Sugar price fall to cost Fiji: Grynberg
Tuesday August 28, 2007

The decline of sugar prices from 2009 to world market levels will have very serious microeconomic consequences for Fiji, and the Reserve Bank of Fiji and other policy makers will have to consider how the nation adjusts to that decline, says Dr Roman Grynberg, director economic governance, Pacific Islands Forum Secretariat.

Speaking at a presentation on "The Future of the Economic Partnership Agreements (EPA) with the EU: Will they be genuinely developmentally positive?" last week, Dr Grynberg said that sugar in a sense is part of the EPA but not part of it.

And he says that failure to conclude the EPA by December 31 (only four months away), will not impact on Fiji's sugar industry immediately. The EPA is aimed at redefining the trade regime between the European Union (EU) and the Asian Caribbean and Pacific (ACP) countries.

"We know that the EU has effectively, unilaterally abrogated the sugar protocol and by 2009, the sugar prices will fall dramatically," Dr Grynberg said.

"Following that time, we don't know what the sugar prices will be but it won't be far above the world market price. By 2009, the huge preferences that were the basis for Fiji's prosperity in the post colonial era will be gone," he says.

He notes that almost a 36 per cent decline in prices will occur and "it will hurt, it will have serious consequences for Fiji"

But the question, he says is what happens (immediately) after 2009.

"We don't know exactly what will happen to the sugar price, because the EU has not said what will happen. And it is our understanding, that there will not be prices offered to the ACP sugar farmers that are substantially above world market prices, following that date."

Dr Grynberg says that for 30 years Fiji sugar farmers have exported sugar to the EU at prices between two and three times the world price.

"This is the late (and former prime minister) Ratu Sir Kamisese Mara's gift to Fiji.

"He did a brilliant job of negotiating the first LOME convention which brought Fiji that access. It provided relative economic stability for the country as a result has provided relative prosperity.

"Even though you can say many bad things about the sugar protocol, it is the one form of aid that I have never seen in my whole life where people like me don't stand between them.

"It is money that goes from the EU straight into the pockets of the cane farmer. There are no intermediaries and as a result, the benefit of the aid goes to those who are supposed to benefit from it."

But, says Dr Grynberg, will there be many benefits after 2009 remains a very open question. But it certainly will not be anywhere near as beneficial as it is now, he notes.

"It is my understanding that there is a preference from their side (EU) to put whatever sugar preferences there are into an EPA arrangement, post 2009.

"But certainly by 2015, it is our understanding that there would be no preferences whatsoever."

"Whether it happens in 2009 or by 2015, those prices will decline to world market levels which will have very serious microeconomic consequences on Fiji's sugar industry."

Dr Grynberg says that hopefully the ACP countries will come to a compromise by December 31 regarding the EPA, "on our different views on what constitutes developmentally positive".

But it is certainly by no means the end of market access for Fiji sugar, he pointed out.

"Fiji sugar will continue to have access even if there is no EPA up until 2009 because sugar protocol continues to exist until then.

"So for the next two years, whether there is an EPA or not, it is my understanding that failure to conclude an EPA on December 31 will not impact the sugar industry immediately."