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TWN Info Service on WTO and Trade Issues (Apr19/01)
1 April 2019
Third World Network


Guatemala initiates dispute over India’s support for sugarcane

Published in SUNS #8875 dated 27 March 2019

Geneva, 26 Mar (Kanaga Raja) – Guatemala has initiated a dispute at the World Trade Organisation (WTO) over domestic support measures and alleged export subsidies provided by India to producers of sugarcane and sugar.

As an initial step, Guatemala has sought consultations with India. Guatemala’s request for consultations with India was circulated to WTO members on 25 March 2019.

The dispute initiated by Guatemala is similar to disputes initiated separately by Brazil and Australia over alleged domestic support provided by India to the agricultural producers of sugarcane and sugar, as well as all alleged export subsidies that India provides for sugar and sugarcane. (See SUNS #8861 dated 7 March 2019 and #8863 dated 11 March 2019).

If consultations fail to settle the dispute within 60 days after the date of receipt of the request for consultations, the complaining party may request the establishment of a panel.

The establishment of a panel may also be requested by a complaining party during the 60-day period if the consulting parties jointly consider that the consultations have failed to settle the dispute.

In its communication to the DSB (WT/DS581/1), Guatemala claimed that India maintains various domestic support measures in favour of sugarcane producers and sugar producers, such as:

(i) a system of administered prices for sugarcane which operates at the federal level through the Fair and Remunerative Price (“FRP”) and, in the case of certain states, at the state level through the State Advised Price (“SAP”);

(ii) a minimum selling price for sugar; and

(iii) additional measures that provide financial assistance to sugarcane producers which include production subsidies provided to sugar mills to offset sugarcane price arrears, soft loans provided to sugar mills to offset sugarcane price arrears, and subsidies to maintain buffer stocks.

Guatemala maintained that India did not schedule domestic support reduction commitments in Section I of Part IV of its Schedule of Concessions.

Article 7.2(b) of the Agreement on Agriculture states that “[w]here no Total AMS commitment exists in Part IV of a Member’s Schedule, the Member shall not provide support to agricultural producers in excess of the relevant de minimis level set out in paragraph 4 of Article 6”.

According to Article 6.4(b), the de minimis level for developing countries, such as India, is 10 per cent of the total value of production for the basic agricultural product in question.

Guatemala considers that India’s domestic support measures are inconsistent with India’s obligations under Articles 3.2, 6.3, and Article 7.2(b) of the Agreement on Agriculture as they exceed the de minimis level of 10 per cent provided for in Article 6.4(b) of the Agreement on Agriculture.

According to the Guatemalan communication, in addition to domestic support measures, India provides export subsidies for sugarcane and sugar which take the form of subsidies provided to sugar mills contingent on compliance with minimum indicative export quotas (“MIEQs”), as well as subsidies to sugar mills for internal transport, freight, handling and other charges to facilitate e xport freight support for exports.

India did not schedule export subsidy reduction commitments in Section II o f Part IV of its Schedule of Concessions.

According to Guatemala, India, therefore, may not provide export subsidies to sugarcane or sugar.

Guatemala considers that India’s measures are thus inconsistent with India’s obligations under Articles 3.3, 8, 9.1, and 10.1 of the Agreement on Agriculture and Article 3 of the Subsidies and Countervailing Measures (SCM) Agreement.

In its communication, Guatemala identified the measures through which India provides domestic support in favour of producers of sugarcane and sugar, and which are subject to its request for consultations.

The measures at issue include the following, as well as any amendments, related, successor, replacement or implementing measures thereto:

1. Federal-level domestic support for sugarcane in the form of a federal administered price, the “Fair and Remunerative Price” (“FRP”), which is fixed by the Federal Government and paid by sugar mills to sugarcane farmers as reflected in, but not limited to, the instruments and documents identified (in paragraph 1 of Annex A to Guatemala’s request for consultations).

2. State-level domestic support for sugarcane in the form of a state administered price, the “State Advised Price” (“SAP”), which is fixed by some Indian States and paid by sugar mills located in that State to sugarcane farmers in that State as reflected in, but not limited to, the instruments and documents identified (in paragraph 2 of Annex A to its request for consultations).

3. Federal-level domestic support for sugarcane in the form of a minimum mandatory selling price for sugar that Indian sugar mills are required to charge for the sale of sugar in India as reflected in, but not limited to, the instruments and documents identified (in paragraph 3 of Annex A to its request for consultations).

4. Federal-level domestic support for sugarcane, in the form of production- based assistance to offset sugarcane price arrears, involving budgetary outlays and/or other measures to support the production of, and the set of prices for, sugarcane and sugar, as a result of, but not limited to, the instruments and documents identified (in paragraph 4 of Annex A to its request for consultations).

5. Federal-level programs and measures making available subsidised loans to offset sugarcane price arrears to support the production of, and the set of prices for, sugarcane and sugar, as a result of, but not limited to, the instruments and documents identified (in paragraph 5 of Annex A to its request for consultations).

6. Federal and state-level measures providing financial assistance towards the maintenance of stocks for sugar, including budgetary outlays and/or other measures to offset cost of sugarcane and support sugarcane price, as reflected in but not limited to, the instruments and documents identified (in paragraph 6 of Annex A to its request for consultations).

7. Other state-level domestic support for sugarcane and sugar including assistance subsidies, production subsidies, low-interest loans, and exemption of purchase taxes as reflected in, but not limited to, the instruments and documents identified (in paragraph 7 of Annex A to its request for consultations).

Guatemala also identified the measures through which India provides export subsidies for sugarcane and sugar, and which are subject to its request for consultations.

The measures at issue include the following, as well as any amendments, related, successor, replacement or implementing measures thereto:

1. Federal-level measures which provide subsidies to sugarcane and sugar producers contingent upon export performance, including, but not limited to, the instruments identified (in paragraph 8 of Annex A to its request for consultations).

2. State-level export subsidies for sugarcane and sugar, which make the provision of financial support to sugar mills contingent upon export performance including, but not limited to, the instruments and subsidies identified (in paragraph 9 of Annex A to its request for consultations).

3. Federal-level assistance and export incentives, including but not limited to the instruments identified (in paragraph 10 of Annex A to its request for consultations).

4. Freight assistance, including under the Sugar Development Fund (SDF) Rules rule 20A, as well as but not limited to the instruments identified (in para graph 11 of Annex A to its request for consultations).

Guatemala considers that the measures identified appear to be inconsistent with Articles 3.2, 6.3 and 7.2(b) of the Agreement on Agriculture because they provide product-specific domestic support for sugarcane in excess of the 10 per cent de minimis level.

Guatemala said that India did not schedule domestic support reduction commitments in Section I of Part IV of its Schedule of Concessions and, therefore, pursuant to Article 6.4 of the Agreement on Agriculture, India’s domestic support measures may not exceed the 10 percent de minimis level.

Guatemala considers that the measures identified provide export subsidies that appear to be inconsistent with Articles 3.3, 8, 9.1, and 10.1 of the Agreement on Agriculture.

Guatemala said that India did not schedule export subsidy reduction commitments in Section II of Part IV of its Schedule of Concessions. Accordingly, India may not provide export subsidies for sugar or sugarcane.

The measures identified constitute export subsidies that also appear to be inconsistent with India’s obligations under Article 3 of the SCM Agreement, said Guatemala.

[According to civil society groups from the region, Guatemala has a “sugar cartel”, with the worst reputation both on the effects of its activities on the environment and in its relations with the peasant labour in the sugarcane plantations. SUNS]

 


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