Industrial change in the EU beet sugar industry (own-initiative opinion)

EESC opinion: Industrial change in the EU beet sugar industry (own-initiative opinion)

The European Union is the world's biggest producer of beet sugar and the principal importer of raw cane sugar for refining. EU sugar policy today is supported by three pillars: production quotas, a sugar reference threshold and trade measures (border protection). Production quotas will cease to exist as of 1 October 2017, which means that one of these pillars will fall. Another pillar – border protection – is looking increasingly shaky.

The EU sugar sector has invested heavily in technical improvements and cost-reductions, as well as in human capital, research, education and training. Over the last 25 years the average EU cost of production for beet sugar has increased by only 0.4 per cent per year, compared to an inflation rate of 2.3 per cent per year; this translates into a constant reduction of costs relative to inflation across over two decades. According to independent experts like LMC International, many of the EU beet sugar industries are now ranked in the top quartile of world industries for cost competitiveness. Efficiency in beet sugar production has also increased consistently; between 1990 and 2015, the amount of sugar produced per factory in the EU-15 has tripled.

In 2006 a major reform to the EU sugar regime resulted in an acceleration of these positive trends, but came with a high cost. Over the last decade the EU sugar industry has closed almost half its factories with the loss of 4.5 million tonnes of production capacity, over 24 000 direct jobs and 165 000 farm suppliers. Following the 2006 reform, sugar production was completely stopped in five Member States, and was substantially cut (by over 40 per cent) in a further six. These changes affected mainly rural areas.

For the European sugar industry to continue to invest, the right political and regulatory climate is essential. However, the EU's trade policy is posing significant challenges to the long-term viability of the European sugar industry: in both recently-completed and ongoing free trade negotiations the EU is offering access for third countries to the EU sugar market, which is exposing EU sugar prices to downward pressure and volatility. This is because domestic support in many of the major sugar producers allows them to trade at below the cost of production.

The aim of this proposed opinion feeds into the general framework of the Europe 2020 strategy and is twofold: (1) highlight to the European Commission and Member States that the EU sugar industry is highly efficient, with high-quality manufacturing jobs and which is respectful of the environment and (2) investigate possible policy responses to the challenges facing the European sugar sector after 2017, which include (i) a potentially sustained period of low prices and (ii) market opening to some of the EU's main competitors, such as Brazil and Mexico.

Relevant EESC opinions

European Commission

Overview

Policy, strategy, regulation, market and FAQ

European Parliament

EurActiv

Sugar and Trade Authorities