THE IMPORTANCE OF SPECIAL TRADING ARRANGEMENTS IN THE PROMOTION OF GROWTH AND STABILITY IN DEVELOPING COUNTRIES


Address of Dr the Hon. Arvid Boolell, ACP Ministerial Spokesman on Sugar and Minister of Agriculture, Fisheries and Cooperatives

Excellencies,

Ladies and Gentlemen,

It is indeed a great pleasure for me to have this opportunity to address this conference on an issue which is so vital not only for my country but also for a significant number of ACP countries signatory to the ACP Sugar Protocol.

Allow me, however, before proceeding further to express my sincere thanks to the Government and People of Fiji for their warm welcome and the excellent facilities put at our disposal to conduct deliberations. My thanks also go to the FAO who has agreed to co-sponsor this important reflection on the importance of sugar in the World economy.

Before I focus on the ACP-EU Sugar Protocol, I shall like to preface my presentation on the complexities of the emerging international environment that is shaping the new global trading system. We are by now all too familiar with the two concurrent processes that have taken place since the late eighties and which have provoked a complete paradigm-shift in our appreciation of the new international order.

The first one is, of course, a political phenomenon. I am referring here to the decline of Communism, the end of the East/West rivalry, the end of the Cold War and henceforth the declining importance of geostrategic considerations as the prime determinant of foreign policy. The histrionics of this process are of no concern to us here but for the corollary benefits we were made to believe would result therefrom. More particularly, this revolution was supposed to usher in an era of greater international security in terms of stalling the arms struggle and yielding a peace dividend whereby liberated resources would go towards development efforts. Likewise, the retreat of the ideological differences led to the convergence of political values in regard to respect for human rights, democracy, good governance and the rule of law. Almost all of us acquiesce to the virtues of such a vision and have repeated our attachment to such principles. But when we proclaim the need to sustain such a vision for the whole world but note simultaneously strong contradictory undercurrents in the world economy that work against such a vision, we have cause for concern on the coherence of such a discourse. We shall come later on to the importance of special trading arrangements and more particularly the Sugar Protocol in enhancing such principles and objectives.

The second process relates to globalisation and liberalisation which has been raised to the status of a new religion which holds the promise of salvation.

It is undeniable that liberalisation of trade and capital, technological innovations, the internationalisation of production along with the unprecedented revolution in information and communications technology have led to a more rapid integration of the economies of the developed world. Unfortunately, developing countries are faced with serious risks of marginalisation and social disruption. The WTO itself has acknowledged this dimension and the Singapore Ministerial Declaration has indeed adopted provisions to address this issue (and we are awaiting the implementation thereof). Likewise the conclusion of the Uruguay Round of Multilateral Trade Negotiations and the advent of the WTO on the world scene are engineering a new global economic system that is driven more by economic than political and socio-cultural considerations.

It would be pointless not to realise and take cognizance of such fundamental changes in the international economic system. It would also be pointless to deny the need for a rule-based trading order where unilateral and discriminatory actions could not hold sway. However, may I point out that rules are established by Governments and can, if they generate poverty and frustration, be modified by Governments. But this is only where agreement ends. When one tries to erect globalisation and liberalisation as universal absolutes independent of field realities at the level of countries and economies, we feel that such an approach is pregnant with intractable dangers that could compromise equity and fairness in the field of economic development.

Thus it is argued in some quarters that the forces of globalisation and liberalisation would create new opportunities which would benefit the entire human community in developed and developing countries alike. But the problems facing developing countries are so immense that, I am afraid, one can only view the so-called long-term universal gains as a "mirage".

The international community must therefore appreciate that a uniform approach cannot be in the interest of one and all. Timely words of caution were echoed in the recent declaration of the Director-General of UNCTAD in the recent plenary of the ECOSOC meeting in Geneva when he argued that the world economy was polarising rather than converging, that the resulting inequality could trigger a backlash, thus jeopardising the benefits of recent economic reforms and further marginalising the poor.

It is therefore, important to acknowledge, as I have emphasised time and again in my addresses to different audiences, that unbridled trade liberalization and the absolute reign of free market precepts are not a panacea to the problems of underdevelopment nor a solution to the disjunctures of the global trading system but would result in serious disruptions of the socio-economic fabric of our societies. Even more so, if one agrees that international security is contingent upon economic security, it is crucial to stall the disturbing trend towards the marginalisation of a large fraction of humanity.

It is crystal clear, therefore, that a novel approach is needed that takes account of the fact that there is no level playing field and that an indiscriminate application of global trading rules will be counter-productive. We, therefore, argue for a more realistic approach that will avoid the perversion for free trade absolutism. In this regard any examination of preferential trade accords should take into account the following elements:

  1. the fragility and vulnerability of small economies, particularly of small island states and landlocked countries;
  2. the development status of developing economies;
  3. the historical facts regarding the genesis of commodity and sometimes single-commodity dependent countries;
  4. the fact that numerous attempts to cultivate crops other than sugarcane on a commercial basis have failed and thus prevented effective agricultural diversification;
  5. the exiguities of local markets and the constraints of distance that increase freight costs; and
  6. the technological gap that has been sustained over time by an unfair international division of labour.

