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Sugar Market Liberalization: Modeling the EU Supply of "C" Sugar

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Author Info
Gohin, Alexandre
Bureau, Jean-Christophe

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Abstract

The various assessments of the effects of a liberalization of world sugar markets are largely inconsistent. One cause seems to be the modeling of the EU supply response. We investigate three possible linkages between production quota sugar and the out-of-quota or "C" sugar supply: i/ the existence of fixed costs covered by the in-quota sugar; ii /the "overshooting" behavior as prevention against poor yields; iii/ the production of C sugar as "reference building" in view of expected reforms. Modeling these effects results in the introduction of an implicit cross-subsidy between in quota sugar and C sugar. The resulting specification is included in a detailed model of EU agricultural sector so as to account for intersectoral linkages. We simulate the effects of the reform of the sugar sector proposed by the EU Commission in July 2004 and the effects of a ban on sugar export subsidies. The cuts in production and prices required to eliminate export subsidies are larger than those proposed by the Commission. However, the reform proposal makes large a decrease in tariffs possible. The need to eliminate export subsidies appears more constraining than the constraints on tariffs reduction for the EU. As expected, different assumptions on the interaction between in-quota prices and C sugar supply have a significant impact on the results and explain some of the differences observed in the literature regarding the effect of sugar market liberalization.

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Paper provided by European Association of Agricultural Economists in its series 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark with number 24740.

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Date of creation: 2005
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Handle: RePEc:ags:eaae05:24740

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Keywords: Common Agricultural Policy; sugar; modeling; general equilibrium models; Agricultural and Food Policy; D58; Q17; Q18;

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  1. Gohin, Alexandre, 2005. "The specification of price and income elasticities in computable general equilibrium models: An application of latent separability," Economic Modelling, Elsevier, vol. 22(5), pages 905-925, September. [Downloadable!] (restricted)
  2. de Gorter, Harry & Fisher, Eric O'N., 1993. "The Dynamic Effects Of Agricultural Subsidies In The United States," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 18(02), December. [Downloadable!]
  3. Peterson, Everett B & Hertel, Thomas W & Preckel, Paul V, 1994. "A General Equilibrium Framework for the Food Marketing System," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 21(1), pages 37-57.
  4. Rozakis, S. & Sourie, J. -C., 2005. "Micro-economic modelling of biofuel system in France to determine tax exemption policy under uncertainty," Energy Policy, Elsevier, vol. 33(2), pages 171-182, January. [Downloadable!] (restricted)
  5. Poonyth, Daneswar & Westhoff, Patrick & Womack, Abner & Adams, Gary, 2000. "Impacts of WTO restrictions on subsidized EU sugar exports," Agricultural Economics, Blackwell, vol. 22(3), pages 233-245, April. [Downloadable!] (restricted)
  6. Elobeid, Amani & Beghin, John C., 2004. "Multilateral Trade and Agricultural Policy Reforms in Sugar Markets," Staff General Research Papers 11539, Iowa State University, Department of Economics. [Downloadable!]
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  7. Perroni, C. & Rutherford, T., 1991. "Regular Flexibility of Nested CES Functions," Working Papers 91145, Wilfrid Laurier University, Department of Economics.
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  8. van der Mensbrugghe, Dominique & Beghin, John C. & Mitchell, Don, 2003. "Modeling Tariff Rate Quotas in a Global Context: The Case of Sugar Markets in OECD Countries," Staff General Research Papers 10717, Iowa State University, Department of Economics. [Downloadable!]
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  9. Hertel, Thomas W., 2002. "Applied general equilibrium analysis of agricultural and resource policies," Handbook of Agricultural Economics, in: B. L. Gardner & G. C. Rausser (ed.), Handbook of Agricultural Economics, edition 1, volume 2, chapter 26, pages 1373-1419 Elsevier. [Downloadable!] (restricted)
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  10. Aksoy, M. Ataman & Beghin, John C., 2005. "Global Agricultural Trade and Developing Countries," Staff General Research Papers 12228, Iowa State University, Department of Economics. [Downloadable!]
  11. Ball, V Eldon, et al, 1993. "The Stock of Capital in European Community Agriculture," European Review of Agricultural Economics, Oxford University Press for the Foundation for the European Review of Agricultural Economics, vol. 20(4), pages 437-50.
  12. Gohin, Alexandre & Moschini, GianCarlo, 2007. "Evaluating the Market and Welfare Impacts of Agricultural Policies in Developed Countries: Comparison of Partial and General Equilibrium Measures," Staff General Research Papers 12727, Iowa State University, Department of Economics.
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  1. Nolte, Stephan, 2006. "The application of spatial models in the analysis of bilateral trade flows: An alternative to the Armington approach for the world sugar market," Working Paper Series 10288, Humboldt University Berlin, Institute for Agricultural Economic and Social Sciences. [Downloadable!]
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