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transcript
European Communities – Export Subsidies on Sugar (WT/DS266)
By: Charles ConnerGiovanella de Weever
Jacqueline Doll
Presentation Overview
Background on sugar policies and trade regimes
Analysis of dispute settlement case
EU sugar sector reforms
Potential impact on world sugar markets
Complainant Brazil, Australia, Thailand
Respondent European Communities
Third Parties Barbados;Belize; Canada; China; Colombia; Cuba; Fiji; Guyana; India; Jamaica; Kenya; Madagascar; Malawi; Mauritius; New Zealand; Paraguay; St. Kitts and Nevis; Swaziland; Tanzania; Trinidad and Tobago; United States; Cote d’Ivoire
Involved Parties
Date Action
September 27, 2002 Request for consultation
December 23, 2003 Panel Established
October 15, 2004 Panel Report
April 28, 2005 Appellate Report
May 19, 2005 Adoption of Appellate Body report and the Panel report
April 28, 2005 Article 21.3 (c) Arbitration report
June 8, 2006 Australia, Brazil, and Thailand each reached an understanding under Articles 21 and 21 of the DSU
Timeline
EC’s Common Agricultural Policy (CAP)
Why it started Treaty of Rome Improving the lives of farmersDirect Subsidies
Impact on ImportsQuotas
StructureMultifunctionalMultilateral
Common Market Organization (CMO)
Established in 1968, the CMO is a system of price imports, quotas, and income arrangements to support European sugar farmers
A and B Sugar: two categories of sugar reaching certain quantities that are guaranteed a minimum price
C Sugar: any sugar produced in excess of category A and B quantities. This sugar must be exported within a certain time frame, or a charge will be levied.
Quotas are allocated to the member states, who in turn allocate quotas to each processor on the basis of its production in a reference period
ACP Sugar Protocol
Intergovernmental agreementFixed quantities (raw/sugar cane) Indefinite period of time
How much they’re guaranteed to import1.6 million tons of sugar
Biggest ACP sugar producersSwazilandMauritius
The EU exports an equivalent amount to imports from ACP countries.
European Sugar Market(Sugar Regime)
Consumption 17.6 million tons 12% of world market consumption
Production Third largest producer Roughly 20 million tons per year 14% of world market share
Price of sugar Remains high in the EU
Beet production is costly
Net Exporter
Complainants Sugar Sectors
Brazil Production: 35.8 million tons Consumption: 9.45 million tons Exports: 23.85 million tons
Thailand Production: 7.7 million tons Consumption: 2 million tons Exports: 5 to 6 million tons
Australia Production: 4.9 million tons Consumption: 1 million tons Exports: 4.1 million tons
Brazil’s Complaint
“The EC under Council Regulation No. 1260/2001, export subsidies for sugar and sugar containing products above its reduction commitment levels specified in Section II of Part IV of its schedule of Concessions”
Inconsistent with:
Article III: 4 and XVI of the GATT 1994
Articles 3.3, 8, 9.1(a) and (c), and 10.1 of the Agreement on Agriculture
Articles 3.1 (a) and 3.2 of the SCM Agreement.
Consultations
September 27, 2002 – Request for consultations by Brazil and Australia concerning the European Communities’ support for its sugar, allegedly in excess of its commitment schedule under Annex 2 of the Agreement on Agriculture
March 14, 2003 – Thailand requests consultations with the EC on the same issue
July 11, 2003 – Unable to reach a negotiated agreement with the EC, Brazil requests the establishment of a panel at the next DSB meeting
Complainants Argument/Position
The European Communities had exceeded their commitments on amber box subsidies under its reduction commitments schedule
Price supports of A and B quota sugar effectively cross-subsidize C quota sugar. C sugar must be exported or carried over to fulfill the next year’s quotas
ACP countries are guaranteed exports of 1.6 million tons annually into the EC, and an equivalent amount must be exported.
Terms of Reference
EC: Complainants’ claims under the Agreement on Agriculture are outside of the Panel’s terms of reference Violations of Article 3.3 and 8 are export subsidies, not
“exports of sugar” Identification of violations were not specific enough
Complainants merely referenced “sugar regime” or Council Regulation No. 1260/2001, which is 45 pages long
Sugar exports are private transactions, not government measures within meaning of DSU 6.2
Complainants: Article 10.3 of AA reverses burden of proof. EC had to prove no export subsidies had occurred on exports in excess of its commitments
Panel: Complainants were sufficiently specific and demonstrated that exports had occurred in excess of the EC’s Schedule, shifting burden of proof onto the EC. Therefore Complainants’ argument is within Panel’s terms of reference.
ACP/India Sugar
EC: Exports of ACP/India sugar do not count towards its reduction commitments because of “Footnote 1” in its Schedule Footnote 1: “Does not include exports of sugar of ACP
and Indian origin on which the Community is not making any reduction commitments. The average export in the period 1986-1990 amounted to 1,6 mio t.”
EC referred exclusively to Footnote 1 in relation to ACP/India sugar exports
Panel: All export subsidies scheduled pursuant to Article 3 & 8 had to be subject to reduction commitments. Footnote 1 was not, therefore it was invalid. The EC itself apparently did not consider Footnote 1 as
a commitment because it had not notified the WTO of its export subsidies with respect to ACP/India Sugar.
C Quota Sugar
Complainants: EC has created legal framework that encourages overproduction of sugar, segregates the export market for C sugar from the domestic market by imposing sanctions on exports, and generates profits and capital used to fund exports below the cost of production for C sugar. This framework is in effect a payment under Article 9.1(c) of the Agriculture Agreement.
