On the history and future of Swiss sugar

What agricultural policy do we want?

by Dr rer. publ. Werner Wüthrich

Sugar is found in many foods and plays an important role in our diet. Where does it come from? Some will say: mainly from Cuba or from other South American countries where it is extracted from sugar cane. In the middle of the 20th century, this answer would still have been correct – but not afterwards.

For a long time, Swiss agriculture has been heavily oriented towards dairy farming and meat. Products of arable farming such as cereals are imported to a greater extent, which has repeatedly led to difficulties. During the First World War, for example, importing grain was difficult and the country had serious supply problems that led to hunger and social problems. During the Second World War, ETH professor Friedrich Traugott Wahlen was faced with the not easy task of getting farmers to switch increasingly to arable farming. His message was that the population could be fed more sustainably in terms of calories with potatoes, cereals and vegetables than with milk and meat. And it worked! With the Wahlen plan, the lunch table was often modest, but the population did not have to suffer from hunger.
  After the war, the Federal Council tried to preserve arable land and prevent farmers from quickly switching back to dairy farming, which tended to produce surpluses. It did not succeed! 30 per cent of the arable land soon became “green” again. However, the Federal Council’s policy did succeed with one project: the cultivation of sugar beet.

Success story – after initial difficulties

The conditions were favourable. There had already been experience since the beginning of the 20th century. Sugar beet was grown in the Bernese Seeland and processed into local sugar at the Aarberg sugar factory from 1899. However, production was modest, so that the degree of self-sufficiency after the Second World War was only about 15 per cent. It made sense to build a sugar factory in eastern Switzerland as well and to promote the cultivation of sugar beet with federal funds. After great initial difficulties and after two referendums, this policy was to become a success story.
  The new sugar factory was to be built in Andelfingen. The planners in the Department of Agriculture were confident. The National Council and the Council of States received the project positively and voted in favour by a large majority. The referendum was taken, and it came to a vote – and a nasty surprise. On 14nbsp;March 1948, the people voted a clear “no” by 63.3 per cent (Wüthrich 2020, pp. 123–147). The reasons were mainly psychological. The whole presentation of the new sugar regime was all too reminiscent of the state-controlled wartime economy, and many wanted to get away from that. The Federal Council would have determined the area under cultivation and the price of sugar beet, organised its utilisation and much more – just as it had done with all basic foodstuffs during the war. To finance all this, the tariffs on imported sugar were to be raised, which would have increased the price for consumers. The farmers also wanted more entrepreneurial freedom again and to determine for themselves what they wanted to grow.

The people’s no leads to success

However, the sugar project was not “dead” with the people’s “no” vote. In keeping with the principle of subsidiarity, the communes, cantons, associations and private companies took matters into their own hands. They founded the Swiss Sugar Association, which in turn founded a joint-stock company in which the Confederation did not have a stake at all, but twenty cantonal governments, associations and companies from trade and industry as well as numerous private individuals did. (This joint-stock company was later renamed Schweizer Zucker AG). They prepared a new sugar bill “without the Confederation”. An increase in the price of sugar was ruled out from the outset. A second sugar factory was to be built in Frauenfeld. Protective tariffs were to enable cost-covering prices and thus reliable planning for cultivation and utilisation. The federal bill was unanimously accepted in the National Council and the Council of States – which is rare. Also among the people, no one had the idea of taking the referendum.
  This sequence of events is a prime example of the functioning of federalism and the principle of subsidiarity, which belongs in a civics textbook: the state or the federal government should only take on tasks that the citizens and the lower-political levels cannot do themselves.
  The 1948 no-referendum had led to a solution that was generally accepted. The voters in Frauenfeld approved the construction of the new sugar factory and were also prepared to contribute financially. The cultivation of sugar beet proved its worth. Beet is an important crop for crop rotation and helps to maintain arable farming in Switzerland. In 1974 and 1985, there were two more federal referendums: The two sugar factories were to be expanded with the help of the Confederation and the area under sugar beet was to be increased. In 1974 the people voted yes, but in 1985 they voted no to a project that was too large.
  Just a few years ago, 6,000 farmers in Switzerland grew sugar beet, which was processed in the two sugar factories in Aarberg and Frauenfeld into about 250,000 tons of sugar, which corresponded to a self-sufficiency rate of almost 100 per cent. 85 per cent went to the food industry and 15 per cent to the shops. In autumn, you can meet many tractors with trailers, heavily loaded with sugar beet, on the access roads to Aarberg and Frauenfeld. A “soft smell” also tells the population that sugar processing is in full swing. No one is bothered by this because the factory simply belongs to the region. – Swiss sugar was and is an entrepreneurial success project in which the people set a decisive course not only in the initial phase.

