NCPA - National Center for Policy Analysis

Sweet Deal for the European Union

April 21, 2004

Developing countries and the European Union are locked in a bitter trade dispute over EU sugar subsidies. Brazil, Australia and Thailand have challenged EU subsidies of sugar at the World Trade Organization, claiming the payments exceed the WTO-agreed limit. Oxfam, a development organization, recently gave the WTO challenge a credibility boost by releasing a scathing report on the size and impact of the EU subsidies.

Oxfam says that Europe is hiding the magnitude of its subsidies through "economic sophistry." For example:

  • While Europe pegs its sugar subsidies at $1.5 billion, there are 833 million euros in "hidden subsidies."
  • These payments mainly benefit a cartel of six sugar producers, which alone received about $977 million last year.
  • Every euro of sugar exported cost 3.30 euros in subsidies.

Unsurprisingly, Oxfam also found that EU subsidies hurt the developing world by generating oversupplies and lowering global sugar prices:

  • The EU subsidies undercut Brazil's sugar export earnings by $494 million in 2002, while Thailand lost $151 million.
  • Since 2001, the cost to Ethiopia, Mozambique and Malawi was $238 million; to put this into context, Malawi's export losses were greater than its primary health care budget, while the cost for Ethiopia is equivalent to what it spends on its HIV/AIDS programs.

The global impact of Europe's agricultural subsidies is becoming increasingly difficult to sugar-coat, through sophistry or other means. Europe pretends to be the champion of poor countries, but its farm policies threaten to undermine the world trade round, which was supposed to benefit the developing world, say observers.

Source: Editorial, "European sugar-coating," Washington Times, April 21, 2004 and "Dumping on the World: How EU Sugar Policies Harm Poor Countries," Oxfam Briefing Paper No. 61, March 2004.

 

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