Sugar was historically the largest export product of Thailand until the 1855 Bowring Treaty(47) with the United Kingdom, and later, with thirteen other countries(48). Exported sugar then decreased while the amount of exported rice grew rapidly and substituted the export position of sugar(49). However, since the enactment of the Cane and Sugar Act of 1984, sugar production has considerably increased because it provides that cane growers and sugar producers must share the profits from production at a rate of 70:30. In 1996, cane cultivated areas expanded by almost 160 percent, and occupied around 1 million hectares with almost 50 percent concentrated in the Ratchaburi-Suphanburi-Kanchanaburi triangle and Lobburi-Sukhothai arc(50). For this reason, sugar became the third largest agricultural product of Thailand after rice and rubber, and roughly 1.5 million people work in the sugar industry. (51)

Table 2: Thai Cane/Sugar Production and Allocation 1998-2004

Production Year	Cane Production (million tons)	Sugar Production (million tons)	Domestic Consumption (million tons)	Export (million tons)
1998/1999	50.33	5.19	1.75 (33.7%)	3.44 (66.3%)
1999/2000	53.49	5.52	1.65 (29.9%)	3.87 (70.0%)
2000/2001	49.07	4.99	1.70 (34.1%)	3.29 (65.9%)
2001/2002	59.49	6.14	1.82 (29.6%)	4.32 (70.4%)
2002/2003	74.06	7.30	1.89 (25.8%)	5.41 (74.1%)
2003/2004	64.48	7.01	1.92 (27.4%)	5.09 (72.6%)

          As Table 2 shows, cane averaged an increase of over 10 million tons per year and sugar product increased around 1 million tons. Approximately 70 percent of sugar product was exported whereas only 30 percent was distributed for domestic use. Thailand consequently became the third largest sugar exporter in the world market, creating a high dependence on the international market for sugar. In 2004, the main importers of sugar from Thailand were Indonesia (24%), Russia (14%), Japan (11%), Malaysia (9%), South Korea (6%) and Taiwan (5%) while the main export competitors of sugar were Brazil (29%), the EC (15%) and Australia (8%). (52)

          Although exported sugar increased on average in quantity and value every year, Thai cane growers and sugar producers were in debt roughly 250 million dollars in recent years(53). The world sugar price dropped below the total cost of production because of heavy export subsidies from developed countries, especially the EC. The price for exported sugar reduced sharply from 210 dollars per ton in 2001 to 157.4 dollars per ton in 2002(54). Additionally, many cane growers planted alternative crops like tapioca instead of cane. As shown in Table 2, cane production declined about 10 million tons from 2002/2003 to 2003/2004. Subsequently, the Royal Thai Government estimated damages resulting from the EC export subsidization on sugar at approximately 154.6 million dollars in 2002(55). After comprehensive discussions with the injured private sector, Thailand decided to sue the EC before the WTO in 2003.

          Thailand’s economy depends substantially on its agricultural sector. Agricultural trade brings in foreign income to compensate the trade deficit caused by importing non-agricultural products. Over-subsidized sugar from the EC adversely affected Thai cane growers and sugar producers, pushing Thailand to bring its case to the WTO.