UPDATE 2-Brazil, others condemn extra EU sugar export

* Brazil, Australia, Thailand say extra sugar export illegal

* Urge withdrawal of extra out-of-quota EU exports

* New trade dispute possible

* EU says this sugar is not subsidised, export is legal

(Adds quotes)

By Jonathan Lynn

GENEVA, Feb 1 (BestGrowthStock) – Australia, Brazil and Thailand
called on Monday for the immediate withdrawal of an additional
export of 500,000 tonnes of out-of-quota sugar by the EU, saying
it was illegal under World Trade Organisation (WTO) rules.

The three states, which won a WTO dispute with the European
Union over its sugar export subsidies five years ago, warned it
they did not rule out further action, including the possibility
of reopening the case which could lead to retaliation.

The European Union’s executive Commission announced the
extra sugar exports in the current 2009/10 marketing year last
week as sugar prices hit 29-year highs. [ID:nLDE60Q1CM]

A statement by the three sugar exporters said the extra
500,000 tonnes meant EU sugar exports in the current year could
reach 1.85 mln tonnes, 576,500 tonnes more than the 1.27 million
tonne ceiling the EU is committed to under WTO agreements.

The European Union argues its ceiling is some 100,000 tonnes
higher because of its expansion to 27 from 15 members since the
current WTO agriculture agreement was signed.

Brazil’s ambassador to the WTO, Roberto Azevedo, told a news
briefing that the nature of the EU’s sugar regime meant that all
sugar produced there was subsidised.

If more than the agreed quota of such sugar was exported, it
amounted to a prohibited subsidy under WTO rules, and other
affected countries did not need to prove any adverse impact, he
said.

“The sugar that will now be dumped into the international
market is the result of surpluses which were accumulated in a
succession of inflated crops,” Azevedo said.

“Therefore they cannot claim that this surplus sugar is not
subsidised because of market conditions today.”

Azevedo said the three states feared the Commission’s action
sent the wrong signal and would encourage growers and refiners
to continue over-producing.

EU SAYS NOT SUBSIDISED

But the EU Commission said it had done a careful analysis
which showed the quantities authorised for export did not
benefit from any subsidy and so could not be counted as part of
the subsidised exports the EU is allowed under WTO rules.

“We are absolutely, 100 percent confident that this is
completely legal and does not in any way violate our WTO
commitments,” said Commission agriculture spokesman Michael
Mann.

The EU said it decided to authorise the exports because of
exceptional market conditions, a reference to the strong global
demand and tight supply which saw the sugar price (SBHO: ) touch a
29-year peak of 30.40 cents a pound on Monday on the ICE
commodities exchange before falling back to 29.71 cents later.

Among factors driving the price are a shortfall in
production in India, which is buying up sugar on the
international market as a result.

The dispute will be closely watched by European sugar
producers such as Suedzucker (SZUG.DE: ), Danisco (DCO.CO: ) and
France’s Tereos [TEREO.UL], which has a Brazilian subsidiary
Acucar Guarani (ACGU3.SA: ).

Stock Market Research Tools
(Reporting by Jonathan Lynn; additional reporting by Bate Felix
in Brussels; editing by Tim Pearce)

UPDATE 2-Brazil, others condemn extra EU sugar export