Decline of Swiss sugar production as a result of the Bilateral Agreements I

EFTA’s free trade agreement with the then EC of 1972 still excluded agriculture. For a long time, Switzerland was still able to shape its agricultural policy independently with the direct participation of the people.
  This changed with the increasing political rapprochement with the EU. Within the framework of the Bilateral Agreements I of 1999, the EU concluded an agricultural agreement with Switzerland for certain areas. This included sugar as a basic agricultural product. The agreement contained a strangely absurd clause. The EU is allowed to protect itself with protective tariffs against cheap imports from Switzerland. Switzerland, on the other hand, is barred from doing so. This is reminiscent of the “unequal colonial treaties in the 19th century with China”, commented Samuel Krähenbühl, editor at Schweizer Bauer (20 February 2016). One can only conjecture how such a provision got into the great treaty. In 2005, an agreement was reached on sugar, which is industrially processed into luxury foodstuffs and foodstuffs. Switzerland undertook to align the price with the EU level. In fact, the EU price in euros has applied since then. Reason: The domestic industrial enterprises, such as the “Schoggifabriken” (chocolate factories), are to have the same length of spit as their competitors in the EU. In this way, the Swiss sugar industry was to be integrated into the EU internal market as far as possible.
  In the following years, prices began to fall. In 2007, the farmer received CHF 98 per tonne for his sugar beet. In 2014 - seven years later – CHF 48 was still paid. In 2017, the sugar market in the EU was completely liberalised (i.e. the quota system was abandoned), and prices continued to fall. In 2019, CHF 44.– was still paid. The farmers’ loss of income was compensated somewhat. The federal government increased direct payments from 1,800 to 2,100 Swiss francs per hectare, but this was far from compensating for the lower yield. About a third of the beet growers gave up. Guido Stäger, CEO of Schweizer Zucker AG, commented in 2018: “The degree of self–sufficiency with Swiss sugar is falling towards 60 per cent, more than 100,000 tonnes of EU sugar will have to be imported” (Schweizer Bauer of 25 August 2018, 2 December 2020, 15 January 2021).

Other secondary effects and consequences of the EU internal market

The two sugar factories in Frauenfeld and in Aarberg are no longer working to capacity today (which makes sugar more expensive to produce). The Schweizer Bauer of 25 August 2018 reports that 132,000 tonnes of sugar beets had to be imported in 2017, according to the customs administration. It is annoying that “northern German beets are currently also being processed in the Frauenfeld sugar factory”. – These unnecessary transports of heavy beets through half of Europe not only contradict the Confederation’s climate strategy, but also all common sense, since these beets could be planted as before in the region where crops and knowledge are already available.
  In addition, the production of sugar today is not sustainable enough due to the pressure of costs. Josef Meyer, President of the Swiss Sugar Beet Growers, made the following comments: “We have to cut costs where we can so that sugar beet farming works out in the end” (Schweizer Bauer, 25 August 2018). The result is that the vast majority works according to organic standards, but not according to IP guidelines.
  Only 250 beet farmers in western and eastern Switzerland – less than 10 per cent – do this. In the “Integrated Production IP”, farmers abstain from using insecticides and fungicides. The use of herbicides is restricted. Each farm must plant 10 acres of flowering strips (flower meadow) to comply with the biodiversity programme. The farms are inspected annually according to IP-Suisse. Although the two sugar factories process organic beet, 90 per cent of it is imported (Schweizer Bauer of 25 August 2018, 28 November 2020).
  The fact that the sugar industry is largely integrated into the EU’s internal market thus has serious consequences. Today, one gets the impression that many things are going wrong. It is possible that the degree of self-sufficiency will be reduced again to 15 per cent (where it already was once after the Second World War) and the Frauenfeld sugar factory built at that time will be closed again. However, a study concludes that the production with only one sugar factory is not profitable.
  The problems cannot simply be remedied with a little more or less direct payments, which are connected with administrative effort and tied to conditions that farmers often perceive as pressure. The fundamental question is whether Switzerland should once again determine its agricultural policy more itself. Adequate border protection, which helps to ensure that prices cover costs, is indispensable. – Do we really want to dismantle the reconstruction work of the post-war generations and import sugar from abroad?

Alarm

At the policy level, there have been several reactions that clearly point to the unsatisfactory situation. Here are two examples: Already in 2015, National Councillor and Farmers’ Association President Jacques Bourgeois (FDP) submitted the motion “Stop the ruinous price dumping of sugar! Protection of the domestic sugar industry” is submitted. He demands that the tariff rates should be set in such a way that “a minimum price is ensured for sugar”.
  In autumn 2020, the Fribourg CVP councillor Pierre André Grandgirard and 52nbsp;co-signatories launched the initiative “Swiss sugar must not disappear!” It was supported by the Fribourg Parliament. The content: The beet disease Viröse is currently rampant in some areas of Europe, leading to major harvest losses. Until now, farmers have fought this disease with the product Gaucho. Probably in view of the upcoming vote on the pesticide ban initiative, the Federal Council today banned the emergency use of this product. However, more than ten EU countries have allowed its use with restrictions (Schweizer Bauer of 21 November 2020). National Councillor and farmer Andreas Aebi said: “If we are banned from using these products, we will no longer want to import food produced with these products. I am prepared to allow less sugar into Switzerland. That would be consistent, everything else is a lie” (quoted in Schweizer Bauer of 13 January 2020).

