Mr J.N. Greenfield, Director, Commodities and Trade Division, FAO.

It is my task to draw a few conclusions from two days of intensive discussions on sugar in the world and of course with particular reference to the Asia/Pacific region.

I would like to divide this summary into three parts - first our discussions on overall sugar market developments, secondly the country studies and thirdly something on the global policy environment.

First on the world sugar market, it was agreed that the industry has been undergoing a period of considerable change, a lot of deregulation has been going on, partly linked to development in global policy changes as reflected in the Uruguay Round. An important change that we discussed is the improved world market stability. We had a useful debate on the causes of this enhanced stability but the rising share of developing countries in world imports were clearly an important factor.

We also saw the rise of the Asia and the Pacific region in the world sugar economy and we had a preliminary debate on its future. Growth would continue to be high even the growth rate would probably fall from the "tigerish" rate.

In this connection, we had a useful round of comments of FAO’s draft projections for some countries in the region. The FAO Secretariat is very grateful for the comments, which will be taken into account in their review.

We also noted that there have been some sharp changes in export performance with particularly fast growth by two of the relatively free market trading countries - Australia and Thailand. A related trend that was widely noted was the decline in marginal costs of production in real terms. Currently a floor level of costs for efficient producers could be estimated at about 10cts/lb.

Another important change regards nutritional views on the status of sugar. In the past there were widespread concerns at the healthiness of consuming sugar. In an important discussion of the latest scientific evidence on this topic the beneficial effects of sugar consumption were highlighted and the negative connotations were shown to be unfounded. It was demonstrated that moderate consumption of sugar in a well balanced diet was consistent with good health.

A common change in all the region was the marked growth of sugar consumed in the form of products (confectionery, bakery products, ice cream and particularly soft drinks which is also an area where other sweeteners were the most competitive in a number of countries).

The second part of our proceedings concerned a number of very interesting country studies. I am not going to summarise them but I will limit myself to some of the issues raised of a more general interest.

The first of the points that strikes me is the great role everywhere of the sharing formula. Each country studied had different formula and it seems that success here has been an important part of success in the growth of the sector.

The second point is that the industry has had to undergo continuous policy changes and policy reviews to reflect both domestic exigencies as well as to deal with shocks in the external market.

Every study laid great emphasis on the need to cut costs because of the recognition of increased competition on world markets and increasingly on domestic markets too. The impact of currency fluctuations on relative cost of products was stressed.

For most of the developing countries in the region, the link of sugar to food security was an issue. While sugar is a good source of food in its own right, it was often grown in competition for food grain (rice and maize). However sugar earnings wee usually vital for the food security of the farmers, particularly the small farmers.

There was a lot of interest in the use of bagasse as a source of energy as well as other uses. More or less all countries reported on developments in this area.

The third part of our proceedings concerned developments in the overall world trading system and its implications for world sugar policy. I refer to such developments as the Uruguay Round, discussions on the Lomé Convention and discussions on the continuation of the reform process scheduled to begin in 1999 in the World Trade Organisation.

The meeting agreed on the advantages of a fair and rules based trading system and that the trend was for further liberalisation.

There was an important discussion of the problems that were occurring for many developing countries during the reform process.

There was the risk of marginalisation and further reform would need to take into account the factors as the stages of development, the needs of small island states and land locked countries; the problems of single commodity dependent countries; lack of alternative crops to the cultivation of sugar; freight costs; technological gap that has opened up; and the need, therefore, for special and differential treatment for developing countries, including the need for a considerable period for adjustment.

In particular there were lengthy discussions of the special importance to many ACP countries of the ACP-EU Sugar Protocol, which guaranteed prices for a fixed volume for an indefinite period. Representatives of these countries were concerned to note the pressures that sought to question the validity of this arrangement. In their view, the absence of special arrangements such as the sugar protocol would have serious consequences for ACP sugar supplying states, on employment, social conditions, export earnings and income. In this connection, the preamble to the WTO agreement was recalled where the objectives of reform were stated to raise living standards, to ensure full employment and to achieve sustainable development in a way consistent with different levels of economic development.

Regarding the preparations for 1999, the need for developing countries to be equal and well informed partners was emphasised. Governments would need to review their experience with the implementation of the Uruguay Round Agreement; they should assess the impact of the implementation of the reform programme on the markets for their commodities.

They should prepare special analyses of the issues that are likely to be covered in future negotiations such as a reduction in protectionism that could put world prices under upward pressure, the administration of tariff quotas; the environment; the possible erosion of preferential margins; and their experience as food importers. In preparing for 1999 developing countries needed to strengthen their administrative arrangements, including co-ordination mechanisms and their presence at Geneva as well as seek allies among other groups of countries to strengthen their bargaining position.

To conclude, Mr Chairman, I should like to thank you and John May together with your staff, the Sugar Industry, as well as the Government of Fiji, for the excellent support you have given to the successful conclusion of the meeting.