purpose of this report is to present and discuss findings
of a study of trade liberalization on the World sugar
market. The study considers the following scenarios:
(a) the effects of trade liberalization from the Uruguay
Round (UR), (b) the effects of complete global trade
liberalization, (c) the effects of partial trade liberalization,
(d) the effects of complete trade liberalization in
the industrialized countries, (e) the effects of partial
trade liberalization in the industrialized countries,
(f) the effects of complete trade liberalization in
the major developing countries (Brazil, China, Indonesia,
and Republic of Korea), and (g) the effects of partial
trade liberalization in the major developing countries.
The analysis focused on changes in the world sugar price
and on changes in production, consumption, stock changes,
and net trade in the 42 countries and/or regions: USA,
Canada, European Union, Other Western Europe, Poland,
Other Eastern Europe, Former USSR, Japan, Australia,
New Zealand, Fiji, Rest of Oceania, China, India, Indonesia,
Philippines, Thailand, Malaysia, Pakistan, Vietnam,
Korea, Bangladesh, Other Asia, Cuba, Guatemala, Mexico,
Argentina, Brazil, Chile, Other Latin America, South
Africa, Kenya, Zimbabwe, Algeria, Malawi, Tanzania,
Egypt, Mauritius, Rest of Africa, Turkey, Saudi Arabia,
and Other Near Eastern countries. In addition to these
countries, analysis of trade liberalization on the ACP
countries and SIS aggregate was also conducted, including
an analysis of the effects on these aggregates from
revision of the ACP/EC Protocol. Also, a separate analysis
was conducted on the impact of selected trade scenarios
on individual ACP countries and developing export and
multi-region, non-spatial equilibrium model of the world
sugar market was developed in order to project future
prices, production, consumption, stock changes, and
net trade under various scenarios. Supply, demand, and
stock change elasticities were obtained for each country/region
either through direct estimation or from prior studies.
Projection information on real per capita GDP, population,
and tariff changes were derived from published data.
Parameters for supply changes were derived from estimated
trend coefficients of econometric models of production
and from expert opinions of observers of the sugar industry.
Income elasticites by country were obtained from FAO
and from estimates obtained from econometric analysis
of consumption. The projection information was then
used to simulate prices, production, consumption, stock
changes, and net trade by country/region to 2000 and
2005 under the various scenarios.
main results of this study may be summarized as follows:
world sugar price (assuming full implementation of the
UR) is projected to increase to $0.123 per pound from
the baseline of $0.119 in 1993-95. Compared to the case
of no change in tariffs to 2000, the effect of the UR
agreement is to raise the real world sugar price 7.0%.
Production is expected to decline in the USA, EU, Japan,
Australia, China, Indonesia, the Philippines, Mexico,
Brazil, and South Africa as a result of the UR agreement.
Consumption would rise mainly in the USA and Japan because
of reduced domestic prices. Imports would increase in
the USA, China, Indonesia, and the former USSR because
of the UR agreement. Exports would be lower in the EU,
Australia, Mexico, and Brazil as a result of the UR
agreement; however, exports are projected to be higher
in India and Cuba as a result of the UR agreement because
of unchanged tariffs to 2000.
baseline price is projected to decrease to $0.120 assuming
continuation of the UR agreement to 2005. Production
and consumption are projected to be higher for most
countries. The largest increase in imports is projected
to occur in the former USSR because of decreased production.
