THE IMPACT OF EU SUGAR QUOTA REMOVAL ON EU EXTERNAL TRADE IN SUGAR: A BILATERAL PERSPECTIVE

As part of the 2006 reform of the European Union (EU) sugar regime, national quotas on the supply of sugar for domestic human consumption (for which beet producers receive a supported price) were renewed only up to 2014/15. It is the intention of the European Commission that they should not be renewed beyond that date, although this position is currently coming under renewed discussion. Three recent studies (LEI, 2010; European Commission, 2011a; Nolte et al., 2012) have examined the effects of sugar quota abolition on the EU market and its trade position. These studies suggest that the net importer status of the EU would be maintained, although net imports decrease. However, there exist no studies investigating changes in bilateral trade flows between EU and third countries. This paper analyses the impacts of quota sugar cessation on the bilateral trade flows between the EU and third countries in 2020 against a reference scenario in which quotas remain in force. The study uses the partial equilibrium model CAPRI, which covers 77 countries grouped into 40 trade blocks. It models bilateral trade flows and bilateral trade measures between the various trade blocks. The results show that, with the expiry of EU sugar quotas, total EU sugar imports would be 43% lower in 2020, while total EU sugar exports would decline by 16%. Sugar imports from high-cost third countries decline very substantially, but those from the low-cost producer Brazil decrease only slightly. However, Brazil suffers loss of market share in third countries, notably in Africa, due to trade diversion. The net result is that, despite its strong comparative advantage in the production and marketing of sugar, Brazil suffers a welfare loss of EUR 40 million, whereas most other non-EU sugar-producing countries experience negligible welfare effects or small welfare gains. The largest welfare gain occurs in the EU (+EUR 845 million).JRC.J.4-Agriculture and Life Sciences in the Econom