EU-Brazil dispute over sugar - International Trade Relations

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EU-Brazil dispute over sugar
Lisette Bez, Keisey Cambronne, Sarah Campbell
October 5, 2010
Outline
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History & Context
Main WTO issue
Position of the EU & Brazil
Decision
Implementation or sanctions
Proposal for resolving the issue
History: Brazil Sugar policies
• Brazil is one of the worlds largest sugar cane producers.
• Brazil has considerable influence over the international sugar market.
• Nearly half of Brazil’s sugar is grounded for ethanol production.
http://www.sucrose.com/learn.html
History: EU sugar policies
• The basic tools of the EU sugar policies are:
– Import restrictions with limited free access for
certain suppliers
– Internal support prices that ensure returns for
producers for fixed quantities of production and
permit the maintenance of refining capacity
– Export subsidies for a quantity of domestically
produced sugar
History & Context
• September 27th 2002, Australia and Brazil allege the European
Comission (EC) provided export subsidies for sugar exports.
• Specifically, Australia and Brazil contended that the EC
provides export subsidies in excess of the export subsidy
commitments that it had previously agreed to for C sugar.
• According to Brazil, the EC intervention in the price system for
sugar guaranteed a higher price for the sugar that is produced
without certain production quotas (such as A&B sugar).
History & Context
• On October 15th 2004, the panel found that
the EC had exceeded its annual commitment
levels since 1995.
• The panel found that the EC had acted
inconsistently with its obligations under
Articles 3.3 and 8 of the Agreement on
Agriculture.
Recent Updates
• January 28th 2010, the EU announced a decision to
increase its out of quota sugar exports by ½ million
tons.
• Australia, Brazil and Thailand all voted concerns over
the decision.
• According to Australia the increase is inconsistent with
previous EU assurances that all out of quota sugar
exports would be counted against the EU WTO export
subsidy commitment limits.
• The EU made the decision without the consultation of
the complainants.
Main WTO Issue:
•Case filed by Australia, Thailand, Brazil .
• Consultations requested on September 27, 2002.
• EC’s export subsidies exceeded its reduction
commitment as stated in Section II Part IV of its Schedule
of Concessions.
1.6m tons of ACP re-exported sugar receive subsidies
• EU was in violation with its WTO obligations:
•Agreement of Agriculture
•Agreement of Subsidies and Countervailing Measures
Sugar Production Among Major Producers
EU sugar Policy:
Why is Sugar an Issue for EU Countries?
• Heavily protected agricultural sector involving a
number of subsidies and protectionist programs.
– Common Market Organization (CMO)
• Sugar Beets grown in most member states and
produced across 230,000 holdings.
• Net exporter of sugar representing 15% of world
exports (13% of production, 12% consumption, 5% of
imports as of 2003).
• Trade arrangements with sugar producers in ACP
countries
Sugar Production: Companies, Factories, and
Employment
Distribution of EU Sugar Producers
(1997-2000)
• Chart showing figures of growth
Distribution of Sugar Beet Production
across Member States
The Sugar CMO
• EC 1260/2009
• Created in 1968 (CAP) to guarantee European
Producers a fair income and to supply the market
from its own consumption.
• Price support system that included import levies,
quotas corresponding to consumer demands, export
refunds.
• Set minimum price for sugar beets.
• Amended in 1995 to restrict export refunds (did not
include C sugar exports).
WTO Laws Involved in Dispute:
• Agreement on Agriculture:
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3.3: Incorporation of Concessions and Commitments
8: Export Competition Commitments
9.1:Export Subsidy Commitments
10.1: Prevention of Circumvention of Export Subsidy
Commitments
• Agreement on Subsidies & Countervailing Measures
o 3.1, 3.2:Prohibition (prohibited subsidies)
o 1.1:Definition of a Subsidy
• GATT
o Art.III:4: National Treatment on Internal Taxation and regulation
o XVI: Subsidies
Brazil’s Position
• Claim the EU was subsidizing sugar exports beyond
what was approved in the Uruguay Round by:
– Using production revenues of “A” and “B” sugar quotas to
cross-subsidize the export of “C” sugar.
