2006年-世界发展银行全球_Sugar_in_the_Caribbean___Adjusting_to_Eroding_Preferences_34页_504kb

Summary of "Sugar in the Caribbean: Adjusting to Eroding Preferences" by Donald Mitchell

Core Content

This working paper analyzes the challenges faced by the Caribbean sugar industry due to the erosion of trade preferences that have historically supported its competitiveness in the European Union (EU) and United States (U.S.) markets. The paper highlights the economic and social implications of this shift, as well as the need for restructuring and diversification strategies to ensure the long-term viability of the industry.

Main Points

1. Dependence on Preferences

• Caribbean sugar producers rely heavily on preferential access to EU and U.S. markets, where sugar is sold at prices 2–3 times higher than the world market price.
• In 2000/01, 85% of export quantities and 94% of export revenues came from these preferences.
• Without these preferences, export revenues would decline by 60% assuming world prices remain constant.
• The EU and U.S. sugar programs are under pressure to reform, which will likely reduce the prices paid to Caribbean producers.

2. Economic Impact of Preference Erosion

• The EU intervention price in 2003 was over three times the world market price, while the U.S. producer price was over double.
• The European Commission proposed a 39% reduction in the EU intervention price over two years starting in 2006, which will significantly impact Caribbean exporters.
• St. Kitts & Nevis has announced plans to close its sugar industry, and Trinidad & Tobago began a major restructuring and privatization program in 2003.

3. Caribbean Sugar Industry Overview

• Sugar accounts for over 20% of merchandise exports in Belize, Guyana, and St. Kitts & Nevis.
• It occupies 31% of the cropland in the region, with 60% in Barbados, St. Kitts & Nevis, and Trinidad & Tobago.
• Sugar provides employment to the rural poor, and its decline threatens both economic and social stability.

4. Challenges Facing the Industry

• Rising production costs due to higher wages, inefficiencies, and public sector mismanagement.
• Untimely strikes and high absenteeism have further reduced productivity.
• Declining production and increased imports have led to domestic consumption being met by imports rather than local production.

5. Global Trends and Competitiveness

• World sugar production costs have declined by 40% since 1980, driven by low-cost producers such as Brazil, Thailand, and Australia.
• The Caribbean is composed of high-cost producers, making it difficult to compete in the global market.
• To remain competitive, Caribbean sugar producers must reduce costs, add value to their products, and restructure their operations.

6. Policy and Reform Recommendations

• Rationalization and privatization are necessary to improve efficiency and competitiveness.
• Professional management and cogeneration of energy could help reduce costs.
• Diversification into other crops (e.g., fruits, vegetables, meats) is crucial for meeting local demand, tourist industry needs, and export markets.
• International assistance will be essential for countries to manage the transition.

7. EU and U.S. Sugar Programs

• The EU Sugar Protocol (SP) and Special Preference Sugar (SPS) program provide preferential access to the EU market.
• The U.S. sugar import quota system, introduced in 1982, allows Caribbean countries to export sugar at higher prices.
• The U.S. over-quota tariff is expected to decline over time, reducing the competitiveness of Caribbean sugar in the U.S. market.

8. Currency Risk

• Caribbean countries face currency risk due to the EU paying in Euros and the U.S. paying in dollars.
• The depreciation of the Euro after its introduction in 1999 reduced export earnings, while its appreciation since 2001 has helped sugar exports.
• Some countries do not hedge against currency fluctuations, leading to significant price swings (up to 30% over two years).

Key Information

• Export Revenues: Caribbean sugar exports earned US$406 million during 1999–2001, with 60% attributed to EU and U.S. preferences.
• EU Sugar Program:
  • The ACP-EU Sugar Protocol has remained unchanged since 1975, with constant quotas.
  • The EU's Special Preference Sugar program is expected to be phased out.
• U.S. Sugar Program:
  • The tariff-rate quota has been reduced over time.
  • The over-quota tariff is prohibitive at world prices but is expected to decline.
• Caribbean Restructuring:
  • Trinidad & Tobago's restructuring program included severance payments, retraining, privatization, and closure of one factory.
  • The program cost TT$1.5 billion (US$240 million), but the annual losses were TT$0.5 billion (US$80 million).
• Future Outlook:
  • Doha Round and WTO reforms are likely to further erode preferences.
  • Caribbean countries must diversify and restructure to remain economically viable.

Conclusion

The Caribbean sugar industry is at a critical juncture due to the erosion of trade preferences. While these preferences have historically supported export revenues and employment, their decline will necessitate significant changes in production, management, and diversification strategies. Governments must take proactive steps to assist in the transition, and international support, particularly from the EU, will be vital for the region's adaptation.