Skip to main content

WTO disputes

European Communities Export Subsidies on Sugar - WT/DS 265

Panel established pursuant to Article 6 of the Understanding on Rules and Procedures Governing the Settlement of Disputes


First Oral Statement

30 March 2004


1. Mr Chair, members of the Panel, members of other delegations and staff of the Secretariat assisting the Panel,

2. The outcome of this dispute will be very significant for the Australian sugar industry and for the health of the WTO system. I appreciate that members of the Panel have had to quickly digest a substantial amount of factual and evidentiary matters, not least the interaction of the various price support components of the EC sugar regime and the detailed evidence provided on the costs of EC sugar production. Let me say however, that, on the basis of Australia's reading of the submissions of the three complainants and the respondent, there appear to be remarkably few relevant facts at issue.

3. In contrast to the complexities of the EC sugar regime, the architecture and structure of the WTO provisions relating to agricultural export subsidies - as contained in the Agriculture and Subsidies Agreements - are clear and straight forward. A WTO Member may only apply export subsidies to agricultural products within a very narrow and clearly delineated band of rights. The application of export subsidies to sugar must therefore conform to the relevant provisions of the Agriculture Agreement, including scheduled export subsidy reduction commitments. If they do not, they are prohibited under both the Agriculture and Subsidies Agreements.

4. As Australia sees it, the broad legal task of the Panel is (a) definitional, in respect of export subsidies defined in Article 9.1(c), or in the alternative Article 10.1 of the Agriculture Agreement, and other export subsidies coming within the definitions of the Subsidies Agreement ; (b) interpretative, in relation to the diminishing of obligations arising from the unilateral insertion of a footnote in the EC's schedule of export subsidy reduction commitments and (c) the application of the Subsidies Agreement to agricultural export subsidies.

5. This is not a test case. These issues are not new to WTO dispute settlement. The Appellate Body and panels have previously examined the same legal issues and have provided clarifications of the legal obligations at issue in this dispute. Those findings have been adopted by the Dispute Settlement Body. There are very few WTO Members opposed to the clear and compelling jurisprudence which has been developed on these issues.

6. Australia will not seek in this statement to provide a summary of its first written submission. Nor will it seek to respond to all of the arguments of the parties and third parties, without prejudice to the relevance of the matters raised by those parties. Australia reserves the right to elaborate in full on the matters raised in other submissions in its rebuttal submission and in other relevant Panel proceedings.

7. This dispute concerns the EC's export subsidy obligations on sugar to Australia in the context of the export subsidy obligations of the Agriculture and Subsidies Agreements. Specifically, Australia is claiming that the export subsidies applied to 'C' sugar and to 'ACP/India equivalent' sugar are inconsistent with the EC's export subsidy obligations on sugar in the Agriculture and Subsidies Agreements, whether or not they are included in the EC's Schedule of export subsidy reduction commitments for sugar.

8. The obligations under those Agreements are not complex and can be interpreted in accordance with the plain words of the texts of those Agreements. The structure of the disciplines in both Agreements is simple and straight forward.

9. In the context of the Agriculture Agreement, a WTO Member may apply export subsidies – as defined in Article 9.1 of the Agriculture Agreement - provided that the product in question is a "covered product" and provided also that the export subsidies do not exceed the Member's scheduled commitments on budgetary outlays and subsidised quantities. A WTO Member must not apply any other export subsidy in a manner which leads to or threatens to lead to circumvention of scheduled reduction commitments.

10. In the context of the Subsidies Agreement, the export subsidy obligation is even more straightforward. Except as provided by the Agriculture Agreement, export subsidies are prohibited under the Subsidies Agreement.

11. It is not in dispute that the EC is exporting quantities of sugar in excess of its scheduled reduction commitments under the Agriculture Agreement. It is not in dispute that the EC is providing export subsidies, as defined in Article 9.1(a) of the Agriculture Agreement. The EC acknowledges that it has not undertaken any export reduction commitments in respect of export subsidies coming within the definition of Article 9.1(a) of the Agriculture Agreement. It is also not in dispute that EC budgetary outlays on export subsidies for sugar are in excess of the EC's scheduled reduction commitments for sugar. Further, it is not in dispute that EC sugar is being exported at below the total average cost of production. What then is in dispute?

