Australia Takes Fight on EU Sugar Subsidies to the WTO

Australia put its case before a World Trade Organisation panel in Geneva overnight hearing Australia, Brazil and Thailand's challenge to the European Communities' (EC) sugar export subsidies, Trade Minister Mark Vaile announced today.

“Australia is challenging the EC because we believe the EC is exporting more subsidised sugar than it is legally entitled to under WTO rules and also exceeds its agreed limits on budgetary support for such subsidies,” Mr Vaile said.

Despite being one of the world's highest cost producers, the EC is the second largest sugar exporter, with exports around 5 million tonnes a year (compared to Australia's exports of around 4.2 million tones). The EC spends around EURO 7 billion (A$11.3 billion) in support of its sugar sector, including more than EURO 1 billion (A$1.6 billion) on export subsidies.

At the panel hearing, Australia strongly rebutted arguments made by the EC in defence of its regime, which included claims that Australia, Brazil and Thailand were acting in bad faith by launching this WTO case.

“This case is important for Australia, and other competitive sugar exporters, because if successful it will require the EC to change its sugar regime which has a highly distorting and depressive effect on world sugar prices,” Mr Vaile said.

“The case also has implications for efforts in the Doha round of trade negotiations to eliminate all agricultural export subsidies. The Australian sugar industry has strongly supported the Government's action in taking this case.”

A large number of other interested WTO Members will address the panel as third parties in the case. These include members of the African, Caribbean and Pacific (ACP) group of countries which currently have preferential access to the EC's sugar market. The ACP countries have expressed concerns about the implications of this case for them. However, Australia, Brazil and Thailand have consistently explained that the case is about the EC's breach of its WTO commitments and does not challenge the preferential access provided by the EC to the ACP countries.

A second panel session will take place 11-12 May this year, with an interim report due in July and the final decision expected in September this year. The panel's report is appealable on points of law to the WTO's Appellate Body.

The text of Australia's statement to the panel is available on DFAT's website.

Contact: Matthew Doman on 02 6277 7420 Nicole Guihot (Departmental) 02 6261 1555