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IP/04/915

Brussels, 14 July 2004

Sugar: Commission proposes more market-, consumer- and trade-friendly regime

Today, the European Commission tabled a radical overhaul of the EU sugar regime. The current system has come under fierce criticism for misallocating resources, hampering competition, harming developing countries and giving consumers, taxpayers and the environment a raw deal. The Commission proposes to substantially cut back sugar exports and export refunds, abolish intervention, reduce EU production and the internal sugar price and grant a de-coupled payment to sugar beet farmers. The reform process shall start in July 2005. To give all parties time to adjust, the changes should be implemented over four years. In view of the uncertainties in the international field, a review is foreseen in 2008.

Franz Fischler, EU Agriculture Commissioner said “This reform gives the EU sugar sector and developing countries a realistic perspective. Our consumers will see much more market orientation, developing countries much less trade distortions.”

Impact of the reform

The reform will lead to the continuation of sugar production in the EU - at a sustainable and competitive level. With the decoupled income payment, EU sugar beet farmers will be partially compensated for the income loss in the form of a fully decoupled payment. EU consumers and the sugar consuming industry will see lower prices. This reform will also tackle certain environmental problems caused by intensive production.

Job aspects

The existing sugar regime does not safeguard jobs. Over the last decade the sector has shed around 17,000 industry-related jobs. While there were 240 sugar mills in the EU in 1990, just 135 were left in 2001. This trend will continue.

The reform will also lead to restructuring, but with the difference that the remaining production will be competitive and the jobs sustainable. The reform will give the industry time to adapt. To cushion the social and economic effects of restructuring, the Commission proposes a conversion scheme for sugar factories which are no longer economically viable.

New Member States

Considering that the new Member States have already been fully benefiting from the existing sugar regime, the Commission proposes to grant full compensation. These payments will be subject to financial discipline.

ACP action plan

The EU fully stands by its commitments to ACP countries and India. With the reform, they will get a clear perspective, keep their import preferences and retain an attractive export market. The EU will initiate a dialogue with the affected countries on the basis of an action to be proposed before the end of 2004 to define appropriate trade and development measures. The Commission will propose to provide tailor-made programmes to help them adapt to the new market conditions to improve the competitiveness of sugar production where viable or to support diversification.

The 49 poorest countries will be able to export more sugar duty free to the EU.

Main changes

  • Reduction of the institutional support price from €632/t to €421 in two steps over three years
  • Reduction of the minimum price for sugar beet from € 43.6/t to € 27.4 in two steps over three years
  • Abolishing public intervention, replaced by a private storage scheme
  • Reduction of EU production quota by 2.8 million t (from 17.4 mio t to 14.6 mio t) over four years
  • Reduction of subsidised exports by 2 mio t (from 2.4 mio t to 0.4 mio t)
  • New, decoupled payment for sugar beet farmers to partially compensate (60%) income losses
  • Quotas transferable between operators of different Member States
  • Conversion scheme of € 250/t for factories leaving the sector

The details of the proposal are available at:

http://ec.europa.eu/agriculture/capreform/index_en.htm

See also MEMO/04/177


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