MODELLING THE EFFECTS OF EU SUGAR MARKET LIBERALIZATION ON AREA ALLOCATION, PRODUCTION AND TRADE

This paper presents a partial equilibrium simulation analysis of EU sugar market reforms with a version of the European Simulation Model (ESIM) addressing three issues: preferential EU imports are a function of the price differential between world market and EU price, EU supply functions are estimated based on FADN data, and the production of bioethanol in the EU and the rest of the world is taken into account as an important component in sugar beet and sugar cane demand. It is found that the current sugar market reform including the restructuring process until the end of 2007 is sufficient to allow the EU to comply with its WTO commitments only very narrowly. EU sugar supply is simulated to decrease from roughly 19 million tons in the base period to 15.5 million tons by 2015 and the EU price remains at a level of about 450 €/t and thus significantly above the reference price. In case of full liberalization production in the EU is projected to decrease to 7.5 million tonnes by 2015.