EU sugar policy

assessment of current impact and future reform

Barend Hazeleger

commissioned by NOVIB Agrapen 2001

table of contents 1 World sugar market---------------------------------------------------------------------------------------------------------------3 1.1 Supply and demand (im)balance---------------------------------------------------------------------------------3 1,2 Main exporters and importers---------------------------------------------------------------------------------4 1.2.1 Raw sugar trade-----------------------------------------------------------------------------------------4 1.2.2 White sugar trade---------------------------------------------------------------------------------------5 1.3 Market characteristics---------------------------------------------------------------------------------------------6 The common market organization of sugar in the EU----------------------------------------------------------8 2.1 Production control--------------------------------------------------------------------------------------------------8 2.2 Price support---------------------------------------------------------------------------------------------------------9 2.2.1 Guaranteed minimum prices for A and B quota--------------------------------------------9 2.2.2 C sugar price--------------------------------------------------------------------------------------------10 2.2.3 Production refunds for the chemical and pharmaceutical industries------------------10 2.3 Trade measures----------------------------------------------------------------------------------------------------10 2.3.1 Import duties---------------------------------------------------------------------------------------------11 2.3.2 Export refunds-------------------------------------------------------------------------------------------11 2.3.3 Preferential access under the sugar protocol-----------------------------------------------11 2.3.4 Maximum supply needs, special preferential sugar and most favoured . nation sugar----------------------------------------------------------------------------------------------12 2.4 The costs of the CMO sugar---------------------------------------------------------------------------------13 2.5 Conclusions-----------------------------------------------------------------------------------------------------------14 The effects of the CMO sugar on third parties-------------------------------------------------------------------15 3.1 EU exports-----------------------------------------------------------------------------------------------------------15 3.1.1 Cost price comparison with other exporters---------------------------------------------------------16 3.1.2 Quota sugar exports--------------------------------------------------------------------------------------16 3.1.3 C sugar exports--------------------------------------------------------------------------------------------17 3.1.4 Effects of EU exports on world market sugar prices-----------------------------------------------17 3.1.5 Conclusions------------------------------------------------------------------------------------------------18 3.2 EU market access regime-------------------------------------------------------------------------------------------18 3.2.1 Conclusions------------------------------------------------------------------------------------------------21 Effects of policy changes of the CMO sugar-----------------------------------------------------------------------------22 4.1 The future CMO sugar------------------------------------------------------------------------------------------------22 4.1.1 Multilateral trade liberalization and developing countries----------------------------------------22 4.1.2 Effects of trade liberalization on the world sugar market-----------------------------------------24 4.1.3 Conclusions------------------------------------------------------------------------------------------------25 4.2 Preferential access: Everything but Arms------------------------------------------------------------------------26 4.2.1 Critique on EBA--------------------------------------------------------------------------------------------27 4.2.2 Conclusions------------------------------------------------------------------------------------------------27 4.3 Production control: current account for sugar-------------------------------------------------------------------29 4.3.1 Conclusions------------------------------------------------------------------------------------------------30 References--------------------------------------------------------------------------------------------------------------------------31 Annex 1: Classification scheme for LEI simulations-----------------------------------------------------------------------32

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World sugar market

The world production of white and raw sugar exceeds the demand. Stocks have risen over the last ten years to 45% of the yearly consumption. As a result prices on the world sugar market have been fallen since 1995 to a level of about 175 - 250 dollars per tonne, which is below the cost price of most producers.

1. 1 Supply and demand (im)balance

The world production of sugar amounted to 132 million tonnes in 1999/2001. In the same year consumption rose to 128 million tonnes. The average growth of production is 3 to 4 % a year, consumption increases with 1,5% a year. Since the beginning of the 1990's stocks rose from 30 to 45% of annual consumption (see table 1). Table 1: world supply balance and international trade in sugar
1996/97 1997/98 1998/99 1999/00 --------------------------------------1 000 t raw sugar ------------------------------------Supply balance (marketing year September/August ) Initial stock Production Imports Availability Exports Consumption Final stock of which: as % of consumption International trade Imports/world of which: EU-15 % Exports/world of which: EU-15 %

45 703 124 103 37 265 207 071 39 436 120 940 46 548 38.5

46 548 128 063 39 281 213 892 41 205 123 245 49 442 40.1

49 442 135 121 41 369 225 932 43 412 126 704 56 416 44.5

56 416 132 264 38 560 227 240 40 413 128 269 58 558 45.7

35 153 1 868 5.3 35 422 4 209 11.9

37 278 1 883 5.1 37 021 5 152 13.9

37 076 1 814 4.9 37 263 6 357 17.1

35 887 1 941 5.4 39 487 5 086 12.9

Source: FO Licht (supply balance), International Sugar Organization (international trade)

The growing stocks resulted into a sharp decline of prices after 1995 to a level of 200 US $ per tonne (see figure 1 for raw sugar prices, white sugar prices follow the same trend).This is close to or even below the cost price in most exporting countries. Brazil, considered as one of the most important sugar cane producers, is able to

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produce raw sugar at US$ 150 - 200 per tonne (source NEI). The mayor reasons for this price decline are growing exports from Brazil, Australia, Cuba and Thailand and declining imports by Asian countries and Russia due to the economic crises in these countries. Figure 1: World monthly raw sugar prices $ cts/pound (x 1.94 to get Euro cts/kg)

Source: coffee, sugar and cocoa Exchange Inc.

1. 2 Main exporters and importers

On the world market two types of sugar are distinguished: raw and white sugar. Raw sugar is an intermediate product shipped for refinement in the importing countries. White sugar is the end product. Raw sugar almost entirely consists of cane sugar. White sugar consists of refined beet and cane sugar. 1.2.1 Raw sugar trade The raw sugar market is heavily concentrated and dominated by Brazil and Australia, followed by Cuba and Thailand. This top 4 exporters accounts for 65% of raw sugar supply on the world market (see table 2). The preferential sugar exports are exports from ACP countries under the EU/ACP convention to the EU. Later on India got the same rights. In total the preferential exports amount to 1,304,700 tonnes a year. The top-4 exporters of these preferential exports are: Mauritius (491,030.5 tonnes), Fiji (165,348.3), Guyana (159,410.1) and Swaziland (117,844.5). The special preferential sugar exports (SPS) are established on top of the preferential exports to meet the capacity of the seven EU raw sugar refineries. Again India and the ACP countries account for these SPS exports. Table 2: Raw sugar export volumes, 1997-98 (in 1,000 tonnes of raw sugar)
exporting country raw sugar export volume (world market share) preferential sugar + sps of which: US tariff rate quota 221.1 126.6 21.3 35.1 25.0 73.2 36.6 32.0 39.6 610.5 989.5 1,600.0 worldmarket exports 4,500.2 3,941.1 2,509.3 1,377.8 815.2 768.6 706.4 344.3 167.8 123.2 15,253.9 718.9 15,972.8 EU sugarpolicy
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Brazil Australia Cuba Thailand South Africa Mexico Guatemala Colombia Nicaragua El Salvador Top-10 Others Total Source: NEI

4,721.3 4,067.7 2,509.3 1,399.1 850.3 793.6 779.6 380.9 199.8 162.8 15,864.4 3,452.5 19,316.9

(24%) (21%) (13%) (7%) (4%) (4%) (4%) (2%) (1%) (1%) (82%) (18%) (110%)

1,744.1 1,744.1

The main importers of raw sugar are listed in table 3. The top-10 account for 70% of total raw sugar imports. The EU is the third largest importer with a share of 8,2% of total raw sugar imports mostly consisting of preferential and special preferential sugar imports. Table 3: Raw sugar import volumes, 1997/98 (in 1,000 tonnes of raw sugar)
importing country imports from world market imports under preferential conditions total raw sugar imports

Russia USA EU Japan South Korea Canada Malaysia Egypt Morocco Saudi Arabia Top-10 Others Total Source: NEI

4,152.8 561.5 1,601.6 1,367.2 1,082.0 974.0 962.9 525.9 422.9 11,650.8 6,232.9 17,883.7

1,600.0 1,744.1

3,344.3 3,344.3

4,152.8 2,161.5 1,744.1 1,601.6 1,367.2 1,082.0 974.0 962.9 525.9 422.9 14,994.9 6,232.9 21,227.8

1.2.2 White sugar trade The white sugar market is less concentrated than the raw sugar market. The market share of the top-10 exporters is 66%; on the world market for raw sugar this is 82%. The same is true for the import side: the market share of top-10 importers of white sugar is 37%, of raw sugar this is: 70%. The EU is by far the largest exporter of white sugar with 30% of world exports, followed by Brazil, Thailand and Pakistan (see table 4). EU production and exports are more or less stable. The last years the EU exported an average of 5.4 million tonnes of white sugar to the world market. 2.5 million tonnes consisted of C-sugar, exported without export refunds, the rest 2.9 million tonnes was exported with refunds. The latter consisted of 1.2 million tonnes of quota sugar (EU-production) and 1.7 million tonnes of white sugar, originally imported as preferential or special preferential raw sugar from ACP countries and India (non EU-production). Table 4: white sugar trade, 1997/98 (in tonnes of raw sugar equivalents)
exporting countries EU Brazil Thailand Pakistan India Colombia Poland Ukraine Guatemala South Korea Top-10 Others Total Source: NEI white sugar exports 6,411.9 3,329.8 1,224.2 639.0 527.5 473.8 403.2 398.6 365.1 364.9 14,138.0 7,169.0 21,307.0 importing countries Nigeria Russia India Iran Algeria Sri Lanka Iraq Israel Peru Indonesia Top-10 Others Total white sugar imports 897.6 886.7 874.7 856.9 643.2 529.8 510.1 471.6 458.3 446.4 6,575.3 11,312.6 17,887.9

