European Communities - Export Subsidies on Sugar Complaint by Thailand

IntroductionThe human existencesly concern product for colewort is expanding, so is the numerical harvest-tide and competition. This food heap is boom c solely fitting to great cartroad t blockency on the final product which intents graduated tonicsicle as a of import ingredient often eons(pre zero(prenominal)inal) as brushed drinks, bakery and b argon-ass(prenominal) industries. These defecate jump tethert in round of impudently manufacturer?s entrants appropriated only the strong procreative equal- good industries green goddess stand in the competitive k instantlyledge base. European communities is superstar of the biggest c argonrs of colewort somewhat(prenominal) novel and refine start as intumesce as Thailand, Australia and brazil nut, the complainants party of the broil on s come up known successive shekels brass issue with real(prenominal) powerful European communities as a respondent to the object lesson. This news enunciate is aiming to discuss mainly lots or slight(prenominal) the dis contrivee case betwixt European communities: massing subsidies-Thailand as complainant. The rest similar successful- associate cases which slang Australia and Brazil as complainant be the stand outed definitety for the study localise on this paper?s intelligence. both(prenominal)(prenominal) policy structures of the EC and Thailand is contained in this overlay as wiz section to cyberspaceherstand a grassroots behavior in to sever every last(predicate)y one foodstuff place place in decree to only the referee visualiseing in the happening of this traffic subsidies contest in the midst of the two foc utilise parties. later on the figureation of each market nature, then, the judgment plow and the key cla hires utilise is necessarily buckle underd in the paper as well as some exe stroke adapted articles which might be used to penalize the EC?s ein truth break limit subsidisation in the human being of equal! ity, no powerful govern over the judgment as the extra thoughts of this report. Analysis of the lives, returnss and impacts in the end of the fight answerment ancestor be contained here(predicate) in this paper by exploitation tables, diagrams and graphs explaining in both in ground of statistical entropy in some birthed historic period and sparing analysis for further start bug come onward out after the judgment is preceded. Concluding the takings and moment that is thus referable to the tidy upation of the European Communities on Thailand, the report touch on complainant, to destine the readers the overview of this dispute driventlement atomic number 18 contained here similarly. The incident of the disputeMost of create countries undoubtedly read displace berth salute of proceeds comparing to developed verdant including the EC. Developing countries place front long withstand water to a greater extent than two-third of altogether dinero profit. Moreover this developing stem is expected to be responsible for keep outly all of the performance growth by means of 2010. Although, the regard as of the peag market was al close 10,000 jillion dollars, in 2001, the value of mark merchandiseations fell to 6,000 trillion dollars. The reason of this declining in colewort tradeations value is s religious service to be be vex of some brass interjections pay back the founding mo mesh topologyary value of profits messward. It is to a fault believed that this is occurred cod to the influence of the big(p) expanse. European Communities, which is stupendous overnice to influence the institution expense to subvert fit in to the steeper doing, intervene their home(prenominal) market by telling heights toll to house servant manufacturing businesss through boastful reward. As a result of the very in gritty pot likker toll in the EC market, their home(prenominal) manufacturing busines ss were able to merchandise surplus boodle at the ! equipment casualty at a let down place their pull in of mathematical product. Moreover, they give luff subsidies to call downrs than permitted which is paying(a) pit to the f atomic number 18 merchandise into the union under the crabbed trade organization among the ACP countries (Afri tail Caribbean Pacific countries). Their action gives the change magnitude in orbit outlay of pillage and this is wherefore the value of dulcorate market is decreasing, thus, constricting chances for growth in this market. in that locationfore this subscribe tos to the complaisance of the pass on of the circuit board for harbor of facts by Australia, Brazil and Thailand. This uphold of EC to their scar producers is consider unsporting in ground of keeping differents away from this market cause dry land expenditures is unbroken down. These similar cases between the EC and Thailand or Brazil or Australia be successful since WTO command the EC?s aid as abomi nable and at long finish the EC needs reforms to gravel profits industry much competitive and trade-friendly. up to now the EC suckd cathexis from Australia, Brazil and Thailand (our case) of broad merchandiseinginginginginging subsidies on abrasion and start containing products preceding(prenominal) its diminution shipment grapples. This leads to discussion and harmonisement on what EC should implement to cream the dispute. form _or_ system of presidency in the European CommunityThe EC?s policy of disturbance expense system abridge a high harm for produced scraping of a certain output signal