TRADE: EU Produces a Bitter Sweet Pill

By IPS Correspondents Reprint | | Print |

Stefania Bianchi

BRUSSELS, Sep 8 2004 (IPS) - Sugar producing countries and civil society groups have cautiously welcomed a WTO ruling against the European Union’s controversial sugar regime as a “triumph” for most developing countries, but warn that poorest sugar producers could be hit hardest.

The European Union (EU) will be forced to overhaul its sugar regime after the World Trade Organisation (WTO) ruled Wednesday (Sep. 8) that the bloc is illegally dumping millions of tonnes of subsidised sugar on world markets.

In a case brought by Brazil, Thailand and Australia against the EU, the WTO ruled that EU subsidies help farmers cover their fixed costs and enable them to grow additional amounts of sugar at low additional cost, which they then sell on the international market.

The ruling also found that the EU exports up to five million tonnes of sugar each year despite a commitment to reduce its subsidised exports to just over a million tonnes a year.

Wednesday’s ruling follows a preliminary WTO decision last month.

Civil society groups say the EU sugar regime depresses the world price by 17 percent and reduces imports of sugar by up to 10 million tonnes, destroying poor farmers’ livelihoods across the world.

The EU says there are no subsidies attached to these exports, but the panel of experts ruled that they are cross-subsidised by the high guaranteed prices paid for quota sugar.

While the verdict will be sweet news for large sugar producers such as Australia, Brazil and Thailand, poorer growers in Africa, the Caribbean and parts of the Pacific say that the ruling could signal the end of the sugar industry in their countries.

Subsidies are usually considered a threat to developing country agriculture, but in these three regions EU sugar policy benefits nations by guaranteeing their exports often three times the world price.

Mauritus, which produced 646,000 tonnes of sugar in 2001 is particularly concerned. “If the sugar protocol, in particular the guarantees are to be reviewed as a result of actions that the EU will have to take to comply with the panel’s recommendations, it is obvious that Mauritius as the largest beneficiary of the protocol will be seriously affected,” Mauritian trade official Sunil Boodhoo told IPS.

The ruling “will signify the demise of the sugar industry in Mauritius,” he said. “However hard we may try, we shall never be able to compete with Brazil, nor will the rest of the world.”

Many civil society groups praised the WTO ruling as a victory for developing countries, but they urged the EU to act responsibly when reforming the regime.

“This ruling is a victory for all developing countries,” Jo Leadbeater, head of Oxfam International’s EU advocacy office told IPS. “Crucially, the ruling does not affect the right of the EU to import sugar from the ACP and India on preferential terms. It is now up to the EU to stand by its development commitments and implement the WTO ruling in a way that protects these countries’ preferential access to the EU.”

Adam Harrison from the conservation group WWF said “what this ruling means for the ACP countries…depends entirely on how the EU reacts to the ruling. If they react, as they already have in their proposals for reform, by cutting the price they guarantee to pay, then ACP countries will suffer because they too will be faced with a price cut.”

He urged the bloc to get to the roots of the sugar problem. “If however, the EU reacted by tackling the key problem, which is the over-production of sugar in Europe…then countries like Mauritius and numerous other less developed countries could genuinely benefit from improved access to a valuable European market.”

The European Commission, the executive arm of the EU, acknowledged Wednesday that ACP countries could be at risk as a result of the WTO ruling.

“The ACP countries’ strong intervention against the challenge in the panel proceedings indicates that the case also threatens the value of the current preferential access arrangements for ACP countries and India which the EU has had in place for decades,” it said in a statement.

WWF says the EU must cut its sugar production by about eight million tonnes, grant preferential access to environmentally sustainable sugar from developing countries and use Common Agricultural Policy (CAP) money to finance development aid packages linked to raising environmental and labour standards in developing countries’ sugar industries.

Outgoing EU agriculture commissioner Franz Fischler had indicated Sunday (Sep. 5) that the EU is “very likely” to appeal against the anticipated WTO ruling. “The reaction of the panel is very negative…but we will continue to fight and defend our positions.”

But reacting to the ruling Wednesday the Commission said a decision whether to appeal would be made “in due course.” An EU appeal could delay the final outcome until early next year.