ACP/EU

i) New European Union (EU) Sugar Regime

The EU Council of Ministers approved the reform of the EU Sugar Regime in February 2006 which falls within the framework of the reform of the EU Common Agricultural Policy. The objective of the reform is to make the EU sugar sector globally competitive and align the Common Market Organisation for Sugar with the other sectors which have already been reformed. The new Sugar Regime will apply from the marketing year 2006/2007 until the end of the marketing year 2014/2015.

The current marketing year 2006/2007 marks the first year of sugar price reduction under the new EU Sugar Regime. A drastic reduction of 36% in the price of sugar will be achieved in 2009/2010. The proposed percentage reduction in the reference price for raw sugar for the 2006/2007 marketing year is 5.1% compared to the pre-reform ACP guaranteed raw sugar price. The reference price for raw sugar will remain at the same level for the 2007/2008 marketing year. In succeeding years, the white and raw sugar reference prices will be reduced progressively, by 14.3% in 2008/2009 and a further 21.7% in 2009/2010.

The price cut foreseen for the 2008/2009 and 2009/2010 marketing years are scheduled to take effect on 1st October 2008 and 1st October 2009 respectively when the full 36% will come into effect.
The international commitment on the part of the EU to import sugar under the ACP-EU Sugar Protocol has been maintained in the new Sugar Regime. There is a provision also to open complementary quantity which is needed to allow an adequate supply of raw sugar to the full-time refiners. The Complementary Quantity replaces the former Special Preferential Sugar Agreement. Fiji expects to benefit from the Complementary Quantity.

ii) EU Action Plan on Accompanying Measures

Parallel to the reform of the EU Sugar Regime, accompanying measures have been proposed by the EU for Sugar Protocol countries affected by the reform of the EU sugar regime. The Accompanying Measures are aimed at supporting the restructuring of the sugar industry to withstand the price reduction under the new EU sugar regime which came into effect from 1st July 2006. Out of the first year’s allocation of €40 million in 2006 from the EU to the 18 Sugar Protocol supplying States, Fiji’s initial indicative allocation for 2006 was €3.5 million. This was revised upward by the Commission in June 2006 to €4,038,000 resulting from Commission Decision taking into account that a few eligible countries will not use their full indicative allocation in 2006.

Fiji submitted its Action Plan on multi-annual National Adaptation Strategy for the sugar industry to the Commission in April 2006 which was further revised in September 2006.

The Commission will release funds based on the agreed contract terms under the Financial Proposal agreed with the respective ACP Governments for the 2006 allocation which is expected in the first half of 2007.

In October 2006, the EU Council of Ministers formally approved a package of aid 2007-2013 which includes €1.244 billion for ACP Sugar Protocol countries. Article 17 of the draft regulation concerns ACP sugar, and states that the accompanying measures shall aim at supporting their adjustment process as they are faced with new conditions on the sugar market due to the reform of the common organization of the market in sugar. It is expected that €165 million will be agreed under the Accompanying Measures for the ACP Sugar Protocol countries in 2007. The yearly amount thereafter will be fixed by the EU Council and European Parliament upon the proposal of the Commission and the respective ACP countries advised accordingly.

At the ACP Ministerial Consultations on Sugar in early December in Khartoum, Sudan, Ministers agreed to continue lobbying the Commission to top up the €165 million for 2007 in the subsequent years.

iii) Sugar Protocol and EPA Negotiations.

Dr Stephen Thornhill was asked to undertake a study to identify the best strategies for African, Caribbean and Pacific (ACP) sugar supplying countries to safeguard the existing benefits of the Sugar Protocol (SP) within the various options under the proposed Economic Partnership Agreements (EPA).

At the 10th ACP Special Ministerial Conference on Sugar at Nadi, Fiji Islands the report by Dr Thornhill was presented. The Ministers at this meeting noted with grave concern that the EU offer on sugar in the context of EPAs would mean the abolition of the Sugar Protocol as from October 2009, and that this offer was thus tantamount to a denunciation of the SP. Ministers therefore requested the Commission and EU Member States to comply with the provisions of Article 36.4 of the Cotonou Agreement which called for a joint review of the Protocol with a view to safeguarding its benefits, bearing in mind its special legal status. These benefits, tangible and intangible, were identified in the Thornhill Report to establish the benefits of the SP and the manner in which these are to be safeguarded in the context of Article 36.4 of the Cotonou Agreement.

For Fiji, and indeed for all other ACP sugar supplying States, the critical objective is to safeguard at a minimum the current benefits (guaranteed price, access including EU obligation to buy with respect to intervention and indefinite duration) of the Protocol in any new trading arrangement while preserving its special legal status.

ACP – EU Sugar Protocol

Fiji is part of the African, Caribbean and Pacific (ACP) Sugar protocol Group comprising of 18 countries supplying sugar to the European Union (EU). Fiji is the sole member of the ACP-EU Sugar protocol from the Pacific Region. We have been reliable trading partners with the EU since 1975 and for a much longer period with the United Kingdom under the Commonwealth Sugar Agreement. The ACP Sugar Group can be categorized as small developing nations which are vulnerable to severe climatic disruptions and external economic shocks. Most, like Fiji, have a high dependence on sugar exports for contributions to GDP, foreign exchange earnings and employment especially in the rural areas.

The ACP-EU Protocol, which has been widely acclaimed as a model trade and development cooperation instrument between the developed EU partners and the developing ACP countries. However, such a proven trade model is about to change due to a number of factors.

The predictable and stable level of earnings from the exports of sugar by Fiji to the EU markets over several years has been crucial in fostering our socio-economic development and in raising the standards of living of our people. The earnings have also been invested in the development of infrastructure, including communication, transport, education, medical and other basic amenities. They have been a major contributor to the alleviation of poverty in the country. The nation as whole is grateful for this to EU and hopes that the reform also provides such level of comfort that was obtained from Sugar Protocol agreement.