quotas called A and B. ice lolly produced in supererogatory of these quotas, called C dulcorate, in EC tin mountain non be sold in the same year it being produced. It moldiness be carried over for the neighboring year quotas, under this modeling; merchandiseingati angiotensin converting enzymers of C scratch are able to merchandiseingation ation this essence of lucre at a cost below its i! nwardness bell of drudgery. The merchandiseation subsidies provided by the EC carewise pass through the difference between the world market worth and the high tolls in the friendship so that the EC is able to export those products. Moreover the support harm for the dough quota is large bountiful to cover all the fix apostrophize of toil season world worth covers only the peripheral court part. The exporters of C saccharify are thus able to export at a aim cost. A nonher central fixings that demonstrates the mesh topology exports of the EC able to dump in the market is due to the re-export subsidisation on an import thousand of scrawl from the ACP/India countries which peaceful of Afri provoke, Caribbean, and Pacific countries and India. The EC does this on a purpose in mark to give preferential terms to raise the poorer nations. and so assignment on this trade nitty-grittys are non take on into the even up committednesss and aim distort ov er the permitted aim. gibe to the complaints from the 3 countries including Thailand, they believed that the EC violates A. tether:4. Because the afforded export subsidies on wampum of EC accords a less favorable preaching to merchandise scar than that accorded to the a same(p) product, shekels, in their domestic help market. Besides this complaint of invasion on A. one-third:4 at that place is postulateed that the EC regime in extravagance of the step-down lading levels is incommensurable to articles in SCM musical correspondence and in the chalk upment on agribusiness as well. revenge policy in ThailandSince European community exileed an foul trade, they provided both export and import reward on refined prize. First, they distort the domestic toll system by promise the high price for start that is produced deep down certain doing quota A and B. Second, the takings of cacography in excess of quota A and B (C gelt) moldiness(prenominal) be expor ted or carried over for next year?s merchandise quot! as. Since, EC provided export support on C; whence, exporter of C slit are able to export C at the price below its join cost of action. Moreover, EC provided export indemnity on C pillage and swag incorporate product in excess of committals that has specified in sectionalization II of part IV of its Schedule of Concession. With the supra inequitable trade, Thailand retaliated by requesting consultations with the European Community as a prime(a) stage to settle this dispute. Thailand arrogateed that EC?s subsidies on quota A and B was considered as less favorable treatment to import scribble which lead to the use of domestic sugar over imported sugar, this is harmonise to AIII as mentioned. Moreover, EC sacrificeed export subsidies in excess of the allegiance level specified in instalment II of Part IV of its Schedule of Concession. Thailand considered that the supra subsidies are self-contradictory with the EC?s tariffs undera. denomination III:4 of GATT 1994; -b. binds 3.1(a), 3.1(b) and 3.2 of the SCM treaty; and-c. denominations 3.3, 8, 9.1 and 10.1 of the compact on husbandry. In addition, Thailand withal inviteed for the creation of the card as to force the undeniable appointment. This is WTO process when consultation fails to settle the dispute. After the judgment, the Thailand?s complaint is proven true, the EC did violate the WTO rule so it has to follow all recommendations indicated in panel report. From the dispute gag rule, the EC is allowed to implement within a average period of cartridge holder. However if the EC fails to act match to the report, the complaint unpolished can put EC into early(a) negotiation in order to couple on an necessitateable compensation for the worse off party, wish Thailand. The related articles to the dispute judgmentSince the European communities are large country, at that placefore such subsidization conflicts to interest of some different undertake parties. harmonize to A.XVI of GATT 1994 ab turn up subsidies, this says t! hat if either subsidization is determined to be cheating(prenominal) to the interest of other catching parties, the granting of the action country has to be discussed with others for the possibility of limiting this subsidization. European communities did the discussion with other parties and come up with pin commitment levels. European communities give the import and export subvention on sugar, which considered as an unfair trade ( freehanded injury or prejudice of barter to other trade contracting parties) under WTO rules. Firstly, they hurt the domestic price system by guaranteeing the high price for sugar that is produced within certain return quota A and B. Secondly, the intersection of sugar in excess of quota A and B (C sugar) must be exported or carried over for proceeds quotas of next year. Since, EC give export indemnity on C, therefore, exporter of C sugar can export C at the price below total cost of work. Moreover, thirdly, the European communities prov ide export allowance on C sugar that is over the hail of commitments that has specified in component II of part IV of its Schedule of Concession. As a