The European Union's regime for subsidising sugar farmers was declared illegal by the World Trade Organisation yesterday in a landmark ruling that will severely curtail dumping of excess production on global markets.
Brazil, Australia and Thailand were claiming victory last night after a preliminary WTO finding that the EU had affected the livelihoods of farmers in the rest of the world by breaching agreed limits on financial support for exported sugar.
Coming just three days after the WTO's 147 members agreed to cuts in farm support as part of an attempt to broker a new trade liberalisation deal, the ruling in Geneva was seen as an important breakthrough in the fight to reduce western protectionism.
"This decision is another im portant step in the elimination of distortions in international agricultural products markets," the Brazilian foreign minister, Celso Amorim, said in a statement.
The sugar ruling provided Brazil with its second WTO victory over the west this year. In April, the body that polices world trade told the United States that much of the aid for 25,000 American cotton farmers was illegal.
A spokeswoman for Pascal Lamy, the EU trade commissioner, declined to comment yesterday, noting that WTO rules prevented public reaction to confidential rulings. But a trade source in Geneva said: "Brazil has won on pretty much all counts."
The country's agriculture minister, Roberto Rodrigues, said the EU would have to cease exporting 2 million tonnes of sugar starting from next year because of the ruling and that Brazil would export 10% more. Brazil is the world's largest producer and exporter of sugar.
The interim ruling by the WTO's disputes panel found that the EU was exporting four times the permitted amount of subsidised sugar on world markets each year, depressing world prices and costing Brazil, Thailand and Australia hundreds of millions of dollars in lost foreign exchange earnings.
Oxfam, the development charity, said last night: "This ruling is a triumph for developing countries and a death knell for unfair EU sugar subsidies, which undermine poor farmers' livelihoods and deny them the chance to trade their way out of poverty.
"The scam has been uncovered. The EU must now act to reform the regime in a way that benefits poor countries," Oxfam added.
