Introduction

ACP countries have preferential terms of access for their sugar exports to the EU. The Sugar Protocol of the Lomé Agreement gives (indefinite) dutyfree access for agreed quantities of sugar at guaranteed (protected domestic EU) prices to specific ACP Protocol countries. This results in these ACP countries receiving prices for their sugar exports to the EU that are in excess of those on the world market, and a corresponding transfer of income that embodies a significant element of rent or ‘aid’.

In September 2002, Australia and Brazil filed complaints and requests for consultations with the EU at the WTO, concerning the nature of the EU's sugar market. The complaint is that the volume of EU subsidised exports of sugar exceeds the levels the EU had committed itself to under the Uruguay Round Agreements. If this challenge at the WTO leads to reforms of the EU sugar policies, then this may lead to reductions in protected EU import prices and therefore in turn to reductions in the level of income transfer to the ACP Protocol exporters. Reduced rents or ‘aid’ to these relatively sugar-dependent ACP exporters may have serious macroeconomic implications, in terms of incomes, employment, the balance of payments and tax revenue.

The EU sugar regime

The production of beet sugar in the EU is limited under the Common Agricultural Policy (CAP) by the imposition of country-specific quotas that form part of an overall EU quota limit. Quotas apply to the finished refined product (white sugar) but implicitly constrain production of the raw beet.