EU quota threatens Wrocław plant
The country's sole isoglucose producer Cargill has warned the new European Union quota on the sugar alternative agreed in Brussels could force the company to scrap its multimillion euro investment in its almost new Wrocław plant. The American company plans legal and lobbying action to eliminate or increase this quota on the sugar substitute, part of the final Poland-EU deal concluded in Brussels just before the weekend.
The limits would penalise Cargill, which has so far invested €150 million for various food-trading and processing facilities. Gerrit Heuting, managing director at Cargill Polska, warned the decision would also send a depressing signal to foreign investors that the government would not always safeguard their investments from European Union decisions, especially in an industry as regulated as sugar.
"It's irresponsible of the government and the EU," he said. "Our €84.5 million investment could go down the drain."
The threat emerged as the first major indication of how business and industry will be affected by decisions reached in Brussels which the government in Warsaw has little power to change or overturn.
Deputy Minister of Agriculture Jerzy Plewa said that "especially in the case of isoglucose" the government wanted to secure a higher quota, but the final result was indeed a compromise, even though it was able to ratchet up the EU's first offer by more than 20,000 tonnes.
As of May 2004, the food industry would be subject to new quotas for sugar and the sweetner isoglucose. EU production quotas will reduce national limits on isoglucose from 62,200 tonnes to 26,781 tonnes, but it will increase the existing sugar allocation to 1.76 million tonnes from roughly 1.52 million tonnes.
Heuting chalks this up to heavy and increasing pressure from the European sugar industry. Europe's beet growers and refiners are already fiercely protected from sugar cane and isoglucose competition by the common agricultural policy.
As a result of the new limit, isoglucose production will shift elsewhere, and the country will become a new importer of the sweetener, according to Heuting. "It will come from Hungary," he said.
At present, Hungarian producers are not subject to any national quotas, but the EU proposes a 137,000-tonne limit, which is more than the country now produces, Heuting said. He pointed out that about 36,000 tonnes of Cargill's existing output would be threatened. And that demand will shift to Hungary.
Cargill executives are at present deliberating over ways to rectify their dire situation.
"Until May 2004, nothing will happen, but the future of our investment is at stake," Heuting said.
"We are trying to get the government to defend the investment, to try to convince the EU to increase the quota."
On the other side of the argument, the country's sugar producers say that Cargill should be surprised that the isoglucose quota is so large, a figure which had been increased at the expense of sugar producers.
"They should be very glad," said Stanisław Dziedzic, the Warsaw-based business development director at sugar producer British Sugar Overseas (BSO).
He said the European Commission had originally proposed a 2,000-tonne quota that was gradually escalated through negotiations. He added that Cargill would be able to stay productive in the country via glucose production and could shift isoglucose production to one of its plants in Germany. He noted that he was disappointed that the sugar quota was so small.
But Heuting explained that the effect of the isoglucose limits have even farther-reaching consequences. "If someone makes an investment in Poland and the government expropriates such an investment, what signal does this give to other investors in Poland if actions cannot be taken?" he said.
The limits would penalise Cargill, which has so far invested €150 million for various food-trading and processing facilities. Gerrit Heuting, managing director at Cargill Polska, warned the decision would also send a depressing signal to foreign investors that the government would not always safeguard their investments from European Union decisions, especially in an industry as regulated as sugar.
"It's irresponsible of the government and the EU," he said. "Our €84.5 million investment could go down the drain."
The threat emerged as the first major indication of how business and industry will be affected by decisions reached in Brussels which the government in Warsaw has little power to change or overturn.
Deputy Minister of Agriculture Jerzy Plewa said that "especially in the case of isoglucose" the government wanted to secure a higher quota, but the final result was indeed a compromise, even though it was able to ratchet up the EU's first offer by more than 20,000 tonnes.
As of May 2004, the food industry would be subject to new quotas for sugar and the sweetner isoglucose. EU production quotas will reduce national limits on isoglucose from 62,200 tonnes to 26,781 tonnes, but it will increase the existing sugar allocation to 1.76 million tonnes from roughly 1.52 million tonnes.
Heuting chalks this up to heavy and increasing pressure from the European sugar industry. Europe's beet growers and refiners are already fiercely protected from sugar cane and isoglucose competition by the common agricultural policy.
As a result of the new limit, isoglucose production will shift elsewhere, and the country will become a new importer of the sweetener, according to Heuting. "It will come from Hungary," he said.
At present, Hungarian producers are not subject to any national quotas, but the EU proposes a 137,000-tonne limit, which is more than the country now produces, Heuting said. He pointed out that about 36,000 tonnes of Cargill's existing output would be threatened. And that demand will shift to Hungary.
Cargill executives are at present deliberating over ways to rectify their dire situation.
"Until May 2004, nothing will happen, but the future of our investment is at stake," Heuting said.
"We are trying to get the government to defend the investment, to try to convince the EU to increase the quota."
On the other side of the argument, the country's sugar producers say that Cargill should be surprised that the isoglucose quota is so large, a figure which had been increased at the expense of sugar producers.
"They should be very glad," said Stanisław Dziedzic, the Warsaw-based business development director at sugar producer British Sugar Overseas (BSO).
He said the European Commission had originally proposed a 2,000-tonne quota that was gradually escalated through negotiations. He added that Cargill would be able to stay productive in the country via glucose production and could shift isoglucose production to one of its plants in Germany. He noted that he was disappointed that the sugar quota was so small.
But Heuting explained that the effect of the isoglucose limits have even farther-reaching consequences. "If someone makes an investment in Poland and the government expropriates such an investment, what signal does this give to other investors in Poland if actions cannot be taken?" he said.
