World Trade Organization
WT/DS265/AB/R,
WT/DS266/AB/R, WT/DS283/AB/R
AB-2005-2 (28 April 2005)
1.
The
European Communities appeals certain issues of law and legal interpretations
contained in the Panel Reports, European
Communities − Export Subsidies on Sugar (the "Panel
Reports"). The Panel was established to consider
complaints by Australia, Brazil, and Thailand (the "Complaining
Parties") regarding export subsidies for sugar and sugar-containing
products accorded under Council Regulation (EC) No. 1260/2001 of 19 June
2001 ("EC Regulation 1260/2001") and related instruments (together,
the "EC sugar regime").
2.
EC
Regulation 1260/2001 is valid for the marketing years 2001/2002 to 2005/2006 and
establishes, inter alia:
quotas for sugar production; an
intervention price for raw and white sugar, respectively;
a basic price and a minimum price for beet for quota sugar production; quota (that is, "A" and "B") sugar as
well as non-quota (that is, "C") sugary;
import and export licensing requirements; producer levies; and
preferential import arrangements. Furthermore,
the EC sugar regime provides "export refunds" to its sugar exporters
for certain quantities
C sugar.
These "refunds", which are direct export subsidies, cover the
difference between the European Communities' internal market price and the
prevailing world market price for sugar. Non-quota
sugar (that is, C sugar) must be exported, unless it is carried forward,
but no "export refunds" are provided for such exports.
The factual aspects of the EC sugar regime are set out in greater
detail in the Panel Reports.
3.
The
Complaining Parties claimed before the Panel that, under the EC sugar
regime, the European Communities provided export subsidies for sugar in excess
of its reduction commitment levels specified in Section II, Part IV of the
European Communities' Scheduley, in
violation of certain provisions of the Agreement
on Agriculture and the Agreement on
Subsidies and Countervailing Measures (the "SCM
Agreement") governing export subsidies.
The Complaining Parties alleged that such subsidies in excess of the
European Communities' reduction commitment levels were provided to exports of C sugar
as well as to sugar equivalent in volume to sugar imported into the European
Communities under preferential arrangements with certain
African–Caribbean–Pacific countries y
(the "ACP Countries") and India.
4.
The
Panel Reports were circulated to Members of the World Trade Organization
("WTO") on 15 October 2004. The
Panel concluded, at paragraph 8.1 of the Panel Reports, that:
(a)
the
European Communities' budgetary outlay and quantity commitment levels for
exports of subsidized sugar are determined with reference to the entry specified
in Section II, Part IV of its Schedule, and the content of Footnote 1 thereto in
relation to these entries is of no legal effect and does not enlarge or
otherwise modify the European Communities' specified commitment levels;
(b)
the
European Communities' quantity commitment level for exports of sugar pursuant to
Articles 3.3 and 8 of the Agreement
on Agriculture is 1,273,500 tonnes per year, effective from the
marketing year 2000/2001;
(c)
the European Communities' budgetary outlay commitment level for exports
of sugar pursuant to Articles 3.3 and 8 of the Agreement on Agriculture is €499.1 million per year, effective from the marketing year 2000/2001;
(d)
the
Complaining Parties have provided prima
facie evidence that, since 1995, the European Communities' total exports of
sugar exceed its quantity commitment level.
In particular, in the marketing year 2000/2001, the European Communities
exported 4,097,000 tonnes of sugar, that is, 2,823,500 tonnes in excess of its
commitment level;
(e)
there
is prima facie evidence that the
European Communities has been providing export subsidies within the meaning of
Article 9.1(a) of the Agreement
on Agriculture to what the European Communities considers to be exports of
"ACP/India equivalent sugar" since 1995; and
(f)
there
is prima facie evidence that the
European Communities has been providing export subsidies within the meaning of
Article 9.1(c) of the Agreement
on Agriculture to its exports of C sugar since 1995.
