Speech delivered by The Hon. Roger Clarke, Minister of Agriculture And Fisheries
Signing of service agreement between Pan Caribbean Sugar and the Sugar Industry Authority
May 08, 2012
Ministry of Agriculture & Fisheries
The sugar industry in Jamaica has always been orientated to export sales. The wealth created by this industry in the pre-emancipation period funded the industrial revolution in Britain, and left us with the legacy of a plantation economy. This plantation economy was characterized by the dominance of one crop, whose production was principally orientated for exports and which dominated every aspect of a country’s life – that is, social, economic and political. In turn, we imported almost all of what we consume.
The Industrial Revolution rendered sugar production in Jamaica relatively less attractive and was responsible for diversification into cocoa, coffee, citrus, pimento and other crops. However, sugar remained king.
In the Post-Emancipation period, sugar was exported principally to Britain under the Commonwealth Sugar Arrangement, which provided Jamaica with a fixed quota and a guaranteed price. Smaller quantities were sold to Canada under so called “free quotas” and later to the USA similarly, under a quota system, particularly after the Cuban Revolution.
The Commonwealth Sugar Agreement was subsumed in the Lome Agreement, when Britain joined the European Economic Community, EEC, in 1973. The Lome Convention first signed in 1975; afforded ACP states export quotas into the EU markets with guaranteed price, of indefinite duration. These prices were highly preferential.
The sugar industry in Jamaica has always favoured fixed prices. The Lome Convention, and its successor the Cotonou agreement, were executed between Jamaica and the EU. In these circumstances, it suited all manufacturers of sugar to pool their sugar for export for two reasons.
Firstly, no one producer had the capacity to fill the quota. Indeed, some of the estates did not even have adequate storage.
Secondly, with a fixed guaranteed price, pooling of sugar for export was easy.
It is out of this experience that most of the institutions and the regulatory framework for the sector was born. Jamaica cane product sales, JCPS, owned jointly, by the cane farmers and manufacturers was responsible, based on an agency agreement with the SIA for managing the logistics and shipping arrangements for delivery of sugar to Britain.
The government’s exit from cane and sugar production should not be equated to abandonment by the government of the industry. On the contrary, we are strengthening the regulatory framework, and facilitating the growth of the industry, through the strengthening of research capacity and extension, through SIRI.
The regulatory regime was so constructed to ensure that from the revenues derived from exports, farmers and manufacturers got their proportionate share of the proceeds, as provided for by an industry accepted and legally underpinned cane payment system.
It is well known that the sugar landscape has changed tremendously since 2004, when Brazil, Thailand and Australia successfully mounted a challenge in the World Trade Organization, WTO, regarding the incompatibility of the EU sugar regime with principles of free trade. This triggered by the EU its sugar regime, manifested in a 36% reduction in the price paid for ACP exports, to be effected between 2006 and 2009. As if that was not enough, the EU in 2009 unilaterally renounced the sugar protocol under the Cotonou agreement, which effectively removed any guaranteed price.
The Cotonou agreement which was non-reciprocal has now given way to an economic partnership agreement, EPA, between Europe and Cariforum, of which Jamaica is a member. While this agreement continues to give us duty-free access to the EU, it does not provide a guarantee price. In fact, refiners based in Europe have been busy in the last few years competing for supplies from ACP states.
The loss of preferential markets with guaranteed prices as well as the privatization of the industry and the open competition among refiners and traders for our sugar has rendered the case for pooling less competitive. The new players therefore, in the industry, which have emerged since our privatization efforts in 2009 have indicated a desire to pursue their own marketing arrangements, as allowed for under the sugar industry control act.
What we are witnessing here today is the signing of an agency appointment between the SIA and Complant/Pan Caribbean Sugar Company Limited, which will give Pan Caribbean the right to market its own sugar, subject to the provisions of the Sugar Industry Control Act.
For the next three crop years, the rest of the industry will continue to pool their sugar in order to satisfy an agreement to supply Tate and Lyle of Britain a specified quantity of sugar, within the framework of JCPS.
I wish to assure the cane farmers that this dualism in the marketing of our sugar will in no way be to their disadvantage. The agency appointment makes adequate provision for the Sugar Industry Authority, as regulator, to independently verify the authenticity of whatever proceeds will be declared by Pan Caribbean. It is also the case that Pan Caribbean will be obliged to utilize the existing cane payment formula.
I am aware of the concerns of the cane farmers in relation to Pan Caribbean selling their sugar at the best possible price that is attainable, since payment for cane is linked to the price obtained by Pan Caribbean for its sugar. In this regard, Pan Caribbean by letter dated February 29, 2012, has outlined specific proposals to allow for transparent and direct consultation /collaboration with the cane farmers in relation to the marketing of its sugar.
It is therefore my expectation that in short order, the proposal that has been agreed to between Pan Caribbean and the Cane Farmers Association will be enshrined in a formal agreement between both parties.
Today as we sign this agreement, we are no longer under the sceptre of gloom that the 36% reduction by the EU portended. I am proud to have been the Minister of Agriculture in the then government that refused to roll over and die, but took the bold step to restructure our industry. We are experiencing prices for sugar today that more than doubled the guaranteed price in Europe we were trying to hang on to. The privatization which we initiated has brought new hope to the industry and only last week I was advised at the Cane Expansion fund seminar, that we have been able to facilitate an expansion of acreage in cane by 4,500 hectares. We have been able to do this through an injection of $1.1 billion into the cane expansion fund at 5%. Coupled with the expansion being undertaken by Pan Caribbean and the other estates, in the next crop year, we will begin to see an appreciable increase in cane supply to factories.
The high prices prevailing will only make the prospects sweeter. The government’s exit from cane and sugar production should not be equated to abandonment by the government of the industry. On the contrary, we are strengthening the regulatory framework, and facilitating the growth of the industry, through the strengthening of research capacity and extension, through SIRI. At the same time we are committed to once and for all address in a comprehensive and sustainable way the social conditions in sugar dependent areas.
Long live king sugar!