David Jessop - THIS WEEK IN EUROPE

As this was being written, meetings in Brussels of the African, Caribbean and Pacific (ACP) group of nations to determine their response to the European Commission's proposals on the future of the sugar were still under way.

There, ACP ministers and officials have been discussing for the past week how to respond to the European Commission's recent announcement that it intends denouncing this month the EU/ACP sugar protocol and introducing in its place, a new liberalised market-access regime through Economic partnership agreements (EPAs).

In early August, the EC announced that it would be tabling during September, a proposal to unilaterally denounce the existing regime that at present provides 18 ACP sugar-producing nations with legally guaranteed benefits.

These are significant and include duty-free access for named ACP nations for agreed quantities of sugar; quota transferability; a guaranteed price approximating to that applied for European beet farmers; exemption from the safeguard clause contained in the Cotonou Convention enabling producers to ship sugar irrespective of supply levels in Europe; an obligation by Europe to buy agreed quantities as the buyer of last resort; and an agreement of indefinite duration.

This unique preferential arrangement was intended originally as the sweetener to make the ending of Commonwealth preference acceptable when Britain entered Europe.

However, its effect over the years since 1972 has been to provide a viable basis for the continuing production of raw sugar in the Caribbean and elsewhere in the ACP.

In its place, the EC is proposing in the context of the EPA negotiations, a new arrangement that essentially grants duty-free and quota-free access for sugar, along with all ACP products, from January 1, 2008.

In the case of sugar, the EC's April 2007 offer proposed retaining the present sugar regime until October 2009.

During this time, the quotas for existing protocol suppliers would be increased, producers in the least-developed ACP nations - mainly in Africa - would see their quotas increased by 50 per cent and quotas would be opened for a number of ACP nations that are at present not sugar protocol suppliers, such as the Dominican Republic.

At the same time, the guaranteed price paid by Europe would decline in line with the reduced price being paid to EU beet producers.

After October 2009, the EC offer envisaged the abolition of country quotas and guaranteed prices and the introduction of a special safeguard mechanism for the more developed ACP sugar-producing nations - in the case of the Caribbean, every country other than Haiti.

Oversimplified, this would mean that if the supply were over a certain figure, this would result in the excess being subject to tariffs at most favoured nation rates up to 2015 and thereafter, to GSP tariff levels.

The EC also offered to pay an as yet undetermined price for ACP sugar up to 2012, but offered no certainty from 2013 on, the year in which further reforms are likely to take place in theEU Common Agricultural Policy and Europe's own sugar regime.

These proposals for fundamental reform of a regime are, to put it mildly, creating real anxiety.

almost impossible task

Senior figures connected with the industry in the region point out that sugar producers in the Caribbean have been undertaking the almost impossible task of reorienting their industries to a 37 per cent price cut, while only very slowly receiving the transitional assistance for restructuring promised by the EC.

Against this background, they point out, they are now faced with the uncertainty of future market conditions, an uncertain price, and the entry into the EU market of new lower-cost ACP producers.

They argue that what seems to be little understood in Brussels is that the EC approach has the practical effect of undercutting existing commercial arrangements and the short- to medium-term assurances that those that extend finance to the industry require.

Producers in the Anglophone Caribbean also suggest that while they are comfortable with the decision to afford the Dominican Republic a 100,000 tonne quota in the short term, the probability is that once there is duty-free and quota-free access to the EU market at lower prices, Santo Domingo's access may challenge the viability of sugar production in some parts of the region.

In private, some of the senior figures in the industry accept that the region and the ACP should have come to terms with the inevitability of change long ago and begun to restructure their industries.

They also describe ACP discussions on the legality of the EC's action in renouncing the sugar protocol as 'rearranging the deck chairs on the Titanic'.

too comfortable

They accept that the industry and governments have become too comfortable with present arrange-ments that are unsustainable in the face of economic globalisation.

However, they couple such remarks with anger that the EC has failed to be transparent in its approach, has not recognised the social role that sugar continues to playin many Caribbean economies, or the sheer complexity and developmental damage involved in trying to take a preference-based industry in a very short time into a commercially based market.

They are also highly critical of those European Commissioners that in their view, see the effect of sugar reform in the Caribbean as collateral damage in taking the high ground: the reform of Europe's own sugar regime.

By the early part of this week, the position taken by Caribbean and other ACP ministers on sugar will become clear.

However, lurking on the horizon is a not entirely unrelated and potentially much bigger and largely unobserved threat to Caribbean agriculture that ministers will have to deal with: food-price inflation.

In a recent interview with the London Financial Times, Jacques Diouf, the Director General of the U.N. Food and Agriculture Organisation warned that surging prices for wheat, corn and milk had the "potential for social tension leading to social reactions and eventually political problems", especially in developing nations.

Diouf was speaking against a background of growing demand for food from nations such as China and India, a rising global population, climate change, the biofuel industry's currently insatiable appetite for grain, and burgeoning speculation in international markets in foodstuffs.

Put another way, today's problems in managing a way forward for Caribbean sugar may rapidly be overtaken by the far more significant and potentially destabilising issue of food security.

Reform of the sugar sector is challenging and essential, but diverting.

It should not detract from the urgent need to restructure the whole Caribbean agricultural sector.

David Jessop is director of the Caribbean Council. Email: david.jessop@caribbean-council.org