The EU-Mercosur deal – don’t sweat the sweet stuff
As you read this blog, EU and Mercosur negotiators are engaged in tense talks in the Paraguayan capital of Asunción. From Buenos Aires to Berlin, media reports of an “endgame” abound. We’ve been here before – for almost 20 years, these partners have come together time and again to try to reach a deal, and fell short on every occasion.
Despite the unprecedented political and economic benefits of an EU-Mercosur accord, yet again there are whispers that this years-long game may end in frustration. Like any trade deal, both sides enter into negotiations with certain “red lines” that they find extremely hard to cross. On both sides of the Atlantic, tough decisions will have to be taken on sensitive and complex areas such as the automotive sector and the openness of procurement markets.
At crucial stages such as this, it is imperative that we don’t let far simpler issues get in the way. Here, sugar provides a compelling example of an area where both sides can win.
For Brazil, the largest Mercosur economy, sugar is an offensive interest. This is hardly surprising – the country is the world’s biggest exporter of sugar by quite a stretch, meaning it will insist on gaining access to the EU market for this most valuable product. This is even more urgent for Brazil considering the impact of the recent EU sugar reforms, which have seen EU sugar prices significantly reduced. This has translated to lost market access to Brazil – to the tune of over 700,000 tonnes – as the duties imposed on their sugar imports to the EU have rendered them uncompetitive. Brazil simply will not accept any deal with the EU that fails to address this.
For the EU, sugar is traditionally seen as a “sensitive” product, making protection of the domestic industry a defensive interest. It is about time that this rhetoric was abandoned. Domestic sugar production in the EU is among the most efficient and competitive in the world, and has nothing to fear from Brazilian imports. Indeed, this year will likely see EU sugar exports triple, as beet producers shake off the shackles of sugar quotas and confidently step back on to the world stage.
As cane refiners, we have been excluded from this brave new world. We can no longer access raw sugar from our traditional suppliers in less-developed countries to the same extent as in the past due to new market realities. We are totally dependent on access to zero-duty raw sugarcane through free trade agreements, and we need such access in the EU-Mercosur agreement.
This situation is not because we are uncompetitive, or that we haven’t moved with the times – on the contrary, our small part of the EU sugar sector is highly innovative and its sheer longevity shows that it is well able to mix it with the big boys on the beet side.
Without access to zero-duty raw sugar imports, however, our industry will simply cease to exist. No longer will raw sugar be refined in the EU, ending a centuries-long tradition. No longer will at least 4,000 people have access to high-quality manufacturing jobs. No longer will the EU have an important link to the global market in sugar, of which 80% is based on cane rather than beet.
We are asking for access to defined amounts of sugar through a tariff-rate quota, not the “floods” of cheap sugar often imagined by our competitors – our sector is simply not big enough to make this threat in any way believable. Rather, our members will be able to import sugar from Brazil at zero-duty, to complement sugar sourced from other suppliers, and continue to compete in the EU market.
So let’s grant a raw sugar TRQ to Brazil, as without one, an EU-Mercosur deal, with the huge benefits it will bring, will never be possible.
Let’s make that TRQ duty-free. The EU has never before negotiated an FTA where a sugar TRQ had a duty attached. Now is not the time to start, as any duty attached will see that sugar stay in Brazil. Any duty = no market access at all.
Let’s make sure that the EU sugar sector remains diverse and dynamic for industry and consumers alike.
Let’s not sweat the sweet stuff.