WTO rules against EU sugar subsidies, bloc to appeal

BRUSSELS, (AFP) - The European Union has confirmed that the World Trade Organization has ruled its subsidies for sugar production are illegal, but said it would appeal.
The EU's executive commission said a WTO panel had upheld an interim ruling that found in favor of a complaint by Australia, Brazil and Thailand against the bloc's regime for sugar production and exports.
"We are dissatisfied with this ruling and will appeal it," EU Agricultural Commissioner Franz Fischler said in a statement.
Brazil's Foreign Ministry said it was very satisfied with the ruling, calling it "an important step toward ending distortions in world agricultural trade."
The three complainant nations are in particular opposed to EU preferential treatment for sugar imports from poorer African, Caribbean and Pacific countries and from India.
In July last year, the trio took WTO action against a system of production and export subsidies for EU sugar farmers that campaigners argue completely outweigh any EU preferential help given to producers in poorer countries.
Fischler said that despite the WTO ruling -- which had yet to be made public at the organization's Geneva headquarters -- the EU would not be deterred from undertaking "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," he said.
Fischler is pushing for the bloc to bring down its guaranteed prices and quotas for sugar producers from July 2005, in the face of resistance from some EU member states.
The commission also wants EU sugar subsidies to be "decoupled" from actual levels of production, so that in future there is no incentive to over-produce and dump excess sugar on the developing world.
But the EU would continue to reserve preferential terms for sugar exports from certain countries.
According to the commission, the WTO panel ruling on the sugar dispute concluded that the EU has been exporting more sugar with export subsidies than it is permitted to do under a WTO agreement.
The panel found that one aspect of the EU's sugar regime, regarding re-exports of sugar made in preferred countries, "has no legal effect."
"It further considers that exports of EU sugar produced outside the quotas -- 'C sugar' -- benefit from export subsidies," the commission said.
EU Trade Commissioner Pascal Lamy said the points criticized by the WTO panel were actually allowed under the Uruguay Round of global trade negotiations.
"The EU will abide by its international obligations," he said.
"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."