TALLINN - The government continues to battle the European Commission in order to avoid a fine of 55 million euros 's the equivalent of more than half of one percent of the country's annual GDP 's for stockpiling sugar on the eve of EU accession.
Prime Minister Juhan Parts wrote to Commission President Jose Manuel Barroso last week, imploring the Commission to reconsider the fine. Parts' letter warned that Estonia's public image of the EU may suffer a "serious backlash" as a result of this financial penalty.
"This is an important question for Estonia," said Erki Peegel, spokesman for the prime minister's office. "The government's position is that such a big levy is not the right decision from the European Commission. If the commission doesn't change its current position, Estonia is willing to go to court."
According to an EC regulation of Jan. 14, 2004, new member states may only hold a "normal carry-over stock" of sugar at the time of EU accession. Countries holding excessive sugar stocks would then be charged a sum "equal to the [surplus] quantity multiplied by the highest import charges." These charges are set in accordance with the directives of the Common Market Organization, which has regulated European sugar prices and quotas since 1968.
In Estonia's case, the commission has threatened to impose the penalty for an estimated 91,650 tons of sugar hoarded by citizens and companies in the months leading up to accession.
"When a country joins the EU, it has to put in place mechanisms to prevent speculation," says Michael Mann, agriculture spokesperson for the European Commission. "Estonia has palpably not done what it should have done. This is obviously a major problem, but we're going to have to find a solution."
Parts has argued that more than two-thirds of the country's surplus sugar stocks were hoarded by private consumers and should not count as part of a proscribed commercial stockpile. Kalle Nolvak, representing the Ministry of Agriculture's bureau of trade policy, echoes this position. "We have more or less proved our consumers bought sugar for private consumption," Nolvak says.
But if the government is be believed, then every man, woman and child in Estonia has, on average, 50 kilos of sugar stashed away in their cupboards and pantries. Brussels remains skeptical about this claim.
Still, prior to EU accession, the Russian-language media ran a series of stories warning of increased sugar prices in Estonia. These reports not only resulted in panic-buying, they also proved to be remarkably accurate.
"The retail price of sugar increased almost two-and-a-half times in one week after accession," says Nolvak. "The Ministry of Agriculture never denied that the sugar price would increase. There was no other option."
The issue of the massive price-rise, and now the issue of the massive fine, has provided powerful ammunition for Estonia's Euroskeptics. "The sugar problem is a result of the referendum," says Uno Silberg, who is former head of economy at the Ministry of Agriculture and currently a member of the EU Committee of the Regions. "Before the referendum, nobody talked about such problems. The government lied to the people."
As the EC's Mann points out, this issue will have repercussions throughout new member states. The commission is currently checking on various similar stockpiles. "This isn't just going to happen in Estonia," says Mann. "We have to be consistent across the board."
Tanel Kerikmae of Kauppi and Kerikmae, a Tallinn-based legal consultancy specializing in European law, echoed this point. "This is a complex and controversial case that will set important precedents in EU law 's precedents that will not only affect current member states, but also influence the prospects of further European enlargement," Kerikmae says.
Regardless of their positions, all sides of the dispute agree that this case will set a major new precedent in trade relations, which will resound throughout Europe for many years to come.