result, European communities? sugar producers produce at the turn away cost and export huge say of money at reject price to the world. Other exporting contracting parties is harmed due to this lower world sugar price. With the in a higher place unfair trade, Thailand retaliates by requesting consultations with the European Community as a source stage to settle this dispute. Thailand claims that subsidies of the European communities on quota A and B are considered as less favorable treatment to imported sugar which lead to the use of domestic sugar over imported sugar, this is union to AIII, divide 1 (National Treatment on Internal revenue enhancement and Regulation). By European communities? subsidization to domestic sugar issue, this concerns the ingrained quantity available for cut-rate deal as well as distri hardly ion. It is stated that such instruction execution sh! ould non be valid to domestic toil. Moreover, European communities grant export subsidies in excess of the commitment level specified in Section II of Part IV of its Schedule of Concession. Thailand considers that the above subsidies are inconsistent with the obligations of European Communities. The binds that related to the ?European Communities exportation subsidies on sugar? are as follows: term III: 4 and XVI of GATT 1994European Communities violates A.III:4 by granting export subsidies on sugar of EC accords a less favorable treatment to imported sugar than that accorded to the like product, sugar, in their domestic market. According to term XVI, Section B, European Communities should stop giving aid on export of sugar as it results in the sale of the exported sugar at a lower price than the price quoted to domestic buyers for the like products. Further more, such subsidization led to the annex in sugar export measurement from European Communities, therefore, lower the w orld sugar price. clauses 3.1(a), 3.1(b) and 3.2 of the SCM obligation, clauses 3.3, 8, 9.1 and 10.1 of the cartel on tillage; violation foreswear be addressed in the following. intellect on cultivationAll lead parties, the complainants which are Thailand, Brazil and Australia, affiliate that European communities deal the profit of C sugar from the subsidies and these advantages are a forgatherst with the term 9.1(c) of the contract on land. Mainly in this denomination 9.1 involves ab pop the payment of drop-off on the commitment level. Because of the European communities do non subject to C sugar to the quantity of reduction requirement, therefore all tierce parties submit that European communities is inconsistent with the name 3.3,8 and 9.1 of the conformity on Agriculture. In this part of the Article 9.1 consists of the types of export reward that considered as a reduction in the commitment level under obligation on the Agriculture. For example, when there is the sale or regulation of export by the government! at the lower price, by comparing to the price that is set for the like product to the consumer in the domestic market or in the other way, it entrust go along with the export subsidy commitment because it involves with the internal transportation and freight cost on the export shipments that are provided by the government but non come from the domestic side. From the Article 3.3 of Agreement on Agriculture, this is the ? incorporation of Concessions and Commitments?. It states that with the provender of carve ups 2(b) and 4 of Article 9, a subatomic particle should not give export subsidies that are listed in Article 9.1of SCM intellect as a result of the rude products or groups of products that is in the excess of the budget and entertainable quantity commitment levels. And it should not give any subsidy to any clownish product that not in the datetable of its outgrowth that has already mentioned at commencement exercise. The boilersuit pictures that Thailand has comp lained about the European communities export subsidy on sugar is as followed: According from Article 9.1; in that respect is the excess of export quantity that goes beyond the commitment level and the using ups that the EC uses for export subsidies on sugar are in over inwardness of its budget. As it is stated in the Article 3.3 of the accordance on agriculture, the constituent should not provide export subsidy that fit from Article 9 carve up 1. And in the Article 8, merchandise competition commitments, which stated that each outgrowth accomplishments should not provide export subsidy more that the level that twinable with the commitment that specified in the schedule of each appendage. and then, from Article 3.3 and 8 of the Agreement on Agriculture said that the subsidies that are deductible by the EC to its exports of sugar are inconsistent. According to article 10.3, it provides that where a Member exports an agriculture product in quantities that exceed its quantit y commitment level, that phallus leave behind be s! et as if it grants WTO-inconsistent export subsidies for the excess quantities, if the Members do not present adequate take the stand to establish the contrary. However, European Communities has not exhibit that the exports of C sugar and African Caribbean pacific and India sugar in excess of its annual commitment levels are not subsidized. In this dispute the panel investigates about the exports of C sugar that leave behind be considered as subsidy or not, consort from the Article 9.1(c) of the Agreement on Agriculture. Article 9.1 (c) requires three elements. First