Modelling the effects of an abolition of the EU sugar quota on internal prices, production and imports

Abstract

We apply a spatial price equilibrium model of the world sugar market to simulate an abolishment of the EU quota system in 2015/16. To overcome the normative nature of the approach, we calibrate the model by attaching a non-linear cost term to each trade flow. This is in some regards similar to positive mathematical programming. We suggest an economic interpretation and an econometric specification of the cost term. Production in the EU increases to almost 16 million tons. Twelve member states increase production, seven reduce it. Preferential imports are significantly reduced. Simulated effects are found to be more pronounced the higher the world market price.CAP, structural change, sugar, TRQ, spatial modelling, trade preferences, PMP, Agricultural and Food Policy, Farm Management, Land Economics/Use,