In such circumstances our request for special and differential treatment in the form of preferential trade accords vital for sustaining growth and stability in or countries is justified and warranted.

It is not my intention here to make a detailed plea for all special trading arrangements nor it is within my competence to attempt such a discourse. I shall therefore leave my call on that score to the general philosophical principles I have elaborated above. Instead, I shall now draw your attention to one such special arrangement which is of special importance to my county and to other ACP States, namely the ACP-EU Sugar Protocol which is of indefinite duration i.e. of a permanent nature.

Ladies and Gentlemen,

Let me now turn more specifically to the ACP-EU Sugar Protocol. The Sugar Protocol has been hailed as a unique instrument that combines developmental and commercial concerns between countries of the North, the EU on one side and the ACP countries signatory to the Protocol on the other. The Sugar Protocol was negotiated in distinct historical circumstances.

First, the accession of Great Britain to the European Economic Community included the need to devise a mechanism to take on board the interests of the developing countries of the Commonwealth sugar exporters. The Commonwealth states that were parties to the Commonwealth Sugar Agreement had guarantee of access to the UK market to supply the UK raw cane sugar refineries that on their part needed stable supplies. The Protocol also encompassed other ACP States which were not colonies of the UK and were supplying sugar to France.

Second, at the time of negotiating the Sugar Protocol, the prices of sugar had shot up to reach around 425 a tonne. When we were signing the Protocol, the world price had increased to some 625 a tonne. The Community and Commonwealth prices were much below that level and the prices negotiated on an annual basis were also below that level.

Indeed, the sugar market is of a highly speculative nature. It should be recalled that the world sugar market is a residual one. Only 20 percent of production is open to world market transactions and subject to very frequent fluctuations. Indeed numerous studies have demonstrated that sugar is by far the most volatile commodity.

Nonetheless, despite a favourable international conjecture the ACP states decided to take definite commitments to supply agreed quantities, more precisely 1.3 million tonnes. The Community convened to import from us those quantities at guaranteed prices but more importantly for an indefinite period. This guarantee of duration is vital to our countries which as I have explained earlier suffered from the hardship brought about by "free" trade. The ACP States agreed to forego lucrative export earnings because they thought of the long term perspective and the need for stability of earnings so important for the sustained and meaningful development of their economies.

It was in these circumstances that we signed in 1975 the Sugar Protocol which provided for a triple guarantee to ACP supplying states:

    • Guarantee of access
    • Guarantee of price
    • Guarantee of an indefinite duration

It is imperative to note that the implementation of the Protocol has worked to the advantage of both parties and that there is no internal criticism against the Protocol as a mutually beneficial instrument. The Signatory ACP States have honoured their obligations at all times and even when there were shortfalls in supply from one country, the Protocol allows for complementing these shortfalls from the other supplying states. The Protocol has, therefore, never proved to be dysfunctional and has stood the test time.

Ladies and Gentlemen,

As you are aware, over the last ten years the EU has adopted in respect of sugar a restrictive price policy. You will appreciate that in our case the real take-home prices are further eroded by international inflation. According to the OECD, the index of producer prices for manufactured goods has increased by some 28.9 percent over the 1986-1994 period.

It must be borne in mind that the ACP Sugar Supplying States are not producers of chemical inputs; of fertilizers and pesticides; nor of agricultural and factory equipment and implements. These have to be imported. In comparison, many other sugar producing countries even in the developing world are more or less self- sufficient in terms of such inputs and equipment. In addition, the size and scale of their industry enable them, whenever they effect a procurement exercise, to benefit from discounts associated with bulk purchases.

Compounded to the erosion of the real prices the ACP are burdened by every increasing ocean and inland freight costs which on an average represent 15 percent of the negotiated price.

When we are experiencing such problems, we are indeed concerned to note the pressures that seek to question the validity of such trading arrangements. No doubt this approach ignores historical circumstances that led to their genesis, the undeniable functionality of these arrangements and their vital importance for the sustainable development of their stakeholders. Allow me here to briefly comment on the difference between our case and that of some of the adepts of free trade dogmatism. Our countries are fragile economies relying heavily on sugar cane which in addition is best suited to our conditions. In others:

  1. vast expanses of land exist where they can develop their cane industry and optimise economies of scale;
  2. sugar is but one of the agricultural commodities produced and traded and is by no means the most important one; and
  3. mineral resources, gas/oil are to be found.

Our countries are not endowed with such natural advantages; instead they have their own specificities which must be taken into account when any comparison is made.

It is vital for me to indicate the importance of the Sugar Protocol in the development and survival of the ACP Sugar Supplying States. For it is precisely of survival that we are talking here when we realise the stock of human suffering, the regression in development efforts and the social and political chaos that the absence of special arrangements like the Sugar Protocol may entail.

