An Analysis of the EU Sugar Policy Reform on ACP Countries: A Quota Market Framework
The pressures for reform within the World Trade Organization have led to the European Union (EU) reforming its sugar policy with a price cut phased from 2006 and scheduled to end in 2009. The reform will have an impact on the sugar protocol African Caribbean and Pacific (ACP) countries that have a preferential market access to the European Union with a protected price. This study investigates the effect of EU sugar policy reform has on these ACP sugar countries.
First, it examines how the protocol countries sugar supply and demand determinants. While the determinants of supply in some countries performed as expected, others did not show sign of an improvement due to the sugar protocol. On the demand side we found that in some countries price does not affect the decision of the consumer.
Second it explores the protocol countries transfer benefits before and after the reform. Before the reform, the countries were enjoying substantial transfer benefits. After the reform, there are some countries that will no longer be able to make profits by selling to the European Union.
Finally, we develop a quota market analysis to examine negotiated transfer quota outcomes between ACP countries. We allow for the countries that can no longer make a profit to sell their quota rights to the countries that can still make a profit. We assumed equal bargaining powers and unequal bargaining powers. In the equal bargaining power case, total profit is equally divided between seller and buyer. In the unequal bargaining power case, we consider two scenarios. The first scenario where the world sugar price is not affected by EU sugar policy reform revealed that the sellers would have greater bargaining power and a larger share of the profit. The second scenario where the world sugar price is increased by thirty percent revealed that the buyer would exercise superior bargaining power relative to the seller and would have a larger share of the profit. Buyers can expand their production and sellers can use the revenues to diversify away from sugar.
Advisor:Westra, John; Salassi, Michael; Kennedy, Lynn P.; Koray, Faik A.; Reagan, Thomas E.
School:Louisiana State University in Shreveport
School Location:USA - Louisiana
Source Type:Master's Thesis
Keywords:agricultural economics agribusiness
Date of Publication:07/09/2009