Reform in the EU Sugar Regime: Impact on the Global Sugar Markets

The ongoing trade negotiations, unilateral trade concessions and obligations under the WTO are pushing the EU sugar regime to undertake reforms. These reforms will alter the positions of developing countries in the global sugar markets. A complete unilateral liberalisation of the EU sugar sector is simulated to depict the winners and losers in the global sugar markets if no preferences are governing the imports of sugar into the EU. The supply responses, which strongly affect the outcomes, are dependent on both the nature of substitution for sugar as well as on the efficiency of sugar production in different countries. The multiregion general equilibrium framework (GTAP) is used for this analysis. The results show that the total liberalisation of sugar imports from the LDCs will be a major threat to the EU sugar regime. The current regime limits sugar imports from all developing countries or some efficient producers, if the production cost data is a right estimate of the potential supply response from developing countries. The LDCs will be the winners under the EBA concession supported by the current regime, but a few efficient sugar producers will be the winners if the current regime is entirely liberalised.