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The Sugar Worker, April 2004. News from the Sugar Sector.

Posted to the IUF website 02-May-2004

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The Sugar Worker
Information and Analysis for Unions in the Sugar Sector
Volume VI, Number 4
April 2004


IUF: Preparatory Meetings for Global Sugar Conference Held

Close to 100 delegates from some 35 countries plan to attend the first IUF global sugar conference, sponsored by the NGG, the German food workers federation, from 19-21 May in Frankfurt.

In preparation for the conference, on 24-25 February, the Agro Industrial Workers Union of Ukraine held a meeting to discuss the national sugar situation and prepare a contribution for the conference. The meeting was attended by 30 delegates from sugar companies, 17 chairpersons of union committees from sugar producing regions, and representatives of the union's central committee. Also in attendance were two IUF officials from the Moscow Office, and a representative of the International Labour Organisation (ILO). The delegates analysed the situation of the industry, exchanged information on industrial relations in the factories, and outlined a trade union plan to protect workers' interests. The meeting had the support of the Social Justice Fund of the Canadian Auto Workers (CAW).

The state of Sao Paulo, Brazil, was the scenario of two preparatory meetings, one held by CONTAG, a national rural workers confederation, the other by FERAESP, the federation of rural workers of Sao Paulo state, recently affiliated to the IUF. Brazil is the world's largest producer of sugar and ethanol (fuel alcohol) from cane, and Sao Paulo accounts for about 60 percent of the ethanol and sugar produced in the country. The key questions put to the delegates for discussion was why Brazilian sugar appears so inexpensive in the international market. They explored some of the main factors behind this low costs, and what working conditions, including wages and terms and conditions of the workers, prevail in this huge sugar and alcohol complex that have so much influence on world markets.

Delegates from eleven rural workers federations from sugar producing states participated in the CONTAG meeting, as well as the directors of CONTAG international and salaried workers departments. The meeting also identified some tasks for CONTAG in relation to their own affiliates in the sugar sector. Delegates from about 20 unions from the state of Sao Paulo and a representative from CONTAC, another IUF affiliate, attended the FERAESP meeting. Both meetings had the presence of the IUF Latin American office, and the global sugar coordinator. The meetings were held in Sao Paulo and Araraquara from 12-16 April, and had the support of the Friedrich Ebert Stiftung (FES).

Also with the support of the FES (Jamaica office), seven women representatives of four Caribbean sugar unions met on 26 & 27 April in Kingston, Jamaica, to outline the English-speaking Caribbean Women contribution to the sugar conference. The delegates presented information on women in the sector, their numbers and areas of work, main concerns, and put together some recommendations for IUF global activities in relation to women in the industry. Among the issues identified were Health & Safety, Discrimination in the Work Place, Sexual Harassment, Employment for Women in a Restructured Industry, and Participation of Women in Trade unions. The delegates agreed that a key aspect in the IUF's work is information, networking, and training programs. The Caribbean region has the longest sugar program implemented by a regional office in coordination with the general secretariat and the global sugar coordinator.

European Union: WTO Panel Hearings on Sugar Regime

Some twenty-two countries have enlisted themselves as "third parties" in the dispute on the European sugar regime brought before the World Trade Organisation (WTO) by Australia, Brazil and Thailand. The WTO held a panel meeting on 30 March and 1 April, attended by close to 140 delegates, a record number for this kind of WTO proceedings, said press sources. Among the third parties, the African, Caribbean and Pacific (ACP) countries are especially concerned with the outcome of the dispute, because many of them heavily depend on the EU preferential sugar agreement to provide stability to their economies.

Australia, Brazil and Thailand, the complainants, said that the EU is subsidising exports of surplus sugar ("C" sugar), which are not included in the EU's commitments for export subsidies reductions agreed in the Uruguay Round of GATT, which preceded the WTO. (Only the export of subsidised "A" and "B" sugar counts towards the reduction commitments.) The subsidies, the complainants said, cover the difference between domestic and export prices with monies collected through a levy paid by producers and sugar processors. Additionally, because of the high intervention prices for sugar under quota (Quotas "A" and "B", related to domestic consumption), processors can sell "C" sugar at low international prices.

If the WTO were to agree with the complainants, then the EU would be in violation ofs commitments on export subsidy reductions agreed in the Uruguay Round of GATT. Brazil said specifically that the EU committed to subsidise 1 million tonnes of sugar per year, but in the 2001/02 marketing year it subsidised more than 4 million tonnes. Australia, Brazil and Thailand also pointed to the EU exports of 1.6 million tonnes of sugar, amount equivalent to preferential imports from the African, Caribbean and Pacific (ACP) countries and India.

In its written submission, the EU rejected the claim that the domestic support act as export subsidies of "C" sugar but conceded, according to news reports, that this sugar might benefit from domestic supports. The EU made clear, however, that support to "A" and "B" sugars is not conditional on "C" sugar being produced for exports. The EU also said that the complainants were aware that the EU commitments in the GATT's Uruguay Round reflected the EU's understanding that "C" sugar exports do not benefit from export subsidies, and that the complainants did not request at that moment that "C" sugar exports should be included in the export subsidies reductions by the EU.

While technical arguments are complex, if the WTO were to agree that "C" sugar exports have to be included in the reduction of export subsidies, a practical result would be that the EU would have to reduce the volume of subsidised exports in about 60 percent, instead of the 21 percent commitment under the GATT.

The EU also said that their subsidy reduction commitments did not include the ACP/India imports. Fourteen ACP countries (Barbados, Belize, Fiji, Guyana, Ivory Coast, Jamaica, Kenya, Madagascar, Malawi, Mauritius, St Kitts, Swaziland, Tanzania and Trinidad & Tobago) are third parties to the dispute, as the ACP/EU sugar protocol is key for the survival of their industries. They said that the sugar protocol is an integral part of the EU sugar regimen, and to challenge any of its elements would destabilize the entire system.

