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WTO: EC sugar regime provides illegal subsidies

29 April 2005

WTO: EC sugar regime provides illegal subsidies

The WTO Appellate Body has ruled that the EC is providing export subsidies to sugar in violation of WTO rules.

The Appellate Body rejected the EC's appeal from an earlier Dispute Panel ruling, and found comprehensively in favour of the three complainants, Brazil, Thailand, and Australia. New Zealand participated as a third party in the dispute.

In making its ruling the Appellate Body applied and confirmed earlier case law developed in New Zealand's successful case against Canadian dairy export subsidies.

Trade Negotiations Minister Jim Sutton said this was an important ruling for New Zealand.

He said that although New Zealand does not export sugar, as an agricultural exporter we have a strong interest in the correct interpretation of WTO disciplines on agricultural export subsidies.

"This ruling prevents other similar schemes being adopted on products of direct interest to New Zealand.

"Together with other recent wins against US cotton subsidies and the EC regime for geographical indications, it further underlines the importance of the WTO in protecting New Zealand's export interests."

Of most interest to New Zealand, the Appellate Body upheld the Panel's ruling that the EC effectively finances EC exports of some sugar on to the world market. It does this by guaranteeing a price on the domestic market that is three times higher than the world price. Sugar that the EC deems is surplus to domestic requirements is then required to be exported at a loss. These exports displace sugar from competitive sugar-producing countries, many of which are developing countries.

Mr Sutton said the high cost of production of EC sugar producers means that they simply should not be able to compete with the lower cost producers in Brazil, Thailand, Australia and many developing countries.

"The Appellate Body report recognises this fact by finding the sugar concerned is exported using subsidies contrary to the EC's WTO commitments."

The ruling comes at a time when the EC is considering plans to extensively reform and reduce its support for sugar farmers. Separately, the EC and other WTO Members have agreed to eliminate all export subsidies in the Doha Round of trade negotiations, although the timeframe for this is still under negotiation.

Mr Sutton leaves New Zealand on Sunday to attend an OECD meeting and a seminar on the next steps in the Doha round, being held in Paris, France. Most of the key WTO member countries' trade ministers will be present.

He said removing the roadblocks in the way of a successful conclusion to multilateral negotiations would be the focus of both meetings next week.

Mr Sutton returns to New Zealand on May 7.


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