– The EU exceeds its export subsidy reduction commitment
by subsidizing 1.6 million tons of ACP/India sugar that it
refines.
• The EU must conform its sugar export subsidies with
the standards of the Agreement on Agriculture.
The EU Position
• Claim their sugar policy is legal.
– Exports of “C” sugar do not benefit from export
subsidies.
– Exports of ACP/India sugar are in conformity with
EU schedule of commitments.
• Notes that global sugar prices are low because
of a market surplus.
– Brazil had increased its sugar exports ten-fold in
10 years.
The Panel Report
October 15, 2004
• EU exceeded its export subsidy commitment level by
the exported quantity of 2.8 million tons.
– A member’s statement that its exports are not subject to
its reduction commitment schedule has no legal effect.
– The EU had provided producers with export subsidies since
exports occurred at prices below the average total cost of
production.
• EU must bring domestic market regulation into
conformity with WTO obligations.
• Panel notes the concerns of developing countries
who have preferential access to EU market.
EU Appeal
October 15, 2004
• EU Agricultural Commissioner Franz Fischler:
– “We are dissatisfied with this ruling and will
appeal it. But the EU’s appeal will not prevent the
EU to plough on with a radical overhaul of its
sugar regime. This reform is necessary for internal
reasons. It will make the EU sugar sector more
competitive and trade friendly.”
The Appellate Body Report
April 28, 2005
• Upholds majority of panel findings and
concurs with recommendation to bring sugar
regime into conformity with AoA.
– May 19, 2005: The Dispute Settlement Body
adopted the reports of the Panel and Appellate
Body
– May 22, 2006: Deadline (reasonable time period)
for EU to comply with ruling
– February 20, 2006: EU adopts reformed Common
Market Policy
In 2010
• EU announced it would authorize the export
of an additional 500,000 tons of out-of-quota
sugar.
• January 25: Letter to EU from Brazilian
Sugarcane Industry Association
– Market Disruptive Consequences
– Global Trade Negotiations
– Legal Implications
Conclusion
• The EU has an annual surplus of 5-6million
tons of sugar.
• What can the EU do with this surplus?
• Significant reduction in domestic price
incentives for EU?
• Reduction of export refunds?
• Reduction of quota production quantities?
Questions?
Works Cited
"EU Fights WTO Sugar Ruling." Food Navigator. 19 Oct. 2004. Web. 29
Sept. 2010. <http://www.foodnavigator.com/Financial-Industry/EU-fights-WTO-sugar-ruling>.
"European Communities — Export Subsidies: Statements by Australia,
Brazil and Thailand." World Trade Organization. 18 Feb. 2010. Web. 29
Sept. 2010. <http://www.wto.org/english/news_e/news10_e/dsb_18feb10_e.htm>.
European Union. EU Agricultural Commissioner. Commission Appeals
Against WTO Sugar Ruling. 15 Oct. 2004. Web. 29 Sept. 2010.
<http://trade.ec.europa.eu/doclib/docs/2004/october/tradoc_119659.pdf>.
Geneva, Switzerland. The Reform of the EU Sugar Sector: Implications
for ACP Counries and EPA Negotiations. South Centre, Nov. 2007. Web.
29 Sept. 2010. http://www.gina.gov.gy/epalink/The%20reform%20of%20the%20EU%20sugar%20sector.pdf
"The European Sugar Sector". European Commission.September 2006.Web.30 Sept 2010.
http://www.wto.org/english/tratop_e/dispu_e/265_266_283abr_e.pd
"European Communities Exports on Sugar". World Trade Organization.
28 April 2005.Web.30 Sept2010. http://www.wto.org/english/tratop_e/dispu_e/265_266_283abr_e.pdf.
"How Sugar is Made-An Introduction". Sugar Knowledge International. 9 Sept 2010.Web. 29 Sept 2010.
http://www.sucrose.com/learn.html
"Reforming the European Union's Sugar Policy". European Commission. 2003. Web 1 Oct 2010.
http://ec.europa.eu/agriculture/publi/reports/sugar/fullrep_en.pdf
"Uruguay Round Agreement" World Trade Organization. ND. Web. 28 Sept 2010. http://www.wto.org/english/docs_e/legal_e/14ag_01_e.htm#art3_3
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