The answer to this question can remove or drop the guillotine on ACP sugar producers.

A lobbying mission representing the Enlarged Bureau of the ACP Sugar Group is in Brazil trying to convince the Lula Government to do just that.

The Brazil and Australia challenge calls into question the propriety of EU exports in the context of the World Trade Organisation (WTO) agreement and the level at which the domestic price is set for European beet farmers, and though the challenge is directly aimed at the EU, indirectly, it affects ACP producers.

Commonwealth countries were exporting sugar to the United Kingdom decades before the entry into force of the European Commission, and by mutual consent, this long standing arrangement was transferred to the ACP/EU Sugar Protocol.

Under the ACP/EU Sugar Protocol, ACP sugar suppliers enjoy preferential terms for their exports to the EU. These prices are related to the price paid to Europe’s beet sugar producers and a reduction of the domestic price paid in Europe would ultimately reduce the price paid to ACP sugar suppliers.

The ACP/ EU Sugar Protocol (SP) was formed and took effect in February 1975. It is a government-to-government agreement between the EU and ACP States and covers individual quantities of cane sugar for each ACP country party to the agreement.

The fundamental principles of the SP are agreed quantities, guaranteed prices and indefinite duration.

Article 1 of the ACP/EU Sugar Protocol states that “ the European Community undertakes for an indefinite period to purchase and import, at guaranteed prices, specific quantities of cane sugar, raw or white, which originate in the ACP States and which these States undertake to deliver to it.”

Guaranteed prices for the ACP sugar apply bulk sugar cost, insurance and freight paid (CIF) to European ports delivered under the SP. Prices are negotiated annually and are based within the range obtained in the Community.

Article 3(2) of the Sugar Protocol provides that quantities may not be reduced without the consent of the individual States concerned.

It would be up to the ACP States to hold the EU to the guarantees of the ACP/EU Sugar Protocol. However, the challenge posed by the two-non-ACP States Brazil and Australia, is based on the EU's obligations to the WTO.

The challenge has passed through the first stage of the process, that of consultations between the complainants and the EU, but, there has been no word by either complainant on whether or not they are satisfied with the explanations given by the EU during that process.

As the position now stands, Brazil and Australia can decide, either to drop the challenge or to take it to the next stage which would be before a dispute panel.

A successful challenge could mean that the EU would have to make adjustments to meet the legal judgment and this is where ACP sugar supplies can be negatively impacted.

If EU export commitments are challenged, the level of production in Europe could probably be cut back and domestic production would also likely be reduced. This would ultimately call into question the need to import over one million tonnes of sugar.

One can clearly see how this would affect ACP States. While ACP sugar exports to the EU can be considered quite negligible, (1.6 million metric tonnes), the loss of this market could create economic imbalances for the producing countries.

Take Guyana, for example. Eighty per cent of total sugar exports is to the European Union. This single commodity contributes 20 per cent of Guyana’s total Gross Domestic Product (GDP) and over 50 per cent of the agricultural products.

The industry employs directly and indirectly about 26,000 people who provide for about 150,000 household members. Include the population of 750,000 and consider the loss of livelihood for those employed by the industry and the effects on dependants.

Consider also that sugar is Guyana’s single largest earner of foreign exchange. In 2001, sugar earned US$121 million, from the nations' estimated total merchandise exports of US$489 million.

Of this US$121million earned by sugar, just under US$100 million came from export to the EU. And this is largely due in part to the preferential price offered to ACP States.

While these figures may appear small in comparison to the budgetary estimates of Brazil and Australia, in Guyana, they represent the volume/quality of infrastructure, social and technical services provided for the population.

Brazil and Australia have been at pains to point out that their challenge is not directed to ACP States and that they are in fact supportive of the preferential prices guaranteed under the Sugar Protocol.

These countries contend that it would be up to Europe to guarantee the preservation of the benefits for ACP States.

However, these assurances do not guarantee the future of ACP sugar producers. Latin American banana producers and the giant banana corporations of America gave similar assurances that their challenge was not intended to harm the ‘Banana Republics’ of the Caribbean, but one only has to look at Dominica to see how far those assurances went towards staving off economic disaster.