Implementation

							European Communities
Export Subsidies on Sugar

           Jessica Cadima
           Walter Chubrick
           Tracie Flora

           October 2, 2007




                             1
Summary
   Complainants: Australia, Brazil, and Thailand

   Respondent: European Communities

   Measure at issue: Excess of A and B sugar quota levels is
    called C sugar, which is not eligible for domestic price
    support or direct export subsidies and must be exported

   Industry at issue: Sugar industry




                                                                2
Schedule/History
   Panel established on 29 August 2003

   Panel report circulated 15 October 2004

   Appellate body circulated 28 April 2005

   Adopted 19 May 2005




                                              3
Background
   Under WTO rules, export subsidies on agricultural products
    are prohibited unless maintained within limits specified in the
    export subsidy commitment schedules of each Member.


                      Dollar Value     Million of Tons



     EC Limits        $800M            1.2735



     EC 4             $1.6B            5.0




                                                                 4
WTO
Subsidies and countervailing measures

   The WTO Agreement on Subsidies and Countervailing
    Measures disciplines the use of subsidies, and it regulates
    the actions countries can take to counter the effects of
    subsidies.

   Under the agreement, a country can use the WTO’s
    dispute-settlement procedure to seek the withdrawal of
    the subsidy or the removal of its adverse effects.

   Or can launch its own investigation and ultimately charge
    extra duty (“countervailing duty”) on subsidized imports
    that are found to be hurting domestic producers.




                                                                  5
National & International
Interests Involved
   Australia

   Brazil

   Thailand

   ‘ACP Countries’ – African Caribbean Pacific Countries

   India




                                                            6
    Position of Main Parties


Complaints by Australia (WT/DS265), Brazil (WT/DS266) and
Thailand (WT/DS283).

    All 3 complaints addressed the same concern: That the current
    regulation and related instruments and measures taken
    thereunder had appeared to be inconsistent with:

   Articles 3.3, 8, 9.1, 10.1 and 11 of the Agreement on Agriculture,

   Articles 3.1 and 3.2 of the Subsidies and Countervailing Measures
    (SCM) Agreement; and

   Articles III:4 and XVI of GATT 1994.
                                                                     7
Position of Main Parties
   The Complaining Parties claimed the European
    Communities provided export subsidies for sugar in excess
    of its reduction commitment levels.




                                                                8
Position of Main Parties
   The Complaining Parties alleged that such subsidies in
    excess of the EC‘s reduction commitment levels were
    provided to exports of C sugar as well as to sugar equivalent
    in volume to sugar imported into the EC under preferential
    arrangements with certain the ACP Countries and India.




                                                                9
Reasons for Positions
        The EU is protecting its sugar farmers from
         external competition.

        This causes higher sugar prices in the EU
         compared to world market prices.

        Furthermore, the EU subsidises the production of
         sugar to the extent that domestic supply exceeds
         domestic demand.

        Consequently, the EU sugar farmers dump their
         excess supply of sugar on the world market
         thereby depressing the world price on sugar.

        The result-a distortion of the global production of
         sugar, which reduces the efficiency in the world
         economy and overall wealth.

                                                            10
Reasons for Positions
        Brazil had argued that EU export subsidies on
         sugar from mostly former European colonies in
         Africa, the Caribbean and the Pacific should be
         counted within, not in addition to, the EU's agreed
         limits.

        protectionist policies have cost Brazil, the
         world’s biggest sugar exporter, $494 million
         of potential earnings in 2002. In Ethiopia,
         Mozambique, and Malawi the cost was $238
         million since 2001.




                                                           11
Panel Decisions
15 October 2004

   Exports of sugar exceeds commitment levels.

   Producers/exporters of ACP/India equivalent sugar received
    subsidies.

   Producers/exporters of C sugar that exceed the European
    Communities' commitment levels receive payments on
    export by virtue of governmental action.

   The EC had failed to demonstrate that its exports of C sugar
    and ACP/India (equivalent) sugar that exceed the European
    Communities' commitment level were not subsidized.

                                                                   12
    Panel Decisions
15 October 2004

   The EC, through its sugar
    regime, acted
    inconsistently with its
    obligations under Articles
    3.3 and 8 of the
    Agreement on Agriculture.

   The EC nullified or impaired
    benefits accruing to Brazil
    under the Agreement on
    Agriculture.

                                   13
Appeal Timeline
   13 January 2005
    The European Communities notified its intention to
    appeal certain issues of law and legal interpretations
    developed by the panel.

   The Panel upheld its findings that the European
    Communities acted inconsistently with its obligations
    under Articles 3.3 and 8 of the Agreement on Agriculture
    by providing export subsidies on sugar in excess of its
    commitment levels specified in its schedule.




                                                               14
Implementation

The Panel recommended that the Dispute Settlement
Body request the European Communities to bring its EC
Council Regulation No. 1260/2001, as well as all
other measures implementing or related to the European
Communities' sugar regime, into conformity with its
obligations in respect of export subsidies under the
Agreement on Agriculture.




                                                         15
Implementation Timeline

   13 June 2005
    The European Communities informed the DSB of its
    intention to implement the recommendations and rulings.

   09 August 2005
    The complaining parties informed the DSB that the parties
    were unable to reach agreement in a reasonable period of
    time for implementation.




                                                                16
Implementation Timeline
   30 August 2005
    The parties jointly requested Mr. A.V. Ganesan (an
    independent, third party body) to act as an arbitrator.

   05 September 2005
    Mr. Ganesan accepted the appointment


   28 October 2005
    The award of the arbitrator was circulated to Members, in
    which the arbitrator determined that the reasonable period
    of time is 12 months and 3 days expiring on 22 May 2006.




                                                                 17
Implementation

In addition to this settlement, at the DSB meeting on 27
September 2005, the complaining parties expressed their
concern about the European Communities’ decision to increase
exports of sugar by almost 2 million tons through a
declassification system.




                                                               18
Issues
   Improve interpretations of articles in Agreement on
    Agriculture.

   Improve timeliness of dispute settlements




                                                          19
Conclusion

   This dispute has ensured that there will be reform. The
    dispute has given force to reform, because prior attempts
    made to reform the EC sugar regime (dating back to 1972)
    have failed.

   The outcome of this dispute confirms that high cost
    producers such as the EC cannot circumvent their existing
    WTO export subsidy commitments by the unlimited disposal
    of sugar surpluses on world markets.

   The WTO said that by breaking agreed limits on export
    subsidies the EU was hurting developing countries by
    undercutting their producers' prices.


                                                                20
Questions ??




               21