The abolition of the European sugar quota, combined with a reduction of import tariffs, will lead to a 10% increase in sugar production and a drop in the price of sugar and sugar beet. Farmers' incomes will fall by 5-7% on average, depending on the type and location of the farm. The added value and employment will increase slightly for arable farming complex as a whole, including the beet-processing industry.
These are the assessments made in the LEI, part of Wageningen UR, report
Sugar quotas: yes or no? Economic consequences for sector, chain, international market relations and developing countries. The proposal to abolish the sugar quotas is under discussion in Brussels and reductions in import tariffs are being discussed within the framework of the WTO.
Growing market for sugar
Increasing prosperity will result in an increase of around 20% in the consumption of sugar globally by 2020. The sugar prices on the global market will be unstable as a result of the fluctuating supply and the reduced stocks. The increased demand will result in increasing prices following an initial drop relative to the relatively high current world prices.
Difficulties ahead for poorer countries
If we only look at the gradual reduction of market protection for sugar beet cultivation – not taking into account changes in quota policy – we see that the Dutch sugar beet growers will lose income. However, the sugar cane growers in the poorest developing countries will find themselves pushed out of the market if they have to compete with more efficient sugar cane-producing countries on the European market.
The consequences for poorer countries can be quite considerable. So far, the least-developed countries and the African, Caribbean and Pacific group of states (the ACP countries) pay only very low import tariffs, if any at all, for sugar exports to the European Union. They will lose that advantage, and they will generally be unable to take on the competition, which includes countries like Brazil.