Special Ministerial Conference on sugar

Concern about prices, the 1992 strategy and the point of view of Tate & Lyle

The third Special Ministerial Conference of ACP sugar exporters (Barbados, Belize, Cd’Ivoire, Congo, Fiji, Guyana, Jamaica, Kenya, Madagascar, Malawi, Mauritius, Swaziland, Tanzania, Trinidad and Tobago, Uganda and Zimbabwe) was held in London from 9 - 11 May. Price fixing and the future of ACP sugar cane in the Single European Market of 1992 were on the agenda as well as the economic diversification of the countries concerned and the competition from new (natural and chemical) sweeteners were also discussed. Mr M. Dulloo, the Mauritian Agriculture Minister and Spokesman of the Conference, reminded the meeting that the British capital had been chosen as the venue to highlight the fact that the United Kingdom had a high symbolic value and was the Community Member State which has been most significantly and directly instrumental in the establishing the Sugar Protocol in 1975. The British Government showed its appreciation of this choice by sending the Junior Agriculture Minister, David Curry, to the Conference.

The ACPs and first of all Lawrence Anthony (Malawi), the President of the Sugar Sub - Committee of ACP Ambassadors in Brussels, began by reminding delegates of the historical context of the Sugar Protocol, which was established to give continuity to the commitments which the UK had made to ACP sugar under the Commonwealth Sugar Agreement guaranteeing the large UK sugar industry supplies from the producer countries before Britain joined the European Community.

The Protocol, like the Commonwealth Sugar Agreement, had been signed at a time when the world market favoured the producers who had made sacrifices to save the British industry, Mr Anthony pointed out. ACP sugar had made a big contribution to the the success of Britain’s post - war sugar policy and had played a vital part in the negotiations when the United Kingdom joined the Community. The Protocol had been devised to ensure continuity for the commitments the British had made under the Commonwealth Sugar Agreement, but this continuity was forever being compromised, in both the Community and the world at large by trends whose main result was to reduce both the significance of the Protocol and the advantages which the ACPs were supposed to derive from it. Dr Ghebray Berhane, the Secretary - General of the ACP Group, echoed these sentiments, saying that “the prolonged freeze of the guaranteed sugar price, which has now turned into a decrease, combined with the reluctance of the community so far to adopt other measures to counteract the effects of such actions and to alleviate the effects of international developments, pose a serious threat to the ability of the protocol to meet its objectives “.

Guaranteed prices - shock item?

Mr Dulloo, also mentioned the economic side of the Protocol, but he put the main emphasis on its ‘&political, socio - historic and cultural significance”, the better to highlight the importance of the Community’s commitments to the ACP Sugar Protocol signatories. The fact that the Protocol was of unlimited duration and that it was independent of the Lomonvention showed just how important they thought it was for the Member States to make sure the provisions were applied, particularly when it came to the Single Market of 1992 and developments on the international sugar market. The various economic and international parameters in the sugar sector were causing the ACPs many worries, Mr Dulloo went on, and the fixing of a guaranteed price for cane sugar as prescribed in the Protocol was one of the first of them. The Ministers maintained that the Community was failing to apply the Protocol in refusing to embark on joint action with the ACPs to fix the annual guaranteed price for their sugar - a shock item which has always been a bone of contention. However, various international expert reports made to the Conference underline the fact that it would be wrong for the reference price for white sugar to be the benchmark according to which the ACPs adjust their approach. The ACPs, as Philippe Chalmin for one said, should devote more of their energies to the transport (cif to fob) issue and to the Portuguese market, where 200 000 tonnes of raw sugar cane are at stake.

As to the actual level of sugar prices, Chalmin went on, “ the fate of the ACP sugar producers is linked to that of the European ones, which is both the strength and the weakness of the Protocol. The strength is that it was negotiated within the framework of Lomithout depending directly on it, the cost being in the EAGGF budget in the form of the cost of the refunds required to re - export equivalent quantities of European sugar. And in some years this has been a great deal, upwards of ECU 500 million and well in excess of the Stabex allocation, for example. As things stand, the Sugar Protocol is not being contested by the European beet and sugar producers, because they benefit from the extra ACP pressure in the negotiation of European prices and it is in their interest to maintain the status quo, with identical price levels, that is to say”.

