sugar on the international market would fall over a number of years and this would compensate for the reduction in government subsidies on the price of sugar in the coming years.

This, the sources said, will prevent a massive increase in the price of sugar for Maltese consumers.

The Commission is hoping for a political agreement on the proposals at the Agriculture Council in November.

Addressing a press conference in Brussels, Agriculture Commissioner Mariann Fischer Boel said there was no alternative to a profound reform.

"The easy option would be to sit on my hands. But that would mean a slow and painful death for the European sugar sector. I am convinced that EU sugar producers have a competitive future, but only if we act now and act decisively to prepare them for the challenges ahead.

"We are offering a long term, stable planning horizon with a generous restructuring fund to encourage less competitive producers to leave the sector and to cope with the social and environmental impacts of the restructuring process. And we will maintain preferences for our traditional suppliers in the developing world. Our market will remain an attractive place for some of them to sell their sugar."