BRUSSELS (AP) — The European Union agreed on a major overhaul of its sugar subsidy program yesterday, cutting prices by 36 percent in a landmark deal that the union said will strengthen its hand in upcoming world trade talks.
“I know I’ll be in a much better position for the negotiations in December,” said EU Agriculture Commissioner Mariann Fischer Boel, referring to the world trade talks in Hong Kong.
She told reporters the agreement reached after three days of arduous talks “complies completely” with World Trade Organization rules. The European Union said it would effectively end its dumping of cheap sugar on the world market.
Caribbean producers, however, decried the deal, which will phase out their preferential access to Europe’s high-price market.
“They have clearly looked after [their] own farmers and left us in the cold,” said Ian McDonald, director of the Sugar Association of the Caribbean in Georgetown, Guyana. “This is devastating news.”
British Farm Minister Margaret Beckett, who headed the talks, said the decision to overhaul the European Union’s 40-year-old sugar subsidies marked “a historic day,” but acknowledged that implementing the reform would be tough for many countries.
“It was a decision of considerable difficulty and complexity,” she said. “Every member state faced problems.”
Reform of the sugar sector is a sensitive issue and will cause job cuts at refineries and force many farmers to stop growing sugar beet and sugar cane. More than 325,000 farmers in the European Union are growing sugar beet.
Under the reform, Ireland will be forced to shut down all its sugar beet production because of quota cuts, while Italy will give up half of its production quotas in exchange for millions of dollars in aid for farmers.
Other countries also will have to make deep cuts. Finland will close one of its two refineries, said Finnish Agriculture Minister Juha Korkeaoja.
Poland, Greece and Latvia remained vehemently opposed to the compromise, arguing that the reform was unfair for their producers.
The European Union has come under increasing pressure from its trade rivals to follow through on WTO demands that it eliminate its protected sugar-market pricing system.
A successful WTO challenge by Australia, Brazil and Thailand forced the European Union into the cuts to its subsidy system.
To persuade nations that opposed the initial reform plan, Mr. Beckett and Ms. Fischer Boel presented a compromise that boosts compensation to farmers and industry to ease the pain of the cut in prices and quotas.
Under the old system, production was supported by generous EU subsidies and import tariffs that guaranteed and inflated price for sugar. That now will be phased out over four years starting in 2006.
Farmers and industry will benefit from a $7 billion compensation fund to get out of the sugar business or put their sugar beets to other uses, such as bioethanol.
Farmers were not placated. “The reform is too drastic and … it will wipe out production for many growers,” said the COPA-COGECA, umbrella groups that represent Europe’s 15 million farmers.
EU sugar prices are more than three times higher than the global-market rate. Brussels also pays out export subsidies to get millions of tons of sugar a year off its market.
The changes will render the European Union a net importer of sugar. Most imports likely will come from a group of the poorest African producers, the European Union said. They will get tariff and duty-free access to the European Union’s sugar market beginning in 2009 under a separate aid-and-trade deal.
However, other African and Caribbean producers will see their preferred access to EU markets at inflated prices phased out. The European Union has offered them $47 million to help cushion the impact, but Caribbean reaction was furious.
“They are taking from the poor and giving to the rich,” said George Bullen, a spokesman for several small Caribbean states. “This is outrageous.”
Mr. Bullen said Caribbean leaders will take the fight to the WTO talks in Hong Kong.