· whether the financing of exports of 'C' sugar at below the average total costs of production constitutes an export subsidy coming within the definition of Article 9.1(c) of the Agriculture Agreement, that is whether there is a payment on export and if so, whether the payment is financed by virtue of governmental action;

· whether "governmental action", in the context of Article 9.1(c) of the Agriculture Agreement, should be defined in a way that would exclude price support which serves to finance payments on exports;

· whether there are export subsidies other than Article 9.1 listed subsidies, being applied to 'C' sugar inconsistently with the provisions of Article 10.1 of the Agriculture Agreement;

· whether the EC has a reduction commitment obligation in respect of budgetary outlays on exports of sugar which are not financed by producer levies;

· whether the export subsidy prohibitions of the Subsidies Agreement apply to export subsidies on sugar found to be inconsistent with the EC's obligations under the Agriculture Agreement.

Systemic Significance of This Dispute

12. As I have said earlier, this is not a test case. However, should the Panel decide that, on the basis of the facts of this case, different, or new jurisprudence should apply, any of the Panel's findings on the issues raised in this dispute will bear critically on both the individual operation of the Agreements and their interaction.

13. The Agriculture Agreement reflects the result of difficult negotiations over many years, not just during the Uruguay Round, but reaching back to the negotiation of Article XVI:4 of GATT 1994, when export subsidies were effectively classified as the most trade distorting form of subsidy. There are now modest, but nevertheless binding, disciplines on agricultural export subsidies, including, in certain circumstances, a prohibition on export subsidies on agricultural products.

14. The Subsidies Agreement also constitutes a significant advance on the Tokyo Round Code in that the Subsidies Agreement does not contain any product exclusions from the export subsidy prohibitions. Article 21.1 of the Agriculture Agreement, makes it clear that the Agreement does not exclude the application of the Subsidies Agreement to agricultural export subsidies.

15. On the basis of the interpretations and justifications advocated by the EC in its first written submission, – which do not find support in WTO jurisprudence - the EC may ignore its binding, scheduled export subsidy reduction commitments on sugar. It may also ignore its obligations to subject export subsidies to any reduction commitments, or alternatively substitute, on an ex post facto basis, such obligations with a lesser commitment – a commitment to place a quantifiable ceiling on export subsidies - despite the absence of any such exceptions provisions. The EC may also ignore its export subsidy obligations under the Subsidies Agreement. Further, the EC may avoid the WTO conditions and procedures attached to the grant of a waiver.

16. The Marrakesh Declaration explicitly welcomed a more effective and reliable dispute settlement system, together with reinforced multilateral trade provisions in agriculture. Yet, on the basis of the EC's arguments, the WTO dispute settlement system would be less effective and reliable, as a WTO member could be disbarred from right of recourse to dispute settlement because of alleged failure to raise an issue in informal bilateral discussions predating the WTO. Also on the basis of the EC's arguments, the reinforced multilateral trade provisions on agriculture have only extremely limitedapplication to EC agricultural export subsidies, although, seemingly, the EC considers it has enforceable rights in regard to the agricultural export subsidies of other WTO Members.

17. In relation to 'C' sugar, the EC has not contested the evidence that the export of such sugar at below the total average cost of production are cross subsidised from the EC price support system for quota sugar. The EC is seemingly claiming that - notwithstanding the plain words of Article 9.1(c) of the Agriculture Agreement and the clear evidence of the means of governmental financing of the cross subsidy - the term "governmental action" must be interpreted in a way that would serve to exclude all forms of price support, other than producer-financed export subsidies.

18. In relation to 'ACP/India equivalent' sugar, the EC is seemingly claiming a right – which is without support in the WTO system - to export as much as it imports with benefit of direct export subsidy. Such actions go beyond the arrangements applying to inward processing and escape the stringent disciplines applying to inward processing under the Subsidies Agreement.

