Modelling Preferential Sugar Imports of the EU: A Spatial Price Equilibrium Analysis

Abstract

A spatial price equilibrium model with a large coverage of countries, policies and regional trade arrangements is applied to simulate preferential sugar imports of the European Union (EU) in 2015/16 under different assumptions with respect to the expansion of the sugar sectors of various least developed countries in order to benefit from unlimited EU market access. These are analysed under three different policy settings: a continuation of current policies, except for export refunds which are phased out by 2013, a continuation of current policies including export refunds and finally a World Trade Organisation agreement. Preferential imports are estimated to clearly exceed current estimates by the European Commission. In all scenarios, however, they are not found to threaten the reference price of the new Common Market Organisation.

Keywords: sugar, Common Agricultural Policy, World Trade Organisation, partial equilibrium model, bilateral trade, spatial price equilibrium model, mixed complementarity problem

JEL Classification: F11, F13, Q11, Q17, Q18