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1. 3 Market characteristics
Often the world sugar market is considered to be a residual market. In terms of volumes it is not. Almost 30% of total production is traded internationally. Looking at the export/production ratio of some major exporters it becomes clear that countries like Brazil (export/production ratio 47%), Australia (77%), Thailand (61%), Cuba (74%), Guatemala (73%) and South Africa (51%) produce sugar deliberately for selling on the world market. The EU export ratio of 30% equals world average (source NEI). In terms of prices it can be argued that the world sugar market is a residual market. Most of the major sugar exporting countries protect the domestic market with price support, subsidies and with high tariffs (table 5). For all OECD countries the producer nominal assistance coefficient (a measure for all transfers from taxpayers and consumers to indivudual producers) for sugar was around 1.75 in 1998 (Silvis) which means that gross farm receipts are 1.75 times of what they would be without any budgetarysupport. The same coefficient for the consumer was 2.09, meaning that the consumer paid 2.09 times more at the farm gate than he or she would have paid at the world market. But not only OECD countries protect their domestic market. In Brazil for example domestic sugar price plus the domestic demand are high enough to cover most or all of the fixed costs of the sugar producers. The Australian government subsidises the irrigation systems of the sugar cane plantations. And in Thailand, growers are supported with favourable credits and subsidised fertilisers. However, the level of support in these countries is much lower than the EU support. (source NEI page 36). Table 5: Ad valorum equivalent tariffs rates (%) under the Uruguay Round Agreement
Region/Country Africa Egypt Kenya Mauritius South Africa Tanzania Zimbabwe Latin America and Caribbean Argentina Brazil Cuba Guatemala Mexico Near East Turkey Asia Bangladesh China India Indonesia Japan Korea Rep. Malaysia Pakistan Philippines Thailand Oceania Australia New Zealand Fiji North America USA Canada Western Europe European Union Eastern Europe Poland Former USSR Tariff 1995 Tariff 2000

30.0 100.0 122.0 124.0 120.0 150.0 35.0 85.0 40.0 178.0 173.0 150.0 200.0 100.0 150.0 110.0 337.0 23.7 17.0 150.0 100.0 104.0 43.0 0.0 40.0 175.0 9.7 70.0 120.0 15.0

20.0 100.0 122.0 105.0 120.0 150.0 35.0 35.0 40.0 160.0 156.0 135.0 200.0 76.0 150.0 95.0 287.0 18.0 15.0 150.0 50.0 94.0 21.6 0.0 40.0 150.0 8.2 60.0 96.0 15.0

The tariffs from table 5 represent market distortions between each country's internal price and the border (world) price. Lower income countries, which rely more heavily on sugar as a source of income, tend to have fewer tariff barriers (both duties, quota and other import conditions) than high-incomecountries with more heavily subsidize domestic roduction. (source: FAO)

source: FAO EU sugarpolicy

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The EU isolates its domestic demand and all of its preferential imports from the world market. That means that the traded amount of sugar on world market is smaller than it would have been in de absence of the CMO sugar. According to economic theory changes in supply and demand on a small market have greater impact than on a large market. Thus the CMO sugar contributes to instability on the world sugar market and (through the export refunds see paragraph 3.1) depresses prices. Most experts share this view: prices on the world market don't reflect the cost price of the major exporters, are artificially depressed and highly volatile. Hannah, head economic and statistic division of the International Sugar Organization, offers a different view (see box 1) Box 1: growing influence of developing countries on the world market stabilises sugar prices
In his opinion the low sugar price since the 1980s is a direct result of the investments and technology developments in alternative sweeteners (HFCS). In order to avoid substitution on a world scale the sugar price has balanced out with the production costs of HFCS. Direct competition with alternatives caused the low sugar prices on the world markets in the 1990s. Hannah does not agree either with the prevailing opinion about the high volatility of sugar prices. He analyses the percentage of deviation from the mean at 13,1 per cent over the period 1988 - 1996. Compared with earlier periods the price volatility has been reduced by a factor of 4 due to the growing importance of developing countries on the world sugar market. The last decade the dominance of the import market has shifted from the developed countries to developing countries. By 1996 the relative share of developing countries was almost 60 per cent of the market. Substitution of sugar by HCFS in the developed world and growing demand from the oil exporting developing countries lead to this shift. Developing countries have on average higher price elasticity for sugar than developed countries. So when prices rise, less is purchased and vice versa. The result is a much more stable sugar price over the last 10 years than there used to be 20 to 30 years ago. Hannah suggest that this stabilisation could be threatened by rapid liberalisation measures because protectionism has aided this stability and protection is needed for the sugar industry in importing developing countries source A.C. Hannah

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The common market organisation of sugar in the EU

The European common market organisation (CMO) for sugar consists of three elements: 1 production control (quotas), 2 price support (internal prices production levies and refunds) and 3 trade measures (export refunds, import levies and preferential agreements). The CMO is to a large degree financed by the sugar producers and industry except from the re-exporting of sugar originally imported under preferential agreements with the ACP countries and India.

2. 1 Production control
Sugar production within the EU is controlled by quotas per country and per industry. There are two types of quota. A-quotas (12 million tonnes) roughly cover the internal demand of the EU. The B-quotas (2.6 million tonnes) equal the amount of sugar that can be exported with the aid of export refunds. Guaranteed prices (intervention price, basic and minimum prices for sugar beets and cane see paragraph 2.2) only apply to A and B sugar quota. And only A and B sugar can be sold on the EU market. The major difference between A and B sugar is the amount of production levy (2 respectively 39,5 % of the Intervention price at the maximum, see paragraph 2.2). Sugar produced in excess of A and B sugar quota, the so called C sugar must be exported without export refunds (on average 2.5 million tonnes). The EU allocates the quotas to the member states (see table 6). The A quotum is equal to the historic sugar production of each country at the start of the CMO sugar. B quotum was granted to countries with comparable advantages in beet production, giving them a change to specialise further. The EU member states allocate the quota further down to individual processors. On the basis of these factory quotas, the processor grants the growers beet delivery rights. Processor and grower may decide to produce on top of this C-sugar and C-beets. Prices, delivery rights etc. are laid down in an obligatory contract between processor and grower (see paragraph 2.2). Sugar production within the EU is quite stable. The quota system effectively limits the supply on the EU market. It does so at the costs of the consumer and to a lesser extent the world market. The production of quota sugar is structurally at least 10% higher than sugar consumption in the EU. For this surplus quota production the producers get a price twice as high as the world market price. In addition depending on climatic circumstances some C sugar is produced. This is profitable thanks to the high prices for A and B quota sugar which apparently cover all variable and fixed costs. With respect to C sugar exports, prices on the world market are acceptable to EU sugar producers as long as they can cover their variable costs. The total volume of EU sugar export has been quite stable over the years (source NEI, page 36/37).

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Table 6: Allocation of national sugar quota (in tonnes of white sugar)

Region Austria Belgium Denmark Finland France-continent French overseas territ. Greece Germany Ireland Italy Netherlands Portugal-continent Portugal-Azores Spain Sweden UK EU-15 Source: NEI A quota 316,529 680,000 328,000 133,433 2,530,000 466,000 290,000 2,637,703 182,000 1,320,000 690,000 63,636 9,091 960,000 336,364 1,040,000 11,982,756 B quota 73,881 146,000 96,629 13,343 759,233 46,600 29,000 811,610 18,200 248,250 182,000 6,367 909 40,000 33,636 104,000 2,609,655 B/A (in %) 23,3 21,5 29,5 10,0 30,0 10,0 10,0 30,8 10,0 18,8 26,4 10,0 10,0 4,2 10,0 10,0 21,8 Total quota 390,410 826,000 424,629 146,776 3,319,233 482,600 319,000 3,449,313 200,200 1,568,250 872,000 70,000 10,000 1,000,000 370,000 1,144,000 14,592,411 % of total 2,7 5,7 2,9 1,0 22,7 3,3 2,2 23,6 1,4 10,7 6,0 0,5 0,1 6,9 2,5 7,8 100,0

2. 2 Price support
Each year the EU Council of the Agricultural Ministers fixes an intervention price for white sugar. From it the basic and minimum prices for sugar beet and sugar cane are derived. Intervention and minimum prices have been frozen since 1984/85. Intervention has not been practised since 1986 thanks to the fact that the production quota can be adapted each year. 2.2.1 Guaranteed minimum prices for A and B quota The basic price for sugar beet and cane is 58% of the intervention price. From the basic price the production refunds are deducted, resulting in a minimum price for A and for B quota sugar (see table 7). The processor is obliged to pay the growers at least these minimum prices. It is this legal obligation that guarantees basic beet and cane prices for A and B quota. To cover the costs of the export refunds (and also part of the production refunds paid to the chemical and pharmaceutical industry), the EU imposes production levies: 2% of the Intervention price for sugar on both A and B quota sugar; a variable levy on B quota sugar with a maximum of 37.5% of the Intervention price for sugar; an additional levy in case the 2% and 37,5% levies are not enough to cover the costs of the export refunds. The levies are paid by the industry which reclaims 58% of it from the farmers by deducting it from the basic beet price.

