Zimbabwe: EU to Shift Sugar Policy

MAJOR changes are on the horizon for sugar, one of the world's most highly protected agricultural commodities, according to a report by the International Food Research Policy Institute.

It says low-cost producers of sugar such as Zimbabwe and Malawi stand to benefit immensely from the proposed liberalisation of world sugar trade by the European Union.

The United States has, however, maintained its protectionist measures that favour sugar producers in that country, restrict access to sugar markets, distort global competition and prices for many competitive low-cost producers and exporters.

"A recent shift in EU policy . . . could significantly reshape sugar markets in both industrialised and developing countries," IFPRI noted.

"More open global trade in sugar would benefit some poor African countries that are low-cost producers of sugar, including Malawi and Zimbabwe.

"Other countries, such as Mauritius and Swaziland, would be hurt economically due to loss of preferential market access.

"In order to be competitive in global sugar markets, developing countries would have to produce sugar efficiently and massively, meaning they would have to engage in large-scale, high-tech production, calling into question the opportunities for smallholder farmers."

Initiated in 2006, the European Union's sugar reforms focus on cutting subsidies to farmers and closing obsolete sugar mills.

Over time, these policy changes could cause sugar production in the EU to fall by one-third, IFPRI said, shifting the EU from a net exporter to a net importer of sugar.

Reducing EU protectionism will also have a ripple effect across the globe, increasing world sugar prices and providing new opportunities to low-cost producers, such as Brazil, Colombia, Guatemala, South Africa, and Thailand.

Conversely, countries that currently have preferential access to sugar markets would experience economic losses.

The report said further: "The full impact of these reforms is uncertain, including how the EU will cope with future challenges, such as the full liberalisation of sugar imports from the least developed countries in 2009. Neverthe-less, the changes are significant and could influence US sugar policies."

Currently, US policy protects sugar producers and processors from competition by limiting imports and excluding lower-cost producers from open access to the market.

This keeps domestic sugar prices artificially high. However, 40 countries have been given preferential access to US markets, including certain high-cost producers, such as a number of Caribbean countries.

As EU reforms proceed, IFPRI explained that the U.S "could come under pressure to change its sugar price support programme".

"Potentially, the US could end sugar subsidies and institute a buyout, as it has for peanut quotas and tobacco price supports. Restrictions on imports and domestic production could be relaxed and tariffs lowered.

"Although these changes would bring sugar prices down, their impact on developing countries would vary.

"The potential impact of policy changes on farmers in both developed and developing countries is huge, but more open global trade in sugar would result in more winners than losers."

Last year, Zimbabwe produced over 440 000 tonnes of sugar and was able to meet its export quota to the EU.