CARICOM to consider ring-fencing regional sugar market

CARICOM’s Council for Trade and Economic Development (COTED) has begun to explore with regional sugar producers whether a Common External tariff (CET) of 40% might protect the industry from terminal decline by redirecting sugar previously destined for export, towards regional food and soft drink manufacturers.

The discussion follows from the decision by the EU to abolish its national sugar production quotas as part of a long-planned agricultural reform.

According to industry analysts the changes to the EU regime which were introduced on October 1, will see the price paid for ACP cane sugar reduce rapidly as Europe becomes self-sufficient in beet sugar and begins to export. The effect would be to cause high-cost Caribbean cane sugar exports to Europe to fall to zero and in the longer-term world market prices to also decline.

In a response, the Sugar Association of the Caribbean (SAC) and regional producers have presented to governments a number of far-reaching recommendations earlier this year which COTED is now considering.

To protect the regional sugar industry and the large numbers in the rural community dependent on its continuation, sugar industry representatives have proposed that COTED agree to apply on a uniform basis, a CET of 40% on all raw and brown sugar and refined sugar coming from outside the Caribbean single market. The industry also want to see the regional market managed and policed more rigorously than at present.

According to sugar industry sources, initial independent studies suggest that although the uniform imposition of higher duties would increase prices to industrial users of refined sugars, this should not affect the market for locally produced soft drinks. This they say is because such producers finished products are already protected against external competition by an existing high tariff wall.

They add that the same studies indicate that the additional cost to consumers would be marginal: between US$1 to US$10 per annum or an additional six cents on a locally produced two litre bottle of Coca-Cola, presently costing US$3.00. They do however recognise that other users of imported sugar, such as the sweetened milk industry, may need additional tariff protection and technical support.

Those involved in making sugar’s case believe that the imposition of a CET on all sugar entering CARICOM would mitigate the adverse impact of EU reforms by creating a larger Caribbean market into which industries could sell sugar at a price that is viable. They also suggest that a regional market for sugar would make the industry attractive to investors.

However, balancing the interests of sugar, a large employer, with those of much smaller but significant domestic manufacturers is likely to prove challenging, suggesting that COTED and possibly Heads of Government may have to determine in the coming months how best to encourage convergence between an existentially threatened traditional industry and the interests of manufacturers who have traditionally sought the lowest cost inputs from outside the region.

This is an extract from the Caribbean Council’s leading weekly editorially independent publication, Caribbean Insight, which provides in depth information on current economic, political and commercial developments in the Caribbean and news on events in Europe and the US that affect the region. Business people, academics, and those with a general interest in the Caribbean find it an invaluable tool for developing and maintaining knowledge and providing an insight into political, economic and commercial events in the region.

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