A WTO dairy ruling has possible implications for the EU sugar sector

The WTO ruling on Canada's domestic support measures in the dairy sector, seeking to restrict cross subsidisation of exports would appear to carry important implications for the Brazilian and Australian challenges to the EU sugar regime. The WTO Appellate Body said milk sales by dairy farmers to processors of 'commercial export milk' were made at a price below their cost of production and therefore financed by the higher prices dairy farmers received from their sales at the price fixed by Canada for the domestic market. The Appellate body had earlier ruled that the subsidy effect should be judged by comparison with farmers' cost of production not by comparing export and domestic milk prices. The key to the decision was the assessment that Canadian government action is instrumental in providing a significant percentage of producers with the resources that enable them to sell 'commercial export milk' at below the costs of production. Significantly the Appellate body ruled that in such cases the burden of proof rested with the country seeking to refute the claim that it was exceeding export subsidy commitments rather than the countries bringing the complaint. Comment: This WTO Appellate Body finding would appear to have a direct relevance to the relationship between the intervention price for 'A' and 'B' quota sugar in the EU and the sale price of 'C' sugar exported to world markets without export refunds. It would appear to increase the prospects of a finding in favour of Brazil and Australia in their current challenge to the EU sugar regime.