Modelling the EU sugar supply to assess sectoral policy reforms

Classification JEL : Q17, Q18We investigate the possible linkages between the EU sugar production under quota and the supply of C sugar. We calibrate the implicit cross-subsidy between in-quota sugar and out-of-quota sugar. The resulting supply specification is included in a computable general equilibrium model of the EU economy detailing the agricultural sector. We simulate the effects of the 2006 reform of the EU sugar regime and the effects of a ban on sugar export subsidies. Results suggest that the reform makes it possible to fill the requirements of the 2005 World Trade Organisation panel but that further adjustment will be needed to eliminate all export subsidies as is scheduled for 2013