“ But that is what is ambiguous about the Sugar Protocol”, Philippe Chalmin continued, “ is that the ACPs have to submit to the logic of the common agricultural policy whereby agricultural spending is reduced and Community prices drop as a result. It could be dangerous to have special compensation for price drops, as has been projected, because it would be creating a precedent and singling out a “ Sugar Protocol “ item, opening up a gap between the beet system and the ACP producers and opening the door to complaints from the European sugar industry about the Protocol being financed from the EAGGF rather than the EDF. Too much open insistence on price rises could well bring down the whole fragile edifice - which, paradoxically, has the beet producers and the ACPs on the same side for the moment”.

The ACP sugar producers should not focus on the reference price for white sugar, Mr Chalmin went on. “ On the contrary, their interests lie in staying linked to the fate of the European producers”, he added.

Don’t wave a red flag at the bull

David Curry, the U.K. Junior Agriculture Minister and the only member of a Community Government to attend the meeting (the Community as such was not in fact invited), looked at the various ACP problems and complaints related to the common agricultural policy and its effects on the uncertain future of their sugar in the large market of 1992.

The evolution of Community support price and their implications for ACP sugar prices, the future of the Community’s sugar regimes, the GATT negotiations, the completion of the large internal market and the impact of developments in Eastern Europe, and the possible future shape of the British sugar industry, were causes of ACP concern. Mr Curry tried to give some answers, while warning that his answers did not “constitute a panacea “.

He began by reminding the Conference that the United Kingdom was only one out of 12 voices in Community affairs and that decisions were taken by a majority vote. The point of reforming the common agricultural policy (CAP), he said, was to have a policy which was “ sound - based, economically realistic CAP”. The United Kingdom was virtually the only Member State to have much interest in ACP sugar or to show any particular understanding of ACP concerns. It would continue to have great need of raw sugar from the ACPs - and without a sugar industry to use it in Britain, it was difficult too see how the 1.3 million tonnes of ACP sugar could get into the Community every year for refining. Which was why, Mr Curry said, they had to advocate: no weakening of the Protocol; a fair ACP price offering stability; no ammunition - giving to enemies. If the price for ACP sugar was put higher than the price for Community sugar, it would be “ waving a red rag at the bull”, he emphasised.

The Minister then said that the Community should be seeing how to solve the crucial problem of the cost of transport in the ACP sugar price. He also mentioned the United Kingdom’s “ twin responsibility” - to the beet producers and the sugar cane industries.

A dynamic export strategy

The ACP Ministers also discussed what they should do to make their problems known to the various groups in the Community which might have a positive influence on the Twelve’s sugar decisions. It was agreed that ACP sugar - exporting countries would run a press and information campaign in the Member States, although not all participants were keen on this, as some feared that the shortage of time and money would hinder success and others, Barbados in particular, had reservations, especially about the financial aspects. Malawi’s Trade, Industry and Tourism Minister, Mr R.W.Chirwa, also expressed doubts as to whether they were all equally enthusiastic about such an information campaign, the cost of which was considerable. And Jamaica stressed that understanding on the part of one Member State, the United Kingdom in this case, was no indication of what the position of the other 11 Community countries would be.

The press campaign and the ACP Ministers’ tour of the Community would be financed via a levy on the sugar earnings of the countries concerned. Revenue from this special tax, a propoal from the Fjiain delegation led by Viliane Conelevu, the Minister for Primary Industry, would also be fed into a fund to provide permanent financing for the work of the Sugar Group in the ACP States.

