Title: EU Export Subsidies on Sugar
1EU Export Subsidies on Sugar
EU rt
- Patti Mohr
- Amanda Monson
- Maria L. Ortiz
1
2EC Export Subsidies on Sugar
- Background
- Parties Brazil vs. EU
- WTO Issues
- Impact
- Analysis
2
3Parties
- Complainants Australia, Brazil, and
Thailand
- Respondent European Union
- Third Parties Barbados, Belize, Canada,
China, Colombia, Cote dIvoire Cuba,
Fiji, Guyana, India, Jamaica, Kenya,
Madagascar, Malawi, Mauritius, New
Zealand, Paraguay, St. Kitts and Nevis,
Swaziland, Tanzania, Trinidad Tobago,
The United States.
3
44-Year Process
Arbitration Report Oct. 2005
Agreement June 2006
4
5Appellate Body Decision (8 2)
- EU acted inconsistently with its obligations
under the Agreement on Ag. (Art. 3.3 8)
- EU financial supports are export subsidies under
Agreement (Ag Article 9.1 (2))
- EUs sugar program nullify or impair trade
benefits of Uruguay Rounds Ag Agreement for
Brazil
5
6Following the AB Report
- Implementation (June 2005) The EU said it would
implement the DSB recommendations and rulings
within a reasonable period of time to implement
them. - Request for Arbitration (August 2005) Parties
were unable to reach agreement on a reasonable
period of time for implementation.
-
- Arbitration Report (October 2005) A WTO
arbitrator said the EU must implement the WTO
ruling by no later than May 22, 2006.
- Agreement (June 2006) Parties reach agreement.
6
7Significance A hot commodity
- Sugar is crucial to developing countries b/c
they have a comparative advantage in producing
low-cost goods.
- Ag subsidies thwart trade talks.
7
8Background Brazil vs. EU
- 1 exporter vs. 2 exporter
- 1 raw sugar importer (of WTO) EU
- (1.9 million tons imported 1.7 million tons frm
developing countries at zero/ low tariff.)
- EU imports raw sugar from ACP countries, under a
preferential treatment mechanism negotiated
during the Uruguay Round.
- EU refines and exports refined white sugar.
8
9Main issue
- Brazil issues a complaint against EU
- EU overproduction of sugar artificially depresses
global market prices
- EU discriminates ag. imports discrimination on
non-ACP countries
9
10Contested EU Regulations
- Council Regulations No 1260/2001
- Europes Scheduled Commitment to Reduce Sugar
Subsidies excludes all products that have
materials imported from ACP- and/or India.
- (Footnote 1, sect. II, Part IV of schedule )
Request for Consultations by Brazil
1 October 2002
10
11Brazils position
- EU Subsidies EU pays sugar farmers 2 billion in
annual export subsidies.
- That encourages overproduction and it
artificially boosts the price of sugar on the
European market.
- It makes the global market price fall, making it
hard for poorer sugar producers to compete.
- Price Guarantees The EU promises producers a
price of 632 euros per ton, which is about 3
times the world price. The EU buys the sugar from
the farmer at this price, and puts it into
storage. This is known as intervention buying.
More often, it pays an exporter the difference
between the world price and the higher European
price. Meanwhile, countries wanting to export
sugar into the EU face huge tariffs. - Excess must be exported EU sets quotas for sugar
production for the European market, and farmers
must export any surplus sugar at lower prices.
11
12Brazil Position
- Main problem EU exports more subsidized sugar
than is allowed under global trade agreements.
- Impact Brazil estimated that global sugar prices
would rise almost 20 if EU scrapped its
subsidies. Brazilian sugar producers lose 500
million to 700 million in exports a year because
of European subsidies.
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13Main WTO Principle
- Non-discrimination/MFN
- (Brazil says the EU favors sugar imports from ACP
countries WTO says members cannot discriminate
between trading partners.)
- National Treatment
- (Brazil says EU fixed Intervention Price for
in-quota sugar sold in the EC is only available
to EU producers. thus provides less favorable
treatment to imported products.)
13
14WTO Agreements
- WTO Agreement on Agriculture
- (Requires members to reduce all export subsidies,
as defined in Article 9.)
- GATT Agreement
- Article III of the GATT
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15WTO Specific Provisions
- Articles 3 and 8 prohibit members from providing
export subsidies except as permitted by both the
Agreement and in the Members commitment
schedule. EU sugar annual scheduled limits are
499.1 million (800 million) 1.27 million
tons. - Article 9.2 of WTO Agreement on Agriculture
requires an approx. 1/3 reduction of existing
export subsidies on agricultural commodities.
Each WTO Member providing subsidies has
established its reduction commitments on a
schedule. These schedules became binding
provisions. They include direct subsidies to
producers contingent on export performance and
payments on the export of an agricultural
product that are financed by virtue of government
action. - (Articles 9.1(a) 9.1(c))
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16EUs Position
- EU insists its preferential treatment of sugar
imports from ACP countries from India help the
poor.
- The treatment is provided under its agreement w/
former colonies is allowed under WTO Uruguay
Round.
- Other arguments
- Brazil is not harmed by EU trade rules. Its
exports of sugar have increased.
