EU condemns the WTO sugar challenge

In a press release on July 10th 2003 the European Commission condemned the Brazilian, Australian and Thai challenge to the EU's 'C' sugar exports, claiming it was 'nothing less than an attack on the EU's trade preferences for developing countries'. The Commission argued that the challenge risks 'undermining the benefits of the EU regime for many sugar-dependent developing countries, especially ACP countries'. EU Trade Commissioner Pascal Lamy maintained that the WTO action could 'destabilise the sugar-dependent economies of small ACP countries', whilst merely deflecting attention form the real causes of depressed world market prices, namely the rapid expansion of Brazilian and Australian sugar exports (from 1.6 million tonnes to 12 million tonnes in the case of Brazil). Comment: While the Commission maintains that EU exports of sugar are largely the result of the preferential import of 1.9 million tonnes of sugar, the reality is that the EU has been exporting around 5 million tonnes per annum in recent years, with the system of quota administration within the EU encouraging overproduction. The Commission implies that the EBA preferences extended to LDCs are allowing increased sugar exports from developing countries. However the EU maintains in place a maximum-supply-needs ceiling which limits the total amount of preferential sugar imported into the EU. Increased LDC exports of sugar are thus at the expense of ACP beneficiaries of the special preferential sugar arrangement. This will remain the case until the EU raises the maximum-supply-needs ceiling or LDCs are given full duty-free access in 2009. While the European Commission maintains that the WTO challenge is likely to destabilise ACP sugar-dependent economies, the eventual extension of CAP reform to the sugar sector, involving a shift from price support to direct aid to farmers, is likely to profoundly affect the value of sugar preferences extended to ACP sugar suppliers. The prospect of sugar-sector reform may however have been deferred by the June 26th 2003 decision to retain the vast majority of the funds generated by 'modulation' for investment in rural development rather than additional sectoral reform.In a press release on July 10th 2003 the European Commission condemned the..