|
 |
|
Matthew Vella
The Maltese government has effectively saved some Lm600,000 after it was expected to grant some Lm1 million in subsidies to sugar importers, because pre-accession stockpiling led to no new sugar imports.
On Monday, the European Commission stamped a EUR1.2 million (Lm515,000) charge on Malta for failing to prevent the build-up of surplus sugar stocks prior to accession in May 2004. Malta will retain 25% of these charges and a payment of Lm400,000 will be made in four instalments up to 2009.
But the government saved hundreds of thousands it would have had to pay to subsidise the higher EU sugar price, because no new sugar imports occurred after membership because of the stockpiling.
Malta was fined for failing to prevent the build-up of 2,400 tonnes in pre-membership sugar stocks – a figure well beneath the 20,400 tonnes Brussels claimed Malta had back in September 2004, which would have meant a payment of over EUR11 million, a spokesperson for the rural affairs secretariat confirmed.
“The government, through the permanent representation in Brussels, subsequently embarked on an intensive programme of meetings and discussions in which the various aspects of this issue were tackled, resulting in the figure being revised and lowered by about 90%.”
Whatever the real amount of pre-membership sugar imported, it was certainly enough to keep prices and quantities stable since no new sugar imports were registered in the three months after membership – saving the government from paying out subsidies.
Sugar is in fact the most heavily-subsidised of agricultural products, a deal secured in the accession negotiations between Malta and the EU. Due to the high price differential between EU sugar prices and world market sugar, a subsidy scheme for the importation of sugar allows the gradual phasing-in of the price increase – while also giving time for the EU sugar reform to lower prices to more rational levels.
In the first year of the subsidies, Malta could have subsidised up to 100% of the price differential between EU and world prices.
Together with four other countries – Estonia, Cyprus, Latvia, and Slovakia – Brussels fixed charges of EUR57 million (Lm24.4m) over the next four years.
Before membership, Maltese importers purchased sugar from the EU at the higher internal market price – some 150% higher than world prices – but benefited from export refunds as a non-member state.
After May 2004, importers were no longer eligible for export refunds and any non-EU sugar, being cheaper, would carry hefty import duties.
As part of its accession negotiations, government was allowed to grant subsidies to sugar importers to fund the shortfall generated by the higher EU price.
But Brussels claimed in September 2004 that Malta had failed to prevent the speculative stockpiling of some 20,400 tonnes of sugar, purchased with the alleged aim of reselling it at the higher EU price.
Over the last two years, the Maltese government managed to whittle down Brussels’ claims of over 20,000 tonnes in sugar overstocks to 2,400 tonnes, arguing that companies had to ensure continuity of sugar stocks and that other processing firms were importing sugar for the sole aim of re-exporting it to world markets.
Eventually, the stockpiling of sugar before membership resulted in no new imports of sugar for the first three months after May 2004, and minimal imports for the subsequent seven months – effectively, government was not required to pay out any substantial import subsidies.
“No importation of sugar carried out in the first three months post-accession, a period that taking into account normal consumption patterns for Malta should have seen an importation of between 3,000 and 4,000 tonnes. The subsidy payable would have been slightly more than the payment requested by the Commission,” the spokesperson said.
With no imports – where an estimated 4,000 tonnes of sugar are imported every quarter – government effectively saved some Lm1 million in subsidies it would have to give to importers had they imported it at the higher EU price.
The government was later charged by the European Commission at EUR499.5 for each tonne of sugar not eliminated. The spokesperson said Malta chose not to destroy any of the excess sugar, as it was not considered as being a worthwhile option.
Countries like Estonia however, landed EUR45 million in charges because of unchecked sugar stockpiling – possibly due to phantom companies set up before May 2004 who resold cheap sugar at the higher EU price in the Baltics.
“Measures to prevent the build-up of surplus stocks are a normal feature of every EU enlargement,” Mariann Fischer Boel, Commissioner for Agriculture and Rural Development, said. “It is our legal duty to enforce these rules, which prevent economic operators across the Union being harmed by speculative stockpiling. But I am aware of concerns in the affected countries and have done everything possible to ensure a fair outcome.”
The Ministry for Rural Affairs and the Environment had confirmed earlier in 2005 that it had commenced verification exercises on large consignments of non-EU food products, to check on companies that imported large stocks of agricultural produce over and above usual amounts.
Importers fearing the imposition of new tariffs and duties on non-EU products after 1 May, 2004, reportedly overstocked on products such as beef and sugar, amongst others, to avoid paying the common external tariff imposed by the EU on products imported from outside the bloc.
According to EU Directive 1972/2003, the ministry is obliged to carry out ‘investigations’ on those companies whose importation of non-EU products before 1 May went beyond historical levels of importation.
According to the EU directive, issued with the aim of avoiding speculation on food prices in the run-up to accession, all surplus stocks of certain sugar products, frozen beef, and milk and cream containing added sugar or sweetener, will be levied with the common external tariff. Surplus stocks were be determined according to historical levels of importation, which in Malta are based on averages of three-year import levels, and the circumstances in which stocks were built up. |
