. /.WORLD TRADE
ORGANIZATIONWT/DS265/21
11 July 2003
(03-3752)
Original:  English
EUROPEAN COMMUNITIES – EXPORT SUBSIDIES ON SUGAR
Request for the Establishment of a Panel by Australia
The following communication, dated 9 July 2003, from the Permanent Mission of Australia to
the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.
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My authorities have requested me to submit th e following request for the establishment of a
panel on behalf of Australia.
On 27 September 2002 Australia requested consultations with the European Communities
(EC) pursuant to Article 4 of the Understanding on Rules and Procedures Governing the Settlement of
Disputes (DSU), Article XXII:1 of the Genera l Agreement on Tariffs and Trade 1994 (GATT 1994),
Article 19 of the Agreement on Agriculture and Articl es 4 and 30 of the Agreement on Subsidies and
Countervailing Measures (SCM Agreement) with respect to the EC's Common Organization of the
Markets in sugar and its application and implementation.  The request was circulated to Members on
1 October 2002 in document number WT/DS265/1.  Consultations were held on 21 and 22 November
2002 but unfortunately did not result in resolution of the dispute.
Consequently, Australia requests that a Panel be established pursuant to Article 4.7 and
Article 6 of the DSU, Article XXIII:2 of GATT 1994, Article 19 of the Agreement on Agriculture andArticle 4.4 and Article 30 of the SCM Agreement.
The measures that are the subject of this request are the subsidies provided by the EC in
excess of its reduction commitment levels on sugar and sugar containing products including sugar
cane and sugar beet, processed and unprocessed cane and beet sugar and chemically pure sucrose insolid form, molasses resulting from the extraction of refining of sugar, isoglucose, inulin syrup and
the other products listed in Article 1 of Council Regulation (EC) No 1260/2001 of 19 June 2001 on
the European Communities' Common Organization of the markets in sugar sector (Official Journal of
the European Communities, 30 June 2001, L178/1-45).
The above-mentioned subsidies are accorded through the EC sugar regime, which is
contained in a number of EC regulations including Council Regulation No 1260/2001 and related EC
regulations, administrative policies, rules, decisions and other instruments including instruments pre-
dating the above regulation, and their implementation.  These various instruments will be referred to
as "the EC sugar regime".
In addition to setting down the conditions attaching to imports of sugar, the EC sugar regime
provides conditions attached to the production, supply and exports of sugar, including domestic
support and export subsidies.  Sugar is classified into quota and non-quota sugar.  Non-quota sugar is
known as C sugar.  The sugar regime provides for the reclassification from quota to C sugar and fromC sugar to quota sugar.  Sugar classified as C sugar cannot be disposed of in the EC market.WT/DS265/21
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Australia is particularly concerned at the subsid ies provided by the EC for "C sugar" exports
under the EC sugar regime.  Under the regime, produ cers of C sugar are able to sell C sugar on the
world market at below the total average cost of production through cross-subsidisation of C sugar
from quota sugar profits.  By financing payments on the export of C sugar, the EC exceeds its exportsubsidy reduction commitments under the WTO Agreement on Agriculture.
Australia is also particularly concerned at the provisions of the EC sugar regime which accord
direct subsidies contingent on export performa nce for quantities of approximately 1.6 million tonnes
of sugar which are additional to the budgetary outlays and quantities of subsidised exports notified by
the EC to the Committee on Agriculture under the provisions of Article 18.2 of the Agreement on
Agriculture.  In the application of those provisions, the EC significantly exceeds its budgetary outlaysand quantity commitments for export subsidies on sugar under the Agreement on Agriculture.
By granting export subsidies within the meaning of Articles 1.1(a)(1)(i), 1.1(a)(1)(iv),
1.1(a)(2) and 1.1(b) of the SCM Agreement that are not permitted by the Agreement on Agriculture,
the EC also acts inconsistently  with its obligations under Articles 3.1(a) and 3.2 of the SCM
Agreement.
Australia considers that the provision of the above subsidies and the relevant elements of the
EC sugar regime are inconsistent with the EC 's obligations under the following provisions:
– Articles 3.3, 8, 9.1(a), 9.1(c), and alternatively, 10.1 of the Agreement on Agriculture;
– Articles 3.1(a) and 3.2 of the Agreement on Subsidies and Countervailing Measures.
Australia therefore requests the establishment of a Panel in accordance with Article 7 of the
DSU.
I would be grateful if you would place this item on the agenda for the next DSB meeting
scheduled for 21 July 2003.
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