Blog: A fair deal for sugar in the EU-Australia FTA
At the launch of EU-Australia FTA negotiations in 18 June 2018, EU Trade Commissioner Cecilia Malmström looked forward to “an agreement that offers clear benefits for both the EU and Australia. It will boost economic opportunity for businesses, both big and small, and create jobs.” The European Sugar Refineries Association (ESRA) fully supports this aim, and calls upon the European Commission to ensure that those benefits are felt by all in the sugar industry as a new round of negotiations takes place this week.
For EU cane refiners, this Agreement could not be happening at a more important time. The last year has seen massive changes take place in the EU sugar sector, since the abolition of quotas in September 2017. The result of this has been a sharp increase in beet sugar production in the EU, which is by far the biggest cause of the extremely depressed price level for white sugar. EU cane refiners – like all European sugar producers – are faced with an extremely difficult commercial environment as a result. However, unlike our competitors, the costs of our raw materials have remained largely in line with past years, seeing no significant reduction. One major reason for this is the imposition of tariffs on the vast majority of raw sugar imports to the EU.
Exceptions to this rule are key to the future of our sector. In recent years, the EU has agreed to a number of limited, duty-free tariff-rate quotas (TRQs) for raw sugar in FTAs with countries in Latin America and Southern Africa. This has become the lifeline on which the survival of our industry depends. However, the amount of sugar available under these agreements is not sufficient to allow us to compete – a situation which is exacerbated by the effective loss of access for EU refiners to raw sugar supplies from less-developed countries and major producers under WTO quotas due a lack of supply in the former case, and the imposition of duties in the latter. The agreement with Australia offers a huge opportunity to address this imbalance in EU sugar policy.
Australia is a leading global exporter of sugar, and its cane growing industry a model of market-orientation and sustainability. Sugar growers – mostly family farmers based in the state of Queensland – operate independently of any price supports, import tariffs, quotas, or other forms of protection. It is in effect the most trade-exposed sugar sector in the world.
What is more, Australia’s success is not something to be afraid of. The country already enjoys varied market access to multiple trade partners in the Asia-Pacific area, which includes some of the biggest drivers of global sugar demand. Any suggestion that Australian sugar cane would “flood” the EU – particularly considering the low price reality we see today – is in no way reflected in commercial reality. In any case, if a TRQ approach is taken, the volumes available for import will be limited from the outset. But there is even more.
The market-orientation of the Australian sugar sector means that the country is also an importer of white sugar. We strongly encourage our colleagues in the beet sector to view Australia not just as a source of imports, but also as an important export market for EU white sugar.
What we see is a win-win situation, for all stakeholders in both the EU and Australia. In its 2016 study on the cumulative impact of FTAs, the European Commission implicitly acknowledged that Australian sugar imports – even under an ambitious scenario of full liberalisation – would not cause any harm to the EU sugar sector. The impact assessment of the EU-Australia FTA further acknowledged that imports would remain at a manageable level. So there is no danger to the European beet sector. And yet for EU cane refiners, access to zero-duty Australian raw sugar could ensure the survival of our sector and the thousands of European jobs that depend on it.
We call upon the European Commission to bear this in mind as negotiations progress. The only real access to this market is duty-free access, and the EU domestic sugar sector does not require “protection” from Australian imports. Too often in the past, hugely beneficial trade deals have been held to ransom by the question of agricultural market access – this doesn’t have to happen with Australian sugar.