been ruled out, post 2009 price levels may depend, as explained above, on the agreement and
enforceability of voluntary export restraint.
Central to all this is the continuation of an EU cane refining capacity, which is currently
owned by a single company. This depends, in turn, on how competition between cane and
beet refiners is ‘managed’ in the EU market. The worst outcome from a developing country
perspective would be a closure of all or a large part of the cane refining capacity.15 For the
Protocol beneficiaries, if the price guarantees remain in force, this could turn the trade into a
cash transfer operation which would make a reality of the current fiction that 1.3 million
tonnes of EU subsidised exports are accounted for by its imports: the EU would have to re-
export onto the world market the deliveries of cane that it receives. For LDCs it offers the
prospect of sales being made to refiners at prices determined by competition between the
EBA beneficiaries (and possibly with EU producers as well).
Industry sources suggest that even after any feasible restructuring to reduce production costs,
a cut in the reference price for raw sugar under the Protocol to €325 per tonne would cause
production to cease in Barbados, Belize, Côte d’Ivoire, Jamaica, Madagascar, St Kitts and
Trinidad.16 Without restructuring, production would also cease in Mauritius. The potential
‘beneficiaries’ that could see production increase significantly if allowed are Malawi,
Swaziland, Zambia and Zimbabwe; there could also be significant increases from Guyana
and Tanzania if production costs are reduced. Congo and Fiji would continue to produce, but
at current levels.
The combined effect of the price and volume changes would see countries falling into one of
three categories in terms of earnings from sugar exports. On the ‘slightly worse than actual’
assumption of €325 per tonne and assuming both that the industry restructures and that all
ACP states are able to increase export volumes, the categories and their membership are as
follows.
1. Total loss of forex revenue: the countries in which production ceases - Barbados,
Belize, Côte d’Ivoire, Jamaica, Madagascar, St Kitts and Trinidad - plus Tanzania which
is forecast to re-direct supplies to the domestic market.
2. Substantial loss of forex revenue: Congo, Fiji, Malawi, Mauritius, and also Zambia
(which, like Tanzania, is forecast to redirect its current exports, partly to the regional
market).
3. Modest increase in forex revenue: Guyana, Swaziland, Zimbabwe.
The economic impact of these losses will depend on the relative importance of sugar to the
economy and the possibilities for diversification. It has been estimated by industry sources
that in 2000-02 the Sugar Protocol accounted for over 10 percent of GDP in Guyana, for
about 5 percent in Swaziland, Mauritius and Fiji, for between 1 and 2.5 percent in Belize, St
Kitts, Barbados and Malawi, and for under 1 percent in the rest. This implies that the
outcome forecast would benefit the two countries with the greatest dependence on the
Protocol even though it would adversely affect the rest.
15
Or its continuation in business only at the cost of slashing the prices its pays for cane imports.
16 The analysis does not include Mozambique.
16