WTO rules against EU sugar subsidies

WTO legal deci­sions are crush­ing the use of so-called ‘domes­tic’ sup­ports to sub­si­dize exports of agri­cul­tur­al prod­ucts. Yes­ter­day the WTO released the Pan­el’s con­dem­na­tion of two forms of EU sug­ar subsidies—first report­ed “here”:http://www.inquit.com/article/309/sugar-case-victory-on-eu-subsidies—that have helped to crip­ple world mar­kets
# Annu­al sub­si­dies on 1.6 mil­lion tonnes of sug­ar that the EU imports, duty free, from for­mer colonies in Africa, the Car­ribbean and Fiji—but prompt­ly dumps back on world mar­kets at much low­er prices
# Sub­si­dies to so-called ‘C’-class sug­ar whose pro­duc­tion is nom­i­nal­ly not sup­port­ed by the CAP(Common Agri­cul­tur­al Pol­i­cy) sub­si­dies but that ben­e­fits, as the com­plainants alleged, from cross-sub­si­diza­tion due to the high lev­el of sub­sidy that EU pro­duc­ers receive for pro­duc­tion of con­trolled quan­ti­ties of so-called ‘A’ and ‘B’ class sug­ar You can find a PDF file (about 1mb) of the Pan­el report “here”:http://www.wto.org/english/tratop_e/dispu_e/265r_e.pdf. The EU Com­mis­sion “press release”:http://europa.eu.int/comm/trade/issues/respectrules/dispute/pr151004_en.htm promis­ing to appeal the find­ings con­tains a good short sum­ma­ry of the com­plaint and the find­ings (as well as some grum­bles from the Com­mis­sion­ers). The true sig­nif­i­cance of this case is not it’s impact on world sug­ar mar­kets (see below) but it’s con­fir­ma­tion that the insane pro­duc­tion sub­si­dies for agri­cul­ture in North Amer­i­ca and Europe are equiv­a­lent to export sub­si­dies which are pro­hib­it­ed unless cov­ered by the phase-down deal struck in the 1994 Uruguay Round Agree­ment on Agri­cul­ture. The WTO has now found three times in the space of 20 months, that overblown domes­tic pro­duc­tion sub­si­dies that are per­mit­ted by WTO (also sub­ject to lim­its) leak into export mar­kets, cre­at­ing unfair sub­si­dized exports in excess of the amounts per­mit­ted under the 1994 Agree­ment. This is the ker­nel of deci­sions on “Cana­da dairy subsidies”:http://www.ustr.gov/Document_Library/Press_Releases/2002/December/U.S.Wins_in_WTO_Challenge_to_Canadian_Dairy_Subsidies.html, “US Cot­ton subsidies”:http://www.inquit.com/article/356/wto-report-on-us-cotton-subsidies , and now EU sug­ar. The trip­ple wham­my impact of these cas­es should con­sol­i­date the deci­sion to elim­i­nate the use of export subi­si­dies and _should give a big boost to “efforts”:http://www.inquit.com/article/307/a‑guide-to-the-wto-framework-agreement to more nar­row­ly con­strain the use of so-called ‘green’ and ‘blue’ domes­tic sup­port pay­ments. The case will not, unfor­tu­nate­ly, have a big impact on world sug­ar mar­kets. This find­ing won’t stop sub­si­dies and it won’t lift prices for sug­ar. Why? Two rea­sons:
# WTO requires the los­ing side to change its laws to com­ply with the treaty rules: this is hard­ly ever the same thing as chang­ing the under­ly­ing pol­i­cy. It usu­al­ly means find­ing a dif­fer­ent way to do what you want­ed to do in the first place.
# The glob­al sug­er mar­ket has fac­tored this case into its expec­ta­tions long ago and there is sim­ply too much sug­ar being pro­duced around the world for even a favor­able out­come to impact prices. In fact, EU sug­ar mar­ket reg­u­la­tions are doomed for oth­er rea­sons. The Com­mis­sion announced months ago that it will soon intro­duce some basic changes to the way sug­ar prices and pro­duc­tion is con­trolled to open up pro­duc­tion to more com­pe­ti­tion and, grad­u­al­ly, to cut back on the imports of duty-free sug­ar from it’s ex-colonies. See “my ear­li­er story”:http://www.inquit.com/article/266/proposed-eu-sugar-reforms on the changes and the Com­mis­sion’s “press release”:http://europa.eu.int/comm/trade/issues/respectrules/dispute/pr140704_en.htm

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