WTO to Strengthen World's Ruling on Sugar: Thailand as a Case Study

WTO RULING TO STRENGTHEN WORLD’S EXPORT ON SUGAR:

THAILAND AS A CASE STUDY

KANAPHON CHANHOM*

III. Implementation and the New EC Sugar Regulation

The Appellate Body required that the EC bring its Regulation into conformity with its obligations under the AoA.(111) Normally, the EC would immediately implement the rulings; however, the EC informed the DSB in June 2005 that it required a “reasonable period of time” to implement the recommendations and rulings of the DSB.(112) Having comprehensively considered the contention from both parties, an arbitrator determined that the "reasonable period of time" for this case would be 12 months and 3 days from the Panel and Appellate Body Reports adoption date (May 19, 2005).(113) The period would expire on May 22, 2006 and the EC would implement the rulings from that date forward.

Eventually, the EC issued Council Regulation (EC) No. 318/2006 of February 20, 2006. This Regulation focuses on the improvement of the sugar regime for the EC years 2006-2010.(114) In the Preamble, this Regulation precisely states that it is necessary to arrange and reduce the quotas of sugar following the recent decisions of the WTO.(115) The key goals of the Regulation are to eliminate sugar intervention, combine A and B quotas, and eliminate over-quota sugar exports.

Regarding the elimination of intervention prices, Article 3 provides that the “reference price” of sugar will be reduced progressively each year.(116) The minimum price for quota beet decreases from 32.86 euro per ton in 2006/2007 to 26.29 euro per ton in 2009/2010.(117) These price reductions will save domestic consumers from shouldering the higher prices for sugar for consumption. Moreover, it will prevent over-quota sugar resulting from cross-subsidization as a result of high intervention prices. In short, these measures intend to limit exported sugar with respect to the “budgetary outlay” of the reduction commitments.

Regarding sugar quotas, the quota for the production of sugar is fixed(118) and not more than 17,770,537 tons per year.(119) The EC may benefit from an additional quantity(120) of up to 1,100,000 tons per year.(121) Out-of-quota production may be used for the processing of certain products, carried forward to the quota production of the next marketing year, or exported within the “quantitative limit.”(122) These measures intend to limit exported sugar regarding the “quantitative outlay” of the reduction commitments.

The Panel and the Appellate Body effectively applied the law of export subsidies provided in the AoA to resolve whether Footnote 1 should be included in the reduction commitments. They adopted an economic approach to support the provisions and strengthen their verdicts, particularly when considering the average cost of production as a benchmark to see if there was a payment in the form of “cross-subsidization” constituting export subsidies within the meaning of Article 9.1(c). Moreover, they applied a statistical approach when considering a number of farmers participating in the A and B beets refund program to observe whether sales of C beet involved export subsidies within the meaning of Article 9.1(c). These approaches enabled an assessment of concrete evidence and contributed to a well-reasoned decision. As a result of the reliability of the decision, the EC surrendered and complied with the recommendation of the DSB.

According to the new Regulation, the structure of the sugar regime preserves self-sufficiency inside the union. But the EC is no longer the world’s largest refined sugar exporter. Exported sugar from the EC will sharply decrease from approximately 5-6 million tons to roughly 1.27 million tons and its share of the world sugar market will decrease at least 25 percent.