Sugar and bananas

The EU has finally agreed on two measures which will help exporters from the developing world increase their exports to it.

The EU has agreed to cut the price of sugar offered to its farmers by 36 per cent. European sugar farmers used to obtain sugar support at three times the world price of sugar. The new measures come into force in July of next year and will be in force until 2015 to give farmers time to adjust and switch to other crops. Those farmers who want to abandon sugar farming will be offered compensation to the tune of 64.2 per cent of revenues lost.

Some of the former colonies of EU member states, which are considered as 'external territories', will also lose these subsidies. But many producers in the developing countries outside the EU will gain from these measures because they will net more income as a result of increased exports to the EU.

The EU pays around €1.5 billion in subsidies to its sugar farmers. It had to remove these subsidies after the World Trade Organisation declared them to be illegal. The money thus saved from the reduction of subsidies will certainly be diverted to more useful ends.

Meanwhile, as from January 1, 2006, the EU will apply a fixed tariff of €176 per tonne of bananas imported from Latin America but will give its traditional exporters in the African, Caribbean and Pacific regions (ACP) a duty-free import quota of 775,000 tonnes.

The measure will give Latin American exporters more access to the EU market while maintaining a preferential margin for the EU's traditional producers from the ACP.