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Table 7: Calculation of the basic beet price

Intervention price Processing costs Value of molasse Transport of beet White sugar price in beets Basic price of beet with 16% sugar Minimum price for A quota beets Minimum price for B quota beets Source: NEI and European Commission 631.9 Euro / tonne white sugar -243.6 Euro / tonne white sugar 22.5 Euro / tonne white sugar - 44.1 Euro / tonne white sugar 366.7 Euro / tonne white sugar 47.67 Euro / tonne of beets 46.72 Euro / tonne of beets 32.42 Euro / tonne of beets
The white sugar price in beets equals 58% of the intervention price. So the farmer gets 58% and the processor 42%. In practise the processor gets more. The market price is generally higher than the intervention price and the processor keeps all or most of this price difference. The white sugar price is multiplied by 0.13 to get the basic price of beet, assuming one gets 130 kg of sugar out of one tonne of beets

2.2.2 C sugar price C quota sugar is produced in excess of A and B quota. Processors are obliged to sell it on the world market without export refunds. Processors don't have the legal obligation to pay the growers minimum price. In practise farmers receive about 60% (equal to the share they get for their A and B quota from the Intervention Price) of the receipts of C-sugar (source NEI page 10). Prices, quantities, quality, delivery periods, and payment schedules are put down in a contract between the processor and the grower. This so called inter-trade agreement is also prescribed by the CMO to offer the grower a minimum protection. 2.2.3 Production refunds for the chemical and pharmaceutical industries Chemical and pharmaceutical industries using EU sugar would be disadvantaged over competitors outside the EU. To ensure a level playing field the CMO provides a production refund to these industries. The production refund equals the average export refund paid minus 84.5 Euro per tonne. Up to June 30. 2001 production refunds over the first 60.000 tonnes were paid out of the EU budget. The costs of production refunds for every tonne in excess had to be covered by the production levies. Presently the industry uses about 200.000 tonnes of sugar per year (source NEI page 16). From July 1. all costs of the production refunds have to be paid out of the production levies (budget neutral).

2.3 Trade measures

The EU sugar market is isolated from the world market through a system of import duties and export refunds. For sugar imports from the ACP countries and India special arrangements have been made 2.3.1 Import duties Since the GATT Uruguay round the EU imposes fixed import tariffs on sugar imports. The agreed upon tariffs are listed in table 8.

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Table 8: EU import tariffs for white, raw and preferential sugar (in ECU's per tonne)
Marketing year 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 Source: NEI white sugar 507 490 473 456 439 419 raw sugar 410 396 382 368 354 339

There is a special safeguard clause in the GATT agreement which allows the EU to impose an additional import duty if the value of the imported sugar (price plus fixed duty) drops below the trigger level (530 ECU per tonne for white sugar). This has been constantly the case since the agreement went in force (1995/96). The additional import duty varies from zero to 100 ECU/tonne if the value drops from 531 to 200 ECU/tonne of white sugar. Fixed and additional import duties are more or less prohibitive. Hardly any non-preferential sugar is imported into the EU (source NEI page 15). 2.3.2 Export refunds The EU exports three distinctive categories of sugar: quota sugar (A and B) that qualifies for export refunds a quantity of sugar equivalent to the amount of imported preferential sugar (re-export) which also qualifies for export refunds and C sugar which must be sold on the world market without export refunds. The maximum export refund equals the intervention price plus free on board costs minus the world market price (export value). Export refunds are granted through a weekly tendering system. Exporters make a bid consisting of the desired level of export refund and the amount of sugar they want to export. The EU sugar management Committee decides on the basis of actual price developments on the world market and the total amount of sugar that needs to be exported in the current marketing year. Not only white and raw sugar qualifies for export refunds also sugar contained in food and drinks (non Annex I products) does. This export refund is fixed monthly and equals the export refund for white sugar at the beginning of the month minus 30 ECU per tonne of sugar. Under the GATT agreement the EU is obliged to reduce the amount it spends on export refunds. It will do so by reducing the quantities (sugar quotas) exported with the aid of export refunds. For the first time this was applied for the 2001/02 marketing year. Quotas were reduced with 115,000 tonnes. 2.3.3 Preferential access under the sugar protocol Before entering the EU the UK imported large quantities of raw sugar from its former colonies for refinement. To safeguard the interests of both the UK refiners and the ACP countries concerned these imports were included in ACP-EU convention first signed in 1975 and became part of the CMO sugar. The so called sugar protocol of the Lom conventions forms an integral part of the new ACP-EU Partnership Agreement signed in Cotonou on 23 June 2000. In the protocol the EU commits itself for an indefinite period of time to purchase and import, at guaranteed prices, specific quantities of cane sugar, raw or white, which originate in the ACP states. The quantities of sugar to be imported are given in table 9. These export can enter the EU free, no import duties are charged. Later on 10.000 tonnes of sugar from India was added to the list. The guaranteed price for this preferential sugar equals the intervention price for raw sugar in the UK. If the ACP (or Indian) sugar can not be sold on the market for this or a higher price the EU is obliged to buy it through the intervention agencies.

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Table 9: ACP EU sugar quotas and production

Countries ACP/EU Sugar Protocol Agreed Quanitities (tonnes w.s.e.) 50,312.4 40,348.8 10,186.1 10,186.1 165,348.3 159,410.1 118,696.0 10,760.0 20,824.4 491,030.5 15,590.9 117,844.5 10,186.1 43,751.0 0.0 30,224.8 1,294,700.0 SPS 1998/99 Basic Allocation (tonnes w.s.e.) 9,207.9 7,384.4 1,864.2 11,864.2 30,261.2 29,174.5 21,723.2 1,969.2 13,811.2 89,866.0 2,853.4 51,567.3 1,864.2 8,007.1 12,050.3 30,531.6 324,000.0 Normal Annual Production (tonnes tel quel) 70,000 122,000 43,000 155,000 450,000 300,000 230,000 100,000 200,000 650,000 25,000 474,000 120,000 120,000 200,000 600,000 3,859,000

Barbados Belize P R Congo Cote d'Ivoire Fiji Guyana Jamaica Madagascar Malawi Mauritius St Kitts Nevis Swaziland Tanzania Trinidad & Tobago Zambia Zimbabwe Total

Source: http://www.acpsugar.org/acpstats1.htm 2.3.4 Maximum supply needs, special preferential sugar and most favoured nation sugar There are seven refineries of raw cane sugar in the EU, two in the UK, two in Portugal, two in France and one in Finland. The import volume of preferential sugar is not enough to meet their total production capacity. In 1995 the EU solved this problem by opening its market a little bit more for raw sugar imports. This arrangement, the Maximum Supply Needs fixes the total amount of raw cane sugar to be imported under highly reduced import duties at 1,779,000 tonnes per year. This quantity has to be met by imports from: the French overseas departments; the Preferential Sugar from the ACP countries and India; Most favoured Nation sugar. In the case these three sources do not provide the industry with 1,779,00 tonnes, additional raw cane sugar can be imported from ACP countries and India. This additional volume is called Special Preferential Sugar. Since the amounts of Preferential Sugar and Most Favoured Nation Sugar (85,463 tonnes of raw sugar coming from Cuba (68%), Brazil (28%) and other countries (4%), are fixed, the volume of the Special Preferential Sugar depends on production and consumption in the French overseas departments. In 1998/99 the tariff quotas for Special Preferential Sugar were 324,000 tonnes from ACP countries and 10.000 tonnes from India. The import tariff for Special Preferential Sugar is 83.3 ECU/tonne (1999/00). The import tariff for Most Favoured Nation sugar is 98 ECU/tonne of white sugar.

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2.4 The costs of the CMO sugar

The CMO sugar is often referred to as being a self financing market organisation. It differs from other schemes in the sense that the producers (processors and growers) themselves are paying the costs for exporting surplus sugar to the world market. And compared with other market organizations the CMO sugar does not draw heavily on the EU budget, but it isn't budget neutral either. Total expenditures are estimated at 1,575 million ECU, total production levies at 813 million ECU and thus the yearly deficit at 762 million ECU (source NEI page 198) see table 10. Table 10: Expenditures and receipts CMO sugar 1990-99 in millions of ECUs
(1) Year (2) Export Refunds Sugar + Isoglucose 1251 1306 1531 1377 1312 1230 1116 1266 1204 1412 (3) Production Refunds (4) Aid Transport Raw sugar from DOM 21 22 17 18 15 15 14 13 14 12 (5) Other Interventions (6) Total Expenditures (7) Total Production Levies (90%) 571 469 528 632 694 615 670 699 661 813 (8) Not covered Expenditures

1990/91 1991/92 1992/93 1993/94 1994/95 1995/96 1996/97 1997/98 Av.95/96-97/98 Budget 1998/99

50 63 72 74 70 81 82 105 89 110

32 51 67 42 35 24 34 44 34 41

1354 1441 1687 1511 1432 1350 1246 1427 1341 1575

783 972 1159 879 738 735 576 728 680 762

Notes and sources: DOM = Departements Outre Mer = French overseas territories. Source columns 2 to 5: Depenses dans le secteur du sucre, DGVI-G-1, 3-3-1999. Column 2 does not include export refunds of non-annex I products, which are booked under chapter 20. Source columns 7: calculations from DG.VI.C and annual Commission Regulations as regards fixing the levies. Column 7 does not include production levies paid for isoglucose and inulin, which varied from 7.7 to 9.3 million Ecus per year in recent years. Production levies (columns 7 refer to the production year, which runs officially from 1/7 till 30/6.

Source: NEI

This deficit is mainly due to the fact that the production levies only cover the costs of exporting surplus quota sugar to the world market. Export refunds for the equivalent of the imported preferential sugar under the various regimes are paid out of the EU budget. The same is true for special aid for the raw sugar cane refineries, the French overseas departments, the administration costs of the CMO and production refunds for 60.000 tonnes of sugar used by the chemical and pharmaceutical industry (as of July 1. this has altered and production refunds are now 100% self financed). The deficit is analysed further in table 11.

