September 2004

Busted: World Trade Watchdog Declares EU & US Farm Subsidies Illegal

Oxfam has welcomed a ruling at the World Trade Organisation (WTO) that states that the majority of the subsidies the EU and US pay their sugar and cotton farmers are illegal.

In two separate cases brought by Brazil and other developing nations, the EU and US have been found guilty of paying subsidies that encourage overproduction and allow the dumping of excess farm produce overseas, which undermines the livelihoods of poor farmers in the third world.

“These rulings are a triumph for developing countries and a warning bell for rich countries who consistently flout the rules at the WTO and whose unfair systems are creating misery and poverty for millions” said Phil Bloomer, Head of Oxfam International's Make Trade Fair Campaign.

“Developing countries have won the moral battle, the intellectual battle and now the legal battle. This is a signal that the modus operandi of the rich and powerful in the WTO getting away with anything they like will no longer be tolerated.”

The cotton panel found that $3.2 billion in US cotton subsidies and $1.6 billion in export credits (for cotton and other commodities) are against WTO rules. This represents almost all cotton subsidies and close to 50% of all export credits used by the USA in 2002.

The sugar panel found the EU is violating its commitments to the WTO by exporting up to four times more subsidised sugar onto world markets than is allowed.

Phil Bloomer added: “The EU and US are proven to be in the wrong. They must now immediately act on the panels' recommendations and take the necessary steps to reform their unfair regimes. If they do not they will undermine an organisation that they created and that they need.”

In each case, the parties will have the opportunity to appeal against the rulings before the deadline for implementation next year. Oxfam is urging the countries not to appeal but to implement them quickly and in good faith.

We estimate that US cotton dumping cost Africa more than $300m between 2001 and 2002, while Mozambique, Malawi and Ethiopia have lost $238m since 2001 as a result of restricted access to Europe's markets for their sugar.