Brazil has challenged the world’s two trade superpowers by initiating dispute settlement processes Friday at the World Trade Organisation (WTO), tackling the subsidies the United States gives its cotton growers, and the European Union its sugar producers.

The Fernando Henrique Cardoso government called for consultations about the subsidies that U.S. cotton growers and exporters, and EU sugar producers and exporters receive from their respective governments.

The non-governmental humanitarian organisation Oxfam International says in a study released Friday that the United States spends 3.9 billion dollars a year to support its 25,000 cotton producers.

That is “more than three times the U.S. foreign assistance to Africa’s 500 million people,” according to the report.

The Britain-based Oxfam also states that the consumers and taxpayers in the 15 EU countries pay 1.5 billion dollars a year to place the bloc’s surplus sugar on foreign markets.

The Australian government also lodged a formal challenge Friday against the EU regarding the sugar question.

The requests for consultations, as were filed by both Brazil and Australia, mark the first step a WTO member country must take in beginning the dispute settlement process for defending a trade right that has allegedly been violated.

The next step, if consultations prove unable to resolve the dispute, is to petition for the creation of a special panel to hear the case.

Brazil’s two complaints are significant because they represent the first efforts to open up the WTO to handling lawsuits involving subsidies for farm commodities.

In an earlier food commodity dispute that had international implications — the clash between the EU and Latin American banana producers allied with the United States — subsidies were not involved.

The Brazilian challenge could have an impact on the closed-door negotiations taking place at the WTO to reform the accord that governs world trade in agricultural products.

In the farm trade debate, two groups have emerged: a protectionist bloc consisting of the EU, Japan, Switzerland, Norway and South Korea; and a bloc that favours greater liberalisation, led by the Cairns Group, which is made up of net agricultural exporters like Brazil, as well as the United States.

Jesús Zorrilla, one of the EU’s agricultural negotiators, commented that the Brazilian complaint “comes at a bad time”.

The Brazilians “have thrown a case at us that is going to cloud the climate of the negotiations and radicalise positions” on the WTO agricultural agreement reforms, Zorrilla said.

Pedro Camargo, secretary of international affairs for Brazil’s Agriculture Ministry, explained that the request for consultations with the EU and the United States was the result of a “difficult decision”.

The filing of the complaint, which Brasilia initially considered at mid-year, was delayed because it was necessary “to fully comprehend its significance before taking action,” said Camargo.

In the case of U.S. cotton, Brazil charges that Washington’s farm subsidies are “trade distorting” and have a “negative impact on the production and commercialisation of cotton in Brazil and worldwide.”

Oxfam has researched how U.S. protectionism has contributed to the sharp decline of international cotton prices, which in the 2001-2002 season caused revenue losses of 1.3 billion dollars for India, 1.0 billion for the already troubled Argentine economy, and 640 million dollars in lost revenue for Brazil.

In Africa, the policies meant negatives for Burkina Fasso: a one-percent decline in its gross domestic product (GDP) and a 12-percent reduction in its export income.

The same cause is cited for the fact that Mali’s GDP shrank 1.7 percent and its exports eight percent, while the GDP of Benin contracted by 1.4 percent and export suffered a nine-percent decline.

Oxfam stressed the importance of the case opened by Brazil at the WTO, saying, “If it succeeds, it will improve prospects for poverty reduction in a large group of cotton-dependent countries.”

As far as the European bloc’s sugar subsidies, Brazil focused on the surplus exports, identified as “C” grade sugar, sold abroad at a price below production costs and a volume of some 3.6 million tons annually.

The Brazilian petition mentions that the European bloc “imports approximately 1.6 million tons per year of raw sugar on preferential terms. This sugar is refined in the EU and subsequently re-exported at subsidised prices.”

EU negotiator Zorrilla responded that the bloc has respected its trade commitments since 1995, the year the WTO was created, and has maintained stable sugar production from that time.

“We are the leading importer of sugar in the world, ahead of the United States, Australia and Japan combined,” he said

The EU has not contributed to the decline in international sugar prices, said Zorrilla, blaming overproduction on countries outside the bloc.

The Oxfam study indicates that Brazil, Thailand and Australia are among the world’s most competitive exporters of the commodity, stressing that “if there were no protectionist sugar regimes in Europe, the United States and Japan, they would merit a substantial part of the additional sugar demand in international markets.”

Other low-income countries, including India, Colombia, Cuba and South Africa, are significant producers and would also benefit from greater trade opportunities for sugar.

And several least developed countries (LDCs), such as Mozambique, Malawi and Zambia, “are among the lowest cost producers of sugar in the world but Europe’s regime destroys their ability to reap much of the potential benefits of that advantage,” states Oxfam.

The mechanism for dispute resolution at the WTO establishes that the parties have 10 days to respond to the request for consultations and an additional 30-day period to schedule the meetings.

If 60 days after the consultations have begun there is still no resolution to the dispute, Brazil can request the creation of a special panel to issue a ruling on the case.

.

