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WTO disputes

European Communities – Export Subsidies on Sugar - WT/DS 265 (DS 265, DS 266, DS 283)

First Meeting with the Panel

Responses by Australia to questions from the EC

21 April 2004

C Sugar

To all the Complainants

1. Were you of the view at the time of the conclusion of the WTO Agreement that exports of C sugar benefited from export subsidies? (Please provide supporting evidence).

2. If so, why did you wait until this dispute to raise the issue?

3. If not, when did you first take the position that exports of C sugar benefit from export subsidies? (Please provide supporting evidence).

Australia refers to its response to Panel Question 41. Australia also refers to Article 3.7 of the DSU and the jurisprudence of the Appellate Body on that provision in EC-Bananas III and Mexico-High Fructose Corn Syrup Article 21.5.

To Australia

4. At paragraph 85 of its First Written Submission, Australia states that, as an outcome of the Uruguay Round negotiations, developed WTO countries, including the EC, "were required to reduce the quantities benefiting from export subsidies by 21 %". In view of that, why is Australia requesting that the EC reduce its subsidised exports by 60 %?

Australia is requesting that the EC conform to its WTO obligations, including its scheduled reduction commitments.

To all the Complainants

5. Would the Complainants agree that, in accordance with the terms of the Modalities Agreement, the EC would have been entitled to include the exports of C sugar made during the base period in the base quantity?

The bound base outlay and quantity commitment levels included in the EC schedule were determined by the EC.

6. Would the Complainants agree that the non-inclusion of such sales is a scheduling error? If not, why would the EC have agreed to reduce its subsidised exports by 60 %, rather than by 21 %, without being requested to do so?

No. Australia refers to its rebuttal submission. Australia considers that the EC took a calculated risk and has profited from that risk for nearly a decade.

7. Would the Complainants agree that such error would be excusable?

Australia refers to the relevant sections of its rebuttal submission.

8. Did you anticipate at the time of the conclusion of the WTO Agreement the interpretation of Article 9.1 (c) of the Agreement on Agriculture made by the Appellate Body in Canada – Dairy? (If so, please provide supporting evidence).

Australia refers to its response to Panel Question 41. Australia would like to know whether the EC ever made any assessments of its own in regard to 'C' sugar.

To Thailand

9. According to LMC data[1], exports of B and C sugar from Thailand would be made well below average total cost of production. Would you agree that exports of B and C sugar from Thailand involve "payments" within the meaning of Article 9.1 (c)?

10. Would Thailand agree that exports of B and C sugar are financed by the profits made in the domestic market with the sales of A sugar? If not, how are the exports of B and C sugar financed?

11. Would Thailand agree that its exports of B and C sugar benefit from export subsidies? If not, what are the relevant differences between Thailand's sugar regime and the EC's sugar regime?

12. On the basis of which WTO provision or legal principle does Thailand consider itself entitled to act inconsistently with Articles 3.3, 8 and 9.1 of the Agreement on Agriculture, while reproaching the EC with a violation of the same provisions based on essentially the same facts?

13. Thailand's sugar regime has been in place since 1984. Thailand did not schedule any reduction commitments with respect to sugar. Does this mean that Thailand was of the view at the moment of the conclusion of the WTO Agreement that its sugar regime, and therefore the EC's sugar regime, do not provide export subsidies?

14. Should the Panel uphold Thailand's claims, what steps will be taken by Thailand in order to bring its sugar regime into conformity with its WTO obligations?

To Australia

15. According to LMC data[2], exports of sugar from Australia would be made at prices significantly below average total cost of production. Would you agree that exports of sugar from Australia involve "payments" within the meaning of Article 9.1 (c) of the Agreement on Agriculture?

The question is outside the terms of reference of the Panel. As in the past – including in the provision of comprehensive advice to Commissioner Fischler – Australia is prepared to discuss such matters within the framework of bilateral dialogue at technical or policy level, as well as in relevant international forums.

16. How are those payments "financed"?

See response to Question 15.

17. How do you explain that the prices for refined sugar in Australia are significantly higher than on the world market? How do you explain the absence of imports of sugar into Australia, despite that price differential and despite the removal of customs duties in 1997?

See response to Question 15.

18. Does the term "by virtue of Government action" in Article 9.1 (c) include the toleration of anti-competitive practices?

Australia notes that institutional restrictions on competition form part of EC price support under the EC sugar regime and that the EC's Competition authorities have only limited scope in which to rectify the anti-competitive practices of EC sugar producers. The EC itself has described its sugar regime as one of "tacit collusion". Australia refers to Exhibits COMP-1, COMP-2, COMP-3, COMP-5, COMP-10 and ALA-12.

19. The sugar regime in place in Australia at the time of the conclusion of the WTO Agreement, and until 1999, provided for the distribution of quotas to growers and mills ("peaks"). Production "within peak" was intended for the domestic market and the "assured" preferential export markets, while "overpeak" production was exported to other markets at world market prices. The prices paid by the Queensland Sugar board (a marketing monopoly) for sugar "within peak" ("No. 1 pool" prices) were higher than those paid for "overpeak" sugar ("No. 2 pool" prices). Would Australia agree that such system involves the "cross-subsidisation" of pool 2 sales by pool 1 sales?

See response to Question 15.

