WTO Ruling Deals Blow to EU Sugar Subsidies, Sparking Reform Plans

Strategic Insights -

The European Union was dealt a significant blow yesterday when a World Trade Organisation panel confirmed that its subsidised sugar policy is illegal, sparking intense debate over plans to reform support for sugar farmers. The ruling, made in response to a case brought by Brazil and Australia, has set off alarm bells among sugar producers in the EU, with shares in major companies like Ebro Puleva and Tate & Lyle plummeting. The EU's executive body, the European Commission, has proposed a reform that would cut sugar prices, but the move has been met with resistance from some poor sugar-growing nations in the African, Caribbean and Pacific region.

Key Takeaways:

  • The EU's subsidised sugar policy was found to be illegal by a World Trade Organisation panel, following a case brought by Brazil and Australia.
  • The ruling could lead to significant changes in the EU's sugar regime, including potential cuts to production quotas and subsidies for farmers.
  • The European Commission has proposed a reform that would cut sugar prices, but the plan is opposed by some poor sugar-growing nations that have special quotas allowing them to sell to the EU market at an artificial price.
  • Mariann Fischer Boel, the EU's agriculture commissioner, has stated that she will push for an even more radical reform, aiming to cut the support price by more than the originally proposed 33 per cent.
  • The reform plans have put developing countries in a difficult position, with some likely to benefit from a rise in the world price and others facing a loss of revenue.
  • Oxfam has argued that the EU should cut production quotas for its own farmers, rather than cutting the price of sugar, to protect poor developing countries' preferential access to the EU market.

Statistics:

  • 33 per cent: The proposed cut in support price for sugar farmers, which Mariann Fischer Boel has outlined as insufficient.
  • 20 per cent: The alternative proposal by 19 least-developed countries, which would see the price cut over a period of 10 years.
  • 10 countries: The number of countries that have written to the European Commission requesting a slower and smaller price cut.
  • 2009: The year in which Mozambique, a least-developed country, will gain duty-free access to the EU sugar market.

Sources:

  • World Trade Organisation
  • The Financial Times
  • "OECD Agricultural Outlook 2008", Organisaton for Economic Co-operation and Development