The European Union has rejected complaints from Brazil and Australia that its sugar subsidies constitute a distortion of trade.

The latter countries have lodged complaints with the World Trade Organisation (click here for further information ). Their officials argue that the subsidies paid to unproductive producers in the European Union artificially depress global market prices to below production costs.

However, EU agriculture commissioner Franz Fischler said the WTO filing was regrettable: "We don't think this is the proper way forward [...] sugar prices have gone up and down over the last few years; you can't blame the EU for price fluctuations," he said.

The EU must now hold consultations with Australia and Brazil within 30 days and if no agreement is reached the issue can be referred to the WTO for adjudication. Australia contends that Europe's sugar subsidies breach its obligations under the Uruguay Round, under the agreement on subsidies and countervailing measures and under the GATT (General Agreement on Tariffs and Trade).