ASHEVILLE, N.C. — After more than a decade of transition, the Europe Union’s sugar policy reform is complete, and it is transferring $2.5 billion a year in wealth from farmers and E.U. taxpayers to food processors with no discernible benefit to consumers, Patrick Chatenay, president of ProSunergy Ltd., Canterbury, U.K., said at the International Sweetener Symposium, sponsored by the American Sugar Alliance, on Aug. 7.
"Domestic and foreign subsidies destroy competitive industries,” he said, “Europe is still wrestling with the effects of both and these subsidies are distorting Europe’s market.”
Even after reform, European sugar farmers are still receiving nearly $700 million a year in subsidies to keep production up, and that is fueling some inefficiency, Mr. Chatenay said. He explained that most of these subsidies are going to producers in the least efficient areas, while the most efficient producers are receiving no sugar-specific help, and some are going out of business.
Meanwhile, European producers now are exposed to artificially low sugar prices found on the heavily subsidized world market. Subsidies in Brazil, India, Thailand and elsewhere have generated surplus sugar that has pushed prices well below average production costs.
That’s imperiling even Europe’s efficient sugar businesses and farms without lowering overall food costs in the region. Plummeting sugar prices are being absorbed by industrial buyers without being passed along to E.U. consumers, Mr. Chatenay said.
Europe was forced to overhaul its sugar policies after the World Trade Organization found its use of export subsidies and other programs to be in violation of international trade rules. And the rocky road that Europe experienced transitioning to a liberalized market is also an important consideration, Mr. Chatenay told the audience.
“Eighty-three sugar mills were closed, some 150,000 farms gave up growing sugar beets, and tens of thousands of sugar-related jobs were lost with the initial reform,” he said. “The latest reform will increase these losses because of the resulting low-price environment.”
Mr. Chatenay’s presentation mirrored a study published in June for the American Sugar Alliance about the effects of the E.U. policy changes.
U.S. sugar producers receive loans that are repaid with interest when their sugar is sold, rather than E.U.-style direct subsidy payments. Some critics of the U.S. no-cost sugar policy point to the E.U. as a model for change, but Mr. Chatenay warned that there are valuable lessons to be considered from Europe’s experience.