The verdict endorsed a decision it had taken last October, after receiving complaints from Australia, Brazil and Thailand that the EU policy of subsidising sugar exports broke international trade rules.

In particular, it noted that the EU’s subsidised exports had been exceeding an agreed 1,273,000 tonnes annual limit since 1995.

Luiz Felipe de Seixas de Correa, Brazil’s ambassador to the WTO, said: “This result today means an important victory for us. It is certainly going to help the inclusion of agriculture in the multilateral trade system.”

The European Commission last night said that it was disappointed, but confirmed that it would respect the ruling. It has 15 months to comply. Peter Mandelson, Trade Commissioner, said: “We will abide by our international obligations on the sugar regime and will work closely with member states on the necessary reforms.”

The WTO ruling may force the Commission to make bigger cuts in its generous sugar subsidy system than it planned.

Although other areas of the EU’s Common Agricultural Policy have been reformed in recent years, sugar, for which subsidies have been given for 40 years, has been left virtually untouched.

Development groups welcomed the ruling. Phil Bloomer, of Oxfam, said the EU had to “act quickly to introduce reforms that end export dumping and increase market access for the world’s poorest countries”.

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