WTO raises stakes in EU sugar row

The World Trade Organisation (WTO) yesterday increased the pressure on the European Union (EU) to make sweeping reforms of its sugar regime by finding that subsidies paid under the policy violated global trade rules.

Ireland has already objected to recent EU Commission proposals to reform its sugar regime.

The preliminary ruling, in a case brought by Brazil, Thailand and Australia, is also expected to strengthen the hand of agricultural exporting countries that want wealthy nations to agree to deep cuts in their farm support spending as part of the Doha global trade round.

Yesterday's decision by a WTO disputes panel follows a WTO ruling in June in favour of a complaint by Brazil that $12.5 billion (€10.3 billion) of subsidies paid by the US to its cotton farmers were illegal.

Mr Celso Amorim, Brazil's foreign minister, expressed "great satisfaction" with the ruling, calling it "another important step in eliminating distortions in the international market".

The European Commission, which handles trade policy on behalf of the 25 EU member states, declined to comment. The complex EU regime has long been criticised as a wasteful programme that supports high-cost European farmers . However, it is strongly defended by some poor African, Caribbean and Pacific countries, from which the EU guarantees to buy sugar at more than three times the world price.

The ruling is expected to add impetus to recent proposals made by the commission for changes to the sugar regime, in the face of resistance from France and other sugar producers.

Ireland also voiced strong opposition to the proposals and the Minister for Agriculture, Mr Walsh said they were a direct threat to the 1,000 jobs in the processing and supply industry as well as to the 3,800 farmers growing sugar beet. The proposals, if carried through, would also hit Greencore, the State's only sugar beet processor.

If the WTO decision stands, it is likely to require even more radical reforms of the regime than put forward in the EU Commision proposal.

Trade diplomats said the WTO tribunal found EU domestic support for sugar indirectly subsidised exports of surplus production and violated the EU's commitment to limit export subsidies.

The WTO is expected to confirm the preliminary ruling later this year. It may then go to appeal, a process which could take a year or longer to complete.

The decision is likely to have an impact on the Doha trade negotiations . As part of a WTO agreement reached last weekend, the EU committed itself to eliminating its farm export subsidies, while the US agreed to negotiate curbs on its food aid and export credit programmes. - (Financial Times Service)