The WTO dispute process started in mid February, with a first meeting of the parties. After a written response from the EU and submissions from third parties (countries who request to be party to the dispute), there was the first panel meeting on 30 March -1 April. It is expected that a first panel report will be ready by 29 July, followed by a final report by the end of September. In case of appeal, the Appellate body would have until February 2005 to issue a final report.

Meanwhile, the proposed reforms to the EU sugar regime may be delayed, as in preliminary talks EU members held different views on the regime; for instance, the Nordic countries favoured a complete liberalisation while others, like Spain, prefer maintaining the status quo. Last year, the European Commission presented three possibilities for the sugar reform: full liberalisation, gradual reduction in support prices, and maintaining the status quo after the present regime expires in 2006. The most likely path to follow, said trade sources, is a 10-year phase-out of price supports and a gradual reduction of production quotas. European domestic prices would fall from around 700 euros to 450 euros per tonne (USD 835 to 540 per tonne).

Australia: Government Rescue Package for the Industry

After being left out of the Free Trade Agreement (FTA) with the United States, the sugar industry received a rescue package worth 444 million Australian dollars (USD 320 million), in a government decision with high political content. The package includes AUD 146 million support to the industry and AUD 21 million in income support to farmers. There is AUD 75 million for community and diversification projects, including alternative uses for cane, like ethanol production. Farmers leaving the industry will receive AUD 100,000 each from an AUD 96 million fund, while AUD 39 million would assist the remaining farmers to improve efficiency.

The rescue program includes support for business planning by growers, retraining for harvesters and mill workers made redundant, the possibility of farmers passing their properties to their children in the next three years, when they would not be penalised when applying for pension, and crisis counselling for farmers.

The package, the fourth since 1998 according to press reports, comes in an election year, and after government was heavily criticised by its failure to include sugar in the FTA negotiated with the US, a market where Australians have an 85,000-tonne yearly quota. Leaving sugar aside of the FTA angered cane growers, who dominate the government's electoral seats in the sugar belt of Queensland and New South Wales. Local press sources said that the eighth-year old conservative government is eight seats away from losing the elections, and the rescue package intends to win back the sugar votes. Cane growers and millers, however, have sought an AUD 600 million to restructure and downsize the industry. Spokespersons for cane growers said that as many as 2,000 growers, from a total of 6,000, may decide to leave the industry.

Sugar Trade: US-Dominican Republic FTA Reached

On 15 March, the US and the Dominican Republic reached a free trade agreement (FTA) with the DR obtaining an immediate increase of 10,000 tonnes in its sugar quota, and a 2 percent yearly increase for the next 15 years. The DR holds the single largest share of the US tariff-rate quota, with some 185,000 tonnes per year. The US-DR agreement would be included in the CAFTA (Central America) package, which the US reached with Guatemala, El Salvador, Nicaragua and Honduras. Costa Rica was also added to the CAFTA group. It is thought that including the DR would broaden the political support for CAFTA for its approval by Congress. Trade sources said that the CAFTA agreement would probably be tabled in November.

The US domestic sugar was against the FTA with the DR, as it is against the US including sugar any bilateral FTAs, because it considers that trade liberalisation should be dealt with at the multilateral talks of the World Trade Organisation (WTO). The industry said that, if the US negotiates bilateral FTAs, it should use the agreement reached with Australia, which did not include sugar, as a "template", instead of CAFTA. Although CAFTA grants rather small increases in access to the US market, the industry said that enough sugar is produced domestically, and the concessions are a bad precedent anyways. The US is to negotiate new FTAs with several countries, including Colombia and Thailand, which are major sugar producers and exporters.

Company News

Brazil: Joao Pessoa Group Acquires New Mill

The Joao Pessoa Group bought the Evereste Açúcar e Álcool mill located in Penápolis, near Aracatuba, in northwest Sao Paulo. The Group said that it acquired 50 percent of the mill, and would have complete control of management. The remaining 50 percent is held by cane growers from the region, which supply the mill. The mill had been out of operation for some years and was bought at an undisclosed nominal price. The Pessoa Group will invest some 70 million reais (USD 24.4 million) in the mill, which is expected to process some 700,000 tonnes of cane in the 2005/06 harvest, and increase capacity to 3 million tonnes in three more years. International sources reported that the mill was bought because is located next to 36,000 hectares that the Group already owns that, in part, also supply the Group's Benalcool mill.

The Evereste is the eleventh mill owned by the Pessoa Group, ranked as the country's second largest sugar and alcohol company, with annual revenues of about 600 million reais, some USD 209 million. The Pessoa Group is based in the state of Pernambuco in the Brazilian Northeast, and started operations in the Centre-South region in 1992.

India: Bajaj Hindusthan New Factory

In December 2004, the Bajaj Hindusthan of the Shishir Bajaj Group would begin operations in a new factory located in Meerut, Uttar Pradesh, with a processing capacity of 7,000 tonnes of cane per day, reported the Economic Times on 10 March. The Group would invest 1.4 billion Indian rupees (USD 31.7 million) in the factory, with about 35 percent financed with own resources. The investment would place the Bajaj Hindusthan as the country's leader sugar group with a processing capacity of 31,000 tdc. The second group would be KK Birla with 30,000 tdc, third, the Balrampur with 26,000 tdc. The Bajaj Hindusthan has also put a bid on 24 of the mills under a privatisation scheme by the Uttar Pradesh government, and is India's largest producer of ethanol.