EUROPE: Loses Sugar Appeal at W.T.O.

The World Trade Organization's highest court issued a final
ruling Thursday ordering the European Union to stop illegally dumping
subsidized sugar on global markets or face punishment.

The decision by the W.T.O.'s appellate court in Geneva gave the
European Union up to 15 months to bring itself into compliance with
global trade rules. The panel rejected calls by Brazil, Thailand and
Australia, which filed the original complaint, for a 90-day deadline to
comply.

The verdict was nonetheless another victory for Brazil, after the
United States lost a similar appeal last month over its cotton
subsidies. Brazil, the world's largest sugar exporter and a major
cotton producer, has taken the lead at the W.T.O. in arguing that
subsidies hurt developing countries by encouraging overproduction,
creating excess that is then dumped on world markets.

"These two decisions have completely changed the way subsidies for
agricultural products are viewed in international trade," Eduardo
Pereira de Carvalho, president of Unica, Brazil's largest sugar
industry association, said. "And that opens the door for developing
countries."

Still, it is unclear how the European Union will respond to the
ruling. Europe and the United States have argued that their subsidy
reductions should be part of continuing efforts to liberalize
agriculture under the Doha round of trade talks that began in 2001.
Poor countries argue that they cannot wait for a deal, which is
unlikely to come before the end of 2006 at the earliest.

In Brussels, European Union officials criticized the latest ruling,
but said they would take it into consideration as they set about
overhauling their sugar export subsidy system, which costs some $2
billion a year and is being revamped for the first time in 35 years.

"We presented our case forcefully and I had hoped that the appellate
body would take greater account of our arguments," Mariann Fischer
Boel, the European agriculture commissioner, said. "Naturally, I will
take account of this verdict when I finalize the reform proposals we
are due to publish on June 22."

The European Union was already addressing its subsidies program
because of the high price of sugar in Europe and because advocacy
groups like Oxfam had long criticized it for its distortions of world
markets. The European proposal envisions cutting the minimum price of
sugar in Europe by a third and reducing the export subsidies.

Roberto Azevedo, a senior trade official at Brazil's foreign
ministry in Brasília, urged the European Union to comply with the
ruling "in the shortest possible time frame."

Last month, the W.T.O. gave Washington until July 1 to get rid of
$3.2 billion in annual subsidies to cotton farmers. The Bush
administration has said that it will comply.

Last year, a panel of W.T.O. experts found that the European Union
exported about 4 million metric tons of sugar in 2001, the period under
investigation, or about three times what global trade rules allow. The
appeals court upheld those findings.

Brussels appealed the W.T.O.'s decision in January, arguing that it
did not directly subsidize more than 1.3 million metric tons of exports
- the ceiling set during an earlier trade round. The W.T.O., however,
upheld an earlier ruling that found that farmers were able to sell
another 2.7 million tons of sugar at artificially low prices on global
markets because of Europe's sugar system.

Todd Benson contributed reporting from São Paulo, Brazil, for this article, and Paul Meller from Brussels.

• 181 Food and Agriculture