Statement by the Ambassador of Guyana, Dr. Odeen Ishmael, on the cancellation of the EU-ACP Sugar Protocol at the SELA meeting on Trade Policies, Negotiations of Trade Agreements and Latin American and Caribbean Integration - Caracas, 22 October 2007

Posted November 2nd. 2007

Madam Permanent Secretary of the Latin American and Caribbean Economic System (SELA), Ambassadors, members of delegations, ladies and gentlemen.

I wish to bring the following matter to the attention of SELA:

1. The European Union (EU) on September 28 unilaterally cancelled the 32-year-old Sugar Protocol which has been pivotal to trade ties with Guyana and other sugar exporting nations of the African, Caribbean and Pacific (ACP) grouping. This move came while critical talks on preserving benefits in new economic partnership agreements (EPAs) were still ongoing.

2. The EU had earlier decided to break up the ACP into six different groupings, each getting its own EPA. As it stands now, the Caribbean is way ahead of the other groups in negotiations with the EU, but major stumbling blocks remain, not the least of them being the region's concern about what would happen to bananas and sugar in the new EPA scheduled to come on stream in January.

3. The Sugar Protocol, set up in 1975 between the EU and the 18 ACP sugar-producing countries, had offered these countries access to the EU market and guaranteed, preferential prices (three times average world price) for an indefinite duration. World Trade Organisation (WTO) rules had required a renegotiation of the EU/ACP pacts to ensure compliance, but the ACP had always been assured that the Sugar Protocol benefits would still exist especially considering its special legal status.

4. But with the decision taken by the EU, all these benefits will be withdrawn two years time.

5. The EU stated immediately after its crucial action: "The arrangements of the sugar protocol have served the interests of both the ACP states and the (EU) community, by guaranteeing ACP exporters an outlet to a profitable market and ensuring a regular supply for cane sugar refineries. However, the arrangements of the sugar protocol can no longer be maintained."

6. However, by taking this action, the EU has failed to take into account the sensitive nature of sugar and the multifunctional role it plays in the economies of ACP countries, and Guyana. The Government of Guyana also stated that it was the position of the ACP group of states that market access should build on the legal provisions of the sugar protocol and that no country should be worse off than present.

7. Currently, many matters remain outstanding, and no ACP region has an agreement with the EU as to how the benefits of the Sugar Protocol would be integrated into the proposed new economic partnership agreements.

8. The Sugar Protocol is a standing agreement which offers substantial benefits, but the EU's action is unprecedented since there is no other agreement in place.

9. For the ACP, and Caribbean sugar producing countries in particular, it is unfortunate that a point is now reached when the Caribbean sugar producing countries have been diligently working to complete an EPA with the EU. As such, the Caribbean sugar producing countries feel the EU's move to unilaterally denounce the Sugar Protocol is either an act of no confidence in the EPA process or is intended to pressure the Caribbean negotiators or both.

10. The ACP countries are already absorbing an EU-imposed 36 percent price cut in sugar over a four-year period starting last year. Meanwhile, restructuring aid promised by EU has been delayed.

11. The protocol covered 1.6 million tonnes of sugar. Sugar accounts for almost a fifth of Guyana's gross domestic product. It is therefore a potentially double blow to Guyana's economy, for unless the guarantees of the Sugar Protocol are transposed into the new agreements, it will leave Guyana significantly worse off than it is already.

12. With Guyana already facing an annual loss of US$35 million as a result of earlier price cuts, the decision now of EU countries to no longer guarantee its duty-free market for sugar is regarded as unkind act and a betrayal. The EU is Guyana's largest market for sugar and last year 200,000 tonnes were exported.

13. In Guyana, about 24, 000 persons depend directly on the industry, which brings in the most foreign exchange for Guyana. This new EU decision therefore has serious implications for the socio-economic stability of the country.

14. The Sugar Protocol has been in existence since the first ACP-EEC Lomé Convention was signed on February 28, 1975. Even though the Cotonou Partnership Agreement replaced the Lomé Convention in June 2000, the Cotonou Agreement preserved the Lomé trade provisions until the end of 2007. It also committed the parties to negotiate World Trade Organisation (WTO)-compatible trading arrangements to be implemented from January 2008, but due to the EU's persistent reluctance, this joint review has not been undertaken. Then on April 4, 2007, the EU unilaterally announced a new market access offer for sugar. Caribbean and ACP stakeholders are unanimous in the view that, even within the context of WTO rules, the EU's offer does not maintain the benefits of the Sugar Protocol.

15. The decision to scrap the Sugar Protocol, which will take effect in October 2009, was passed during a meeting of EU ministers dealing with competition issues in September. It is also part of the EU's own sugar sector reform passed in 2006, and forms part of the EPAs the EU is negotiating with all 78 ACP member countries.

16. Following the September 14, 2007 Special Ministerial Consultation on sugar held in Brussels ACP ministers negotiating the EPAs with the EU, issued a joint call for "an equitable and fair trading regime" also urging a "fair price" for sugar exports to Europe under the EPAs.

17. The ACP group also urged that the minimum price should not be less than the reference prices agreed to by the EU council in its regulations.

18. It also proposed to the EU that guaranteed prices for sugar up to September 30, 2009 be maintained until 2015 as part of the market access offer in the EPAs. This, the group explained, was because accompanying measures negotiated between the EU and the ACP countries would have been based on the 36 percent EU price cuts which took effect from 2006-2007 and would be phased in over a four-year period. The accompanying measures will run until 2015.

19. The ACP ministers said unstable prices would also undermine investment efforts for diversification and competitiveness being undertaken by their respective sugar industries under the accompanying measures scheme.

20. To express their concerns over the current development, a group of Caribbean leaders, including the President of Guyana, met in Jamaica in early October for a special meeting with Peter Mandelson and Louis Michel, EU commissioners for trade and development, and had a long discussion about legal steps to force Europe to abide by the original deal, at least until a new arrangement is in place. However, the meeting ended in deadlock since the EU was not willing to shift its position.

21. Caribbean governments are also outraged that the EU is pressing them to open their economies to reciprocal trade, a move that would significantly change the economic dynamics of most of the 15 Caricom trade bloc members. During the talks in Jamaica, the Caribbean leaders offered to liberalise 85 percent of the region's trade with Europe over 25 years, with much of that process being completed in just over a decade. The original regional offer was around 25 percent, a ceiling Europe rejected.

22. It is unclear when a next round of talks with the EU will begin, but regional ministers are due to meet in Haiti later this month to continue preparations for the EPA.

23. In the light of the current situation, international bodies dealing with trade and economic issues should raise their voices in support of the position of the affected countries. SELA, in which Guyana and other Caribbean countries play an integral role, must take cognizance of the situation and render its solidarity to them.

Thank you.

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