Global Policy Forum

By Maxine Frith

One is an English aristocrat worth £35m with 9,000 acres and an 18th century manor house; the other earns less than £300 a year cutting sugar cane for 12 hours a day in rural Mozambique to support his parents and four brothers.

The link between the two, and the reason why one has continued to increase his wealth while the other faces losing what he has, is the £1.34bn a year EU sugar regime. Aid agencies are calling for reform of a system that costs some of the poorest countries millions of pounds each year in lost trade.

The European Commission is to publish proposals today on how it intends to reform EU sugar subsidies, after a ruling by the World Trade Organisation earlier this year that the regime was illegal. But campaigners such as Oxfam say the proposals will not go far enough and will continue to benefit some of the richest farmers in the world at the expense of the poorest. Critics of the system, including the National Farmers' Union, say the system of inflated price guarantees, generous export refunds and high import tariffs surrounding sugar production is the most graphic example of how the Common Agricultural Policy (CAP) distorts trade and makes it impossible for African farmers to compete on the international stage.

Michael Bailey, a senior policy advisor at Oxfam, said: 'The EU has been caught red-handed providing illegal subsidies to its sugar producers. European sugar policies top the list of trade injustices suffered by Africa and reform is desperately urgent. Consumers and taxpayers are financing a system which denies African countries the chance to grow out of poverty, while lining the pockets of the European sugar industry."

Nowhere are the iniquities of more apparent than when it comes to the lives of John Fellowes and Inacio Albano. John Fellowes, the fourth Lord de Ramsey, receives more than £500,000 a year in CAP subsidies for various crops grown on his three farms in Cambridgeshire and Lincolnshire. In addition, a minimum pricing system run by the CAP guarantees that sugar made from his beet is bought for at least three times more than world prices.

Thousands of miles away, Inacio Albano, 25, cuts sugar cane until his hands bleed at a mill in Marremeo, north-east Mozambique but is just thankful to have a job in a country where more than two-thirds of the population live on less than £1 a day. Mozambique is heavily dependent on its sugar industry, but loses more than £20m a year - equivalent to its entire national budget for agriculture and rural development - because of the trade distortions caused by the EU sugar scheme.

Landowners in some of the richest parts of Europe, including 7,500 in eastern England, grow sugar beet under quotas set by the European Union but managed by companies such as British Sugar, part of Associated British Foods. For sugar grown within the quotas, a minimum price of €631 (£423) per ton has been set by the EU, below which it cannot be bought by companies that use it for food products or sell it in bags.

The guaranteed price within the EU is three times higher than the world price of €157 per ton. Oxfam estimates the price system gives the 27 largest sugar beet farmers in the UK an average of £137,595 a year in support.

Production costs of sugar cane in countries such as Mozambique are far lower than in Europe, but they are prevented from importing their products to the EU and benefiting from the higher prices by import tariffs and duties charged on their products. The import duties create a tariff equivalent to 324 per cent on sugar grown outside the EU. The EU does allow some Least Developed Countries (LDCs) such as Mozambique to import sugar to Europe without incurring the tariffs, but the quantities are severely limited. If that were not enough distortion, some of the world's poorest countries have to contend with EU export subsidies that leave them at even more of a loss. Processors and traders who export EU-quota sugar outside the continent are compensated for the gap between domestic and world prices by €525 per ton. That means every euro in export sales generated by sugar costs the EU €3.3 in subsidies.

Tate and Lyle, the sugar company whose pre-tax profits rose by 12 per cent to £255m last year, was paid £120m in export refunds in 2003 alone. Five million tons of EU sugar is dumped on the world market every year, suppressing the international price while the European price remains at a guaranteed high. Leaked reports of the European Commission proposals suggest they focus on cutting the minimum price guarantee by as much as 40 per cent over two years but do not address the issue of export refunds. That would have the worst impact on many of the LDC farmers who do export some of their sugar to the EU, while not unduly affecting the richest farmers and businesses.

Lord de Ramsey, British landowner: £500,000 from CAP adds to £34m family fortune

John Fellowes, the fourth Lord de Ramsey, lives in an 18th-century manor house among 7,000 acres of prime farmland in Cambridgeshire and Lincolnshire worth £34m. His family have been draining and farming the fens since the middle of the 17th century, and have grown rich off the land. Like his father, he has been president of the Country Landowners' Association and was also head of the Environment Agency, an appointment made by his friend John Major when he was Prime Minister.

Lord de Ramsey was the recipient of more than £500,000 from the Common Agriculture Policy in 2003-2004, in subsidies for the crops grown on the two farms he owns and another in which he has a half share. He also benefits substantially from the EU sugar regime, which guarantees the price of sugar beet that he grows on his land, and prevents cheaper imports from outside the member states.

Inancio Albano, Mozambican cane-cutter: 'Things are difficult, but I am glad to have a job'

Inancio Albano, 25, considers himself one of the lucky ones in the area of north-east Mozambique where he lives, despite leaving school at 14 to work long days cutting sugar cane to support his parents and four younger brothers. While the work is hard and he earns less than £300 a year, he says that at least he has a job.

Across the river from his town of Marrameo is Luabo, where the sugar mill is derelict. It closed during the civil war, and while people in Luabo are desperate for it to reopen and provide jobs, it remains closed, partly because of the EU sugar regime. Despite having higher yields and lower production costs, Mozambique cannot sell its sugar within the EU because of the huge import duties imposed on most of its products. It is also disadvantaged because EU companies are given generous export refunds, allowing them to dump more than five million tons of sugar outside its borders each year.

In numbers

* £1.34bn: amount EU pays in sugar subsidies every year

* £120m: amount paid to Tate and Lyle in export refunds in 2003-04

* 300 per cent: subsidy paid on EU sugar (it spends €3.3 on every euro of sugar it exports)

* €64: amount every household in the EU pays a year to support the sugar regime

* Two-thirds: number of people in Mozambique living on less than $2 a day

* 1.8 million: number of people in Mozambique with HIV and Aids

* 38: life expectancy in Mozambique

* 20,000: number of jobs that could be created in Mozambique if sugar trade distortions were scrapped

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