Raw cane sugar autonomous tariff rate quota open consultation: what could this mean for the industry?
On Monday, the government opened a public consultation on its raw cane sugar autonomous tariff rate quota (ATQ), which was proposed as part of the post-Brexit UK Global Tariff. In this blog, we look at why the government has extended the policy to public consultation and explore how it could impact the UK’s sugar industry.
What is the raw cane sugar ATQ?
ATQs are quotas that permit imports of a certain good up to a given quantity to enter into the nation at a lower or zero tariff for a specified period of time. They are typically introduced to generate competition and economic growth as part of free market economic thinking. In this instance, the ATQ specifically concerns the importation of raw cane sugar into the UK.
The government proposed its plans for the new ATQ earlier this year, which would allow up to 260,000 tonnes of raw cane sugar to be imported into the UK tariff free from 1 January 2021. However, there is an important precondition for the raw cane sugar ATQ: organisations are only granted use of the ATQ if they are determined to be a ‘refiner’.
There is currently a grey area concerning what constitutes a refiner, though. To qualify under EU law, the organisation must refine white sugar. So, albeit counterintuitive, brown sugar refiners would not be allowed to use the raw cane sugar ATQ. But as the UK has now left the EU, the interpretation of a ‘refiner’ could change, and both white and brown sugar refiners may be granted use of the raw cane sugar ATQ.
The raw cane sugar ATQ will allow refiners to import up to 260,000 tonnes of raw cane sugar into the UK tariff free from 1 January 2021.
Why has it been introduced as a ‘public consultation’?
Before leaving the EU on 31 January 2020, it had been almost half a century since the UK last had independent control of its tariff policy. With this being such a long time, consultations are being used to give the public the opportunity to share their opinions on the proposed policy. The results of this consultation should therefore inform the government on a democratic route forward.
Of course, the key stakeholder groups that will likely make their voices heard in the consultation are sugar beet growers, refiners, and manufacturers. Of these groups, the community of growers are those most likely to form the strongest opposition because they will find themselves competing with tariff free imported raw cane sugar which will undercut the price of their homegrown beet sugar. After the mounting difficulty that growers have faced since the loss of neonicotinoids in 2018, coupled with a year of challenging weather, they may feel particularly disillusioned.
NFU Sugar has regularly voiced such concerns regarding the advantage cane producing nations have over British beet growers, previously saying “growers in the UK cannot compete on the same terms as sugar growers elsewhere who have access to state support or technologies that are illegal in the UK.” In August, this concern turned to disillusion when NFU Sugar board chairman Michael Sly described the new raw cane sugar ATQ as “highly concerning, unjustified and unnecessary,” claiming the policy “does not achieve genuine economic competition”.
Beet growers in the UK believe that sugar cane producing nations already have an unfair economic advantage – even without the proposed ATQ.
It is worth noting that these comments were made before the government opened the public consultation. Will NFU Sugar’s position soften in light of the consultation? One would think the opposite. In fact, recent articles in the farming trade media have urged growers to make their position known to overturn the ATQ. It will be intriguing to see how this develops in the coming weeks and months.
What does this mean for the industry in the UK?
As it stands, once the quota comes into effect on 1 January 2021, most of the sugar imported through the ATQ will most likely be processed at the Silvertown Refinery. This situation might change, though, if the UK government interprets the definition of a ‘refiner’ differently to the EU. However, whether the ATQ even makes it into law depends on the public reaction to the policy over the coming months – if the government receive widespread opposition from growers, refiners and manufacturers, they may look to abandon the ATQ policy.
If it does pass, though, how long will the policy last? The consultation states 12 months, but as we have seen before, quotas can be reduced or extended. One would think that it would either go one of two ways: never coming into effect or being a long-term policy, but this is merely speculation. At this stage, we simply do not know how long it might last.
The next question is where would the raw cane sugar be imported from? Brazil would be an obvious supplier because it is the largest producer of sugar in the world. However, due to high rates of deforestation in the South American country, importers in the UK may look elsewhere. As a result, the former Commonwealth nations might be better import partners, as we have previously highlighted.
The introduction of the raw cane sugar ATQ is a divisive issue. Ultimately, the way it could impact the UK’s sugar industry will depend on the reaction from the public consultation – if it even comes into action – and how the UK government interprets the definition of a refinery. But if the legislation is confirmed post-1 January 2021, the impact could be wide-reaching.
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