After having been quiet for a time, it seems the issue regarding the future of EU sugarbeet quotas is rearing its head again. As usual, there are two very clear camps both for and against ending the quotas, none of which seem likely to accomplish market balance.
Perhaps part of the reason that market balance will be difficult to achieve is because no matter what side of the quota debate a group or a member state seems to be on, the ultimate goal is very extreme, very black and white with little room to allow market nuances. And a market is nothing if not full of nuance. It’s that flexibility that seems to be missing.
Those who want to keep sugarbeet quotas include, not surprisingly, most farmer groups. We say “most” because Ireland has been clear that if the EU will continue to refuse to grant it quota in order to restart its beet industry, then it wants nothing to do with the quota policy. If an extended quota policy will grant some quota to Ireland, then fine, the Irish are OK with that too.
UK farmers also seem to be OK with the idea of getting rid of quotas. They’ve had some very good harvests, except for the notable exception of 2010/11 due to some weather anomalies, and are feeling that they’re at the top of the European beet game. With such good beet results, they’re sure that they could expand production significantly but feel hampered by the quotas rather than see them as a safety net. So for the UK, let the quotas die away.
For the rest of the farmers, it seems clear that they’re very happy with their safety net. The Common Agricultural Policy, after all, is meant to be just that. A safety net. Not a handholding subsidy program that pays farmers to grow food so that Europeans can eat cheaply, and then export the surplus onto the world market. It’s supposed to be there to make sure that farmers keep farming so Europeans keep eating locally produced food.
In the words of Scarlett O’Hara, “As God as my witness, I will never be hungry again.” That’s the point of the CAP, at least.
So within that safety mechanism lie beet quotas, the last of the quotas within the CAP. So in that sense, it may seem that perhaps quotas are an old school kind of agricultural policy since all the rest have gone away or are in the process of being phased out. But as everyone from sugar users to WTO negotiators will tell you, sugar is different and should be treated as such.
Coming back to the farmers groups, it’s also the factories that want to keep quota in tact. Quotas make sense for factories because they know how much they can produce and how much they need from farmers. They know how big their factory needs to be, how much it can or should expand, or how it should stay the same. It makes business decisions a lot easier.
Taking away beet quotas would make life much more messy, more life-like. Decisions about whether to reduce capacity, mothball factories or invest in new facilities would suddenly become reality rather than just daydreams (or nightmares, depending on the quality of management). To make those decisions would require sophisticated understanding of the European market, the global market, and the capacity of local farmers (which requires talking to farmers, gasp! And treating them like suppliers rather than dumb hicks, gasp!)
No. Nice, safe quotas sound like the better way to go altogether.
Then there are those on the other side of the camp, other than British and Irish farmers, who would like quotas to go away immediately. Those of course are the sugar users. They’re absolutely convinced that doing away with quotas would automatically translate into local sugar production meeting their exact demands for supply availability and price whenever they need it. And if they couldn’t get what they wanted, they could just import from the world market at will.
They could, in every sense of the word, have their cake and eat it too.
What they fail to understand is that without sugarbeet quotas, EU production becomes just like everybody else’s. Unpredictable. The US would remain the only sugar market regulated by sugar production quotas, and therefore the only market that would clearly know what it will produce—if the weather cooperates. Everyone else? Well, they just kind of wing it. Unless moves to eliminate the sugar program in the US get passed, in which case it’s a complete free for all.
Yes, the Brazilians are the sugar supply saviours of the world but only when it suits them or they’re able to. If ethanol prices are more interesting than sugar, voila, there’s more ethanol than sugar. If there’s big demand for Brazilian sugar, the ports get all tangled up for weeks and months while those who need the sugar just have to sit and wait. And then there’s that problem with the industry itself that it’s just not producing as much as it used to and is in desperate need to set itself to rights so it can grow again and fill would-be market demand in, say, a Europe without quotas. And in a US without its sugar program.
India is hardly the place for Europe to be looking for sugar, other than the 10,000 tonnes they promise to buy every year. It might give the bored European refiners something to do, melting down and re-refining Indian sugar but that is only a few years in every 10. Thailand’s looking good, but diverting that sugar from the Asian market will be much more expensive than what the European sugar users are willing to pay.
Then there are the ACP countries who have been shunned and beaten by the European sugar regime and various attempts at reform. Do the sugar users think that these industries that have been weakened, rather than strengthened, by reform will all of a sudden be ready to step in when a quota-less European market needs them at last? If the users want that to happen, then they’d better head south quickly and get into investing in their preferred suppliers or there might not be anything extra on hand when they most need it.
All in all, both sides of the quota debate are setting themselves up to fail. The only way is to compromise, not politically because that will turn into a mishmash that fails even worse at balancing the market than the last attempt at reform. The compromise needs to come in the form of balancing local production with imports. If that’s not with quotas, then someone clever needs to actually sit down and figure out something else, and quickly.