The Impact of Central American Free Trade Area (CAFTA) on the United States sugar market

This paper tries to estimate the impact of establishment of CAFTA on the United States sugar market. We use the United States sugar demand elasticity and the amount of increase in the U.S. sugar import quota under CAFTA agreement to estimate the magnitude of this effect. This study shows that these increased imports will result in a decrease in the U.S. domestic sugar price of about 1.7 cents, or approximately 8.6 percent. Although it amounts to only pennies per pound, this decrease in the domestic price could result in the incursion of significant U.S. government expenditures given the current structure of the U.S. non-recourse loan program