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)