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EU plan to slash sugar price will hurt region
Posted: Wednesday, June 29, 2005

By Grorge Alleyne,

The plan by the European Union to slash, by 39 percent the price of raw cane sugar it imports from the Caribbean under the Convention of Lome will hurt Caribbean economies and place increasing pressure on Trinidad and Tobago.

Indeed, the ultimate step, the complete abandoning of the preferential entry to the European Union (EU), not only of sugar, but bananas and rum has not been unexpected by the English speaking Caribbean. What had not been expected, however, had been the timing of the sugar price cut, a mere year or so following on the ruling of the World Trade Organisation in 2004 of "unacceptable levels" of subsidy of EU sugar exports.

What is ironic is that farm subsidies both in Europe and the United States which (the US) is leading the charge in the WTO against Europe's agricultural subsidies, generally, are far greater than in any other member or group in the WTO. I do not know what the adjusted euro figure will be for EU sugar exports. But the European Union, particularly the United Kingdom and France, having built their First World economies on fortunes gained from former colonial possessions is better positioned to withstand a loss in sugar earnings.

And while EU financial losses will be relatively small, the economies of affected Caribbean countries will be hard hit. The Caribbean is set to receive a "double whammy" as not only the sugar industry but the banana as well will shortly be affected adversely by the rules and regulations of the standard bearer of globalisation, the World Trade Organisation.

Already, in some Caribbean countries several of the smaller banana plantations have either curtailed production or have closed down. The same will be true shortly of sugar cane estates and sugar factories. Additionally, though unrelated to the WTO, nutmeg estates in, say, Grenada well savaged late last year by Hurricane Ivan and will not be viable for some time to come. So that between the WTO's sugar and banana backlash and Hurricane Ivan there will be considerably less money turned around in the various Caribbean economies and an uncomfortable depletion of jobs.

The social and economic misfortunes of affected Member States of the Caribbean Community of Nations will add to the problems of others. The fall off in export earnings of the respective states will mean that they will be unable to import the industrial and agricultural products of others, leading to lower revenues and fewer jobs. Trinidad and Tobago which has traditionally been the principal Caribbean shelter in times of regional economic distress will experience, undoubtedly, both an increased demand for financial aid and a rise in unauthorised immigration.

The WTO's ruling on unacceptable levels of subsidy must be viewed in the context of United States opposition not only to European Union agricultural subsidies but that of preferential subsidies as well.

Yet even as the US argues against preferential entry it has accorded this same status to Caribbean sugar entering its market. The annual US quota for Caribbean raw sugar enjoying preferential entry is approximately 60,000 tonnes.

The cold truth, however, is that the Caribbean is the unwilling victim of a battle for market share between the US and the EU. In addition, while the Commonwealth Sugar Agreement and the Sugar Protocol of the Convention of Lome to which it yielded pride of place when the UK entered the European Economic Community (now the EU) appeared to be aimed at providing economic assistance to former British and European colonies they were well designed to continue the hobbling of the growth of these economies.

It was a continuation of the old master-slave, master-indentured servant mentality of the UK and Western Europe through which Britain and France, in particular, discouraged the refining of sugar cane in their colonies. As historian and late Prime Minister of Trinidad and Tobago, Dr Eric Williams, would point out in his work, From Columbus to Castro, (Page 163), "Refined sugar fetched five times the price of raw sugar." Dr Williams would state also in reference to the French colonies that "in 1964 the establishment of new refineries was prohibited in the West Indies."

It should be noted that both the Commonwealth Sugar Agreement and the Convention of Lome agreed only to the preferential entry of raw sugar. The EU is today the principal exporter of refined sugar, somewhere in the region of five million tonnes annually, and re-exports the refined product to, among other places, Caricom.

But the immediate politics of the Convention of Lome apart it is the long-term damage to the Region's economies of the cut in the price of our sugar exports and the around the corner end to preferential entry of bananas, sugar and rum which we must address.

The answers must lie not in self pity, but in the development of marketing and economic strategies, including long needed closer ties with Latin America including the non-English speaking countries of the Caribbean.

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