Ministers at the London meeting also pointed out that sugar was of social and cultural as well as economic importance to the exporting countries. One or two states, Mauritius and Jamaica for example, took part in the exhibition run in the Commonwealth Secretariat to demonstrate the economic and socio - cultural aspects of sugar cane - growing in the countries concerned. This event was organised by the ACP - EEC Cultural Foundation, with technical back - up from Georgia Bernard, the Cultural Affairs Expert at the ACP Secretariat in Brussels. Mauritius’ Ambassador, Raymond Chasle, the doyen of the ACP diplomatic corps, made a short speech on this occasion, saying, in particular, that, if the Community safeguarded the sugar industry in the ACP exporting countries, it would be contributing to the defence of an important part of a literary and cultural life which had for centuries been inspired and nourished by the story of sugar cane - growing.

As well as dealing with the major and immediate issues of prices, 1992, the international market, the GATT negotiations and so on, the Conference heard what professionals from the sugar industry had to say. There was a great deal of interest in a much awaited speech by Neil Shaw, the Chairman of Tate & Lyle (the company which looms large in the European sugar industry), who presented the industry’s point of view and explained his company’s strategy. The strength of Tate & Lyle, he maintained, would also be beneficial to the ACP production - which the company would always need. (Extracts from Mr Shaw’s speech follow).

Practical decisions still had to be taken on most of the points at issue when the Conference ended, although the participants broadly agreed on the need for a dynamic exporters’ policy for the post - 1992 era. L.P.

Neil Shaw, President of Tate & Lyle

“We want to work for you and be paid on the basis of results “

The following is a rmf the speech given by the President of Tate & Lyle to the ACP special ministerial conference on sugar in London:

(...)” Looking ahead, let’s try and get a feel for what is happening in the overall sweetener industry on a worldwide basis”. “ First”, Mr Shaw said, “ by the end of this year, there will be a final Bill in the United States to cover the new Foreign Bill and obviously the Sugar Act in the United States is part and parcel of the Foreign Bill. The trend in the United States for cane sugar and cane sugar imports is good. I believe we will see a Bill passed by the Senate and the Congress that will give a minimum import figure of cane sugar imports into the United States of 1250 000 tonnes. Some of you here will recall a couple of years ago when the initial import figure was set at 750 000 tonnes. So we see a minimum figure which is significantly above that at which we started out a couple of years ago and we should see figures that approach 2 million tonnes of imports and this year we could easily count up to 1.8 m. That is a good trend”.

“ We will see controls on the amounts of beet and of cane sugar that can be grown in the United States. We will see, certainly, controls on the amount of corn sweeteners that can be marketed in the United States. And this is a major development, and one in which Tate & Lyle has had an important part to play because the corn refiners in the United States have been against any controls, they wanted to expand their industry without any kind of governmental controls. (...)”

A healthy outlook

“ One of the other points that is important is that there will not be any increase in the minimum price for sugar that enters into the United States, at least for the first year and a half, until 1991 or 1992, when it will be allowed to increase by the Consumer Price Index. Why is that important? There is at the present time a minimum support figure of 18 cents U.S. per pound. That minimum figure is a very lucrative one to any efficient producer of beet or cane in the U.S. and certainly to the corn and sweetener industry. It is important that we don’t see an increase in the price because in the U.S. if we were to see one, we would see increases in beet sugar production, and that would happen in marginal areas that are not efficient sources for beet sugar production. But once it starts, it’s very difficult to limit the future growth of that industry.” (...)

“ So the outlook in the United States is good. Tate & Lyle has changed. We have broadened our field in a significant way in terms of our focussing on the sweetener industry. We say to our customers we’re in the sweetener industry. We are prepared to supply sweeteners from whatever origin, be it cane, be it beet, or be it corn. And we will be in a position to support their requirements in the non - calorie or artificial sweeteners. “

