TRADE: WTO Report Jolts EU Sugar Producers

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Stefania Bianchi

BRUSSELS, Aug 4 2004 (IPS) - Civil society groups have hailed a World Trade Organisation ruling against the European Union’s sugar subsidies as a triumph for developing countries.

The World Trade Organisation (WTO) ruled Wednesday (Aug. 4) that the European Union (EU) is illegally dumping millions of tonnes of subsidised sugar on world markets.

In a case brought by Brazil, Thailand and Australia against the EU, the WTO’s dispute- settlement body, the world’s trade court, ruled that EU subsidies help farmers cover their fixed costs and enable them to grow additional amounts of sugar at low additional cost, which they then sell on international markets.

The ruling also found that the EU exports up to four times more subsidised sugar each year than allowed under world trade agreements.

The EU exports up to five million tonnes of sugar each year despite making a commitment under the Uruguay round of trade talks to reduce its subsidised exports to just over one million tonnes a year.

Interest groups say such government subsidies give European farmers unfair advantage in global export markets.

The international relief organisation Oxfam says that the EU reduces world sugar market prices by 23 percent. In 2002 this led to foreign exchange losses of about 494 million dollars for Brazil, 151 million dollars for Thailand, and 60 million dollars each for South Africa and India.

The WTO interim report handed over to the concerned parties Wednesday found that around 2.7 million tonnes of non-quota or ‘C’ sugar EU exports contravene WTO rules.

The EU says there are no subsidies attached to these exports but the panel of experts ruled that they are cross-subsidised by the high guaranteed prices paid for quota sugar.

The report also ruled that the bloc additionally subsidises re-export of 1.6m tonnes of sugar – the equivalent of imports from the African, Caribbean and Pacific (ACP) countries and India. These subsidised exports further exceed the amount permitted under WTO rules.

Jo Leadbeater, head of Oxfam International’s Brussels office said the ruling marked the “death” of the bloc’s “unfair” sugar subsidies.

“This ruling is a triumph for developing countries and a death knoll for unfair EU sugar export subsidies, which undermine poor farmers’ livelihoods and deny them the chance to trade their way out of poverty,” she said in a statement. “The scam has been uncovered. The EU must now act to reform the regime in a way that benefits poor countries.”

Oxfam also stressed that the EU should act more responsibly towards developing countries.

“The EU may claim that this ruling goes against poor countries’ interests by threatening their preferential imports. But in actual fact there is nothing here to stop the EU from continuing to import developing country sugar,” said Leadbeater.

The environmental group WWF highlighted the environmental effects that the EU’s sugar regime has had on poorer countries.

“Depriving developing countries of a decent living from sugar does nothing to tackle the environmental damage caused by our sugar consumption,” said Elizabeth Guttenstein, head of European agriculture in WWF’s Brussels office.

“The EU and U.S. must implement meaningful reforms that support social and environmental benefits across the world rather than just agricultural production at home. This would show they are serious about agricultural trade reform. Failure to do so would seriously undermine the multilateral trading system,” she added.

Both groups are calling on the EU to implement sugar reforms that end export dumping and facilitate increased meaningful access to Europe’s markets for Least Developed Countries (LDCs).

The WTO report was issued confidentially to the EU, giving the trade bloc time to prepare a response by the time the ruling is made public in September.

EU member states will have several weeks to decide whether to accept the ruling or launch an appeal, which could delay the final outcome till early next year.

The European Commission, the EU executive, said Wednesday it was unable to comment on the ruling.

“I can confirm that the WTO has sent its interim panel report to the parties. This panel is confidential and therefore the Commission will not comment on it,” said Arancha Gonzalez, EU spokeswoman for trade.

“We trust other the other parties to this case will also abide by their international obligation to respect the confidentiality of the interim report. We will now carefully study the interim report as well as our options in this dispute,” she added.

If the ruling is accepted it could force the EU to slash the subsidies abruptly. For big sugar producers like France, Germany and Poland, that would create real problems for farmers and politicians.