Introduction

On 27 September 2002, the Governments of Australia and Brazil (the ‘Complainants’) filed requests for consultations with the European Communities (EC) alleging that the structure of its sugar market violates its obligations under certain agreements of the World Trade Organisation (WTO). If the Complainants are successful in their challenge, the EC may find itself obligated to change the nature of its sugar market in order to bring it into compliance with WTO obligations. Such changes could result in a significant reduction in price supports from which domestic and certain African, Caribbean and Pacific (ACP) suppliers benefit.

The EU Common Market Organisation for sugar

General structure

The EU's Common Market Organisation (CMO) for sugar has the following five principal features:

• production quota scheme

• guaranteed price and intervention mechanism

• export refund programme

• production levies

• preferential import programme.

Quota scheme

Under the CMO, processors are required to pay growers a guaranteed minimum beet price, and the EC will pay producers a fixed ‘intervention price’ for a certain quantity (quota) of refined white sugar per EC Member State. National quotas are allocated to individual sugar-producing factories. There are two types of quota, A and B, the main difference being the level of the production levies applied to them. Only ‘quota sugar’ can be sold in the EC; sugar produced in excess of quota (‘C-sugar’) must be exported without any export refund. Thus, the quota system acts as a limitation on the supply of sugar on the EC sugar market.