EU sugar audit leaves sour taste

EU sugar reform hit Ireland hard and whether we can recover depends on how cheaply we can produce it, writes Europe Correspondent Ann Cahill

Ireland was the worst hit of all countries by the EU’s sugar reform with the closure of its single remaining sugar factory and as a result no buyer for the beet produced by 3,700 growers.

The report into the European Commission’s role in the reform by the European Court of Auditors paints a picture of poor research, very little controls on member state governments and a poorly thought out programme.

European sugar production is now concentrated in six major companies, Europe is no longer self-sufficient and has to import 15% of its needs, the price of sugar has massively dropped but the savings have not been passed on to the consumer.

Ireland is specifically mentioned by the auditors, who note that the figures the commission was working off came from 2001 and not 2005 — the Carlow plant was closed in March that year increasing the profitability of the single remaining factory in Mallow.

In its reform proposals first produced in July 2004, the commission divided the member states according to how competitive they were in producing sugar. Ireland, Greece, Italy and Portugal were in the lowest category, with the yield and cost of producing a ton of sugar in Ireland much more expensive than in most of the other 20 producing countries.

Ireland’s member on the Court of Auditors, Eoin O’Shea who is an accountant and a barrister, believes if the more up-to-date information later available in Greencore’s accounts was used, Ireland would not have been in this category and not under as much pressure to cut or give up it’s quota.

The closure of Carlow allowed greater economies of scale to be achieved increasing daily productivity by about 30%. Ireland’s quota was just 1.1% of the overall amount of sugar produced in the EU but it produced enough to meet the needs of the country and to export some.

Whatever the case, Fine Gael Mallow town councillor, Noel O’Connor expressed the feelings of those who once made a living from the sugar industry when he said he was “totally devastated” by the closure. “The repercussions of the closure of the factory have been enormous”, he said adding that even as the factory was closing the sugar price was rising.

Labour agriculture and food spokesperson Sean Sherlock, who is also from the area, says the decision was ultimately taken by the Council of Ministers including Mary Coughlan. “Questions must be asked about her role in this fiasco. Workers have paid for her incompetence with their jobs,” he said.

A report carried out by Alan Matthews and Hannah Chaplin of Trinity College Dublin in 2005, however, found that sugar production was not economical in Ireland and could only be carried out because of the rigid system of quotas and subsidies.

Professor Matthews pointed out that sugar processing was very profitable for companies with quotas and that Greencore made 20% of its profits from sugar even though it make up just 10% of its turnover. But consumers were paying around €15 a person to fund the sugar scheme, he found.

The auditors report published yesterday found that the commission did not check how governments managed their part. It comments that different countries applied different rules and notes that the €104 million paid out to Irish growers and machine operators to help them diversify did not require them to show how they spent the money. In Germany, France and Spain, for instance, the money went to regional authorities that used it for local development; Czech growers could spend it only on new agricultural machinery.

The commission responding to the auditors’ findings pointed out that the scheme was voluntary and that industry and growers did not need to swap their business for compensation from the EU.

However, in Ireland the entire sugar quota — the amount of beet that could be grown to qualify for the generous subsidies from the EU — was all owned by Greencore, a public company that was state owned until it was privatised in 1991. The state continued to own a single ‘golden’ share allowing the minister to prevent the company being sold.

The writing was on the wall for some time as the sugar regime was the only part of the generous farm subsidies that had not been reformed by 2004. Brazil and some other big sugar producers won their case against the EU’s sugar policy at the World Trade Organisation. The EU was under massive pressure to reform ahead of the Doha development round since they were exporting the subsidised sugar and affecting production from poorer countries.

Ireland and nine other countries, enough to form a blocking minority, resisted the proposals at first and then negotiated to increase the length of time over which quotas would be phased out and increase the compensation.

In the end the 12% quota held by the five countries said to be the least profitable was reduced to 5% of the total while the big producing countries including France, Germany and Britain increased their share from 68% to 78%.

But the object of the exercise – to make the sugar industry more competitive — has not been achieved the auditors found. It has not even saved money since the €1.2 billion a year compensation paid to poor African and Caribbean countries who were able to get a better price for their sugar in Europe is on-going.

The auditors recommend that in future the commission carry out social impact studies before paying out for social consequences. Greencore received €112 million for diversification. They sold their sugar brands including Suicre to a Germany company, are holding onto the Carlow and Mallow plants until the property market improves and has become Europe’s biggest sandwich producer.

Fianna Fáil deputy Ned O’Keeffe wants the country’s sugar industry restored. This time, he says, it should be owned by the farmers producing sugar beet. But whether they would get a quota and produce sugar at a cheap enough price to compete is another question.

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