The Future of CARICOM Sugar under a Liberalized Trading Regime

The primary objective of this study was to assess and analyse the implications of liberalization of the European Union (EU) and United States of America (USA) sugar markets on CARICOM producers. Traditionally the EU has been the major market for CARICOM sugar, traded under the EU/ACP Sugar Protocol (SP) and Special Preferential Sugar (SPS) quota arrangement. Additionally, sugar is also sold to the USA through a quota arrangement under the Caribbean Basin Initiative (CBI). Currently Brazil, Thailand and Australia have requested a WTO panel against the EU, challenging the special arrangements for sugar imports from a number of ACP countries as agreed in the Uruguay Round. This has caused sugar exporting ACP countries to express strong concerns and opposition to this action which runs the risk of undermining this preferential market. But the challenge does not stop there. There are also efforts to change what is considered as "market-distorting sugar regimes" in the United States and Japan through both bilateral and multilateral channels. Much like the case of banana, the outcome of these challenges can pose serious problems for CARICOM economies. This study therefore sought to assess the possible impact of loss of these preferential sugar markets on CARICOM's raw centrifugal sugar industry. In order to do this, an econometric single commodity static market model was constructed and partial equilibrium analysis was used for the impact analysis. Regression models were constructed for the demand and supply equations in order to derive the respective elasticities to be used in the partial equilibrium model. It was found that if the EU and the USA were to discontinue the preferential sugar marketing arrangements and CARICOM producers were required to sell their sugar at the world 'free' market equilibrium price, such a measure will have negative quantity, financial and welfare effects.