Background

Over the past three decades, the Sugar Protocol, as part of the Lomé Convention and the succeeding Cotonou Agreement, allowed Jamaica, as a member of the ACP, to sell up to 126,000 tonnes of raw sugar annually into the EU market at guaranteed preferential prices.

Following the WTO Panel ruling of April 2005, which found the ACP-EU Sugar Regime to be WTO inconsistent, the EC, in June 2005, announced sweeping changes which signal severe hardships for sugar production in ACP countries.  The changes will not only see a reduction in the import quotas for ACP sugar, but the guaranteed prices offered to ACP countries, which will be reduced by 36% over four years.  The reasons put forward by the EC for the proposed changes were: (1) to make the EC’s sugar regime WTO-compliant, and (2) to reduce beet sugar production in Europe.

Other proposed changes include:

1. The replacement of the intervention price by a reference price, which will be supported by a private storage scheme, to be applied in instances where suppliers of sugar exceed their quotas,
2. The EU will no longer pay the refining subsidy on behalf of ACP/India sugar suppliers which is a requirement under its commitment to remove domestic subsidies,
3. Quotas will be continue to be applied until the expiration of the current regime, which is targeted at 2014 – 2015,
4. By retaining its quota de-classification system, the EU has allowed for imports of raw sugar for refining to be removed from the market, however, the resulting storage costs will have to be borne by suppliers.

Recent Developments

These reforms will have a profound impact on the sugar industries and the livelihoods of sugar cane farmers as well as the wider economies of Jamaica and other countries across the Caribbean and the wider ACP.

The EU has proposed support for the 18 ACP sugar-producing countries to cope with these changes, via a package of ‘Accompanying Measures’, beginning with €40 million for Year One (2006/7).  The support mechanism is expected to continue up until 2013.  In comparison, the EU has offered a ‘compensation package’ to European beet sugar producers, amounting to some €7.5 billion in support up to 2015.

CARICOM leaders spoke out strongly against the reforms announced by the EU in November 2005.  At the time, Jamaica’s Minister of Foreign Affairs and Foreign Trade declared that, based on their harsh treatment of the ACP sugar and banana producers, the EU should not have counted on the ACP to support its initiatives during the Sixth WTO Ministerial Conference, held subsequently in December 2005 in Hong Kong.

A CARICOM lobby mission led by the Honourable Denzil Douglas, Prime Minister of St. Kitts and Nevis, visited Europe from 6th to 9th March, 2006 to meet with Heads of Government and Ministers in the United Kingdom, Finland, Germany, Austria and Belgium.  The mission urged the EU to increase its compensation package for 2006 from 40 million euros and also requested that resources be made available to Caribbean countries up front, rather than for them to wait for instalments to be paid over six years;

Time to Adapt!

The Jamaica Country Strategy for the Adaptation of the Sugar Industry 2006-2015 was prepared by the Planning Institute of Jamaica (PIOJ) in collaboration with local stakeholders, and was submitted to the EU in January 2006.  Jamaica has formally requested assistance under the Accompanying Measures, on the basis of this Strategy.

The adaptation strategy is broadly aimed at achieving sustainability and competitiveness in the industry and at promoting economic, social and environmental sustainability of sugar-dependent areas. 

Features of the adaptation strategy include:

1. The ultimate closure of the Bernard Lodge and Long Pond sugar factories;
2. The diversification of former sugar cane fields into the cultivation of papaya, ackee and other orchard crops, including sour-sop, mango, guava, citrus, limes, coconut and vegetables;
3. Renewed emphasis on ethanol production;
4. Pursuit of private investment in the development of existing government-owned sugar operations.

The rationalisation of the sugar industry also requires the upgrading of machinery integrally linked to sugar production, including factory and transportation equipment. 

The Industry envisages an increase in production and marketing of branded sugar to target niche markets, comprised mainly of the West Indian Diaspora, particularly in Europe, as well as the domestic and regional hospitality trade. 

Community planning and regional interventions are required to mitigate any potential dislocation to the rural labour force and to avoid any increase in rural poverty.  This entails co-ordination with existing poverty reduction policy and programmes being implemented by Government and its agencies.  In  addition, the upgrading of rural infrastructure, including roads, water supply and access to telephone services and information-based businesses is a priority, as this will impact the private sector’s decision to invest in the affected areas. 

However, much financial and technical support is required to effect the full and timely implementation of the strategy for restructuring and revitalisation of the Jamaican sugar industry to adapt to the EC reforms. 

For further information on Jamaica and ACP/EU Trade Relations, please refer to the following websites: www.acpsec.org, www.europa.eu.int, www.moa.gov.jm, www.mof.gov.jm, www.pioj.gov.jm, www.jpjamaica.com ,www.statinja.com