If EU Changes Sugar Policy, U.S. Won't Be Far Behind

When it comes to agriculture trade policy, the United States and European Union tend to blame each other for trade distorting practices. And in at the negotiating table developing countries look to the U.S., EU, Japan and other developed countries to change current policies to create a more friendly trade environment.

But one of the most sensitive issues in the debate is sugar.

In the next few weeks the European Union will be presenting a significant change in sugar policy that encourages regions in the expanded 25 countries in the EU to produce sugar, instead of all 25 countries.

EU Commissioner for Agriculture and Rural Development Mariann Fischer Boel explained that she sees two options on sugar. "We could do nothing and the sugar industry would suffer a long painful death. And at the end of the day there would be no sugar industry," she says. Or the EU could move forward with a proposal to be announced on June 22 plans to encourage sustainable regions of the EU to raise sugar, she explains.

Gary Blumenthal, president and CEO of ag trade think tank World Perspectives, explains that for a long time the U.S. sugar producers have hid behind EU sugar programs. If the EU changes sugar programs by cutting prices and quotas, that rationale is gone for U.S. producers, he says.

"There's been a lot of airfare between U.S. and EU sugar producers to keep the current sugar programs in place," comments Blumenthal. "But it would be more difficult to prevent reform from occurring in the U.S. if the EU does enact reforms."

The EU and U.S. sugar programs are over 40 years old. Boel says with the addition of the 10 countries entering the European Union, it became clear that the mechanisms of post-war period programs were no longer suitable for the enlarged European Union at the beginning of the 21st century.

In the United States where President Bush is leading an aggressive trade liberalization agenda, the time may be nearing for a change in U.S. sugar policy, says James Grueff, former assistant deputy of international trade policy for Foreign Agriculture Service.

Sluggish support for the Central America Free Trade Agreement (CAFTA) is a result of the sugar industry's fears that allowing Central American sugar into the United States could wipe out sugar producers.

But more importantly it is their fear that the 100,000 sugar allowed to enter the United States under the agreement is only the tip of the iceberg. With more than five agreements in the pipeline, sugar producers are trying to hold their ground on this first one to lessen the degree of impact from future agreements.