Consultation on Sugar
Impact of OECD country policies on developing countries
27 August 2004
An FAO informal expert consultation on sugar markets and policy was held in Rome on 5 to 6 August 2004 to discuss the impact of OECD domestic support and trade policies on developing countries.
The meeting brought together a panel of experts in the analysis of sugar policy issues. These included Mike Wohlgenant, Professor at North Carolina State University; Pierre Charlebois, Chief of the Economics and Sectorial Analysis Unit of the Agricultural and Agri Food Canada; Donald Mitchell, Lead Economist of the World Bank; Ellen Huan-Niemi and Jyrki Niemi, Economic Researcher and Senior Economist of the MTT Economic Research. Gareth Forber, Senior Research Economist at LMC International, Leonardo Bichara Rocha, Economist from the International Sugar Organization, Alexandre Barros Rands, Professor of the Federal University of Pernambuco, Brazil and Ramesh Chand, Head of the Agricultural Economics Unit of the Indian Institute of Economic Growth.
The overall objective of the consultation was to assemble and evaluate the existing analytical knowledge concerning the impact of sugar policies in OECD countries on sugar producing developing countries. The consultation reviewed sugar policies in both developed and developing countries and their impact on the world sugar economy, with a focus on the nature of the analytical models and methodologies used. In particular, the consultation examined how policies were modelled and how different assumptions concerning demand and supply responses influenced estimates of the quantitative impact of reforms on domestic production, trade, and world prices. The pervasiveness of the effects of established sugar trade policies on the economic behaviour of the sector makes it difficult to predict how producers might respond to a liberalized regime.
Specific OECD policy issues examined included: United States sugar policy and the North American Free Trade Agreement (NAFTA); linkages between the European Union (EU) sugar regime and the preferential, regional and multilateral trade agreements - in particular, the impact of EU policy changes on LDC and ACP countries; Australian sugar policy reform. An examination was made of the impact of the OECD policies on specific developing countries, namely the Brazilian, Indian and Thai sugar sectors.
The major conclusion of the consultation was that while most of the modelling studies reviewed agreed on the direction of changes in world prices and trade likely to result from policy reform, there were considerable differences in their predictions concerning the magnitude of these changes. The models showed that efficient low cost producers (mainly Brazil) would capture a bigger share of the world market after reform, while those typically higher cost ACP countries currently enjoying preferences would suffer. However, for countries in the middle ground as far as competitiveness is concerned, such as India and South Africa, the results were less clear since whether they gained or lost depended upon the extent of price changes predicted.
Future research analysis should examine supply response, as well as focus on measuring the welfare effects of trade and domestic sugar reforms on the economies of sugar producing developing countries. In addition, future works on sugar modelling ought to take into account ACP countries at the disaggregate level, and be more policy oriented with an emphasis on food security issue.
For further information on the Consultation please contact: Kaison.Chang@fao.org