Trade Preferences in the EU Sugar Sector: Winners and Losers

The ongoing trade negotiations, unilateral trade concessions and obligations under the WTO are pushing the EU sugar regime to undertake reforms. These reforms will alter the positions of developing countries in the global sugar markets. This paper will describe the trade preferences granted to developing countries under the EU sugar regime. Sugar imports into the EU from the Least Developed Countries (LDCs) are expected to be totally liberalised from year 2009 onwards because of the 'Everything But Arms' (EBA) concession. During the transition period until year 2009, the EBA concession is gradually granting quota preferences and partial duty-free access to sugar imports from the LDCs. Simultaneously, the temporary import quotas (Special Preferential Sugar) given to the African, Caribbean and Pacific (ACP) countries are assumed to be decreasing during the transition period. Within this background, a complete unilateral liberalisation of the EU sugar sector is simulated to depict the winners and losers in the global sugar markets if no preferences are governing the imports of sugar into the EU. The supply responses, which strongly affect the outcomes, are dependent on both the nature of substitution for sugar as well as on the efficiency of sugar production in different countries. The multi-region general equilibrium framework (GTAP) is used for this analysis. The results show that small concessions will not threaten the EU internal market, but total liberalisation of sugar imports from the LDCs will be a major threat to the EU sugar regime. The current regime limits sugar imports from all developing countries or some efficient producers, if the cost data is a right estimate of the potential supply response from developing countries. The LDCs will be the winners under the EBA concession supported by the current regime, but a few efficient sugar producers will be the winners if the current regime is entirely liberalised.