Mariann Fischer Boel
Member of the European Commission responsible for Agriculture and Rural Development

Reform of the EU Sugar Regime

European Parliament Plenary
Strasbourg, 10 March 2005

Introduction

First I want to thank Mr. Daul and Mr. Fruteau and the members of the Agriculture and Rural Development Committee for all the work they have done. The drafting of the resolution as well as the hearing on 30 ^th November last year are valuable contributions to our thorough preparations of this important reform of the sugar CMO.

Allow me first a few introductory remarks before responding to your questions.

The need for reform of the sugar sector is inevitable. Based on the consultations I have conducted with stakeholders these last few months it is my clear impression that this view is widely shared. The question is "how far" and "how fast" do we go.

I believe that we need an ambitious reform:

A reform that brings the sugar regime in line with the 2003 CAP-reform, allowing decisions by farmers to be determined by market signals and not by political decisions;

It must also be a reform that will enable the necessary restructuring of our sugar sector which will secure the long term viability of this sector in the EU;

On prices let me be very clear: maintaining a price three times higher than the world market price is becoming increasingly difficult to justify and will by no means lead to a sustainable European sugar sector.

And it will have to be a reform that enables us to live up to our international commitments.

Reaction on major issues of EP resolution

Let me make the following comments on the major issues you have raised in your resolution:

Price and quota cuts

I am convinced that there is a future for sugar production in the European Union. But it must be based on competitiveness. We will therefore need to accept that sugar production should be concentrated in the areas where it has a sustainable long term perspective.

With the proposed price cuts in the Communication we will still stay well above the current world market prices. I am therefore convinced that the proposed 33% price cut and a 2.8 mio. Quota cutis a necessary minimum to achieve an effective reform, balance the market and respect our international obligations. The less thorough we are now, the more likely it is that we will have to reform again in the near future, with the accompanying uncertainty for the sector.

It is clear that the reform will force farmers and producers to take important - for some difficult - decisions about their future in the sector. We have to offer them a clear outlook. I therefore consider predictability to be a key issue. I have taken good note that this is a concern shared by this Parliament. I therefore do not intend to include the idea of a mid term review in two or three years in the legal proposal. Instead a long term perspective will be offered.

Farmers will get compensation equal to 60% percent of the reduction of the institutional price through the single farm payment scheme. This will offset the loss in revenue. Past experience shows that income loss at farm level does not equal the price cut. It is especially true for sugar where the farmers will no more carry the cost of the production levy. In any case the reform needs to be budget neutral, which limits the degree of compensation. If we go beyond 60%, other sectors have to pay, through reduction in direct payments etc.

Quota transfer

I come to the next point, the transfer of quota between Member States. In the communication this is introduced as one of the key elements in driving the necessary restructuring of the sugar industry.

Quota transfers could facilitate production moving to regions where production conditions are the best. And at the same time provide regions that are not competitive with an opportunity to give up their quota and invest the proceeds in alternative economically viable activities.

But your concerns about the quota transfer have not gone unnoticed. If our objectives can be achieved through alternative instruments this deserves thorough consideration. I have been particularly interested in the ideas put forward in the resolution on making the transfer subject to some degree of control by Member States and farmers and the setting up of a specific fund. I am currently exploring these ideas. Notably the creation of a specific fund forms an important element of my reflections.

EBA quota and compensation ACP countries and least-developed countries (LDC's)

Let me be very clear on the Everything But Arms (EBA). This initiative is one of the cornerstones in our trade relations with the LDC's. It was the result of an unprecedented unilateral concession made by the EU. A logical step given our commitment to the development of these countries. It would be a wrong signal to roll back our privileges to the LDC's - particularly in a year where we are trying hard to convince the rest of the developed world to follow our example and increase market access to developing countries.

I am therefore against renegotiating the EBA initiative. Furthermore a system with regulated imports at remunerative prices would lead to a price reduction which is too small and thus inefficient. We shouldn't give incentives for unsustainable investments within the EU or in third countries.

We recognise that the sugar reform will imply certain adjustments of the sugar sector in the ACP countries concerned. But we have also clearly indicated that we stand prepared to accompany this process. On the basis of an action plan the Commission presented on 24 January a dialogue with the ACP is currently taking place.

It is the Commissions intention to submit the final action plan on accompanying measures in form of a Communication to the EP and the Council in mid-2005.

WTO

The last point I want to address is the WTO. The final ruling of the WTO's Appellate Body is fixed for the 28th of April. Our reform proposal will take due account of its outcome.

With that we will have brought the common market organisation sugar in line with our existing WTO obligations.

[Effects on new Member States

The resolution specifically addresses the position of the new Member States. I do not agree with your conclusion that those Member States would suffer from unfair quota reductions. In my opinion a special arrangement would just be against our restructuring objective and our principle of an equal treatment for all MS.

I would like to highlight that the Communication foresees the same compensation for farmers in new and old Member States.

Impact assessment

You ask for a detailed impact assessment.

The Commission has carried out impact analyses that give clear answers to the main questions of the reform proposals, including the regional effects. I am convinced that more studies will not provide us with facts that we do not already know. Further analysis will only lead to further delay of the decisions that we have to take.]

Timetable

Let me conclude with the timetable.

For internal and external reasons I consider it absolutely necessary to reach a political agreement on the sugar reform in November this year the latest. In fact the current sugar regime expires on the 1 ^st of July 2006. The sector has to know sufficiently in advance how the new sugar regime will look like in order to make their decisions for the marketing year 2006/2007. Furthermore, we have a clear interest to show our WTO partner before the WTO Ministerial Conference in December this year in Hong Kong the basic elements of our sugar reform if we do not want to risk that the sugar issue might spoil the Hong Kong meeting as it was the case with cotton in the Cancun meeting.

The UK Presidency has scheduled discussions in the Council in order to reach such an agreement in the November Council.

To meet this time frame I will present the legal proposal in EP and Council before summer

I know that I can count on your cooperation to make this possible.

Thank you for your attention.