European Communities Export Subsidies on Sugar

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European CommunitiesExport Subsidies on Sugar
Jessica CadimaWalter ChubrickTracie Flora

• October 2, 2007

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Summary

• Complainants Australia, Brazil, and Thailand
• Respondent European Communities
• Measure at issue Excess of A and B sugar quota
  levels is called C sugar, which is not eligible
  for domestic price support or direct export
  subsidies and must be exported
• Industry at issue Sugar industry

3
Schedule/History

• Panel established on 29 August 2003
• Panel report circulated 15 October 2004
• Appellate body circulated 28 April 2005
• Adopted 19 May 2005

4
Background

• Under WTO rules, export subsidies on agricultural
  products are prohibited unless maintained within
  limits specified in the export subsidy commitment
  schedules of each Member.

Dollar Value Million of Tons
EC Limits 800M 1.2735
EC 4 1.6B 5.0
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WTOSubsidies and countervailing measures

• The WTO Agreement on Subsidies and Countervailing
  Measures disciplines the use of subsidies, and it
  regulates the actions countries can take to
  counter the effects of subsidies.
• Under the agreement, a country can use the WTOs
  dispute-settlement procedure to seek the
  withdrawal of the subsidy or the removal of its
  adverse effects.
• Or can launch its own investigation and
  ultimately charge extra duty (countervailing
  duty) on subsidized imports that are found to be
  hurting domestic producers.

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National International Interests Involved

• Australia
• Brazil
• Thailand
• ACP Countries African Caribbean Pacific
  Countries
• India

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Position of Main Parties

• Complaints by Australia (WT/DS265), Brazil
  (WT/DS266) and
• Thailand (WT/DS283).
• All 3 complaints addressed the same concern
  That the current regulation and related
  instruments and measures taken thereunder had
  appeared to be inconsistent with
• Articles 3.3, 8, 9.1, 10.1 and 11 of the
  Agreement on Agriculture, 
• Articles 3.1 and 3.2 of the Subsidies and
  Countervailing Measures (SCM) Agreement and 
• Articles III4 and XVI of GATT 1994.

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Position of Main Parties

• The Complaining Parties claimed the European
  Communities provided export subsidies for sugar
  in excess of its reduction commitment levels.

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Position of Main Parties

• The Complaining Parties alleged that such
  subsidies in excess of the ECs reduction
  commitment levels were provided to exports of C
  sugar as well as to sugar equivalent in volume to
  sugar imported into the EC under preferential
  arrangements with certain the ACP Countries and
  India.

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Reasons for Positions

• The EU is protecting its sugar farmers from
  external competition.
• This causes higher sugar prices in the EU
  compared to world market prices.
• Furthermore, the EU subsidises the production of
  sugar to the extent that domestic supply exceeds
  domestic demand.
• Consequently, the EU sugar farmers dump their
  excess supply of sugar on the world market
  thereby depressing the world price on sugar. 
• The result-a distortion of the global production
  of sugar, which reduces the efficiency in the
  world economy and overall wealth.

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Reasons for Positions

• Brazil had argued that EU export subsidies on
  sugar from mostly former European colonies in
  Africa, the Caribbean and the Pacific should be
  counted within, not in addition to, the EU's
  agreed limits.
• protectionist policies have cost Brazil, the
  worlds biggest sugar exporter, 494 million of
  potential earnings in 2002. In Ethiopia,
  Mozambique, and Malawi the cost was 238 million
  since 2001.

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Panel Decisions

• 15 October 2004
• Exports of sugar exceeds commitment levels.
• Producers/exporters of ACP/India equivalent sugar
  received subsidies.
• Producers/exporters of C sugar that exceed the
  European Communities' commitment levels receive
  payments on export by virtue of governmental
  action.
• The EC had failed to demonstrate that its exports
  of C sugar and ACP/India (equivalent) sugar that
  exceed the European Communities' commitment level
  were not subsidized.

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Panel Decisions

• 15 October 2004
• The EC, through its sugar regime, acted
  inconsistently with its obligations under
  Articles 3.3 and 8 of the Agreement on
  Agriculture.
• The EC nullified or impaired benefits accruing to
  Brazil under the Agreement on Agriculture.

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Appeal Timeline

• 13 January 2005
• The European Communities notified its intention
  to appeal certain issues of law and legal
  interpretations developed by the panel.
• The Panel upheld its findings that the European
  Communities acted inconsistently with its
  obligations under Articles 3.3 and 8 of the
  Agreement on Agriculture by providing export
  subsidies on sugar in excess of its commitment
  levels specified in its schedule.

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Implementation
The Panel recommended that the Dispute Settlement
Body request the European Communities to bring
its EC Council Regulation No. 1260/2001, as well
as all other measures implementing or related to
the European Communities' sugar regime, into
conformity with its obligations in respect of
export subsidies under the Agreement on
Agriculture.
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Implementation Timeline

• 13 June 2005
• The European Communities informed the DSB of its
  intention to implement the recommendations and
  rulings.
• 09 August 2005
• The complaining parties informed the DSB that
  the parties were unable to reach agreement in a
  reasonable period of time for implementation.

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Implementation Timeline

• 30 August 2005
• The parties jointly requested Mr. A.V. Ganesan
  (an independent, third party body) to act as an
  arbitrator.
• 05 September 2005
• Mr. Ganesan accepted the appointment
• 28 October 2005
• The award of the arbitrator was circulated to
  Members, in which the arbitrator determined that
  the reasonable period of time is 12 months and 3
  days expiring on 22 May 2006.

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Implementation

• In addition to this settlement, at the DSB
  meeting on 27
• September 2005, the complaining parties expressed
  their
• concern about the European Communities decision
  to increase
• exports of sugar by almost 2 million tons through
  a
• declassification system.

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Issues

• Improve interpretations of articles in Agreement
  on Agriculture.
• Improve timeliness of dispute settlements

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Conclusion

• This dispute has ensured that there will be
  reform. The dispute has given force to reform,
  because prior attempts made to reform the EC
  sugar regime (dating back to 1972) have failed.
• The outcome of this dispute confirms that high
  cost producers such as the EC cannot circumvent
  their existing WTO export subsidy commitments by
  the unlimited disposal of sugar surpluses on
  world markets.
• The WTO said that by breaking agreed limits on
  export subsidies the EU was hurting developing
  countries by undercutting their producers'
  prices.

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Questions ??