World Trade Organization
WT/DS266/R
EUROPEAN
COMMUNITIES – EXPORT SUBSIDIES
ON
SUGAR
[COMPLAINT BY BRAZIL]
This proceeding
was initiated by three complaining parties, Australia, Brazil and Thailand.
In
communications dated 27 September 2002, Australia and Brazil requested
consultations with the European Communities pursuant to Article 4 of the
Understanding on Rules and Procedures Governing the Settlement of Disputes
("DSU"),
Article XXII:1 of the General Agreement on Tariffs and Trade 1994
("GATT 1994"), Article 19 of the Agreement on Agriculture, and Articles 4.1 and 30 of the
Agreement on Subsidies and Countervailing Measures ("SCM Agreement"), with respect to export subsidies
provided by the European Communities to its sugar industry. Australia
and Brazil held consultations with the European Communities in Geneva on 21 and
22 November 2002 but these consultations did not result in a resolution of the
dispute.
On 14
March 2003, pursuant to Article 4 of the DSU, Article XXIII of the GATT 1994, Article 19 of the Agreement on Agriculture, and Articles 4
and 30 of the SCM Agreement,
Thailand requested consultations with the European Communities with respect to
certain subsidies provided by the European Communities in the sugar
sector. Consultations were held in
Geneva on 8 April 2003 but failed to resolve the dispute.
On 21 July
2003, Australia, Brazil and Thailand requested the establishment of a panel
pursuant to Articles 4.7 and 6 of the DSU
and Article XXIII:2 of the GATT 1994.
At its
meeting on 29 August 2003, the Dispute Settlement Body (DSB) established a
panel pursuant to the requests of Australia (WT/DS265/21); Brazil (WT/DS266/21); and Thailand (WT/DS283/2), in accordance
with Article 6 of the DSU. At that meeting, the parties to the dispute
agreed to establish a single panel pursuant to Article 9.1 of the DSU with standard terms of reference.
……………………….
The
European Communities established, in 1968, a Common Organization (CMO) for
Sugar, the main rules of which are today set out in "Council Regulation
(EC) No. 1260/2001 on the common organization of the markets in the sugar
sector" (the Regulation), dated 19 June 2001. The Regulation is valid for marketing years 2001/2002 to
2005/2006 and the information below refers to those years.
The
Regulation sets out the basic rules with respect to, inter alia, the intervention prices for raw and white sugar,
respectively; the basic price and the
minimum price for beet; A and B quotas
as well as C sugar; import and export licences; levies; export refunds;
and preferential import arrangements.
…………………………….
Brazil
requests, for the reasons set out in its submission, that the Panel make the
following rulings:
·
the EC violates
Article 9.1(a) of the Agreement on
Agriculture since it does not subject to its reduction commitments all of
the sugar to which it grants direct export subsidies;
·
the EC accords
subsidies within the meaning of Article 9.1(c) of the Agreement on Agriculture to its exports of C sugar; the EC therefore grants subsidies in excess
of its quantity reduction commitment for sugar inconsistently with Articles 3.3
and 8 of the Agreement on Agriculture;
·
the export
subsidies that the EC grants to A and B quota sugar and to ACP/India sugar are
subject to the EC's reduction commitments for sugar; the EC therefore grants subsidies in excess of its quantity
reduction commitment for sugar inconsistently with Articles 3.3 and 8 of the Agreement on Agriculture; and
·
the EC's export
subsidies for quota sugar, C sugar and ACP/India equivalent sugar are
granted inconsistently with Articles 3.1(a) and 3.2 of the SCM Agreement;
·
alternatively,
if the Panel finds that the footnote is a valid qualification of the EC's
substantive obligations under the Agreement
on Agriculture, the EC is not complying with the terms of its footnote and
is thus violating Articles 3.3, 8 and 9.1 of the Agreement on Agriculture.
·
alternatively,
if the Panel finds that the EC's subsidies on sugar are not export subsidies
within the meaning of Article 9.1 of the Agreement on Agriculture, these subsidies are export subsidies that
are applied in a manner which results in, or threatens to lead to,
circumvention of the EC's export subsidy reduction commitments and are
therefore inconsistent with Article 10.1 of the Agreement on Agriculture.
Brazil also requests that the Panel recommend to the DSB, in accordance with Article 19.1 of the DSU and Article 4.7 of the SCM Agreement, that the European Communities bring its export subsidies for sugar into conformity with its obligations under the Agreement on Agriculture by withdrawing without delay the export subsidies for sugar inconsistent with the Agreement on Agriculture.
The Complainants have provided prima
facie evidence that the European Communities' exports of sugar exceeds its
commitment levels since 1995 and in particular since the marketing year
2000/2001.
The Complainants have also provided prima
facie evidence that producers/exporters of ACP/India equivalent sugar that
exceed the European Communities' commitment levels receive subsidies within the
meaning of Article 9.1(a) of the Agreement
on Agriculture.