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17Specific EU Rebuttal
- 1) No export subsidies on C sugar
- 2) C sugar exports do not exceed ECs reduction
commitments
- 3) ECs notification is consistent with Agreement
on Agriculture
- 4) SCM Agreement does not apply to subsidies of
agricultural products
- 5) Brazil not acting in good faith (Art. 3.10)
17
18ACP Countries
-
-
- Angola - Antigua and Barbuda - Belize - Cape
Verde - Comoros - Bahamas - Barbados - Benin -
Botswana - Burkina Faso - Burundi - Cameroon -
Central African Republic - Chad - Congo
(Brazzaville) - Congo (Kinshasa) - Cook Islands -
Cte d'Ivoire - Cuba - Djibouti - Dominica -
Dominican Republic - Eritrea - Ethiopia - Fiji -
Gabon - Gambia - Ghana - Grenada - Republic of
Guinea - Guinea-Bissau - Equatorial Guinea -
Guyana - Haiti - Jamaica - Kenya - Kiribati -
Lesotho - Liberia - Madagascar - Malawi - Mali -
Marshall Islands - Mauritania - Mauritius -
Micronesia - Mozambique - Namibia - Nauru - Niger
- Nigeria - Niue - Palau - Papua New Guinea -
Rwanda - St. Kitts and Nevis - St. Lucia - St.
Vincent and the Grenadines - Solomon Islands -
Samoa - Sao Tome and Principe - Senegal -
Seychelles - Sierra Leone - Somalia - South
Africa - Sudan - Suriname - Swaziland - Tanzania
- Timor Leste - Togo - Tonga - Trinidad and
Tobago - Tuvalu - Uganda - Vanuatu - Zambia -
Zimbabwe
www.bidnetwork.org/page/46595/en
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19Export Schedule
Current notifications state that after May 2006
it includes exports of ACP and India.
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20Harm to developing countries
- EU 2003 Report "WTO challenge against EU sugar
program will hurt developing countries."
- Pascal Lamy added "This WTO action could not
only destabilise the sugar-dependent economies of
small ACP countries, but is also a smoke screen
to hide the real causes of the current depressed
world sugar prices.
20
http//trade.ec.europa.eu/doclib/docs/2003/october
/tradoc_113885.pdf
21EU Top Domestic Producers
21
22Europes Domestic Producers
- 1967 common market established to protect
domestic sugar industry (producers, refiners,
etc.)
- Import levies
- Reformed in 1974, 1981, 1999 2001
AGRI/63362/2004 A Description of THE COMMON
ORGANISATION OF THE MARKET IN SUGAR, September
2004 http//ec.europa.eu/agriculture/markets/suga
r/reports/descri_en.pdf
22
23No Suffer Injury Evidence
- ? Complaint is legally unfoundedand also
unjustified because Brazil cannot claim to have
suffered any injury as a result of the alleged
violation. - ? Brazils sugar exports have risen
exponentially, while the Europes have remained
static since the Uruguay Round.
http//trade.ec.europa.eu/doclib/docs/2004/april/t
radoc_116584.pdf First Written Submission BY EC
11 March 2004
23
24Not a new issue
- Long History
- 1978 Australia Brazil brought complaints
against the ECs export subsidies under Article
XVI of the GATT.
- 1995/96 Uruguay Round at no point during the
negotiations did the complainants or any other
participant suggest that exports of C sugar
benefited from export subsidies and should be
subject to the reduction commitments.
http//trade.ec.europa.eu/doclib/docs/2004/april/t
radoc_116584.pdf First Written Submission BY EC
11 March 2004
24
25June 2006 Agreement
- The EU will
- Gradually reduce internal sugar prices by 39
- Compensate domestic farmers
- Find a new way to assist ACP countries
- Simplify single quota system
25
26Winners Losers
- Winners Food industries and consumers
- Upset with the fixed quotas status quo, but
very satisfied with the price fall
- Losers Refineries, sugar mills, farmers
- ACP countries will have to reform industries
- EU domestic producers upset w/ the price fall
of the industry but are satisfied with the fixed
quotas status quo.
http//ec.europa.eu/agriculture/publi/reports/suga
r/fullrep_en.pdf
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27Analysis Why the case matters
- Developing countries/emerging economies can
effectively use the Dispute Resolution system to
level the playing field.
- Special trading relationships with post-colonial
countries dont take precedence over global trade
rules.
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28Cases filed with WTO
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29Embolden Brazil?
- Will Cotton Sugar cases encourage Brazil to
file more complaints?
- Brazils foreign minister the ruling confirms
that there are immense distortions in global
agricultural trade
- Brazil filed 2 cases since 2005 AB decision
- July 2007 Complaint ag. U.S. ag subsidies
- Nov. 2008 Complaint against the U.S. treatment
of orange juice
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30Impact on Trade
- Developing countries will produce more sugar
- Impact on renewable energy
- EU sugar production could fall by 1/3
- Uncertain impact for countries w/ preferential
access to sugar markets in EU US
- Potential for economic losses
- (Source Herald article)
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31Beneficiaries of the Ruling
- Brazilbiggest winner b/c it is the lowest-cost
producer b/c it can easily shift sugarcane
devoted to ethanol production to sugar
production - Also African countries (Uganda, Cameroon,
Rwanda, South Africa Kenya) Cuba
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32Impact on U.S.
- The 2008 Farm Bill guarantees U.S. producers 85
of the domestic sugar market. (U.S. to sell
surplus at Ethanol auctions)
- Canadas Financial Post calls the sugar deal one
the sweetest feats of protectionism ever to come
out of Washington, probably the world.
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33Impact on Doha Round Talks
- Rising powers gain negotiating power
- Might ease way for productive talks since EU
trade negotiators will be (slightly) less
beholden to vested interests.
- EU seen as a fairer negotiator. (It no longer
dumps sugar on the world market.)
- But. EU/US Ag subsidies are still huge
continue to thwart talks.
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34Conclusion
- We agree with WTO rulings.
- The case is a example of a successful use of the
DSU system.
- EU Brazil came to an agreement, following
arbitration
- But it took a long time for the parties to reach
agreement (4 yrs) and the implementation process
is also lengthy.
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