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EU-Brazil dispute over sugar

EU-Brazil dispute over sugar. Lisette Bez, Keisey Cambronne, Sarah Campbell October 5, 2010 . Outline. History & Context Main WTO issue Position of the EU & Brazil Decision Implementation or sanctions Proposal for resolving the issue. History: Brazil Sugar policies.

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EU-Brazil dispute over sugar

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  1. EU-Brazil dispute over sugar Lisette Bez, Keisey Cambronne, Sarah Campbell October 5, 2010

  2. Outline • History & Context • Main WTO issue • Position of the EU & Brazil • Decision • Implementation or sanctions • Proposal for resolving the issue

  3. 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

  4. 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

  5. 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).

  6. 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.

  7. Recent Updates • January 28th2010, 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.

  8. 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

  9. Sugar Production Among Major Producers

  10. 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

  11. Sugar Production: Companies, Factories, and Employment

  12. Distribution of EU Sugar Producers (1997-2000) • Chart showing figures of growth

  13. Distribution of Sugar Beet Production across Member States

  14. 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).

  15. WTO Laws Involved in Dispute: • Agreement on Agriculture: • 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 • 3.1, 3.2:Prohibition (prohibited subsidies) • 1.1:Definition of a Subsidy • GATT • Art.III:4: National Treatment on Internal Taxation and regulation • XVI: Subsidies

  16. 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.

  17. 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.

  18. The Panel ReportOctober 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.

  19. EU AppealOctober 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.”

  20. The Appellate Body ReportApril 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

  21. 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

  22. 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?

  23. Questions?

  24. Works Cited "EU Fights WTO Sugar Ruling." Food Navigator. 19 Oct. 2004. Web. 29Sept. 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. 29Sept. 2010. <http://www.wto.org/english/news_e/news10_e/dsb_18feb10_e.htm>. European Union. EU Agricultural Commissioner. Commission AppealsAgainst 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: Implicationsfor 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/14-ag_01_e.htm#art3_3

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