The
following issues are raised in this appeal:
whether
the Panel erred in finding, in paragraph 7.37 of the Panel Reports, that the
alleged "payments", within the meaning of Article 9.1(c) of the Agreement
on Agriculture, in the form of low-priced sales of C beet
to sugar producers, fell within the Panel's terms of reference;
whether
the Panel erred in finding, in paragraphs 7.191, 7.198, 7.222, and 8.1(a) of the
Panel Reports, that Footnote 1 to Section II, Part IV of the European
Communities' Schedule ("Footnote 1") is of no legal effect and does
not enlarge or otherwise modify the European Communities' commitment levels
specified in that Schedule;
whether
the Panel erred in finding, in paragraph 7.292 of the Panel Reports, that the
alleged payments in the form of low-priced sales of C beet to sugar
producers are "financed by virtue of governmental action", within the
meaning of Article 9.1(c) of the Agreement
on Agriculture;
whether
the Panel erred in finding, in paragraph 7.334 of the Panel Reports, that the
production of C sugar receives a "payment on the export financed by
virtue of governmental action", within the meaning of Article 9.1(c)
of the Agreement on Agriculture, in
the form of transfers of financial resources through cross-subsidization
resulting from the operation of the European Communities' sugar regime;
whether,
as a result of its findings under (c) and (d) above, the Panel erred in finding,
in paragraph 8.1(f) of the Panel Reports, that there is prima facie evidence that the European Communities has been
providing export subsidies, within the meaning of Article 9.1(c) of the
Agreement on Agriculture, to its
exports of C sugar since 1995;
whether
the Panel erred in finding, in paragraphs 7.374 and 8.4 of the Panel Reports,
that the European Communities' violations of the Agreement on Agriculture nullified or impaired the benefits
accruing to the Complaining Parties under the Agreement on Agriculture;
whether
the Panel erred in finding, in paragraph 7.74 of the Panel Reports, that
Australia, Brazil, and Thailand (the "Complaining Parties") acted in
good faith, under Article 3.10 of the Understanding
on Rules and Procedures Governing the Settlement of Disputes (the
"DSU"), in the initiation and conduct of the present dispute
settlement proceedings and have not been estopped, through their actions or
silence, from alleging that the European Communities' exports of C sugar
are in excess of its export subsidy reduction commitments;
whether
the Panel erred, in paragraph 7.387 of the Panel Reports, in exercising judicial
economy and declining to examine the Complaining Parties' claims under Articles 3.1(a)
and 3.2 of the Agreement on Subsidies and
Countervailing Measures (the "SCM Agreement"); and
whether
certain aspects of the European Communities' Notice of Appeal
satisfy the requirements of Rule 20(2)(d) of the Working
Procedures for Appellate Review (the "Working
Procedures").
For
the reasons set forth in this Report, the Appellate Body:
upholds the Panel's finding, in paragraph 7.37 of the Panel
Reports, that the alleged "payments", within the meaning of Article 9.1(c)
of the Agreement on Agriculture,
in the form of low-priced sales of C beet to sugar producers, fell within
the Panel's terms of reference;
upholds the Panel's finding, in paragraphs 7.191, 7.198,
7.222, and 8.1(a) of the Panel Reports, that Footnote 1 to Section II, Part IV
of the European Communities' Schedule does not enlarge or otherwise modify the
European Communities' commitment levels specified in that Schedule;
upholds the Panel's finding, in paragraph 7.292 of the Panel
Reports, that the alleged payments in the form of low-priced sales of C beet to
sugar producers are "financed by virtue of governmental action",
within the meaning of Article 9.1(c) of the Agreement
on Agriculture;
upholds
the Panel's finding, in paragraph 7.334 of the Panel Reports, that the
production of C sugar receives a "payment on the export financed by
virtue of governmental action", within the meaning of Article 9.1(c)
of the Agreement on Agriculture,
in the form of transfers of financial resources through cross-subsidization
resulting from the operation of the European Communities' sugar regime;
upholds, as a result of its findings under (c) and (d)
above, the Panel's finding, in paragraph 8.1(f) of the Panel Reports, that there
is prima facie evidence
that the European Communities has been providing export subsidies, within the
meaning of Article 9.1(c) of the Agreement
on Agriculture, to its exports of C sugar since 1995;
upholds, as a result of its findings under (b), (c), (d),
and (e) above, the Panel's finding, in paragraphs 7.340 and 8.3 of the Panel
Reports, that the European Communities, through its sugar regime, acted
inconsistently with its obligations under Articles 3.3 and 8 of the Agreement
on Agriculture;
upholds the Panel's finding, in paragraphs 7.374 and 8.4 of
the Panel Reports, that the European Communities' violations of the Agreement
on Agriculture nullified or impaired the benefits accruing to the
Complaining Parties under the Agreement
on Agriculture;
upholds
the Panel's finding, in paragraph 7.74 of the Panel Reports, that the
Complaining Parties acted in good faith, under Article 3.10 of the DSU, in the
initiation and conduct of the present dispute settlement proceedings and,
assuming arguendo that estoppel
applies, have not been estopped, through their actions or silence, from alleging
that the European Communities' exports of C sugar are in excess of its
export subsidy reduction commitments;
finds that the Panel erred, in paragraph 7.387 of the
Panel Reports, in exercising judicial economy, and thereby failed to discharge
its obligation under Article 11 of the DSU with respect to the Complaining
Parties' claims under Article 3 of the SCM Agreement, but is not in a position, and therefore declines,
to complete the legal analysis and to examine the Complaining Parties' claims
under the SCM Agreement left
unaddressed by the Panel; and
finds that the European Communities' Notice of Appeal
satisfies the requirements of Rule 20(2)(d) of the Working Procedures for Appellate Review.
The
Appellate Body recommends that the Dispute Settlement Body request the
European Communities to bring Council Regulation (EC) No. 1260/2001, as
well as all other measures implementing or related to the European Communities'
sugar regime, found in this Report, and in the Panel Reports as modified by this
Report, to be inconsistent with the Agreement on Agriculture, into conformity with its obligations
under that Agreement.