In the case of ACP countries, the Sugar Protocol ha been distinctly instrumental to socio-economic development and has in no small measure not only contributed to social harmony but upheld the principles of democracy, good governance and the rule of law. The contribution of the sugar industry to the social dimension cannot be understated. In the first instance, it has through revenue derived by Government enabled the establishment of strengthening of the system of social benefits. It has also ensured that funds, though not to the required level, were available for the essential investments in education and health. In developing countries, social benefits are by no means a privilege but mainly a source of income to the vulnerable so as to enable them to break the shackles of dire private. Secondly, the sugar companies also participate in the social fields, through the provision of fringe benefits to the workers and the active amenities including housing estates and even in certain countries the establishment of educational institutions.

The vital role of the sugar industry in ACP Sugar Supplying States is evidence by its contribution to nation building and development. The following relevant data underpins the prime role of the industry in ACP economies:

  1. Employment: About 250 000 people are directly employed in ACP sugar industries. For example, 35 percent of the active population in Swaziland, 23 percent in Mauritius and over 12 percent in Fiji. The indirect employment which results from the industries backward and forward linkages and which are spread throughout these countries, is considerable;
  2. Export Earnings: Earnings from sugar account for a major proportion of total agricultural exports in many ACP countries (for example 95 percent in the case of Barbados; 79 percent for Fiji and 74 percent for Swaziland);
  3. Contribution to Gross Domestic Product: Sugar revenue is a vital contributor to ACP economies. In St Kitts it represents 60 percent, in Guyana 30 percent and in Swaziland 23 percent.
  4. Social Impact: The ACP industries play an important role in the provision of education and health services. In addition, housing and essential training in engineering and agricultural skills are also provided to the rural population employed by the industry. In most ACP countries the sugar industry had helped fix the rural population in a productive activity and prevented mass migration to the cities.

The above facts unambiguously show the link between the Protocol and development efforts as well as its importance in fostering the values of good international citizenship. While making our case, we, however, would like to dispel immediately any doubts that the ACP Sugar Supplying States want to bask in the comfortable complacency of immobilism and conservatism. We are the first to recognise that we would be doing a disservice to ourselves if that would be the case.

All of us have embarked on modernisation programmes which would enable:

  1. cost reduction;
  2. the installation of modern, more efficient and larger-sized equipment which are geared towards energy saving and energy generation;
  3. the enhancement of the environment friendliness of the cane plant and of the sugar industry;
  4. the improvement of health and safety conditions through the installation or use of "worker friendly" equipment.

You would note our concern regarding the social and environmental aspects. In our factory modernisation programme the emphasis is on the optimal use of bagasse of energy generation so as to avoid the use of fossil fields and more importantly to avoid the emission of greenhouse gases. In 2001, in Mauritius, use of bagasse will reduce coal imports by 250 000 tonnes and imply the avoidance of emission of some 675 000 tonnes of carbon dioxide. In this regard, I would like to refer you to the very first preambular paragraph of the Marrakech Agreement establishing the WTO:

"Recognizing that their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily going volume of real income and effective demand, and expanding the production of and trade in goods and services, while allowing for the optimal use of the world’s resources in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development,"

The aim of the WTO is to improve the well being of people and not to pursue economic objectives for their own sake. This concern for standard of living and the environment is at the centre of our development strategy for the sugar industry. The fulfilment of such a strategy rests on the guarantee of stable levels of export earnings which only our preferential trade accords in sugar provide.

The emphasis on stable and sustained export earnings is precisely related to the efforts we have already undertaken to modernise our industries, to improve efficiency and competitiveness on the one hand and to enable genuine diversification to the extent possible on the other. The maintenance of such special arrangements will provide the necessary resources to enhance our global competitiveness and ensure our smooth integration in the world economy. Our economies are in a transitional stage that will need a longer lead time to enable them to compete on the level playing field. Many of our economies are presently under the grips of painful structural adjustment programmes while yet others are in the process of undertaking radical political and constitutional reforms to restructure their political systems. It would not be in the interests of the international community to compromise such efforts and jeopardise the results obtained so far.

In conclusion, therefore, I should stress that the ACP-EU Sugar Protocol should be understood in the context of the historical and economic realities which justified its existence more than twenty years ago. From the sixteenth century to the nineteenth century, millions of slaves and indentured labourers were brought from Africa, India and China to turn rock into white gold sugar. In some countries cotton was grown, in ours sugar best adapted to our ecosystem was developed.

Let us not forget the misery we endured in the 19th century when trade was made "free." Small countries best by frequent cyclones and burdened by freight had to compete with giants with huge internal markets. Let alone education and social amenities, we were not even able to cope with regular epidemics which decimated our population by thousands. This is our experience of free trade, it meant for us the bondage of poverty and misery. Similarly, we bore the full brunt of the depression of the thirties. Light came at the end of the tunnel in 1951 when the Commonwealth Sugar Agreement was concluded. We should avoid the facile view that looks at this preferential trading arrangement form the narrow lenses of newly coined and superimposed concepts.

I thank you for your attention.