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Packages of Redpath sugar at the company’s refinery in Toronto.Fred Lum/The Globe and Mail

Canada's two dominant refined sugar makers have scored a major victory to keep the market to themselves for at least another three years, after a federal trade tribunal reversed its earlier decision to let European sugar into the country duty-free.

"We're very pleased with the ruling. We think it should have been the ruling in the first place," said Redpath president Jonathan Bamberger. "These are heavily protected and price-supported markets that we can't access" in Europe.

But the ruling, released late Friday by the Canadian International Trade Tribunal (CITT), could complicate ongoing free trade talks between Canada and Europe, observers said. "The Europeans aren't going to be pleased" with the decision, particularly after the European Union made modest changes in the last decade to partially liberalize the sugar market, said one senior Canadian trade expert who asked not to be identified. "This is just another issue to complicate agricultural discussions" that are expected to centre on Canada's attempts to gain access to European markets for beef and pork exports.

The CITT determined that if sugar from Europe's subsidized industry was allowed into Canada, it would harm Redpath Sugar and Rogers Sugar, who have had an overwhelming share of the Canadian refined sugar business since 1995 thanks to a string of rulings to maintain high duties on sugar from Europe and the United States. That was a reversal of the CITT's 2010 decision, in which it concluded recent reforms to Europe's sugar regime would prevent excess sugar from being sent to Canada at below-market prices should the duties fall.

That 2010 decision broke from past rulings and was also at odds with recommendations from the Canadian Border Services Agency. The Canadian manufacturers appealed, claiming the EU reforms had had only limited effect and that exports of cut-rate European sugar to Canada would increase, threatening their operations and jobs. They won a partial victory in May, when the Federal Court of Appeal overturned the CITT's 2010 decision and asked it to reopen the case. It was the first time in the tribunal's 23-year history that such a decision had been overturned..

The concerns of the sugar industry have since been borne out by soaring prices and surplus sugar production in Europe. Producers there have also exceeded by hundreds of thousands of tonnes the EU's trade commitment to limit subsidized exports to global markets. In its decision Friday, the CITT conceded that if its 2010 decision had stood, it "would likely result in more than negligible shipments of dumped and subsidized EU refined sugar to Canada," resulting in harm to the domestic producers.

"They failed to account for the fact new [sugar production] capacity was coming on board" in the original decision, said Darrel Pearson, co-chair of the international trade and investment practice with law firm Bennett Jones LLP in Toronto. "For the Canadian industry it continues a lengthy period of protectionism of what is effectively an oligopoly, and means the cost to consumers and manufacturers will remain relatively higher than what it could have otherwise been."

As a result, sugar from the U.K. Germany, Denmark and the Netherlands will continue to be subject to a 78 per cent duty, while another 22-cent per kilogram duty will be added to all sugar from the EU, as has been the case since 1995. A similar duty on U.S. sugar was extended in 2010 and remains in effect.

Maurizio Cellini, head of the economic and trade section of the European Union Delegation to Canada, declined to comment on the ruling, saying only "we will study the decision."