The UK Presidency of the European Union achieved an historic deal on the reform of the EU sugar sector in Brussels today.

Welcoming the deal Margaret Beckett, Secretary of State for the Environment and chair of this week's talks, said:

"After difficult and detailed negotiations we have reached agreement on radical reform of the EU sugar regime

"This is an historic deal - the sugar sector has remained largely unreformed for nearly 40 years. Achieving reform was one of the key objectives for the UK's Presidency as we set out last July. The overwhelming majority of Member States backed our compromise proposal for a 36% price cut over four years.

"This deal brings sugar in line with other CAP reformed sectors and puts the EU in a much stronger position for the Doha round talks in Hong Kong in December.

"In addition, the UK presidency compromise gives African, Caribbean and Pacific countries, our traditional suppliers, more time to adjust to reduced prices.

"I recognise that reaching agreement has not been easy for many member states, including the UK, but I firmly believe this ground-breaking decision will secure a sustainable future for the EU sugar sector."

The key points of the deal are:

• EU sugar prices are to be cut by 36% over 4 years alongside a voluntary restructuring scheme aimed at reducing production by around 6 million tonnes in the same period.

• Compensation for growers will consist of fully decoupled payments of 60% of the resulting fall in incomes from the price cuts, some additional funding from the voluntary restructuring scheme and, in member states surrendering more than 50% of their quotas additional time -limited coupled aid of a further 30% which may be paid with a smaller nationally funded top-up.

• The deal will not involve any new restrictions on preferential imports from least developed countries under the Everything But Arms agreement but does contain new provisions to guard against fraud.

BACKGROUND

1. The EU sugar regime has remained virtually unchanged for nearly 40 years. It has maintained EU prices at roughly three times world levels and operates through a system of national production quotas, intervention buying, deterrent import tariffs and subsidised exports.

2. The main driver for change was the need to liberalise and modernise the sugar regime to bring it into line with other CAP reforms already in place. In addition there are tight deadlines in the first half of 2006 relating to the need to replace or re-enact the current 5 year legal base and to comply with the WTO Appellate Body ruling in respect of subsidised exports.

3. It is also estimated that every euro of benefit for preferential suppliers costs up to five times as much in economic terms as well as inflicting damage on other developing country markets. The current regime causes the EU to dump 5 million tonnes of highly subsidised sugar each year on the world market, greatly restricting the ability of many developing countries to export sugar to Europe or to supply local markets.