As seen in Table 3, the EC exported a large amount of sugar over the reduction commitments reported to the WTO. The EC’s high exports caused the quantity of sugar in the world market to be at an extreme surplus, which in turn caused the world sugar price to drop sharply. As one of the largest exporters adversely affected by the EC sugar, Thailand, jointed with Australia and Brazil(69), filed against the EC before the WTO in 2003.

         Thailand, Australia and Brazil raised many potential issues before the Panel. The main issue, however, was whether the EC had been exporting quantities of subsidized sugar in excess of its reduction commitment levels(70). The complainants argued that this action was inconsistent with Articles 3 and 8 of the AoA.(71) They also claimed that subsidized exports of C sugar were inconsistent with Articles 3, 8 and 9 of the AoA or the SCM Agreement.(72)

          The EC admitted that its exports of sugar were in excess of the figure in the commitments. It argued that there were two elements to its commitments, however: the Footnote 1 ceiling of 1.6 million tons and the reduction commitments basic ceiling(73). Thus, the total quantity of exported sugar was not in excess of the commitments.(74) The EC also denied that C sugar benefited from subsidies that were inconsistent with the AoA or the SCM Agreement. (75)

           The Panel found that the EC’s budgetary outlay and quantity commitment levels for exports of subsidized sugar were determined in its schedule(76). In addition, the content of Footnote 1 was of no legal effect and could not extend or modify its commitment levels. The Panel further found that producers/exporters of C sugar exceeding the EC’s reduction commitment levels gained payments on export by virtue of governmental action, within the meaning of Article 9.1(c) of the AoA(77). Subsequently, the Panel concluded that the EC had violated its obligations under AoA Articles 3.3 and 8 by supplying export subsidies within the meaning of AoA Article 9.1(a) and (c) in excess of both the quantity commitment and the budgetary outlay commitment levels determined in its schedul(78)e. The Panel decided in favor of the complainants, requiring that the EC comply with its reduction commitments.(79)