Britain’s sugar industry owes its existence to a period of poor European relations. When the British Navy blockaded Napoleon’s ports, the French leader experimented by growing sugarbeets to feed his people. The industry was so successful that it later spread across the Channel.
Brexit negotiations will hopefully be carried out in a more friendly spirit, but they offer opportunities and raise risks with which policymakers are only just beginning to grapple. The British beet sugar industry is a prime example of the complex issues involved. When Britain leaves the EU, it will have the ability to set its own trade policies on a great many issues – sugar included. At a dinner at The Spectator’s offices, sponsored by British Sugar, a group of policymakers, MPs and journalists sat down to discuss the issues at stake.
Britain’s home-grown sugar industry is highly successful. Sugarbeet is grown in Britain and processed in four advanced manufacturing plants belonging to British Sugar, a subsidiary of Associated British Foods, supplies about 50 per cent of the UK’s demand for sugar. The industry supports 9,500 jobs in the UK economy and does not require subsidy: its plants are among the most efficient in the world. Besides sugar, the industry produces animal feed, electricity and bioethanol – a bio fuel added to petrol.
Current EU policy impacts on the sugar industry in several ways. While there are no subsidies specifically for sugarbeet production, farmers growing it do benefit from the EU Single Farm Payment which is paid to landowners based on their land area kept in agricultural condition. Currently, the EU still operates a highly regulated sugar regime, with a quota system which limits production country by country, and minimum beet prices. However, in October, the EU is removing these quotas and minimum prices (a move which has nothing to do with Brexit). Also, sugar imports into the EU are subject to tariffs. Brazilian producers, for example, pay 98 euros per tonne they import to the EU. If they exceed a set quota, this rises to the WTO level of 339 euros per tonne. Britain’s sugar importers argue that this is an unfair protectionist barrier that means consumers pay more. The exception to the tariffs, under EU rules, is sugar from the Least Developed Countries (LDC), which are allowed to export sugar to the EU tariff-free. In some of these countries sugar cane farmers are dependent on the UK for up to 90 per cent of their sales.
So what to do after Brexit? Britain will be able to choose either to liberalise its food markets or to maintain some form of protection. We could abolish agricultural subsidies and open our markets to some countries in return for access to theirs. Paul Kenward, Managing Director of British Sugar, is confident that his business can compete – on equal terms – with anyone in the world. What he fears, though, is what he calls ‘dumping’. Brazil, for example, developed a huge sugarcane industry so that it could reduce its dependence on foreign oil producers – much of the sugar it produces is turned into bioethanol to power road vehicles. When oil prices fall it can mean large quantities of surplus sugar, and the trouble is that a Britain without any import tariffs on sugar would be left vulnerable to this, almost alone in the world.
Source: www.spectator.co.uk