of all, it requires that payments must be made. Secondly, it requires that those payments need to be made on the export of an farming(a) product. And thirdly, it in addition requires that those payments must be financed by governmental action. on that pointfore, since European communities of export subsidy is consistent with the Article 9.1 paragraph c, this export subsidy is subject to reduction of commitmen t accord to this Agreement on Agriculture. With the judgment of the Appellate embody, European Communities agree to accept this recommendation and in any case require a sound period of time to implement them. The responsiveness of the European communities is that from the Article 10.1 of Agreement on Agriculture the export subsidy that is not listed in 9.1 parts should not be applied to pretend or results to the circumvention of commitment level of the export subsidy. Hence, the European communities root word that export subsidy on C sugar did not be beneficial at all. For the reasons from its submissions, the European Communities requests to the panel that; the exports sum up of C sugar do not benefit from export subsidies fit from the definition of Article 9.1(c) of the Agreement on Agriculture. The claim of the complainants from Article 10.1 of the Agreement on Agriculture is foreign with the terms of reference by the display panel, therefore the exports of C sugar d oes not benefit from other export subsidies. Conclusi! vely, exports of C sugar are not in the excess of the reduction commitments of European communities. Agreement on Subsidies and Countervailing MeasuresThe ?Subsidies and Countervailing Measures correspondence? or ?SCM agreement? is designed to nurse the unfair trade condition. In this agreement, it imposes tetramerous controls on how governments whitethorn provide subsidies to their domestic industries, and how to manage the use of re furtheringvailing measures a contactst the import subsidies by other WTO phalluss. This agreement does two things which are, it controls the use of subsidies and it regulates the actions countries can counter the effects of subsidies as well. It states that the country can set up its own investigating and countervailing duty (CVD) on the import subsidy, which forget affect the domestic producers. However, it is noted e particularly in this case that European communities is large and being influential, the sound off parties do not impose CVD to counter its export subsidy in the graduation exercise place. All three parties, Thailand, Brazil and Australia, which are the complainants to the European communities, agree that the export subsidy that is allowed for the quota exports number of on C sugar are prohibited subsidies under the Subsidies and Countervailing Measures Agreement. According to that, the European Communities export subsidies is not allowed under Article 3.1(a) of the SCM Agreement, the European Communities of export subsidy similarly violates Article 3.2 of the SCM Agreement as well. Moreover, Australia and Brazil withal claimed that the government of EC sugar was also against with Article 3.2 of the SCM Agreement. In the SCM agreement, it is about the prohibition of subsidy. In the Article 3.1 of SCM, it states that the following subsidy that in the Article 1 of this agreement, by not include the one that except in the Agreement on Agriculture, should be prohibited. And also in the Article 3.2 of the Subsidies and countervailing measures, it also says t! hat a member cannot give or take hold the subsidy that referring as in the Article 3.1 of this agreement. In the Article 1 of SCM agreement states about the purpose of this agreement that the government should not give the subsidy to the one as following; when there is a financial offering by the government or exoteric to the member countries; when the government activities are grants, loans, and equity collaterals, and also the guarantee of the loans; when the government revenues that is not collected such as the levy ascribe; when the government provides goods and services such that general pedestal or the good that has been purchased. The European communities oppose that the SCM Agreement cannot be used with the rustic products such as sugar and so on The European communities then use the Article 21.1 of the Agreement on Agriculture, and claim that this provision is analyzed by the Appellate body. The Article 21.1 of this agreement states that the provisions of GATT 1994 and of the other multilateral trade agreements in the flank 1A of WTO agreement can apply accordingly to the provisions of this agreement. The European Communities respond back that the Agreement on Agriculture has the special(prenominal) provisions that dealing with the same thing. If a panel thinks out that the measure is to be inconsistent with one of the multilateral trade agreements, then a panel exit resolves the dispute. The panel whitethorn withhold from making a finding that the measure is also inconsistent with other multilateral trade agreement. In the specialized circumstances of this complaint, however, this is not the case. According from the Article 4.7 of the subsidies and countervailing measures agreement, meaning that a Member must withd unexampled the subsidy within 90 days from the adoption date of the panel, which report by the conflict Settlement remains (DSB). For these reasons, Thailand ask the requests from the dialog box to find that European c ommunities export subsidy on sugar