“Today, we are a stronger, fitter, more widely geographically dispersed company than ever before in our history. We continue with the basic policy with which we started early in the 1980s, that we do not own or control any raw sugar producing estates anywhere in the world. We manage many industries in different parts of the world on behalf of the owners, which is usually the Government - or in many cases a mixture of government and private sector in that particular country. And that’s the way we are going to keep it. We want to be in any of your countries if you want us in terms of management contracts. We want to work for you, and we want to be paid on the basis of results. If you don’t produce more, we don’t get paid more. We believe strongly that’s the way, from a technical and production point of view, that Tate & Lyle can participate without having any of those difficulties which inevitably must arise, where, when the times are good, that one is accused of being a multinational that is taking out large profits from individual countries. That will not be the case with Tate & Lyle. We will on occasion be a 5 or 10%, maybe even a 15 % shareholder in raw sugar estates, but we will not, under any circumstances, have the controlling interest.” (...)

“ You should not worry “

“ Tate & Lyle is a strong partner of units. We are anxious and still totally committed to the basic business of cane refining industry, and the management of cane sugar estates.

You should not worry about the fact that we may have lost our interest in cane because we have new sources of income in different parts of the world from different products. That is not the case. Our interest and commitment to cane is total. It is long term, and it is one that we will not change. As far as Tate & Lyle is concerned in the UK you will see, starting very soon, a very strong advertising campaign promoting sugar. Sugar is a natural food, an important part of any balanced nutritional diet.” (...)

The ACPs’ concerns as a Group

Mr Neil Shaw went on to analyse ACPs’ concerns as he sees them. “ The number one concern “, Mr Shaw said, “ is price. And you need a price which is reasonable and one that you can defend. I strongly resist, I believc you should resist (as it is boing resisted in the United States) any attempt to produce prices for sugar that will allow uneconomic expansion of the industry. If that happens, we start to kill the goose that lays the golden egg. There is a very fine line between what is too much and what is reasonable, and it is one that you in your Group should be doing.

“ Concern N° 2 is obviously that Portugal has joined the Common Market. It has had a long history of importing cane sugar. It is part and parcel of the Common Market. It has been given assurances that sugar will be made available when the introductory period ends in 1992. And, again, if I were looking ahead, I’d say to you, your concerns are ones that you can act on.

“Your third concern is the whole regime of 1991, of the sugar logislation, and that encompasses many parts of the supply distribution costing refining of the product line to the consumer.

“The fourth concern is Tate & Lyle. What shape is Tate & Lylc in? Is it prepared and able to receive your sugar, refme it in a very efficient way on a low - cost basis that will get to the consumer in the UK’?

“The concerns on price I leave to you. But I would like to summarise on all of those points be they: price, Portugal’s market, or the future 1991 regime. Now is the time that this group has to work together. Not just at conventions or at seminars, or Group meetings such as this, but every day. You have a lot of pressure, a lot of lobbying capability, but you’re going to have to see the Germans, the French, the Belgians, the Dutch, the Danes, those members of the Common Market, and of course Portugal, to sell the fact that the EEC has to look after not only its own agricultural interests, but its role as an international player in the food agricultural system. You have to do it now, and you will be surprised at how many converts you will achieve. This, the Western world be it in North America, or in Europe - is moving very quickly, away from aid and much more from trade and there is no product line in the world that is a better example of legislation which has made it very difficult for a product which you grow more efficiently than countries in temperate climates.(...)

“So the ability to put your Group together and to start lobbying in a disciplined, regular way, a way that gets down to people contacts. The Commission is one of the most important points of contact that I could stress to you at the present time. Because right now the Commission isn’t really listening very much. It has more or less made up its mind what it is going to do for 1991. I do not think it is too late to have the Commission realise that there is a push from the politicians who say: look, we should be treating this subject on a more equal basis between our domestic producers and the people with quota import licences into this country. (...)

“We believe the quotas are at an absolute minimum and should be increased to the extent of a share of the Portuguese market. We believe that there should be some mechanism whereby if there is a role for increased production in Europe, that the cane sugar suppliers should be part of that increase. I think we have to go aggressively at trying to increase and certainly hold ourselves at the present levels and the pricing arrangements for those levels.” (...)