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Table 11: Origin of the CMO sugar budget deficit in million of ECUs
Year Export Refunds Preferent. Imports 694 688 683 688 82,8% 794 Production Refunds 60,000 Tonnes 21 21 21 21 2,5% 25 Aid Transport raw sugar from DOM 15 14 13 14 1,8% 12 Other interVentions 10% Adminstr. Costs Total Estimated Deficit Actual Deficit Estimated as % of Act. deficit 92 109 90 96 104

1995/96 1996/97 1997/98 Av.93/9497/98 Budget 1998/99

24 34 44 34 4,1% 41

68 74 78 73 8,8% 90

822 831 839 831 100,0% 962

898 763 937 866 928

Notes: 1. Export refunds for the equivalent quantity of the preferential imports are calculated on the basis of an average quantity of 1.6 million tonnes and an average export refund of respectively 430, 430, 434, 430, 427 and 496 ECU/t for the years 1993/94 to 1998/99. The total average quantity is based on 1.3 million tonnes of ACP sugar, 0.2 million tonnes of SPS sugar and 0.1 million tonnes of sugar from India, Cuba and Brazil. 2. Production refunds are based on 60,000 tonnes multiplied by the export refunds minus 85 Ecu/t. 3. DOM = Departements Outre Mer = French overseas territories.

Source NEI

2.5 Conclusions
The CMO sugar is quite effective in stabilizing the supply on the EU market. Quotas and preferential imports are fixed and surplus sugar is (obligatory) exported to the world market with the aid of export refunds. Import duties are prohibitive, preventing non-preferential imports from entering the market. The CMO sugar also helped to stabilize sugar prices within the Union. The intervention price acts as minimum price. Sugar prices in the EU are much more stable than the world market prices, partly because the fluctuations in production are transferred to this market. The CMO sugar makes it possible to grow beet and produce sugar within the EU at remunerative prices. The effective minimum revenue for white sugar in the EU ranged from 575 to 600 ECU/tonne while the world market price varied from about 360 ECU/t in 1995/96 to 200 ECU/t in 1998/99. As a percentage of the world market sugar price they varied from 170% to 300% over the period 1992/93-1998/99. The CMO sugar although not entirely self financed is relatively cheap and costs the EU approximately 800 million ECU's a year. Most of the costs (83%) are spent on export refunds for the equivalent of the imported preferential sugar (1,800,000 tonnes). This historically grown situation is now often referred to as a kind of development aid.

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3
Product

The effects of the CMO sugar on third parties

The CMO sugar enables European producers to export sugar at prices far below the production costs in the EU and thus contributes to the downward trends in international sugar prices. Secondly the CMO sugar market access regime is highly discriminative in the sense that it shuts the door completely at some parties while others are welcomed in at favourable conditions.

3.1 EU exports
As shown in paragraph 1.3 almost all major exporters support and protect their own sugar producers and are thus able to export sugar at low prices. Sugar prices on the world market don't reflect the costs of production of the major exporting countries. Table 12: Average cost of sugar production for country aggregates (in US $/tonne)
Country group Belgium, Netherlands, Chile, Turkey, UK, US Cost Period 1989-94 456 (434-479) 656 (566-713) 989 (791-1221) 198 (177-219) 280 (258-303) 277 (246-329) 366 (332-429) Cost Period 1994-98 450

Refined beet sugar Low cost producers Refined beet sugar Major exporters Refined beet sugar High cost producers Raw cane sugar Low cost producers Refined cane sugar Low cost producers Raw cane sugar Major exporters Refined cane sugar Major exporters

EU, Turkey, Ukraine

710

Bulgaria, Kazachstan, Moldova, Romania, Russia, Ukraine, Japan Brazil, Colombia, Malawi, Guatemala, Zambia

n.a.

197

Brazil, Colombia, Malawi, Guatemala, Zambia

n.a.

Australia, Brazil (CS), Cuba, Colombia, Guatemala, Thailand, Mauritius, South Africa Australia, Brazil (CS), Cuba, Colombia, Guatemala, Thailand, Mauritius, South Africa

335

n.a.

Source: NEI page 113

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3.1.1 Cost price comparison with other exporters The EU is not the most efficient producer of sugar nor is beet an obvious source for sugar. Production costs of sugar in the EU varies on average between 625 and 560 Euro/tonne. This is well above what is considered to be the benchmark for international competitiveness (230 $/tonne), well above actual world market prices (around 245$/tonne white sugar in the summer of 2001) and well above the cost price of efficient producers like Australia and Brazil (150 $/tonne). The most important reason for the gap between EU cost price and other southern producers is the origin of the sugar. Cane and beet sugar have the same chemical content and also in the use there is little difference between the two sugars. But the average costs of producing beet sugar are 50 - 70 per cent higher than those of cane sugar. Consequently cane sugar is outperforming beet sugar and sets the prices at international markets. On the basis of the average production costs the EU processors can't compete with its major competitors (see table 13). But thanks to the CMO sugar, processors don't have to compete on the basis of the average costs. They can compete on the basis of the variable costs. The costs of producing sugar in the EU are shown more in detail in table 15. Table 13: Beet sugar production costs in the EC: comparison between 1993 and 1998 (in ECU per tonne)
1993 Beet Capital costs Permanent personnel Maintenance materials Fuel (sugar only) Lime Total overheads Source: NEI 400 100 52 20 18 14 20 1998e 388 80 37 15 15 9 15 Processing costs, seasonal personnel included are around ECU 58 per tonne.

The EU exports roughly 20% of the quota sugar produced (11% if preferential sugar is not taken into account)., So 80% is sold on the internal market. Prices on the EU market are higher than the intervention price and much higher than the cost price of efficient producers like the UK, the Netherlands and Belgium. The processor's net margin on the internal market is highly disputed. The industry states it is less than 10%, researchers come up with figures between 4 and 25% (source NEI page 74). In any case it can be assumed that all or almost all of the processor's fixed and variable costs of the total sugar production is met at the internal market. Sales to the world market are profitable if the variable costs plus levies (in the case of quota sugar) or the processing costs (C-sugar) are covered. 3.1.2 Quota sugar exports For quota sugar exports the processor receives the world market price plus the export refund which equals more or less the intervention price of 629.3 Euro/tonne. The difference between A and B quota sugar is the amount of production levy (2 or 39.5% maximum, not taking an additional levy into account). All member states except for Finland, Portugal and Greece fully use their A and B quotas. So it must be profitable to export even B quota sugar to the world market. Table 14 shows why. Table 14: Cost price calculation for B quota sugar exported to the world market
Beet price Variable production costs Levy Total Source: NEI EU sugarpolicy
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0.58 x 631.9 ECU/t 0.42 x 0.395 x 631.9 ECU/t

366.5 ECU/t 58.0 ECU/t 105.0 ECU/t 529.5 ECU/t

16

The calculated 529,5 ECU/tonne is still lower than the intervention price (632.9 ECU/tonne) the processors will receive. That is the reason why the main exporters of quota sugar (France, Germany, the UK, Belgium, Italy and Denmark) find it still worthwhile to export some of their A and even B quota sugar to the world market. 3.1.3 C sugar exports Because of the profitability of producing and selling quota sugar in the EU, both processors and growers are eager to use their total production quota. If not, they risk the transfer of the unused quota to other countries, processors or growers. Therefore the area sown under beet is usually based on a conservative estimate of the potential yields. On average this practise results in the production of 800.000 tonnes 'unintentional' C sugar (source NEI page 117). Both intentional (1.4 million tonnes) and unintentional C sugar have to be exported without export refunds. This is possible only under the assumption that all fixed and variable costs of the industry have been covered through the sale of A and B sugar on the internal market. The major C sugar producers (France, Germany, the U.K., Spain and Denmark) reckon only with the variable processing costs of 58 ECU/tonne. Usually the grower receives 60% of the receipts of C sugar, the processor 40%. So if the world market price is at low as 150 $/tonne white sugar C sugar processors still break even. 3.1.4 Effects of EU exports on world market sugar prices In the absence of the CMO sugar the EU would not be able to export sugar to the world market. On the contrary most of its demand would be secured by buying white sugar and raw cane sugar on the world market. In the absence of the CMO sugar Borrell and Hubbard (cited in Goodison: the EU sugar regime, 2001) expect EU imports to rise with 7 million tonnes and exports to decline with 5 million tonnes. The CMO sugar not only isolates the EU production and consumption from the world market but the production imported under preferential trade agreements as well. All taken together the NEI estimates that in the absence of the CMO sugar the volume traded on the world market would be 46% higher (NEI page 44). The effects of the CMO sugar on the world market will be twofold: it contributes to the price instability on the world market. Changes in supply and demand have a greater effect on prices than they would have if the EU did not isolate its own market; it depresses the prices on the world market. The CMO sugar increases supply and decreases demand on the world sugar market. In a situation of surplus production this has a depressing effects on prices. In the absence of the CMO sugar the sugar price on the world market would be higher and less volatile. How much higher and how much less volatile is hard to say. Studies on the quantitative effects are not very clear and differ considerably from each other. The NEI made a "quick-and-dirty" estimate of the short term price effect. If the EU would decrease its quotas with 10%, .... this would cause an increase of the New York spot price of about 15 US $/tonne per tonne (which is about 8.5% of the present raw sugar price of US $ 175 per tonne). But the same institute also concludes: The volume of EU sugar export has been quite stable over the years. As such the EU exports have not caused instability on the world market. Also the dramatic decline of world market prices since 1995 was not caused by EU exports. The price decline was primarily caused by a substantial increase of exports from Brazil, Thailand and Australia. At the same time, import demand from Russia and a number of Asian countries declined. (source NEI pages 43,44). A study by the World Bank concluded that the long-term impact of the CMO Sugar on the sugar world market price could be about minus 17% (cited in NEI). Borrell (cited in Goodison 2) and the FAO have calculated the price rise on the world sugar market if all (not only EU) protective measures were removed at respectively 33 and 43 per cent. Borrell expects EU exports to diminish and import to rise, the FAO the opposite.

