Brazil Takes Aim at EU on Sugar Subsidies

ipsnews.net Mario Osava and Gustavo Capdevila

The efforts of the Asia, Caribbean and Pacific group (ACP) in Brasilia proved useless Friday, as the former European colonies failed to dissuade Brazil from following through on its complaint at the World Trade Organisation (WTO) against European sugar export subsidies

RIO DE JANEIRO, Feb 7 (IPS) - The Brazilian government's inter-ministerial Chamber of Foreign Trade had decided a day earlier to request the designation of a special WTO panel, a step in the dispute settlement process, to study the legality of both the European Union's subsidies for its sugar exports and the United States' subsidies for cotton producers. The previous step of consultations has been completed in the two cases, and now a decisive phase of arbitration can begin at the WTO. Brazil rejects the notion that a victory in the dispute would mean an end to the import preferences granted by the EU to the ACP countries for their sugar, or that it would hurt these mostly poor economies. Delegates from Mauritius, Fiji, Guyana, Swaziland and Belize, speaking in Brasilia on behalf of the 17 ACP sugar-exporting countries, said their exports to the EU are vital to their economies and that they fear a decline in sugar revenues. The sugar trade allows the ACP countries to obtain income that would be impossible through other products, as the EU pays them the rate set within the European bloc, which is more than three times the sugar price on the international market. EU Trade Commissioner Pascal Lamy also paid a visit to Brazil to pressure the government. Last week he warned the Luiz Inácio Lula da Silva government that its legal manoeuvres at the WTO would ultimately hurt the ACP countries. But Brazil's trade authorities argue that their complaint before the WTO, supported by Australia, is not aimed at the EU's preferential conditions for sugar imports from ACP countries, and therefore should not affect this form of development assistance to those nations. The target of the legal action, say the officials, is subsidised exports. The EU imports nearly 1.6 million tons of unrefined sugar from the ACP group at approximately 620 dollars a ton, and then refines and re-exports it to other markets at around 200 dollars a ton. On top of the sugar imported from the ACP countries are the 3.6 million tons produced within the EU, which the bloc also exports under hefty subsidies, for some 5.2 million tons of sugar competing on other markets under ”disloyal” terms, bringing down prices worldwide, say the Brazilian government and sugar industry leaders. The EU agreement with the ACP ”is not at risk,” says Elizabete Serodio, an international negotiations consultant for UNICA, the Sao Paulo sugar agro-industry union, an umbrella of farmers and companies representing two-thirds of Brazil's sugar output. The EU Court of Auditors report at the end of 2002 makes it clear that any adjustment necessary in the European sugar regimen will have to be in its domestic production, not in its imports from the ACP nations, Serodio told IPS. Furthermore, in the EU-ACP protocols of Lomé and Cotonou, the preferences for sugar imports, unlike for other products, were established for ”an unspecified period” and can only be modified if both sides agree, she pointed out. The EU is exerting pressure, including through the ACP countries, that are ”legitimate”, but Brazil and other exporters also ”have to fight to defend their interests” within the rules of the WTO, Serodio said. The international sugar trade stands at approximately 35 million tons a year, slightly more than a quarter of global consumption of 130 million tons. It is this context that makes the five or six million tons exported by the EU with subsidies such a distorting factor of unfair competition, she explained. Sugar industry analysts estimate that the European subsidies cause Brazil annual losses of 500 million dollars. Australia has already joined Brazil in the complaint filed with the WTO. Thailand could follow suit once it completes the consultation phase. As it waits for a decision from Bangkok, and to carry out further studies of the impacts of the EU sugar policy, Brazil has decided to put off requesting a WTO panel for two months. The sugar dispute is not the first time that developing countries have been on opposing sides, notes Rubens Ricupero, secretary-general of the United Nations Conference on Trade and Development (UNCTAD). ”And we will see many other examples of this kind of dispute in the near future,” Ricupero told IPS in Geneva. Just a few years ago was the banana case, in which Central America and countries like Ecuador and Colombia criticised the special conditions that the EU granted the product coming from the ACP nations, he said. Differentiated treatment by wealthy countries creates this sort of ”confrontation” between developing nations, ”which all compete among themselves, all trying to export their commodities, their agricultural or mineral products.” ”These arrangements are never the best solution” to help the poorest countries, says Ricupero. The ideal approach, he said would be to ”reduce the level of discrimination” and provide poor countries with security for development, allowing them to specialise in the areas in which they are most competitive. The smaller countries of the ACP ”will not have much of a chance” in competing with the geographically larger nations like Brazil and Australia ” for a simple reason: productivity in sugar is a function of the availability of new land,” said the UNCTAD chief. Sugar productivity depends on land because it is the kind of product that can only be profitable if produced on a massive scale, he said. (END)