By Gustavo Capdevila
GENEVA, Sep 27 2002 (IPS)

Brazil has challenged the world’s two trade superpowers by initiating dispute settlement processes Friday at the World Trade Organisation (WTO), tackling the subsidies the United States gives its cotton growers, and the European Union its sugar producers.

The Fernando Henrique Cardoso government called for consultations about the subsidies that U.S. cotton growers and exporters, and EU sugar producers and exporters receive from their respective governments.

The non-governmental humanitarian organisation Oxfam International says in a study released Friday that the United States spends 3.9 billion dollars a year to support its 25,000 cotton producers.

That is “more than three times the U.S. foreign assistance to Africa’s 500 million people,” according to the report.

The Britain-based Oxfam also states that the consumers and taxpayers in the 15 EU countries pay 1.5 billion dollars a year to place the bloc’s surplus sugar on foreign markets.

The Australian government also lodged a formal challenge Friday against the EU regarding the sugar question.

The requests for consultations, as were filed by both Brazil and Australia, mark the first step a WTO member country must take in beginning the dispute settlement process for defending a trade right that has allegedly been violated.

The next step, if consultations prove unable to resolve the dispute, is to petition for the creation of a special panel to hear the case.

Brazil’s two complaints are significant because they represent the first efforts to open up the WTO to handling lawsuits involving subsidies for farm commodities.

In an earlier food commodity dispute that had international implications — the clash between the EU and Latin American banana producers allied with the United States — subsidies were not involved.

The Brazilian challenge could have an impact on the closed-door negotiations taking place at the WTO to reform the accord that governs world trade in agricultural products.

In the farm trade debate, two groups have emerged: a protectionist bloc consisting of the EU, Japan, Switzerland, Norway and South Korea; and a bloc that favours greater liberalisation, led by the Cairns Group, which is made up of net agricultural exporters like Brazil, as well as the United States.

Jesús Zorrilla, one of the EU’s agricultural negotiators, commented that the Brazilian complaint “comes at a bad time”.

The Brazilians “have thrown a case at us that is going to cloud the climate of the negotiations and radicalise positions” on the WTO agricultural agreement reforms, Zorrilla said.

Pedro Camargo, secretary of international affairs for Brazil’s Agriculture Ministry, explained that the request for consultations with the EU and the United States was the result of a “difficult decision”.

The filing of the complaint, which Brasilia initially considered at mid-year, was delayed because it was necessary “to fully comprehend its significance before taking action,” said Camargo.

In the case of U.S. cotton, Brazil charges that Washington’s farm subsidies are “trade distorting” and have a “negative impact on the production and commercialisation of cotton in Brazil and worldwide.”

Oxfam has researched how U.S. protectionism has contributed to the sharp decline of international cotton prices, which in the 2001-2002 season caused revenue losses of 1.3 billion dollars for India, 1.0 billion for the already troubled Argentine economy, and 640 million dollars in lost revenue for Brazil.

In Africa, the policies meant negatives for Burkina Fasso: a one-percent decline in its gross domestic product (GDP) and a 12- percent reduction in its export income.

The same cause is cited for the fact that Mali’s GDP shrank 1.7 percent and its exports eight percent, while the GDP of Benin contracted by 1.4 percent and export suffered a nine-percent decline.

Oxfam stressed the importance of the case opened by Brazil at the WTO, saying, “If it succeeds, it will improve prospects for poverty reduction in a large group of cotton-dependent countries.”

As far as the European bloc’s sugar subsidies, Brazil focused on the surplus exports, identified as “C” grade sugar, sold abroad at a price below production costs and a volume of some 3.6 million tons annually.

The Brazilian petition mentions that the European bloc “imports approximately 1.6 million tons per year of raw sugar on preferential terms. This sugar is refined in the EU and subsequently re-exported at subsidised prices.”

EU negotiator Zorrilla responded that the bloc has respected its trade commitments since 1995, the year the WTO was created, and has maintained stable sugar production from that time.

“We are the leading importer of sugar in the world, ahead of the United States, Australia and Japan combined,” he said.

The EU has not contributed to the decline in international sugar prices, said Zorrilla, blaming overproduction on countries outside the bloc.

The Oxfam study indicates that Brazil, Thailand and Australia are among the world’s most competitive exporters of the commodity, stressing that “if there were no protectionist sugar regimes in Europe, the United States and Japan, they would merit a substantial part of the additional sugar demand in international markets.”

Other low-income countries, including India, Colombia, Cuba and South Africa, are significant producers and would also benefit from greater trade opportunities for sugar.

And several least developed countries (LDCs), such as Mozambique, Malawi and Zambia, “are among the lowest cost producers of sugar in the world but Europe’s regime destroys their ability to reap much of the potential benefits of that advantage,” states Oxfam.

The mechanism for dispute resolution at the WTO establishes that the parties have 10 days to respond to the request for consultations and an additional 30-day period to schedule the meetings.

If 60 days after the consultations have begun there is still no resolution to the dispute, Brazil can request the creation of a special panel to issue a ruling on the case.

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