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October 7, 2002 - International Trade News

Australia/Brazil Challenge the European Sugar Regime

On September 27, 2002, Australia and Brazil lodged formal complaints with the World Trade Organization (WTO) over the sugar subsidies paid by the European Union. Australian Trade Minister Mark Vaile said, "Australia will lodge a request for dispute consultations, the first step in the formal WTO dispute process." Earlier, Vaile had expressed concerns that the EU's reforms to its Common Agricultural Policy do not address the EU sugar regime.

Australia is taking this action in consultation with Brazil, which has launched a similar challenge on EU sugar and a separate case on US cotton. Brazil indicated that they are focussing now on EU sugar subsidies that are prohibited by WTO agreements, but that they are also very concerned about the "protectionist distortions caused by the US Sugar Program."

Secretary of Production and Trade of the Brazilian Agriculture Ministry, Pedro de Camargo Neto, said that the protectionist approaches of both the EU and the US greatly impact Brazilian exports of these key commodities and undermine job creation and economic growth in developing nations. He went on to say that these actions highlight the "difference between the promise of free trade and the reality," adding that concerns about the US Sugar Program may also prevent Brazil from reaching agreement in the ongoing Free Trade of the Americas negotiations.

For its part, the EU rejected the complaints that its sugar subsidies constitute a distortion of trade. However, according to various reports, the EU heavily subsidizes its sugar industry, including export subsidies on some 3.6 million tonnes of refined sugar and sugar products, as well as domestic subsidies to the industry. The EU, now the world's largest refined sugar exporter despite its high cost of production, has long been criticized for export subsidies that undercut other sugar producers who depend on the world price.

The outcry intensified recently with major cane producing countries accusing the EU of pushing world sugar prices below the cost of production. In June, OXFAM released a report identifying developed country agricultural policies as major factors contributing to the impoverishment of developing countries (see August 7, SugarNews). At the Johannesburg UN World Summit on Sustainable Development in August, delegates repeated this message and another Oxfam Report was released dealing specifically with EU sugar policies.* According to that report:

  • Europe's sugar industry is receiving a £1billion (approximately US$ 1.6 billion) handout from taxpayers and consumers, allowing it to dump millions of tonnes of subsidized sugar on international markets at the expense of some of the world's poorest farmers

  • This has enabled sugar beet farmers in Germany, Britain and France to become the world's largest exporters of white sugar despite being the world's most expensive (high cost) producers. OXFAM noted that it costs €670 (US$660) to produce a tonne of white sugar in Europe compared with just €286 (US$280) in more competitive countries such as Brazil, Ethiopia, Senegal and Mozambique, but duties of up to 140% shut most low-cost producers out of Europe.

Oxfam Community Aid Abroad, issued its own press release publicly welcoming the challenge of the EU sugar subsidies and stressing that the same unfair European agricultural policies threatening Australia's sugar industry are also hurting hundreds of thousands of small-scale sugar producers and farm workers in developing countries.

The EU must now hold consultations with Australia and Brazil. If no agreement is reached, the issue will be referred to a WTO dispute settlement panel for a ruling.

* Oxfam International, "The Great EU Sugar Scam - How Europe's Sugar Regime Is Devastating Livelihoods In the Developing World"