When former ‘King Sugar’ is waiting to be pronounced dead
The news out of Europe this past week has not been good for cane sugar, a manufactured product that has been at the heart of the continent’s relationship with the English-speaking Caribbean for over 300 years and, at one point, was the mainstay of most regional economies, including Barbados.
Bloomberg, the global financial and business news service, reported that the European Union (EU) is planning from this October to fully liberalize its market for domestic beet sugar, a move which is expected not only to reduce demand for cane sugar imports from former colonies like Barbados which make up the African, Caribbean and Pacific (ACP) group but also bring down prices close to what obtains on the world market where only the most efficient producers can survive.
Jamaica, Belize and Guyana, which still export significant quantities of raw cane sugar to the EU, will be the Caribbean Community (CARICOM) countries hardest hit. In Barbados’ case, even though exports today are negligible compared with 25 or so years ago, they still bring in valuable foreign exchange which helps to boost the island’s stock of international currency reserves.
Does this latest EU move finally signal the death knell for the region’s sugar industry which generated great wealth for Britain, in particular, during its heyday as a colonial power, and also helped to support the birth of the industrial revolution? David Jessop, a leading United Kingdom analyst who has monitored Caribbean-European relations for four decades, suggests it may very well be, unless sugar interests in the region can develop a coordinated and concerted plan of action.
Otherwise, he predicted in a recent newspaper column, “it is quite possible that in a few years’ time, there will be little left of an industry that, for evil and good, has played a central role in the making of the Caribbean”. The threat to Caribbean sugar producers specifically lies in the fact that the pending change to the EU’s sugar regime will place regional producers at a disadvantage because inherent inefficiencies cause them to operate at high costs and render them uncompetitive against much more efficient EU beet sugar producers.
The issue for the region is further compounded by uncertainty related to Britain’s pending withdrawal from the EU as a result of the Brexit vote, given the fact that regional sugar exports, which once fetched guaranteed preferential prices on the EU market, have mostly gone to Britain. According to Mr Jessop, not only will the new EU sugar regime apply to Britain until it formally separates from the continental bloc in 2019 at the earliest, but it also means that Britain is unlikely, for some time yet, to be able to reconcile politically, how it will address the sugar issue.
It is against this backdrop that a high level meeting is taking place in Jamaica this week that will discuss the latest developments and explore options available to the industry. Organized jointly by the Sugar Association of the Caribbean, the Caribbean Community (CARICOM) and other partners, the meeting will bring together government ministers, officials and a wide range of industry partners to discuss the future of the industry, which is still a major employer in Guyana.
Since the creation of the European Single Market in 1992, uncertainty has increasingly surrounded the future of Caribbean sugar exports. It was a major factor that prompted St Kitts, once a leading exporter, to exit the industry altogether, because the combination of rising production costs and declining EU market prices made remaining in production an unprofitable proposition.
Here in Barbados, despite similar uncertainty, there has been a reluctance to take a similar decision on the industry because of, perhaps, sentimental reasons, even though the industry has become deeply indebted and many plantations have gone out of production. A Government plan to restructure and transform the industry to shift the focus away from just producing sugar for export to Europe to include other cane-based products, is yet to get off the ground because of apparent financing challenges.
However, given the continuing uncertainty, a question which Barbados inevitably needs to ask and answer with clarity is whether it really makes economic sense ploughing scarce financial resources into an industry where the prospects are for diminishing returns given not only what is happening on the world market, where prices are already rock bottom, but also the growing campaign against the consumption of sugar, given its link to diabetes, obesity and other chronic non-communicable diseases.
We need to have this frank conversation to arrive at a decision. In so doing, however, we need to be guided, not so much by sentimentality, but by pragmatism.