An end to EU sugar dumping?: implications of the WTO panel ruling in the dispute against EU sugar policies brought by Brazil, Thailand, and Australia

This brief paper examines the implications of a ruling of the World Trade Organization (WTO) dispute settlement panel, which found that EU sugar subsidies contravene WTO rules.The paper presents findings from the ruling as follows:the EU exports of around 2.7 million tonnes of what the EU claims to be unsubsidised sugar (so-called non-quota or 'C' sugar). The panel found that these exports are effectively cross-subsidised by EU support provided for the production of quota sugar. The EU is only able to export non-quota 'C' sugar at prices below the average total costs of production because the support prices for quota sugar are sufficient to cover the fixed costs of production, while world prices cover only their marginal coststhe panel also ruled that the EU is contravening its WTO commitments by subsidising the re-export of an amount equivalent to imports of sugar from the African, Caribbean, and Pacific (ACP) countries and India. These subsidised exports further exceed the EU’s permitted level of subsidised sugar exports. Crucially, the panel ruling does not affect the right of the EU to import sugar from the ACP and India on preferential terms. It is now incumbent on the EU to reassure ACP countries and India that it will undertake to implement the WTO ruling in a way that protects their preferential access to the EUthe sugar panel ruling specifically says that the EU should implement reforms in a way that protects preferential access for ACPs and India, and calls on the EU to 'fully respect its international commitments with respect to imports, including its commitments to ACP'.Based on these findings, the paper criticises the EU’s domestic timetable for sugar policy reform. It finds that the EU’s proposals for sugar reform fall far short of what will be required to bring EU sugar policies into compliance with WTO rules. Furthermore, from a development perspective, the proposals would also fail to end over-production and export dumping, and fail to increase imports from the poorest countries at remunerative prices.The paper recommends four key measures for EU reform:drastically cut the EU production quota by around one-third or 5.2 million tonnes to end all export dumping, facilitate an increase in imports from the least developed countries, and realign domestic production with consumptioneliminate all direct and indirect export subsidies with immediate effectimplement a programme of measures including increased aid and transitional assistance for ACP countries to compensate them for the erosion of their preferential accessimplement the reforms in a way that protects small-scale European farmers from sharp domestic adjustment costs.