Australia, Cuba, and Brazil are projected to have large
increases in exports.
global trade liberalization, the world price is projected
to increase 43.2% to $0.172 from a baseline projected
price of $0.120.The gains from freeing up trade would
be large. The gains would be especially great in many
of the Latin American and Caribbean countries where
production and exports would rise as a result of an
increase in world price, assuming that transfers to
ACP and SIS are not eliminated. The USA, Japan, and
India would experience the largest increase in imports.
partial global trade liberalization (20% reduction in
tariffs across the board), the world price would increase
by 6.4% compared to the case of no further trade liberalization
to 2005. A very similar pattern of changes in production,
consumption, and net trade occurs compared to the complete
liberalization scenario. In neither case are changes
in stock changes from the baseline large.
complete and partial trade liberalization of the developed
countries (i.e., USA,. Canada, EU, other Western Europe,
Australia, New Zealand, Japan, South Africa, and Israel),
the world price rises by 9.8% and 0% ,respectively,
compared to the baseline price of $0.120. With minor
exceptions, production would fall, consumption would
rise, and net trade would decline in the developed countries;
in contrast, production would rise, consumption would
fall, and net trade would increase in many of the other
countries. As in the other cases, the USA and Japan
would experience significant increases in imports while
the EU, Mexico, and Brazil show large increases in exports.
and partial trade liberalization in selected developing
countries (i.e.., Brazil, China, India, Indonesia, and
the Republic of Korea) would cause the world sugar price
to rise 16.7% and 1.1%, respectively, compared to the
baseline price of $0.120. Aside from Korea, production
would fall, consumption would rise, and net trade would
fall in all of these developing countries. The USA,
former USSR, Mexico, and other Latin America countries
would gain the most in terms of increased production
and net trade.
developing export countries would benefit from trade
liberalization because of relatively small trade barriers.
Imports would decline for most developing import countries
with a uniform reduction in tariffs across all countries.
Imports would decline (rise) in China, India, and Indonesia
if trade were liberalized in only industrialized (major
the ACP countries, the impact of the UR agreement will
be to increase production, lower consumption, and increase
exports. Producers receive preferential prices in the
EU and USA for large proportions of sugar exported to
those countries; however, the impact of the UR agreement
will be to increase total revenue from exports slightly
(by about 1%) . Similar effects are expected in the
case of the SIS aggregate, with a 3.3% increase in expected
in export earnings as a result of the UR agreement.
no change in transfers, ACP producers would gain under
complete and partial trade liberalization and under
complete and partial trade liberalization in the selected
large developing countries. They would lose under continued
market reform in developed countries and they would
lose with reduction in transfers from the EU and USA
with partial trade liberalization. Assuming a 20% decrease
in transfers to ACP countries with partial global trade
liberalization, export earnings to ACP countries would
decline by about 7%. Exports would rise except for trade
liberalization only in the developed countries, and
partial and complete elimination of preferences under
the ACP Protocol and USA TRQ.
trade patterns would be exhibited across individual
ACP countries as for the aggregate of all ACP countries.
However, the impact on individual countries would be
expected to be greater compared to the aggregate of
all ACP countries. What is apparent from the various
trade simulations is that ACP producers will likely
continue to experience price erosion unless their preferences
remain intact or trade with the major developing countries
(India, China, Indonesia) is liberalized.
in the case of the ACP countries, the SIS producers
gain under both total and partial global trade liberalization
as well as total and partial liberalization in the large
developing countries (assuming no change in export subsidies).
However, the SIS lose with trade liberalization of developed
countries. Under partial global trade liberalization
with a 20% reduction in transfers from the EU and the
USA, export earnings for the SIS would decline by only
about 2.1%. The SIS aggregate could lose about 4% of
export earnings over the current status quo (continuation
of the UR to 2005) with complete trade liberalization
and with complete elimination of transfers.
comparison of export earnings by ACP countries and SIS
aggregate under complete trade liberalization indicates
that the combined value of transfers from the EU and
USA to these countries is worth between 27-31% of the
value of their export earnings.
of trade barriers within common trading areas poses
a threat to many developing countries, especially ACP
countries. Full implementation of NAFTA by 2008 could
provide increased access to the USA market by Mexico.
If the USA maintains its import restrictions, this would
limit access to the USA market by ACP countries. However,
under trade liberalization the USA’s imports would
be projected to increase sufficiently to meet increased
exports from Mexico as well as increased exports from