Trade, Aid and Rural Development: EU Sugar Policy and the Experience of Swaziland
In 2006, the European Union (EU) reformed its sugar policy, reducing the reference price for sugar by 36%. This did not just affect European sugar beet producers, but also sugar cane producers in the eighteen African, Caribbean and Pacific (ACP) countries which had preferential access to the EU. As a significant sugar exporter and highly dependent on the industry economically, Swaziland was hit particularly hard by reform.
To cushion this impact and secure their acquiescence to reform, the EU agreed to an ‘Aid for Trade’ programme called the Accompanying Measures for Sugar Protocol countries (AMSP). This earmarked almost €1.3bn to assist the affected ACP countries by enhancing the competitiveness of their sugar industry, diversifying economic activity in the cane growing areas and addressing the social and environmental impacts of adaptation. Swaziland was initially allocated €134m of this total.
Key Purpose of ECDPM Study
This paper considers the impact of the EU reference price reduction and AMSP ‘Aid for Trade’ programme on the Swazi sugar industry. An evaluation of the Swazi sugar experience is relevant to two development policy debates concerning the ‘Aid for Trade’ initiatives and the Common Agricultural Policy (CAP).
Key Findings of ECDPM
The impact of the EU sugar policy reform has been felt most acutely by three Swazi groups: 1) small-scale cane growers who have seen the price of sugar lag behind rapidly inflating costs and been unable to pay off their debts, 2) workers who have seen jobs retrenched, outsourced and ‘casualised’ as the sugar mills reduce labour costs, and 3) local communities which relied on social amenities provided by the mills.
The major beneficiaries of the AMSP programme have been the subsistence farmers who have been given grants to enter into the cane growing business.
Notwithstanding ongoing challenges, the Swazi sugar industry has made significant efforts to ensure its long-run profitability. However, the Swazi industry does still rely on the remunerative export market offered by the EU.
To make sure that opportunities to enter the sugar industry are preserved, and that the outstanding issues facing the rural poor can be addressed, the EU should support traditional cane exporters like Swaziland. This means they should first and foremost prevent unnecessary liberalisation of the EU sugar market. When addressing preference erosion resulting from liberalisation in this and other sectors, the EU should consider new priorities for its Aid for Trade programmes.
Pressure should be brought to bear on the owners of the sugar mills to recognise their responsibility to stakeholders as well as shareholders.
Read Discussion Paper 133