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3.1.5 Conclusions Although not exactly quantifiable the depressing effect of the CMO sugar on the world sugar price is bad for exporting countries and good for importing countries. The losers are most likely Australia, Brazil, Colombia, Guatemala, Cuba, Thailand and South Africa being the current major exporters of raw and refined cane sugar to the world market (see table 3). Mauritius, -also a major exporter- has more to loose than to gain given the fact that this country exports almost all its sugar under the EU / ACP sugar protocol embedded in the EU CMO sugar. The World Bank study by Borrel and Duncan; 1990) estimated that the annual income foregone because of lower prices would amount to US $ 160 million for Australia and Brazil, US $ 72 million for Thailand, US $ 50 million for the Philippines and South Africa, US $ 20 million for the Dominican Republic and US $ 13 million for Colombia and Guatemala (in 1984 US $ values) (NEI page 37). The top 10 of winners are the main importing countries of sugar: : Russia, Japan, South Korea, Canada, Malaysia, Egypt, Nigeria, India, Iran and Algeria. Of these countries only Egypt and Russia have a considerable domestic production of over 1 respectively 2 million tonnes. In the long run these countries might be better of with high prices, with the further development of domestic production and with substitution of the imports. Box 2: Non Annex I products, the South African experience
Besides exporting sugar, the EU also exports products (mainly foods and drinks) containing sugar (so called annex I products). For these products more or less the same trade measures (export refunds and import duties) are applied as for sugar. The sugar content of non annex I products qualifies for export refunds (see 2.3) and products entering the market face import duties plus in some cases a sugar levy. The exports of the non annex I products (more than just sugar containing products) has more than doubled since the fixed tariff regime of the Uruguay Round was put in place. Over the last years EU non annex I products have been pushing other suppliers of the markets. A good example is South Africa (Kaplan) South Africa peaches canning industry has a cost advantage over other producers. In addition it is widely acknowledged that South African peaches are of the highest quality. Up to the 1980s South Africa dominated international trade with 35% of the total. This situation changed in the two last decades of the previous century. Production in the EU (Spain and Greece) boomed and South Africa lost large parts of its markets in the EU, USA and Japan. According to Kaplan EU-trade and agricultural policies are to blame: "The combination of high duties into Europe and subsidies on peaches has two impacts on comparative production shares. First, it significantly favors European producers in their domestic markets. Comparing like-with-like grades of canned peaches, the f.o.b. prices of Greek producers selling to Germany was $ 16.50 per standard carton in 1997, compared to $ 13.62 for South African firms, providing a 21% premium to the Greek canners -almost exactly equivalent to the extent of the tariff. Second, a profitable domestic market provides the wherewithal for European producers to cross subsidize sales into third country markets. Relative f.o.b. prices for like-for-like grade exports to Japan were $ 14.78 for the Greek firms, and $ 17.60 per standard carton for their South African counterparts .... . The same cross subsidizing trends are evident in other third-country markets. One consequence of this is that European, and in particular Greek, producers have frequently been the subject of dumping actions -most recently in Mexico and New Zealand."

3.2 EU market access regime

As seen in paragraph 2.3 the EU uses a highly detailed and discriminative import regime. Annually it imports around 2.2 million tonnes of sugar (white sugar equivalent) of which 1.6 million tonnes consist of preferential and special preferential sugar (see table 15).

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Tabel 15: annual EU sugar imports by category 1996/97-1998/99 (in 1,000 tonnes of white sugar equivalent)
types of import preferential sugar special preferential sugar mfn (most favoured nation) sugar imports by Aegan Islands, Azores, Canary Islands and Madeira imports pure sugar at full import duty imports of sugar in non-annex I products (duties fully paid) total imports source: NEI quantity 1,308 303 82 74 28 462 2,257

Through the fixed and additional import duties the EU applies, it virtually blocks all imports from the world market. Combined the import duties can amount to more than 500 ECU per tonne. Preferential and Special Preferential Sugar are allowed to enter the Union at import tariffs of respectively 0 and 83.3 ECU per tonne (1999/00). Importers of PS and SPS sugar are obliged to pay guaranteed prices for these imports equal respectively to the intervention price of raw sugar (PS) and the intervention price minus an adjustment levy paid to the refineries. For the period 2001/02 - 2002/03 these prices are fixed at 523.7 Euro / tonne and 494.5 Euro / tonne. This is well above the current raw sugar world market price (200 Euro / tonne). The income transfer from the EU to those ACP countries and India that provide the PS and SPS sugar is listed in table 16. Table 16: income transfers through PS and SPS sugar and dependence on the EU sugar market
Country SPS+PS extra revenue 1000 ECU Barbados Belize Congo Cote d Ivoir Fiji Guyana Jamaica Madagascar Malawi Mauritius Saint Kitts and Nevis Swaziland Tanzania Trinidad and Tobago Zambia Zimbabwe ACP India ACP + India source: NEI, prices and quantities 1997/98 17,166 14,790 3,703 6,593 60,118 58,422 43,367 4,055 10,461 178,531 5,715 51,474 3,703 16,037 3,406 18,214 495,756 6,072 501,828 Extra revenue per capita ECU 64.5 62.7 1.3 0.5 72.7 68.2 16.8 0.3 1.0 154.0 139.4 52.1 0.1 12.2 0.4 1.6 4.8 0.0 0.5 PS+SPS quotas as % of total sugar exports PERCENTAGE 117 49 45 56 79 82 99 39 80 96 108 69 73 92 16 48 79 4 64

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The SP and SPS arrangements create an income transfer of more than 500 million ECU per year (in current prices it would be even higher). Mauritius, Fiji, Guyana and Swaziland are the prime beneficiaries, receiving almost 70% of the total income transfer. The importance of the EU sugar market to the sugar sector in the ACP countries and India is illustrated in the third column. Some states like Barbados, Saint Kitts and Nevis and Jamaica export all of their surplus sugar (or even more) to the EU. Dependence is also strong in Mauritius, Trinidad and Tobago, Guyana and Malawi. Some of these countries are high cost producers and would not be able to export sugar without the preferences granted by the EU. Little is known about the effects of the income transfers on the development of the sugar sector in the countries concerned. Goodison has done some research on Southern Africa countries. Two examples are highlighted here (Goodison 1). Box 3: The effects of the income transfers to Mauritius and Swaziland
Mauritius exports virtually all of its sugar production to the EU and thus its sugar sector is strongly dependent of the high priced demand in the EU. Currently the sector employs about 24,000 people and accounts for 7% of GDP. Total production is 574,000 tonnes, PS and SPS quotas are 573,000 tonnes and consumption (in most years covered by imports) is 43,000 tonnes. Mauritius is a high cost producer with production costs at 200% of those in countries like Zambia, Malawi and Zimbabwe. Sugar production would not be profitable at world market prices. Recently Illova, one of the two sugar processors that dominate the regional sugar production in Southern Africa, sold its interests in 3 mills in Mauritius and shifted production and processing to the low cost producer Zambia. The Mauritian sugar sector plans to rationalize milling capacities. This will probably involve the closing down of 6 out of 14 mills and could result in a 20 25% cut in the labour force. Swaziland exports 36% of its production as PS and SPS to the EU, another 36% is sold to industrial users serving regional markets, 9% is sold to non-industrial regional users and the rest is sold as Tariff Quota Sugar to the USA. The sugar sector is the dominant sector in Swaziland, accounting for 60% of GDP and employing 80,000 people. Production is 526,000 tonnes, PS and SPS quotas are 170,000 tonnes and consumption is 204,000 tonnes. 55% of total sugar sector revenues comes from the sales to the EU (36% of production). Through this high returns the Swazi Sugar Association has been able to undercut South Africa's sugar prices and to offer industrial users low prices. The latter has stimulated the development of a value added foods and drinks industry, that buys a higher volume of sugar now than is exported to the EU. The ability to cross subsidise sugar prices on the back of high sugar revenues from the EU market, has promoted the structural development of sugar based value added industrial activities in Swaziland. The Swaziland sugar sector wants to increase (small holder) production to 700,000 in 2008.

