POLICIES IN THE EUROPEAN UNION
EU Sugar Policy
The European Union (EU) is the third largest sugar producer and the second largest consumer in the world. EU sugar policy was first established in 1968 and regulates all aspects of the industry, ranging from production quotas and guaranteed prices, to exports subsidies and import restrictions.
After a WTO panel found EU sugar policy not compliant with international trade rules, the EU undertook an extensive reform in 2006 that substantially reshaped its sugar market. In the few years that followed, the EU changed from being the world’s second largest sugar exporter to a net sugar importer.
Import tariffs and quotas
Most EU sugar imports are controlled by Tariff-Rate Quotas (TRQs), which set the amount of sugar that can enter the region from abroad at a reduced or zero duty. The EU applies prohibitive Most-Favored Nation (MFN) tariffs to additional sugar imports. These high import duties – €339 per ton on raw cane sugar for refining and €419 per ton on white sugar – prevent imports beyond the TRQ limits from most competitive, sugar-producing countries such as Brazil, Thailand and Australia.
Today, 412,054 tons of Brazilian sugar can be imported at a preferential rate of €98 per ton (78,000 tons can be imported at an even lower rate for seven years) and an erga omnes TRQ (meaning a quota open for any country to meet) of 289,977 tons is also available at the same duty rate. In addition, a temporary duty-free quota of 400,000 tons annually is open for industrial sugar imports.
The EU grants duty-free, quota-free access for sugar imported from the world’s Least Developed Countries (LDC) and ACP countries that were members of the former Sugar Protocol and are signatories of Economic Partnership agreements. However, transitional safeguards are in place to prevent a surge of imports from these countries through 2015.
More and more sugar is also imported through free-trade agreements where the countries partnering with the EU don’t get full access to the EU market, but are granted a zero-duty TRQ. This is the case of Ukraine, Peru, Colombia, Central America, Panama and Moldova.
2006 Sugar Reform
The European sugar reform was mainly motivated by the negative ruling of a WTO panel in a case brought by Australia, Thailand and Brazil against the EU, but the market access granted to LDCs and EU enlargement also played a role. As the EU increased its membership, the government had to offer additional import opportunities as compensation for new member states adopting the EU sugar policy and its protectionist measures.
In December 2013, the EU modified its common organisation of the markets in agricultural products, and as part of it, the EU reformed once again its sugar policy. With the intention to let producers respond to market signals, production quota will be abolished on 30 September, 2017 and export subsidies are set at zero. This reform should have a significant impact on the EU sugar market and prices. As a consequence, imports will also be affected, however it is still unknown to what extent.