EU trade talks undermined as sugar reform blocked

EUOBSERVER / BRUSSELS - Further troubles for Brussels' negotiating position in worldwide trade liberalisation talks emerged on Tuesday (25 October), as 11 member states reaffirmed their opposition against a commission-proposed sugar reform.

According to a commission proposal to overhaul the EU's sugar regime in June, the sugar support price - paid to farmers from EU funds - should be gradually cut by 39 percent from 2006 onwards.

The proposal stipulates that farmers should be compensated for 60 percent of the incurred losses.

But 11 member states in a letter to agriculture commissioner Mariann Fischer Boel have demanded that 'the price cut must be significantly less and has to be gradually introduced over time' - reaffirming an earlier letter they had sent.

The letter, seen by the EUobserver, also says 'the price cut must be compensated by way of higher direct aids'.

The countries that signed the letter are Greece, Spain, Portugal, Italy, Ireland, Finland, Poland, Hungary, Latvia, Lithuania and Slovenia. They say their demands are 'rooted in the shared objective to keep a viable sugar sector in all signatory member states'.

The tough stance by the group of states, which together form a minority large enough to block the sugar reform, is set to complicate Brussels' efforts to achieve EU agreement on the sugar overhaul before a crucial World Trade Organisation (WTO) meeting in December in Hong Kong.

A commission spokesman said failure to clinch a deal before the WTO summit would imperil Brussels' negotiating position in Hong Kong, as the absence of an EU commitment to cut sugar prices would mean the need to make concessions to third countries in other WTO areas.

The commission and the UK presidency have set the next agricultural ministers meeting in November as a target to reach agreement on sugar reform.

But one European diplomat working on the dossier said that 'it is hard to imagine' that the deal can be struck before the end of the year.

The signatories of the letter fear that the proposed sugar reform will leave thousands of their beet farmers without work.

Italy's prime minister said last weak the proposal would force the closure of the complete Italian sugar production, putting 71,000 jobs in danger.

But other states, such as Sweden, Denmark and Estonia, wish to see an even more radical overhaul of the EU's sugar policy.

The question of whether or not member states will overcome their differences before the end of the year may serve as a test case for the EU's capacity to maintain one line on the broader and much more far-reaching WTO talks on agriculture.

On top of this, the sugar issue puts a further strain on the ongoing and tough talks on the EU budget for 2007-2013, with some member states fearing the reform will result in net higher expenditure because of the cost of compensation for farmers.

The commission's sugar reform proposals follow WTO demands that EU subsidies be decreased and exports reduced.

Brussels also says the new scheme is necessary because recent free trade arrangements under the 'Everything but Arms' initiative will open up the EU market to sugar from the world's poorest nations - making the restructuring of EU sugar production an urgent matter.