EU loses WTO plea on sugar aid

Brazil has spearheaded complaints on sugar subsidies

The European Union has lost its appeal against a World Trade Organisation decision that its subsidies to sugar farmers are illegal.

In mid-2004, the WTO ruled that EU farm subsidies were unfair after complaints from Brazil, Australia and Thailand.

Although disappointed at losing, the EU intends to comply with international obligations, an EU spokesman said.

The EU's sugar subsidies have drawn criticism from anti-poverty campaign groups such as Oxfam.

They argue that wealthy European farmers are getting handouts that make it difficult for farmers in developing countries to compete.

Reform pledge

"We're disappointed that the appellate body did not uphold our argument but of course we will comply with our international obligations," said Michael Mann, an EU agriculture spokesman in Brussels.

"Independently of this panel, we are anyway planning a far-reaching reform of our sugar sector," he said.

EU farm ministers have already discussed cutting sugar subsidies by a third, and other ways to reduce Europe's sugar production.

Oxfam and the World Wide Fund for Nature have both produced reports criticising European sugar subsidies. Oxfam argued that even wealthy British aristocrats benefited from subsidies.

"The writing has been on the wall for ages, but the EU has been refusing to read it," Oxfam spokesman Phil Bloomer said after news of the decision emerged.

Trade talks crisis looms

Furthermore, Brazil argued the EU made unfair use of arrangements intended to help poor farmers in former European colonies.

It failed to include 1.6 metric tonnes of output from African, Caribbean and Pacific countries within its agreed quota limits for subsidised sugar, increasing the amount of EU-produced sugar inside the quota.

Rich nations' farm subsidies have been a major stumbling block in global trade talks launched in Doha, Qatar, in 2001.

The latest round of discussions in Geneva was in serious trouble on Thursday, according to WTO director general Supachai Panitchpakdi.

"We are close to a crisis. We are not there yet. If we do not make substantive progress in May then we are in a real crisis," he reportedly told the Geneva meeting.

He added that there was a real risk the talks would not be concluded in time for the WTO's next ministerial get together in Hong Kong in December.