Beet, the unknown root

OK. This is the weirdest thing and I'm not sure I got it down pat. I'm actually quite sure it can't be the way I understand it from the meagre sources I have available. Follow me and then explain to me where my thinking is wrong. All right. Says Mr. Vasile Puscas, Romanian Minister Delegate and the Chief-Negotiator with the European Union:

Concerning the sugar sector, I must say that the negotiations were extremely tough, taking into account the low production obtained in Romania during the last years (the average production during 1998 – 2002 is 99,000 tons, with 55,000 tons in 2000) and the considering that Romania is net sugar importer country. In these circumstances we succeeded in obtaining a total sugar quota (quota for sugar beat plus processing quota), which together with the quota obtained for isoglucose covers entirely the domestic consumption in Romania. This quota is about four times as much as the quota presented by the mass media as being the Commission proposal. We have chosen this strategy in order to support the sugar industry. I must underline the fact that we obtained the best results in comparison with all the other sugar importer countries that acceded to the European Union in May 2004.
Via The Periscope

OK. This is what I understand: 1. Romania is a sugar importer. 2. Romania is allowed to export an amount of sugar to the EU that equals its sugar consumption. Confusing? Yeah, well. Then read this:

European Union regulation number 2007/00 from September 18, 2000, and amendment RC 2563/00 from November 20, 2000 opened the market of the European Union to the import of the sugar produced in Yugoslavia and other countries of the Western Balkans without any restrictive measures or customs burden. Price of the protected sugar on the European market amounts to 650 EUR/ton, and the average price in the world are below 300 EUR/ ton. The average sales price of our sugar exported to the EU market approximated to 600 EUR/ton. In order to enable the import of our sugar the EU has simultaneously reduced the production sugar share for their sugar producers. One of the main objections to the EU regarding its market opening to the import from the countries of the Western Balkans is that these countries have shortage of sugar, which they mostly import themselves; therefore the import from these countries is in fact a fabrication.
Yugoslavian Government Anti-Corruption site

See, with the prices as they are, my first thought was -- why not export all your sugar to the EU for 600 EUR/ton, then supply for your own needs on the world market for a less than half of the price? Probably because its forbidden in the contract. (See below.) The second thought was - why is the EU doing this? They are actively throwing away my tax money! They are cutting subsidies in the EU and redirecting them to non-EU members. Very humane, furthering poor countries and all that, but economically utterly stupid. Or is there a twist I'm missing? I mean, they could just buy sugar on the world market for lower prices (OK, with the demand and whatnot, the prices would go up but not by 100%). They'd save 350 EUR/ton on the EU product and 300 EUR/ton on the Balkan import. Anyhow, the ultimate goal is for those countries to up their sugar production, thus being self-supplying plus able to export sugar. Sugar beet is a highly intensive crop. You have to pump fertilizer in like mad. Not good for the soil at all. Hm. Also, if Romania joins the union, and the EU succeeds in cutting the protected price, then Romania would end up getting a lot less for all that sugar they are now producing. Is anybody taking that into account? It all seems rather pointless to me. But then, I'm suffering from post-pregnancy-mother-of-toddlers-brain which is a good excuse for almost anything, not the least being European economic policy. So if someone can explain this mystery to me, I'd be grateful. BTW, the fact that the quote above is from the Anti-Corruption web site of Serbia? Well, it turns out that Serbia exported imported sugar branded as Serbian sugar. The real surprise in my eyes is that everybody seemed so surprised by this.

Comments

[Carlos]

Someday, when we have a quiet six to eight hours to spare, over pie and coffee I will describe the truly bizarre history of US milk pricing.

I think the story might go something like this: Romania is a net sugar importer. But it still produces sugar for export. It's getting cheap 300 EUR/ton sugar from Brazil, plus a thirty percent tariff, so call it 400 EUR/ton. It's also selling pricey domestic 600 EUR/ton beet sugar to the EU, but making 50 EUR/ton profit on the deal, since under the quota agreement, it sells for the European stabilized price. However, it is not allowed to repackage cheaper Brazilian sugar as being produced in Romania.

But that still must be only half the story. What happens after Romania joins the EU, while the EU reduces its subsidies?

C.

[Pouncer]

The United States gov't price supports (subsidies) for cane sugar grown in Hawaii, Florida, Puerto Rico, and other warm regions also distort world market prices. Given the slave/plantation style of agriculture common to the cane industry I'd as soon tax the crop -- heavily -- as subsidize it. OINIC.