MODELLING THE EFFECTS OF EU SUGAR MARKETLIBERALIZATION ON AREA ALLOCATION, PRODUCTION ANDTRADE

This paper presents a partial equilibrium simulation analysis of EU sugar market reformswith a version of the European Simulation Model (ESIM) addressing three issues: preferential EUimports are a function of the price differential between world market and EU price, EU supplyfunctions are estimated based on FADN data, and the production of bioethanol in the EU and the restof the world is taken into account as an important component in sugar beet and sugar cane demand. Itis found that the current sugar market reform including the restructuring process until the end of 2007is sufficient to allow the EU to comply with its WTO commitments only very narrowly. EU sugarsupply is simulated to decrease from roughly 19 million tons in the base period to 15.5 million tons by2015 and the EU price remains at a level of about 450 €/t and thus significantly above the referenceprice. In case of full liberalization production in the EU is projected to decrease to 7.5 million tonnesby 2015...