Home Economics Disaggregated impacts of CAP reforms : proceedings of an OECD workshop.
New-look EU sugar balance sheet
With the renunciation of about 5.5 million tonnes of production quota, the EU balance sheet took on a new appearance (Table 8.3). The 2008/09 supply-demand situation showed a distinct deficit: domestic output was considerably smaller than internal demand, and export availability declined dramatically while import demand grew. The European Union’s historic role as an exporter of subsidised white sugar came to an end with the last-ever tender for export subsidies on 25 September 2008. On the other hand, as early as 2008/09, the European Union became the world’s leading net importer of sugar.
The deficit in 2008/09 was a structural one and is not likely to disappear in the foreseeable future. In other words, domestic production is limited by quotas to around
14.5 million tonnes, raw value, and stagnant consumption (the long-term ten-year average growth rate does not exceed 0.9% per annum) imply the necessity of annual imports of around 4.5 million tonnes, raw value, as against the average for the past five years of 3.1 million tonnes. Therefore, one may conclude that, in terms of the EU sugar balance sheet, the main results brought about by the radical reform of the EU sugar regime are the end of large-scale white sugar exports to the world market and a hefty growth in import demand.
Table 8.3. EU27 sugar balance
'000 Million tonnes of raw sugar
Although in general terms the situation is quite clear, there are still a number of complications. For example, European sugar production has increased significantly in 2009/10. Both beet and sugar yields have shown a remarkable improvement boosted by the warm weather and further advances in developing high-yielding beet varieties. An early start to planting and a warm April that year boosted plant development, while good sunshine until October lifted sugar content Moreover, the area under beet increased to 1.541 million hectares, up 4.5% from the previous crop year. Of importance, the reported area includes acreage for beet used for ethanol production.
While quota sugar production remains well under control and does not exceed 13.1 million tonnes, out-of-quota production is expected to have increased to 4.3 million tonnes (Table 8.4). However, this figure includes a beet-based ethanol output equal in sugar equivalent to 1.1 million tonnes.
Following a considerable increase in sugar output in 2009/10, the sugar sector managed to convince the Commission to increase the limit for out-of-quota sugar in excess of the WTO limits to 1.37 million tonnes. At the end of January 2010, the Commission allowed an additional 0.5 million tonnes of exports of out-of-quota sugar in response to the considerable increases in European sugar production in 2009/10. The allowance was announced as a temporary measure. According to the European
Commission, this fully respects the EU's international obligations and has been made possible by the exceptional market conditions at both the EU and world levels, since the current world market prices are significantly higher than the EU reference price (EUR 404.4/tonne or USD 586.9/tonne as against the current level of world market prices of about USD 600/tonne).
The decision has met with strong criticism by major sugar exporters. On 1 February, Australia, Brazil and Thailand called for the immediate withdrawal of the additional export of 0.5 million tonnes of sugar, insisting it was illegal under WTO rules. The three states, which won a WTO dispute against the European Union in 2005, warned they would not rule out further action, including the possibility of reopening the case, which could lead to retaliation. The European Commission, however, insists that it had “done a careful analysis which shows that quantities authorised for export did not benefit from any subsidy and so cannot be counted as part of the subsidized export allowed under WTO rules”.
Table 8.4. EU Sugar production in 2009-10
'000 tonnes, white value
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