Other Issues

19. Turning from the systemic importance of this dispute, I will now address a range of matters raised in the EC's first written submission – which it has characterised as a rebuttal submission (as opposed to a first written submission in accordance with the Panel working procedures). These issues are:

· why Australia initiated this dispute;

· the EC's obligations;

· issues of fact and interpretation relevant to the Panel's legal examination;

· burden of proof;

· terms of reference;

· the EC's unfounded allegations that Australia has not acted in good faith.

Why Australia Initiated This Dispute

20. Australia's direct commercial interests are at stake in this dispute. Sugar cane is grown in three Australian States, with the bulk of production in Queensland. The Australian sugar industry depends on the world market for around 80% of its income. Australian canegrowers, sugar millers and refiners, as well as regional communities in sugar cane growing districts have a direct stake in ensuring that the EC – as the world's second largest exporter of sugar – fully observes its WTO export subsidy commitments for sugar. Yet the EC has criticised Australia for pursuing this complaint and seemingly, considers that the Australian Government should ignore these concerns and refrain from seeking enforcement of its WTO rights.

21. These concerns are not new. As far back as the 1970's Australia challenged the EC's sugar regime under the then GATT provisions relating to subsidies in the agriculture sector. Prior to the conclusion of the Uruguay Round, the then Australian Minister for Trade wrote to the then EU Agriculture Commissioner on 10 December 1993, recording Australia's expectation that the EU Schedule of export subsidy reduction commitments should include commitments on all EC export subsidies on sugar.

22. Australia is not alone in having serious concerns about the operation of the EC sugar regime. In recent public statements, the EU Commissioner for Agriculture acknowledged the trade distorting effect of export subsidies. He also registered the need for reform of the EC sugar regime. The EC has acknowledged that the EC sugar regime is a source of tension with many of its trading partners. In the context of the present dispute, the tension is directly linked to the way in which the EC is applying its WTO reduction commitment obligations.

23. Since the inception of the WTO, the EC has been exporting sugar at levels significantly in excess of its Scheduled reduction commitments. In the marketing year 2000/2001, the EC's sugar exports – 6 million tonnes - were more than five times greater than the maximum quantities specified in the EC's Schedule of binding reduction commitments under the Agriculture Agreement. The EC is consistently providing direct export subsidies at levels more than twice its Scheduled reduction commitments on budgetary outlays.

24. The EC is acknowledged as a high cost producer of sugar. The lowest cost EC beet producers have costs virtually double those of low cost cane producers. The EC sugar regime subsidises both its beet producers and its sugar manufacturers.

25. The EC is the world's second largest exporter of sugar. The EC acknowledges that its current production levels are dependent on the domestic and export price support arrangements under the EC sugar regime. Absent price support, the EC could not maintain average export levels of sugar anywhere near the EC average exports of 5 million tonnes a year over more than a decade. The production and export of 'C' sugar and 'ACP/India equivalent' sugar are directly attributable to EC governmental action within the framework of the EC sugar regime.

26. As far back as 1973 the EU Commission had identified a problem with 'C' sugar[1]. The EC has access to a very wide range of sources of information on the commercial performance of Member State sugar industries at EC-wide level, as well as at Member State and industry levels. At EC institutional level, they include the Standing Committee on Sugar, a Sugar Management Committee, regulatory reporting requirements, Commission export licensing authority, together with information collected for the purposes of investigations by the Court of Auditors and Competition authorities. The EC sugar regime – which involves substantial market price support from EU consumers and large payments from taxpayers, as well as other, more hidden, costs – is reviewed every five years.

27. Despite repeated requests by Australia to the EC for access to any information available to it, or to requests for clarification – including at the dispute consultations, at the Committee on Agriculture and as part of the EC Trade Policy Review - the EC has been unforthcoming. The EC has never explained to Australia the reasons why it is able to maintain high levels of exports if it is not applying export subsidies to 'C' sugar. The EC cannot sustain such an approach in these Panel proceedings. It has the burden of proof to demonstrate that 'C' sugar exports are not subsidised.

