Impact of the Sugar Regime Reform

Impact of the Sugar Regime ReformTHE crownwork REFORMS 2005-2007SOURAV ROYTHE SUGAR REGIME REFORM (2005-06)The European Union (EU) forms one of the largest profit producers in the world. This seat was formed through the application of protectionist policies ranging from production and harms to trades and spell outs that is relevant throughout the EU. The policy that is prevalent in Europe with regard to booty regulation is commonly known as the CMO (Common Market Organisation). Since its inception in 1968 the CMO had hardly chthonicgone any crystalize. Taking into account all the disentangles that the EUs Common Agricultural programme ( lie) had gone through the 1992 MacSharry Reform, Agenda 2000, and the 2003 thug mend- the shekels securities industry of Europe had escaped through all the make better consummations. But the 2003 reforms gave rise to certain factors which led to the need for reforming their lollipop market. low the Everything-But-arms (EBA) initiat ive that led the EU to withdraw tariff from 48 growth countries which means that there availability of more quantity of stops. Secondly, the refined sugar administration of EU does non comply with the EUs WTO export rules which in turn imply that EU cannot export out-of quota sugar. Thirdly, there was addition of 10 more countries in the EU which led to the increase in the imbalance of demand and sum up of sugar.The main purpose of the CMO is to ensure uninterrupted sugar production within the countries of the EU where sugar production is feasible. This is made practical through the National Production Quota given to the producers of sugar within the EU. at that place also exists an intervention price a minimum summation that is guaranteed to the producers of sugar so that they have the incentive for continuous sugar production. The EU at a lower place takes several mechanisms in order to protect the domestic sugar industry. Firstly, EU imposes high restrictive quotas on import of sugar substitutes. Secondly, high amount of subsidies be given to dispose off the excess amount of supply and maintain high domestic prices.The 2005 sugar reform under the tough of EU aims at (1) lowering the production of sugar at places where the damage of inputs are higher or where the rate of yield is low (2) to crop the export subsidies in line with rules l charge down by the WTO (3) to shrivel up the import of sugar from the EBA countries into the EU (4) to reduce the price gap surrounded by sugar and other substitutes of sugar. The main elements of the new sugar regime reform 2006 are as followsOver a four year period beginning in 2006/07 the intervention price for sugar is reduced from 631.9 Euros to 404.4 Euros per ton, that amounts to a cut of about 36%In order to compensate for the price cut, the farmers were entitled to receive a compensation amounting to 64.2% of the price cuts. Farmers in those countries magnanimous up at least 50% of the quota on suga r are provisioned to receive a coupled payment (coupled with production) of 30 percent of the income spill along with all possible national aids.Unlike the previous reform, in this reform the A and B quota are coupled together into a single quota amounting to 17.4 million tons of sugar.In order to encourage the remains of quota, a voluntary restructuring scheme is introduced for a maximum period of 4 years. The scheme involves buying out quota from th producers of sugar and encouraging manufactory closures.With regard to the management of the supply side, it consists of both the old and the new carcass mechanisms. An important feature is the replacement of the intervention outline with a commendation price. The supply management mostly depends on the private storage system when market prices fall below the reference price.The border protection measures did not undergo a change except for cutting down on the quotas and the tariffs in order to bring them at par with the WTO comm itments. Non preferential import duties including the special safeguards were not affected by the new regime.An examination of the market reveals just about effects of the current sugar regime reform. Although the existing reform has been replaced by a new reform, there unbosom exist some price support policies which have the potential to limit the extent to which the goals of the reform policy can be achieved. Moreover, high import barriers will play along to shield the domestic sugar industry. The inability of quota holders to trade quotas across particle states may restrict the degree of industry adjustment toward greater court efficiency.The application of the new sugar reform regime is going to deviate the sugar market for the EU. According to the estimates given by the EU commission, a cut in the export of sugar due to the due to the rules mess out by the WTO there is going to be a diminution in the production of sugar amounting to be around 2 million. risque cost reg ions like Ireland, Greece, Italty and Portugal would face a lot of trouble while the low cost regions would be in a advantageous position to increase production.With regard to trade, shipments of sugar were expected to increase to the EU from the EBA countries subsequently 2009 but there exists certain uncertainty regarding this. below the SWAPS provision, the EBA countries could import sugar at world price and then export locally produced sugar within the EU. Even with the lower intervention prices, very few tribe within the EU believe that EBA countries will be able to export raw sugar at a reasonably low price. Under the reform, only the ACP countries within the LDC group (i.e., Malawi, Zambia, and Zimbabwe) have the potential to offset losses in their current quota exports to the EU by increasing their export volumes under the EBA Initiative.THE 2007 REFORMIn order to have an environment-friendly development the various sections of CAP are monitored. On the November 2007 th e commission declared that there will be a Health Check up on the various reforms of CAP. It gives the solicitude that the CAP should undertake to continue the reform process that started in 2003 with the insertion of SPS (Special Payment Scheme). It mainly focuses on three measuresSimplifying the SPS scheme.Market measuresNew environmental challenges.Simplifying the bingle Payment SchemeAccording to the CAP Health Check, the Single Payment Scheme should be developed in the following slipwaystandardising the application of the system in order to limit cases where aid is still granted under a coupled support system go on adaptation of the principle of cross-compliance, which promotes sustainableagriculture whilst taking account of societys new requirementsReviewing the allocation of aid limiting the higher level of payments and increasing the minimum area doorstep required for small amounts.Market developmentsIn order to encourage effectivecompetitionon unsophisticated markets, the Commission intends to review some CAP management instruments which no eternal meet market requirements, in particular measures concerning cereals and dairy products.New environmental challengesThis illustrates the new challenges that the CAP could contribute towards meeting climate change, bio-energy and water management, as well as other challenges such as biodiversity.