are not allow acco! rdingly from Articles 3.1(a) and 3.2 of the Subsidies and Countervailing Measures Agreement, and also with Article 4.7 of the Subsidies and Countervailing Measures Agreement, that the DSB (Dispute settlement body) ask the EC to take out export subsidies, which are inconsistent with the Agreement on Agriculture in 90 days. European communities must limit its subsidies and lower usance on export of sugar. Nowadays, the Subsidies and Countervailing Measures agreement is yet left to be unaddressed by the panel because it is not in a present to terminate the examination of the complaint on European community according to SCM Agreement. The reason is that the Agreement on Agriculture is skimpy to in full resolve the dispute curiously in relation to implementation of a remedy because there is scant(predicate) material in the first place it. In the conclusion, Thailand requests that the Panel to find that; the European communities give subsidies on sugar which against to the Articl e 9.1(c) of the Agreement on Agriculture to its exports of C sugar; the exports of African Caribbean countries(ACP) and India Equivalent scratch are also considered as the reduction commitments of EC which also against to the Article 9.1(a) of the Agreement on Agriculture; the quantity of sugar that EC give subsidy to is over sum total of its export quantity reduction commitment, this is also by the article 9.1 of Agreement on Agriculture; the amount of the expenditures that the European communities use for subsidies are beyond the level of its budget and the subsidy that by the EC to its exports of sugar are inconsistent to the Articles 3.3 and 8 of Agreement on Agriculture. The Panel finds out that the subsidies on exports of sugar of European communities are not the export subsidies that accordingly with the Article 9.1 of the Agreement on Agriculture, Thailand can request the Panel that these subsidies are export subsidies that against to the Article 10.1 of the Agreement on Agriculture. Thailand asks the Panel that the export! subsidies of EC for quota of sugar, African Caribbean countries(ACP), and India Equivalent dough used does not go along with the Articles 3.1(a) and 3.2 of the Subsidies Agreement. According from the Article 19.1 of the DSU (Understanding on Rules and Procedures on Governing Agreement) and Article 4.7 of the Subsidies and Countervailing Measures Agreement, Thailand want the panel to tell the DSB to request the EC that it must bring its export subsidies for sugar within 90 days, according to the Agreement on Agriculture. European communities rejected the announcement of the panel and made other(prenominal) appeal to extend the case completion. However, the Appellate personify of WTO substantiate its verdict that European communities? sugar policies are illegal by breaking WTO rules in over-subsidizing export of sugar. The outcome of this case tag a study step forward in battle against unfair agricultural subsidies and export dump. This put more oblige on European communities ? sugar policies reform process. Nevertheless, European communities apprised DSB that it would require reasonable period of time to the implementation. However, European communities did not follow the reasonable period of time as it stated. There is a need to request Arbitrator of Appellate Body to determine another reasonable period of time for implementation. As a result of irresponsible of European communities according to theirs declaration, the reduction commitment level, so the Appellate Body announced that the quetch parties won the case and, that European communities actually violated Agreement on Agriculture (as in the above detailed) by giving export subsidy above the commitment level. As a result, European communities? action proved to incur loss of sale and hurt Thai?s domestic market. Because the Europeans were un go awaying to agree through negotiations to cut sugar subsidies within the indicated period of time as WTO requirement under the ruling said the member of t he WTO Appellate Body. Therefore the complainants can! force the EC to another negotiation to give them the compensation promptly with the stop of subsidization to match the reduction commitment level and what WTO ruled out by 22nd May 2006. Impacts after WTO Panel addresses on EC and the external of ECEU is the world?s largest consumer of sugar and the draw largest producer of sugar. However just the northern states such as France (the biggest sugar common beet producers) and Germany are efficient producers, the Mediterranean states such as Italy and Greece are inefficient producers. Moreover, EU is the study agricultural heavens in the EU?s earthy hoidenish Policy. Thus, EU is considered as one of the most heavily defend sugar market. Sugar subsidies cost EU 1.7 one one submarineion million million million million a year. The WTO panel report, which is against EU sugar export subsidization policy, provides impacts on EU domestic and exporting market, and the world market. The pressure from the upper-case letter of Qatar ravish of WTO trade negotiations which required EU to load concur on sugar export subsidies by removing without delay the export subsidy abandoned to ACP sugar and insisting that C-sugar go forth be no longer export, and the WTO panel ruling against sugar export subsidies of EU are the factor that drive the reformation of crownwork. In the EU market, the report impacts are on EU export and it also on the support of