March 2, 2016 / 6:01 AM / 3 years ago

Brazil to challenge Thailand sugar subsidies at WTO

BRASILIA (Reuters) - Brazil will challenge Thailand at the World Trade Organization (WTO) over subsidies for sugar producers that it says have dragged down global prices for the sweetener, the Trade Ministry said.

Brazil said the Thai government has given support to cane growers and sugar mills that is inconsistent with international trade agreements, allowing the Asian country to win market share at the expense of Brazilian producers.

“These subsidies have been subject of several questionings at different committees in the WTO, but we saw no signs of changes,” the Brazilian Trade Ministry said in a statement.

Although WTO cases take years before a ruling is reached, the move could potentially shake up the global sugar market, given that Brazil and Thailand are the world’s two largest exporters of the sweetener.

Last year, Brazilian sugar producers said they were gathering evidence to launch the case against Thailand and India for subsidies they say could cost them $1.2 billion a year in revenue.

Brazil said Thailand’s favorable policies towards its sugar sector had the effect of raising the country’s exports as a share of the global market from 12.1 percent to 15.8 percent in the past four years.

Over the same period, Brazil fell to 44.7 percent from 50 percent, according to the ministry.

Thailand said on Wednesday that Brazil’s claim was baseless.

“There is no government subsidy. Everything is consistent with trade agreements,” Worawan Chitaroon, deputy secretary-general of the Cane and Sugar Industry Policy Bureau under Thailand’s Industry Minister, told Reuters.

Monetary support received by Thai sugar producers came from the country’s Cane and Sugar Fund, which raised the money itself, Worawan said.

When the fund did not have enough money, it sought loans from the state-owned Bank for Agriculture and Agricultural Cooperatives, but the government did not have any role in this, she said.

Brazil’s cane industry group Unica has been asking its government to take action against Thailand and India for some time.

It blames the policies of the two Asian countries for stimulating sugar production over a period when the commodity endured a long cycle of low prices that only now seems to be ending.

This is not the first time Brazil has challenged a country over sugar subsidies. Brazil won a landmark case against the European Union in 2004 that triggered a complete overhaul of the bloc’s policies for sugar production, which had long lasting implications for the global market.

Brazil also won its case against U.S. cotton subsidies before the WTO.

Reporting by Alonso Soto and Marcelo Teixeira; Additional reporting by Panarat Thepgumpanat in BANGKOK; Editing by Alan Crosby and Richard Pullin

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