Blog: The EU, Mexico, and Sugar - the exception that proves the rule?
In April 2018, following two years of negotiation, the EU and Mexico reached a political agreement on an update of the 2000 EU-Mexico Global Agreement. Among the most notable innovations was the inclusion of market access for agricultural products, which had been left out of the original agreement. While the result was lauded as a victory for the EU in a tumultuous trade environment, the unfortunate truth is that the EU cane refining sector came out very much the loser.
On the question of sugar, the Agreement states quite matter-of-factly that “…exclusion of products has been kept to the strict minimum and refers only to the sugar sector”. Negotiators agreed on a 30,000 tonne TRQ, to be phased in over three years. Crucially, this TRQ comes with a duty of €49/tonne attached. The context is clear: in the hard-fought horse-trading of agricultural access which characterises each and every free trade agreement, the needs of EU cane refiners have been utterly ignored.
Let’s put this into context. For EU cane refiners, access to duty-free imports of raw sugar through free trade agreements is not a matter of convenience – it is a question of survival. The current market situation for sugar in Europe is one of oversupply and low prices. This is the result of the abolition of sugar quotas which has seen EU producers of beet sugar massively increasing the supply of sugar in Europe. This is by far the most important driver of this new low-price reality – it has absolutely nothing to do with imports.
The result for cane refiners is an extremely difficult commercial environment. We sell to the same markets as our colleagues in the beet sector. We are also EU businesses with EU workers and EU customers. However, while those colleagues can now sow as much sugar beet as they want, buy their raw materials at lower prices, and benefit from EU subsidies through instruments such as voluntary coupled support, we have been cut adrift. In these challenging times, duty-free access to raw sugar through FTAs has quickly become our sole reliable source of raw material, and current volumes are insufficient for our industry. 30,000 tonnes of Mexican sugar would have represented a small respite for cane refiners, without posing any threat to EU sugar producers – but a duty means that this sugar will never come to Europe. The question is then, why was this duty attached?
The answer appears to be simple. Our competitors in the beet sector – which constitutes almost 90% of all EU sugar production – have campaigned tirelessly to impose a duty on Mexican sugar. This campaign has been based on scaremongering and misleading statements. We have heard that a duty can “level the playing field” between the EU and other sugar-producing countries in a time of low prices – this is pure protectionism, and unjustified considering the competitiveness of the EU sugar industry. We have been told that imports will further lower EU prices – this is utterly illogical considering both the share of imports in the EU market and that fact that it has become a surplus market.
We understand that after years of operating in a sector that was insulated from global competition, the post-quota reality is daunting. We understand that it is going to be a difficult few years of painful adjustment for beet producers. But none of this justifies a campaign which will have one result and one result only – the death of the EU cane refining industry.
With this in mind, we want to send a message to EU policymakers: we are also your constituents, and we need you to consider the needs of the entire EU sugar sector when negotiating trade deals. We ask you to consider that when a duty is attached, we will never be able to import sugar under EU FTAs. Before Mexico, you acknowledged our difficult situation in every FTA that included sugar by negotiating duty-free TRQs – and we thank you for this. We ask you now to let Mexico be the exception that proves this rule.
Marie van Raemdonck
ESRA Executive Director