EC: C sugar exporters only get payment from world markets. Those prices should be relevant benchmarks.
Panel: A Quota Sugar purchased at 46.72 Euros/ton; B Quota Sugar purchased at 32.42 Euros/ton. About 350 percent and 250 percent of world market prices respectively. Growers of A and B beet also grow C beet. There are no
independent C sugar beet producers, therefore the minimum prices paid to A and B producers cross-subsidizes C producers.
C Quota Sugar, cont’d
Inconsistent with Article 9.1(c) – payments made on the export of an agricultural product that are financed by virtue of government action.
Canada-Dairy Appellate Body: Provision of an agricultural input below its total costs of production constitutes a “payment” to the processor of that input.A payment may be granted in a form other than
money payment, including revenue foregone.
C Quota Sugar, cont’d
Panel: Below costs C beet sales to C sugar producers, cross-subsidization from profits made on sale of A and B sugar, and exports of sugar below total costs of production constitute export payments.
Because C beet must be processed into C sugar which must be exported, payments are made “on the export.”
EC sugar regime arrangement results in C sugar producers receiving payments on the export “financed by virtue of government action.”
Exports of C quota sugar are subsidized by the EC government in excess of its reduction schedule, and are therefore inconsistent with the EC’s obligations under Articles 3 and 8 of the Agreement on Agriculture
Panel Conclusions
Panel found that the EC’s total exports of sugar exceeded its quantity commitment level, inconsistent with Articles 3.3 and 8 of the Agreement on Agriculture
Since 1995, the EC provided export subsidies within the meaning of Article 9.1 (a) of the Agreement on Agriculture to exports of “ACP/India equivalent sugar”
Also since 1995, the EC provided export subsidies within the meaning of Article 9.1 (c) of the Agreement on Agriculture to its exports of C sugar
The EC did not demonstrate that its sugar exports in excess of its commitment levels were not subsidized, and was therefore acting inconsistently with the Agreement on Agriculture
Panel Recommendations
Bring EC Council Regulation No. 1260/2001 into conformity with its export subsidies obligation under Articles 3.3 and 8 of the Agreement on Agriculture
EC should bring its production of sugar more into line with domestic consumption while respecting its international commitments with respect to imports
The Panel recognizes the EC’s statement on its commitment to ACP countries and India. Reform of its sugar regime can continue import preferences.
Appellate Body Findings
Upheld panel findings that the EC was in violation of its commitments with regard to C Sugar and and preferential treatment of ACP imports
Disagreed that footnote 1 had no legal effect, but agreed that it did not have the effect of enlarging the EC’s quantity commitment levels
Disagreed with the panel’s decision to not consider complainants’ claims regarding the SCM agreement
Implementation
May 19, 2005- The DSB adopted the Appellate Body Report and also the Panel Report, which had been modified.
In recent 2010 discussions, the EC recently decided to export an additional “half a million tons” of a particular category of sugar, also known as “out of quota” sugar. The total will now be two million tons, and Australia, Brazil and Thailand objected to this decision.
Australia, Brazil, and Thailand repeated their statement recently made in the DSB in reference to WTO cases DS265, DS266, and DS283
Souce: http://www.wto.org/english/news_e/news10_e/ag_com_10mar10_e.htm
EC’s Solution
EC’s sugar reforms
EU lost DS266, and the sugar regime was set to expire on June 30, 2006
The objectives of the reform included: 1. regular supply of sugar 2. making the sugar sector more competitive 3. market orientation 3. fair standard of living for farmers 4. maintain preferential access for ACP and LDC producers 5. Limit budget costs 6. Simplify regime and make transparent
The reforms resulted in a significant price reduction and direct payments to farmers increased
Broader Implications and Issues
Impact on world sugar market
Impetus for the DOHA round, along with Brazil’s US Cotton WTO Case DS 267
Bilateral interest
National and International Interests Involved
The affects on US trade producers and ACP countries
Diversification of Crops
Sources ACP/EU Sugar Protocol. African, Caribbean and Pacific Sugar Group. 2005.
http://www.acpsugar.org/Sugar%20Protocol.html
Common Agricultural Policy. Wikipedia. http://en.wikipedia.org/wiki/Common_Agricultural_Policy
EU sugar sector: Facts and Figures. 2004. http://www.deltha.ec.europa.eu/bic/news/newsfile/sugar_figures.pdf
Sugar and the European Union: Implication of WTO Findings, and Reform. USDA-Foreign Agricultural Service. 2004.http://www.fas.usda.gov/htp/sugar/2004/internet%20article%20on%20wto%20and%20reform%20rev1.pdf
Sugar: World Production Supply and Distribution. USDA-Foreign Agricultural Service. September 2009. http://www.fas.usda.gov/htp/sugar/2009/Nov_sugar_2009.pdf
The Sugar Industry. Australian Government-Department of Agriculture, Fisheries and Forestry. 13 Feb. 2008. http://www.daff.gov.au/agriculture-food/wheat-sugar-crops/sugar/industry
The Common Agricultural Policy: A Brief Introduction. Institute for Agriculture and Trade Policy. September 2007. http://www.iatp.org/iatp/publications.cfm?refid=100145
The Common Agricultural Policy Explained. European Commission: Agricultural and Rural Development. http://ec.europa.eu/agriculture/publi/capexplained/cap_en.pdf
The Common Organization of the Market in Sugar. European Commission: Agriculture Directorate-General. September 2004. http://ec.europa.eu/agriculture/markets/sugar/reports/descri_en.pdf
The European Sugar Sector: A long-term competitive future. European Commission. September 2006. http://ec.europa.eu/agriculture/capreform/sugar/infopack_en.pdf