WTO rules EU's sugar subsidies unfair

Decision could spark additional challenges

August 05, 2004|By NEW YORK TIMES NEWS SERVICE

SAO PAULO, Brazil - Brazil scored its second triumph in less than two months at the World Trade Organization, which ruled that the European Union's sugar subsidies give its farmers an unfair advantage on global export markets, Brazilian officials said yesterday.

Sugar is one of the European Union's most heavily subsidized crops, and the government supports have helped European sugar producers become the second-largest exporters in the world, behind Brazil, which is the largest sugar producer.

The preliminary ruling was issued Monday, officials said. If it is upheld by the WTO next month, it could strengthen the hand of developing nations as they hammer out the details of a deal reached last weekend in Geneva, where the trade body's 147 members agreed to a negotiating framework to reduce farm subsidies in the rich nations by as much as 20 percent and cut import tariffs on everything from corn to soybeans.

The decision also could trigger a fresh wave of complaints at the WTO, which already had ruled in favor of Brazil in late June in a landmark case against the billions of dollars in annual subsidies that the United States pays cotton farmers.

"It's going to be very interesting to watch whether Brazil, in particular, is going to use its legal victories in cotton and now sugar to mount other cases," said Gary Hufbauer, a senior fellow and trade specialist at the Institute for International Economics in Washington. The organization describes itself as a private, nonprofit, nonpartisan research group devoted to the study of international economic policy, and is supported by an annual budget of $7 million from charitable foundations, private corporations and individuals.

"This is the really big question," Hufbauer said, "whether they're going to say, `OK, we've done enough and now it's time to negotiate,' or whether they say, `Well, we're on a roll, so let's bring another case.'"

The particulars of the ruling were not disclosed, but Brazilian officials said the decision favored their claims on most counts. The complaint, which Brazil filed in August last year along with Australia and Thailand, argued that the nearly $2 billion in annual export subsidies that the European Union pays its sugar farmers encourages overproduction and artificially depresses international prices.

The European Union sets quotas for sugar production for the European market, and farmers must export any surplus sugar at lower prices. In its complaint, Brazil accused the European Union of exporting more subsidized sugar than is allowed under global trade agreements.

Brussels has disputed that claim, insisting that Europe's practice of selling sugar bought from poor countries in Africa, the Caribbean and the Pacific basin should not be counted against permitted exports.

The WTO complaint brought by Brazil estimated that global sugar prices would rise almost 20 percent if Brussels scrapped its subsidies. Brazilian sugar producers claim they lose $500 million to $700 million in exports a year because of European subsidies.

Though Brazilian officials declined to discuss the ruling in detail, they said they were gratified.

"We're very satisfied," Clodoaldo Hugueney, the undersecretary for economic affairs at Brazil's foreign ministry, said by telephone from Brasmlia.

"This ruling, just like the cotton decision, confirms that there are immense distortions in international agricultural markets," Hugueney said.

In Brussels, Arancha Gonzalez, a spokeswoman for European Union Trade Commissioner Pascal Lamy, said European officials would not comment on the decision, Reuters reported. Many trade experts expect the European Union to appeal the decision if it is upheld next month.

The ruling came less than a month after the union's agriculture commissioner, Franz Fischler, proposed sweeping changes to Europe's 30-year-old sugar subsidy program.

Under the proposal, which was met with criticism from Europe's 60,000 sugar beet farmers, Brussels would cut minimum price guarantees for producers by a third and cut production quotas to discourage dumping excess output on overseas markets.

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