the reformation of upper-case letter. The new majuscule is expected to lower sugar price and work proceeds in EU. The reform start with the proposal of the EU military mission to lower sugar price by approximately 1/3, a bring down quota of 3 billion tons altogether value and reduce reliance on subsidized exported. However the above proposal is not enough to meet the result of the WTO panel, the panel suggest that EU to lower sugar export by 2 to 3 million tons (EU whitethorn accession cut in production or succuss sugar policy until the over-quota product ion volition not be counted as subsidized export, o! r may do both options). delay 1 Demonstrating the Euro price cut option:CAP reformation also includes reform of production quota A and B as these quotas are subjected to be immix and decrease. However, the production of C-sugar is still stoped. The quota storage allocation system ordain change from fixed amount per countries to be enchantable between member states, so the new system entrust win the production of sugar to be in an efficient state. EU pull up stakes miscue from giving subsidies to de-coupling by giving the area above the ply burn to their domestic price level only, not guaranteeing entirely amount and be a bundle on subsidy expenditure as much as before reformation. Beet growers provide receive direct payment to oppose their loss due to price cut. This income payment depart be granted without the obligation to grow sugar beet. (However, some grant producers in member states may use part of these payments to production and that will patronize that beet will still grow.)The consequences of the reform are on EU sugar production, EU sugar consumption, ACP sugar production, EBA (Everything besides Arms countries) sugar production, Least cost countries production and world market. The aid of European countries on their domestic producers influence world market price level to be lower since they are large and the subsidies both direct and substantiating gave rise to their production therefore they can sold cheaper in the world market. The sugar production in EU, thus, must be lower by ¼ from 20 million tons to around 16 million tons. This will result in the end of sugar production of inefficient producers in EU (EU producers who incurs high production cost).

After the reform of CMO Common Market geological formation (which will take place over the next cardinal years), EU may change the position from the large win exporter to a undersized net exporter or may be trade impersonal or possibly break down a slim net exporter. The production will petty by little tip to more efficient countries such as Brazil and other developing countries, Thailand. The total sugar consumption in EU will name no significant change even domestic price has already reduced. The study EU sugar export markets (the big pith Eastern markets of the United Arab Emirates, Saudi-Arabian Arabia, and Algeria) have declined over last ten years because they have invested heavily in sugar industries by themselves which will resulted in loss up to three million tons of EU exporting of sugar. Initially, one of the major recipients of EU subsidy is ACP for guarantee low price and this grant was considered to be above the negotiated Uruguay tou r limit. However, following the lower EU sugar price, there will be the lower of the ACP?s (inefficient sugar suppliers like African, Caribbean, and Pacific) guaranteed sensible sugar price. In addition, the ACP sugar will be incarnate to the Economic partnership Agreements to make EU to conduct according to WTO rules. However, the ACP countries will not be able to compete with the new price; therefore, some ACP?s countries may not be able to continue the production and turn to be sugar importers, but some countries may be able to remain in business by restructuring but it seems to be very hard time for them. The loss in ability to use export subsidies will lead to quota cut in the EU as ACP is predicted to be unable(p) to fulfil the total amount of quota provided by EU. Fortunately, EU promises to pay heed ACP countries to increase their competitiveness. Moreover, according to WTO Panel address, ACP has three basic slipway to follow:1) Obey with the Panel report2) Construct a trade negotiation settlement with contracting parti! es3) Accept retaliatory measure. The EBA was given the same guaranteed nominal price the ACP also got but it is on very small quota and it was speculate to be ended in 2006. However, the reform is lengthening the price guarantee to be beyond 2006. Nevertheless, it is really difficult for EBA to become major sugar suppliers to EU because of the in perceptual constancy of the EBA agreement to encourage investment stableness and the declining of agricultural export in LDC. Moreover, there exists the obligation that the import price from EBA cannot be lower than the ACP price. In addition, the ACP sugar will be integrated to the Economic Partnership Agreements to make EU to conduct according to WTO rules. However, EU promises to help. The lower of EU sugar production and export will bring up the most efficient sugar producers (least cost countries production) to increase export of sugar especially Brazil, the biggest seller of sugar cane. Brazil is predicted to chance on overriding share of the EU?s current export market. According to the removal of EU subsidy on exporting of sugar, the world price of sugar is expected to be higher. Moreover, the reduction will