28. As a leading Member of the WTO and as a leading exporter of sugar, the EC would be fully aware that it has a special burden of proof under the provisions of Article 10.3 of the Agriculture Agreement, to demonstrate that exports in excess of scheduled reduction commitments are not subsidised, according to any WTO export subsidy definition. The EC was fully aware, before the inception of the WTO that the reach of WTO reduction commitment obligations goes far beyond producer-financed subsidies. The EC is responsible for the issue of export licences for sugar (as well as for managing export refunds) and would therefore be aware at all times that exports of sugar from the EC were at levels consistently greater than its reduction commitment levels. Prior to the conclusion of the Uruguay Round, it would have been fully aware of the texts that would have treaty force on the inception of the WTO Agreement.

The EC's Obligations

29. Australia is claiming that the EC is acting inconsistently with its WTO obligations under Articles 3.3, 8 and 9.1 and, in the alternative Article 10.1, of the Agriculture Agreement and with Article 3.1(a) and 3.2 of the Subsidies Agreement. The claims of inconsistency relate to the export subsidies the EC provides to 'C' sugar and to 'ACP/India equivalent" sugar (that is, a quantity of sugar which the EC alleges to correspond to its imports of sugar from the ACP and India).

30. The obligations under the Agriculture Agreement are discrete, but interrelated. Article 3.3 serves to define the level of a WTO Member's scheduled reduction commitment under Article 9.1. Also, by virtue of Article 3.3, if the product is not a scheduled product, the level is effectively set at zero for an Article 9.1 listed subsidy.

31. In regard to 'C' sugar, which must be exported, the undisputed evidence before the Panel clearly indicates that a payment is being made on export –in the form of sales at below the average total costs of production. The evidence also plainly indicates that the sustained losses from the payments are being financed by the price support delivered to quota sugar under the EC regime. However, the EC argues, inter alia, that a special legal meaning must be given to "governmental action" – that is, in the sense used in Article 9.1(c) of the Agriculture Agreement, the term excludes price support to sugar provided to the same producer within domestic quota ceilings.

32. In regard to 'ACP/India equivalent' sugar the EC is attempting to engage in product-splitting. Whether or not it is entitled to do so, it cannot have it both ways. If 'ACP/India equivalent' sugar is not a product covered by its Schedule, it cannot be in conformity with its obligations under Articles 3.3, 8 and 9.1 of the Agriculture Agreement. If, on the other hand, the EC is arguing that such sugar does come within the description of sugar as a scheduled product, then it follows that the EC is acting inconsistently with its obligations under Articles 3.3, 8 and 9.1(a).

33. By virtue of the provisions of Article 3.3 of the Agriculture Agreement, there is clear advantage to a WTO Member in the inclusion of a product in its Schedule. If it chooses to include a particular product (or groups of products) within the product coverage of its Schedule, it has the right to provide any Article 9.1 listed subsidy on the export of that product, provided that the budgetary outlay and quantity levels are not in excess of the final budgetary outlay and commitment levels specified in its Schedule. If it does not include a particular product or group of products in its Schedule, it is prevented, by the terms of Article 3.3, from granting any article 9.1 listed export subsidy to that product or groups of product.

34. Once the commitment is made in the Schedule and forms part of the treaty, the Member making the commitment is bound not to exceed the specified reduction commitment levels which it has inscribed in its Schedule.

35. The fact that a WTO Member either explicitly or implicitly provides that it is not making any reduction commitment on a purported 'category' of a covered product (as compared to a 'group of products') or quantity of a covered product does not mean that the WTO member concerned has no reduction commitment obligation.

36. Australia notes, from Exhibit EC-7 submitted by the EC, EC officials had previously advised Australian officials that the exclusion of quantities of sugar from its reduction commitment was justifiable as an "FTA outside GATT". Australia seeks clarification whether the EC will maintain such purported justification during the course of this dispute. If so, the EC should clarify whether it is attaching any sort of conditionality to access under the EC's WTO bound tariff quota for sugar.