20. Australia did not schedule any reduction commitments with respect to sugar. Does this mean that Australia was of the view in 1994 that its sugar regime did not have the potential for conferring export subsidies? Why?

See response to Question 15.

To Brazil

21. At paragraph 92 of your submission you state that "subsidies in the form of export payments and or of price support that operate to increase exports of any product are contingent upon export within the meaning of Article 3.1(a)". Would the same be true of other subsidies within the meaning of Article 1.1 of the SCM Agreement, including for example "deficiency payments" to farmers?

22. The EC understands that, in an ongoing dispute concerning exports of upland cotton from the United States, Brazil takes the view that the cost of production of upland cotton in the United States is well above prevailing world market prices. Are US exports of upland cotton "payments"?

23. Would those "payments" be contingent upon export performance, if "they generate production of a large surplus that may not be sold in the [US] domestic market" (Brazil's First Written Submission, para. 92)?

24. Is Brazil considering to bring complaints against other major exporters of sugar (e.g. South Africa, Colombia, Guatemala, India), all of which have in place measures that keep domestic prices well above world market levels and, according to LMC data, have an average total cost of production significantly higher than world market prices?

To Australia and Thailand

25. Would you agree that the operation of Brazil's ethanol policies, whereby the Government guarantees a lucrative market for sugar cane, "cross-subsidizes" the production of sugar and "generates the production of a large surplus that may not be sold in the Brazilian market"?

See response to Question 15.

26. Do you agree with the interpretation of export contingency made by Brazil at paragraph 92 of its First Written Submission?

Australia notes that, at the request of the EC, the Panel will issue separate reports.

Footnote 1

To all the Complainants

27. Australia and Brazil are on the record in 1981 as disagreeing with differential treatment for ACP/India equivalent sugar. Despite the fact that the Complainants opposed this differential treatment, is the EC correct in stating that in concluding the WTO Agreement, of which the footnote formed part, they explicitly agreed to this treatment ?

No. See responses to Panel Questions 16 and 17.

28. If the answer to the previous question is that the Complainants did not agree to this treatment when they concluded the WTO Agreement, do they disagree with the Appellate Body's statement that:

[w]hile each schedule represents the [..] commitments made by one Member, they represent a common agreement among all Members.[3]

See response to Panel Question 18. Australia notes that the EC has unilaterally withdrawn two of its schedules since the inception of the WTO Agreement.

29. Brazil and Thailand have stated that at the time of the conclusion of the WTO Agreement they considered that footnote 1 to the EC's schedule was invalid. Please provide supporting evidence including whether this issue was brought to the attention of the EC or any of the ACP sugar supplying states?

See responses to Panel Questions 16 and 17.

To Australia

30. Australia affirmed in its closing statement that:

Australia confirms that it advised the EC before, at and after the conclusion of the Uruguay Round that the EC's unilateral exclusion of so-called ACP and India equivalent sugar from its export subsidy reduction commitments was illegal and subject to challenge.[4]

See responses to Panel Questions 16 and 17.

31. Did representatives of Australia discuss with representatives of the EC the inclusion of footnote 1 in the EC's schedule?

See responses to Panel Questions 16 and 17.

32. Did representatives of Australia agree with EC representatives the inclusion of footnote 1 in the EC's schedule?

See responses to Panel Questions 16 and 17.

To Brazil and Thailand

33. Australia made the following factual statement in its Opening Statement:

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.[5]

Brazil stated that:

Export subsidy reduction commitment schedules under the Agriculture Agreement, however, were not the subject of negotiations.[6]

Do Brazil and Thailand agree with Australia's statement of fact that WTO Members could, and did, have negotiations on commitments limiting subsidisation ?

To all the Complainants

34. If you were of the view in 1994 that the footnote was invalid why did you wait until this dispute to raise the issue?

Australia refers to Article 3.7 of the DSU and the jurisprudence identified in the response to the EC's first question.

EC actions in regard to its complaints against US FSC measures are relevant.

35. Would the Complainants agree that, had they made a persuasive case in the Uruguay Round negotiations that the proposed footnote was invalid, the EC would, in accordance with the Modalities Agreement, have been entitled to include the exports mentioned in footnote 1 in the base quantity?

The EC took a unilateral decision not to include 'ACP/India equivalent' sugar in the base outlay and quantity commitment levels. Australia refers to Exhibit ALA-6.

36. Would the Complainants agree that, if they are successful in this claim (leaving aside C sugar), the EC's export subsidies on sugar would have been reduced by 60 % rather than 21 % ?

The EC took a unilateral decision to exclude certain quantities and budgetary outlays from its base commitment levels. In enactment of the 1995 and 2001 sugar regimes, the EC did so in full knowledge of the consequences when signing on to the Final Act – that, in respect of Article 9.1 listed export subsidies, it would be exporting in excess of its commitment levels.


[1] The LMC Worldwide Survey of Sugar and HFCS Production Costs, 2003 Report, LMC International.

[2] Ibid.

[3] Appellate Body Report, EC – Computer Equipment, para. 109, emphasis in the original.

[4] Para. 16, Australian Closing Statement of 1 April 2004.

[5] Para. 62, Australian Statement of 30 March 2004 (emphasis added).

[6] Para. 79, Brazil's Statement of 30 March 2004 (emphasis in original).

Last Updated: 9 January 2013
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