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Copyright 2005 The Financial Times Limited
Financial Times (London, England)

April 29, 2005 Friday
London Edition 2

SECTION: INTERNATIONAL ECONOMY; Pg. 8

LENGTH: 619 words

HEADLINE: WTO ruling against sugar policy boosts Brussels reform plan

BYLINE: By ALAN BEATTIE, RAPHAEL MINDER and FRANCES WILLIAMS

DATELINE: LONDON, GENEVA and BRUSSELS

BODY:


A World Trade Organisation panel confirmed yesterday that the European Union was illegally pushing subsidised sugar on to the world market, adding impetus to controversial plans by the EU's executive body to reform support for sugar farmers.

Shares in European sugar producers including the Spanish company Ebro Puleva and the UK companies Tate & Lyle and Associated British Foods, which owns British Sugar, fell sharply on the news.

Planned cuts in sugar prices under the European Commission's reform proposal, which will be re-examined in the light of yesterday's ruling and published in June, are likely to disappoint sugar farmers from some European and developing countries who fear a sharp loss of revenue.

Brazil and Australia, which brought the case to the WTO, said yesterday's final ruling, upholding an earlier decision, vindicated their view that the EU's sugar regime depressed the world price and hurt their producers.

The EU sets quotas for domestic production and gives its farmers a guaranteed price, currently more than three times world levels, a policy that the WTO said implicitly subsidises EU exports.

David Spencer, Australia's envoy to the WTO, said: "I hope the European Union will take the decision immediately to limit exports and subsidies."

Last year Franz Fischler, the then agriculture commissioner, said he wanted a cut of 33 per cent in the support price over three years.

The proposal was opposed by some poor sugar-growing nations in the African, Caribbean and Pacific region that have special quotas allowing them to sell to the EU market at the artificial price.

An alternative proposal by a group of 19 least-developed countries would see the price cut by just 20 per cent, over a period of 10 years rather than three.

But their pleas seem unlikely to be answered. Mariann Fischer Boel, the agriculture commissioner, told the FT yesterday she would go even further than the original plan.

"Obviously 33 per cent is not far enough," she said. "I really want to make this a long-lasting reform and that is the way to do it."

The Danish commissioner said she was aware that getting approval for her more radical reform would require convincing EU farm ministers, who "are very conservative when it comes to sugar".

Last November, 10 countries, including Greece, Spain, Ireland, Hungary and Italy, wrote to the Commission asking for a slower and smaller price cut. But Ms Fischer Boel said she was ready for a tough fight.

The ruling, and the EU's reform plan, has put developing countries in a difficult position. Some, such as Brazil and Thailand, which backed the WTO case and have very competitive sugar producers, are likely to benefit from a rise in the world price as a result of EU reform.

Others such as Mauritius, which holds about a third of the quotas to sell into the EU, will lose out.

Some, such as Mozambique, which as a least-developed country will gain duty-free access to the EU sugar market from 2009 under a special agreement, are in an ambiguous position.

The sugar-producing group of least-developed countries did not comment yesterday. Oxfam, the London-based non-governmental organisation that has called for faster market access but a slower cut in price, argued that the EU should cut production quotas for its own farmers.

"This ruling should do nothing to threaten poor developing countries' preferential access to the EU market," said Phil Bloomer, head of Oxfam's Make Trade Fair campaign.

Mark Vaile, Australia's trade minister, said: "The WTO has confirmed that there is nothing to prevent the EU from observing both its treaty commitments to those developing countries as well as its WTO commitments to Australia, Brazil and Thailand." London stock market, Page 46

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