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Weekly Comment

Sweet nothing for global trade


The transition to the new EU sugar regime is a reminder of what was lost when the Doha round of WTO trade talks collapsed.

This is not to say that dealing with the sugar reforms, which came into effect on 1 July 2006, will be easy.

The expected difficulties - job losses and factory closures - have already materialised, and the gradual removal of the guaranteed support price will inevitably lead to a significant reduction of sugar production within the EU.

But the changes have also corrected - at least in principle - an ethical, and economic, wrong. Most sugar producers have accepted this, and are working to ensure that the new regime will be beneficial in the long term.

Danisco for example plans to close its plants in Assens, Denmark and Salo, Finland. But it has maintained its expectations for this year's sugar output, and claims there is still potential for an output of 1 million tonnes.

Similarly, Germany-based sugar giant Suedzucker expects a revenue increase of 5 per cent in 2006 / 07, underlining its confidence in a reformed sugar sector.

It is too early to assess the true impact of the new regime. But in the end, the reforms will increase the performance of the EU sugar industry by forcing out uncompetitive producers.

However, sugar reform was supposed to be part of something bigger. When this reform package was being finalised, it was widely seen as a crucial step towards the successful conclusion of the WTO Doha trade round.

These talks presented the global community with the opportunity to revolutionise food trade on a global scale.

The final Doha round of WTO trade talks aimed to free global trade by cutting industrial and agricultural tariffs and by reducing farm subsidies. And Europe's new sugar policy was seen as an important bargaining tool in achieving this.

It was widely promoted as being 'trade friendly', underlining the EU's commitment to successful negotiations by reforming a policy that had remained unchanged in decades.

It was supposed to send out a signal to the world that the EU was taking into account international developments in its domestic reforms and showing serious commitment to the talks in its willingness to reform central aspects of the CAP (common agricultural policy).

Everyone around that table in Hong Kong knew that such concessions were necessary if a properly liberalised world market was to be established. But in the final analysis, no one was prepared to put pay the cost of short term pain for long term gain. Countries fought for the right to continue to protect uncompetitive sectors of the economy.

EU sugar reform, while long overdue and still to be followed through, now stands as testament to the extent to which good intentions were prepared to stretch.

To the detriment of almost everyone, WTO members refused to budge on issues such as the lowering of tariffs on certain goods, and as a result, global barriers to trade and unfair subsidies remain in place to this day.

The WTO talks broke down because of this intransigence and collective failure to see a better future. An opportunity to achieve a fairer basis for global trade has been missed, and all we are left with is a tantalising glimpse of what could have been.

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