The country?s sugar revenue will face mounting pressure as the World Trade Organisation (WTO) rules against the European Union (EU) sugar regime. Themultilateral trade organisation has upheld a previous ruling that says the prevailing EU sugar policy is contrary to its rules.

Brazil, Thailand and Australia brought a case to the WTO panel where they argued that Europe was exceeding the limit of subsidised sugar it is allowed to sell on the world market. They complained that an amount of 1.6 million tons of sugar ? a quantity equivalent to the overall quota of the Africa, Caribbean and Pacific countries (ACP) ? was unaccounted for.

This amount of sugar, they say, enjoys subsidies from the EU in the form of the high prices farmers get on the domestic market. This enables them to dump the sugar excess on the international market.

The prices on the EU market are three times higher than prevailing world prices. ACP producers are entitled, under the Sugar Protocol, to a price that is closely related to that on EU domestic markets. Any subsequent change in the sugar regime in Europe will inevitably impact on the sugar earnings for Mauritius and its ACP partners.

The latter have released a communiqué on their website following the WTO final decision, showing their disappointment, ?It would seem to us that the Appellate body did not take into account our arguments so crucial for the survival of our small vulnerable economies.?

Extra-WTO arrangement

They insist on the fact that ?the ACP is not against the reform of the EU sugar regime. It wants a reform which is fair and equitable to all stakeholders and one which complies fully with the legal and political commitment of the EU vis-à-vis the ACP sugar regime.?

The EU has some 15 months to adjust to the new requirements. ?The European Commission regrets the attack on the EU sugar regime but will abide by the WTO appellate body ruling,? says a communiqué. They can also devise some kind of extra-WTO arrangement that takes on board the interests of all countries involved and does not cause any prejudice to any member of the trade body.

Mauritius should also face the reform in the EU sugar regime that is taking place, regardless of the WTO ruling. A drop of 37% in export prices is being envisaged. Both decisions are a serious blow to the local sugar industry, which is already under tremendous pressure due to the downsizing and centralisation of milling operations.

EU proposal made public in June

Now that the WTO has published its ruling, the European Commission should follow closely with a proposal for the sugar protocol reform. The latest declarations by new EU commissioner for agriculture, Mariann Fischer Boel, portend nothing positive for the sector.

While former commissioner Franz Fischler had suggested a 37% fall in sugar export prices for ACP countries, the present one warned that the cut could be even more important. As ACP members were already worried about the 37% drop, this is far from reassuring. The final decision should be known on 22nd June. Meanwhile, the Mauritian minister of Agriculture and spokesperson for the ACP countries, Nando Bodha, is in Paris to lobby the EU commissioner but observers are not sure this will change anything.