Posted on: Saturday, October 16, 2004
Europe violating trade rules, WTO finds
By Naomi Koppel
Associated Press
GENEVA — The European Union has broken international trade rules by subsidizing sugar producers, the World Trade Organization ruled yesterday.
Sugar exporters are getting more in government handouts than is allowed under WTO rules, bringing down the price of sugar on the world market and making it difficult for producers in other countries to compete, a three-member panel of legal experts said.
The panel made the ruling following complaints from Brazil, Australia and Thailand, all major sugar producers. The main points in the report had been leaked after the ruling was sent confidentially to the governments last month, but the report was made public yesterday.
Brussels immediately said it will appeal.
"The EU will abide by its international obligations. But at the same time we will defend the legitimate interests of EU sugar producers and the preferential access enjoyed by developing countries into the EU," trade commissioner Pascal Lamy said.
EU sugar prices are more than four times higher than the global market rate and are protected by massive import tariffs.
Brussels also pays export subsidies to get millions of tons of sugar a year off its market, helping keep EU prices high and support Europe's farmers. The 1994 WTO Agriculture Agreement sets a quota of 1.43 million tons for which the EU is allowed to pay subsidies.
EU producers don't receive direct payments for the 3.3 million tons they export beyond this quota, but the complainants allege that payments for the "quota sugar" effectively subsidize the rest, and that sugar producers can buy beets at less than the cost of production.
Since sugar is so expensive to produce in the EU, opponents of European policy argue, producers wouldn't be able to sell it elsewhere unless they were subsidized.
The development charity Oxfam estimates that last year $985 million in EU subsidies went to six sugar giants, including Germany's Sudzucker, Britain's Tate & Lyle and France's Beghin Say.
The panel ruled that the EU had failed to prove that sugar above the quota wasn't getting government support, and therefore it should be considered subsidized.
It also ruled that illegal subsidies were being paid on the re-export of 1.76 million U.S. tons of sugar bought from mostly former European colonies in Africa, the Caribbean and the Pacific — which enjoy preferential import tariffs in the EU.
It ordered the EU to "bring its measures into conformity" with WTO rules.
To avoid affecting the poor nations with preferential deals, it suggested this should be done by considering "measures to bring its production of sugar more into line with domestic consumption" — in other words, by discouraging EU farmers from growing beets and producers from refining it.
The EU has announced plans for gradual reform to reduce the export aid and the quantities of sugar that qualify for it. But the bloc may now be forced to cut the payments more abruptly.