The NEI describes the income transfer as a 'sort of development aid' (NEI page X Summary). True or not, fact is that it exceeds in many case the amount of development aid to the countries concerned. The EU does not monitor the use of the income transfer. Questions can be asked about the spending of the money. Who profits from it? Goodison (Goodison 2) suggest that the additional revenues have helped sugar sector companies to make provisions for health and educational services for sugar workers. Having said so, the study concludes Undoubtedly, the sugar companies and their shareholders are major beneficiaries of the preferential sugar arrangements extended by the EU to Southern African sugar producers. Does the income transfer generate employment and stimulate economic developments? The case of Swaziland suggest that it does. The income transfer has played a crucial role in the development of a regional value added foods and drinks industry. But at the same time it was also instrumental in gaining competitive advantage over South Africa, illustrating the (in)direct discriminative nature of the preferential arrangements. Are the countries that currently qualify for the preferential treatment, the countries that need it most? Out of the 17 countries listed in table 16, only eight countries belong to the LDCs. Some of the poorest countries being low cost sugar producers like Sudan and Mozambique don't have access to the European market, while

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high cost producers from the Caribbean do. Oxfam GB touches upon these irrationalities: It is important that Caribbean countries are assisted through transitional arrangements to diversify their economies and improve their competitiveness, rather than rely on the continuation of the EU sugar regime that excludes equally-deserving, competitive producers like Mozambique from the EU market (Oxfam) 3.2.1 Conclusions The CMO sugar market access regime is highly discriminative in the sense that it shuts the door completely at some parties while others are welcomed in at favourable conditions. Even the sugar protocol, at first sight a nice gesture towards ACP countries, has unintended negative side-effects. With the aid of the preferential arrangements some countries have gained competitive advantage over other developing countries and competitive low income countries are arbitrarily denied access to the EU. Some processors have been sheltered from international competition for years and have not been stimulated to improve their operations and lower the costs of production. In some countries the sugar sector depends totally on the CMO sugar. Some countries have earned a lot of money thanks to the CMO sugar but the question remains: Who has profited? In the light of these effects and given the EBA initiative and the fact that the CMO sugar as well as the EU-ACP relations will change the coming years, a plea to just preserve the preferential arrangements with regards to PS and SPS is simply too simple. One must keep in mind also that measures to minimize the price effects of the CMO sugar could be in conflict with the wish to stimulate sugar production in certain developing countries. Liberalization of the EU sugar market i.e. removing trade barriers and ending price support is logically not compatible with preferential access of developing countries.

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The overall direction of changes in the Common Agricultural Policy is clear: price support will be replaced by direct aid to farmers. In the case of the CMO sugar changes could be as follows: reducing internal sugar prices (1), compensating farmers through direct payments (2) and reducing the quota (3) in the short run and abolishing the quota system in the long run. This comes close to a full liberalization of the EU sugar market. As a result world sugar market price will rise and access to the EU market will improve. The bad news is that preferential access is lost and that import substitution and dumping will not end. After analysing the effects of liberalization regarding sugar on developing countries, some policies of 'managed' trade are discussed in this chapter. These are (at the access side): the EBA (everything but arms) initiative and at the export side: a current account for sugar.

Effects of policy changes of the CMO sugar

4.1 The future CMO sugar

The reform of the Common Agricultural Policy of the EU has been set in motion with the MacSharry reforms of 1992, confirmed by the Agenda 2000 package. The overall aim is to lower domestic price, partly compensated by direct income payments. The CMO sugar is not included in Agenda 2000. With minor adaptations the current policy will be extended to 2005. Recently the European Commission commissioned several impact assessment studies to investigate possible options for the future sugar CMO. Anticipating these assessments, it is safe to assume that domestic sugar prices will be lowered after 2005, especially so since both the volume of subsidized sugar exports and the amount of sugar export refunds are exceeding the commitments of the Uruguay Round with roughly 35 and 60 per cent. The most likely future CMO sugar will consist of the following elements: low domestic sugar prices, moving towards world market prices; direct income payments to (partly) compensate farmers for the lower prices and reduced quotas (A and B sugar) and finally abolishment of the quota system. Lower or even zero tariffs are not necessarily part of this future sugar policy, since the reform is primarily aiming at the internal EU market, but it is obvious that lower domestic prices may go hand in hand with lowering tariffs. If the assumptions made here are right, the future CMO sugar looks very much alike to liberalization of the EU sugar market, with the important exception of the direct payments to farmers. What will be its effect on international trade and agricultural development? The answer to this question is based on two recent quantitative studies by the FAO and the LEI (Agricultural Economics Research Institute). 4.1.1 Multilateral trade liberalization and developing countries: The LEI used a model to quantify the effects of liberalization on developing countries distinguishing different groups of (developing) countries (see annex 1) and various liberalization scenarios of which four are presented here:

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1. Trade liberalisation in primary products: reduction of all import tariffs and export subsidies with 50% in all countries (AC50) 2. Trade liberalisation in primary products and reduction of domestic agricultural support: in addition to the first experiment input and output subsidies in developed countries are reduced with 50% (ACD50) 3. Trade liberalisation in primary and processed agricultural products and reduction of domestic agricultural support. All reductions are 50% (ACPD50) 4. Trade liberalisation in all products and reduction of domestic agricultural support: in addition to the second experiment all import tariffs and export subsidies in non-agricultural sectors are reduced with 50% in all countries (AAD50) source: LEI page 34. Some of the results are presented in table 17. Table 17: change in trade balance and in GDP
Country(group) Change in trade balance million US $ AC50 all products prim. ag. prod. 54 451 60 -119 46 280 -98 -1,695 -476 -127 -2,300 143 2,274 1,987 -479 0 211 1,226 -104 -315 2,455 234 160 -1,710 -247 -162 -2,377 798 1,733 -2,457 -1,034 -1,590 Welfare (extra income as percentage change in GPD) AC50 ACD50 ACPD50 AAD50 0.0 0.0 0.0 0.1 0.1 0.0 0.0 0.2 0.1 0.0 0.1 0.0 0.0 0.0 0.1 0.0 11,490 -0.1 0.0 -0.1 0.1 0.1 0.0 0.0 0.1 0.1 0.1 0.1 0.1 0.0 0.1 0.1 0.1 17,253 0.6 0.6 0.2 0.5 0.3 0.0 0.2 0.4 0.2 0.3 0.1 0.3 0.0 0.2 0.6 0.2 44,477 1.3 1.5 0.1 1.7 0.7 0.1 0.6 0.8 0.5 0.8 0.4 0.3 0.0 0.2 0.8 0.3 78,348

Liexp India Liaexp Liimp Miexp Miaexp Mifexp Lmiimp China Umiimp Jpnnic Ausnz Nafta EU Row World World a) a) change in million US $ source: LEI
LIEXP LIAEXP LIIMP MIEXP MIAEXP MIFEXP LMIIMP UMIIMP China India EU NAFTA AusNz JPNNIC ROW

Low Income exporters in both primary agricultural and processed food products Low Income exporters in primary agricultural (and importers of processed food products) Low Income importers of both primary agricultural and processed food products Middle Income (both lower and upper middle) exporters in both primary agricultural and processed food products Middle Income (both lower and upper middle) exporters in primary agricultural (and importers of processed food products) Middle Income (both lower and upper middle) exporters of processed food products (and importers of primary agricultural products) Lower Middle Income importers of both primary agricultural and processed food products Upper Middle Income importers of both primary agricultural and processed food products People's Republic of China (mainland, excluding Hong Kong) India European Union (EU15) North American Free Trade Area Australia and New Zealand Japan Group Rest of World contains GTAP regions: Rest of World, Rest of Efta and Switzerland

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In the context of this report three conclusions of the LEI study are worth mentioning: Trade liberalisation in agriculture (AC50) leads to an expansion of the primary agricultural sector for net exporters of primary products and a decline of processing and manufacturing. The LIAEXP countries are the exception to this overall trend. In the case of liberalisation their imports (food grains) will grow faster than their exports, because these countries have relatively high initial import tariffs on food grains and they encounter a very low tariff on their exports of other primary products. Their loss in international market share is translated into a decline in domestic primary production, which also leads to drops in domestic supply prices. Hence, their agricultural sector experiences clearly negative effects from this partial liberalisation scenario. If domestic agricultural protection in high-income countries (direct income payments) is reduced (ACD50), production in the EU en Japan (&NICs) will go down, demand will rise and EU exports will decline. New market opportunities arise. However, developing countries are not able to increase their market share. It's the industrialised world that profits, mainly farmers in NAFTA and AUSNZL who are able to expand production. In terms of agricultural growth prospects, the most positive effects on developing countries are simulated if trade barriers in the agri-processing industries are reduced on top of agricultural trade - and domestic policy reforms (ACPD50). Large shifts in trade and production can be expected, with high income country processing sectors declining and middle income countries expanding their processing sectors. Also, primary production is expanding significantly in low- and middle income exporting countries -especially in Latin America. Again the only exception to this pattern are the LIAEXP countries, who don't profit. This is a consequence of the fact that their trade pattern is biased towards trade with the EU, which is expected to decrease import demand of primary agriculture in the wake of shrinking processing activities. The biggest winners in this simulation are farmers and processing firms in AUSNZL. 4.1.2 Effects of trade liberalization on the world sugar market The findings of an FAO study on the effects of trade liberalization on the world sugar market, published in 2001 are more or less in line with those of the LEI results. Also the FAO study distinguishes different groups of countries and liberalization scenarios. Full compliance with and continuation of the Uruguay Round Agreement to 2005 was chosen as a baseline projection. In this scenario the world market price is estimated at 262 US $ per tonne and countries are obliged to reduce its tariffs and in the case of the EU, its amount of export subsidies as agreed in 1995. The overall effect would be an increase in production and consumption in most countries. In the EU production would decrease because of its Uruguay Round obligations. Under full trade liberalization, i.e. sugar trade barriers between all countries will be eliminated completely, world market price for sugar is estimated to rise with 43% to 386 US $ per tonne, overall production and consumption would rise and net trade would fall (because domestic consumption rises more than production). There are striking differences between continents and countries, mainly depending on the level of protection these regions / countries initially applied. Countries with high tariffs will experience under full trade liberalization a fall of production and a rise of consumption. This is most clearly the case in Asia, notably India. Besides India, Japan and the USA would experience under full trade liberalisation the largest increases in exports. ACP countries The FAO study pays special attention to the effects on ACP countries (and small island states) because of their preferential status in sugar trade. The effects of the different liberalization scenarios on ACP countries are presented in table 18.

