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Contributions from
the Column
Facts and trends
AIDS: auditors criticise Bush administration
WTO disapproves of EU sugar subsidies
Demobilisation in Afghanistan a success
Additional funds for German civil peace service
Kemal Dervis next head of UNDP
New World Bank data on governance
Monetary fund for Asia under preparation
New leaders for WTO and UNCTAD
Canada concentrates development aid
The failure of Plan Colombia
06/2005
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[ Sugar ]
WTO rules against European subsidies
The European Union exports three times more subsidised sugar than is allowed under the rules of the World Trade Organisation (WTO). Therefore, Europe must significantly reduce its sugar subsidies. A WTO dispute settlement panel reached this decision in appeal proceedings in late April. The committee confirmed a previous ruling of September 2004, against which the EU had raised objections. Australia, Brazil and Thailand – along with the EU the largest sugar exporters worldwide – had taken legal action against the EU sugar regime. The latest decision is final.
According to WTO regulations, the EU may not export more than 1.3 million tonnes of subsidised sugar annually. In actual fact, the exports amount to well over four million tonnes. The EU had argued that the exports above the permitted level were not subsidised. The WTO judgement did not accept this reasoning. Rather, it claims that the European sugar industry is only in the position to sell three million tonnes more at world market prices because of high subsidies. After all, the price on the world market alone would not, by a long shot, cover the production costs.
Furthermore, the WTO decision prohibits the current EU practice of re-exporting sugar bought preferentially from developing countries of Africa, the Caribbean and the Pacific (ACP countries) associated with the EU. This practice adds another 1.6 million tons to the subsidised sugar exports from Europe. Nonetheless, Rudolf Buntzel of the Protestant Church Development Service in Germany stressed that the WTO ruling was not directed against the interests of the poorer developing countries. He said that the decision did not put the trade preferences of the ACP countries at risk. In order to fulfil obligations towards the WTO as well as the ACP countries in the future, the EU would only have to reduce its production to below 90 percent of domestic consumption.
The European Commission regrets the decision, but stresses it will comply with international obligations. The EU has 15 months to put the ruling into action. Mariann Fischer Boel, the European Union’s agriculture commissioner, said that the WTO ruling is already taken account of in the proposals to reform the EU sugar regime, which she wants to present to the public on 22 June.
On the other hand, the German Farmers’ Association has asked the German government and the EU Commission to block “the ruthless cut-throat competition of world market leader Brazil”. According to this view, Brazil has increased its exports by two thirds “at the expense of the EU and developing countries”. However, Rudolf Buntzel says that Brazil is simply interested in “stopping the illegitimate dumping of EU sugar on third country markets”, rather than in opening up EU markets to cheap Brazilian sugar. (ell)
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