Associated Press

Brussels, June 22:

The European Union’s head office was set on Wednesday to announce sweeping changes to its 40-year-old system for protecting sugar growers despite criticism from domestic producers and exporters from some of the world’s poorest nations.

The European Commission is expected to propose cutting guaranteed prices to European producers by 39 per cent following a successful challenge to the subsidy system at the World Trade Organization by Australia, Brazil and Thailand.

However such cuts would face fierce resistance from European producers and poor nations in Africa and the Caribbean who have had preferential access to EU markets. “Europe’s sugar market needs urgent reform,” EU agriculture commissioner Mariann Fischer Boel wrote in an article published on Wednesday in The Financial Times.

She acknowledged the cuts “are likely to incite noisy protests,” but insisted they were “crucial to guarantee the survival of European Union sugar production.” The WTO ruled in April that the EU’s system of subsidies to guarantee high prices for European sugar producers was illegal.

It agreed with Brazil, the world’s biggest producer, which argued that the EU system depressed world prices and made it impossible for others to compete.

EU sugar prices are more than four times higher than the global market rate and are protected by massive import tariffs. Brussels also pays out export subsidies to get millions of tons of sugar a year off its market, helping to keep EU prices high and support Europe’s farmers.

Thee EU system also grants preferential treatment to sugar producers to poor nations in Africa and the Caribbean who fear their industries could be devastated by changes that would slash guaranteed prices and open them up to competition.

“This proposal in its current form will badly hurt some of the poorest countries in the world,” said Luis Morago, spokesman for the aid group Oxfam. “This proposal will only profit the biggest farmers and the large processing companies.” Poor nations are urging the EU to phase in prices cuts over 10 years to allow their producers to adapt to the market changes. Oxfam said the Commission’s likely offer of euro40 million ($48 million) compensation to the poor nations next year was inadequate and called for at least euro500 million ($600 million) a year.

Fischer Boel said in the article that the EU would remove all tariffs on sugar imports from the world’s poorest nations, but she said she could no longer offer them guaranteed high prices because that would “draw in more imports than we could absorb and our market would be in danger of imploding.”

The commission hopes the changes will be approved by the 25 EU member nations before a WTO meeting in December. However it faces opposition from Ireland, Italy, Portugal and other countries where producers have warned the reforms threaten to wipe out local sugar industries.