Jamaica Gleaner | October 5, 2007

The gloves are off — Europe dismisses sugar, insults tourism ahead of ’make-or-break’ trade talks

Lavern Clarke, Business Editor

Sugar producers of the Caribbean are angry at the European Commission/EU for throwing out the long-standing protocol under which regional farmers supplied raw sugar to Europe’s refineries, calling it a slap in the face and urging CARICOM leaders to hit back.

Hoteliers too issued a blistering statement at the top of the week, after the Commission issued a ’one-page’ paper on tourism conceding nothing — an area it has made clear its homegrown companies see value in exploiting commercially.

The Spaniards, for example, have been expanding aggressively in the region, and are now looking to invest in the niche health tourism sector.

Calm heads needed

As the tempers flare, chief trade negotiator Dr. Richard Bernal has urged that calm heads prevail, saying the ’make-or-break’ meeting now on in Montego Bay had to be underpinned by "compromise" on both sides.

It is hoped, said Bernal’s office, that EU commissioners Peter Mandelson and Louis Michel would be "instrumental in massaging the process towards greater compromise."

The parties are hunkered down at the Ritz-Carlton in Montego Bay for two days.

Said Ambassador Bernal: "Hopefully, some of the outstanding issues can be resolved at the meeting between the Cariforum Heads and the European Commissioners. If this is accomplished, we hope to complete the negotiation process in the final scheduled round of negotiations."

The parties are working with an October 15 deadline to initial the Caribbean-EU Economic Partnership Agreement, and its signing before year end.

Perhaps as a signal it means business, Europe decided on the weekend it would no longer guarantee market access at special prices for sugar from its former colonies.

Agriculture Minister Christopher Tufton has told the Financial Gleaner that the changes dictated by Europe would no Jamaica’s course on sugar.

The sector is being divested, and the plans for a spinoff ethanol industry have been in play since 2004.

The region’s top producer and exporter Guyana, however, denounced the EU decision within the meeting rooms of the United Nations Tuesday.

In addition sugar producers across the wider region, who feel betrayed by the decision, are in turn calling on their governments to denounce the Commission for its "unilateral decision" and to exert political pressure on their richer trading partner.

The proposals, said Sugar Association of the Caribbean chairman Karl James, shift the burden of the EC’s internal adjustment onto Caribbean sugar producers.

"This is both unfair and untenable," said James.

"SAC accordingly urges Caribbean governments to denounce the Council decision and to hold the EC to its treaty obligations enshrined in the Sugar Protocol, or to a replacement arrangement which provides no less commensurate benefits."

Inadequate and unacceptable

The Caribbean Hotel Association, having characterised the European Union’s ’non-paper’ as inadequate and unacceptable, also demanded that CARICOM continues its push for agreement on the proposed tourism text.

Among its concerns was the absence of a position on business travel to the EU.

"Very generally, the CHA is dismayed that the EU is of the view that their one-page summarised document could adequately and fairly represent trading arrangements that will pertain between Cariforum and the EU for the leading economic sector in the Cariforum region," said president Peter Odle.

"We understand that the EU has shown little interest in considering Cariforum’s detailed and substantive proposal on tourism and we find this dismissive approach unproductive at the very least."

Its unclear how much influence the Caribbean truly has left over Europe, and whether the heads have any real room to manoeuvre, but the EU by its latest action has signalled that it is even less inclined to haggle as the year end deadline approaches on replacement trade deals to Lome that evaporates at midnight December 31, when the Cotonou waiver on preferences expires.

Its position clear

The EU, having negotiated with the region for years, has made its position clear - either Caricom members sign the new EPA or join the generalised list of countries that get little or no concession in their commercial dealings with the 27-member bloc.

James points out, however, that producers have been a cheaper source of sugar for Europe’s refineries, saying the price they are paid for the raw product was often below prevailing world market rates.

The producers earn under euro490 per tonne of sugar.

"Moreover, they did so in line with shipping requirements that suited the European refiners, and in the context of a commercial relationship which provided real benefits to European freight, insurance, banking and food and confectionery interests," said James.

"Against this background, the decision to denounce the Sugar Protocol is a slap to the face."

The EU, earlier this year, in its first signal that it was determined to get the EPA signed, issued a blanket offer to African Caribbean and Pacific countries for unfettered access to its markets, which means the products they trade will have to compete with other countries on price, with only a few product exceptions that would continue to be guaranteed some level of market protection.

"The EU will completely open its market to Caribbean exporters," said Carlo Pettinato, the first secretary/head of section trade, economics, politics and information at the EC Delegation to Jamaica office in Kingston.

"No more duties, no more quotas - full stop."

Pettinato, who made the comment at a global trade forum in Kingston last week, includes that message in almost every public speech he gives.

Europe’s discarding of the sugar aid and trade is only the latest demonstration that commercial diplomacy is now second to maintaining its timetable.

Said Bernal: "The region is committed to this process but finding the middle ground is often not easy. However, if we do not finalise these negotiations according to the schedule, the options are much less advantageous."

Pettinato was more explicit about the consequences last week at the trade forum co-hosted by the Private Sector Organisation of Jamaica and the Small Business Association of Jamaica.

"Without WTO-compatible trade arrangements set out in Economic Partnership Agreements, the EU can only offer the ACP its generalised system of preferences," he said.

"This would give Least Developed Countries duty and quota free access to the EU but the 36 ACP non-Least Developed Countries, like Jamaica, would get substantially less generous preferences. This would hit key exports like bananas, horticulture, aluminium, cocoa and beef. Based on 2005 figures, non-LDCs would pay over €1 billion in additional customs duties."