In the midst of a scandal about offering political access for cash, former Labour foreign secretary Jack Straw has said he worked to influence EU sugar policy on behalf of commodities merchant ED&F Man. He then seemed to imply that doing so was no big deal, talking openly about handling negotiations with EU representatives and the prime minister of Ukraine as a paid consultant for the company “under the radar”.
Straw’s lobbying related to a practice called “tolling” and laws that had been brought in to prevent it in Ukraine. And the scandal that now surrounds him gives us a glimpse into the complex world of sugar regulation and lobbying in Europe.
Over the years, EU sugar policy has been shaped as much by politics as by economics. Indeed, the political dimension arises partly because of the economics. Sugar is derived from two sources: sugar beet, grown in temperate climates like European countries, and sugar cane, grown in tropical climates.
Sugar cane has low production costs but sugar beet is much more expensive to produce. Moreover, beet production tends to occur in a few specific locations in a country, with processing facilities close to where the beet is grown. These processing facilities also need to run at high levels of capacity utilisation to be profitable.
These high processing costs and highly localised production (where high quality rural jobs are located) result in a very strong political lobby for support and protection of the sugar industry in the EU – and indeed in the US too.
And while other parts of the EU’s Common Agricultural Policy have been reformed over many years, sugar policy reform only arrived in 2004. This reform came on the back of a build-up of multiple pressures and fierce lobbying from both those who wanted to maintain the status quo, retaining production quotas and high prices within the EU; and those who wanted to liberalise the market, reduce prices and phase out production quotas.
One consequence of the reforms was that countries with less efficient sugar production saw their industries shrink considerably. They faced pressures similar to the challenges reported in Moldova after the Ukrainian policy change, where higher cost producers lost out to producers from countries with more efficient, lower-cost, producers.
Meanwhile, under the Sugar Protocol of the Lomé Convention, a group of former (mainly British) colonies enjoyed privileged terms for exporting sugar to Europe for many years.
But the EU ended up with an oversupply and had to export an equivalent quantity of sugar derived from EU-grown beet, to keep the EU market in some sort of balance.
Tolling is, in essence, the practice of processing imported cane rather than sugar beet, in the sugar beet off season – usually to export it again. This can include sugar cane from tropical countries. The practice helps maintain a high level of capacity utilisation at the processing plant and thus helps ensure profitability. Moreover, it appears to offer great potential for Ukraine’s sugar industry.
The fact of the matter is, Straw has claimed lobbying success in a policy area that has always been highly politicised. And in fact, the policy changes he has boasted about are not particularly unusual in the world of sugar. It is not unheard of for a company to import sugar cane to process during the sugar beet off-season in order to maintain profitability, even if it is not a universal practice.
According to at least one blog, it appears that Straw’s lobbying successes were exaggerated – mind you, for £5,000 a day, I too might be tempted to over-egg the pudding.
It is probably fair to say that Straw’s position as an MP helped him get direct access to the Ukrainian prime minister to talk sugar. It may well be that he, not alone but with the British ambassador, played a role in a specific policy decision.
But this policy reversal enabled ED&F Man to continue doing something that is not uncommon for companies in the sugar processing industry to do anyway. Indeed, given the widespread practice of tolling, the motives behind the original Ukrainian policy change to ban tolling are not at all clear.
Accessing senior officials at the European Commission is more straightforward than getting to prime ministers. As an academic, I have interviewed very senior policy officials in Brussels over the years. I doubt that Straw’s position as an MP was a key deciding factor in him getting in to meet someone, especially in the context of the Brussels-focused lobbying machine that is part and parcel of modern political life. And given the decision-making structures of the EU, it seems likely that the impact of one meeting on EU policy is on the slim side of modest.