WTO Panel on the Sugar Regime

> WTO Panel on the Sugar Regime

(posted on 13/09/04) (updated on 17/09/04)

The WTO Panel on the EU sugar regime officially presented its report on 8 September to the parties of the dispute, namely Australia, Brazil and Thailand (for the complainants) and the EU (as respondent). The official report comes one month after the interim report (released on the 4th of August 2004), period during which parties to the dispute may make comments on the document. As a general principle, the substance of the legal reasoning of the interim report is almost never changed and is reflected in the final report. The official report is due for public circulation, tentatively on 23 September 2004, date at which the count down for adoption of the panel report or appeal will start.

What is the status of the report?

The report is not yet a report of the WTO as an organization per se. Indeed, for a report to be considered as a WTO report, it should be adopted by the Dispute Settlement Body (DSB) of the WTO which comprises all members of the WTO General Council (article 16 of the Understanding of the rules and procedures governing the DSB). If there is no appeal from the EU, the adoption of the final report by the DSB should take place by the end of November 2004.

Main Decisions of the Panel on the Sugar Regime

  • On the first count, the panel has upheld the complainants charge that EU domestic support given for the production of A and B sugar, which is limited by quota and used largely to fill domestic demand, acts to cover losses incurred by EU farmers selling sugar produced in excess of these quotas at low prices on the world market.

The complainants had argued that by subsidizing the export of this so-called C sugar, the EU was violating its Uruguay Round export subsidy reduction commitments that apply only to subsidies given to the export of A and B sugar. Brazil had contended that the EU is committed to only subsidising the export of 1 million tonnes of sugar, but that the EUs domestic support program resulted in the subsidisation of more than 4 million tonnes in the 2001-2002 marketing year. On its side, the EU had claimed that the exports of C sugar do not benefit from exports subsidies within the meaning of the Agreement on Agriculture and, subsidiarily, that C sugar exports are not in excess of its exports subsidies reduction commitments.

  • On the second count, the panel has upheld the complainants charge that the EU exceeded the volume of sugar it agreed to provide export subsidies for, as part of the Uruguay Round, by selling an additional 1.6 million tonnes of refined sugar onto the world market with the EU producer-processor funded export subsidies. That amount of sugar is equivalent to the 1.6 million tonnes of raw sugar the EU imports from India and ACP countries, which is exported in an effort to limit the supply in the EU market. The EU had argued that a footnote it inserted into its Uruguay Round schedule allowed it to subsidise the export of up to 1.6 million tonnes of this sugar.

However, the panel has asked the EU to implement the ruling in such a way that it would not derogate from its commitment to provide preferential access to India and the ACP and that ACP should keep import preferences and retain an attractive export market.

What is the next step?

The EU has already publicly announced that it will most likely appeal the report if it is not favourable to them. Article 16 of the Dispute Settlement Understanding (DSU) provides that a party must, within 60 days after the circulation of a panel report, notify the DSB of its intention to make appeal, unless a party decides to ask that the report be adopted at the following meeting of the DSB.

Since the appeal must be filed before adoption actually occurs, the effective deadline for filing an appeal is variable and could be as short as 20 days, but it can also be longer, i.e. up to 60 days. Thus, if the complainants want to shorten the deadline for the other party to file an appeal, it can do so by placing the panel report on the agenda for a DSB meeting (with a ten days notice) to occur on the 20th day after the panel report has been circulated. In practical terms, the EU would have to oppose to the adoption of the report immediately, should the complainants ask that the report be adopted during the DSB meeting, i.e. 20 days after circulation of the report, instead of 60 days.

The issue will then be taken up by the appellate body which, within 60 days (90 days exceptionally) from the notice appeal must issue a report. The panel report can only be appealed on issue of interpretation of law and only by parties to the dispute, not third parties. The appellate body will issue its report by January 2005, at earliest, or February 2005, at latest. Should the EU lose the appeal, it would have between 15 to 18 months (maximum) to comply with the report (article 21 DSU).