37. If the EC wishes to secure legal cover for any subsidies in excess of its Scheduled reduction commitments or which are being applied inconsistently with any other obligations under the Agriculture and Subsidies Agreements, it would need to request a waiver under the provisions of Article IX of the WTO Agreement. Australia notes that a waiver may only be granted in exceptional circumstances in accordance with the procedures of Article IX of that Agreement. The EC would also need to seek a waiver for any recalculation of base level outlays and quantities, given that it has bound the base levels in its Schedule.

Factual and Evidentiary Issues Relevant to the Panel's Legal Examination

38. On the basis of Australia's examination of the first submissions of the complainants and respondent, Australia considers that the Panel's legal examination has been made simpler because there are few facts of relevance to legal interpretation that remain at issue. By way of illustration, the EC does not appear to have disputedevidence in submissions in regard to the following relevant facts:

· the production and export of 'C' sugar is integrated with the production of quota sugar, and financed by the domestic and export price support for that quota sugar through the EC sugar regime;

· there is no production of 'C' sugar independent of quota sugar production;

· EC sugar exports are made at below the total average costs of production;

· the EC is exporting sugar in excess of the budgetary outlay and quantity commitments specified in its Schedule;

· the EC does not apply its scheduled reduction commitments (either budgetary or quantity) to sugar which it designates as "equivalent" to imports from ACP members and from India;

· the EC does not apply any reduction commitments to export subsidies on sugar coming within the definition of Article 9.1(a) of the Agriculture Agreement;

· the EC does not apply the Footnote in its Schedule in a way that would limit the scope of the Footnote to exports of sugar of ACP and Indian origin;

· the EC appears to have the institutional capacity, within its existing sugar regime, to apply reductions to budgetary outlays and to the quantities of subsidised sugar exported, consistent with its WTO obligations.

39. There are some factual issues which, in Australia's view might warrant further clarification. For instance, the EC appears to consider that 'C' sugar might not be a scheduled product, on the basis that such sugar was not included in the calculation of its base levels . The EC also appears to have confirmed that EC 'ACP/India equivalent" sugar is a scheduled product, but has cast confusion over the definition of 'exports of ACP and Indian origin'. At various times, the EC has used different and often contradictory terminology, including in Uruguay Round negotiating documents and in its Schedule, and which it continues to use (in its Notifications to the Committee on Agriculture and in its own public documents). For example, the EC variously uses terms such as "exports of sugar of ACP and Indian origin", "EC exports of sugar corresponding to imports from the ACP and India" and "exports of sugar equivalent to imports of sugar from those countries". Australia considers that there is also some confusion as to the sense in which the EC is deploying the terms "corresponding" and "equivalent".

40. Australia also considers that there is a need for clarification of some apparent anomalies in regard to Tables 8, 9 and 10 of the EC's first written submission, including an apparent discrepancy with figures which the EC has provided to the Chair of the Committee on Agriculture. Australia intends to identify the matters in a note to the Panel and copied to the parties.

Differences of Fact between Canada-Dairy and EC-Sugar

41. Despite the EC's attempts to distinguish the factual situations in the present case and Canada – Dairy, the jurisprudence of Canada-Dairy can be applied to the operation of the EC sugar regime and the export of 'C' sugar.

42. Indeed, if anything there are even more compelling reasons, on the basis of the facts of 'C' sugar, why Article 9.1(c) should have application to the cross-subsidies provided to 'C' sugar through the domestic and export price support provided to sugar producers under the EC sugar regime. A high proportion of EC quota holders produce 'C' sugar and there are no independent producers of 'C' sugar. Hence all 'C' sugar is exported at prices below cost of production with the losses being financed from the sales of quota sugar on the domestic and export market with benefit of EC price support.

43. Australia considers that the differences of fact identified by the EC are more apparent than real and there is a marked similarity between the schemes applied by Canada to "commercial export milk" (or "CEM") and by the EC in regard to 'C' sugar.

44. First, in regard to the products at issue, in both cases the goods are manufactured from a primary product. Sugar beet is a primary product as much as milk. Butter, skim milk powder and sugar are all classified as basic products under the EC's own classifications for the purposes of product-specific AMS calculations.

