Global Policy Forum

By Gustavo Capdevila

The European Union is upset with the request that Australia, Brazil and Thailand filed at the World Trade Organization (WTO) for a dispute settlement panel to determine whether EU sugar production and export subsidies are legal under existing trade treaties. "We are very disappointed… and regret that (the three countries) have taken this initiative," Carlo Trojan, EU representative to the WTO, said in comments to IPS.

But the chief negotiator for Australia, David Spencer, pointed out that the demand against the European bloc is based on an apparent anomaly in world sugar trade. He cited a report from the House of Commons that says "the cost of production of a ton of sugar in the EU is 660 dollars, when it's 280 dollars in Brazil, Colombia, Guatemala and other countries." "So how can the EU produce 40 percent of the world production share in sugar? How is it possible?" wondered the Australian diplomat.

This phenomenon, said Brazil's representative to the WTO Luiz Felipe de Seixas Correa, "is the result of the distortion that we have to address. And the distortion lies with the European internal support program for sugar." The EU subsidizes large farm operations whose high production costs put them at a disadvantage on the world market, including sugar beet growers in Britain, and the bloc supports companies that refine imported raw sugar, often coming from former European colonies.

But at the meeting of the Dispute Settlement Body (DSB) in Geneva on Monday, the EU was able to bloc the creation of a panel of three independent experts who would judge whether the bloc upholds the international trade rules regarding sugar. At the DSB's next sessions, which have not yet been scheduled, a panel will automatically be set up to handle the sugar question, which is complicated because it could affect the interests of a group of 15 sugar-producing nations in the developing South.

The complaint lodged by Australia, Brazil and Thailand is "quite disappointing," commented Jaynarain Meetoo, ambassador of Mauritius, speaking on behalf of his and the other 14 countries potentially affected by a WTO decision against the EU. In addition to Mauritius, the group is made up of Barbados, Belize, Cote D'Ivoire, Democratic Republic of the Congo, Fiji, Guyana, Jamaica, Kenya, Madagascar, Malawi, St. Kitts and Nevis, Swaziland, Zambia and Zimbabwe. These countries, members of the Africa, Caribbean and Pacific (ACP) bloc of former European colonies, enjoy the benefit of special access to EU markets. Meetoo maintains that Australia and Brazil had repeatedly assured that in their dispute with the EU they would not take any steps that could harm the interests of the ACP countries, which supply sugar to the European markets.

Big agro-industries in the EU import raw sugar from the ACP and from poor countries to refine it and export it, even back to developing countries, with added value paid for with subsidies, and at prices far below production costs, say market analysts. Raw sugar imports involve high tariffs, except in the case of the ACP and of the so-called less developed countries (LDCs), for which the EU has a system of quotas. As a result of this system, the European bloc pushes down sugar prices on the international market.

But Meetoo argues that the decision of Australia, Brazil and Thailand -- three major producers and exporters of numerous farm commodities -- to file the complaint shows that the WTO rules are being used to deepen the marginalization of small, vulnerable economies. The EU presented itself before the WTO as defender of the ACP countries. "We consider this is a direct attack on those who benefit from preferences on the EU market," Trojan told IPS.

Oxfam, the Britain-based international humanitarian organization, has been following the evolution of the world sugar market, and had some strong words for the EU policy. In 2001 the EU launched its initiative to open its markets for the LDCs -- the 49 countries with the lowest per capita GDP (gross domestic product) -- known as "Everything But Arms" (EBA), because it only excluded weapons from entry into the bloc. Among the various commodities covered by the plan was sugar from the LDCs. "But in order to make room for this EBA sugar, instead of cutting back on European quota production, the EU has cut back quota imports from the ACP countries - literally trading one group of developing countries off against another," said Celine Charveriat, Oxfam's representative in Geneva. "The EU is now the world's largest exporter of white sugar. In 2000-2001 it exported almost seven million tons of sugar, at prices far below its costs of production," Charveriat told IPS.

Oxfam proposes that the EU cut its own production by 25 percent, end its dumping practices (disloyal competition, or selling at below production cost), restore the ACP preferential quotas and greatly increase access for sugar imports from LDCs.

Brazil rejects the idea that the request for a dispute settlement panel at the WTO was aimed against the ACP group. De Seixas Correa stressed that this is a matter involving only the EU, which "can address ACP concerns after it loses this dispute." Fellow complainant Australia also asserts that the legal action targets the EU only, and specifically the subsidies it grants sugar exports. Nor does Australia propose to question the preferential agreements the EU has established with its former colonies of the ACP that are sugar exporters, said Spencer.

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