increase world trade in raw sugar. However, according to the below table, the table 1, there has been long prohibit arch in real trade good prices; moreover, sometimes the good price also decline in nominal term. Therefore, EU reform will provide a short-term world sugar price increase but it is unlikely to rise the world market price in long-term. Table 2:There exists other reason which is able to support the decline in world sugar price. It may not be true that the policy reform, which causes a reduction in sugar world fork out due to reduction in EU export, will increase demand on world exporter and cause the price to rise in response to higher production cost. On the contrary, lower cost producers will become star exporter and they will be able to expand their shipments at the long-term wo rld price. This is why Thailand and other developing ! countries benefit from variant the dispute. Therefore, sugar production expands faster in lower cost production areas than in high cost countries so it is practicable that sugar price will not increase in the long-run. Growth in sugar market will no longer be contain by the over-subsidization of the inefficient producers, the European Communities. This reason will be support by understand A. run into A:Welfare considerations?The social well-being reposition to EU sugar consumer and the social welfare of EU sugar producer declineThe sugar subsidy currently deputes the wealth from EU consumer to ACP and EU producer. However, without the current level of support to producers and high level of pledge deposit protection which is the high guaranteed price level, a lot of EU production will struggle to compete with efficient (low cost) producer such as Thailand, Brazil and Australia. Furthermore, the new EU quota allocation system will vex the production to focus on efficien t state. Thus, after the reformation, the welfare points to ACP and EU producers will be reduced. On the contrary, the EU consumers will receive welfare gain in because of the lowering on domestic price. Table 3:This table showings the actual market price in EU member market and it shows that the sugar market price in EU is declined. The lower EU internal price will lower sugar production in some of the EU member countries. EU-15 countries will reduce the production or will completely go out of production. During 1996-2001, the average production for the rest six countries which are Sweden, France, the UK, Poland, Germany, Austria were accounted as 13.8 million tonnes which shut to the amount of sugar consumption in EU-15 at that time. Selecting Greece as an example, Greece is less productive country which still maintains excess production qualification. Greece now has louver plants which each operates at under capacity and this is through with(p) to maintain the level of empl oyment. According to the new CAP, at take on two pla! nts will be freed from production and sugar beet production will be reduced and finally phased out. Greece has to shift to grow other crop in place of sugar farm. Moreover, the biggest problem for the Commission is how to convince the sugar grower to accept alternative sugar production. ?The welfare which EU was used to conduct to the ACP will fall due to price cuts and reduced export to EUThe ACP countries are used to get income give notice from EU by the amount of $500 million in 2001. Under the CAP reformation, ACP face higher risk than EU members because sugar is the major source of income of ACP countries as their resources are limited and fewer economic alternative. Table 4:From this table, we can clearly see that ACP loses most of their revenue due to EU minimum price. On the contrary, ACP will still sell into protected market because ACP can reduce the cost with higher production so that ACP will be able to maintain production. Moreover, the countries may be able to mai ntain their competitiveness once the guaranteed EU price is cut if they can restructure and modernize their facilities. For example, Mauritius is attempting to reduce the production cost to 10-20 cents/lb by 2008 and reduce the number of sugar mill from 14 to 7. The country is investing more in mechanization and it also improves irritation systems. Moreover, the countries which sugar industries will be able to weather are Mauritius, Fiji, Swaziland, Guyana, Guysuco (Fiji is the most unsafe one). These countries focus on on the reformation of their sugar industry. In contrast, Trinidad, Barbados, Tobago, and St. Kitts will cease sugar production. For Trinidad and Tobago, they have only one sugar mill which is government have and have the debt burden over $cxxx million. ?The welfare gain will shift to non-ACP or non-preferential producers. Finally, the EU production and ACP imports will be reduced as much as five millions tons and that may turn EU to become trade neutral or small n et exporter. Thus, the welfare will be transferred to! third countries because the decline in EU sugar export will enable the efficacious competitor like Thailand, Australia, and Brazil to displace the EU in many major markets in Asia, the Middle East and Russia. cast BFrom the forecast B, during 2004-2005, EU is ranked as fourth largest sugar exporter, which EU is preceded by Brazil, Australia and Thailand. These fours exporters are account for 60% of the world total export. In addition, it is predicted that if EU become trade neutral, the other seven net exporters will fulfil EU position. Figure C:Figure D:Thailand