45. Second, with the exception of 'incorporated products' in the Agriculture Agreement[2], the export subsidy provisions of the Agriculture Agreement and of the Subsidies Agreement apply equally to all covered agricultural products, without distinction between the degrees of processing.

46. Third, in both cases, Canada and the EC required that the product at issue be exported.

47. Fourth, in both cases, the 'governmental action' provides for the supply of the primary product at prices below the prices for which the same product may be sold for consumption on the domestic market.

48. Lastly, both products are sold at prices below the average total costs of production and the losses in both cases are financed by virtue of governmental action.

Burden of proof

49. Australia notes that, without prejudice to the relevance of this issue, the EC has disputed where any payment might lie in regard to Article 9.1(c) of the Agriculture Agreement and also whether there is a payment on export.

50. Australia notes that the EC has not come forward with any evidence to suggest that a 'payment' is not being made. Consistent with the application of the burden of proof requirements of Article 10.3 of the Agriculture Agreement, the EC is required to establish thatno export subsidy, whether listed in Article 9.1(c) or not, is being applied to 'C' sugar exports. Australia is not required to lead with evidence in that regard. If the EC does not produce any evidence on this point, it will have failed to establish that an export subsidy is not being applied to C sugar, within the meaning of either Articles 9.1 or Article 10.1.

51. The EC has neither put forward a prima facie case under Article 10.1 of the Agriculture Agreement nor provided any rebuttal of Australia's claims under the Subsidies Agreement, other than to assert that the Subsidies Agreement does not apply to export subsidies granted on agricultural products, even where they might have exceeded a Member's commitment. This is an unsustainable defence and does not constitute a rebuttal to Australia's prima facie case in regard to its claims under the Subsidies Agreement, established in Australia's first written submission.

Terms of reference of the Panel

52. Australia rejects the EC's counter-claims that Article 10.1 is outside the Panel's terms of reference. Australia clearly identified Article 10.1 in its request for a Panel and that, if the export subsidy to 'C' sugar was not an export subsidy within the meaning of Article 9.1, there were other subsidies being appliedin excess of reduction commitment levels. If Australia were required to identify all "other export subsidies" individually, this would have the effect of limiting the EC's burden of proof under Article 10.3. Further, Australia has sufficiently identified the regulations applied.

53. In that context, Australia notes that the EC itself has, on a number of occasions, considered that similar language was sufficiently specific to identify the precise measures at issue, for example, "any other implementing measures",[3] "other relevant documents",[4] "any implementing measures thereof and all other related measures",[5] "any implementing decrees and other regulations",[6] and "any implementing measures taken thereunder".[7]

54. The framework regulation in question is entitled "Common Organisation of the Markets in Sugar". All of the provisions of the regulation, whether referring to 'C' sugar or to quota sugar, are directly relevant. In EC documents submitted as Exhibits to the Panel, the EC itself acknowledges the role of 'C' sugar in the market balance. Moreover, at the WTO consultations, the EC representative described the EC sugar regime as involving a number of interwoven "threads" which could not be separated from each other, including the provisions related to imports and exports.

Good Faith Issues

55. The EC has made a number of allegations that Australia is not acting in good faith and has drawn legal linkages to those allegations. Australia feels it necessary to put those unfounded assertions into a factual, evidentiary and legal context, without prejudice to the legal relevance of the assertion.

56. An allegation of bad faith is a most serious accusation to make against another WTO Member. The EC's allegations are without foundation and constitute an artifice to persuade the Panel to accord the EC permanent immunity in respect of any measures inconsistent with its export subsidy obligations for sugar under the Agriculture and Subsidies Agreements. All WTO Members should be concerned at the implications of the EC's allegations.

57. The EC's claims of bad faith rest on the legally and factually incorrect basis of: (a) a purported failure to raise concerns during informal bilateral discussions some 10 or more years ago for which there are no agreed records; and (b) an injury test as a precondition to right of recourse to dispute settlement, in this case the export performance of a complainant.

