WTO RELEASES FINAL RULING IN EC SUGAR CASE

On 15 October the WTO panel in the case against the EC's export subsidies for sugar -- brought by Brazil, Thailand and Australia -- released its final report to the public. The report confirmed the panel's major findings, provided in earlier confidential rulings. The panel found that the EC subsidises sugar exports beyond the level formally notified to the WTO -- its so called commitment schedule -- and is in violation of the WTO Agreement on Agriculture (AoA) (see BRIDGES Weekly, 15 September 2004). The panel further found that sugar exports above the EC's commitment level amount to the equivalent of the sugar imported under preferential arrangements from the African, Caribbean and Pacific (ACP) countries and India, as well as of sugar produced in excess of EC sugar quotas.

EC scheduling error for C sugar

The complainants had argued that EC export subsidies for C sugar (sugar produced in excess of internal quotas) exceeded scheduled commitments. The EC had, however, brought the counterargument that this alleged breach resulted exclusively from an "excusable and common scheduling error," which the complainants had always been aware of but failed to take action on. The panel disagreed with the EC, reasoning that the "fact that a Member does not complain about a measure at a given point in time, cannot by itself deprive that Member of its right to initiate a dispute at some later point in time".

ACP and India sugar: footnote to EC's schedule has no legal effect

The EC had further argued that a footnote in its schedule of commitment excluded 1.6 million tonnes of sugar -- equivalent to the quantity that it imported from the ACP and India -- from the scope of its subsidies reduction undertaking. The panel dismissed this argument, holding that the footnote had no legal effect and could not enlarge or modify the EC's specified commitment levels. The panel, however, declined to rule on the complainants' claims under the Agreement on Subsidies and Countervailing Measures (SCM Agreement). This was because the findings under the AoA rendered such a ruling unnecessary, and because the parties had not sufficiently argued out their subsidiary claims relating to the SCM Agreement.

Enhanced third party rights and amicus curiae briefs

In its preliminary rulings, the sugar panel granted additional participation rights to all third parties in this case, going beyond what is currently available under the WTO Dispute Settlement Understanding (DSU). The panel refused, however, to consider an unsolicited petition -- a so called amicus curiae brief -- from Wirtschaftliche Vereinigung Zucker (WVZ), an association representing German sugar producers. Although the panel invited the parties to make comments on the brief in the interest of due process, it decided not to further consider the petition as it was filed late in the proceedings and was based on confidential information that Brazil had submitted during the panel hearings.

EC and ACP dissatisfied with the ruling

In a press release issued on the day of the public circulation of the sugar report, the EC announced its intent to appeal the decision and simultaneously proceed with its plans to reform the sugar sector (see BRIDGES Weekly, 30 June 2004). EU Trade Commissioner Pascal Lamy noted that "the WTO decision calls into question the texts and commitments unanimously agreed upon by all WTO Members during the Uruguay Round. The EU will abide by its international obligations. But at the same time we will defend the legitimate interests of EU sugar producers and the preferential access enjoyed by developing countries into the EU".

The ACP countries, of which fourteen were third parties to the case, have consistently cautioned that the survival of their economies would be threatened if the panel found in favour of the complainants. In the wake of the ruling, the Fiji Times described the ACP participation in the case as "a bitter-sweet experience arguing for special treatment with the world's biggest players". Nonetheless, trade specialists noted that the ACP should be reassured by the panel's comment that the EC should honour its commitments to the ACP and India under their preferential trade arrangements in the implementation of the ruling.

Commenting on the EC's intention to appeal, Jose Alfredo Graca Lima, Brazil's ambassador to the EC, lamented the fact that the implementation of WTO rulings tends to be longwinded because "what usually happens is that you win the case, a panel gives a decision and almost automatically there's been recourse to the Appellate Body... these things can drag on for many, many months''. Australian trade minister Mark Vaile described the ruling as a victory for Australian sugar farmers, however similarly cautioned that the outcomes most likely would not be implemented before March 2005 due to the appeal process.

The final panel report is available.

ICTSD reporting; "WTO reality not so sweet," FIJI TIMES ONLINE, 19 October 2004; "WTO rules against EU sugar subsidies, bloc to appeal," NEWS.DESIGNERZ.COM, 16 October 2004; "WTO decision a boost for Aussie sugar farmers," THE SYDNEY HERALD, 16 October 2004; "Brazil Favors Law Changes Over Fines to Resolve Trade Disputes," BLOOMBERG.COM, 15 October 2004; "WTO sugar ruling sparks EU appeal," BBC NEWS, 15 October 2004.