The deregulation of the European sugar market is looming. A French parliamentary report has requested support to French overseas departments where the sugar sector is fragile. EURACTIV France reports.
French sugar production in its overseas departments is poorly equipped to cope with the liberalisation of the European sugar market planned for 2017. According to a report by the French parliament, ending European support of the sugar sector will harm production in France’s overseas departments.
Many people in French Guiana, Martinique, Guadeloupe, and especially the Reunion, live from the proceeds of the sugar industry, which is currently protected by European regulation.
In 2017, the EU Common Organisation of the Market in the sugar sector will bring an end to production quotas by country, and market price support, which allows European producers to sell their unsold stock at a minimum price guaranteed by the EU.
The current system was called into question in 2006, when the World Trade Organisation (WTO) restricted European sugar exports after a complaint from several producing countries accusing the EU of dumping.
To end these restrictions, the EU announced it would reform the sugar industry in 2015, but then postponed it to 2017.
A long awaited reform
The 2017 deadline is eagerly awaited by large sugar beet producers, the most competitive producers in the sector. “European sugar beet would like to see an end to the quotas. However, it is clear that there will be winners and losers,” stated Philippe Gosselin, UMP member and author of the parliamentary report.
The reform should make European prices conform to world prices, which are currently lower, and increase the competitiveness of the European sector.
Sugar beet producers have been waiting and preparing for this change for years. “The European sugar beet industry began restructuring for an eventual liberalisation in 2006. Today, they are just waiting for the end of quotas to release their production capacity,” warned Jean-Claude Fruteau, President of the overseas delegation and co-author of the report.
The opening of the European sugar market will be difficult for the French overseas departments. According to the report, the sugar sector directly or indirectly employs approximately 20,000 people. “In a department like Reunion, there are two economies: sugar and tourism,” explained Jean-Claude Fruteau.
Sugar production threatened due to lack of competitiveness.
Increased competitiveness is a significant economic and social burden in departments where the production is “not yet completely mechanised”, claims Philippe Gosselin. He argues that the French overseas sugar sector is not likely to survive increased competitiveness when the market is opened in 2017.
There is a substantial competitive difference between sugarcane and beet: after taking into account EU grants, sugarcane is on average €200 more expensive per tonne. After 2017, this difference is set to increase to €237.
To prevent a destabilisation of the sugar sector, members of the French parliament called on the French state to increase financial support to sugar producers in its overseas departments. The maximum state aid to overseas departments is currently €90 million.
“We must increase the current €90 million state aid limit to €128 million. Without this increase, we will have big problems,” warned Philippe Gosselin.
“France must negotiate an increase with the European Commission,” claims Jean-Claude Fruteau. This request would require a revision of regulation on aid to agriculture sectors in the outermost regions of the Union, and the go-ahead from Brussels.
Other suggestions include taking steps to receive a Protected Geographical Indication for brown sugar production in French overseas departments at a European level.
Nevertheless, European sugar beet producers will not be the only ones to profit from opening the market.
Thanks to commercial preferences granted by the EU to a number of countries like Panama and Colombia, tariffs on sugar imports were decreased. “The problem is that the producers from these countries do not always respect the norms imposed on European producers” argued Jean-Claude Fruteau.
To deal in part with this new competition, the report also proposes maintaining tariffs on brown sugar imports from other countries.