Euro-MPs Vote to Extend Sugar Quotas

A plan to liberalise the EU sugar market, one of the most highly subsidised aspects of European agricultural policy, has been thrown into doubt after lawmakers rejected a proposal to end production quotas by 2015.

The European Parliament’s agriculture committee voted instead to extend the quotas until 2020. Some observers predicted they could last well beyond that.

The vote drew a harsh reaction from food and drink companies, which view the quota system as a protectionist relic and blame it for supply shortages and EU sugar prices are roughly 50 per cent higher than those on world markets.

The quota system dates back to the 1960s, and was established as a way to ensure stable prices for Europe’s beet farmers. Since then, it has also enriched a collection of large European sugar companies.

Supply shortages have become acute in recent years, with last year’s quota of 13.8m tonnes failing to keep pace with EU consumption of more than 16.5m tonnes. The price of sugar has risen to more than €700 per tonne in the EU, compared with world prices of just under €500.

EU prices have also been supported by high tariffs on imported sugar from all but the poorest countries.

Under pressure from the World Trade Organisation, the EU adjusted its sugar policy in 2006, and member states agreed to end production quotas by 2015. The European Commission, the EU’s executive arm, has submitted a formal proposal to do so as part of its broader review of the common agricultural policy.

But the agriculture committee’s vote makes that unlikely. Germany and France, the EU’s biggest member states, are also thought to favour an extension of the quotas.

An extension of the quotas – and the high tariffs – will be particularly painful for small and medium-sized food companies, which have struggled to secure supplies, while maintaining profits for big sugar companies.

The Financial Times, January 2013.