Brazilian Sugarcane Industry Association Calls on European Commission Not to Authorize Sugar Exports Above WTO Ceiling

By Brazilian Sugarcane Industry Association unica, PRNE
Sunday, January 24, 2010

SAO PAULO, January 25 - In a letter sent today to Commissioner for Agriculture Mariann Fischer
Boel, the Brazilian Sugarcane Industry Association (UNICA) called on the
European Commission to stick with its commitment, assumed at the World Trade
Organization (WTO), and not allow European exports of sugar above the ceiling
of 1.374 million tonnes.

According to UNICA, current EU sugar surpluses are the result of stocks
accumulated over the last campaigns, when world sugar prices were lower than
the European price. Current higher prices for sugar on the world market are
an exceptional circumstance that should not trigger a change in European
sugar policy.

"The EU is trying to externalize its surplus problems on world markets,
while this sugar surplus could well be used by downstream domestic users,"
says UNICA President and CEO Marcos Jank in the letter to Fischer Boel.

UNICA believes that the European Commission should undertake a proper
consultation of the interests at stake and an assessment of potential
implications, as such a decision would be an incentive for EU farmers to
expand their sowing.

"In the short term, some user industries could be left without sugar they
are counting on, as the export market becomes more profitable. In the mid to
long term, when global prices for sugar drop below the European price, the EU
will be left with cross-subsidized surpluses of sugar that will need to be
exported, putting the EU in clear infringement of its international
commitments," concluded Jank.

COPY OF THE LETTER FROM UNICA TO THE COMMISSIONER FOR AGRICULTURE

Sao Paulo, 25 January 2010

Dear Mrs. Commissioner Fischer Boel,

With regards to the request made by European sugar producers and some
European Union Member States to increase exports above the ceiling of 1.374
million tonnes of sugar consolidated at the World Trade Organisation, the
Brazilian Sugarcane Industry Association (UNICA) would like to draw your
attention to the potential adverse effects of such a decision, based on the
following elements:

In relation to market disruptive consequences

— The production surplus that the European Union is currently facing is
the result of large stocks accumulated over previous sugar campaigns, when
world sugar prices were lower than the EU price. The existence of these
surpluses is a clear demonstration that the EU sugar reform adopted in 2006
did not reach all its objectives. As a consequence, the EU externalizes its
surplus problems on world markets. However, this surplus of sugar in the
European Union could well be used by downstream domestic users, such as the
yeast, chemical and biofuels industries. These sectors have not been
consulted by the European Commission on the possibility to exceed the agreed
export limit. A decision of the kind would put their industries at a risk of
shortage as arbitrage would be open between exports on a profitable global
market and sales on the EU market.

In relation to global trade negotiations

— The decision would contradict the alleged EU's ambition to conclude
the multilateral trade negotiations at the Doha Round. It would also set a
dramatic precedent as per the results of previous panels (e.g. milk) where
the EU's trade partners did not resume exports when global market trends
returned to a favourable situation.

In relation to legal interpretation

— The conclusion of the Dispute Settlement Body (the "DSB") in the Panel
and Appellate Body Reports 'European Communities - Export Subsidies on Sugar'
requires the EU sugar regime to be put in conformity with its international
obligations. As a consequence of this decision, the EU proceeded to the
reform of its sugar regime in 2006, which provisions are detailed in
Regulation 2006/318. Since the EU never exported sugar above the ceiling
bounded at the WTO after the reform, the conformity of the new sugar regime
has never been assessed in light of the finding of the conclusion of the DSB.
However, the eventual decision of the EU to allow sugar exports above the
ceiling would require an assessment of the SDB findings to determine whether
such exports could still be considered as cross-subsidised, focusing mainly
on available quantities and marketing campaigns under consideration. We would
therefore urge the European Commission to defer any decision on the matter
until its legal services have advised on the interpretation of the panel –
expected in February 2010 — and submit their interpretation to the WTO for
prior assessment of conformity.

— In addition, a decision to allow exports above the WTO ceiling could
have adverse long-term consequences for the sugar market as the EU could find
itself with even larger surpluses to export in the future sugar campaigns
when global prices return to lower levels. As farmers are now planning their
sowing for the future campaign, a positive decision by the European
Commission to allow exports above the WTO ceiling would trigger additional
sowings for the next campaign, leading to additional surpluses that would
have to be exported. When international sugar prices return below the EU
price, it makes no doubt that the EU sugar would once again benefit from
cross-subsidization, putting the European Union in clear infringement of its
international commitments.

In view of the above mentioned considerations, we trust that your
services will allow the necessary time for consulting with the impacted
industries and the parties to the EC-Export subsidies on sugar WTO panel -
Australia, Brazil and Thailand - and for considering all the significant
consequences such a decision would entail. In the meantime we remain, yours
sincerely,

Marcos Sawaya Jank

President and CEO

ABOUT UNICA

The Brazilian Sugarcane Industry Association (UNICA) represents the top
producers of sugar and ethanol in the country's South-Central region, the
heart of the sugarcane industry. With over 120 member companies, UNICA
provides information on the sector, including statistics and specific
research, and enters into dialogue with stakeholders in support of Brazil's
sugarcane, ethanol and bioelectricity sectors.

    FOR MORE INFORMATION
    CDN - Corporate Communications
    Rosa Webster - +55-11-3643 2707 / rosa.webster@cdn.com.br
    Mariane dos Santos - +55-11-3643-2730 / mariane.santos@cdn.com.br

Rosa Webster, +55-11-3643-2707, rosa.webster at cdn.com.br, or Mariane dos Santos, +55-11-3643-2730, mariane.santos at cdn.com.br, both of CDN - Corporate Communications for UNICA

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