Developing countries and the European Union are locked in a bitter trade dispute over EU sugar subsidies. Brazil, Australia and Thailand have challenged EU subsidies of sugar at the World Trade Organization, claiming the payments exceed the WTO-agreed limit. Oxfam, a development organization, recently gave the WTO challenge a credibility boost, by releasing a scathing report on the size and impact of the EU subsidies. The WTO is expected to rule on the sugar challenge this summer.
Oxfam reported that Europe was trying to hide the magnitude of its subsidies through “economic sophistry.” While Europe pegs its sugar subsidies at $1.5 billion, Oxfam said there are 833 million euros in “hidden subsidies.” These payments mainly benefit a cartel of six sugar producers, which alone received about $977 million last year. “The regime maintains a system of corporate welfare, paid for by EU taxpayers, with the human costs absorbed by developing countries,” the report said. Every euro of sugar exported cost 3.30 euros in subsidies.
Unsurprisingly, Oxfam also found that EU subsidies hurt the developing world by generating oversupplies and lowering global sugar prices. The EU subsidies undercut Brazil’s sugar export earnings by $494 million in 2002, while Thailand lost $151 million. Since 2001, the cost to Ethiopia, Mozambique and Malawi was $238 million. To put this into context, Malawi’s export losses were greater than its primary health care budget, while the cost for Ethiopia is equivalent to what it spends on its HIV/AIDS programs.
While the EU claims it is a non-subsidizing exporter, Oxfam claims that it is actually the world’s top subsidizer, dumping around 5 million tons of the commodity on the market every year. Oxfam also debunked EU claims that it gives broad market access to 49 poor countries. The report said Europe’s total annual quota for sugar imports from these countries is equivalent to just three days of EU consumption.
The global impact of Europe’s agricultural subsidies is becoming increasingly difficult to sugar-coat, through sophistry or other means. Europe pretends to be the champion of poor countries, but its farm policies threaten to undermine the world trade round, which was supposed to benefit the developing world. Although U.S. subsidies also generate overproduction and price distortions, Europe has been particularly reluctant to reduce its towering subsidies.
Please read our comment policy before commenting.