WTO sugar ruling no immediate threat
Stabroek News
April 9, 2004
Guyana's sugar will continue to access the EU market long after the World Trade Organisation (WTO) panel rules on the subsidy challenge by Australia, Thailand and Brazil, but may suffer a reduction in its preferential price, industry sources say.
On April 1, the WTO panel began hearings into the case brought by the three leading world sugar producers against the EU for subsidised sugar exports.
Guyana has been advised that the hearing is very neutral at this stage and the EU has not lost its case by a long shot. Additionally, sources maintain that even if the WTO panel should rule against the EU, which is uncertain, the politics of sugar in the EU will assure a long transition into any new arrangement with sources in Guyana confident of continued access to that market. As it stands, the EU commissioners are on their way out and because of the politics of sugar, the incoming commissioners are unlikely to concede to any ruling, which would affect the EU's sugar industry. Guyana will benefit from this reluctance to affect negatively the sugar industry in the EU.
Both Dr Richard Bernal, head of the Regional Negotiating Machinery (RNM) and Dr Peter Gonsalves, a RNM WTO director indicated to Stabroek Business that the WTO panel ruling on this issue will be key to the future of the EU sugar regime.
However, Gonsalves notes that lobbying is underway by Guyana to secure, for as long as possible, access to the EU preferential regime. Other RNM sources insist that Guyana should do whatever it takes to make its sugar sector competitive and find creative means to even subsidise the sector, as other states have no compulsion in doing exactly that under different guises. Additionally, one source suggested Guyana ought to stop looking at the production of sugar as a sugar industry but rather focus on it as a cane industry and diversify into ethanol and other products to allow for sustainability.
Guyana and Belize are seen as the two states in this region, which will survive the onslaught of a change in the EU regime. Dr Gonsalves insists that with the dislocation of other sugar industries in the region, the quota into the EU under the ACP arrangement should be re-allocated to players in this region and not within the entire ACP.
Australia, Thailand and Brazil are accusing the EU of shipping four times the amount of subsidised sugar than it is permitted under its Uruguay Round export subsidy reduction commitments. The three argue that domestic support schemes available for EU produced sugar under quota serves to subsidise the export of surplus sugar which ought to be subject to the EU's subsidy reduction commitments.
The EU is accused of subsidising exports by setting a high intervention price at which it will pay producers to store sugar if the price of sugar falls below that price on the world market. This is added to when producers receive export subsidies for sugar produced under two different quotas to offset the difference between the high domestic price and the world price.
Brazil has argued that the EU is only allowed to subsidise the export of one million tons of sugar but its domestic support programme has resulted in the subsidisation of more than four million tons between 2001-2002 marketing year.
Local observes have noted that Brazil also sells on the world market at a lower price than it sells sugar domestically and will stand to gain if the EU has to reduce its subsidy and hence cut back on its sugar production. Sources say the price for sugar will not increase on the world market as a result of a cut back by the EU because Brazil will increase its production and offload this on the world market, keeping the prices down.
Guyana's Minister of Foreign Trade and International Co-operation, Clement Rohee, made a submission to the WTO for special and differential treatment of small states in its ruling in the case.
The EU is accused of selling an additional 1.6 million tons of refined sugar on the world market, an equivalent amount to the quota for raw sugar imports from India and the ACP countries, of which Guyana is a member.