GATT Orders U.S. to Change Sugar Quotas

WASHINGTON —  The United States got word Thursday that it must abandon its protective quotas on imports of foreign-grown sugar or make changes to bring them into line with international trading rules.

The order came from the Geneva-based General Agreement on Tariffs and Trade, the 96-country compact that administers world trading rules. The GATT Council, the organization’s top policy-making body, approved a lower-level finding that the quotas were illegal.

Thursday’s decision will not necessarily mean the end of the U.S. sugar quotas, which have been criticized as one of the most egregious examples of U.S. protectionism. The order was based on relatively technical violations, which Washington believes that it can easily correct.

May Delay Action

But the GATT Council also opened the way Thursday for initial consideration of a more sweeping complaint by the European Community that would challenge the application to raw sugar imports of a 1955 loophole that has allowed Washington to maintain quotas on farm products.

U.S. officials say it is likely that the White House will delay action on the ruling for at least several months. Policy-makers are considering several options, including converting the quotas to tariffs, which would then be legal under international rules.

The Bush Administration has little stomach for continuing the sugar quotas. U.S. Trade Representative Carla A. Hills told an audience in Paris earlier this month that the sugar restrictions are “very difficult . . . and hard for me to defend.”

Nevertheless, the Administration faces a vocal minority in Congress that wants to maintain the quotas. Because of the quota system, U.S. consumers pay twice the world price for sugar, with the benefits going mainly to makers of corn sweeteners.

At the same time, the quotas shut out imports from cash-strapped U.S. allies such as the Philippines, the Dominican Republic and much of the Caribbean.

The quotas limit imports of foreign sugar to 1.25 million tons a year--about 7.6% of the total U.S. market.

No Violation Found

The finding of the GATT Council--based on a complaint filed by Australia--had been widely expected. The Australians had charged that the quotas violated GATT rules requiring that U.S. producers be restricted as well, through imposition of domestic marketing controls.

Hills pointed out in a formal statement Thursday that the GATT panel “did not find the sugar program to violate” GATT rules, but ruled only that “U.S. administration of the quota system is in contravention of the GATT.”

While conceding that the United States has “an obligation” to bring the quotas into line with international trading rules, she also noted that U.S. officials would have “ample time to consider our options,” and would be “consulting closely with the industry and Congress.”