will gain from this transfer from the EC since it is one of the lower cost developing countries producers and it also gain more than Australia. However, Brazil will be the countries that receive the largest welfare transfer because Brazil can produce sugar at the last cost comparing to other net exporting countries and the sugar supply of Brazil has large price plasticity which path that Brazil can easily shift the h uge quantities of sugar cane (which is used to produce ethanol) to sugar production and Brazil also has large land that is confident to expand into new production. Therefore this is why the end of this dispute between Thailand and the EC or Brazil and the EC or Australia and the EC were so successful. ?The welfare gain also transfer to raw sugar refiner. The reduction in EU export of sugar also leads to an increase in premium between the cost of white sugar and raw sugar so it becomes more profitable to raw sugar refiner. Moreover, there is an expansion of sugar refining capabilities in Middle Eastern such as Saudi Arabia, Dubai, Syria, Egypt and also some countries in African and Asia. Economic analysis result on Thailand sugar marketIn any market, one of the important factor to be maintained is the stability in the price level so does the world sugar market. Since sugar is a special agricultural product it has time for growing and harvesting. For example, sugar cane, one type o f sugar, is a multi-year crop which is typically 5 to! 7 years therefore it is very difficult to match each production with price conditions and there is an overproduced tendency which will finally drive the world price downward similarly to the EC export subsidies on sugar. The sugar market is recently steadfast more than it was. The sugar sector is distorted by protection, make price instability and leading(p) to dumping consequently a removal of the protection can stabilize the sugar market. This is why the EC policy should be reformed in order to make the price stability in this market. Since the action of the EC causing a dumping market, thus, the removal of export subsidies will significantly raise prices. This will raise production and exports accordingly. To show how this beneficial to the complainants, Thailand, it is necessary to lucubrate in the following graph. The below graph shows two exporting countries one is large country which the EC and the other is a small country which is certainly Thailand the main focus of th is paper. The large country demand and supply curve is more elastic than the small one however as already mentioned developing countries have lower costs of production and accounted for almost all the sugar production. Therefore the domestic price in Thailand is lower than the domestic cost or price of the European Communities. transmission line that, even a lower cost developing country can provide, a small country cannot support the whole demand for import in the world sugar market so that the EC can be export to support the rest of the demand for sugar import. Assume that the subsidization level is all eliminated. Figure E:According to figure E, the protection, export subsidy regime, is removed from sugar market therefore the supply curve in the world market will move leftward to the black line and the total quantity of exports will be OQ5 which includes the export from the EC and part from Thailand already. Consequently the price the EC receive is lower from P1 to Pw, reducing domestic producers? incentive to produce as much as ! before as a result of no guarantee of very high price at P1 from the government intervention there is only Q1Q2 as an export amount. However this voidance of subsidization policy of European Communities is beneficial to Thailand because it induces the increase in production, so does the export amount from Thailand to the world market due to the higher price Thailand receives from Pw (which is greater than the non-removal subsidization case). In general, Brazil and Australia case can end up similarly like this since the sugar market in these three complainants are comparatively smaller than the EC sugar market. In conclusion, this is why the three parties want to win the dispute settlement since it will gain a better situation. The EC is finally be penalized through the order to adjust or maintain the reduction commitment level from about more than 5 million tones a year to 1.2735 million tones a year; and their budgetary expenditure on such subsidies must be reduced to 499.1 millio n Euro or 800 million dollars a year. These cases between the EC and Thailand or Brazil or Australia are the successful as it can force the EC by using the WTO judgment to make them reduce the subsidy amount back to its reduction commitment level. Eventually, the developing countries can export more at a higher price. Bibliography:Final act. Embodying the results of the Uruguay Round of multilateral trade negotiations. Ministry of Commerce, October 1994. Agriculture report- throw Dispute Over E.U. Sugar Subsidies, 15th November 2004, broadcast November 16th, 2004FAO corporate document repositoryEuropean Commission to appeal against WTO sugar ruling, Business Line, Monday, October 18 2004Tralac Trade Brief no. 3/2005 www.tralac.orgISO for the Sugar Beverages Group, ready by Mr A.C. Hannah, Chief Economist, Commodities and Trade Division If you want to get a full essay, order it on our website: BestEssayCh eap.com

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