58. In the view of the EC, such actions disbar a complainant from right of recourse to the WTO dispute settlement system. Contrary to the assertions of the EC, nothing of the sort can be read into the provisions of Article 3.10 of the Dispute Settlement Understanding. Neither can a Panel read down a WTO obligation on the basis of allegations of bad faith. Nor can a Panel apply any such reasoning to read into a treaty text meanings which would be contradictory to the plain words of the text.

59. Australia confirms that it has initiated this dispute in good faith in accordance with Article 3.10 and that it will fully engage in the Panel proceedings in good faith.

The Use of Informal Records as Evidence

60. The EC has cited informal discussions – records of which are clearly incomplete – as a basis for reading down its own obligations as well as the rights of another WTO Member.

61. Such an approach has no basis in WTO law or in customary international law. There is no basis in Article 31 of the Vienna Convention on the Law of Treaties to accord such discussions the status of an agreement or instrument for the purposes of context, within the meaning of that Article.

62. Australia recalls that, in the course of the Uruguay Round, informal bilateral discussions took place between a number of GATT signatories, including in relation to agricultural market access concessions on a very large number of tariff lines, non tariff concessions and commitments limiting subsidisation. On the basis of the EC's arguments, informal bilateral meetings outside of the formal negotiating framework– for which there are no agreed records – served to impose an obligation on a participant to identify the subsidised exports that might - or might not - be included in the base outlay and quantity levels as well as the final budgetary outlay and quantity commitments specified in another WTO Member's draft Schedule.

63. Without prejudice to Australia's position that informal discussions cannot serve to read down the treaty rights and obligations of the Members participating in such discussions, Australia would like to correct some factual inaccuracies in the EC's presentation of the content of the discussions.

64. First, the EC evidence is selective. In some instances, the EC does not appear to have provided the Panel with its own responses to relevant concerns raised by Australia. In other instances the EC has not submitted documented concerns raised by Australia. For instance the EC did not include in its lists of meetings any high level meetings between the then Australian Trade Minister and the then EU Agriculture Commissioner, including a copy of correspondence of 10 December 1993. Seemingly, the EC holds to the view that a unilateral and incomplete record of discussions between officials should be accorded a higher evidentiary value than the documented correspondence between a Minister of the Australian Government and an EU Commissioner.

65. Second, Australia holds documented evidence that it explicitly raised concerns about the EC's expressed intent to exclude some sugar from its scheduled reduction commitments.

66. Third, Australia had no reason – or duty – to draw the EC's attention to any error of calculation that Australia might have identified in respect of the base outlay and quantity commitments. Indeed, as we now know from the EC's submission, there was no error of calculation. Therefore, the EC is incorrect in ascribing its WTO breach in respect of 'C' sugar as "a shared and excusable scheduling error." It was neither shared, excusable nor an error. The EC has profited from the so-called "error" by applying WTO-inconsistent export subsidies to sugar for nearly a decade. It now seeks to deconsolidate its binding in regard to base and final commitment levels, through dispute settlement processes, without observing WTO legal procedures.


67. As I have noted earlier, the EC has been exporting sugar at levels considerably in excess of its quantitative commitment levels and has also been providing export subsidies at levels considerably in excess of its budgetary outlay commitments.

68. As I have stated earlier, this dispute is not a test case. The issues of legal substance in relation to the application of WTO export subsidy obligations to EC sugar are not complex.

69. Australia considers that, on the basis of the evidence before the Panel – including evidence from the EC – the EC provides export subsidies to 'C' sugar and 'ACP/India equivalent' sugar, inconsistently with the EC's obligations under the Agriculture and Subsidies Agreements.

70. Australia wishes to register its expectation that in the event of adverse findings, the EC will immediately implement the findings. This expectation derives from the EC's confirmation, in its first written submission, that there is authority within the existing sugar regime to limit budgetary outlays and subsidised exports in accordance with the EC's WTO obligations.

[1] Exhibit COMP-8, page 9

[2] Which are subject to monetary, not quantity reduction limits.

[3] WT/DS142/2

[4] WT/DS248/12

[5] WT/DS39/2

[6] WT/DS273/2

[7] WT/DS54/6

Last Updated: 9 January 2013
Back to top