At the end of August 2012, Tate & Lyle Sugars launched a third legal claim for damages against the European Commission for alleged ‘mismanagement of the European Union’s sugar market’. Tate & Lyle Sugars (now owned by American Sugar Refiners) claim that the EC’s management of the current EU sugar regime is ‘putting the entire cane refining sector at risk’.
Tate & Lyle Sugars’ claim lays responsibility for under-utilisation (60–70%) of its refining capacity in the UK and Portugal at the door of ‘EU sugar policy mismanagement’. The company maintains that it warned the EC as early as 2006 about the potential shortages that would arise for raw cane sugar refiners, ‘but the Commission failed to respond accordingly’. It also claims that the EC has violated regulatory stipulations which require ‘any additional, out-of-quota sugar imports’ to be raw cane sugar, by also allowing imports of refined sugar. The most recent complaint concerns ‘the European Commission’s management of the European sugar market during spring and early summer 2012. Two earlier complaints contested the Commission’s decisions impacting the sugar sector in the 2010-11 marketing year and the period November 2011 to January 2012.’
Under its three complaints, Tate & Lyle Sugars are ‘claiming damages worth €198 million’. The EC has until the end of October 2012 to respond to the initial complaint. An EC spokesperson maintains that ‘the regulations contested by Tate and Lyle represent a balanced policy towards the sugar market.’ Tate & Lyle Sugars’ action comes against the background of calls from food product manufacturers for the EC to ‘either increase quotas and/or allow food manufacturers to import sugar tariff-free from the world market’.
During the UK House of Lords’ deliberations on the future of the EU sugar regime, Tate & Lyle Sugars laid out the background to their claims for damages (see Agritrade articles ‘ The future of EU sugar production quotas’, 23 September 2012 and ‘ Industrial users set out their views on sugar reform against backdrop of...’, 9 September 2012). The House of Lords in its final report observed that ‘the Commission has at least attempted to balance the interests of the beet production and cane refining industries’ and must continue to do so ‘in a timely and transparent manner’.
The policy changes introduced through the EU’s sugar reform process have had very different effects on the relative competitiveness of traditional raw cane sugar refiners and beet sugar refiners. This is in part linked to the agreed reform of import licensing arrangements, which broadened out the right to import raw sugar beyond traditional raw cane sugar refiners. With beet refiners investing in plant modifications – which, according to Tate & Lyle’s oral submission to the UK House of Lords Committee hearing, added ‘some 1.85 million tonnes of new refining capacity’, traditional cane sugar refiners faced intensified competition from these new co-refiners for supplies of imported raw sugar. With co-refiners in a financial position to offer better prices for raw cane sugar (since their capital costs are covered by their beet processing operations), it is argued that these reforms and the EC’s management of the EU sugar regime have contributed to the widely divergent financial performances of traditional cane sugar refiners and co-refining beef processing companies.
While the UK House of Lords Committee’s report argued that ‘the Commission has at least attempted to balance the interests of the beet production and cane refining industries,’ the serious financial problems faced by traditional raw cane sugar refiners are likely to increase pressure on the European Commission to review its management of the sugar regime and to level the playing field between traditional raw cane sugar refiners and beet co-refiners. During the House of Lords hearings, the president of Tate and Lyle Sugars argued that ‘if national [production] quotas remain, traditional cane refiners should also have a national quota’ (i.e. preferred priority access to imported raw sugar under duty-free, quota-free and reduced duty sugar trade arrangements), but that ‘if quotas are abolished, our access to raw material should be unrestricted.’
On the basis of price developments since November 2010 (see Agritrade article ‘ USDA highlights impact of sugar price volatility on ACP exporters and tr...’, 25 November 2012) it seems likely any broadening of duty-free or reduced-tariff access for non-ACP sugar in line with the calls made by Tate & Lyle Sugars could potentially have an impact on the commercial position of ACP sugar exporters in contract negotiations with EU importers.