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Table 18: projections of production, consumption, net trade, export blend price, and export earnings in Africa, Caribbean and Pacific countries (signatories to the sugar protocol)
Scenario Production Consumption Net Trade ..................................... Tonnes ................................... Blend Price World Price ................... US$/tonne ............... Export Value ..1,000 US$..

No Trade Liberalization Uruguay Round to 2000 Uruguay Round to 2005 Complete Trade Liberalization Partial (20%)Trade Liberalization Complete Trade Liber. Developed Countries Partial (20%) Trade Liber. Developed Countries Complete Trade Liber. Developing Countries Partial (20%) Trade Liber. Developing Countries 20 percent Decrease in Transfers 100 percent Decrease in Transfers

3,309,718 3,321,378 3,369,969 3,410,283 3,378,032 3,311,288 3,359,845 3,482,227 3,392,421 3,381,159 3,536,727

1,609,650 1,599,982 1,809,337 1,797,471 1,806,964 1,783,130 1,803,514 1,768,778 1,801,226 1,806,964 1,797,471

1,700,067 1,721,396 1,560,631 1,612,811 1,571,067 1,528,158 1,556,331 1,713,448 1,591,195 1,574,194 1,739,256

481 481 467 506 475 340 443 564 486 436 386

254 270 262 386 287 296 270 315 272 287 386

818,408 828,088 729,433 816,985 746,616 520,289 690,081 967,011 774,578 686,804 672,465

source: FAO

In all the scenarios except for those described in the last two rows of the table, it is assumed that the preferential status of the ACP countries stays unaltered. Under this (questionable) assumption ACP countries would gain under complete and partial global trade liberalization (compared to the baseline scenario in row 3) and under complete and partial trade liberalization in the selected large developing countries (Brazil, China, Indonesia and the Republic of Korea). They would lose under continued market reform in developed countries (because of lower prices) and if their preferential status would be undermined (rows 10 and 11). With a 20 per cent decrease in transfers to ACP countries with partial global trade liberalization (20% lower tariffs), export earnings of ACP countries would decline with 6% (row 10). Under complete trade liberalization and complete elimination of transfers, export earnings would fall with 7.8%. 4.1.3 Conclusions The effects of liberalization on developing countries are mixed; some countries will lose, others will gain. As the LEI study shows, it is possible to distinguish different groups of developing countries who will be affected differently by liberalization; The same is true for reform of the CMO sugar. Most likely the new CMO sugar will have some liberalization characteristics: lower domestic prices, lower tariffs and lower or no export subsidies. Again winners and losers can be discerned. Most third countries (developed and developing) will gain, some, notably the ACP countries, will lose; The EU will compensate its farmers for the lowering of the sugar prices with direct income support. Direct income support enables farmers to keep up sugar beet production and to continue exports to the world market. The same has happened with cereals. Prices have been lowered since 1992 and direct aid expenditures have increased. Thanks to lower internal prices, domestic demand has risen and production has grown. Nowadays

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cereals can be exported to the world market without the aid of export subsidies. Indirectly exports are subsidized through direct income support. To third countries there is little difference between export subsidies and direct income aid. Both have a depressing effect on world market prices (Goodison 3). The LEI study clearly shows that world market prices will rise and production in the industrialised countries will fall, if the domestic support (amongst others direct income support) is reduced (scenario ACD50). But it are not developing countries that will gain. To them the effect of reducing domestic support is only marginal. Developed countries profit from it. In the case of sugar low cost big exporters like Brazil, Australia and Thailand will gain from a reduction of domestic support in the EU; In order to qualify for the WTO's 'blue box' direct income support has to be linked to production control. This could be a simple set-aside scheme. The distinction between A and B sugar becomes meaningless once export refunds (and production levies) are abolished. From the point of view of the European Commission there is no need to preserve the quota system. A very effective mechanism to control sugar production in the EU may be exchanged to a very frail one . As a result sugar production of the EU could rise as has been the case with cereals; The LEI study clearly indicates that developing countries will gain most if trade barriers are reduced, not only for primary but also for processed agricultural products. This is probably also the case with sugar and non annex I sugar products. As described in box 2 paragraph 3.1 EU annex I exports have been doubled since the Uruguay Round Agreement and are pushing other suppliers from (inter)national markets. If sugar prices will be lowered to world market level, EU processors will even be in a better position to expand their market shares. Lowering of domestic sugar prices must be accompanied by lowering tariffs for non annex I sugar products; The future sugar policy as described in this paragraph is a generic one. It does not discriminate between trading partners and therefore it does not specifically improve the trading conditions of low income countries or small-scale producers. On the export side an effective production control mechanism is missing. Subsidized sugar exports to the world market can be avoided only by preventing surplus production to be grown. On the import side the preferential access for developing countries is lost. In the next paragraphs examples of production control and of preferential access will be discussed.

4.2 Preferential access: Everything but Arms

On 5 October 2000, the European Commission adopted a proposal to grant duty-free access to the worlds 48 poorest countries (LLDCs), 39 of which are in the ACP group. The proposal covers all goods except the arms trade. The current gap between the EU and the World price for agricultural products is substantial, and once import tariffs are lifted the EU market would become a very attractive destination for exports. EBA went in force on January 1. 2001 except for 'sensitive' products. For sugar the tariffs will be reduced in the period 2006-2009 to zero. In the transition period 2001-2009 some import duty free sugar is allowed in, increasing from 74,00 tonnes in 2001/02 to 197,000 tonnes in 2009. Altogether the LLDCs produce on average some 2,1 million tons of sugar and consume some 3,7 million tons annually. The deficit of 1,6 million tons is covered by imports. Some LLDCs are already net exporters notably Sudan (114.000 tons of net exports) and Zambia (84.000 tons out of which 13,000 tons are exported to the EU). The speed and extent to which LLDCs would be able to export to the EU cannot be estimated in advance with precision. The European Commission distinguishes two scenarios (European Commission). Scenario 1 assumes that LLCDs will export their domestic sugar to the EU and meet their demand through imports from third countries. This substitution could amount to 1,4 million tonnes. Furthermore the new economic incentive of free access to the EU market can be expected to enhance production in the LLDCs as well as their refining activities. This could add another 1,3 million tons of exports to the EU. On this basis, it could be expected that total EU sugar imports from the LLDCs could reach some 2,7 million tons. Scenario 2 is less optimistic (or alarming) and stresses the infra structural constraints in the LLDCs to respond

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quickly to the new possibility. In this scenario, EU imports of LLDC sugar would gradually increase to 900 000 tons in the medium run on the basis of LLDCs redirecting current exports, some import/export swaps and increases in production. In both cases these volumes will have serious consequences for the CMO sugar: the first 300.000 tonnes could replace the SPS sugar (also 300.00 tonne) at no extra costs; subsidized exports are restricted by the WTO to 2,8 million tonnes. They consist of 1,8 million tonnes originally imported from ACP countries (sugar protocol) and 1,0 million tonnes of quota sugar. If the LLDCs imports exceed the 300.000 tonnes of SPS sugar the EU would have to reduce its own production quota. Apart from the income loss of the farmers and processors this would draw heavily on the EU budget. Export refunds on quota sugar are covered by the production levy. On sugar from third countries they have to be paid out of the budget; additional imports exceeding the 1,3 million tonnes that can be re-exported with export refunds, have to be either placed on the internal market for consumption (implying further reduction of production quota) or used for non-food purposes (ethanol); if European refineries no longer are interested to buy ACP sugar, the sugar protocol obliges the Commission to publicly buy this sugar at the intervention price and then disposed of as mentioned above. For scenario 1 (2,7 million tonnes additional sugar imports from LLDCs) the costs are estimated at 1,054 million (farmers and processor losses excluded) and for scenario 2 (900,000 tonnes) at 263 million . Oxfam GB / IDS published a study on the impact of the EBA, partly to counteract the EU sugar sector criticism that the EBA initiative will have a devastating effect on EU producers and processors. In this report additional sugar imports are estimated at only 100,000 tonnes coming from countries that already export sugar such as Sudan, Zambia, Malawi, Mozambique, Tanzania, Madagascar and (if the human rights situation improves) Myanmar. Oxfam / IDS claims that the effects on the European sugar sector will be marginal, but that EBA at the same time will bring economic benefits to the world's poorest countries and people and thus should be supported. 4.2.1 Critique on EBA Criticism comes from Jean Francois Smeessens, a lecturer at Leuven University and secretary of the Belgian Beet growers Federation. He points out that EBA does not guarantee minimum prices for additional sugar imports. In his view ACP sugar which enters the community at a zero tariff and is bought at guaranteed prices will be substituted by LLDC / EBA sugar which also enters freely but is not offered guaranteed prices. This would undermine the system of guaranteed prices and also of production control at the costs of the ACP as well as the European producers. As mentioned earlier the EU apparently holds on to the sugar protocol and feels obliged to buy ACP PS sugar at guaranteed prices for an indefinite period of time, regardless of what will happen under the EBA. The first sugar to be substituted by EBA sugar will be the SPS quota. But what happens if exports from LLDCs rise to 900,000 or even 2.7 million tonnes? How indefinite is indefinite? 4.2.2 Conclusions ACP countries have gained considerably over the years from the Sugar Protocol. But the effects of the transfers on (economic) development in these countries are questionable (see paragraph 3.2). EBA is even more questionable as a development tool. According to Smeessens substantial imports aren't expected to enter the EU before 2007. The reform of the CMO, planned in 2005, can make the EBA superfluous or undesirable. So, to begin with, questions can be asked about the firmness of the EBA offer to LLDs. Will it ever materialize? Secondly no guarantees about prices and volumes are given. These insecurities are making it very hard for poor countries to invest in sugar production. If Novib / Oxfam wants to preserve preferential access in the future CMO sugar (which is tricky, see the experiences in ACP countries) then this should be based on agreements between the EU and selected countries on prices and volumes.
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Box 4: Mozambique and EBA

