EU loses WTO appeal over sugar subsidies

Top trade court orders end to dumping, gives 15 months to comply


GENEVA - The World Trade Organization's highest court issued a final ruling yesterday ordering the European Union to stop dumping subsidized sugar illegally on global markets or face punishment.

The decision by the WTO's appellate court in Geneva gave the European Union up to 15 months to bring itself into compliance with global trade rules. The panel rejected calls by Brazil, Thailand and Australia, which filed the original complaint, for a 90-day deadline to comply.

The verdict was nonetheless another victory for Brazil, after Washington lost a similar appeal last month over its cotton subsidies. Brazil, the world's largest sugar exporter and a major cotton producer, has taken the lead at the WTO in arguing that subsidies hurt developing countries through overproduction and dumping on world markets.

"These two decisions have completely changed the way subsidies for agricultural products are viewed in international trade," Eduardo Pereira de Carvalho, president of Unica, Brazil's largest sugar industry association, said in Sao Paulo. "And that opens the door for developing countries."

It is unclear how the European Union will respond to the ruling. Europe and the United States have argued that their subsidy reductions should be part of continuing efforts to liberalize agriculture under the round of trade talks that began in 2001 in Doha, Qatar. Poor countries argue that they cannot wait for a deal, which is unlikely to come before the end of 2006 at the earliest.

In Brussels, Belgium, European Union officials criticized the latest ruling, but said they would take it into consideration as they set about overhauling their sugar export subsidy system, which costs about $2 billion a year and is being revamped for the first time in 35 years.

"We presented our case forcefully and I had hoped that the appellate body would take greater account of our arguments," Mariann Fischer Boel, the European agriculture commissioner, said in a statement. "Naturally, I will take account of this verdict when I finalize the reform proposals we are due to [be published] on June 22."

The European Union was addressing its subsidies program because of the high price of sugar in Europe and because advocacy groups like Oxfam had long criticized it for its distortions of world markets. Though details are sketchy, the European proposal envisions cutting the minimum price of sugar in Europe by a third and reducing the export subsidies.

Roberto Azevedo, a senior trade official at Brazil's foreign ministry in Brasilia, urged the European Union to comply with the ruling "in the shortest possible time frame." The WTO did not set a firm deadline, but a spokesman said that Europe would be expected to act within 15 months.

The WTO has given Washington until July 1 to get rid of $3.2 billion in annual subsidies to cotton farmers. The Bush administration has notified the WTO that it intends to comply.

The success of the two complaints at the WTO could give further impetus to Brazilian farmers who want their government to file another complaint, this time on American soybean subsidies, analysts said.

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