The Complainants have provided prima
facie evidence that producers/exporters of C sugar that exceed the European
Communities' commitment levels receive payments on export by virtue of
governmental action: (i) through sales
of C beet to C sugar producers below their total costs of production; and (ii) in the form of transfers of financial
resources, through cross-subsidization resulting from
the operation of the EC sugar regime, within the meaning of Article 9.1(c) of the Agreement on Agriculture.
In light of Article 10.3 of the Agreement on Agriculture, the Panel
reaches the conclusion that the European Communities has not demonstrated that
its exports of C sugar and ACP/India (equivalent) sugar that exceed the
European Communities' commitment level are
not subsidized.
Consequently, the Panel finds that the
European Communities has been acting inconsistently with its obligations under
Articles 3.3 and 8 of the Agreement
on Agriculture by providing export subsidies on sugar within the meaning of
Articles 9.1(a) and 9.1(c) of the Agreement
on Agriculture, in excess of the quantity commitment levels specified in
Section II, Part IV of its Schedule.
………………….
The Panel concludes that:
q
the European Communities' budgetary
outlay and quantity commitment levels for exports of subsidized sugar is
determined with reference to the entry specified in Section II, Part IV of its
Schedule and the content of Footnote 1 in relation to these entries is of no
legal effect and does not enlarge or otherwise modify the European Communities'
specified commitment levels.
q
the European Communities' quantity
commitment level for exports of sugar pursuant to Articles 3.3, and 8 of the Agreement on Agriculture is 1,273,500
tonnes per year, with effect from the marketing year 2000/2001.
q
the
European Communities' budgetary outlay commitment level for exports of sugar
pursuant to Articles 3.3, and 8 of the Agreement
on Agriculture is €499.1 million per year, with effect from the marketing
year 2000/2001”.
q
the Complainants have provided
prima facie evidence that since 1995 the European Communities' total exports of
sugar exceeds its quantity commitment level. In particular, in the marketing
year 2000/2001 the European Communities' exported 4,097,000 tonnes of
sugar, i.e. 2,823,500 tonnes in excess of its commitment level.
q
there is prima facie evidence that
the European Communities has been providing export subsidies within the meaning
of Article 9.1(a) of the Agreement
on Agriculture to what it considers to be exports of "ACP/India
equivalent sugar" since 1995.
q
there is prima facie evidence that
the European Communities has been providing export subsidies within the meaning
of Article 9.1(c) of the Agreement
on Agriculture to its exports of C sugar since 1995.
q
there is prima facie evidence that
the European Communities has been providing export subsidies within the meaning
of Article 9.1(c) of the Agreement
on Agriculture to its exports of C sugar since 1995.
Therefore, the Panel concludes that the European Communities, through its sugar regime,
has acted inconsistently with its obligations under Articles 3.3 and 8 of the Agreement on Agriculture,
by providing export subsidies within the meaning of Article 9.1(a) and (c)
of the Agreement on Agriculture in excess of (i) its quantity commitment level specified in Section
II, Part IV of its Schedule, which since the marketing year 2000/2001 is for
1,273,500 tonnes of sugar and (ii) its budgetary outlay commitment level
specified in Section II, Part IV of its Schedule, which since the marketing
year 2000/2001 is €499.1 million per
year.
Since Article 3.8 of the DSU provides that "[i]n cases where
there is an infringement of the obligations assumed under a covered agreement,
the action is considered prima
facie to constitute a case of nullification or
impairment", the Panel concludes that – to the extent the European
Communities has acted inconsistently with its obligations under the Agreement on Agriculture –
it has nullified or impaired benefits accruing to Brazil under the Agreement on Agriculture.
In light of the above conclusions, the
Panel recommends that the Dispute Settlement Body request the European Communities to
bring its EC Council Regulation No. 1260/2001, as well as all other measures
implementing or related to the European Communities' sugar regime, into
conformity with its obligations in respect of export subsidies under the Agreement on Agriculture.
The Panel is aware of the concerns and
interests expressed, in the context of these proceedings, by several developing
countries, with regard to their continued preferential access to the EC market
for their sugar exports.
Pursuant to Article 19.1 of the DSU, the Panel suggests that in bringing
its exports of sugar into conformity with its obligations under Articles 3.3 and
8 of the Agreement on Agriculture,
the European Communities consider measures to bring its production of
sugar more into line with domestic consumption whilst fully respecting its
international commitments with respect to imports, including its commitments to
developing countries.
In this regard, the Panel notes the
recent statement of the European Communities on 14 July 2004 that the
European Communities "fully stands by its commitments to ACP countries and
India" and that with the reform of its sugar regime, the ACP countries and
India will "get a clear perspective, keep their import preferences and
retain an attractive export market."