EXPLANATORY MEMORANDUM

The present proposal concerns the decision establishing the position to be adopted on behalf of the Union in the International Sugar Council and Administrative Committee of the International Sugar Organization (hereafter "ISO"), as well as in any possible other ad hoc bodies that the ISO may set up to discuss possible amendments to the International Sugar Agreement 1992 in connection with the envisaged discussion on the revision of the International Sugar Agreement 1992 (hereafter "the ISA").

1.CONTEXT OF THE PROPOSAL

•Reform of the International Sugar Agreement 1992

The European Union is a party to the ISA.

The ISA aims to ensure enhanced international cooperation in connection with world sugar matters and related issues, provide a forum for intergovernmental consultations on sugar and on ways to improve the world sugar economy, to facilitate trade by collecting and providing information on the world sugar market and other sweeteners and to encourage increased demand for sugar, particularly for non-traditional uses. The ISA entered into force on 1 January 1993 for a period of three years until 31 December 1995. Since then it has been regularly extended for further periods of two years. The ISA is going to be extended by decision of the International Sugar Council in November 2017 and will remain in force until 31 December 2019.

According to Article 8 of the ISA the International Sugar Council is the responsible body for the performance of all functions necessary to carry out the provisions of the ISA. Article 13 of the ISA stipulates that all decisions of the International Sugar Council shall be taken in principle by consensus unless stipulated otherwise in the ISA. And that in the absence of consensus, decisions shall be made by simple majority vote unless the ISA provides for a special vote.

According to Article 25 of the ISA Members to the ISO hold 2000 votes in total. Each Member to the ISO holds a specified number of votes which is annually adjusted following predefined criteria in the ISA.

The Agreement, and especially the distribution of votes among Members which also determines a Member's contribution, no longer reflects the realities of the global sugar market. Currently, the Union is the largest contributor to the ISO budget by far. Since 2015, the ISO has been discussing at working group level possibilities to review the mechanism of distributing votes. It is necessary that the EU has a position on reviewing the ISA in case the ISO engages actively in such discussions and negotiations.

Bringing reform to the ISO to further align it with the practices the Union fosters in other international commodity boards, as well as with developments in the global sugar market since 1992, is clearly in the interest of the Union. At the very least, this reform should lead to transparency concerning the Members' responsibilities in voting as well as their financial contributions. The allocation of votes in the ISO should be measurable according to indicators such as trade, consumption, production and ability to pay. The latter indicator is used in the United Nations to allow for the recognition of the development aspect of sugar. Taking into account this indicator, results in allotting a greater part of the financial responsibilities to those members that have a greater ability to contribute to the ISO budget.

The Commission can promote the above-mentioned practices with the other ISO members; since the ISO is a consensus-based organisation the EU cannot reform it by itself. Therefore, the general ISO Membership needs to give a clear signal that reform is both possible and desirable. During meetings of the ISO and in bilateral meetings with other ISO Members, the Commission should be in a position to take the initiative to open negotiations on the amendment of the ISA and to engage with other members in case they should take the lead on reform proposals.