Mozambique is identified as one of the countries that could profit by EBA. Oxfam GB commissioned a study to investigate the potential of the Mozambique sugar sector (Hanlon). The main findings are presented here. Mozambique sugar production has been seriously affected by the war of destabilisation. Production fell from 325,000 tonnes of raw sugar (1972) to only 13,000 tonnes in 1992. The sugar sector is now in the phase of rehabilitation. Sugar in Mozambique is produced on large estates each with an own sugar mill. Two mills produce white sugar, the others raw sugar. After completion of the rehabilitation in 2004 4 out of these 6 plantations will produce each 100,00 tonnes a year, a fifth plantation may be reopened if demand grows and the sixth is not likely to be reopened for sugar production any more. Domestic demand is currently 150,000 tonnes a year and rising steadily to a forecasted 200,000 tonnes in 2003 and 250,000 tonnes in 2005. Mozambique is a low cost producer with production costs between 190 and 250 $ per tonne. It enjoys preferential access to the US market for 1.3 per cent of US imports (about 14,000 tonnes in 2000/2001). So the opening of the EU market through the EBA initiative (and of the SADC market as well), should allow the export of a few tens of thousands tonnes, according to the director of the National Sugar Institute. Mozambique protects its local market by imposing an import duty on sugar, raising the price of imported raw sugar to 385 US $ / tonne and of white sugar to 450 US $ / tonne. These tariffs enable local producers to sell their sugar on the Mozambican market well above production costs. The protection is under fire by the IMF and the World Bank but is expected to last until 2012 (opening of the free SADC sugar market). Currently the plantations and mills produce 140,000 tonnes a year and employ about 17,000 workers (6,000 permanent and 11,000 seasonal). In the post colonial era Frelimo and the Government gave high priority to the workers and working conditions on the plantations. For permanent workers, houses with water and electricity were built and health and education facilities provided. The new private owners of the plantations have taken over these responsibility albeit reluctant. The work force is unionized and the union has been recognised by the private sugar companies. Except for land preparation the agricultural work is not mechanised in order to create the maximum number of jobs. Also this policy is continued by the new owners. Seasonal work (the cutting) is done in the dry season and does not compete with the work on the family farms. The local household economy is dependent on some external cash income. Thus permanent and seasonal jobs in sugar production are very much sought after and contribute to the rural economy. According to the Union unskilled labour earns about 30 US $ a month, skilled labour (about one third) 45 - 48 US $ a month. Expansion of sugar production and raising the number of jobs would improve living conditions in the poorest parts of Mozambique and would contribute to political stability in these areas. There are some worrying issues too. With the privatization of the plantations and mills, some outgrowing has been established. All sugar estates expect to (partially) back out of actual sugar cane production and hand this over to large and small farmers and peasants. These growers bear the risks for the company and at the same time are dependent on the good will of the company which can manipulate the cane price or give preference to its own plantation or favoured growers. Also working conditions on individual farms are worse than on the plantation and the work force gets fragmented, harder to organize and harder to use as a force to improve wages and working conditions. An expansion of exports would create jobs, but they would be much poorer jobs than exist now in the industry. And then there is the problem of EU low prized sugar exports to Southern Africa. The EU imports 216,000 tonnes of raw sugar and molasses from LLDCs, but exports 492,000 tonnes of white sugar to these countries. If the EU simply ended these exports it would create a southern market for Mozambique and other LLDCs, probably of more importance than the EBA would do on the EU market. The overall conclusion is, that the opening of the EU market to sugar from Mozambique would create thousands of jobs with few negative side effects. But campaigning for EBA which applies only to raw sugar imports, is not satisfactory. The EU should also lower its tariffs for refined sugar and processed sugar products and end its subsidized exports of sugar and sugar-based products.

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4.3 Production control: current account for sugar

The future CMO sugar should have an effective production control mechanism. Subsidized exports to the world market undermine the trust in a future EU sugar policy, not only in the eyes of the WTO or developing countries but also in the eyes of a growing number of European farmers. Subsidized exports can be avoided by preventing surplus production to be grown in the first place. The Dutch Arable Growers Union came up with a plan to do just that. The so called current account for sugar makes it possible to reduce C sugar exports to almost zero. Reduction of B quota sugar which is also exported with subsidies to the world market, is not foreseen in the plan. The crisis in arable farming makes it impossible to discuss this with farmers right now (source: secretary of the Dutch Arable Growers Union). Nevertheless the current account for sugar is discussed here, because it would diminish exports with around 2.5 million tonnes, is simple and could be put in place tomorrow. The considerable amount of surplus C sugar production in the Netherlands has two reasons: every farmer wants to fully produce his quota sugar because of the remunerative prices for A and B sugar farmers are afraid of losing quota sugar since allocation is based on past production, others speculate on higher allocations The overall response from the farmer is to play safe and sow more hectares than is necessary to meet his quota delivery rights. The current account for sugar gives the farmer more security regarding his or hers quota allocation and more flexibility in response to yield fluctuation, so he can grow less sugar beet. To do that it uses the carry forward mechanism included in the CMO sugar. A processor may carry forward a certain quantity of B or C-sugar to the next year not exceeding 20% of its A quota. This sugar will become part of next years A-quota and will receive the A quota price of that year. The carry forward mechanism is set up for processors allowing them to smooth out the effects of good and bad harvests but can be extended also to growers. The farmers have proposed to lay down in the contracts with the processors that each individual farmer gets a band width for sugar production between 95 and 115% of his or hers quota sugar. If a farmer produces more than his or hers A and B quota he may carry this surplus sugar forward up to a maximum of 15% of the allocated quota. If he produces more than 115% of his quota he must sell this produce as C-sugar. The carrying forward of sugar is voluntary. If an amount of surplus sugar is carried forward it will be deducted from next years quota allocation. If not carried forward the surplus sugar is sold and exported as C-sugar. If a farmer produces 5 per cent or less under his quota, this will have no consequence on net years quota allocation. With the individual farmer's bandwidth of production, allocation is more or less secured and through the carry forward mechanism he or she can make optimum use of the remunerative A and B quota sugar prices. Fluctuations in yields and difference between fields to be sown can be handled more easily by the farmer. Once the structural factors behind surplus production are eliminated the decision to grow or not grow C-sugar will be a matter of simple economics. For C-sugar the grower receives about 60% of world market price. Gross income from for example wheat production is 1,000-2000 per hectare higher. If the responsibility for surplus production is put entirely in the hands of the farmer, C-sugar production will be reduced to almost zero in the Netherlands. And the same is true for the other EU countries.

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The problem of course are the processors. Unlike land, the machinery for sugar processing can't be used in an alternative way. Scaling down costs money, but there are other reason for obstructing the current account for sugar too. According to the secretary of the Dutch Arable Growers Union, Dutch processors are anticipating future reforms of the CMO sugar. They fear that the Netherlands as a low cost producer won't be compensated or won't be compensated as much for the lowering of prices or reduction of quotas as the southern and northern EU countries. They want to expand now and hold on to all the customers they can serve. Scaling down is not in their interest because it could be a hell of a job to win customers back under the conditions of a future CMO. 4.3.1 Conclusion The current account for sugar offers a perfect example of diverging interests of sugar growers and processors. Processors are mainly interested in buying the primary product cheaply and in selling the end product dearly and / or in high quantities. With regard to the future CMO sugar this means that they favour a policy that lowers the prices, abandons production control, lowers the tariffs for primary products and keeps up those for the processed products. For most farmers it is quite the opposite. Farming need prices (supported or not) that reflect the costs of production, border protection for primary products and production control.

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References
Dutch Arable Growers Union, Rekening-courant: louter plussen, Een pleidooi voor de invoering van rekeningcourant in het suikersysteem, April 1999 European Commission, EU trade concession to least developed countries, Everything but Arms proposal, possible impacts to the agricultural sector). FAO Effects of Trade Liberalization on the World Sugar Market, 2001? Goodison 1 The impact of the EU regime on individual Southern Africa sugar producing countries, August 2001 Goodison 2 The EU sugar regime, August 2001 Goodison 3 The future of the Common Agricultural Policy: implications for developing countries, August 2001 Hanlon, Mozambique and the potential for a campaign in Europeon sugar - the position inside Mozambique, August 2001 Hannah The World Sugar Market and Reform, in Prosi Magazine, January 1998 Kaplan, Trade and Industrial Policy on an uneven playing field: the case of the deciduous fruit canning industry in South Africa, in World Development, no 10 1999 LEI Multilateral trade liberalisation and developing coun-tries: A North-South perspective on agri culture and processing sectors, July 2001 NEI, Evaluation of the Common Prganisation of the Markets in the Sugar sector, September 2000 Oxfam Everything but Arms and Sugar, European Parliamentary Briefing, December 2000 Oxfam IDS, The Impact of the EU's 'Everything but Arms' Proposal: A Report to Oxfam, January 2001 Silvis H.J, C.W.J. van Rijswick, Alternative instruments for agricultural support, A survey of measures applied by competitors of the EU, March 2000 Smeessens Initiative PMA et sucre: Vers un "compromis" dangereux?, Fberuary 2001

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Annex 1: Classification scheme for LEI simulations

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