However, Caribbean nations said on Thursday the EU decision would cost them millions of dollars in lost revenue.
The European Union’s Executive Commission proposed deep cuts in sugar subsidies and production quotas over two years, starting from 2006, prompting Europe’s sugar firms to warn of declining profits as rivals grab a larger share of world markets.
The reform would overhaul a sugar policy that has inflated EU prices to three times the global average and follows last year’s successful challenge in the World Trade Organization by the top three exporting nations.
Top exporter reaction
“It’s obviously positive. It’s the first time Europeans have been prepared to significantly start to restructure their sugar industry for 40 years,” Ian White, chief executive of Australian export monopoly Queensland Sugar Ltd told journalists.
Under the plan, which EU ministers want to conclude by November, EU white sugar price supports will be slashed by 39% and minimum sugar beet prices by 42%.
“It’s a step in the right direction,” said Angelo Bressan Filho, director of the sugar and agro-energy department at Brazil’s agriculture ministry.
Brazil, the world’s biggest sugar producer with 40% of the free world market, is eventually expected to fill much of the vacuum left by the EU in international trade.
Thailand, the world’s second-ranked exporter, said producers outside the European Union would stand to gain from the overhaul.
“The reform means the EU will export less sugar to the world market. The price should rise as a result,” said Sukhum Vicheanratanapong, deputy general manager of state-owned Thai Cane and Sugar Corp.
But sugar producers in the Caribbean condemned the proposal, saying the planned cuts could see thousands of jobs disappear.
“This is indeed a devastating proposal that must be fought tooth and nail”
The 18 sugar-producing states in the African, Caribbean and Pacific (ACP) group have long enjoyed duty-free deals allowing them to send 1.3 million tonnes of raw sugar at fixed prices to the EU every year. These prices may fall by up to 40%.
“This is indeed a devastating proposal that must be fought tooth and nail,” said Ian McDonald, chief executive of the Sugar Association of the Caribbean.
McDonald calculated the proposed EU cuts would cost ACP sugar-exporting nations more than $400 million annually, with the cost to Caribbean producers alone being more than $100 million a year.
The EU has said it will compensate ex-colonies, mostly former territories of Britain, France and Portugal, for revenue losses caused by the sugar reforms, and provide more aid up to 2013.
The effects of any reform would take several years to be felt, industry officials in Brazil and Australia said.
“It’s a good start to sugar reform but implementation could take up to 2015,” said Fernando Moreira Ribeiro, secretary general of the powerful Sao Paulo Cane Agroindustry Union.
He said European consumers were paying $700-$800 a tonne compared with world free market prices of $150-$160. Even after the cuts, EU sugar would still be much more expensive, he added.
“In the short to medium term there’s no gain for Brazil and other free market producers,” he said. “I don’t see light yet at the end of a long tunnel.”
With European subsidies at about $0.30 a pound, a 39% cut would still leave prices well above current world prices of about 9 cents a pound, Queensland Sugar’s White said.