What are the implications for ACP sugar producers of Tate & Lyle Sugars expectations on UK sugar sector policy post-Brexit?

Tate & Lyle Sugars continues to put pressure on the UK government to use Brexit to level the playing field between beet processors and cane sugar refiners,  by removing import duties on raw cane sugar. The adoption of such a UK sugar trade policy would carry serious consequences for ACP sugar exporters to the UK market, undermining their competitive position as suppliers to the UK market and driving many out of the UK market. Trilateral customs cooperation arrangements could however be put in place, on a transitional basis, to minimise disruption of current supply chains which serve EU27 markets through the UK, not only in the sugar sector but beyond.

In its written evidence to the House of Commons International Trade Committee inquiry on ‘UK trade options  beyond 2019’, Tate & Lyle Sugars (TLS) highlighted how ‘as a result of the UK’s membership of the EU … raw cane sugar …. can only be purchased in accordance with strict EU trade and agricultural policies’. It argued the EU’s ‘high cane sugar import tariffs, and its Common Agricultural Policy (CAP) discriminate against our business as a cane sugar refiner in order to protect EU beet sugar producers’. This is seen as limiting TLS options for the purchasing of raw cane sugar to around just 5% of the source of globally traded sugar, with this increasing TLS raw cane sugar procurement costs by an estimated €40 million per annum. (1)

According to TLS on some of the raw cane sugar it sources it is ‘required to pay a large import tariff currently equivalent to around 25% of the value of the sugar itself’. When TLS wants to ‘purchase sugar from the remaining 95% of global traded volumes we are forced to pay eye-watering import tariffs currently equivalent to around 84%’.  According to TLS this needs to be seen in a context where ‘around 60% to 80% of the cost of our final product is the cost of the raw material’, as a result  ‘our competitiveness as a business is seriously undermined’ by current EU sugar sector trade and agricultural policies.  In recent years this has seen TLS operating its Thames refinery at only 50% of capacity. (1)

TLS see’s the UKs’ decision to exit the EU as ‘a great opportunity…. to deliver a policy where beet and cane sugar are treated as equals’, a move which would halt the present downsizing and job losses at TLS and promote ‘growth and greater investment in innovative new manufacturing processes, products and exports’. However this is only possible if the UK leaves its existing customs union arrangement with the EU, a policy to which the British government is now committed. (1)

TLS believes reviewing current trade arrangements for raw cane sugar imports to create a policy which treats cane refiners and beet processors as equals, would be wholly consistent with past UK policy initiatives vis a vis EU sugar policy. In this regard TLS quotes a UK government statement on the 2013 CAP reform which declared ‘Regrettably, and despite the UK Government’s best efforts, neither the Council nor the European Parliament have included measures to address the perilous position of EU cane refineries once beet quotas are abolished.  We believe this is a serious omission. Having at least two sources of sugar in the EU is good for the EU’s competitiveness and for food security, and the continued operation of EU refineries is important for a number of developing countries‘. (1)

TLS highlights how adopting EU tariff schedules post Brexit, sets maximum tariffs which may be applied, but notes the UK would be free to apply lower tariffs if it chose. TLS believes the continued application of existing EU tariffs would be ‘unlikely’ in the case of sugar. It notes ‘it will be up to elected politicians in the UK to determine what level of tariff, if any, to apply to imports of raw cane sugar’. (1)

According to TLS if the UK leaves the customs union ‘all models of future trade between the EU and UK that break the link between the UK and the EU’s external trade policy would allow the UK government to solve our issue’. However TLS acknowledges under EU ‘restrictive rules of origin as regards sugar… our sugars would not be considered a British product and may not as a result be able to be traded’. TLS believes this issue will need to be handled sensitively within the UK’s negotiations with the EU. (1)

However TLS also points out ‘sales of sugar into the EU single market are no longer a key consideration for us’. Indeed, for TLS improving access to the companies raw materials (raw cane sugar) ‘far outweighs any loss of sales to the EU single market’. (1)

Meanwhile, analysis posted by ICTSD has highlighted how Brexit could have unforeseen consequences for third country agricultural exports, particularly in the sugar sector. Specifically it is noted ‘unless the UK and EU27 negotiate a FTA agreement that is almost a customs union – with similar tariffs on imports and very liberal rules of origin – third country products could be treated less favourably than they are now‘. For example, ‘UK-based food and drink manufacturers might be loath to incorporate cane sugar…into their processed products for fear of infringing rules of origin on export to EU27’.(2)

(1) House of Commons, ‘Written Evidence submitted by TATE & LYLE SUGARS Limited (UKT0015)’
(2) ICTSD, ‘Brexit and some possible unforeseen consequences for third country exports of farm products’, 9 March 2017
(3) New Britain palm Oil Limited