What kind of agriculture do we want?

The Swiss agricultural policy AP 22+ reinforces the already existing tendency to promote “nature-based” agriculture (whatever one understands by this) at the expense of production agriculture – with the effect that less is produced and more is imported and the degree of self-sufficiency decreases. This is why the Swiss Farmers’ Union has clearly taken position against it. The two initiatives (Drinking Water Initiative and Pesticide Ban Initiative) that will be voted on in June are supporting further this trend. However, from the point of view of most farmers, they overshoot the target by far. What do we really want? A “close-to-nature” agriculture and more imports of food produced with methods banned in Switzerland, as the example from the sugar industry shows?

Halt

The Council of States recently confirmed the financial framework for farmers for four years, but suspended agricultural policy AP22+ and ordered a “halt”. Parliament has already decided on the necessary measures to reduce the use of plant protection products with so-called “reduction paths”. The IP cultivation of sugar beet is to be promoted. Further measures are not necessary. The Council of States instructed the Federal Council to draw up a report with an overview and strategy so that future agricultural policy can be discussed anew. The Council of States’ concern is certainly correct – especially after 25 years of experience with direct payments.
  The committee of the National Council has also been critical about AP22+ in recent days: “The income of the agricultural sector would decline, valuable cultivated land would be lost, imports would increase, and the administrative burden for farmers would rise. All in all, there is too little evidence for a coherent strategy” (from the media release of 2 February 2021). The National Council will decide on 16 March whether it will follow the Council of States (see also Current Concerns Questions No. 4/5 of 2 March 2021).
  Nationally and internationally, the political environment has changed since the turn of the millennium. The Doha Round in the WTO, which aimed to liberalise agriculture globally, was discontinued in 2011 after ten years without results. In the same year, the National Council and the Council of States instructed the Federal Council to “immediately stop” the ongoing negotiations with the EU on a free trade agreement in the agricultural and food sector. In 2008, the UN Agricultural Report (World Agricultural Report) had set new accents worldwide.

Retrospect and outlook

Agricultural policy in Switzerland was and is not easy. Its issues have always strongly sensitised the entire population, so that numerous referendums have taken place in recent decades (far more than on other economic issues). On 12 March 1995, for example, there were three federal referendums on agriculture in a single day (cf. Wüthrich 2020, pp. 123-147).
  In the 1960s, the initial situation was still different from today. A panel of experts had advised the Federal Council on questions of European integration as follows: The cost level of agriculture was about 30 percent and in individual cases up to 70 per cent higher than in the surrounding EEC countries: “All the crops we can grow can be produced in one or more regions of the six countries under much more favourable conditions than here […]. Our agricultural production could not be maintained in the event of a complete dismantling of import protection […]”. (cf.
dodis.ch/34185, pp. 6–9)
  In EFTA’s 1972 free trade agreement with the then EC (which was approved by 72 percent of the electorate), Switzerland retained its sovereignty and excluded the agricultural sector from free trade. As a result, it was able to shape its policy largely independently with the involvement of the electorate until the turn of the millennium. Thus, the production of sugar became a pearl in agricultural policy.
  With ever stronger political ties to the EU, the situation has become much more difficult. The Federal Council justified its goal of largely integrating the sugar industry into the domestic market by saying that sugar-processing companies like Lindt&Sprüngli should have equally long spears as their competitors in the EU.
  Well – the Swiss export industry has never had equally long spears. Lindt&Sprüngli and also Läderach have become big, even though they had to pay a little more for domestic raw materials such as sugar and milk than their competitors abroad. This has not harmed them – on the contrary, it is part of their success story. Even the textile industry in the 19th century had to buy its raw materials (cotton, silk) from far away and accept higher procurement costs. The embroiderers in St. Gallen, for example, or the fabric printers in Glarus found their way by making a special effort and by ensuring excellent quality. They have thus created true works of art and more than made up for the competitive disadvantages in terms of cost. The same can be said of the watchmakers in Geneva and the Jura, of the entire industry and also of the service sector. The disadvantages in the area of procurement and higher wages are only one thing. In addition, there have often been other disadvantages in the area of currencies. Since the Second World War, the US dollar has lost 80 per cent of its value against the Swiss franc, the British pound more than 90 per cent, and the euro has lost about a third of its value since 1998. Did therefore the export economy and with it the entire economy go down? No – on the contrary – it has become stronger, as all statistics show.
  It is not the export economy that is at risk today, but agriculture. Let us beware of imposing too much on from home and abroad, because sufficient self-supply is in the interest of us all.  •

Sources:

  • Numerous issues of the magazine Der Schweizer Bauer (The Swiss Farmer) from 2015 to 2021.
  • Wüthrich, Werner. Wirtschaft und direkte Demokratie in der Schweiz – Geschichte der freiheitlich-demokratischen Wirtschaftsverfassung der Schweiz. (Economy and Direct Democracy in Switzerland - History of the Liberal-Democratic Economic Constitution of Switzerland), Zurich 2020
  • dodis.ch; Collection of Diplomatic Documents of Switzerland

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