Comment and Analysis
It is implicit in the TLS submission that upon leaving the customs union the UK authorities should remove the current €339 per tonne duty on imported raw cane sugar, either unilaterally or as part of new trade agreements negotiated with major competitive raw cane sugar producing countries. Indeed, in its written submission TLS brought the attention of members of the International Trade Committee to the trade policies of those Commonwealth countries which have ‘no import tariffs on raw cane sugar’.  This is clearly the TLS preferred UK sugar sector trade policy post-Brexit.ACP Sugar Exports to the UK 2010-2015 (tonnes)

2010 2011 2012 2013 2014 2015
Guyana 86,011 109,436 133,942 113,712 127,464 167,539
Fiji 100,189 148,903 76,350 110,275 161,076 100,236
Belize 73,171 68,924 81,238 92,343 61,022 98,892
Mauritius 57,647 67,697 57,643 65,572 59,474 71,373
Jamaica 55,003 72,844 45,119 55,311 45,940
Mozambique 21,000 10,210 25,022 20,000
Malawi 4,216 8,623 8,990 19,518 17,501 12,239
Barbados 17,117 12,780 21,898 15,064 299 375
Swaziland 4,539 5,252 5,766 2,078 33,034 366
South Africa 4 4 7 1 3 4
Dominican Republic 0 0 0 32,010 29,380 0
Zambia 7,389 5,426 495 24,722 18,921 0
Sudan 20,329 0 0 0 0 0
Zimbabwe 9,000 55,000 0 0 0 0
Sub-total ACP 454,615 554,889 396,539 520,414 588,507 516,964
Extra-EU total UK sugar imports 1,005,961 908,929 675,312 787,301 729,634 625,906
ACP % total UK imports 45.2% 61.0% 58.7% 66.1% 80.7% 82.6%

Source:  EC, Market Access Data Base

This will potentially have serious consequences for ACP sugar exporters to the UK market,  since the abolition of import duties for raw cane sugar currently applied to non-preferred suppliers would profoundly undermine the competitive position of ACP raw cane sugar suppliers and would in many instances drive them out of the UK market.

The reality is that in the past six years ACP sugar suppliers have come to dominate imports of raw cane sugar into the UK, increasing their share of imports from 45.2% in 2010 to 82.6% in 2015.  While this increased share was largely attributable to the declining overall volume of UK raw sugar imports (resulting from reduced throughput at Tate & Lyle Sugar Thames refinery), in 2015 ACP sugar exports to the UK were 13.7% above the level in 2010 ( but 13.3% below the annual average of the preceding five years).

Exports to the UK  are equivalent to around 40% of ACP sugar exports to the EU, so changes on the UK market will have profound effects on current ACP sugar exports to the EU.  This will come on top of the market effects of EU sugar production quota abolition. EU sugar production quota abolition scheduled for October 2017, is projected to reduce overall EU28 sugar import demand and EU sugar market prices (see companion article ‘Sugar market uncertainties for ACP suppliers will be heightened by BREXIT’).

The effects of the adoption of the TLS preferred option for future UK sugar trade policy, would be even more pronounced for the three largest ACP sugar suppliers to the UK market.  In the case of Belize, sugar exports to the UK account for 34.3% of the current value of its total exports to the EU28 market.  The corresponding figures for Fiji and Guyana are respectively 39.5% and 24.7% of  their current total exports to EU28 markets.

However the concerns raised by Professor Swinbank in the ICTSD paper and references to restrictive rules of origin in the TLS written submission, do point the way to a possible means by which certain sugar export opportunities for ACP suppliers to the UK market could be preserved, even if TLS’s preferred policy of zero tariffs on raw cane sugar imports is adopted by the UK governments.   This would involve ACP governments lobbying the EU and UK authorities for special trilateral customs cooperation arrangements for sugar, which would allow raw cane sugar from countries which enjoy duty free-quota free access to the EU market, to be ‘bagged’ or ‘toll’ refined in the UK without losing its duty free-quota free access to the EU27 market.

Such trilateral arrangements, even if introduced on a purely transitional basis, would serve to minimise disruption of existing sugar supply chains. Such arrangements could prove particularly valuable for Fairtrade sugar producers many of which trade into EU28 market via the UK.

Such trilateral customs cooperation arrangements could also be relevant in other sectors of export interest to ACP countries, most notably Papua New Guinea’s exports of fully traceable sustainable palm oil, which is processed at a dedicated plant in the UK for distribution across the EU28 market. (3)


Key words:          Sugar, Tate & Lyle Sugars, Belize, Fiji, Guyana
Area for Posting: Sugar, Caribbean, Pacific, BREXIT, Corporates